AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 4, 1998
REGISTRATION NO. 333-
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
NATIONSBANK CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NORTH CAROLINA(1) 6711
(I.R.S. EMPLOYER (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL
IDENTIFICATION NO.) INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
NATIONSBANK CORPORATE CENTER
100 NORTH TRYON STREET
CHARLOTTE, NORTH CAROLINA 28255
(704) 386-5000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
PAUL J. POLKING, ESQ.
EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
NATIONSBANK CORPORATION
NATIONSBANK CORPORATE CENTER
100 NORTH TRYON STREET
CHARLOTTE, NORTH CAROLINA 28255
(704) 386-5000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
JAMES N. ROETHE, ESQ. EDWARD D. HERLIHY, ESQ. BOYD C. CAMPBELL, JR.
EXECUTIVE VICE PRESIDENT WACHTELL, LIPTON, ROSEN & KATZ SMITH HELMS MULLISS &
AND GENERAL COUNSEL 51 WEST 52ND STREET MOORE, L.L.P.
BANKAMERICA CORPORATION NEW YORK, NEW YORK 10019 201 NORTH TRYON STREET
555 CALIFORNIA STREET CHARLOTTE, NORTH CAROLINA 28202
SAN FRANCISCO, CALIFORNIA 94104
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective. If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED AMOUNT TO BE REGISTERED(2) OFFERING PRICE PER SHARE(3) PRICE (3) REGISTRATION FEE
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Common Stock.............. 867,937,200 $79.478 $68,982,062,500 $20,349,709
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(1) The Registrant's state of incorporation will change from North Carolina to
Delaware if (i) the proposal to effect the Agreement and Plan of
Reorganization and the related Plan of Reincorporation Merger is approved by
the shareholders of the Registrant and (ii) the proposal to effect the
Agreement and Plan of Reorganization is approved by the shareholders of
BankAmerica Corporation.
(2) Based on an estimate of the maximum number of shares of common stock of the
Registrant to be issued in connection with the merger of BankAmerica
Corporation with and into the Registrant, which is calculated by multiplying
the maximum number of shares of common stock, par value $1.5625 per share,
of BankAmerica ("BankAmerica Common Stock") expected to be cancelled in the
Merger (767,000,000) by the exchange ratio of 1.1316.
(3) Pursuant to Rule 457(f), and solely for the purpose of calculating the
registration fee, the proposed maximum offering price per share is based
upon the aggregate market value on July 29, 1998 of the shares of
BankAmerica Common Stock expected to be cancelled in the Merger and computed
by dividing (i) the product of (A) the average of the high and the low sale
prices of the BankAmerica Common Stock on the New York Stock Exchange on
July 29, 1998 ($89.9375) and (B) 767,000,000, representing the maximum
number of shares of BankAmerica Common Stock expected to be cancelled in the
Merger, by (ii) 867,937,200, representing the maximum number of shares of
common stock of the Registrant expected to be issued in connection with the
Merger.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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(NATIONSBANK(R) LOGO) [BANKAMERICA LOGO]
MERGER PROPOSED--YOUR VOTE IS
VERY IMPORTANT
The Boards of Directors of BankAmerica Corporation and NationsBank
Corporation have agreed on a merger of our two companies. Before we can complete
this merger, the agreement must be approved by each company's shareholders. We
are sending you this proxy statement-prospectus to ask you to vote in favor of
the merger.
The merger will create the first coast-to-coast United States banking
franchise, under the name "BankAmerica Corporation." We believe the merger will
provide the combined company with unprecedented capabilities in serving
individuals, businesses and corporate, institutional and governmental clients
across the nation and around the world. Taken together, our two companies have
assets of approximately $579 billion and shareholders' equity of approximately
$44 billion.
BankAmerica shareholders will receive 1.1316 shares of common stock in the
combined company for each BankAmerica share they own just before the merger.
NationsBank shareholders will continue to own one share in the combined company
for each NationsBank share they own just before the merger. We estimate that, on
completion of the merger, the former NationsBank shareholders will own about 54%
of the outstanding stock of the combined company and the former BankAmerica
shareholders will own about 46%.
Shortly before the merger between NationsBank and BankAmerica, NationsBank
will reincorporate in Delaware, so that, when BankAmerica then merges with
NationsBank, the combined company will also be a Delaware company. When we
reincorporate NationsBank in Delaware, we will also increase the number of
shares that the combined company will be able to issue. We are asking the
NationsBank shareholders to approve this reincorporation merger as part of their
approval of the merger with BankAmerica.
YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to attend your
shareholder meeting, please take the time to vote by completing and mailing the
enclosed proxy card. If you sign, date and mail your proxy card without
indicating how you want to vote, we will vote your proxy in favor of the merger.
If you do not return your card, the effect will be a vote against the merger.
BankAmerica shareholders may also vote by telephone or Internet, as described in
this proxy statement-prospectus.
The dates, times and places of the meetings are:
For NationsBank shareholders: For BankAmerica shareholders:
September 24, 1998 September 24, 1998
12:00 noon Eastern Time 9:00 a.m. Pacific Time
International Trade Center Nob Hill Masonic Center
200 North College Street 1111 California Street
Charlotte, North Carolina San Francisco, California
This proxy statement-prospectus provides you with detailed information
about the proposed merger. You can also get information about NationsBank and
BankAmerica from documents we have filed with the Securities and Exchange
Commission. We encourage you to read this entire document carefully.
We are very enthusiastic about this merger and the strength and
capabilities we expect from the combined company. We join all the other members
of each company's Board of Directors in our wholehearted recommendation that you
vote in favor of the merger.
[HUGH L. MCCOLL SIG] [DAVID A. COULTER SIG]
Hugh L. McColl, Jr. David A. Coulter
Chief Executive Officer Chairman of the Board
NationsBank Corporation and Chief Executive Officer
BankAmerica Corporation
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OF THE SECURITIES TO BE ISSUED UNDER THIS PROXY
STATEMENT-PROSPECTUS OR DETERMINED IF THIS PROXY STATEMENT-PROSPECTUS IS
ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE NOT SAVINGS OR DEPOSIT ACCOUNTS OR OTHER OBLIGATIONS OF ANY
BANK OR NON-BANK SUBSIDIARY OF ANY OF THE PARTIES, AND THEY ARE NOT INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE FUND OR ANY OTHER
GOVERNMENTAL AGENCY.
THIS PROXY STATEMENT-PROSPECTUS IS DATED AUGUST 4, 1998
AND WAS FIRST MAILED TO SHAREHOLDERS ON OR ABOUT AUGUST 13, 1998.
WE HAVE NOT AUTHORIZED ANYONE TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION
ABOUT THE MERGER OR OUR COMPANIES THAT DIFFERS FROM, OR ADDS TO, THE INFORMATION
IN THIS PROXY STATEMENT-PROSPECTUS OR IN OUR DOCUMENTS THAT ARE PUBLICLY FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION. THEREFORE, IF ANYONE DOES GIVE YOU
DIFFERENT OR ADDITIONAL INFORMATION, YOU SHOULD NOT RELY ON IT.
IF YOU ARE IN A JURISDICTION WHERE IT IS UNLAWFUL TO OFFER TO EXCHANGE OR SELL,
OR TO ASK FOR OFFERS TO EXCHANGE OR BUY, THE SECURITIES OFFERED BY THIS PROXY
STATEMENT-PROSPECTUS OR TO ASK FOR PROXIES, OR IF YOU ARE A PERSON TO WHOM IT IS
UNLAWFUL TO DIRECT SUCH ACTIVITIES, THEN THE OFFER PRESENTED BY THIS PROXY
STATEMENT-PROSPECTUS DOES NOT EXTEND TO YOU.
THE INFORMATION CONTAINED IN THIS PROXY STATEMENT-PROSPECTUS SPEAKS ONLY AS OF
ITS DATE UNLESS THE INFORMATION SPECIFICALLY INDICATES THAT ANOTHER DATE
APPLIES.
INFORMATION IN THIS PROXY STATEMENT-PROSPECTUS ABOUT NATIONSBANK HAS BEEN
SUPPLIED BY NATIONSBANK, AND INFORMATION ABOUT BANKAMERICA HAS BEEN SUPPLIED BY
BANKAMERICA.
A WARNING ABOUT FORWARD-LOOKING STATEMENTS
Each company makes forward-looking statements in this document, and in our
public documents to which we refer, that are subject to risks and uncertainties.
These forward-looking statements include information about possible or assumed
future results of our operations or the performance of the combined company
after the merger. Also, when we use any of the words "believes," "expects,"
"anticipates" or similar expressions, we are making forward-looking statements.
Many possible events or factors could affect the future financial results and
performance of each of our companies and the combined company after the merger.
This could cause results or performance to differ materially from those
expressed in our forward-looking statements. You should consider these risks
when you vote on the merger. These possible events or factors include the
following:
1. our revenues after the merger are lower than we expect, our restructuring
charges are higher than we expect, we lose more deposits, customers or
business than we expect, or our operating costs after the merger are greater
than we expect;
2. competition among depository and other financial institutions increases
significantly;
3. we have more trouble obtaining regulatory approvals for the merger than we
expect;
4. we have more trouble integrating our businesses or retaining key personnel
than we expect;
5. our costs savings from the merger are less than we expect, or we are unable
to obtain those cost savings as soon as we expect;
6. changes in the interest rate environment reduce our margins;
7. general economic or business conditions are worse than we expect;
8. legislative or regulatory changes adversely affect our business;
9. technological changes and systems integration are harder to make or more
expensive than we expect; and
10. adverse changes occur in the securities markets.
NATIONSBANK CORPORATION
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 24, 1998
------------------------
NationsBank Corporation will hold a special meeting of shareholders at the
International Trade Center, 200 North College Street, in Charlotte, North
Carolina, at 12:00 noon local time on September 24, 1998, to vote on:
1. The Agreement and Plan of Reorganization, dated as of April 10, 1998,
between NationsBank Corporation and BankAmerica Corporation, the related
Plan of Reincorporation Merger, dated as of August 3, 1998, between
NationsBank Corporation and its subsidiary NationsBank (DE) Corporation,
and the transactions contemplated by those documents. These transactions
include the reincorporation of NationsBank Corporation as a Delaware
company by means of a merger of NationsBank Corporation into NationsBank
(DE). They also include the issuance of NationsBank shares, following
the reincorporation, to BankAmerica shareholders in connection with the
merger of BankAmerica and NationsBank. The currently outstanding shares
of NationsBank common stock and preferred stock will automatically
become shares of NationsBank (DE) in the reincorporation merger, and
will remain outstanding as shares of the combined company following the
merger with BankAmerica.
2. An amendment of the NationsBank Corporation Key Employee Stock Plan,
which will be the stock plan of the combined company following the
reincorporation merger and the merger with BankAmerica.
3. Any other matters that properly come before the special meeting, or any
adjournments or postponements of the special meeting.
Record holders of NationsBank common stock, ESOP Convertible Preferred
Stock, Series C, and 7% Cumulative Redeemable Preferred Stock, Series B at the
close of business on August 4, 1998, will receive notice of and may vote at the
special meeting, including any adjournments or postponements. The Agreement and
Plan of Reorganization requires approval by a majority of the votes entitled to
be cast by the NationsBank voting shareholders, voting together as one class.
The amendment of the NationsBank Corporation Key Employee Stock Plan requires
approval by a majority of the votes actually cast at the special meeting by the
NationsBank voting shareholders, voting together as one class.
Holders of NationsBank preferred stock may exercise dissenters' rights,
under Article 13 of the North Carolina Business Corporation Act. We have
attached a copy of that law as an Appendix to the accompanying proxy
statement-prospectus. Holders of shares of NationsBank common stock will not
have dissenters' rights.
[HUGH L. MCCOLL SIG]
Hugh L. McColl, Jr.
Chief Executive Officer
August 4, 1998
PLEASE MARK, SIGN, DATE AND RETURN YOUR PROXY PROMPTLY, WHETHER OR NOT YOU PLAN
TO ATTEND
THE SPECIAL MEETING.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE
MATTERS THAT YOU WILL VOTE ON AT THE SPECIAL MEETING.
BANKAMERICA CORPORATION
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 24, 1998
------------------------
BankAmerica Corporation will hold a special meeting of shareholders at Nob
Hill Masonic Center, 1111 California Street, in San Francisco, California, at
9:00 a.m. local time on September 24, 1998, to vote on:
1. The Agreement and Plan of Reorganization, dated as of April 10, 1998, by
and between NationsBank Corporation and BankAmerica Corporation, and the
transactions contemplated by that agreement. These transactions include
the merger of BankAmerica and NationsBank, following the reincorporation
of NationsBank as a Delaware company.
2. Any other matters that properly come before the special meeting, or any
adjournments or postponements of the special meeting.
Record holders of BankAmerica common stock at the close of business on
August 4, 1998, will receive notice of and may vote at the special meeting,
including any adjournments or postponements. The Agreement and Plan of
Reorganization requires approval by the holders of a majority of the outstanding
shares of BankAmerica common stock.
[DAVID A. COULTER SIG]
David A. Coulter
Chairman of the Board
and Chief Executive Officer
August 4, 1998
PLEASE MARK, SIGN, DATE AND RETURN YOUR PROXY PROMPTLY, OR COMPLETE YOUR PROXY
BY TELEPHONE OR INTERNET, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE
AGREEMENT AND PLAN OF REORGANIZATION.
(This page intentionally left blank)
To find any one of the principal sections identified below, simply bend the
document slightly to expose the black tabs and open the document to the tab
which corresponds to the title of the section you wish to read. For your
convenience, we have included an index of frequently used capitalized terms in
this proxy statement in an Index of Defined Terms, which is printed on gold
paper after the summary of this proxy statement to help you locate it quickly.
TABLE OF CONTENTS
SUMMARY
INDEX OF DEFINED TERMS
NATIONSBANK SPECIAL MEETING
BANKAMERICA SPECIAL MEETING
THE MERGER
MANAGEMENT AND OPERATIONS AFTER THE MERGER
COMPARATIVE RIGHTS OF SHAREHOLDERS OF NATIONSBANK,
BANKAMERICA AND THE COMBINED COMPANY
AMENDMENT TO THE NATIONSBANK CORPORATION
KEY EMPLOYEE STOCK PLAN
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
APPENDICES
(This page intentionally left blank)
TABLE OF CONTENTS
PAGE
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SUMMARY..................................................... 1
The Companies............................................. 1
The Merger................................................ 1
Comparative Per Share Market Price Information............ 1
Our Reasons for the Merger................................ 2
The Shareholders' Meetings................................ 2
Our Recommendations to Shareholders....................... 2
Record Date; Voting Power................................. 2
Votes Required............................................ 2
Exchange of Certificates.................................. 3
Conditions to Completion of the Merger.................... 3
Termination of the Merger Agreement....................... 3
Federal Income Tax Consequences........................... 4
Accounting Treatment...................................... 4
Opinions of Financial Advisors............................ 4
Board of Directors and Management of the Combined Company
Following the Merger................................... 4
Interests of Persons Involved in the Merger That Are
Different from Yours................................... 5
Options to Purchase Each Other's Stock.................... 5
Dissenters' Rights........................................ 5
Regulatory Approvals...................................... 6
Unaudited Comparative Per Share and Selected Financial
Data................................................... 7
Index of Defined Terms.................................... 13
NATIONSBANK SPECIAL MEETING................................. 15
General................................................... 15
Matters to be Considered.................................. 15
Proxies................................................... 15
Solicitation of Proxies................................... 16
Record Date and Voting Rights............................. 16
Recommendation of the NationsBank Board................... 17
BANKAMERICA SPECIAL MEETING................................. 19
General................................................... 19
Matters to be Considered.................................. 19
Proxies................................................... 19
Solicitation of Proxies................................... 20
Record Date and Voting Rights............................. 20
Recommendation of the BankAmerica Board................... 21
THE MERGER.................................................. 23
Description of the Reincorporation Merger and the
Merger................................................. 23
Background of the Merger.................................. 25
Reasons of NationsBank for the Merger..................... 27
Reasons of BankAmerica for the Merger..................... 29
Opinion of NationsBank's Financial Advisor................ 31
Opinion of BankAmerica's Financial Advisor................ 36
The Reincorporation Merger................................ 42
The Effective Time........................................ 42
Exchange of Certificates.................................. 42
Conduct of Business Prior to the Merger and Other
Covenants.............................................. 43
Conditions to the Reorganization.......................... 45
TABLE OF CONTENTS
PAGE
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Termination of the Merger Agreement....................... 46
Waiver; Amendment; Expenses............................... 46
Material Federal Income Tax Consequences.................. 47
Interests of Certain Persons in the Merger................ 49
NationsBank and BankAmerica Stock Option Agreements....... 52
Accounting Treatment...................................... 56
Regulatory Matters........................................ 56
Restrictions on Resales by Affiliates..................... 57
Dividend Reinvestment and Stock Purchase Plans............ 58
Rights of Dissenting Shareholders......................... 58
MANAGEMENT AND OPERATIONS AFTER THE MERGER.................. 61
Directors After the Merger................................ 61
Management After the Merger............................... 61
Consolidation of Operations; Anticipated Cost Savings..... 61
PRICE RANGE OF COMMON STOCK AND DIVIDENDS................... 63
Market Prices............................................. 63
Dividends................................................. 64
INFORMATION ABOUT NATIONSBANK AND NATIONSBANK (DE).......... 64
General................................................... 64
Business Segment Operations............................... 65
Management and Additional Information..................... 65
INFORMATION ABOUT BANKAMERICA............................... 66
General................................................... 66
Business Segment Operations............................... 66
Management and Additional Information..................... 66
SUPERVISION AND REGULATION OF NATIONSBANK AND BANKAMERICA... 67
CAPITAL STOCK OF THE COMBINED COMPANY....................... 69
Combined Company Common Stock............................. 70
Combined Company Preferred Stock.......................... 71
Combined Company ESOP Preferred Stock..................... 71
Combined Company Series B Preferred Stock................. 73
Combined Company Series BB Preferred Stock................ 73
COMPARATIVE RIGHTS OF SHAREHOLDERS OF NATIONSBANK,
BANKAMERICA AND THE COMBINED COMPANY...................... 75
Board of Directors........................................ 75
Shareholder Vote Required for Business Combinations....... 75
Shareholder Rights Plan................................... 76
Shareholder Proposal and Nomination Procedures............ 76
Dissenters' Rights........................................ 76
Takeover Statutes......................................... 77
Special Meeting of Shareholders........................... 77
Shareholder Action By Written Consent..................... 77
Director's Liability...................................... 78
Amendments to Articles of Incorporation................... 78
TABLE OF CONTENTS
ii
PAGE
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AMENDMENT TO THE NATIONSBANK CORPORATION KEY EMPLOYEE STOCK
PLAN...................................................... 79
Number of Shares.......................................... 79
Administration............................................ 79
Eligibility............................................... 80
Awards of Stock Options and Stock Appreciation Rights..... 80
Awards of Restricted Stock and Performance Shares......... 80
Certain Stock Plan Awards................................. 81
Code Section 162(m)....................................... 81
Withholding for Payment of Taxes.......................... 82
Changes in Capitalization and Similar Changes............. 82
Changes in Control........................................ 82
Amendment and Termination of the Plan..................... 82
Federal Income Tax Treatment.............................. 82
LEGAL OPINION............................................... 84
EXPERTS..................................................... 84
SHAREHOLDER PROPOSALS....................................... 84
OTHER MATTERS............................................... 84
WHERE YOU CAN FIND MORE INFORMATION......................... 85
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION......... 87
NOTES TO THE UNAUDITED PRO FORMA CONDENSED FINANCIAL
INFORMATION............................................... 93
APPENDIX A -- Agreement and Plan of Reorganization.......... A-1
APPENDIX B -- Plan of Reincorporation Merger................ B-1
APPENDIX C -- BankAmerica Option Agreement.................. C-1
APPENDIX D -- NationsBank Option Agreement.................. D-1
APPENDIX E -- Opinion of Merrill Lynch, Pierce, Fenner &
Smith Incorporated........................................ E-1
APPENDIX F -- Opinion of Goldman, Sachs & Co. .............. F-1
APPENDIX G -- Article 13 of the North Carolina Business
Corporation Act........................................... G-1
APPENDIX H -- Certificate of Incorporation of the Combined
Company................................................... H-1
------------------------
TABLE OF CONTENTS
iii
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SUMMARY
This summary highlights selected information from this joint proxy
statement-prospectus. It does not contain all of the information that is
important to you. You should carefully read this entire document and the other
documents to which we refer. These will give you a more complete description of
the transactions we are proposing. For more information about the two companies,
see "Where You Can Find More Information" (page 85). Each item in this summary
refers to the pages where that subject is discussed more fully.
THE COMPANIES (PAGE 64)
NATIONSBANK CORPORATION
NationsBank Corporate Center
Charlotte, North Carolina 28255
(704) 386-5000
NationsBank is a multi-bank holding company, providing retail banking
products and services principally in the Southeastern, Mid-Atlantic and
Midwestern United States, as well as in Texas and New Mexico. NationsBank
provides corporate banking products and services throughout the
United States. As of March 31, 1998, NationsBank's total assets were about $315
billion, deposits were about $170 billion and shareholders' equity was about $25
billion.
BANKAMERICA CORPORATION
555 California Street
San Francisco, California 94104
(415) 622-3530
BankAmerica is a multi-bank holding company, providing retail banking
products and services principally in the Western United States and in Texas, and
corporate banking products and services throughout the United States and
internationally. As of March 31, 1998, BankAmerica's total assets were about
$265 billion, deposits were about $174 billion and shareholders' equity was
about $19 billion.
THE MERGER (PAGE 23)
The merger agreement is the document that governs the reincorporation of
NationsBank and the merger of NationsBank with BankAmerica. Whenever we talk
about NationsBank shareholders approving the merger agreement, we also mean the
Plan of Reincorporation Merger. We encourage you to read the merger agreement
and the Plan of Reincorporation Merger, which are attached as Appendices A and
B.
The merger agreement provides for the following transactions:
1. The reincorporation of NationsBank as a Delaware company. NationsBank will
become a Delaware company by merging into its recently created Delaware
subsidiary shortly before the merger between BankAmerica and the
reincorporated NationsBank. Each NationsBank share outstanding prior to the
merger will automatically become a share of NationsBank as a Delaware
company. After the reincorporation, NationsBank will also be authorized to
issue a greater number of shares than it is currently.
2. The merger of BankAmerica and NationsBank. After NationsBank's
reincorporation, BankAmerica will merge into NationsBank. The combined
company will be called "BankAmerica Corporation." BankAmerica shareholders
will receive 1.1316 shares of the combined company for each BankAmerica share
they own just before the merger.
COMPARATIVE PER SHARE MARKET PRICE INFORMATION (PAGE 63)
Shares of NationsBank and BankAmerica trade on the New York Stock Exchange
and other exchanges. On April 9, 1998, the last trading day before we signed the
merger agreement, NationsBank common stock closed at $76.4375 per share and
BankAmerica common stock closed at $86.50 per share. On July 31, 1998,
NationsBank common stock closed at $79.75 per share and BankAmerica common stock
closed at $89.75 per share.
The market value of 1.1316 shares of the combined company would be $86.50
based on NationsBank's April 9, 1998 closing price and $90.245 based on
NationsBank's July 31, 1998 closing price. Of course, the market price of
NationsBank common stock will fluctuate prior to and after completion of the
merger, but the exchange ratio is fixed. You should obtain current stock price
quotations for NationsBank common
SUMMARY
stock and BankAmerica common stock. You can get these quotes from a newspaper,
on the Internet or by calling your broker.
OUR REASONS FOR THE MERGER (PAGE 27)
The merger will combine the strengths of our individual companies and will
create a company that will rank number one in domestic bank deposits. We expect
that the combined company resulting from the merger will be able to
achieve strong financial performance, with opportunities to increase revenues by
providing a broader range of products and services to customers. We expect that
within two years we will be able to reduce costs by about $1.3 billion after
taxes each year by eliminating overlapping functions and processes and by
applying the same technology throughout the combined company. We believe that
our combined company will be better able to provide products and services to
customers domestically and internationally, and will therefore create more value
for shareholders.
THE SHAREHOLDERS' MEETINGS (PAGE 15)
NationsBank Shareholders. We will hold the NationsBank special meeting at
the International Trade Center, 200 North College Road, Charlotte, North
Carolina, at 12:00 noon, on September 24, 1998. At this meeting, we will ask
NationsBank shareholders:
1. to approve the merger agreement;
2. to amend the NationsBank Key Employee Stock Plan, which will then be the
stock plan of the combined company; and
3. to act on any other matters that may be put to a vote at the NationsBank
special meeting.
BankAmerica Shareholders. We will hold the BankAmerica special meeting at
Nob Hill Masonic Center, 1111 California Street, San Francisco, California, at
9:00 a.m., on September 24, 1998. At this meeting, we will ask BankAmerica
shareholders:
1. to approve the merger agreement; and
2. to act on any other matters that may be put to a vote at the BankAmerica
special meeting.
OUR RECOMMENDATIONS TO SHAREHOLDERS
(PAGES 17 AND 21)
NationsBank Shareholders. The NationsBank Board of Directors believes that
the merger is fair to you and in your best interests, and unanimously recommends
that you vote "FOR" the proposal to approve the merger agreement. The
NationsBank Board also unanimously recommends that you vote "FOR" the amendment
of the NationsBank Key Employee Stock Plan.
BankAmerica Shareholders. The BankAmerica Board of Directors believes that
the merger is fair to you and in your best interests, and unanimously recommends
that you vote "FOR" the proposal to approve the merger agreement.
RECORD DATE; VOTING POWER (PAGES 16 AND 20)
NationsBank Shareholders. You may vote at the NationsBank special meeting
if you owned NationsBank shares as of the close of business on August 4, 1998.
You will have one vote for each share of NationsBank common stock or NationsBank
Series B preferred stock you owned on August 4, 1998 and two votes for each
share of NationsBank ESOP preferred stock you owned on that date.
BankAmerica Shareholders. You may vote at the BankAmerica special meeting
if you owned BankAmerica shares as of the close of business on August 4, 1998.
You will have one vote for each share of BankAmerica common stock you owned on
August 4, 1998.
VOTES REQUIRED (PAGES 17 AND 21)
NationsBank Shareholders. In order to approve the merger, NationsBank
shareholders holding a majority of votes of the outstanding shares of
NationsBank common stock, Series B preferred stock and ESOP preferred stock,
voting together as one class, must vote for the agreement. The amendment of the
NationsBank Key Employee Stock Plan must be approved by a majority of the votes
cast at the NationsBank special meeting.
All together, the directors and executive officers of NationsBank and
BankAmerica can cast less than 2.5% of the votes entitled to be cast at the
NationsBank special meeting. We expect that they will vote all of their shares
in favor of the matters to be voted on at the NationsBank special meeting.
SUMMARY
2
BankAmerica Shareholders. In order to approve the merger, BankAmerica
shareholders holding a majority of the outstanding shares of BankAmerica common
stock must vote for the agreement.
All together, the directors and executive officers of NationsBank and
BankAmerica can cast less than 0.1% of the votes entitled to be cast at the
BankAmerica special meeting. We expect that they will vote all of their shares
for the merger agreement.
EXCHANGE OF CERTIFICATES (PAGE 42)
If you are a NationsBank shareholder, you do not have to exchange your
stock certificates in connection with the reincorporation of NationsBank or the
merger with BankAmerica. Your existing certificates will continue to represent
the same number of shares of the combined company as you held before the merger.
If you are a holder of BankAmerica stock certificates, you will need to
exchange them for new certificates or a book-entry position. If you do not have
stock certificates but hold BankAmerica shares in the form of a book entry with
BankAmerica's transfer agent, those shares will automatically be exchanged.
These new certificates and book-entry positions will both represent shares of
the combined company. Shortly after we complete the merger, we will send
BankAmerica shareholders detailed instructions on how to exchange their shares.
Please do not send us any stock certificates until you receive these
instructions if you want new stock certificates. However, if you want to
exchange your stock certificates for a book-entry position you may send your
stock certificates to the transfer agent at any time (call 1-800-642-9880 for
instructions).
CONDITIONS TO COMPLETION OF THE MERGER
(PAGE 45)
The completion of the merger depends on meeting a number of conditions,
including the following:
1. NationsBank shareholders and BankAmerica shareholders must approve the merger
agreement;
2. we must receive all required regulatory approvals and any waiting periods
required by law must have passed;
3. there must be no governmental order blocking completion of the merger, and no
proceedings by a government body trying to block the merger;
4. we must receive a legal opinion confirming the tax-free nature of the
transaction;
5. the New York Stock Exchange must approve for listing the shares that the
combined company will issue in the merger; and
6. we must receive a letter from each of BankAmerica's and NationsBank's
independent public accountants stating that the merger will qualify for
"pooling of interests" accounting treatment.
Unless prohibited by law, either NationsBank or BankAmerica could elect to
waive a condition that has not been satisfied and complete the merger anyway. We
cannot be certain whether or when any of these conditions will be satisfied, or
waived where permissible, or that we will complete the merger.
TERMINATION OF THE MERGER AGREEMENT
(PAGE 46)
The two companies can agree at any time to terminate the merger agreement
before completing the merger, even if the shareholders of both our companies
have already voted to approve it.
Either company can also terminate the merger agreement:
1. if any government body whose approval is necessary to complete the merger,
including the Board of Governors of the Federal Reserve System, makes a final
decision not to approve the merger;
2. if we do not complete the merger by April 30, 1999;
3. if the NationsBank shareholders or the BankAmerica shareholders do not
approve the merger agreement; or
4. if the other company violates, in a material way, any of its representations,
warranties or obligations under the merger agreement.
Generally, the company seeking to terminate cannot itself be in violation
of the agreement so as
SUMMARY
3
to allow the other party to terminate the agreement.
FEDERAL INCOME TAX CONSEQUENCES (PAGE 47)
We expect that the two companies and their shareholders will not recognize
any gain or loss for U.S. federal income tax purposes in the merger, except in
connection with any cash that BankAmerica shareholders receive instead of
fractional shares. Both companies have received a legal opinion that this will
be the case. This legal opinion is filed as an exhibit to the Registration
Statement of which this joint proxy statement forms a part. Either company has
the right not to complete the merger if it does not receive a confirming legal
opinion at the time of the Merger. The opinion will not bind the Internal
Revenue Service, which could take a different view.
We expect that NationsBank and its shareholders, except perhaps holders of
NationsBank Series B preferred stock, will not recognize any gain or loss for
U.S. federal income tax purposes in the reincorporation.
This tax treatment may not apply to some BankAmerica and NationsBank
shareholders, including the types of shareholders that we describe on page 48,
and will not apply to any NationsBank shareholder who exercises dissenters'
rights under North Carolina law. Determining the actual tax consequences of the
merger to you as an individual taxpayer can be complicated. The tax treatment
will depend on your specific situation and many variables not within our
control. You should consult your own tax advisor for a full understanding of the
merger's tax consequences.
ACCOUNTING TREATMENT (PAGE 56)
We expect the merger to qualify as a "pooling of interests," which means
that, for accounting and financial reporting purposes, we will treat our
companies as if they had always been one company. Either company has the right
not to complete the merger if it does not receive a letter from its independent
public accountants that the merger will qualify as a "pooling of interests."
OPINIONS OF FINANCIAL ADVISORS (PAGES 31 AND 36)
NationsBank Shareholders. In deciding to approve the merger, the NationsBank
Board of Directors considered the opinion of its financial advisor, Merrill
Lynch, Pierce, Fenner & Smith Incorporated, that, as of the date of the opinion,
the proposed exchange ratio was fair from a financial point of view to
NationsBank shareholders. We have attached as Appendix E the written opinion of
Merrill Lynch dated the date of this proxy statement. You should read it
carefully to understand the assumptions made, matters considered and limitations
of the review undertaken by Merrill Lynch in providing its opinion.
BankAmerica Shareholders. In deciding to approve the merger, the
BankAmerica Board of Directors considered the opinion of its financial advisor,
Goldman, Sachs & Co., that, as of the date of the opinion, the proposed exchange
ratio was fair from a financial point of view to the shareholders of
BankAmerica. We have attached as Appendix F the written opinion of Goldman Sachs
dated the date of this proxy statement. You should read it carefully to
understand the assumptions made, matters considered and limitations of the
review undertaken by Goldman Sachs in providing its opinion.
If the merger is completed, each of Goldman Sachs and Merrill Lynch will
earn fees, based upon the market value of the combined company, of up to $50
million.
BOARD OF DIRECTORS AND MANAGEMENT OF THE COMBINED COMPANY FOLLOWING THE MERGER
(PAGE 61)
The Board of Directors. The Board of Directors of the combined company
will initially be comprised of 20 directors. Nine of BankAmerica's directors,
including David A. Coulter, and 11 of NationsBank's directors, including Hugh L.
McColl, Jr., will be appointed to the combined company's Board of Directors.
Management. Mr. McColl, who is NationsBank's Chief Executive Officer, will
become Chairman and Chief Executive Officer of the combined company after the
merger. Mr. Coulter, who is BankAmerica's Chairman and Chief Executive Officer,
will become President of the combined company after the merger. It is the
present intention of the boards of directors of the two companies and of Mr.
McColl that Mr. Coulter will succeed Mr. McColl as Chairman and Chief
SUMMARY
4
Executive Officer of the combined company when
Mr. McColl retires from that position. James H. Hance, Jr. of NationsBank will
become Vice Chairman and Chief Financial Officer of the combined company,
Kenneth D. Lewis of NationsBank will become President of Consumer and Commercial
Banking, Michael J. Murray of BankAmerica will become President of Global
Corporate and Investment Banking, and Michael E. O'Neill of BankAmerica will
become President of Wealth Management and Principal Investing. We expect that
other senior executives of both NationsBank and BankAmerica will continue with
the combined company in senior executive positions after the merger.
INTERESTS OF PERSONS INVOLVED IN THE MERGER THAT ARE DIFFERENT FROM YOURS (PAGE
49)
Certain executive officers and directors of NationsBank and BankAmerica
have interests in the merger agreement that are different from your interests.
The initial Board of Directors of the combined company will be made up of
directors of NationsBank and BankAmerica. The initial executive officers of the
combined company, some of whom will have employment agreements with the combined
company, are currently executive officers of NationsBank and BankAmerica. The
merger will not be considered a "change of control" under NationsBank's stock
plan. However, the merger will be treated as a "change in control" under
BankAmerica's stock plans and change in control agreements it has in place with
some of its executives. This means that the restrictions on those executives
exercising their stock options or selling their restricted shares will go away
at the time of the merger, even if they would otherwise only have gone away at a
later time, and that some of those executives may receive payments under their
existing change in control agreements if they leave their positions after the
merger. The total number of stock options and restricted shares of the five top
BankAmerica executives that become exercisable or unrestricted earlier than they
would have because of the merger is 6,149,650. In connection with the merger,
two of those executives of BankAmerica have announced that they will terminate
their employment. Under their change in control agreements they will receive
cash payments equal to about $13 million in total. The other three of
BankAmerica's top five executives have waived their rights to receive payments
under their existing agreements, which will be replaced by their new employment
agreements with the combined company. Also, the combined company will honor the
employment and indemnification arrangements and benefit obligations which apply
also to the officers and directors of both companies. The NationsBank and
BankAmerica Boards of Directors were aware of these interests and took them into
account in approving the merger agreement.
OPTIONS TO PURCHASE EACH OTHER'S STOCK (PAGE 52)
In connection with the merger agreement, each of NationsBank and
BankAmerica granted a stock option that allows the other company to purchase up
to 19.9% of its common stock. The exercise price of each option is set at the
granting company's closing stock price on the last trading day before the date
of the merger agreement. The exercise price for NationsBank's option to buy
BankAmerica stock is $86.50 per share. The exercise price for BankAmerica's
option to buy NationsBank stock is $76.4375 per share.
Either company can exercise the option only if specific events take place.
These events generally relate to a competing transaction involving a merger,
business combination or other acquisition of the other company or its stock or
assets. As of the date of this document, we do not believe any event of that
kind has occurred. The options could have the effect of discouraging other
companies that might want to combine with or acquire either of the companies. We
have attached the option agreements as Appendices C and D.
DISSENTERS' RIGHTS (PAGE 58)
NationsBank Shareholders. North Carolina law permits holders of NationsBank
preferred stock to dissent from the reincorporation merger and to have the fair
value of their stock appraised and paid to them in cash. To do this, the holders
of these preferred shares must follow certain procedures, including filing
notices with us and, if they are entitled to vote, either ABSTAINING OR VOTING
AGAINST the merger. If you hold shares of NationsBank preferred stock and you
dissent from the merger and follow the required formalities, your shares will
not become equivalent shares of preferred stock in the combined company.
Instead, your only right will be to receive the appraised value of your shares
in cash.
SUMMARY
5
Holders of shares of NationsBank common stock will not have any dissenters'
rights.
BankAmerica Shareholders. BankAmerica shareholders will not have any
dissenters' rights.
REGULATORY APPROVALS (PAGE 56)
We cannot complete the merger unless we obtain the approval of the Board of
Governors of the Federal Reserve System. The U.S. Department of Justice is able
to provide input into the approval process of the Federal Reserve Board. Federal
law requires us to wait for no less than 15 days and up to 30 days before
completing the merger once the Federal Reserve Board approves it. On May 15,
1998, we filed the application to the Federal Reserve Board seeking approval of
the merger.
In addition, the merger is subject to the approval of or notice to various
state and foreign regulators. We have filed or shortly will file all of the
required notices with these regulatory authorities.
While we do not know of any reason why we should not obtain the regulatory
approvals in a timely manner, we cannot be certain when or if we will obtain
them.
SUMMARY
6
UNAUDITED COMPARATIVE PER SHARE AND SELECTED FINANCIAL DATA
The following tables show summary historical financial data for each of our
companies and also show similar information reflecting the merger of our two
companies (which we refer to as "pro forma" information). The summary historical
financial data for NationsBank has been restated to reflect its merger with
Barnett Banks, Inc. on January 9, 1998 which was accounted for using the pooling
of interests method of accounting. In presenting the comparative pro forma
information for certain time periods, we assumed that our companies had been
merged throughout those periods. The following tables show information about our
companies' income per share, dividends per share and book value per share, and
similar pro forma information.
We also assumed that we will treat our companies as if they had always been
combined for accounting and financial reporting purposes (a method known as
"pooling of interests" accounting). We computed the information listed as "pro
forma equivalent" for BankAmerica by multiplying the pro forma amounts by the
exchange ratio of 1.1316. We present this information to reflect the fact that
BankAmerica shareholders will receive more than one share of common stock of the
combined company for each share of BankAmerica common stock they own before the
merger. We expect that we will incur reorganization and restructuring expenses
as a result of combining our companies. The unaudited pro forma earnings and
dividends per share data do not reflect any anticipated reorganization and
restructuring expenses resulting from the merger of our companies.
We also anticipate that the merger will provide the combined company with
certain financial benefits that include reduced operating expenses and
opportunities to earn more revenue. However, we do not reflect any of these
anticipated cost savings or benefits in the pro forma information. Therefore,
the pro forma information, while helpful in illustrating the financial
characteristics of the combined company under one set of assumptions, does not
attempt to predict or suggest future results. The pro forma information also
does not attempt to show how the combined company would actually have performed
had the companies been combined throughout these periods. All adjustments,
consisting of only normal recurring adjustments, necessary for a fair statement
of results of the unaudited historical interim periods have been included.
We base the information in the following tables on the historical financial
information of our companies that we have presented in our prior filings with
the Securities and Exchange Commission. When you read the summary financial
information we provide in the following tables, you should also read the
historical financial information and the more detailed financial information we
provide in this document, which you can find beginning at page 87, as well as
the historical financial information in the other documents to which we refer.
See "Where You Can Find More Information" on page 85. NationsBank's audited
historical financial statements were audited by PricewaterhouseCoopers LLP,
independent accountants, and BankAmerica's audited historical financial
statements were audited by Ernst & Young LLP, independent auditors.
SUMMARY
7
The following unaudited comparative per share data is derived from the
historical financial statements of NationsBank and BankAmerica. The historical
financial statements of NationsBank have been restated to reflect its merger
with Barnett Banks, Inc. ("BARNETT") on January 9, 1998, which was accounted for
using the pooling of interests method of accounting.
UNAUDITED COMPARATIVE PER SHARE DATA
(SHARES IN THOUSANDS)
THREE MONTHS YEAR ENDED DECEMBER 31,
ENDED -----------------------
MARCH 31, 1998 1997 1996 1995
-------------- ----- ----- -----
Earnings per common share (basic)
NationsBank
Historical.............................................. $0.52(1) $3.53(1) $3.56(1) $3.18
Pro forma combined for the merger....................... 0.77(2) 3.71(2) 3.42(2) 3.03
BankAmerica
Historical.............................................. 1.21 4.45 3.72(3) 3.28
Pro forma equivalent for the merger(4).................. 0.87(5) 4.20(5) 3.87(5) 3.43
Earnings per common share (diluted)
NationsBank
Historical.............................................. 0.51(6) 3.44(6) 3.50(6) 3.10
Pro forma combined for the merger....................... 0.75(7) 3.61(7) 3.36(7) 2.98
BankAmerica
Historical.............................................. 1.17 4.32 3.65(3) 3.24
Pro forma equivalent for the merger(4).................. 0.85(8) 4.09(8) 3.80(8) 3.37
Cash dividends per common share
NationsBank
Historical.............................................. 0.38 1.37 1.20 1.04
Pro forma combined for the merger(9).................... 0.38 1.37 1.20 1.04
BankAmerica
Historical.............................................. 0.345 1.22 1.08 0.92
Pro forma equivalent for the merger(4).................. 0.43 1.55 1.36 1.18
MARCH 31, DECEMBER 31,
1998 1997
--------- ------------
Shareholders' equity per common share
(period-end)
NationsBank
Historical.............................................. $26.34 $26.15
Pro forma combined for the merger(10)................... 25.25 25.02
BankAmerica
Historical.............................................. 28.23 27.94
Pro forma equivalent for the merger(4).................. 28.57 28.31
- ---------------
(1) Excluding merger and restructuring items, NationsBank's basic earnings per
common share would have been $1.20, $3.81 and $3.65 for the three months
ended March 31, 1998 and the years ended December 31, 1997 and 1996,
respectively.
(2) Excluding merger and restructuring items, pro forma combined basic earnings
per common share would have been $1.14, $3.86 and $3.57 for the three
months ended March 31, 1998 and the years ended December 31, 1997 and 1996,
respectively.
(3) Excluding restructuring items, BankAmerica's basic and diluted earnings per
common share would have been $3.95 and $3.88 for the year ended December
31, 1996, respectively.
(4) Pro forma equivalent amounts for the merger are calculated by multiplying
the pro forma combined amounts by the exchange ratio of 1.1316.
(5) Excluding merger and restructuring items, BankAmerica's pro forma
equivalent basic earnings per common share would have been $1.29, $4.37 and
$4.04 for the three months ended March 31, 1998 and the years ended
December 31, 1997 and 1996, respectively.
(6) Excluding merger and restructuring items, NationsBank's diluted earnings
per common share would have been $1.17, $3.71 and $3.59 for the three
months ended March 31, 1998 and the years ended December 31, 1997 and 1996,
respectively.
(7) Excluding merger and restructuring items, pro forma combined diluted
earnings per common share would have been $1.11, $3.76 and $3.51 for the
three months ended March 31, 1998 and the years ended December 31, 1997 and
1996, respectively.
(8) Excluding restructuring items, BankAmerica's pro forma equivalent diluted
earnings per common share would have been $1.26, $4.25 and $3.97 for the
three months ended March 31, 1998 and the years ended December 31, 1997 and
1996, respectively.
(9) Pro forma combined dividends per share represent historical dividends per
share paid by NationsBank.
(10) The number of common shares assumed outstanding in calculating
shareholders' equity per common share was 1,727,747 and 1,722,537 as of
March 31, 1998 and December 31, 1997, respectively. Total pro forma
shareholders' equity as of these dates is disclosed under "Selected Pro
Forma Financial Data of NationsBank and BankAmerica Combined."
SUMMARY
8
SELECTED PRO FORMA FINANCIAL DATA
OF NATIONSBANK AND BANKAMERICA COMBINED
THREE MONTHS YEAR ENDED DECEMBER 31,
ENDED ------------------------------------
MARCH 31, 1998 1997 1996 1995
(UNAUDITED) -------------- ---------- ---------- ----------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE
INFORMATION)
Income statement:
Interest income......................................... $ 9,672 $ 37,204 $ 33,540 $ 32,079
Interest expense........................................ 5,086 18,902 16,687 16,370
Net interest income..................................... 4,586 18,302 16,853 15,709
Provision for credit losses............................. 510 1,904 1,645 945
Gain on sales of debt securities........................ 213 181 113 58
Noninterest income...................................... 3,528 11,971 9,744 8,256
Merger and restructuring items.......................... 900 374 398 --
Foreclosed properties expense (income).................. (2) (13) 22 48
Other noninterest expense............................... 4,708 17,633 15,336 14,653
Income before income taxes.............................. 2,211 10,556 9,309 8,377
Income tax expense...................................... 879 4,014 3,497 3,230
Net income.............................................. 1,332 6,542 5,812 5,147
Net income available to common shareholders............. 1,320 6,431 5,610 4,896
Per common share:
Earnings................................................ 0.77(1) 3.71(1) 3.42(1) 3.03
Diluted earnings........................................ 0.75(1) 3.61(1) 3.36(1) 2.98
Cash dividends(2)....................................... 0.38 1.37 1.20 1.04
Shareholders' equity (period-end)....................... 25.25 25.02 21.60 20.39
Balance sheet (period-end):
Total assets............................................ 579,325 570,099 477,088 460,684
Total loans, leases and factored accounts receivable,
net of unearned income................................ 345,006 344,882 318,456 302,892
Total deposits.......................................... 343,936 345,680 308,344 295,419
Long-term debt.......................................... 43,558 42,812 39,997 34,294
Common shareholders' equity............................. 43,630 43,098 34,627 32,732
Total shareholders' equity.............................. 43,690 43,170 36,378 34,881
Average common shares issued (in thousands)............... 1,724,489 1,733,194 1,638,382 1,613,404
Performance ratios:
Return on average assets................................ 0.93%(3)(4) 1.20%(3) 1.20%(3) 1.13%
Return on average common shareholders' equity........... 12.46 (3)(4 15.26(3) 16.32(3) 15.66
Risk-based capital ratios:(5)
Tier 1.................................................. 6.84 6.71 7.39 6.90
Total................................................... 11.01 10.92 11.79 11.12
Leverage capital ratio.................................. 5.96 5.92 6.91 6.24
Total equity to total assets.............................. 7.54 7.57 7.63 7.57
Dividend payout ratio(6).................................. 49.35 36.93 35.09 34.32
Average equity to assets.................................. 7.54 8.02 7.62 7.51
Asset quality ratios:
Allowance for credit losses as a percentage of loans,
leases and factored accounts receivable, net of
unearned income (period-end).......................... 1.96 1.97 1.98 2.05
Allowance for credit losses as a percentage of
nonperforming loans (period-end)...................... 279.31 321.03 290.34 225.11
Net charge-offs as a percentage of average loans, leases
and factored accounts receivable, net of unearned
income................................................ 0.61(4) 0.54 0.53 0.39
Nonperforming assets as a percentage of net loans,
leases, factored accounts receivable and other real
estate owned (period-end)............................. 0.79 0.71 0.86 1.14
- ---------------
(1) Excluding merger and restructuring items, earnings per common share would
have been $1.14, $3.86 and $3.57 and diluted earnings per common share would
have been $1.11, $3.76 and $3.51 for the three months ended March 31, 1998
and the years ended December 31, 1997 and 1996, respectively.
(2) Pro forma combined dividends per common share represent the historical
dividends per common share paid by NationsBank.
(3) Excluding merger and restructuring items, return on average assets would
have been 1.38%, 1.25% and 1.25% and return on average common shareholders'
equity would have been 18.53%, 15.88% and 17.03% for the three months ended
March 31, 1998 and the years ended December 31, 1997 and 1996, respectively.
(4) Annualized.
(5) Capital ratios for 1997, 1996 and 1995 have not been restated to reflect the
impact of NationsBank's merger with Barnett. Barnett and its significant
banking subsidiary were considered "well capitalized" under regulatory
guidelines on January 9, 1998 upon closing of NationsBank's merger with
Barnett.
(6) Excluding merger and restructuring items, the pro forma combined dividend
payout ratio would have been 33.33%, 35.49% and 33.61% for the three months
ended March 31, 1998 and the years ended December 31, 1997 and 1996,
respectively.
SUMMARY
9
SELECTED HISTORICAL FINANCIAL DATA OF NATIONSBANK
THREE MONTHS ENDED
(UNAUDITED)
---------------------------- YEAR ENDED DECEMBER 31,
MARCH 31, MARCH 31, ----------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
--------- --------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE INFORMATION)
Income statement:
Interest income................. $ 5,269 $ 4,781 $ 19,687 $ 16,832 $ 16,186 $ 13,084 $ 10,858
Interest expense................ 2,739 2,368 9,970 8,608 8,992 6,239 4,570
Net interest income............. 2,530 2,413 9,717 8,224 7,194 6,845 6,288
Provision for credit
losses........................ 265 222 954 760 505 384 550
Gain (losses) on sales
of debt securities............ 152 43 155 86 34 (26) 82
Noninterest income.............. 1,776 1,321 5,929 4,408 3,787 3,153 2,702
Merger and restructuring items.. 900 -- 374 118 -- -- 30
Foreclosed properties
expense (income).............. 5 (2) 9 21 30 5 170
Other noninterest
expense....................... 2,452 2,225 9,234 7,283 6,670 6,290 5,703
Income before income
taxes......................... 836 1,332 5,230 4,536 3,810 3,293 2,619
Income tax expense.............. 339 477 1,898 1,597 1,327 1,115 897
Income before effect of
change in method of
accounting for income
taxes......................... 497 855 3,332 2,939 2,483 2,178 1,722
Effect of change in
method of accounting
for income taxes.............. -- -- -- -- -- -- 200
Net income...................... 497 855 3,332(1) 2,939(1) 2,483(1) 2,178 1,922
Net income available to
common shareholders........... 495 851 3,321 2,922 2,459 2,150 1,894
Per common share:
Earnings........................ 0.52(2) 0.90 3.53(1)(2) 3.56(1)(2) 3.18(1) 2.75 2.53(2)
Diluted earnings................ 0.51(2) 0.88 3.44(1)(2) 3.50(1)(2) 3.10(1) 2.70 2.48(2)
Cash dividends.................. 0.38 0.33 1.37 1.20 1.04 0.94 0.82
Shareholders' equity
(period-end).................. 26.34 24.94 26.15 21.23 20.59 17.75 16.19
Balance sheet
(period-end):
Total assets.................... 314,503 280,755 310,554 226,949 228,852 210,882 196,017
Total loans, leases and
factored accounts
receivable, net of
unearned income............... 179,486 179,575 176,778 153,041 147,519 131,892 117,937
Total deposits.................. 170,046 170,664 173,643 140,329 134,925 135,579 123,747
Long-term debt.................. 29,547 26,306 28,890 24,212 18,966 9,265 9,034
Common shareholders'
equity........................ 25,160 23,400 24,684 16,956 15,933 13,895 12,518
Total shareholders'
equity........................ 25,220 23,525 24,747 17,079 16,073 14,145 12,853
Average common shares
issued (in thousands).......... 949,641 945,184 941,992 820,945 773,799 782,255 749,122
Performance ratios:
Return on average
assets........................ 0.64%(3)(4) 1.22%(4) 1.16%(3) 1.22%(3) 1.08% 1.07% 1.00%(3)
Return on average
common shareholders'
equity........................ 8.28(3)(4) 14.69(4) 14.12(3) 17.74(3) 16.91 16.23 15.23(3)
Risk-based capital
ratios:(5)
Tier 1.......................... 6.80 7.06 6.50 7.76 7.24 7.43 7.41
Total........................... 11.19 11.58 10.89 12.66 11.58 11.47 11.73
Leverage capital ratio............ 5.64 6.19 5.57 7.09 6.27 6.18 6.00
Total equity to total
assets.......................... 8.02 8.38 7.97 7.53 7.02 6.71 6.56
Dividend payout
ratio(6)........................ 73.08 36.67 38.81 33.71 32.70 34.18 32.41
Average equity to
assets.......................... 7.72 8.34 8.20 6.85 6.43 6.61 6.63
SUMMARY
10
THREE MONTHS ENDED
(UNAUDITED)
---------------------------- YEAR ENDED DECEMBER 31,
MARCH 31, MARCH 31, ----------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
--------- --------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE INFORMATION)
Asset quality ratios:
Allowance for credit
losses as a
percentage of loans,
leases and factored
accounts receivable,
net of unearned
income
(period-end)......... 1.81 1.82 1.85 1.82 1.81 2.04 2.28
Allowance for credit
losses as a
percentage of
nonperforming loans
(period-end)......... 233.89 263.99 270.05 258.52 304.57 268.16 188.45
Net charge-offs as a
percentage of average
loans, leases and
factored accounts
receivable, net of
unearned income...... 0.63(4) 0.49(4) 0.53 0.49 0.39 0.33 0.52
Nonperforming assets as
a percentage of net
loans, leases,
factored accounts
receivable and other
foreclosed properties
(period-end)......... 0.86 0.81 0.77 0.83 0.74 1.08 1.89
- ---------------
(1) NationsBank applies the provisions of Accounting Principles Board Opinion
No. 25 in accounting for its stock option and award plans and has elected to
provide SFAS 123 disclosures as if NationsBank had adopted the fair-value
based method of measuring outstanding employee stock options. If NationsBank
had adopted the fair-value based method, net income, earnings per share and
diluted earnings per share would have been $3,148, $3.33 and $3.25 for the
year ended December 31, 1997, $2,845, $3.44 and $3.39 for the year ended
December 31, 1996 and $2,466, $3.16 and $3.08 for the year ended December
31, 1995, respectively.
(2) Excluding merger and restructuring items, earnings per common share would
have been $1.20, $3.81, $3.65 and $2.55 and diluted earnings per share would
have been $1.17, $3.71, $3.59 and $2.51 for the three months ended March 31,
1998 and the years ended December 31, 1997, 1996 and 1993, respectively.
(3) Excluding merger and restructuring items, return on average assets would
have been 1.47%, 1.25%, 1.25% and 1.01% and return on average common
shareholders' equity would have been 19.01%, 15.25%, 18.21% and 15.41% for
the three months ended March 31, 1998 and the years ended December 31, 1997,
1996 and 1993, respectively.
(4) Annualized.
(5) Capital ratios for all periods prior to March 31, 1998 have not been
restated to reflect the impact of NationsBank's merger with Barnett. Barnett
and its significant banking subsidiary were considered "well capitalized"
under regulatory guidelines on January 9, 1998 upon closing of NationsBank's
merger with Barnett.
(6) Excluding merger and restructuring items, the dividend payout ratio would
have been 31.67%, 35.96%, 32.88% and 32.16% for the three months ended March
31, 1998 and the years ended December 31, 1997, 1996 and 1993 respectively.
SUMMARY
11
SELECTED HISTORICAL FINANCIAL DATA OF BANKAMERICA(1)
THREE MONTHS ENDED
(UNAUDITED)
--------------------- YEAR ENDED DECEMBER 31,
MARCH 31, MARCH 31, ----------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
--------- --------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE INFORMATION)
Income statement:
Interest income.................................. $ 4,403 $ 4,255 $ 17,517 $ 16,708 $ 15,893 $ 12,384 $ 11,627
Interest expense................................. 2,347 2,100 8,932 8,079 7,378 4,842 4,186
Net interest income.............................. 2,056 2,155 8,585 8,629 8,515 7,542 7,441
Provision for credit losses...................... 245 220 950 885 440 460 803
Gain on sales of debt securities................. 61 13 26 27 24 24 61
Noninterest income............................... 1,752 1,357 6,042 5,336 4,469 4,123 4,212
Restructuring items.............................. -- -- -- 280 -- -- --
Foreclosed properties expense (income)........... (7) 3 (22) 1 18 34 127
Other noninterest expense........................ 2,256 1,996 8,399 8,053 7,983 7,478 7,356
Income before income taxes....................... 1,375 1,306 5,326 4,773 4,567 3,717 3,428
Income tax expense............................... 540 526 2,116 1,900 1,903 1,541 1,474
Net income....................................... 835 780 3,210 2,873 2,664 2,176 1,954
Net income available to common shareholders...... 825 746 3,110 2,688 2,437 1,928 1,713
Per common share:
Earnings......................................... 1.21 1.05 4.45 3.72(2) 3.28 2.70 2.41
Diluted earnings................................. 1.17 1.03 4.32 3.65(2) 3.24 2.68 2.39
Cash dividends................................... 0.345 0.305 1.22 1.08 0.92 0.80 0.70
Shareholders' equity (period-end)................ 28.23 26.25 27.94 26.00 23.95 21.31 19.79
Balance sheet (period end):
Total assets..................................... 265,436 249,904 260,159 250,753 232,446 215,475 186,933
Total loans, leases and factored accounts
receivable, net of unearned income............. 165,520 168,443 168,104 166,270 156,195 140,912 126,556
Total deposits................................... 173,890 168,999 172,037 168,015 160,494 154,394 141,618
Long-term debt................................... 14,011 14,725 13,922 15,785 15,328 15,428 14,115
Common shareholders' equity...................... 19,270 18,501 19,223 18,471 17,599 15,823 14,165
Total shareholders' equity....................... 19,884 20,097 19,837 20,713 20,222 18,891 17,144
Average common shares issued (in thousands)....... 684,737 708,585 699,189 722,373 741,963 714,625 710,213
Performance ratios:
Return on average assets......................... 1.28%(3) 1.25%(3) 1.25% 1.19%(2) 1.17% 1.08% 1.05%
Return on average common shareholders' equity.... 17.89(3) 16.50(3) 16.69 15.00(2) 14.58 13.20 12.88
Risk-based capital ratios:
Tier 1........................................... 7.49 7.83 7.53 7.77 7.35 7.27 7.53
Total............................................ 11.41 11.87 11.56 11.79 11.48 11.69 11.93
Leverage capital ratio............................ 6.86 7.36 6.81 7.44 6.92 6.74 6.58
Total equity to total assets...................... 7.49 8.04 7.62 8.26 8.70 8.77 9.17
Dividend payout ratio(4).......................... 28.51 29.05 27.42 29.03 28.05 29.63 29.05
Average equity to assets.......................... 7.33 7.99 7.82 8.38 8.61 8.75 8.79
Asset quality ratios:
Allowance for credit losses as a percentage of
loans, leases and factored accounts receivable,
net of unearned income (period-end)............ 2.13 2.10 2.08 2.12 2.28 2.62 2.77
Allowance for credit losses as a percentage of
nonperforming loans (period-end)............... 340.46 345.17 390.19 321.74 188.24 177.49 121.55
Net charge-offs as a percentage of average loans,
leases and factored accounts receivable, net of
unearned income................................ 0.58(3) 0.50(3) 0.54 0.58 0.40 0.37 0.89
Nonperforming assets as a percentage of net
loans, leases, factored accounts receivable and
other real estate owned (period-end)........... 0.72 0.78 0.66 0.88 1.52 1.86 2.68
- ---------------
(1) Certain amounts in the historical financial statements of BankAmerica have
been reclassified to conform with the historical financial statement
presentation of NationsBank.
(2) Excluding restructuring items, earnings per common share, diluted earnings
per common share, return on average assets and return on average common
shareholders' equity for the year ended December 31, 1996 would have been
$3.95, $3.88, 1.26% and 15.94%, respectively.
(3) Annualized.
(4) Excluding restructuring items, the dividend payout ratio would have been
27.34% for the year ended December 31, 1996.
SUMMARY
12
INDEX OF DEFINED TERMS
PAGE NO.
--------
401(k) Plan........................ 16
Acquisition Transaction............ 54
ATMs............................... 65
BankAmerica 401(k) Investment
Plan............................. 20
BankAmerica........................ 15
BankAmerica By-laws................ 75
BankAmerica Certificates........... 42
BankAmerica Common Stock........... 19
BankAmerica Option................. 52
BankAmerica Option Shares.......... 52
BankAmerica Record Date............ 20
BankAmerica Shareholders........... 19
BankAmerica Special Meeting........ 19
BankAmerica Stock Option
Agreement........................ 52
BankAmerica Stock Plans............ 51
BankAmerica Treasury Shares........ 24
Bank of America.................... 66
Barnett............................ 8
BEST Plan.......................... 16
BHCA............................... 56
Boatmen's.......................... 73
broker non-votes................... 17
business combination............... 77
CEO................................ 49
Closing Date....................... 46
Code............................... 24
Combined Company................... 15
Combined Company By-laws........... 23
Combined Company Certificate....... 23
Combined Company Certificates...... 42
Combined Company Common Stock...... 23
Combined Company ESOP Preferred
Stock............................ 23
Combined Company Preferred Stock... 23
Combined Company Series B Preferred
Stock............................ 23
Combined Company Series BB
Preferred Stock.................. 23
Commission......................... 46
Committee.......................... 79
Comptroller........................ 67
Conversion Rate.................... 73
Covered Executives................. 50
DGCL............................... 21
Dissenting Shares.................. 58
DOJ................................ 56
PAGE NO.
--------
Effective Time..................... 23
Eligible Dissenters................ 58
Employment Agreements.............. 49
Employment Period.................. 49
EPS................................ 35
Exchange Agent..................... 42
Exchange Fund...................... 42
Exchange Ratio..................... 24
Executive Agreements............... 50
Executives......................... 49
Exercise Termination Event......... 54
Expected Synergies................. 32
FDIC............................... 67
FDICIA............................. 68
Federal Reserve Board.............. 46
GAAP............................... 32
Goldman Sachs...................... 25
Holder............................. 53
IBES............................... 27
Initial Triggering Event........... 53
interested stockholder............. 77
Interstate Banking and Branching
Act.............................. 67
IRS................................ 48
ISOs............................... 82
Issuer............................. 52
Issuer Common Stock................ 52
Issuer Option...................... 52
Issuer Option Agreement............ 52
Issuer Option Repurchase Price..... 54
Issuer Option Share Repurchase
Price............................ 54
Issuer Option Shares............... 52
Key employees...................... 80
leverage ratio..................... 68
LSARs.............................. 51
LSE................................ 63
market/offer price................. 55
Meetings........................... 19
Merger............................. 15
Merger Agreement................... 15
Merrill Lynch...................... 25
Merrill Lynch Opinion.............. 31
MESP Plan.......................... 16
NationsBank........................ 15
NationsBank Articles............... 17
INDEX OF DEFINED TERMS
13
PAGE NO.
--------
NationsBank By-laws................ 75
NationsBank Common Stock........... 15
NationsBank(DE).................... 15
NationsBank Dissenters............. 58
NationsBank ESOP Preferred Stock... 15
NationsBank Executive Committee.... 26
NationsBank Matters................ 15
NationsBank Option................. 52
NationsBank Option Shares.......... 52
NationsBank Preferred Stock........ 23
NationsBank Record Date............ 16
NationsBank Series B Preferred Stock... 15
NationsBank Series BB Preferred Stock... 23
NationsBank Shareholders........... 23
NationsBank Special Meeting........ 15
NationsBank Stock.................. 23
NationsBank Stock Option
Agreement........................ 52
NationsBank Voting Shares.......... 15
NationsBank Voting Shareholders.... 15
NCBCA.............................. 16
NQSOs.............................. 83
NYSE............................... 17
Optionee........................... 52
OTS................................ 67
Owner.............................. 54
PCX................................ 63
PAGE NO.
--------
Peer Group......................... 34
Performance Shares................. 81
Recent Annual Bonus................ 50
Registration Statement............. 85
Reincorporation Merger............. 15
Reincorporation Merger Effective
Time............................. 23
Reincorporation Plan............... 15
Reorganization..................... 15
Repurchase Event................... 54
Restricted Stock................... 49
Restricted Stock Plan.............. 79
Retirement Benefit................. 49
SARs............................... 79
Securities Act..................... 24
SERP............................... 49
Stock Plan......................... 15
Stock Option Agreements............ 52
Subsequent Triggering Event........ 54
Substitute Option.................. 55
Super-Regionals.................... 36
Synergies.......................... 41
Tax Opinion........................ 47
Tier 1 capital..................... 68
Tier 2 capital..................... 68
TSE................................ 63
INDEX OF DEFINED TERMS
14
NATIONSBANK SPECIAL MEETING
GENERAL
This Joint Proxy Statement-Prospectus is being mailed by NationsBank
Corporation, a North Carolina corporation ("NATIONSBANK") to holders of shares
of its common stock, without par value ("NATIONSBANK COMMON STOCK"), ESOP
Convertible Preferred Stock, Series C ("NATIONSBANK ESOP PREFERRED STOCK") and
7% Cumulative Redeemable Preferred Stock, Series B ("NATIONSBANK SERIES B
PREFERRED STOCK") (collectively, the "NATIONSBANK VOTING SHARES," held by the
"NATIONSBANK VOTING SHAREHOLDERS") on or about August 13, 1998, together with
the Notice of the Special Meeting of NationsBank Shareholders (the "NATIONSBANK
SPECIAL MEETING") and a form of proxy solicited by the NationsBank Board for use
at the NationsBank Special Meeting to be held on September 24, 1998 at 12:00
noon, local time, at the International Trade Center, 200 North College Street,
Charlotte, North Carolina, and at any adjournments or postponements thereof.
MATTERS TO BE CONSIDERED
At the NationsBank Special Meeting, NationsBank Voting Shareholders will be
asked to consider and vote upon a proposal to approve the Agreement and Plan of
Reorganization, dated as of April 10, 1998 (the "MERGER AGREEMENT"), by and
between NationsBank and BankAmerica Corporation, a Delaware corporation
("BANKAMERICA"), the related Plan of Reincorporation Merger (the
"REINCORPORATION PLAN"), dated as of August 3, 1998 by and between NationsBank
and NationsBank (DE) Corporation, a Delaware corporation and a wholly owned
subsidiary of NationsBank ("NATIONSBANK (DE)"), and the transactions
contemplated by those documents. These transactions will include, among other
things, (a) the merger (the "REINCORPORATION MERGER") of NationsBank with and
into NationsBank (DE), (b) the merger (the "MERGER," and together with the
Reincorporation Merger, the "REORGANIZATION") of BankAmerica with and into
NationsBank (DE), which will be the surviving corporation in the Merger, will be
renamed "BankAmerica Corporation" and is referred to in this Joint Proxy
Statement-Prospectus as the "COMBINED COMPANY," and (c) the issuance of shares
of the Combined Company to shareholders of BankAmerica. At the NationsBank
Special Meeting, NationsBank Voting Shareholders will also vote upon a proposal
to approve an amendment to the NationsBank Corporation Key Employee Stock Plan,
which, as amended, will be the key employee stock plan of the Combined Company
(referred to in this Joint Proxy Statement-Prospectus as the "STOCK PLAN"). The
proposal to approve the Merger Agreement (which, as used herein with respect to
NationsBank, includes the Reincorporation Plan) and the proposal to approve the
amendments to the Stock Plan are referred to collectively as the "NATIONSBANK
MATTERS." NationsBank shareholders should be aware that, since NationsBank will
become a Delaware corporation as part of the Reorganization, their rights as
shareholders will change. See "Comparative Rights of Shareholders of
NationsBank, BankAmerica and the Combined Company." The NationsBank Shareholders
may also be asked to vote upon a proposal to adjourn or postpone the NationsBank
Special Meeting, which adjournment or postponement could be used for the
purpose, among others, of allowing additional time for the soliciting of
additional votes to approve the NationsBank Matters.
PROXIES
If you are a NationsBank Voting Shareholder, you may use the accompanying
form of proxy at the NationsBank Special Meeting if you are unable to attend in
person or wish to have your shares voted by proxy even if you do attend the
NationsBank Special Meeting. You may revoke any proxy given by you pursuant to
this solicitation at any time before it is exercised, either by submitting to
the Corporate Secretary of NationsBank written notice of revocation or a
properly executed proxy of a later date or by attending the NationsBank Special
Meeting and electing to vote in person. You should address written notices of
revocation and other communications with respect to the revocation of
NationsBank proxies to NationsBank Corporation, NationsBank Corporate Center,
100 North Tryon Street, 56th Floor, Charlotte, North Carolina 28255, Attention:
Corporate Secretary.
All shares represented by valid proxies received pursuant to this
solicitation, and not revoked before they are exercised, will be voted in the
manner specified therein. If you do not specify how your proxy is to be voted,
NATIONSBANK SPECIAL MEETING
15
it will be voted in favor of the approval of the NationsBank Matters. The
NationsBank Board is unaware of any other matters that may be presented for
action at the NationsBank Special Meeting. If other matters do properly come
before the NationsBank Special Meeting, however, it is intended that shares
represented by proxies in the accompanying form will be voted or not voted by
the persons named in the proxies, in their discretion, provided that no proxy
that is voted against any of the NationsBank Matters will be voted in favor of
any adjournment or postponement of the NationsBank Special Meeting for the
purpose of soliciting additional proxies.
Voting by Participants in Certain NationsBank Employee Benefit Plans. If
you are a participant in the NationsBank 401(k) Plan (the "401(k) PLAN"), the
Barnett Employee Savings and Thrift Plan (the "BEST PLAN"), or the Management
Excess Savings Plan of Barnett and its Affiliates (the "MESP PLAN"), you may
submit a voting instructions card to give voting instructions to the respective
Plan trustees. Unallocated shares and shares for which no voting instructions
are received that are held under the ESOP Trust of the 401(k) Plan or that are
held under the BEST Plan or the MESP Plan will be voted by the respective Plan
trustees in the same proportion as the shares for which voting instructions are
received. Shares for which no voting instructions are received that are held
under the Investment Trust of the 401(k) Plan will not be voted. If you have
questions about your instructions to vote shares under the Plans, you should
contact the respective Plan trustees as follows: NationsBank, N.A., Trustee of
the Investment Trust under the 401(k) Plan, NationsBank Plaza, Charlotte, North
Carolina 28255; State Street Bank and Trust Company, Trustee of the ESOP Trust
under the 401(k) Plan, 225 Franklin Street, Boston, Massachusetts 02110; and
Barnett Bank, N.A., Trustee of the Trusts for the BEST Plan and MESP Plan, Post
Office Box 40200, Jacksonville, Florida 32203.
Confidential Voting by Participants in Certain NationsBank Employee Benefit
Plans. NationsBank has put in place procedures to maintain confidentiality of
certain votes. NationsBank uses a single proxy card for all voting by
participants in the 401(k) Plan, the BEST Plan, and the MESP Plan. To protect
the confidentiality of votes, NationsBank directs the stock transfer agent to
restrict the access of NationsBank to proxy cards and ballots and to report
voting results to NationsBank and the respective plan trustees only in the
aggregate.
SOLICITATION OF PROXIES
The entire cost of soliciting the proxies from the NationsBank Shareholders
will be borne by NationsBank, except that BankAmerica has agreed to pay one-half
of the printing costs. In addition to the solicitation of the proxies by mail,
NationsBank will request banks, brokers and other record holders to send proxies
and proxy material to the beneficial owners of the stock and secure their voting
instructions, if necessary. NationsBank will reimburse the record holders for
their reasonable expenses in so doing. NationsBank has also made arrangements
with Georgeson & Company Inc. to assist it in soliciting proxies from banks,
brokers and nominees and has agreed to pay $15,000, plus expenses, for such
services. If necessary, NationsBank may also use several of its regular
employees, who will not be specially compensated, to solicit proxies from
NationsBank Voting Shareholders, either personally or by telephone, telegram,
facsimile or special delivery letter.
RECORD DATE AND VOTING RIGHTS
Record Date. Pursuant to the provisions of the North Carolina Business
Corporation Act (the "NCBCA"), NationsBank has fixed August 4, 1998 as the
record date for determination of the NationsBank Voting Shareholders entitled to
notice of and to vote at the NationsBank Special Meeting (the "NATIONSBANK
RECORD DATE"). Accordingly, only NationsBank Voting Shareholders of record at
the close of business on the NationsBank Record Date will be entitled to notice
of and to vote at the NationsBank Special Meeting. The number of outstanding
shares of NationsBank Common Stock, NationsBank ESOP Preferred Stock and
NationsBank Series B Preferred Stock entitled to vote at the NationsBank Special
Meeting is approximately 962,509,438, 1,972,730 and 8,836, respectively.
Quorum Requirement. The presence, in person or by proxy, of NationsBank
Voting Shares representing a majority of the total voting power of such shares
entitled to vote on the NationsBank Record Date is necessary to constitute a
quorum at the NationsBank Special Meeting.
NATIONSBANK SPECIAL MEETING
16
Voting Rights. Each share of NationsBank Common Stock and NationsBank
Series B Preferred Stock entitles its holder to one vote, and each share of
NationsBank ESOP Preferred Stock entitles its holder to two votes. All such
shares vote together as a single class.
Votes Required. Under the NCBCA and the Amended and Restated Articles of
Incorporation of NationsBank (the "NATIONSBANK ARTICLES"), the affirmative vote
of a majority of the votes entitled to be cast at the NationsBank Special
Meeting is required to approve the Merger Agreement and the transactions
contemplated thereby. The NCBCA and the NationsBank Articles also specify that
the affirmative vote of a majority of the votes cast at the NationsBank Special
Meeting is required to amend the Stock Plan.
Abstentions and Broker Non-Votes. In accordance with North Carolina law,
NationsBank intends to count NationsBank Voting Shares present in person at the
NationsBank Special Meeting but not voting, and NationsBank Voting Shares for
which it has received proxies but with respect to which holders of such shares
have abstained, as present at the NationsBank Special Meeting for purposes of
determining the presence or absence of a quorum for the transaction of business.
In addition, under applicable New York Stock Exchange, Inc. ("NYSE") rules,
brokers who hold NationsBank Voting Shares in "street" name for customers who
are the beneficial owners of such shares are prohibited from giving a proxy to
vote shares held for such customers with respect to the Merger Agreement without
specific instructions from such customers. NationsBank Voting Shares represented
by proxies returned by a broker holding such shares in nominee or "street" name
will be counted for purposes of determining whether a quorum exists, even if
such shares are not voted in matters where discretionary voting by the broker is
not allowed ("BROKER NON-VOTES"). Abstentions from voting and broker non-votes
will not be deemed to have been cast either "for" or "against" the NationsBank
Matters at the NationsBank Special Meeting.
BECAUSE APPROVAL OF THE MERGER AGREEMENT REQUIRES THE AFFIRMATIVE VOTE OF A
MAJORITY OF THE VOTES ENTITLED TO BE CAST AT THE NATIONSBANK SPECIAL MEETING,
ABSTENTIONS AND BROKER NON-VOTES WILL HAVE THE SAME EFFECT AS NEGATIVE VOTES.
ACCORDINGLY, THE NATIONSBANK BOARD URGES THE NATIONSBANK VOTING SHAREHOLDERS TO
COMPLETE, DATE AND SIGN THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED, POSTAGE-PAID ENVELOPE.
As of the NationsBank Record Date, approximately 23,615,000 shares of
NationsBank Common Stock, approximately 1,200 shares of NationsBank ESOP
Preferred Stock and no shares of NationsBank Series B Preferred Stock,
equivalent in the aggregate to approximately 2.4% of the votes entitled to be
cast at the NationsBank Special Meeting, were beneficially owned by directors
and executive officers of NationsBank. It is currently expected that each such
director and executive officer of NationsBank will vote the shares of
NationsBank stock beneficially owned by him or her for approval of the
NationsBank Matters. In addition, as of the NationsBank Record Date, directors
and executive officers of BankAmerica beneficially owned shares of NationsBank
Common Stock, NationsBank ESOP Preferred Stock and NationsBank Series B
Preferred Stock equivalent in the aggregate to less than 0.01% of the votes
entitled to be cast at the NationsBank Special Meeting. It is currently expected
that each such director and executive officer of BankAmerica will vote the
NationsBank Voting Shares beneficially owned by him or her for approval of the
NationsBank Matters.
Additional information with respect to beneficial ownership of NationsBank
Common Stock, NationsBank ESOP Preferred Stock and NationsBank Series B
Preferred Stock by individuals and entities owning more than 5% of the
outstanding shares of each series of such stock and more detailed information
with respect to beneficial ownership of NationsBank Common Stock by directors
and executive officers of NationsBank is incorporated by reference to the
NationsBank Annual Report on Form 10-K for the year ended December 31, 1997. See
"Where You Can Find More Information."
RECOMMENDATION OF THE NATIONSBANK BOARD
The NationsBank Board has, by the unanimous vote of all directors present,
approved the NationsBank Matters. The NationsBank Board believes that the Merger
Agreement and the transactions contemplated thereby are fair to and in the best
interests of NationsBank and the NationsBank Shareholders. The NationsBank Board
unanimously recommends that the NationsBank Shareholders vote "FOR" the
NationsBank Matters. See "The Merger--Reasons of NationsBank for the Merger."
NATIONSBANK SPECIAL MEETING
17
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18
BANKAMERICA SPECIAL MEETING
GENERAL
This Joint Proxy Statement-Prospectus is being mailed on or about August
13, 1998 to the holders of record at the close of business on the BankAmerica
Record Date (as defined below) (the "BANKAMERICA SHAREHOLDERS") of the common
stock, par value $1.5625 per share, of BankAmerica ("BANKAMERICA COMMON STOCK")
and is accompanied by the Notice of Special Meeting and a form of proxy that is
solicited by the BankAmerica Board of Directors for use at the Special Meeting
of BankAmerica Shareholders (the "BANKAMERICA SPECIAL MEETING," and together
with the NationsBank Special Meeting, the "MEETINGS") to be held on September
24, 1998, at 9:00 a.m., local time, at Nob Hill Masonic Center, 1111 California
Street, San Francisco, California and at any adjournments or postponements
thereof.
MATTERS TO BE CONSIDERED
At the BankAmerica Special Meeting, BankAmerica Shareholders will be asked
to consider and vote upon a proposal to approve the Merger Agreement and the
transactions contemplated thereby. The BankAmerica Shareholders may also be
asked to vote upon a proposal to adjourn or postpone the BankAmerica Special
Meeting, which adjournment or postponement could be used for the purpose, among
others, of allowing additional time for the soliciting of additional votes to
approve the Merger Agreement.
PROXIES
If you are a BankAmerica Shareholder, you may use the accompanying proxy if
you are unable to attend the BankAmerica Special Meeting in person or wish to
have your shares voted by proxy even if you do attend the BankAmerica Special
Meeting. You may revoke any proxy given by you pursuant to this solicitation by
delivering to the Corporate Secretary of BankAmerica, prior to or at the
BankAmerica Special Meeting, a written notice revoking the proxy or a duly
executed proxy relating to the same shares bearing a later date or by attending
the BankAmerica Special Meeting and electing to vote in person; however, your
attendance at the BankAmerica Special Meeting will not in and of itself
constitute a revocation of a proxy. You should address any written notice of
revocation and other communications with respect to the revocation of
BankAmerica proxies to BankAmerica Corporation, Bank of America Center, 555
California Street, 6th Floor, San Francisco, California 94104, Attention:
Corporate Secretary's Office #13018. You may also revoke a proxy through the
telephone or Internet proxy procedures discussed below. In all cases, the latest
dated proxy revokes an earlier dated proxy, regardless of which method is used
(mail, telephone or Internet) to give or revoke a proxy, or if different methods
are used to give and revoke a proxy. For such notice of revocation or later
proxy to be valid, however, it must actually be received by BankAmerica prior to
the vote of the BankAmerica Shareholders at the BankAmerica Special Meeting.
All shares represented by valid proxies received pursuant to this
solicitation, and not revoked before they are exercised, will be voted in the
manner specified therein. If you do not specify how your proxy is to be voted,
it will be voted in favor of adoption of the Merger Agreement. The BankAmerica
Board is unaware of any other matters that may be presented for action at the
BankAmerica Special Meeting. If other matters do properly come before the
BankAmerica Special Meeting, however, it is intended that shares represented by
proxies in the accompanying form will be voted or not voted by the persons named
in the proxies, in their discretion, provided that no proxy that is voted
against approval of the Merger Agreement will be voted in favor of any
adjournment or postponement of the BankAmerica Special Meeting for the purpose
of soliciting additional proxies.
Telephone Proxies--An Additional Voting Choice. As a BankAmerica
Shareholder, you may use a toll-free telephone line to authorize the
proxyholders to vote your shares. The telephone procedures are designed to
authenticate your identity, to allow you to vote your shares and to confirm that
your instructions have been properly recorded. The enclosed proxy card contains
the specific instructions to be followed if you want to use telephone voting.
These telephone procedures are not available to BankAmerica shareholders who own
shares in "street name" through a broker or in certain limited instances as
described below for participants in the
BANKAMERICA SPECIAL MEETING
19
BankAmerica 401(k) Investment Plan ("BANKAMERICA 401(k) INVESTMENT PLAN").
BankAmerica has been advised by counsel that these procedures comply with
Delaware law.
Internet Voting by BankAmerica Shareholders -- An Additional Voting
Choice. As a BankAmerica Shareholder, you may submit a proxy by Internet in
lieu of returning an executed proxy card. In order to use this voting feature,
log onto BankAmerica's voting site ("http://www.eproxy.com/bac/") and follow the
instructions. The enclosed proxy card also contains instructions for Internet
voting. BankAmerica employees who hold shares in their BankAmerica 401(k)
Investment Plan account may also use the Internet. If you participate in the
BankAmerica 401(k) Investment Plan and you wish to have your plan shares voted
differently than your shares held directly, you must do so by mail and may not
use Internet voting. BankAmerica has been advised by counsel that these
procedures comply with Delaware law.
Voting by BankAmerica 401(k) Investment Plan Participants. If you
participate in the BankAmerica 401(k) Investment Plan, you may submit a proxy
card (or use the Internet or telephone proxy) to give voting instructions to the
plan trustee, if you have BankAmerica Common Stock in your plan account. If you
hold shares directly in your name alone and have shares in your plan account,
your voting choices apply to both. If you wish to have your plan shares voted
differently than your shares held directly, you must say so on your proxy card.
In that case, you cannot use the telephone proxy procedure or the Internet
voting procedures to give or revoke a proxy.
The plan trustee will vote only those shares for which voting instructions
are received. If you have questions about your instructions to the trustee or
about your plan shares, contact Business Retirement Programs, Unit #9260, 315
Montgomery Street, Mezzanine Level, San Francisco, California 94104, (415)
622-3237.
Confidential Voting. BankAmerica has put in place procedures to maintain
confidentiality of votes. BankAmerica uses a single proxy card for all
BankAmerica Shareholder voting, including voting by participants in the
BankAmerica 401(k) Investment Plan. To protect the confidentiality of votes,
BankAmerica directs the stock transfer agent to restrict BankAmerica's access to
proxy cards, ballots and certain records relating to telephone and Internet
proxies and to report voting results to BankAmerica and the plan trustee only in
the aggregate.
SOLICITATION OF PROXIES
The entire cost of soliciting the proxies from the BankAmerica Shareholders
will be borne by BankAmerica except that NationsBank has agreed to pay one-half
of the printing costs. In addition to the solicitation of the proxies by mail,
BankAmerica will request banks, brokers and other record holders to send proxies
and proxy material to the beneficial owners of the stock and secure their voting
instructions, if necessary. BankAmerica will reimburse such record holders for
their reasonable expenses in so doing. BankAmerica has also made arrangements
with D. F. King & Co., Inc. to assist it in soliciting proxies from banks,
brokers and nominees and has agreed to pay approximately $15,000, plus expenses,
for such services. Directors, officers and employees of BankAmerica who will not
be specially compensated, may also solicit proxies from BankAmerica
Shareholders, either personally or by telephone, telegram, facsimile or mail.
RECORD DATE AND VOTING RIGHTS
Record Date. The BankAmerica Board has fixed August 4, 1998 as the record
date for the determination of the BankAmerica Shareholders entitled to receive
notice of and to vote at the BankAmerica Special Meeting (the "BANKAMERICA
RECORD DATE"). Accordingly, only BankAmerica Shareholders of record at the close
of business on the BankAmerica Record Date will be entitled to notice of and to
vote at the BankAmerica Special Meeting. At the close of business on the
BankAmerica Record Date, there were approximately 686,450,826 shares of
BankAmerica Common Stock entitled to vote at the BankAmerica Special Meeting.
Quorum Requirement. The presence, in person or by proxy, of shares of
BankAmerica Common Stock representing a majority of the total voting power of
such shares entitled to vote on the BankAmerica Record Date is necessary to
constitute a quorum at the BankAmerica Special Meeting.
BANKAMERICA SPECIAL MEETING
20
Voting Rights. Each share of BankAmerica Common Stock outstanding on the
BankAmerica Record Date entitles its holder to one vote as to (i) the proposal
to adopt the Merger Agreement and the transactions contemplated thereby and (ii)
any other proposal that may properly come before the BankAmerica Special
Meeting.
Vote Required. Under the Delaware General Corporation Law (the "DGCL"),
approval of the Merger Agreement requires the affirmative vote of the holders of
a majority of the outstanding shares of BankAmerica Common Stock.
Abstentions and Broker Non-Votes. In accordance with Delaware law,
BankAmerica intends to count shares of BankAmerica Common Stock present in
person at the BankAmerica Special Meeting but not voting, and shares of
BankAmerica Common Stock for which it has received proxies but with respect to
which holders of such shares have abstained, as present at the BankAmerica
Special Meeting for purposes of determining the presence or absence of a quorum
for the transaction of business. In addition, under applicable NYSE rules,
brokers who hold shares of BankAmerica Common Stock in "street" name for
customers who are the beneficial owners of such shares are prohibited from
giving a proxy to vote shares held for such customers with respect to the
matters to be considered and voted upon at the BankAmerica Special Meeting
without specific instructions from such customers. Shares of BankAmerica Common
Stock represented by proxies returned by a broker holding such shares in nominee
or "street" name will be counted for purposes of determining whether a quorum
exists, even if such shares are broker non-votes. Abstentions from voting and
broker non-votes will not be deemed to have been cast either "for" or "against"
the Merger Agreement at the BankAmerica Special Meeting.
BECAUSE ADOPTION OF THE MERGER AGREEMENT REQUIRES THE AFFIRMATIVE VOTE OF A
MAJORITY OF OUTSTANDING SHARES OF BANKAMERICA COMMON STOCK, ABSTENTIONS AND
BROKER NON-VOTES WILL HAVE THE SAME EFFECT AS NEGATIVE VOTES. ACCORDINGLY, THE
BANKAMERICA BOARD URGES BANKAMERICA SHAREHOLDERS TO COMPLETE, DATE AND SIGN THE
ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED, POSTAGE-PAID ENVELOPE
OR TO VOTE BY TELEPHONE OR INTERNET.
As of the BankAmerica Record Date, approximately 533,071 shares of
BankAmerica Common Stock, or approximately 0.08% of the shares entitled to vote
at the BankAmerica Special Meeting, were beneficially owned by directors and
executive officers of BankAmerica. It is currently expected that each such
director and executive officer of BankAmerica will vote the shares of
BankAmerica Common Stock beneficially owned by him or her for approval of the
Merger Agreement and the transactions contemplated thereby. In addition, as of
the BankAmerica Record Date, directors and executive officers of NationsBank
beneficially owned less than 0.01% of the shares of BankAmerica Common Stock
entitled to vote at the BankAmerica Special Meeting. It is currently expected
that each such director and executive officer of NationsBank will vote the
shares of BankAmerica Common Stock he or she is entitled to vote for approval of
the Merger Agreement and the transactions contemplated thereby.
Additional information with respect to beneficial ownership of BankAmerica
Common Stock by persons and entities owning more than 5% of the outstanding
shares of BankAmerica Common Stock and more detailed information with respect to
beneficial ownership of BankAmerica Common Stock by directors and executive
officers of BankAmerica is incorporated by reference to the BankAmerica Annual
Report on Form 10-K for the year ended December 31, 1997. See "Where You Can
Find More Information."
RECOMMENDATION OF THE BANKAMERICA BOARD
The BankAmerica Board has, by the unanimous vote of all directors present,
approved the Merger Agreement and the transactions contemplated thereby. The
BankAmerica Board believes that the Merger Agreement and the transactions
contemplated thereby are fair to and in the best interests of BankAmerica and
the BankAmerica Shareholders, and unanimously recommends that the BankAmerica
Shareholders vote "FOR" approval of the Merger Agreement and the transactions
contemplated thereby. See "The Merger--Reasons of BankAmerica for the Merger."
BANKAMERICA SPECIAL MEETING
21
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22
THE MERGER
THE FOLLOWING SUMMARY OF THE MATERIAL TERMS AND PROVISIONS OF THE MERGER
AGREEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MERGER AGREEMENT AND
THE REINCORPORATION PLAN, WHICH ARE INCORPORATED HEREIN BY REFERENCE AND, WITH
THE EXCEPTION OF CERTAIN EXHIBITS TO THE MERGER AGREEMENT, ARE ATTACHED AS
APPENDICES A AND B, RESPECTIVELY, TO THIS JOINT PROXY STATEMENT-PROSPECTUS.
DESCRIPTION OF THE REINCORPORATION MERGER AND THE MERGER
At the date and time when the Reincorporation Merger becomes effective (the
"REINCORPORATION MERGER EFFECTIVE TIME"), NationsBank will merge with and into
NationsBank (DE) pursuant to the Reincorporation Merger and thereafter, at the
time when the Merger becomes effective (the "EFFECTIVE TIME") BankAmerica will
merge with and into NationsBank (DE) pursuant to the Merger. The Combined
Company will be renamed "BankAmerica Corporation." Subject to the satisfaction
or waiver of certain conditions set forth in the Merger Agreement and described
more fully in "--Conditions to the Merger," the Reincorporation Merger will
become effective upon the filing of a certificate of merger in the office of the
Secretary of State of Delaware and articles of merger in the office of the
Secretary of State of North Carolina, or at such later date and time as may be
set forth in such certificate of merger and articles of merger, in accordance
with Section 55-11-05 of the NCBCA and Section 252 of the DGCL, respectively,
and the Merger will become effective upon the filing of a certificate of merger
in the office of the Secretary of State of Delaware, or at such later date and
time as may be set forth in such certificate of merger, in accordance with
Section 251 of the DGCL. The Reincorporation Merger will have the effects
prescribed in Section 55-11-06 of the NCBCA and Sections 259 and 261 of the
DGCL, and the Merger will have the effects prescribed in Sections 259 and 261 of
the DGCL. The certificate of incorporation (the "COMBINED COMPANY CERTIFICATE")
and by-laws (the "COMBINED COMPANY BY-LAWS") of the Combined Company will be
those of NationsBank (DE), as in effect immediately prior to the Effective Time,
except that the name of the Combined Company shall be "BankAmerica Corporation."
The Reincorporation Merger. At the Reincorporation Merger Effective Time,
automatically by virtue of the Reincorporation Merger and without any action on
the part of any party or any NationsBank Shareholder, and with respect to issued
and outstanding NationsBank Stock (as defined herein) (i) each share of
NationsBank Common Stock shall be converted into one share of common stock, par
value $0.01 per share, of NationsBank (DE) ("COMBINED COMPANY COMMON STOCK"),
(ii) each share of NationsBank Series B Preferred Stock (excluding Dissenting
Shares) shall be converted into one share of 7% Cumulative Redeemable Preferred
Stock, Series B, of NationsBank (DE) ("COMBINED COMPANY SERIES B PREFERRED
STOCK"), (iii) each share of NationsBank ESOP Preferred Stock (excluding
Dissenting Shares) shall be converted into one share of ESOP Convertible
Preferred Stock, Series C, of NationsBank (DE) ("COMBINED COMPANY ESOP PREFERRED
STOCK") and (iv) each share of $2.50 Cumulative Convertible Preferred Stock,
Series BB, of NationsBank ("NATIONSBANK SERIES BB PREFERRED STOCK") shall be
converted into one share of $2.50 Cumulative Convertible Preferred Stock, Series
BB, of NationsBank (DE) ("COMBINED COMPANY SERIES BB PREFERRED STOCK").
(Combined Company ESOP Preferred Stock, Combined Company Series B Preferred
Stock and Combined Company Series BB Preferred Stock will be referred to
collectively from time to time as "COMBINED COMPANY PREFERRED STOCK";
NationsBank ESOP Preferred Stock, NationsBank Series B Preferred Stock and
NationsBank Series BB Preferred Stock will be referred to collectively from time
to time as "NATIONSBANK PREFERRED STOCK"; NationsBank Preferred Stock and
NationsBank Common Stock will, from time to time, be referred to collectively as
"NATIONSBANK STOCK" and holders thereof will, from time to time, be referred to
collectively as "NATIONSBANK SHAREHOLDERS".)
At the Reincorporation Merger Effective Time, each option granted by
NationsBank to purchase NationsBank Common Stock that is outstanding and
unexercised immediately prior to the Reincorporation Merger Effective Time shall
be converted automatically into a substantially identical option to purchase an
equal number of shares of Combined Company Common Stock at an exercise price per
share of Combined Company Common Stock equal to the exercise price per share of
NationsBank Common Stock in effect
THE MERGER
23
immediately prior to the Reincorporation Merger Effective Time and otherwise
subject to the terms of the stock plans of NationsBank under which such options
were issued and the agreements evidencing grants thereunder.
The Merger. At the Effective Time, automatically by virtue of the Merger
and without any action on the part of any party, or any BankAmerica Shareholder,
each share of BankAmerica Common Stock issued and outstanding (excluding shares
of BankAmerica Common Stock held in BankAmerica's treasury or, directly or
indirectly, by NationsBank or BankAmerica or any of their respective wholly
owned subsidiaries, except for any shares held in a fiduciary or custodial
capacity for the benefit of third parties, any shares held in respect of a debt
or other obligation previously contracted, and any shares held by BankAmerica or
its affiliates that the parties reasonably determine prior to the Merger should
be converted in the Merger ("BANKAMERICA TREASURY SHARES")) shall be converted
into the right to receive 1.1316 shares (the "EXCHANGE RATIO") of Combined
Company Common Stock.
At the Effective Time, each option granted by BankAmerica to purchase
shares of BankAmerica Common Stock that is outstanding and unexercised
immediately prior thereto shall cease to represent a right to acquire shares of
BankAmerica Common Stock and shall be converted automatically into an option to
purchase shares of Combined Company Common Stock in an amount and at an exercise
price determined as provided below (and otherwise, subject to the terms of the
stock plans of BankAmerica under which they were issued and the agreements
evidencing grants thereunder):
(i) the number of shares of Combined Company Common Stock to be
subject to the new option shall be equal to the product of the number of
shares of BankAmerica Common Stock subject to the original option
immediately prior to the Effective Time and the Exchange Ratio, provided
that any fractional shares of Combined Company Common Stock resulting from
such multiplication shall be rounded to the nearest whole share; and
(ii) the exercise price per share of Combined Company Common Stock
under the new option shall be equal to the exercise price per share of
BankAmerica Common Stock under the original option immediately prior to the
Effective Time divided by the Exchange Ratio, provided that such exercise
price shall be rounded down to the nearest whole cent.
It is expected that the market price of NationsBank Common Stock will
fluctuate between the date of this Joint Proxy Statement-Prospectus and the date
on which the Merger is consummated and thereafter. Because the number of shares
of Combined Company Common Stock to be received by BankAmerica Shareholders in
the Merger is fixed and because the market price of NationsBank Common Stock is
subject to fluctuation, the value of the shares of Combined Company Common Stock
that BankAmerica Shareholders and NationsBank Shareholders will receive in the
Merger may increase or decrease prior to the Merger. For further information
concerning the historical market prices of NationsBank and BankAmerica Common
Stock, see "Price Range of Common Stock and Dividends--Market Prices." No
assurance can be given concerning the market price of NationsBank Common Stock
before the Effective Time, or the market price of Combined Company Common Stock
after the Effective Time.
Notwithstanding the foregoing, any adjustment with respect to any options
to purchase NationsBank Common Stock or BankAmerica Common Stock, respectively,
that are "incentive stock options" (as defined in Section 422(a) of the Internal
Revenue Code of 1986, as amended (the "CODE")) and that shall be converted into
an option to acquire Combined Company Common Stock at the Reincorporation Merger
Effective Time and the Effective Time, respectively, shall be effected in a
manner that is consistent with Section 424(a) of the Code. In connection with
the conversion of options in the Merger, the Combined Company will reserve a
sufficient number of shares of Combined Company Common Stock, register such
Combined Company Common Stock under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), and comply with applicable state securities or "blue sky"
laws.
In the event NationsBank changes (or establishes a record date for
changing) the number of shares of NationsBank 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 NationsBank Common
THE MERGER
24
Stock and the record date of such transaction is set prior to the Effective
Date, the Exchange Ratio will be proportionately adjusted.
BACKGROUND OF THE MERGER
The managements of each of NationsBank and BankAmerica have, over time,
regularly considered the possibility of acquisitions and strategic combinations
with a variety of financial institutions, and the potential strategic fit with
such institutions based on their lines of businesses, their management and
employee cultures, their geographic locations and the breadth of their
businesses. As part of their operations, NationsBank and BankAmerica also
regularly scrutinize the financial services industry environment, including the
recent wave of consolidation in the industry, and hold discussions with various
financial institutions. NationsBank and BankAmerica have each had a goal of
creating a coast-to-coast banking franchise, and each has viewed the other as an
obvious potential partner with whom it might achieve this goal.
During February and early March 1998, the BankAmerica Board met on several
occasions to discuss broad strategic options available to BankAmerica. These
discussions included a review of changes in the industry, the industry's
financial performance, the financial services consolidation trend,
characteristics of recent mergers and acquisitions of banks and non-bank
entities, and the status of BankAmerica as a competitive acquiror and as a
desirable target or partner in a business combination. During that same period,
senior management of BankAmerica met with Goldman, Sachs & Co. ("GOLDMAN SACHS")
to discuss generally the possibility of a merger of equals involving
BankAmerica.
In mid-March 1998, during the course of a telephone conversation regarding
legislative developments affecting the banking industry, Michael E. O'Neill,
Vice Chairman and Chief Financial Officer of BankAmerica, and James H. Hance,
Jr., Vice Chairman and Chief Financial Officer of NationsBank, agreed to meet
later in the month to discuss their two companies. At their meeting on March 27,
1998, Mr. Hance and Mr. O'Neill discussed the strategic plans of each of the two
companies and their compatibility, the balance sheets, earnings and credit
quality of each company and the benefits and cost savings that such a
transaction might provide. They also identified the following issues to be
discussed by the chief executive officers of the companies: how the board of
directors of a combined company would be constituted; who would manage a
combined company; where the principal offices of a combined company would be
located; and what the name of a combined company would be. Over the next few
days Mr. Hance and Mr. O'Neill had several telephone conversations to discuss
further the possible terms of a merger. During their discussions, Messrs. Hance
and O'Neill expressed the view that such a merger of equals could be beneficial
for each company and its respective shareholders in view of the characteristics
of the companies' businesses, the accelerating trend toward consolidation in
these businesses and in the financial services industry generally, and the
nationwide franchise, centered in high growth markets, that a merger would
create.
On April 1, 1998, Hugh L. McColl, Jr., Chief Executive Officer of
NationsBank, and David A. Coulter, Chairman, President and Chief Executive
Officer of BankAmerica, met to discuss a possible merger of the two companies.
Messrs. Hance and O'Neill also continued their discussions with respect to the
possible terms of a merger. On April 2, 1998, Messrs. McColl and Coulter
preliminarily agreed, subject to conducting due diligence and finalizing terms
and conditions, to recommend a "merger of equals," with no premium to either
party, to their respective Boards of Directors. The recommendation that there be
no premium to either party reflected the parties' commitment to a true merger of
equals in which control is shared, so that no control premium would be
appropriate. In addition, by structuring the transaction so that no premium
would be paid to either party, the parties intended that the shareholders of
both parties share the financial benefits of the combination, rather than
providing for the shareholders of only one party to enjoy the benefit of a
premium.
On April 6, 1998, NationsBank engaged Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("MERRILL LYNCH") to render to the NationsBank Board its opinion as
to the fairness from a financial point of view to the NationsBank Shareholders
of the Exchange Ratio. Over the next few days, the two companies, and their
respective legal and financial advisors, conducted mutual due diligence. During
the same period, senior management of the two companies, and their respective
legal representatives, negotiated the terms of the proposed Merger Agreement,
Stock Option Agreements (as described herein) and other related agreements.
THE MERGER
25
On Monday, April 6, 1998, the Executive Committee of the NationsBank Board
(the "NATIONSBANK EXECUTIVE COMMITTEE") and certain members of NationsBank's
senior management reviewed a proposal to enter into a merger agreement with
BankAmerica. At the meeting, NationsBank senior management discussed the
contacts with BankAmerica to date and the proposed terms for such a merger
according to the preliminary understanding reached between Messrs. McColl and
Coulter on April 2, 1998. NationsBank senior management discussed the historical
performance and strategies of BankAmerica and NationsBank and the preliminary
financial and other terms of the proposed transaction, including the potential
pro forma impact of the merger (taking into account possible expense savings and
operating efficiencies that might be generated by such a transaction) and the
composition of the Combined Company's board of directors. At the conclusion of
the meeting, the NationsBank Executive Committee adopted a resolution approving
the merger proposal and recommending its approval to the NationsBank Board.
On April 9, 1998, the BankAmerica Board held a special meeting to consider
the proposed merger with NationsBank. At this meeting, senior management of
BankAmerica, together with BankAmerica's legal and financial advisors, reviewed
for the BankAmerica Board the strategic investigation and due diligence
BankAmerica had conducted, the discussions and contacts with NationsBank to
date, previous discussions relating to the proposed merger by the Executive
Committee of the BankAmerica Board, the historical performance and strategies of
BankAmerica and NationsBank, the financial and other terms of the proposed
transaction (including the potential pro forma impact of the merger and the
proposed composition of the Combined Company's board of directors), and the
other terms of the proposed Merger Agreement, Stock Option Agreements and other
agreements. BankAmerica's financial advisor presented to the BankAmerica Board
the financial analysis described under "--Opinion of BankAmerica's Financial
Advisor," and stated its oral opinion that, as of the date of the meeting, an
at-market exchange ratio in the merger was fair, from a financial point of view,
to BankAmerica's shareholders. BankAmerica's legal advisor also discussed with
the BankAmerica Board the proposed Employment Agreements (as defined herein)
with certain members of senior management in connection with the proposed
merger. See "--Interests of Certain Persons in the Merger." In addition, Mr.
McColl addressed the BankAmerica Board at this meeting and answered questions
from the members of the BankAmerica Board. Following further discussion and
questions, the members of the BankAmerica Board voted, by unanimous vote of the
eleven directors present at the meeting, subject to approval of the transactions
by the NationsBank Board, to approve the proposed Merger Agreement and the
transactions contemplated thereby including the Stock Option Agreements and the
Employment Agreements.
On April 10, 1998, the NationsBank Board held a special meeting to consider
the proposed merger with BankAmerica. At this meeting, senior management of
NationsBank, together with its financial and legal advisors, reviewed for the
NationsBank Board the strategic investigation and due diligence NationsBank had
conducted, the discussions and contacts with BankAmerica to date, previous
discussions relating to the proposed merger by the Executive Committee of the
NationsBank Board, the historical performance and strategies of BankAmerica and
NationsBank, the financial and other terms of the proposed transaction
(including the potential pro forma impact of the merger (taking into account
possible expense savings and operating efficiencies that might be generated by
such a transaction) and the proposed composition of the Combined Company's board
of directors), and the other terms of the proposed Merger Agreement, Stock
Option Agreements and other agreements. NationsBank's financial advisor, based
on the financial analysis described under "--Opinion of NationsBank's Financial
Advisor," gave its oral opinion to the NationsBank Board that, as of the date of
the meeting, the proposed exchange ratio in the merger was fair, from a
financial point of view, to the shareholders of NationsBank. The NationsBank
Board also reviewed the proposed employment agreements with certain members of
senior management in connection with the proposed merger. See "--Interests of
Certain Persons in the Merger." In addition, Mr. Coulter addressed the
NationsBank Board at this meeting and answered questions from the members of the
NationsBank Board. Following further discussion and questions, the members of
the NationsBank Board voted, by unanimous vote of the 25 directors present at
the meeting, to approve the proposed Merger Agreement and the transactions
contemplated thereby including the Stock Option Agreements and the Employment
Agreements.
Following conclusion of the meeting of the NationsBank Board, on April 10,
1998, BankAmerica and NationsBank executed and delivered the Merger Agreement
and the Stock Option Agreements, and
THE MERGER
26
NationsBank executed employment agreements, to be effective upon completion of
the Merger, with certain executive officers of BankAmerica and of NationsBank.
REASONS OF NATIONSBANK FOR THE MERGER
In reaching its determination to approve the Merger Agreement, the Stock
Option Agreements and the related transactions (including the Reincorporation
Merger and the Merger), the NationsBank Board considered a number of factors, of
which the following are the material factors:
(i) (a) its knowledge and analysis of the financial services industry
environment, including rapid consolidation, trends in technology and
increasing nationwide competition in the financial services industry and
the need to anticipate, and best position NationsBank in light of, industry
trends, (b) its belief that a combination of NationsBank and BankAmerica
will enhance the Combined Company's ability to compete effectively with
other bank holding companies and other financial service providers and
expand its banking franchise to serve a significantly greater number of
customers, and (c) BankAmerica's unique franchise, especially its
positioning in Arizona, California, Nevada and Washington locations, long
desirable to NationsBank because of their dynamic population growth
environment and position to create a truly coast-to-coast franchise;
(ii) its evaluation of the financial terms of the merger-of-equals
structure and the effect of those financial terms on the shareholders of
NationsBank; the belief that such terms are fair to and in the best
interests of NationsBank and the shareholders of NationsBank and are
consistent with NationsBank's long-term strategy of enhancing shareholder
value through expansion, including its long-term goal of creating a
coast-to-coast franchise; and the expectation that the Merger will be
non-dilutive and accretive to earnings per share in 1999 (with pro forma
fully diluted combined earnings per share projected at $4.49 for 1998 and
$5.59 for 1999), based on consensus "street" earnings per share estimates
published by Institutional Brokers Estimate System ("IBES") for both
NationsBank and BankAmerica; however, the NationsBank Board noted that the
Combined Company's ability to achieve such results would be dependent upon
various factors, a number of which would be beyond its control, including
the regulatory environment, economic conditions and unanticipated changes
in business conditions and inflation, and there could be no assurance in
this regard;
(iii) its knowledge and review of the financial condition, results of
operations and business operations and prospects of BankAmerica, as well as
the results of NationsBank's due diligence review of BankAmerica, and its
belief that BankAmerica is a high quality franchise with a respected and
capable management team and a compatible approach to customer service and
shareholder value;
(iv) its belief that the Merger represents an opportunity to leverage
NationsBank's technology, management, infrastructure, products, marketing,
and lines of business over a large consumer, business and corporate
customer base through BankAmerica's geographically diverse distribution
network, and the possibility of achieving significant expense savings and
operating efficiencies (estimated to grow over two years to $1.3 billion
per year on an after-tax basis) through, among other things, the
elimination of duplicate efforts, as well as the belief that the Merger
could provide revenue growth opportunities based on the Combined Company's
leadership in the rapidly growing Arizona, California, Nevada and
Washington markets and the potential cross-selling opportunities available
to the Combined Company;
(v) the non-financial terms of the Merger Agreement and related
agreements, including that nine members of the BankAmerica Board, including
Mr. Coulter, and eleven members of the NationsBank Board, including Mr.
McColl, would comprise the Combined Company's board of directors; that Mr.
McColl would be Chairman and Chief Executive Officer and Mr. Coulter would
be President of the Combined Company; that the Combined Company will have
greater depth of management talent than either company on its own (see
"Management and Operations after Merger"); that the corporate headquarters
would be in Charlotte, North Carolina and the wholesale bank headquarters
would be in San Francisco, California; the employment agreements with
Messrs. Coulter, Hance, Lewis, Murray and O'Neill and benefits potentially
realizable by other employees of BankAmerica (see "--Interests of Certain
Persons in the Merger"); that the corporate name would be BankAmerica
Corporation and that both companies have strong brand names that can be
leveraged in building the Combined Company; and
THE MERGER
27
the terms of the Stock Option Agreements (see "--NationsBank and
BankAmerica Stock Option Agreements");
(vi) the fact that the Combined Company will be incorporated in
Delaware which is widely regarded to have the most developed body of
corporate law among U.S. states;
(vii) the belief that the Merger would receive requisite regulatory
approvals (see "--Regulatory Matters"); and
(viii) the expectation that the Reincorporation Merger and the Merger
would each constitute a "reorganization" under Section 368(a) of the Code
and that the Merger would be accounted for as a "pooling-of-interests" for
accounting and financial reporting purposes (see "--Material Federal Income
Tax Consequences" and "--Accounting Treatment").
In recommending the approval of the Merger Agreement and the transactions
contemplated thereby, including the Reincorporation Merger and the Merger, the
NationsBank Board also considered the opinion of Merrill Lynch that, as of the
date of such opinion, the Exchange Ratio was fair from a financial point of view
to the NationsBank Shareholders. Such opinion was delivered to the NationsBank
Board orally on April 10, 1998 and subsequently confirmed in writing. Because of
its familiarity with and knowledge of the banking industry, BankAmerica and the
terms of and strategic rationale for the proposed merger (including the absence
of a premium to either party), and because of Merrill Lynch's ability to provide
such opinion orally, the NationsBank Board did not require any written materials
from Merrill Lynch at the time of delivery of such oral opinion. Merrill Lynch's
delivery of its oral opinion was accompanied by a brief oral presentation. The
NationsBank Board was advised that, in arriving at such opinion, Merrill Lynch
relied upon publicly available information and certain financial information
provided to Merrill Lynch by the senior management of each of BankAmerica and
NationsBank. The material financial information provided to Merrill Lynch by the
senior management of each of BankAmerica and NationsBank, and discussed during
due diligence conversations, related to the expected synergies and cost savings
to be generated by the Merger, as set forth above, as well as anticipated merger
and restructuring items, as set forth in the pro forma financial information
contained herein. Although the senior management of NationsBank and BankAmerica
also provided Merrill Lynch with 1998 management earnings projections (including
underlying credit quality analysis and capital ratio projections), such
management earnings projections were materially consistent with median IBES
forecasts. The senior management of NationsBank indicated to Merrill Lynch that
they expected NationsBank's stand-alone 1998 earnings per share to be $4.62 on a
diluted basis (compared with the median IBES estimate at that time of $4.73).
The senior management of BankAmerica indicated to Merrill Lynch that they
expected BankAmerica's stand-alone 1998 earnings per share to be $5.03 on a
diluted basis (compared with the median IBES estimate at that time of $4.90). In
light of this consistency, only median IBES earnings forecasts were used by
Merrill Lynch in connection with its quantitative analyses performed in arriving
at its opinion, and management earnings projections were relied upon by Merrill
Lynch for the purpose of confirming such consistency. Management earnings
projections were not included in the presentations of Merrill Lynch or senior
management to the NationsBank Board in connection with the NationsBank Board's
consideration of the Merger Agreement and the transactions contemplated thereby.
See "--Opinion of NationsBank's Financial Advisor."
The foregoing discussion of the information and factors considered by the
NationsBank Board is not intended to be exhaustive but includes all material
factors considered by the NationsBank Board. In reaching its determination to
approve the Reincorporation Merger and the Merger, the NationsBank Board did not
assign any relative or specific weights to the foregoing factors, and individual
directors may have given differing weights to differing factors. After
deliberating with respect to the Reincorporation Merger, the Merger and other
transactions contemplated by the Merger Agreement and the Stock Option
Agreements, and considering, among other things, the matters discussed above,
the 25 members of the NationsBank Board in attendance at the meeting unanimously
approved the Merger Agreement and the transactions contemplated thereby,
including the Reincorporation Merger and the Merger, as being in the best
interests of NationsBank and its shareholders.
THE MERGER
28
BASED ON THE FOREGOING, AND THE OPINION OF MERRILL LYNCH REFERRED TO ABOVE,
THE NATIONSBANK BOARD UNANIMOUSLY RECOMMENDS THAT NATIONSBANK SHAREHOLDERS VOTE
"FOR" THE APPROVAL OF THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY, INCLUDING THE REINCORPORATION MERGER AND THE MERGER.
REASONS OF BANKAMERICA FOR THE MERGER
The BankAmerica Board believes that the consummation of the Merger presents
a unique opportunity to create a premier financial services company with a truly
national banking franchise. In reaching its conclusion that the Merger is fair
to and in the best interests of BankAmerica Shareholders, the BankAmerica Board
consulted with BankAmerica management as well as with its financial and legal
advisors, and considered a number of factors, of which the following are the
material factors:
(i) the BankAmerica Board's familiarity with and review of
BankAmerica's business, operations, financial condition, earnings and
prospects;
(ii) the anticipated effectiveness of the Merger in furthering
BankAmerica's strategy to be a national financial services provider with
the expected concomitant creation of value for BankAmerica Shareholders,
and the benefits associated with NationsBank's franchise in the Southeast,
Southwest, Midwest and Mid-Atlantic, as well as its strong consumer banking
and commercial banking franchises, the depth of its management team and the
quality of its operations;
(iii) a review of the business, operations, financial condition,
earnings and general and financial prospects (based upon IBES forecasts) of
each of NationsBank and BankAmerica, including the results of BankAmerica's
due diligence review of NationsBank's businesses;
(iv) the scale, scope and strength of the banking operations of the
Combined Company, including that the Combined Company would rank first
among banking franchises in its service of 29 million household customers
with approximately 4,800 offices and approximately 14,700 ATMs, rank first
with $212 billion in mortgage servicing and $160 billion in consumer loans,
and rank second with $51 billion in mutual funds;
(v) the global wholesale banking market of the Combined Company as a
premier international services provider to United States corporations, with
offices in 38 countries;
(vi) the expected improved stability of and creation of value for the
Combined Company's businesses and earnings relative to BankAmerica on a
stand-alone basis made possible by the Merger, as a result of substantially
greater geographic, asset and line-of-business diversification;
(vii) the anticipated financial impact of the proposed transaction on
the Combined Company's future financial performance and on BankAmerica
Shareholders, including, without limitation, that the transaction is
expected to be accretive to the Combined Company's earnings (with pro forma
fully diluted combined earnings per share projected at $4.49 for 1998 and
$5.59 for 1999); however, the BankAmerica Board noted that the Combined
Company's ability to achieve such results would depend on various factors,
a number of which would be beyond its control, including the regulatory
environment, economic conditions, unanticipated changes in business
conditions and inflation, and that there could be no assurance in this
regard; the BankAmerica Board was also informed that the tangible book
value per share of BankAmerica Common Stock at December 31, 1997 would
decrease by 13.3% on a pro forma basis, compared with a 3.6% increase in
the tangible book value per share of NationsBank Common Stock;
(viii) the expectation that the Merger will result in synergies for
the Combined Company's operations, including an advantageous cost structure
relative to competitors and to BankAmerica on a stand-alone basis. The
BankAmerica Board noted that, although no assurances could be given that
any particular level of cost synergies will be achieved, the managements of
NationsBank and BankAmerica had identified potential after-tax synergies in
the form of broad-based, after-tax cost savings of approximately $1.3
billion, representing 10% of combined expenses, fully phased in over two
years. The BankAmerica Board also noted, without attempting to quantify,
the possibility of enhancing revenues through cross-selling opportunities.
See "Management and Operations After the Merger;"
THE MERGER
29
(ix) the structure of the Merger and the terms of the Merger Agreement
and the Stock Option Agreements, which were reciprocal in nature, and the
expectation that the Merger will qualify as a reorganization under Section
368(a) of the Code and as a "pooling of interests" for accounting purposes;
(x) the non-financial terms of the Merger Agreement and related
agreements, including that nine members of the BankAmerica Board, including
Mr. Coulter, and that 11 members of the NationsBank Board, including Mr.
McColl, would comprise the Combined Company's board of directors; that Mr.
McColl would be Chairman and Chief Executive Officer and Mr. Coulter would
be President of the Combined Company; that it is the present intention of
the BankAmerica Board and the NationsBank Board and of Mr. McColl that Mr.
Coulter will succeed Mr. McColl as Chairman and Chief Executive Officer
upon Mr. McColl's retirement from that position; that the Combined Company
will have greater depth of management talent than either company on its own
(see "Management and Operations After the Merger"); that the corporate
headquarters would be in Charlotte, North Carolina and the wholesale bank
headquarters would be in San Francisco, California; the employment
agreements with Messrs. Coulter, Hance, Lewis, Murray and O'Neill and
benefits potentially realizable by other employees of BankAmerica (see
"--Interests of Certain Persons in the Merger"); that the corporate name
would be BankAmerica Corporation and that both companies have strong brand
names that can be leveraged in building the Combined Company; and the terms
of the Stock Option Agreements (see "--NationsBank and BankAmerica Stock
Option Agreements");
(xi) the belief of BankAmerica's senior management and of the
BankAmerica Board that NationsBank and BankAmerica share a compatible
culture and that their managements possess complementary skills and
expertise. In this regard, the BankAmerica Board took into account the fact
that the managements of NationsBank and BankAmerica had each demonstrated
the ability to successfully integrate substantial combinations in a timely
manner;
(xii) the fact that the Combined Company will be incorporated in
Delaware which is widely regarded to have the most developed body of
corporate law among U.S. states; and
(xiii) the belief that the Merger would receive requisite regulatory
approvals (see "--Regulatory Matters").
In recommending the approval of the Merger Agreement, including the Merger,
the BankAmerica Board also considered the opinion of Goldman Sachs (including
the assumptions and financial information relied upon by Goldman Sachs in
arriving at such opinion, some of which financial information was provided to
Goldman Sachs by the senior management of each of BankAmerica and NationsBank)
that, as of the date of such opinion, the Exchange Ratio was fair from a
financial point of view to BankAmerica's Shareholders. The assumptions and
financial information relied upon by Goldman Sachs in arriving at its opinion
were derived from publicly available information and internal information
received by Goldman Sachs from senior management of BankAmerica and NationsBank.
The material financial information provided to Goldman Sachs by the senior
management of each of BankAmerica and NationsBank, and discussed during due
diligence conversations, related to the expected synergies and cost savings to
be generated by the Merger, as set forth above, as well as anticipated merger
and restructuring items, as set forth in the pro forma financial information
contained herein. Although the senior management of NationsBank and BankAmerica
also provided Goldman Sachs with 1998 management earnings projections (including
underlying credit quality analysis and capital ratio projections), such
management earnings projections were materially consistent with median IBES
forecasts. The senior management of BankAmerica indicated to Goldman Sachs that
they expected BankAmerica's stand-alone 1998 earnings per share to be $5.03 on a
diluted basis (compared with the median IBES estimate at that time of $4.90).
The senior management of NationsBank indicated to Goldman Sachs that they
expected NationsBank's stand-alone 1998 earnings per share to be $4.62 on a
diluted basis (compared with the median IBES estimate at that time of $4.73). In
light of this consistency, only median IBES earnings forecasts were used by
Goldman Sachs in connection with its quantitative analyses performed in arriving
at its opinion, and management earnings projections were relied upon by Goldman
Sachs for the purpose of confirming such consistency. Management earnings
projections were not included in the presentations of Goldman Sachs or senior
management to the BankAmerica Board in connection with the
THE MERGER
30
BankAmerica Board's consideration of the Merger Agreement and the transactions
contemplated thereby. See "--Opinion of BankAmerica's Financial Advisor."
The foregoing discussion of the information and factors considered by the
BankAmerica Board is not intended to be exhaustive but includes all material
factors it considered. In view of the factors considered in connection with its
evaluation of the Merger, the BankAmerica Board did not find it practicable to
and did not quantify or otherwise assign relative weights to the factors
considered in reaching its determination. In addition, individual members of the
BankAmerica Board may have given different weights to different factors.
BASED ON THE FOREGOING, AND THE OPINION OF GOLDMAN SACHS REFERRED TO ABOVE,
THE BANKAMERICA BOARD UNANIMOUSLY RECOMMENDS THAT BANKAMERICA SHAREHOLDERS VOTE
"FOR" ADOPTION OF THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY, INCLUDING THE MERGER.
OPINION OF NATIONSBANK'S FINANCIAL ADVISOR
NationsBank retained Merrill Lynch to render to the NationsBank Board its
opinion as to the fairness from a financial point of view to the NationsBank
Shareholders of the Exchange Ratio. On April 10, 1998, Merrill Lynch stated to
the NationsBank Board its oral opinion that, as of such date and based upon and
subject to the factors and assumptions set forth therein, the Exchange Ratio was
fair from a financial point of view to the NationsBank Shareholders. Such
opinion was confirmed in writing on April 13, 1998 and again as of the date of
this Joint Proxy Statement-Prospectus (the "MERRILL LYNCH OPINION").
THE FULL TEXT OF THE MERRILL LYNCH OPINION, WHICH SETS FORTH THE
ASSUMPTIONS MADE, MATTERS CONSIDERED, AND QUALIFICATIONS AND LIMITATIONS ON THE
REVIEW UNDERTAKEN BY MERRILL LYNCH, IS ATTACHED AS APPENDIX E TO THIS JOINT
PROXY STATEMENT-PROSPECTUS AND IS INCORPORATED HEREIN BY REFERENCE. THE SUMMARY
OF THE MERRILL LYNCH OPINION SET FORTH IN THIS JOINT PROXY STATEMENT-PROSPECTUS
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE MERRILL LYNCH
OPINION. NATIONSBANK SHAREHOLDERS ARE URGED TO READ SUCH OPINION IN ITS
ENTIRETY. THE MERRILL LYNCH OPINION WAS PROVIDED TO THE NATIONSBANK BOARD FOR
ITS INFORMATION AND IS DIRECTED ONLY TO THE FAIRNESS FROM A FINANCIAL POINT OF
VIEW OF THE EXCHANGE RATIO TO THE NATIONSBANK SHAREHOLDERS, DOES NOT ADDRESS THE
MERITS OF THE UNDERLYING DECISION BY NATIONSBANK TO ENGAGE IN THE REORGANIZATION
AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY NATIONSBANK SHAREHOLDER AS TO
HOW SUCH NATIONSBANK SHAREHOLDER SHOULD VOTE ON THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY. MERRILL LYNCH CONSENTS TO THE SUMMARIZATION
OF ITS OPINION IN, AND ATTACHMENT OF ITS OPINION TO, THIS JOINT PROXY
STATEMENT-PROSPECTUS.
The summary set forth below does not purport to be a complete description
of the analyses underlying the Merrill Lynch Opinion. The preparation of a
fairness opinion is a complex analytic process involving various determinations
as to the most appropriate and relevant methods of financial analysis and the
application of those methods to the particular circumstances and, therefore,
such an opinion is not readily susceptible to partial analysis or summary
description. In arriving at its opinion, Merrill Lynch did not attribute any
particular weight to any analysis or factor considered by it, but, rather, made
qualitative judgments as to the significance and relevance of each analysis and
factor. Accordingly, Merrill Lynch believes that its analyses must be considered
as a whole and that selecting portions of its analyses, without considering all
analyses, would create an incomplete view of the process underlying the Merrill
Lynch Opinion.
In performing its analyses, numerous assumptions were made with respect to
industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of Merrill
Lynch, NationsBank or BankAmerica. Any estimates contained in the analyses
performed by Merrill Lynch are not necessarily indicative of actual values or
future results, which may be significantly more or less favorable than suggested
by such analyses. Additionally, estimates of the value of businesses or
securities do not purport to be appraisals or to reflect the prices at which
such businesses or securities might actually be sold. Accordingly, such analyses
and estimates are inherently subject to substantial uncertainty. In addition,
the Merrill Lynch Opinion was among several factors taken into consideration by
the NationsBank Board in making its determination to approve the Merger
Agreement and the transactions contemplated thereby, including the Merger.
Consequently, the Merrill Lynch analyses described below should not be viewed as
determinative of the decision of the NationsBank Board or NationsBank's
management with respect to the fairness of the Exchange Ratio.
THE MERGER
31
In arriving at the Merrill Lynch Opinion, Merrill Lynch, among other
things, (i) reviewed certain publicly available business and financial
information relating to BankAmerica and NationsBank that Merrill Lynch deemed to
be relevant, (ii) reviewed certain information, including financial forecasts
(which were materially consistent with median IBES forecasts), relating to the
respective businesses, earnings, cash flow, assets, liabilities and prospects of
BankAmerica and NationsBank as well as the amount and timing of the cost
savings, related expenses and synergies expected to result from the Merger (the
"EXPECTED SYNERGIES"), furnished to Merrill Lynch by senior management of each
of NationsBank and BankAmerica, respectively, (iii) conducted discussions with
members of senior management and representatives of BankAmerica and NationsBank
concerning the matters described in clauses (i) and (ii) above, including the
respective businesses, prospects, regulatory conditions and contingencies of
BankAmerica and NationsBank before and after giving effect to the Merger and the
Expected Synergies, (iv) reviewed the market prices and valuation multiples for
BankAmerica Common Stock and NationsBank Common Stock and compared them with
those of certain publicly traded companies that Merrill Lynch deemed to be
relevant, (v) reviewed the results of operations of BankAmerica and NationsBank
and compared them with those of certain publicly traded companies that Merrill
Lynch deemed to be relevant, (vi) compared the proposed financial terms of the
Merger with the financial terms of certain other transactions that Merrill Lynch
deemed to be relevant, (vii) reviewed the potential pro forma impact of the
Merger, (viii) reviewed the Merger Agreement, and (ix) reviewed such other
financial studies and analyses and took into account such other matters as
Merrill Lynch deemed necessary, including Merrill Lynch's assessment of general
economic, market and monetary conditions. Because the internal forecasts
provided to Merrill Lynch by the management of NationsBank and BankAmerica were
materially consistent with median IBES forecasts, Merrill Lynch used median IBES
forecasts in its analyses and relied upon the fact that they were materially
consistent with those provided to it by management.
In preparing the Merrill Lynch Opinion, Merrill Lynch assumed and relied on
the accuracy and completeness of all information supplied or otherwise made
available to Merrill Lynch, discussed with or reviewed by or for Merrill Lynch,
or publicly available, and Merrill Lynch did not assume any responsibility for
independently verifying such information and Merrill Lynch has not undertaken an
independent evaluation or appraisal of any of the assets or liabilities of
BankAmerica or NationsBank or been furnished with any such evaluation or
appraisal. Merrill Lynch is not an expert in the evaluation of the allowance for
loan losses, and neither made an independent evaluation of the adequacy of the
allowance for loan losses of BankAmerica or NationsBank, nor reviewed any
individual credit files relating to BankAmerica or NationsBank, and, as a
result, Merrill Lynch assumed that the aggregate allowance for loan losses for
both BankAmerica and NationsBank is adequate to cover such losses and will be
adequate on a pro forma basis for the Combined Company. In addition, Merrill
Lynch did not assume any obligation to conduct, nor has it conducted, any
physical inspection of the properties or facilities of BankAmerica or
NationsBank. With respect to the financial forecast information and the Expected
Synergies furnished to or discussed with Merrill Lynch by BankAmerica or
NationsBank, Merrill Lynch assumed that they have been reasonably prepared or
reviewed and reflect the best currently available estimates and judgment of
BankAmerica's or NationsBank's management as to the expected future financial
performance of BankAmerica, NationsBank or the Combined Company, as the case may
be, and the Expected Synergies. Merrill Lynch further assumed that the Merger
will be accounted for as a "pooling of interests" under generally accepted
accounting principles ("GAAP") and that it will qualify as a tax-free
reorganization for U.S. federal income tax purposes.
The Merrill Lynch Opinion is necessarily based upon market, economic and
other conditions as they existed on, and could be evaluated as of, the date of
such opinion. For the purposes of rendering the Merrill Lynch Opinion, Merrill
Lynch assumed, in all respects material to its analysis, that the
representations and warranties of each party in the Merger Agreement and all
related documents and instruments contained therein are true and correct, that
NationsBank and BankAmerica will each perform all of the covenants and
agreements required to be performed by it under the Merger Agreement, and that
all conditions to the consummation of the Merger will be satisfied without
waiver thereof. Merrill Lynch assumed that, in the course of obtaining the
necessary regulatory or other consents or approvals (contractual or otherwise)
for the Merger, no restrictions, including any divestiture requirements or
amendments or modifications, will be
THE MERGER
32
imposed that will have a material adverse effect on the contemplated benefits of
the Merger, including the Expected Synergies.
The Merger provides for a fixed Exchange Ratio of 1.1316 shares of
NationsBank Common Stock for each share of BankAmerica Common Stock. Based on
the $76.4375 closing price of NationsBank Common Stock on April 9, 1998 (the
last trading day prior to the rendering of the oral opinion to the NationsBank
Board by Merrill Lynch), the Exchange Ratio resulted in an implied price per
BankAmerica Share of $86.50. After giving effect to the Merger, NationsBank
Shareholders would have a fully diluted ownership interest of approximately
54.7% in the pro forma Combined Company, based on the Exchange Ratio.
The following is a brief summary of the material analyses underlying the
Merrill Lynch Opinion.
Discounted Dividend Stream Analysis--BankAmerica. Using a discounted
dividend stream analysis, Merrill Lynch estimated the present value of
BankAmerica's net income from which dividends can be paid from 1999 through 2003
on a stand-alone basis. The analysis assumed earnings estimates for BankAmerica
based on publicly available analysts' estimates of $4.90 per share for 1998 and
$5.54 per share for 1999 and a long-term annual growth rate of 12%. Merrill
Lynch assumed that BankAmerica's tangible common equity to tangible asset ratio
would be maintained at a minimum 5.5% level. Based on a current BankAmerica
Common Stock price of $86.50 (as of the close of trading on April 9, 1998), 2004
terminal multiples of 14.0x, 15.0x and 16.0x for the BankAmerica Common Stock
and discount rates of 13%, 14% and 15% (chosen to reflect different assumptions
regarding required rates of return of holders or prospective buyers of
BankAmerica Common Stock), the discounted dividend stream analysis indicated a
reference range of between $78.93 and $95.66 per share for BankAmerica Common
Stock. As indicated above, this analysis is not necessarily indicative of actual
values or actual future results and does not purport to reflect the prices at
which any securities may trade at the present or at any time in the future.
Discounted dividend stream analysis is a widely used valuation methodology, but
the results of such methodology are highly dependent upon the numerous
assumptions that must be made, including earnings growth rates, dividend payout
rates, terminal values and discount rates.
Discounted Dividend Stream Analysis--NationsBank. Using a discounted
dividend stream analysis, Merrill Lynch estimated the present value of
NationsBank's net income from which dividends can be paid from 1999 through 2003
on a stand-alone basis. The analysis assumed earnings estimates for NationsBank
based on publicly available analysts' estimates of $4.73 per share for 1998 and
$5.49 per share for 1999 and a long-term annual growth rate of 12%. Merrill
Lynch assumed that NationsBank's tangible common equity to tangible asset ratio
would be maintained at a minimum 5.5% level. Based on a current NationsBank
Common Stock price of $76.44 (as of the close of trading on April 9, 1998), 2004
terminal multiples of 14.0x, 15.0x and 16.0x for the NationsBank Common Stock
and discount rates of 13%, 14% and 15% (chosen to reflect different assumptions
regarding required rates of return of holders or prospective buyers of
NationsBank Common Stock), the discounted dividend stream analysis indicated a
reference range of between $77.11 and $93.84 per share for NationsBank Common
Stock. As indicated above, this analysis is not necessarily indicative of actual
values or actual future results and does not purport to reflect the prices at
which any securities may trade at the present or at any time in the future.
Discounted dividend stream analysis is a widely used valuation methodology, but
the results of such methodology are highly dependent upon the numerous
assumptions that must be made, including earnings growth rates, dividend payout
rates, terminal values and discount rates.
Pro Forma Discounted Dividend Stream Analysis. Merrill Lynch estimated the
present value of the Combined Company's net income from which dividends can be
paid from 1999 through 2003. The analysis assumed earnings estimates for the
Combined Company based on publicly available analysts' estimates of $9.92
billion for 1999, $10.4 billion for 2001, $11.6 billion for 2001, $13.0 billion
for 2002 and $14.6 billion for 2003. Merrill Lynch assumed that the combined
institution's tangible equity to asset ratio would be maintained at a minimum
5.5% level and that the Merger would yield after-tax synergies of approximately
$661 million in 1999, $1.322 billion in 2000 and a long-term growth rate of 8%
thereafter. Merrill Lynch further assumed that the Combined Company would incur
after-tax merger and reorganization charges of approximately $800 million. Based
on a current NationsBank Common Stock price of $76.44 (as of the close of
trading on April 9, 1998), 2004 terminal multiples of 14.0x, 15.0x and 16.0x and
a discount rate of 14%, the
THE MERGER
33
discounted dividend stream analysis indicated a reference range of between
$86.02 and $95.34, compared to $80.73 and $89.55 in the case of NationsBank
alone. As indicated above, this analysis is not necessarily indicative of actual
values or actual future results and does not purport to reflect the prices at
which any securities may trade at the present or at any time in the future.
Discounted dividend stream analysis is a widely used valuation methodology, but
the results of such methodology are highly dependent upon the numerous
assumptions that must be made, including earnings growth rates, dividend payout
rates, terminal values and discount rates.
Analysis of Average Historical Exchange Ratios. Merrill Lynch reviewed a
range of implied average exchange ratios (1.1141 to 1.1796) based on a
market-to-market deal utilizing average stock prices for NationsBank and
BankAmerica over selected trading periods.
Contribution Analysis. Merrill Lynch reviewed the relative contributions
of NationsBank (pro forma for pending acquisitions) and BankAmerica to the
Combined Company based on financial data as of December 31, 1997 and the
NationsBank Common Stock price and BankAmerica Common Stock price of $76.4375
and $86.50, respectively, as of April 9, 1998. Merrill Lynch compared the pro
forma fully diluted equity ownership interests of NationsBank and BankAmerica of
54.7% and 45.3%, respectively, with NationsBank's and BankAmerica's percentage
contributions to (i) total assets of 54.4% and 45.6%, respectively, (ii) total
loans (gross) of 51.3% and 48.7%, respectively, (iii) total deposits of 50.2%
and 49.8%, respectively, (iv) common equity of 56.2% and 43.8%, respectively,
(v) tangible common equity of 50.2% and 49.8%, respectively, (vi) fully diluted
market capitalization (based on stated shares outstanding and options accounted
for under the treasury-stock method at current market price) of 54.7% and 45.3%,
respectively, (vii) 1998 estimated net income (based on publicly available
analysts' earnings estimates) of 56.8% and 43.2%, respectively, and (viii) 1999
estimated net income (based on publicly available analysts' earnings estimates)
of 57.5% and 42.5%, respectively. The average contributions of NationsBank and
BankAmerica were 53.9% and 46.1%, respectively.
Comparison of Selected Comparable Companies. Merrill Lynch compared
selected operating and stock market results of NationsBank and BankAmerica to
the publicly available corresponding data of certain other companies that
Merrill Lynch deemed to be relevant, including First Union Corporation, Norwest
Corporation, Wells Fargo & Co., Fleet Financial Group, Inc., National City
Corporation, PNC Bank Corporation, Wachovia Corporation, U.S. Bancorp, Mellon
Bank Corporation, Sun Trust Bank Inc., Banc One Corporation, First Chicago NBD
Corporation, and BankBoston Corporation (collectively, the "PEER GROUP"). This
comparison showed, among other things, that for the year ended December 31,
1997, (i) NationsBank's and BankAmerica's net interest margins were 3.79% and
4.06%, respectively, compared with a mean of 4.66% for the Peer Group, (ii)
NationsBank's and BankAmerica's "efficiency ratios" (defined as non-interest
expenses divided by the sum of non-interest income and net interest income
before provision for loan losses) were 53.83% and 56.46%, respectively, compared
with a mean of 56.34% for the Peer Group, and (iii) NationsBank's and
BankAmerica's returns on average equity were 15.26% and 15.88%, respectively,
compared to a mean of 17.96% for the Peer Group. The comparison also indicated
that (i) at December 31, 1997, (a) NationsBank's and BankAmerica's equity to
asset ratios were 7.97% and 7.62%, respectively, compared with a mean of 8.42%
for the Peer Group, (b) NationsBank's and BankAmerica's tangible equity to
tangible asset ratios were 4.73% and 5.79%, respectively, compared with a mean
of 6.63% for the Peer Group, (c) NationsBank's and BankAmerica's Tier 1 capital
(as defined herein) ratios were 6.50% and 7.53%, respectively, compared with a
mean of 7.98% for the Peer Group, (d) NationsBank's and BankAmerica's total
capital (as defined herein) ratios were 10.89% and 11.56%, respectively,
compared with a mean of 12.01% for the Peer Group, (e) NationsBank's and
BankAmerica's ratios of non-performing assets to total assets were 0.43% and
0.53%, respectively, compared with a mean of 0.39% for the Peer Group, (f)
NationsBank's and BankAmerica's ratios of non-performing loans to total loans
were 0.71% and 0.72%, respectively, compared with a mean of 0.39% for the Peer
Group, (g) NationsBank's and BankAmerica's ratios of loan loss reserves to
non-performing loans were 270.05% and 390.19%, respectively, compared with a
mean of 421.06% for the Peer Group, (h) NationsBank's and BankAmerica's ratios
of loan loss reserves to non-performing assets were 245.11% and 253.99%,
respectively, compared with a mean of 353.02% for the Peer Group; and (ii) as of
April 9, 1998, (a) NationsBank's and BankAmerica's ratios of market prices to
52-week high were 100.00% and 92.89%, respectively, compared with the mean and
median for the Peer Group of 98.01% and 98.24%,
THE MERGER
34
respectively, (b) NationsBank's and BankAmerica's market prices as multiples of
stated book value were 2.94x and 3.10x, respectively, compared with the mean and
median for Peer Group of 3.69x and 3.62x, respectively, (c) NationsBank's and
BankAmerica's market prices as multiples of stated tangible book value were
5.14x and 4.20x, respectively, compared with the mean and median for the Peer
Group of 5.00x and 4.23x, respectively, (d) NationsBank's and BankAmerica's
market prices per share as multiples of 1998 estimated earnings per share
("EPS") (calculated in accordance with GAAP) were 16.16x and 17.65x,
respectively, compared with the mean and median for the Peer Group of 18.96x and
18.80x, respectively, (e) NationsBank's and BankAmerica's market prices per
share as multiples of 1999 estimated EPS (calculated in accordance with GAAP)
were 13.92x and 15.61x, respectively, compared with the mean and median for the
Peer Group of 16.65x and 16.01x, respectively, (f) NationsBank's and
BankAmerica's market prices per share as multiples of 1998 estimated EPS
(calculated in accordance with the cash method) were 14.74x and 16.00x,
respectively, compared with the mean and median for the Peer Group of 17.38x and
17.16x, respectively, (g) NationsBank's and BankAmerica's market prices per
share as multiples of 1999 estimated EPS (calculated in accordance with the cash
method) were 12.86x and 14.31x, respectively, compared with the mean and median
for the Peer Group of 15.44x and 15.48x, respectively, (h) NationsBank's and
BankAmerica's dividend yields per share were 2.22% and 1.59%, respectively,
compared with the mean and median for the Peer Group of 2.17% and 2.21%,
respectively, and (i) NationsBank's and BankAmerica's dividend per share payout
were 32.14% and 28.16%, respectively, compared with the mean and median for the
Peer Group of 37.04% and 37.98%, respectively.
Pro Forma Financial Impact. Merrill Lynch analyzed the pro forma financial
impact of the Merger on the EPS during calendar years 1999 and 2000, the book
value, the tangible book value and the dividend of NationsBank and BankAmerica.
Based on publicly available analysts' earnings estimates and management
estimates of after-tax synergies of approximately $661 million in 1999 and $1.3
billion in 2000, the analysis indicated that the Merger would result in EPS
accretion of 1.9% and 14.3% in 1999 for NationsBank and BankAmerica,
respectively, and EPS accretion of 7.2% and 20.2% in 2000 for NationsBank and
BankAmerica, respectively. Assuming an after-tax merger and reorganization
charge of $800 million, the Merger would result in book value per share dilution
of 4.1% for NationsBank and book value per share accretion of 1.5% for
BankAmerica. The analysis also indicated that the Merger would result in
tangible book value per share accretion of 4.4% for NationsBank and tangible
book value per share dilution of 9.3% for BankAmerica. The analysis further
indicated that the Merger would result in dividend per share accretion of 13.8%
for BankAmerica, but would have no dividend per share impact on NationsBank.
Review of Selected Merger-of-Equals Transactions. Merrill Lynch reviewed
the financial terms, to the extent publicly available, of ten selected
merger-of-equals transactions in the banking industry. Merrill Lynch reviewed
the premiums offered in the selected merger-of-equals transactions relative to
market value contributions, assuming a constant market capitalization based on
closing stock prices prior to the announcement of such transactions. The
analysis indicated that the premium paid in the selected merger-of-equals
transactions ranged from 0.7% to 9.0%. No premium is being paid to either party
in the Merger.
None of the selected merger-of-equals transactions reviewed was identical
to the Merger, and, accordingly, an analysis of the foregoing necessarily
involves complex considerations and judgments concerning differences in
financial and operational characteristics of the companies involved in the
selected merger-of-equals transactions and other factors that could affect the
acquisition of the transactions selected compared to the Merger.
Pursuant to a letter agreement, dated as of April 7, 1998, between
NationsBank and Merrill Lynch, NationsBank agreed to pay Merrill Lynch, up to a
maximum of $50 million, (i) a fee of $5 million contingent upon and payable upon
the earlier of either the date that Merrill Lynch delivers the Merrill Lynch
Opinion or the execution of the Merger Agreement, and (ii) if, during the period
Merrill Lynch is retained by NationsBank or within two years thereafter,
NationsBank and BankAmerica consummate a merger transaction, an additional fee
of $20 million plus 0.20% of the increased "market capitalization" (calculated
as the greater of (a) zero, and (b) the difference between (1) the combined
market capitalization at the market close on the trading day immediately
preceding the consummation of the transaction, minus (2) the combined market
capitalization at the market close on April 9, 1998). The "combined market
capitalization" on any
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35
date is the sum of the market capitalizations of NationsBank and BankAmerica
based on the closing share price of each entity's common stock on such date and
the number of fully diluted shares of common stock outstanding for each entity
on April 9, 1998. Assuming that the Merger was consummated on June 26, 1998, the
total fee payable to Merrill Lynch would equal approximately $28.3 million. Any
fees previously paid to Merrill Lynch pursuant to clause (i) above will be
deducted from any fee to which Merrill Lynch is entitled pursuant to clause
(ii).
Additionally, NationsBank agreed to reimburse Merrill Lynch for reasonable
out-of-pocket expenses, including, without limitation, reasonable fees and
disbursements of its legal counsel. NationsBank has also agreed to indemnify
Merrill Lynch and certain related persons for certain liabilities related to or
arising out of its engagement.
NationsBank retained Merrill Lynch based upon Merrill Lynch's experience
and expertise. Merrill Lynch is an internationally recognized investment banking
and advisory firm. Merrill Lynch, as part of its investment banking business, is
continuously engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes.
Merrill Lynch has in the past two years provided financial advisory,
investment banking and other services to BankAmerica and NationsBank and
received customary fees for the rendering of such services. The total amount
received by Merrill Lynch from NationsBank in the past two years for financial
advisory, investment banking and other services was approximately $35.5 million.
In addition, in the ordinary course of its securities business, Merrill Lynch
may actively trade debt and equity securities of BankAmerica and NationsBank and
their respective affiliates for its own account and for the accounts of
customers and, therefore, may from time to time hold a long or short position in
such securities.
OPINION OF BANKAMERICA'S FINANCIAL ADVISOR
BankAmerica retained Goldman Sachs in connection with its consideration of
the Merger, because of Goldman Sachs' qualifications, expertise and reputation,
as well as its prior investment banking relationship with BankAmerica.
Presentation by Goldman Sachs. The following summarizes the material
financial analyses presented by Goldman Sachs to the BankAmerica Board at its
meeting on April 9, 1998, which analyses were considered by Goldman Sachs in
rendering the opinion described below. This summary is not a complete
description of the analyses underlying the opinion of Goldman Sachs or of
information presented at meetings between Goldman Sachs and representatives of
BankAmerica held in advance of the consideration by the BankAmerica Board of the
Merger transaction. See "The Merger--Background of the Merger."
Summary Financial Comparison. Goldman Sachs presented a summary financial
comparison of BankAmerica, NationsBank and other super-regional banks and bank
holding companies, consisting of Citicorp, The Chase Manhattan Corporation,
First Union Corporation, Banc One Corporation, Norwest Corporation, U.S.
Bancorp, Wells Fargo & Company, and First Chicago NBD Corporation (the "SUPER-
REGIONALS"), on the basis of various financial ratios and other indicators,
including price to EPS ratios, five-year EPS growth rates, historical price to
stated book value and tangible book value ratios, historical dividend yield and
compound annual rates of return. The Super-Regionals were selected for
comparison purposes through discussions with BankAmerica management and a review
of comparably sized banking institutions. Unless otherwise noted, financial
information presented was at or for the year ended December 31, 1997. Pro forma
adjustments were made for pending acquisitions. Market information presented was
as of April 8, 1998. EPS and price to EPS ratios were based upon median IBES
earnings estimates as of April 8, 1998. In its decision to use median IBES
estimates in its analyses, Goldman Sachs relied on the fact that they were
materially consistent with internal forecasts provided to it by senior
management of BankAmerica and NationsBank.
Goldman Sachs compared estimated ratios of price to EPS and price to cash
EPS (EPS before goodwill amortization) for BankAmerica and NationsBank with the
median ratios for the Super-Regionals for 1998 and 1999. The estimated price to
EPS ratios for 1998 for BankAmerica and NationsBank were 17.3x and
THE MERGER
36
15.8x, respectively. The median price to EPS ratio for the Super-Regionals for
the same period was 18.7x. The estimated price to EPS ratios for 1999 for
BankAmerica and NationsBank were 15.3x and 13.5x, respectively. The median price
to EPS ratio for the Super-Regionals for the same period was 16.1x. The
estimated price to cash EPS ratios for 1998 for BankAmerica and NationsBank were
15.7x and 14.1x, respectively. The median price to cash EPS ratio for the
Super-Regionals for the same period was 16.4x. The estimated price to cash EPS
ratios for 1999 for BankAmerica and NationsBank were 14.0x and 12.3x,
respectively. The median price to cash EPS ratio for the Super-Regionals for the
same period was 14.6x.
The IBES five-year EPS growth estimates for BankAmerica and NationsBank
were 13.0% and 12.0%, respectively. The median IBES five-year EPS growth
estimate for the Super-Regionals was 13.0%.
The price to stated book value ratios for BankAmerica and NationsBank were
3.1x and 3.0x, respectively. The median price to stated book value ratio for the
Super-Regionals was 3.7x. The price to tangible book value ratios for
BankAmerica and NationsBank were 4.2x and 5.2x, respectively. The median price
to tangible book value ratio for the Super-Regionals was 4.5x. Dividend yields
for BankAmerica and NationsBank were 1.6% and 2.0%, respectively, and the median
dividend yield for the Super-Regionals was 1.8%.
The compound annual rates of return for BankAmerica and NationsBank for the
year ending March 31, 1998 were 67% and 34%, respectively, and the mean compound
annual rate of return for the Super-Regionals for such period was 56%. The
compound annual rates of return for BankAmerica and NationsBank for the
three-year period ending March 31, 1998 were 55% and 46%, respectively, and the
mean compound annual rate of return for the Super-Regionals for such period was
46%. The compound annual rates of return for BankAmerica and NationsBank for the
five-year period ending March 31, 1998 were 31% and 26%, respectively, and the
mean compound annual rate of return for the Super-Regionals for such period was
29%. The compound annual rates of return for the S&P 500 for such periods were
46%, 30% and 20%, respectively.
Discounted Cash Flow Analyses. Using a discounted cash flow analysis,
Goldman Sachs estimated the present value of future dividend streams, share
repurchases and terminal values which BankAmerica could produce for the period
from March 31, 1998 to December 31, 2002. The estimate of BankAmerica's future
net income assumed earnings growth for this period based on (i) median IBES
earnings estimates for 1998 and 1999 and (ii) the IBES long-term growth rate for
BankAmerica of 13% thereafter. Using assumed discount rates of 13.7%, 14.5% and
15.3% and terminal values based on multiples of price to forward cash earnings
for the 12-month period ending December 31, 2003 ranging from 14.7x to 16.7x,
Goldman Sachs calculated present values ranging from $78 to $91 per share of
BankAmerica Common Stock at March 31, 1998. This compares with the April 8, 1998
closing price of $84.50 per share of BankAmerica Common Stock.
Using a similar discounted cash flow analysis, Goldman Sachs estimated the
present value of future dividend streams, share repurchases and terminal values
which NationsBank could produce for the period from March 31, 1998 to December
31, 2002. The estimate of NationsBank's future net income assumed earnings
growth for this period based on (i) median IBES earnings estimates for 1998 and
1999 and (ii) the IBES long-term growth rate for NationsBank of 12% thereafter.
Using assumed discount rates of 12.6%, 13.3% and 14.0% and terminal values based
on multiples of price to forward cash earnings for the 12-month period ending
December 31, 2003 ranging from 13.1x to 15.1x, Goldman Sachs calculated present
values ranging from $73 to $86 per share of NationsBank Common Stock at March
31, 1998. This compares with the April 8, 1998 closing price of $74.25 per share
of NationsBank Common Stock.
These discounted cash flow analyses assumed (i) common dividends based on
the current cash payout ratio and (ii) ongoing repurchases consistent with the
consensus of Wall Street analysts' views.
Analysis of Average Historical Exchange Ratios. Goldman Sachs described
for the BankAmerica Board the relative range of pro forma ownership percentages
by BankAmerica Shareholders which would have resulted from the application of
average exchange ratios (ranging from 0.9628 to 1.1853) in relation to average
prices per share for BankAmerica Common Stock and NationsBank Common Stock for
selected trading periods. The pro forma ownership percentages by BankAmerica
Shareholders for these trading periods ranged, on a diluted basis, from 41% to
46%.
Pro Forma Financial Analysis. Goldman Sachs presented the pro forma impact
of the Merger on a variety of financial measures. Earnings estimates for this
pro forma analysis were based on the median IBES
THE MERGER
37
estimates for BankAmerica and NationsBank, after giving effect to an estimated
$1.3 billion of after-tax cost savings. The pro forma analysis assumed common
dividends based on NationsBank's current indicated dividend and the suspension
of share repurchases by the Combined Company.
Goldman Sachs analyzed the pro forma net income and pro forma cash net
income of the combined companies for the four-year period ending December 31,
2001. Taking into account the synergies and excess capital utilization resulting
from the Merger, pro forma net income after the Merger for these four years was
estimated at $8.1 billion, $9.9 billion, $11.6 billion and $13.0 billion,
respectively. After amortization of goodwill resulting from previous
acquisitions by BankAmerica and NationsBank, pro forma cash net income for the
same four years was estimated at $8.9 billion, $10.7 billion, $12.4 billion and
$13.8 billion, respectively.
Goldman Sachs also analyzed the pro forma impact of the Merger from the
perspectives of BankAmerica and NationsBank on a variety of per share measures,
including, among others things, EPS, cash EPS and tangible book value per share.
This pro forma per share analysis was based on the assumption that no cost
savings would be realized in 1998, that 50% of the $1.3 billion of after-tax
cost savings would be realized in 1999, and that 100% of the $1.3 billion of
after-tax cost savings would be realized in the year 2000 and each year
thereafter. Share prices for BankAmerica and NationsBank were based upon closing
prices on April 8, 1998.
The pro forma per share analysis indicated that, from BankAmerica's
perspective, the Merger would be (i) accretive to estimated EPS in 1998 by 5%,
(ii) accretive in 1999 by 13.1%, (iii) accretive in 2000 by 18.1% and (iv)
accretive in 2001 by 17.2%. The analysis also indicated that the Merger would be
accretive to BankAmerica's estimated cash EPS in 1998, 1999, 2000 and 2001 by
7.5%, 14.6%, 18.9% and 17.8%, respectively.
From a NationsBank perspective, the Merger was estimated to be dilutive to
NationsBank's estimated EPS by 4.2% in 1998. The Merger was indicated to be
accretive to NationsBank's estimated EPS in 1999, 2000 and 2001 by 0.3%, 5.6%
and 5.8%, respectively. The Merger was estimated to be dilutive to NationsBank's
estimated cash EPS in 1998 and 1999 by 5.8% and 1.7%, respectively. The Merger
was indicated to be accretive to NationsBank's estimated cash EPS in 2000 and
2001 by 3.2% and 3.3%, respectively.
The indicated impact of the Merger on tangible book value per share from
BankAmerica's perspective based upon December 31, 1997 data reflected a decrease
of 13.3%. It was estimated that NationsBank's tangible book value per share
based upon December 31, 1997 data would increase by 3.6%.
Goldman Sachs also presented data concerning the pro forma impact of the
Merger on various profitability measures, including reported and cash return on
average assets, reported and cash return on average common equity and efficiency
ratios. Analysis of these profitability measures was made on the basis of fully
phased-in cost savings assumptions, as if the Merger had been consummated on
December 31, 1997. For the quarter ended December 31, 1997, the pro forma
reported return on average assets was 1.53%, compared with 1.26% and 1.34% for
BankAmerica and NationsBank, respectively. For the quarter ended December 31,
1997, the pro forma cash return on average assets was 1.69%, compared with 1.39%
and 1.52% for BankAmerica and NationsBank, respectively. For the quarter ended
December 31, 1997, the pro forma reported return on average common equity was
20.1%, compared with 16.8% and 16.4% for BankAmerica and NationsBank,
respectively. For the quarter ended December 31, 1997, the pro forma cash return
on average common equity was 22.2%, compared with 18.7% and 18.6% for
BankAmerica and NationsBank, respectively. For the quarter ended December 31,
1997, the pro forma efficiency ratio (defined as non-interest expense divided by
the sum of non-interest income and net interest income before provision for loan
losses) was 50%, compared with 57% and 55% for BankAmerica and NationsBank,
respectively.
Pro Forma Discounted Cash Flow Analysis. Using a pro forma discounted cash
flow analysis from BankAmerica's perspective, Goldman Sachs estimated the
present value of future dividend streams, share repurchases and terminal values
which could be produced after consummation of the Merger for the period from
March 31, 1998 to December 31, 2002. The estimate of pro forma future net income
assumed earnings growth for this period based on median IBES earnings estimates
for both BankAmerica and NationsBank, giving effect to $1.3 billion of after-tax
cost savings to be realized beginning in the year 1999 at 50% of such
THE MERGER
38
cost savings and continuing in the year 2000 and each year thereafter at 100% of
such cost savings. Using assumed discount rates of 13.1%, 13.8% and 14.6% and
terminal values based on multiples of price to forward cash earnings for the
12-month period ending December 31, 2003 ranging from 13.1x to 16.7x, Goldman
Sachs calculated present values ranging from $83 to $110 per share of
BankAmerica Common Stock at March 31, 1998. This compares with the April 8, 1998
closing price of $84.50 per share of BankAmerica Common Stock. This pro forma
discounted cash flow analysis assumed common dividends based on NationsBank's
current indicated dividend and the suspension of share repurchases by the
Combined Company.
Comparison of Projected Cost Savings. Goldman Sachs presented comparative
information about the projected cost savings indicated by the participants in
selected bank merger transactions, both adjacent market and in-market, which
were announced during the last three years. Goldman Sachs compared cost savings
as a percentage of non-interest expense for BankAmerica and NationsBank with the
median of such percentage for both the adjacent market and the in-market bank
merger groups. The Merger's assumed cost savings was estimated at 22% of
BankAmerica's stand-alone, pre-Merger non-interest expense and 20% of
NationsBank's stand-alone, pre-Merger non-interest expense, compared with a
median cost savings of 25% and 44% of seller's non-interest expense for the
adjacent market and the in-market bank merger groups, respectively. The
approximate period to achieve these cost savings following a transaction was
assumed to be two years for BankAmerica/NationsBank and a median of two years
for each of the adjacent market and the in-market bank merger groups.
Summary Analysis of Selected Recent Bank and other Financial Institution
Mergers. Goldman Sachs also presented summary comparative information
concerning selected recent financial institution merger-of-equals transactions
announced during the last three years. These bank mergers consisted of:
Travelers Group Inc./Citicorp, Royal Bank of Canada/Bank of Montreal, Union Bank
of Switzerland/Swiss Bank Corporation, Dean Witter, Discover & Co./Morgan
Stanley Group Inc., Chemical Bank/The Chase Manhattan Corporation, and NBD
Bancorp, Inc./First Chicago Corporation. Pro forma ownership percentages of the
two parties involved in the selected merger-of-equals transactions ranged from
40%/60% to 50%/50%. This compared with pro forma ownership percentages of
BankAmerica and NationsBank in the Combined Company of 45% and 55%,
respectively. In the selected merger-of-equals transactions, representation of
the respective merged financial institutions on the resulting combined company's
board of directors ranged from 44%/56% to 50%/50%. This compares with
representation of BankAmerica and NationsBank on the Combined Company's board of
directors of 45% and 55%, respectively.
On the first day after announcement of each of these merger-of-equals
transactions (adding as a comparison the Chemical Bank/Manufacturers Hanover
merger), market capitalization increases, calculated as a percentage of
pre-announcement market capitalization, ranged from 3% to 22%. These market
capitalization increases, calculated as a percentage of the net present value of
synergies afforded by these merger-of-equals transactions, ranged from 4% to
49%. The net present value of synergies for this purpose was computed as the
estimated after-tax synergies, increasing at 2% per year, phased-in over two to
three years, and discounted at 10%, less restructuring charges.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to a partial analysis or summary description. Goldman
Sachs believes that its analyses must be considered as a whole and that
selecting portions of its analyses, without considering the analyses taken as a
whole, would create an incomplete view of the process underlying the analyses
set forth in its opinion. In addition, Goldman Sachs considered the results of
all such analyses and did not assign relative weights to any of the analyses, so
the ranges of valuations resulting from any particular analysis described above
should not be taken to be Goldman Sachs' view of the actual value of BankAmerica
or a combination of BankAmerica and NationsBank.
In performing its analyses, Goldman Sachs made numerous assumptions with
respect to industry performance, general business, economic and regulatory
conditions and other matters, many of which are beyond the control of
BankAmerica or NationsBank. The analyses performed by Goldman Sachs are not
necessarily indicative of actual values, trading values or actual future results
which might be achieved, all of which may be significantly more or less
favorable than suggested by such analyses. Such analyses were prepared solely as
part of Goldman Sachs' analysis of the fairness of the Merger to BankAmerica
Shareholders from a financial point of view and were provided to the BankAmerica
Board. The analyses do not purport to be appraisals or to reflect the
THE MERGER
39
prices at which a company might be sold. In addition, as described above, the
opinion of Goldman Sachs was one of many factors taken into consideration by the
BankAmerica Board in making its determination to approve the Merger.
Consequently, the analyses described above should not be viewed as determinative
of the BankAmerica Board's or BankAmerica management's opinion with respect to
the value of BankAmerica or a combination of BankAmerica and NationsBank, or of
whether the BankAmerica Board or BankAmerica management would have been willing
to agree to a different exchange ratio. BankAmerica placed no limits on the
scope of the analysis performed, or opinion expressed, by Goldman Sachs.
Goldman Sachs is an internationally recognized investment banking and
advisory firm. As part of its investment banking business, Goldman Sachs is
continuously engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes. In the course of its
market-making and other trading activities, Goldman Sachs may, from time to
time, have a long or short position in, and may buy and sell, securities of
BankAmerica, NationsBank and other financial institutions. In the past, Goldman
Sachs and certain of its affiliates have provided financial advisory and
financial services to BankAmerica and NationsBank. Since June 1, 1996, Goldman
Sachs has received aggregate fees of approximately $13.4 million in respect of
such financial advisory and financial services provided to BankAmerica and
aggregate fees of approximately $18.6 million in respect of such financial
advisory and financial services provided to NationsBank. Goldman Sachs
contemplates receiving customary fees for rendering such financial advisory and
financial services in the future to BankAmerica, NationsBank, the Combined
Company, or any of their respective affiliates.
BankAmerica has agreed to pay Goldman Sachs a transaction fee of $27.5
million, $7.5 million payable in cash upon execution of the Merger Agreement and
the remainder payable in cash upon consummation of the Merger. An additional
fee, equal to 0.20% of the increase in combined market capitalization of
BankAmerica and NationsBank from the trading date immediately preceding
execution of the Merger Agreement to the trading date immediately preceding
consummation of the Merger, will also be payable upon consummation of the
Merger. Assuming that the Merger was consummated on June 26, 1998, the total fee
payable to Goldman Sachs, including the transaction fee and the additional fee,
would equal approximately $30.8 million. In no event may the aggregate of all
compensation paid to Goldman Sachs exceed $50 million. In addition, BankAmerica
has agreed to reimburse Goldman Sachs for its reasonable out-of-pocket expenses
incurred in connection with the services provided by it and to indemnify and
hold harmless Goldman Sachs and certain related parties, to the full extent
lawful, from and against certain liabilities and expenses, including certain
liabilities under the federal securities laws, incurred in connection with its
engagement.
Opinion of Goldman, Sachs & Co. At the April 9, 1998 meeting of the
BankAmerica Board, Goldman Sachs gave its oral opinion that, as of such date and
based upon and subject to various qualifications and assumptions described with
respect to its opinion, the proposed exchange ratio was fair from a financial
point of view to the BankAmerica Shareholders. Goldman Sachs subsequently
delivered a written opinion to BankAmerica on April 10, 1998 that, as of such
date and based upon and subject to various qualifications and assumptions
described in its opinion, the Exchange Ratio was fair from a financial point of
view to the BankAmerica Shareholders. Goldman Sachs has confirmed its written
opinion dated April 10, 1998 by delivery of a written opinion to BankAmerica
dated the date of this Joint Proxy Statement-Prospectus.
THE FULL TEXT OF THE WRITTEN OPINION OF GOLDMAN SACHS, DATED THE DATE OF
THIS JOINT PROXY STATEMENT-PROSPECTUS, WHICH SETS FORTH ASSUMPTIONS MADE,
MATTERS CONSIDERED AND LIMITS ON THE SCOPE OF REVIEW UNDERTAKEN, IS ATTACHED AS
APPENDIX F TO THIS JOINT PROXY STATEMENT-PROSPECTUS. BANKAMERICA SHAREHOLDERS
ARE URGED TO READ THIS OPINION IN ITS ENTIRETY. NO LIMITATIONS WERE IMPOSED BY
THE BANKAMERICA BOARD UPON GOLDMAN SACHS WITH RESPECT TO THE INVESTIGATIONS MADE
OR PROCEDURES FOLLOWED BY IT IN RENDERING ITS OPINION. GOLDMAN SACHS' OPINION,
WHICH IS ADDRESSED TO THE BANKAMERICA BOARD, IS DIRECTED ONLY TO THE FAIRNESS OF
THE EXCHANGE RATIO TO BANKAMERICA SHAREHOLDERS FROM A FINANCIAL POINT OF VIEW
AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY BANKAMERICA SHAREHOLDERS AS TO
HOW SUCH SHAREHOLDER SHOULD VOTE AT THE BANKAMERICA SPECIAL MEETING AND DOES NOT
ADDRESS ANY OTHER ASPECT OF THE PROPOSED MERGER OR ANY RELATED TRANSACTION.
GOLDMAN SACHS CONSENTS TO THE SUMMARIZATION OF ITS OPINION IN, AND ATTACHMENT OF
ITS OPINION TO, THIS JOINT PROXY STATEMENT-PROSPECTUS. THE SUMMARY OF THE
OPINION OF GOLDMAN SACHS SET FORTH
THE MERGER
40
IN THIS JOINT PROXY STATEMENT-PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF SUCH OPINION.
In connection with rendering its opinion, Goldman Sachs has reviewed, among
other things: the Merger Agreement; the Registration Statement on Form S-4 of
which this Joint Proxy Statement-Prospectus is a part; Annual Reports to
Shareholders and Annual Reports on Form 10-K of BankAmerica and NationsBank for
the five years ended December 31, 1997; certain interim reports to shareholders
and Quarterly Reports on Form 10-Q of BankAmerica and NationsBank; certain other
communications from BankAmerica and NationsBank to their respective
shareholders; and certain internal financial analyses and forecasts for
BankAmerica and NationsBank prepared by their respective managements, including
forecasts of certain cost savings (the "SYNERGIES") expected to be achieved as a
result of the Merger. Such management financial analyses and forecasts included
1998 projections of pre-tax earnings, net income to common equity, average
number of diluted shares and diluted earnings per share which were materially
consistent with median IBES forecasts. Because the internal forecasts provided
to Goldman Sachs by the management of NationsBank and BankAmerica were
materially consistent with median IBES forecasts, Goldman Sachs used median IBES
forecasts in its analyses and relied upon the fact that they were materially
consistent with those provided to it by management. Furthermore, Goldman Sachs
has held discussions with BankAmerica management regarding projected share
repurchases and targeted capital ratios. Goldman Sachs has also held discussions
with members of the senior management of BankAmerica and NationsBank regarding
the strategic rationale for, and the potential benefits of, the Merger and the
past and current business operations, regulatory relationships, financial
condition and prospects of BankAmerica and NationsBank. In addition, Goldman
Sachs has reviewed the reported price and trading activity for BankAmerica
Common Stock and NationsBank Common Stock, compared certain financial and stock
market information for BankAmerica and NationsBank with similar information for
certain other companies the securities of which are publicly traded, reviewed
the financial terms of certain recent business combinations in the commercial
banking industry specifically and in other industries generally and performed
such other studies and analyses as it considered appropriate.
Goldman Sachs has relied upon the accuracy and completeness of all of the
financial and other information reviewed by it and has assumed such accuracy and
completeness for purposes of rendering its opinion. In that regard, Goldman
Sachs has assumed, with the BankAmerica Board's consent, that the financial
forecasts, including without limitation the Synergies and projections regarding
under-performing and non-performing assets and net charge-offs, have been
reasonably prepared on a basis reflecting the best currently available judgments
and estimates of BankAmerica and NationsBank and that such forecasts will be
realized in the amounts and at the times contemplated thereby. Goldman Sachs is
not an expert in the evaluation of loan and lease portfolios for purposes of
assessing the adequacy of allowances for losses with respect thereto and has
assumed, with the BankAmerica Board's consent, that such allowances for each of
BankAmerica and NationsBank are in the aggregate adequate to cover all such
losses. Similarly, Goldman Sachs has assumed that the obligations of BankAmerica
and NationsBank pursuant to derivatives, swaps, foreign exchange, financial
instruments and off-balance-sheet lending-related financial instruments will not
have an adverse effect which would be relevant to its analysis. In addition,
Goldman Sachs has not reviewed individual credit files nor has it made an
independent evaluation or appraisal of the assets and liabilities of
BankAmerica, NationsBank or any of their respective subsidiaries, and Goldman
Sachs has not been furnished with any such evaluation or appraisal. Goldman
Sachs has also assumed, with the BankAmerica Board's consent, that the Merger
will be accounted for as a pooling of interests under generally accepted
accounting principles and that obtaining any necessary regulatory approvals and
third party consents for the Merger or otherwise will not have an adverse effect
on BankAmerica, NationsBank or the Combined Company pursuant to the Merger.
Goldman Sachs' opinion was based on economic, market and other conditions
as in effect on, and the information available to it as of, the date of its
opinion. Goldman Sachs did not express any opinion as to the price or range of
prices at which the Combined Company Common Stock might trade subsequent to the
Merger. In addition, Goldman Sachs' opinion did not address the relative merits
of the Merger and alternative potential transactions. Goldman Sachs rendered no
opinion as to the fairness of the Merger to the holders of any series of
BankAmerica Preferred Stock.
THE MERGER
41
THE REINCORPORATION MERGER
As a result of the Reincorporation Merger, NationsBank will become a
Delaware corporation, and the rights of NationsBank shareholders will cease
being governed by North Carolina law and will, instead, be governed by Delaware
law. It is expected that the Reincorporation Merger Effective Time will occur
several days prior to the Effective Time. In addition to reincorporating
NationsBank from North Carolina to Delaware, the Reincorporation Merger will
also increase the number of authorized shares under NationsBank's charter from
1.25 billion shares of common stock and 45 million shares of preferred stock to
5 billion shares of common stock and 100 million shares of preferred stock. See
"Comparative Rights of Shareholders of NationsBank, BankAmerica and the Combined
Company."
THE EFFECTIVE TIME
Subject to the satisfaction or waiver of certain conditions contained in
the Merger Agreement, the parties will cause the Effective Time to occur no
later than (i) the fifth business day after the last to occur of the
satisfaction or waiver of the conditions described under "--Conditions to the
Merger," including, without limitation: (a) the receipt of the required
shareholder approvals of NationsBank and BankAmerica, (b) the receipt of all
regulatory approvals required to consummate the transactions contemplated by the
Merger Agreement and the expiration of any required waiting periods, (c) the
receipt of all consents or approvals of third parties (other than regulatory
authorities) required for consummation of the Merger other than those that, if
not received, would not reasonably be likely to have a material adverse effect
on BankAmerica or NationsBank, and (d) the listing on the NYSE of the Combined
Company Common Stock to be issued in the Merger; or (ii) such other date to
which the parties may agree.
At the Effective Time, BankAmerica Shareholders will cease to be
BankAmerica Shareholders, and will have no rights as BankAmerica Shareholders,
other than the right to receive (i) the number of shares of Combined Company
Common Stock and cash in lieu of fractional shares, if any, to which they may be
entitled and (ii) any dividend or other distribution with respect to such
BankAmerica Common Stock with a record date occurring prior to the Effective
Time. After the Effective Time, there will be no transfers on the stock transfer
books of BankAmerica or of shares of BankAmerica Common Stock.
EXCHANGE OF CERTIFICATES
At or prior to the Effective Time, NationsBank (DE) will deposit, or will
cause to be deposited, with ChaseMellon Shareholder Services, LLC (the "EXCHANGE
AGENT") certificates representing the shares of Combined Company Common Stock
("COMBINED COMPANY CERTIFICATES"), and an estimated amount of cash to be paid in
lieu of fractional shares to which a holder of record of shares formerly
representing BankAmerica Common Stock would otherwise be entitled based on the
Exchange Ratio (such cash and Combined Company Certificates, together with any
dividends or distributions with respect thereto (without any interest thereon),
are referred to as the "EXCHANGE FUND").
As promptly as practicable after the Effective Time, NationsBank or the
Combined Company, as applicable, will send or cause to be sent to each holder of
record of certificates formerly representing BankAmerica Common Stock
("BANKAMERICA CERTIFICATES") transmittal materials for use in exchanging such
BankAmerica Shareholder's BankAmerica Certificates for the consideration due in
respect thereof. After the Effective Time, a BankAmerica Shareholder's shares of
BankAmerica Common Stock will become the right to receive (i) Combined Company
Certificates into which BankAmerica Shareholder's shares of BankAmerica Common
Stock are converted and (ii) a check in respect of any fractional share
interests or dividends or distributions that such person will be entitled to
receive. The Combined Company Certificates and any checks will be delivered to
such BankAmerica Shareholder upon delivery to the Exchange Agent of BankAmerica
Certificates (or indemnity reasonably satisfactory to the Combined Company and
the Exchange Agent, if any of such BankAmerica Certificates are lost, stolen or
destroyed) owned by such BankAmerica Shareholder. No interest will be paid on
any such cash to be paid upon such delivery.
BANKAMERICA SHAREHOLDERS SHOULD NOT SEND IN THEIR BANKAMERICA CERTIFICATES
UNTIL THEY RECEIVE THE TRANSMITTAL MATERIALS FROM THE EXCHANGE AGENT (EXCEPT TO
CONVERT TO A BOOK-ENTRY POSITION, IN WHICH CASE YOU MAY CALL THE TRANSFER AGENT
AT 1-800-642-9880).
THE MERGER
42
No fractional shares of Combined Company Common Stock and no certificates
or scrip therefor, or other evidence of ownership thereof, will be issued in the
Merger; instead, the Combined Company will pay to each BankAmerica Shareholder
who would otherwise be entitled to a fractional share of Combined Company Common
Stock (after taking into account all BankAmerica shares owned by such
BankAmerica Shareholder) an amount in cash to be paid in lieu of fractional
shares (without interest) determined by multiplying such fraction (rounded to
the nearest thousandth) by the average of the last sale prices of NationsBank
Common Stock on the NYSE as reported in The Wall Street Journal, for the five
trading days immediately preceding the date of the Effective Time.
Notwithstanding the foregoing, neither the Exchange Agent nor any party to
the Merger Agreement will be liable to any holder of BankAmerica Common Stock
(or, if after the Effective Time, former BankAmerica Shareholder) for any amount
delivered in good faith to a public official pursuant to applicable abandoned
property, escheat or similar laws.
No dividends or other distributions with respect to Combined Company Common
Stock with a record date occurring after the Effective Time will be paid to the
holder of any unsurrendered BankAmerica Certificate until the holder thereof
will surrender such BankAmerica Certificate in accordance with the terms of the
Merger Agreement. After the proper surrender of a BankAmerica Certificate, the
record holder thereof will be entitled to receive any such dividends or other
distributions, without any interest thereon, which theretofore had become
payable with respect to shares of Combined Company Common Stock represented by
such BankAmerica Certificate.
Holders of BankAmerica Certificates will need to exchange them for new
certificates or a book-entry position in Combined Company Common Stock. Holders
of BankAmerica Certificates who surrender those certificates without requesting
that their shares be issued in certificated form will have their Combined
Company Common Stock issued in book-entry form. Book-entry holdings of
BankAmerica Common Stock will automatically be exchanged into book-entry
holdings of Combined Company Common Stock unless the holders thereof
affirmatively request the issuance of Combined Company Certificates.
After the Effective Time, certificates representing NationsBank Common
Stock and NationsBank Preferred Stock will continue to represent the same number
of shares of Combined Company Common Stock and Combined Company Preferred Stock.
NATIONSBANK SHAREHOLDERS SHOULD NOT SEND IN THEIR NATIONSBANK STOCK
CERTIFICATES.
CONDUCT OF BUSINESS PRIOR TO THE MERGER AND OTHER COVENANTS
Prior to the Effective Time, except as expressly contemplated by the Merger
Agreement, (i) without the prior written consent of NationsBank (which consent
will not be unreasonably withheld or delayed), BankAmerica will not, and will
cause each of its subsidiaries not to, and (ii) without the prior written
consent of BankAmerica (which consent will not be unreasonably withheld or
delayed), NationsBank will not, and will cause each of its subsidiaries not to:
(a) 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 (1) adversely affect the ability of any party to obtain any
necessary approvals of any regulatory authorities required for the
transactions contemplated by the Merger Agreement or (2) adversely affect
its ability to perform any of its material obligations under the Merger
Agreement;
(b) other than pursuant to rights or other stock options or
stock-based awards previously disclosed to NationsBank, the Stock Option
Agreements (as defined herein), upon conversion of shares of NationsBank
Preferred Stock, pursuant to their terms, or as otherwise previously
disclosed to the other party, (1) issue, sell or otherwise permit to become
outstanding, or authorize the creation of, any additional shares of capital
stock, any stock appreciation rights or any convertible, exchangeable or
derivative securities, (2) enter into any agreement with respect to the
foregoing, or (3) permit any
THE MERGER
43
additional shares of capital stock to become subject to new grants of
employee stock options, stock appreciation rights, or similar stock-based
employee rights;
(c) (1) adjust, split, combine or reclassify any capital stock, or (2)
make, declare or pay any dividend (other than (A) in the case of
BankAmerica, (x) quarterly cash dividends on BankAmerica Common Stock at a
rate not to exceed the rate payable as of the date of the Merger Agreement
(with any increase as is consistent with past practice), (y) dividends
payable on BankAmerica Preferred Stock in accordance with the terms
thereof, and (z) dividends from greater than 95% owned subsidiaries to
BankAmerica or another greater than 95% owned subsidiary of BankAmerica, as
applicable, and (B) in the case of NationsBank, (x) quarterly cash
dividends on NationsBank Common Stock at a rate not to exceed the rate
payable as of the date of the Merger Agreement (with any increase as is
consistent with past practice), (y) dividends payable on NationsBank
Preferred Stock in accordance with the terms thereof, and (z) dividends
from greater than 95% owned subsidiaries to NationsBank or to another
greater than 95% owned subsidiary of NationsBank, as applicable), or (2)
directly or indirectly, combine, redeem, reclassify, purchase or otherwise
acquire any shares of its capital stock, other than (A) as previously
disclosed to the other party, or (B) in the ordinary course pursuant to
employee benefit plans (and, after the date of the Merger Agreement, each
of NationsBank and BankAmerica will coordinate with the other the
declaration of any dividends on NationsBank Common Stock and BankAmerica
Common Stock, respectively, and the record dates and payment dates relating
thereto, it being the intention of the parties that holders of NationsBank
Common Stock or BankAmerica Common Stock will not receive two dividends, or
fail to receive one dividend, for any single calendar quarter with respect
to their shares of NationsBank Common Stock and/or BankAmerica Common Stock
and any shares of Combined Company Common Stock any such holder receives in
exchange therefor in the Reorganization);
(d) except as otherwise agreed by BankAmerica and NationsBank, enter
into or amend any written employment, severance or similar agreements or
arrangements with any of its directors, executive officers or employees, or
grant any salary or wage increase or increase any employee benefit
(including incentive or bonus payments), except for (1) normal individual
increases in compensation to employees in the ordinary course of business
consistent with past practice, or (2) other changes as are provided for in
the Merger Agreement or as may be required by law or to satisfy contractual
obligations existing as of the date of the Merger Agreement or additional
grants of awards to newly hired employees consistent with past practice;
(e) except as otherwise agreed to by BankAmerica and NationsBank,
enter into or amend (except as may be required by applicable law, to
satisfy contractual obligations existing as of the date of the Merger
Agreement or amendments that, either individually or in the aggregate,
would not reasonably be expected to result in a material liability) 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, with respect to any of its directors, officers
or other employees, including, without limitation, taking any action that
accelerates the vesting or exercise of any benefits payable thereunder;
(f) dispose of or discontinue any portion of its assets, business or
properties that is material to it and its subsidiaries taken as a whole, or
acquire (other than by way of foreclosures or acquisitions of control in a
bona fide 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;
(g) amend either company's corporate governance documents, with
certain exceptions;
(h) implement or adopt any change in its accounting principles,
practices or methods, other than as may be required by GAAP; or
(i) knowingly take any action that would, or would be reasonably
likely to, prevent or impede the Reorganization from qualifying as a
"reorganization" within the meaning of Section 368(a) of the Code or for
"pooling of interests" accounting treatment under GAAP, or knowingly take
any action that is
THE MERGER
44
intended or is reasonably likely to result in (1) any of its
representations and warranties set forth in the Merger Agreement being or
becoming untrue in any material respect at any time prior to the Effective
Time, (2) any of the conditions to the Reorganization not being satisfied
or (3) a material violation of any provision of the Merger Agreement
except, in each case, as may be required by applicable law.
The Merger Agreement also contains certain other agreements relating to the
conduct of the parties prior to the Effective Time, including those requiring
the parties (i) to use their reasonable best efforts in good faith to take the
necessary actions to effect the Reorganization; (ii) to take all actions
necessary to obtain all necessary shareholder approvals; (iii) to cooperate in
the preparation of the Registration Statement (as defined herein) and this Joint
Proxy Statement-Prospectus; (iv) to cooperate in preparing, filing and obtaining
all necessary regulatory approvals; (v) to refrain from issuing press releases
regarding the Reorganization without the other party's prior approval (except as
otherwise required by applicable law, regulation or NYSE rules); (vi) to provide
the other party with reasonable access to information regarding such party
(except insofar as such access would violate or prejudice the rights of
customers, jeopardize the attorney-client privilege or contravene certain legal,
fiduciary or contractual obligations) under the condition that no such
confidential information be shared with any third party except as required by
applicable law; (vii) to refrain from soliciting or encouraging any alternative
business combination transactions; and (viii) to take steps necessary to ensure
that the Merger Agreement and the Reorganization will not trigger any special
shareholder rights contained in the corporate governance documents of such party
and will not trigger the anti-takeover laws of the DGCL or the NCBCA.
The Combined Company has agreed to provide indemnification to the officers,
directors and employees of NationsBank and BankAmerica for six years after the
Effective Time against certain liabilities in connection with such individual's
status. The Combined Company has also agreed that all rights to indemnification
provided in BankAmerica's and NationsBank's governing documents shall continue
in effect for six years following the Effective Time with respect to events
occurring before the Effective Time, and that it will use its best efforts to
cause directors and officers of NationsBank and BankAmerica immediately prior to
the Effective Time to be covered with respect to events occurring before the
Effective Time by BankAmerica's directors and officers liability insurance
policy (or a substantially similar policy) for six years following the Effective
Time. NationsBank has also agreed to list the shares of Combined Company Common
Stock to be issued in the Merger on the NYSE.
CONDITIONS TO THE REORGANIZATION
The obligation of each of the parties to consummate the Reorganization is
conditioned upon the satisfaction at or prior to the Effective Time of each of
the following: (i) approval of the Merger Agreement and the transactions
contemplated by that Agreement by the requisite vote of the BankAmerica
Shareholders and the NationsBank Voting Shareholders; (ii) the receipt of all
regulatory approvals required to consummate the transactions contemplated by the
Merger Agreement; (iii) all consents or approvals of all persons required for
the consummation of the Reorganization will have been obtained and will 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 BankAmerica or NationsBank; (iv) no order, decree or
injunction of any court or agency of competent jurisdiction will be in effect,
and no law, statute or regulation will have been enacted or adopted, that
enjoins, prohibits or makes illegal consummation of any of the transactions
contemplated by the Merger Agreement, provided that each of NationsBank and
BankAmerica will have used its best efforts to prevent any such rule,
regulation, injunction, decree or other order, and to appeal as promptly as
possible any injunction, decree or other order that may be entered; (v) the
representations and warranties of each party contained in the Merger Agreement
will be true and correct at the time of the Merger Agreement and at the Closing
Date (as defined herein) except for any such representations and warranties made
as of a specified date, which shall be true and correct as of such date, and
other than any inaccuracies which would not be reasonably likely, individually
or in the aggregate, to have a material adverse effect on the financial
condition or results of operations of the party by whom such representations and
warranties were made (and the covenants of the other party will have been
performed or complied with in all material respects); (vi) no stop order
suspending the effectiveness of the Registration Statement will have been issued
and no proceedings for that purpose will have been initiated or threatened by
the Securities and Exchange Commission (the
THE MERGER
45
"COMMISSION") or any other regulatory authority; (vii) NationsBank and
BankAmerica shall have received from Wachtell, Lipton, Rosen & Katz, an opinion,
dated in each case as of the date of the closing of the Merger (the "CLOSING
DATE") as described under "--Certain Federal Income Tax Consequences"; (viii)
the shares of Combined Company Common Stock issuable pursuant to the Merger
Agreement will have been approved for listing on the NYSE, subject to official
notice of issuance; and (ix) NationsBank and BankAmerica shall have received
from PricewaterhouseCoopers LLP and Ernst & Young LLP, their respective
independent certified public accountants, their respective opinions that the
Reorganization will qualify for "pooling of interests" accounting treatment.
No assurance can be provided as to if or when the regulatory approvals
necessary to consummate the Reorganization will be obtained or whether all of
the other conditions precedent to the Reorganization will be satisfied or waived
by the party permitted to do so.
TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement may be terminated, and the Reorganization may be
abandoned: (i) at any time prior to the Effective Time, by the mutual written
consent of the parties, if the Board of Directors of each so determines by vote
of a majority of the members of its entire Board of Directors; (ii) at any time
prior to the Effective Time, by either party if its Board of Directors so
determines by vote of a majority of the members of its entire Board of
Directors, in the event of either a significant breach by the other party of any
of its representations or warranties contained in the Merger Agreement, which
breach cannot be or has not been cured within 45 days after the giving of
written notice to the breaching party of such breach, or a material breach by
the other party of any of its covenants or agreements contained in the Merger
Agreement, which breach cannot be or has not been cured within 45 days after the
giving of written notice to the breaching party of such breach (provided that
the terminating party is not then in material breach of the Merger Agreement);
(iii) at any time prior to the Effective Time, by either party, if its Board of
Directors so determines by vote of a majority of the members of its entire Board
of Directors, in the event that the Merger is not consummated by April 30, 1999,
except to the extent that the failure of the Merger then to be consummated
arises out of or results from the failure of the party seeking to terminate the
Merger Agreement to perform or observe the covenants and agreements of such
party set forth in the Merger Agreement; and (iv) by either party, if its Board
of Directors so determines by a vote of a majority of the members of its entire
Board of Directors, in the event (a) the approval of the Board of Governors of
the Federal Reserve System (the "FEDERAL RESERVE BOARD") required for
consummation of the Reorganization and the other transactions contemplated by
the Reorganization shall have been denied by final nonappealable action or any
governmental entity of competent jurisdiction shall have issued a final order
enjoining the consummation of the transactions contemplated by the Merger
Agreement, or (b) any required shareholder approval is not obtained at the
BankAmerica Special Meeting or the NationsBank Special Meeting, respectively.
In the event of termination of the Merger Agreement pursuant to its terms
and the abandonment of the Merger, no party to the Merger Agreement will have
any liability or further obligation to any other party except (i) for the breach
of certain representations, warranties and covenants that survive termination
and (ii) that termination will not relieve a breaching party from liability for
any willful breach of the Merger Agreement giving rise to such termination.
WAIVER; AMENDMENT; EXPENSES
Prior to the Effective Time, and subject to compliance with applicable law,
any provision of the Merger Agreement may be (i) waived by the party benefited
by the provision, or (ii) amended or modified at any time, by an agreement in
writing among the parties approved by their respective Boards of Directors and
executed in the same manner as the Merger Agreement. Delaware law prohibits any
amendment to any of the terms and conditions of the Merger Agreement subsequent
to shareholder approval which would, among other things, change the amount or
kind of consideration to be received by the BankAmerica Shareholders in the
Reorganization.
THE MERGER
46
Each party to the Merger Agreement will bear all expenses incurred by it in
connection with the Merger Agreement and the transactions contemplated thereby,
except that printing expenses and Commission registration fees will be shared
equally between BankAmerica and NationsBank.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material U.S. federal income tax
consequences of the Merger to holders of BankAmerica Common Stock and
NationsBank Stock who hold such stock as a capital asset. This summary is based
on the Code, Treasury regulations thereunder, and administrative rulings and
court decisions in effect as of the date hereof, all of which are subject to
change at any time, possibly with retroactive effect. This summary is not a
complete description of all of the consequences of the Merger and, in
particular, may not address U.S. federal income tax considerations applicable to
BankAmerica Shareholders or NationsBank Shareholders subject to special
treatment under U.S. federal income tax law (including, for example, non-U.S.
persons, financial institutions, dealers in securities, insurance companies or
tax-exempt entities, holders who acquired BankAmerica Common Stock or
NationsBank Stock pursuant to the exercise of an employee stock option or right
or otherwise as compensation, holders of Dissenting Shares and holders of
BankAmerica Common Stock or NationsBank Stock as part of a hedge, straddle or
conversion transaction). In addition, no information is provided herein with
respect to the tax consequences of the Merger under applicable foreign, state or
local laws. HOLDERS OF BANKAMERICA COMMON STOCK AND NATIONSBANK STOCK ARE URGED
TO CONSULT WITH THEIR TAX ADVISORS REGARDING THE PARTICULAR TAX CONSEQUENCES OF
THE MERGER TO THEM, INCLUDING THE EFFECTS OF U.S. FEDERAL, STATE AND LOCAL,
FOREIGN AND OTHER TAX LAWS.
In connection with the filing of the Registration Statement, the law firm
of Wachtell, Lipton, Rosen & Katz, has delivered to BankAmerica and NationsBank
its opinion, dated the date hereof and based upon certain customary assumptions
and representations (including representations of NationsBank, BankAmerica and
NationsBank (DE) with respect to certain aspects of their assets, liabilities,
expenses and capital structures prior to and at the Reincorporation Merger
Effective Time and the Effective Time and with respect to their plans concerning
certain aspects of the Combined Company's assets, liabilities, expenses and
capital structure following the Reorganization), and Wachtell, Lipton, Rosen &
Katz will, subject to the qualifications discussed in the following paragraph,
deliver to NationsBank and BankAmerica its opinion, dated as of the Closing Date
(the "TAX OPINION"), to the effect that each of the Reincorporation Merger and
the Merger will be treated for U.S. federal income tax purposes as a
"reorganization" within the meaning of Section 368(a) of the Code and that,
accordingly:
(i) no gain or loss will be recognized by NationsBank, the Combined
Company or BankAmerica as a result of the Reincorporation Merger or the
Merger;
(ii) no gain or loss will be recognized by the BankAmerica
Shareholders who exchange all of their BankAmerica Common Stock solely for
Combined Company Common Stock pursuant to the Merger (except with respect
to cash received in lieu of a fractional share interest in Combined Company
Common Stock);
(iii) no gain or loss will be recognized by the NationsBank
Shareholders who exchange all of their NationsBank Common Stock solely for
Combined Company Common Stock pursuant to the Reincorporation Merger;
(iv) the aggregate tax basis of the Combined Company Common Stock
received by BankAmerica Shareholders who exchange all of their BankAmerica
Common Stock solely for Combined Company Common Stock pursuant to the
Merger will be the same as the aggregate tax basis of the BankAmerica
Common Stock surrendered in exchange therefor (reduced by any amount
allocable to a fractional share interest for which cash is received); and
(v) the aggregate tax basis of the Combined Company Common Stock
received by NationsBank Shareholders who exchange all of their NationsBank
Common Stock solely for Combined Company Common Stock in the
Reincorporation Merger will be the same as the aggregate tax basis of the
NationsBank Common Stock surrendered in exchange therefor.
THE MERGER
47
The obligations of the parties to consummate the Reorganization are
conditioned upon the receipt by NationsBank and BankAmerica of the Tax Opinion.
Wachtell, Lipton, Rosen & Katz will render the Tax Opinion on the basis of
facts, representations and assumptions set forth or referred to in such Tax
Opinion that are consistent with the state of facts existing at the
Reincorporation Merger Effective Time and at the Effective Time. In rendering
the Tax Opinion, Wachtell, Lipton, Rosen & Katz may require and rely upon
representations and covenants, including those contained in certificates of
officers of NationsBank, NationsBank (DE), BankAmerica and others, reasonably
satisfactory in form and substance to Wachtell, Lipton, Rosen & Katz. The Tax
Opinion is not binding on the Internal Revenue Service (the "IRS") or the
courts, and the parties do not intend to request a ruling from the IRS with
respect to the Reorganization. Accordingly, there can be no assurance that the
IRS will not challenge such conclusion or that a court will not sustain such
challenge.
In the event that (i) the Tax Opinion is not received, (ii) BankAmerica and
NationsBank determine to waive the condition to their obligations to consummate
the Reorganization relating thereto, and (iii) the material federal income tax
consequences to holders of BankAmerica Common Stock or NationsBank Common Stock
are different from those described above, BankAmerica and NationsBank will
resolicit the approval of such holders prior to proceeding with the consummation
of the Reorganization.
Based upon the current ruling position of the IRS, cash received by a
BankAmerica Shareholder in lieu of a fractional share interest in Combined
Company Common Stock will be treated as received in redemption of such
fractional share interest, and a BankAmerica Shareholder should generally
recognize capital gain or loss for U.S. federal income tax purposes measured by
the difference between the amount of cash received and the portion of the tax
basis of the share of BankAmerica Common Stock allocable to such fractional
share interest. Such gain or loss should be a long-term capital gain or loss if
the holding period for such share of BankAmerica Common Stock is greater than
one year at the Effective Time. The holding period of a share of Combined
Company Common Stock received in the Merger (including fractional share
interests deemed received and redeemed as described above) will include the
holder's holding period in the BankAmerica Common Stock surrendered in exchange
therefor.
Holders of NationsBank Preferred Stock (other than NationsBank Series B
Preferred Stock, which is addressed in the following paragraph) will not
recognize any gain or loss on the exchange of all of their NationsBank ESOP
Preferred Stock or NationsBank Series BB Preferred Stock solely for Combined
Company Preferred Stock pursuant to the Reincorporation Merger, provided that,
as is expected to be the case, such Combined Company Preferred Stock is treated
for tax purposes as participating in corporate growth to a significant extent by
virtue of its conversion rights. If so, the aggregate tax basis of such Combined
Company Preferred Stock received by NationsBank shareholders who exchange all of
their NationsBank ESOP Preferred Stock or NationsBank Series BB Preferred Stock
solely for Combined Company Preferred Stock will equal the aggregate tax basis
of the NationsBank ESOP Preferred Stock or NationsBank Series BB Preferred Stock
surrendered in exchange therefor.
Assuming that it is not more likely than not that the Combined Company will
exercise its right to redeem or purchase the Combined Company Series B Preferred
Stock within the 20-year period beginning on the date of the Reincorporation
Merger Effective Time, (i) no gain or loss will be recognized by the holders of
NationsBank Series B Preferred Stock who exchange all of their NationsBank
Series B Preferred Stock solely for Combined Company Series B Preferred Stock
pursuant to the Reincorporation Merger, and (ii) the aggregate tax basis of the
Combined Company Series B Preferred Stock received by holders of NationsBank
Series B Preferred Stock who exchange all of their NationsBank Series B
Preferred Stock solely for Combined Company Series B Preferred Stock pursuant to
the Reincorporation Merger will be the same as the aggregate tax basis of the
NationsBank Series B Preferred Stock surrendered in exchange therefor. This
determination is made as of the Reincorporation Merger Effective Time. No
authorities provide clear guidance with respect to determining, as a legal
matter, whether the Combined Company is more likely than not to redeem the
Combined Company Series B Preferred Stock, and, therefore, it is possible that
the IRS could treat the
THE MERGER
48
exchange of NationsBank Series B Preferred Stock for Combined Company Series B
Preferred Stock as a taxable exchange. NationsBank (DE), however, has no present
plan or intention to redeem the Combined Company Series B Preferred Stock.
Holders of NationsBank Series B Preferred Stock are urged to consult their own
tax advisors with respect to the tax treatment of their receipt of Combined
Company Series B Preferred Stock in the Reincorporation Merger, including the
character and amount of any gain or loss in the event that the exchange of
NationsBank Series B Preferred Stock for Combined Company Series B Preferred
Stock is treated as a taxable exchange.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
General. In connection with their approval of the Merger Agreement and the
transactions contemplated thereby, the BankAmerica Board and the NationsBank
Board considered the proposed post-Merger participation by certain members of
BankAmerica and NationsBank management and of the BankAmerica Board and the
NationsBank Board in the management of the Combined Company or on its Board of
Directors. Each Board concluded that it was in the best interests of the
shareholders to assure that BankAmerica or NationsBank, as the case may be, have
the continued dedication of certain key members of executive management pending
the completion of the Merger and that the Combined Company have continuity of
management after the Merger. Therefore, each Board approved the employment
agreements with key members of BankAmerica and NationsBank management that are
described below.
The Boards also considered the interests of officers and directors of
BankAmerica, NationsBank or their respective subsidiaries under existing
employment agreements and severance and benefit plans. In addition, the Merger
Agreement contains provisions relating to the indemnification of such directors
and officers and directors' and officers' liability insurance.
Board Composition and Related Matters Post-Merger. After the Effective
Time, the Board of Directors of the Combined Company will consist of 20
directors, eleven of whom will be appointed from among the current directors of
NationsBank and nine of whom will be appointed from among the current directors
of BankAmerica. The only members of the Board of Directors of the Combined
Company named to date are Mr. McColl and Mr. Coulter. See "Management and
Operations after the Merger."
Employment Agreements with the Combined Company. In connection with the
execution of the Merger Agreement, employment agreements (the "EMPLOYMENT
AGREEMENTS") were entered into with each of David A. Coulter, James H. Hance,
Jr., Kenneth D. Lewis, Michael J. Murray and Michael E. O'Neill (the
"EXECUTIVES"). Each Employment Agreement is for a term of three years (five
years in the case of Mr. Coulter) commencing at the Effective Time and
terminating on the third (fifth in the case of Mr. Coulter) anniversary thereof
(the "EMPLOYMENT PERIOD"). During the Employment Period, Messrs. Hance, Lewis,
Murray and O'Neill will each serve as a member of the Policy Committee of the
Combined Company, reporting directly to the Chief Executive Officer of the
Combined Company (the "CEO"), and Mr. Coulter will serve as President of the
Combined Company and as a member of its Board of Directors and of the Policy
Committee. During the Employment Period, the Executives will receive an annual
base salary of not less than $1 million ($1.5 million or, if greater, 100% of
the annual base salary paid to the CEO, in the case of Mr. Coulter). During the
Employment Period, each Executive will be eligible to receive an annual bonus
and other benefits on a basis no less favorable than peer executives of the
Combined Company. As of the Effective Time, each Executive will be granted
200,000 shares of restricted stock of the Combined Company (300,000 shares in
the case of Mr. Coulter) (in the case of each Executive, the "RESTRICTED
STOCK"). The Restricted Stock will vest in five equal installments on each of
the first, second, third, fourth and fifth anniversaries of the Effective Time
(subject to accelerated vesting upon a change of control of the Combined Company
and upon certain qualifying terminations as described therein). Pursuant to the
Employment Agreements, upon an Executive's termination of employment for any
reason, the Executive will be paid an annual retirement benefit of 60% of his
"final average compensation" (as defined in NationsBank's Supplemental Executive
Retirement Plan (the "SERP")), less benefits payable under BankAmerica's and
NationsBank's tax-qualified retirement plans and social security, and in lieu of
any benefits the Executive is entitled to receive under any non-qualified
defined benefit plan (the "RETIREMENT BENEFIT"), provided that the Executive's
Retirement Benefit will not be less than $2 million (in the case of
THE MERGER
49
Mr. Coulter, 95% of his 1997 "base salary" and "bonus" (as such terms are
defined in the SERP)). The Employment Agreements further provide that, upon the
termination of an Executive's employment with the Combined Company other than
for "cause" (as defined in the Employment Agreements), death or "disability" (as
defined in the Employment Agreements), or if the Executive terminates employment
for "good reason" (as defined in the Employment Agreements), each Executive is
entitled to a lump-sum cash payment equal to the sum of (i) any unpaid base
salary, (ii) a pro rata annual bonus, based on the highest bonus earned in the
three years prior to the date of termination (the "RECENT ANNUAL BONUS") and
(iii) the product of (a) the number of months from the date of termination until
the end of the Employment Period, divided by 12 and (b) the sum of the
Executive's base salary and the Recent Annual Bonus. Upon any such termination,
the Restricted Stock will vest immediately, and each Executive, his spouse and
dependents will be entitled to receive medical and dental benefits coverage for
the remainder of the Executive's life and that of his current spouse on the same
basis as such benefits are provided to peer executives of the Combined Company.
If any amounts payable to an Executive under the Employment Agreement or
otherwise would subject such Executive to the excise tax under section 4999 of
the Code, the Combined Company will make a payment to the Executive such that
after the payment of all income and excise taxes, the Executive will be in the
same after-tax position as if no excise tax under section 4999 had been imposed,
provided that, if such payments (excluding additional amounts payable due to the
excise tax) do not exceed 110% of the greatest amount that could be paid without
giving rise to the excise tax, no additional payments will be made with respect
to the excise tax, and the payments otherwise due to the Executive will be
reduced to an amount necessary to prevent the application of the excise tax.
Each Employment Agreement contains a restrictive covenant which prohibits the
Executive from disclosing confidential information during the Employment Period
and thereafter.
Change In Control Agreements with BankAmerica. In February 1996,
BankAmerica adopted a change in control severance program, pursuant to which
individual change in control agreements (the "EXECUTIVE AGREEMENTS") were
entered into between BankAmerica and each of Eugene Lockhart and Martin Stein
and Messrs. Coulter, Murray and O'Neill (the "COVERED EXECUTIVES"). The
Executive Agreements provide that, if within one year following a Change in
Control (as defined in the Executive Agreements), a Covered Executive's
employment is terminated other than for "cause" (as defined in the Executive
Agreements), death or "disability" (as defined in the Executive Agreements), or
by the Executive for "good reason" (as defined in the Executive Agreements),
such Covered Executive will be entitled to a lump sum payment equal to (i) any
unpaid base salary, (ii) a pro rata annual bonus, based on the higher of (a) the
lowest annual bonus earned in the three years prior to the Change in Control and
(b) the annual bonus paid to peer executives for such year, (iii) the product of
(a) three and (b) the sum of the Covered Executive's base salary and the average
of the actual annual bonuses earned by the Covered Executive in the three fiscal
years prior to the Change of Control, (iv) the value of any benefits forfeited
under the BankAmerica 401(k) Investment Plan and Pension Plan and (v) the
product of (a) three and (b) the annual company contribution for the Covered
Executive's welfare benefits (multiplied by 191% to compensate for the payment
being taxable). In addition, upon any such termination, the Covered Executive
will become 100% vested in the BankAmerica Supplemental Retirement Plan, and, if
the Covered Executive qualifies as a retiree, he will be eligible for the
retiree benefits available to peer executives. The Executive Agreements provide
the Covered Executives with outplacement services and, for the calendar year of
the date of termination and for one additional calendar year thereafter,
continued financial counseling services on the same basis as provided to peer
executives, each at BankAmerica's cost. The consummation of the transactions
contemplated by the Merger Agreement will constitute a Change in Control for
purposes of the Executive Agreements. If any amounts payable to a Covered
Executive under the Executive Agreements or otherwise would subject the Covered
Executive to the excise tax under section 4999 of the Code, BankAmerica will
make a payment to the Covered Executive such that after the payment of all
income and excise taxes, the Covered Executive will be in the same after-tax
position as if no excise tax under section 4999 had been imposed. The severance
payments under the Executive Agreements are conditioned upon the execution and
non-revocation of a general release of claims by the Covered Executive in favor
of BankAmerica and its affiliates. The Executive Agreements contain restrictive
covenants relating to confidentiality and non-disparagement. In the case of
Messrs. Coulter, Murray and O'Neill, the Employment Agreements (described above)
supersede the Executive Agreements, and as
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50
such, these Covered Executives will not be entitled to receive the payments and
benefits described herein. Messrs. Lockhart and Stein will be terminating their
employment in connection with the transactions contemplated by the Merger
Agreement and, under their Executive Agreements, will be entitled to receive
approximately $7.9 million and $5 million, respectively, upon such termination
(plus, in each case, the pro rata annual bonus to be determined as described
above). Additionally, BankAmerica has agreed with Mr. Lockhart that, in return
for providing services for a period of time, he will receive, whether or not the
Merger is consummated, the benefits provided by his Executive Agreement,
stock-based rights substantially the same as those described below and certain
relocation benefits. Approximately 1,000 additional members of senior management
also receive benefits under the change in control severance program that are
comparable to those for the Covered Executives, except that the multiple of base
salary and bonus is generally one and one-half or two, rather than three.
Stock-Based Rights. The Merger Agreement provides that at the Effective
Time each outstanding and unexercised stock option to purchase shares of
BankAmerica Common Stock (and any related LSAR (as defined below)) granted under
the BankAmerica 1992 Management Stock Plan, the BankAmerica 1987 Management
Stock Plan, the BankAmerica Performance Equity Program, the Continental Bank
Corporation 1982 Performance, Restricted Stock and Stock Option Plan and the
Continental Bank Corporation 1991 Equity Performance Incentive Plan (the
"BANKAMERICA STOCK PLANS") will cease to represent the right to acquire shares
of BankAmerica Common Stock and will be converted into and become a right with
respect to Combined Company Common Stock, adjusted for the Exchange Ratio.
Generally, pursuant to the terms of the BankAmerica Stock Plans, at the
Effective Time, the unvested stock options and the restricted stock awards and
restricted stock units held by executive officers and employee directors will
become fully vested and exercisable and all restrictions on any such awards will
lapse. In addition, pursuant to the terms of the award agreements granting
premium priced options to certain officers under the BankAmerica Performance
Equity Program, at the Effective Time the premium priced options will become
vested (without regard to the achievement of the target exercise price) and/or
fully exercisable (certain premium priced options vested due to the achievement
of the target exercise price prior to the Effective Time but remained subject to
restrictions on exercisability) and the holders thereof, upon their election
within a 60-day period following the Effective Time, will have the right, to
exercise the limited stock appreciation rights ("LSARs") granted in conjunction
with the premium price options, in cancellation of the options. Upon the
exercise of an LSAR after the Effective Time, the holder thereof will be
entitled to receive Combined Company Common Stock with a value equal to the
amount by which a share of Combined Company Common Stock on the date of exercise
exceeds the exercise price (as adjusted) of the LSAR. The number of unvested
stock options (excluding premium priced options) to acquire shares of
BankAmerica Common Stock held by Messrs. Coulter, Lockhart, Murray, O'Neill and
Stein that will become vested and fully exercisable as a result of the Merger is
99,999, 284,926, 51,665, 53,331, and 33,333, respectively. The number of premium
priced options (and related LSARs) to acquire shares of BankAmerica Common Stock
held by Messrs. Coulter, Lockhart, Murray, O'Neill and Stein that will become
vested and/or fully exercisable as a result of the Merger is 1,941,500
(719,898), 1,019,300 (377,948), 1,019,300 (377,948), 849,500 (314,990) and
776,700 (288,000), respectively. The number of shares of BankAmerica Common
Stock underlying awards of restricted stock and restricted stock units held by
Messrs. Coulter, Murray, O'Neill, Stein and Lockhart that will become
transferable as a result of the Merger is 0, 0, 0, 0, and 20,096, respectively.
Indemnification and Insurance. The Merger Agreement provides that the
Combined Company will, for six years after the Effective Time, indemnify
directors, officers and employees of BankAmerica, NationsBank or any of their
respective subsidiaries against certain liabilities in connection with such
persons' status as such or in connection with the Merger Agreement, the Stock
Option Agreements or any of the transactions contemplated thereby. Pursuant to
the Merger Agreement, the Combined Company will also, for six years after the
Effective Time and with respect to events occurring prior to the Effective Time,
honor all rights to indemnification and limitations of liability existing in
favor of the foregoing persons as provided in the governing documents of
NationsBank, BankAmerica or their respective subsidiaries. NationsBank and
BankAmerica have also agreed that, for six years after the Effective Time, the
Combined Company will use its best efforts to cause the directors and officers
of BankAmerica and NationsBank to be covered (with respect to acts or omissions
taking place prior to the Effective Time) by directors and officers liability
insurance
THE MERGER
51
policies as favorable as BankAmerica's and NationsBank's current policies, or by
substantially similar policies in substitution therefor. See "--Conduct of
Business Prior to the Merger and Other Covenants."
NATIONSBANK AND BANKAMERICA STOCK OPTION AGREEMENTS
Concurrently with the execution of the Merger Agreement, NationsBank
executed and delivered a stock option agreement, dated April 10, 1998 (the
"NATIONSBANK STOCK OPTION AGREEMENT"), pursuant to which NationsBank granted to
BankAmerica an option to purchase NationsBank Common Stock from NationsBank
under the conditions set forth below (the "NATIONSBANK OPTION"). At the same
time, BankAmerica executed and delivered a stock option agreement, dated April
10, 1998 (the "BANKAMERICA STOCK OPTION AGREEMENT" and, with the NationsBank
Stock Option Agreement, the "STOCK OPTION AGREEMENTS"), pursuant to which
BankAmerica granted to NationsBank an option to purchase BankAmerica Common
Stock from BankAmerica under the conditions set forth below (the "BANKAMERICA
OPTION"). NationsBank and BankAmerica approved and entered into the NationsBank
Stock Option Agreement and the BankAmerica Stock Option Agreement, respectively,
as an inducement to the other to enter into the Merger Agreement.
Except as otherwise noted below, the terms and conditions of the
NationsBank Stock Option Agreement and the BankAmerica Stock Option Agreement
are identical in all material respects. For purposes of this section, except as
otherwise noted, (i) the NationsBank Stock Option Agreement or the BankAmerica
Stock Option Agreement, as the case may be, is sometimes referred to as the
"ISSUER OPTION AGREEMENT," (ii) NationsBank, as issuer of the NationsBank Common
Stock, and BankAmerica, as issuer of the BankAmerica Common Stock, upon the
exercise of the NationsBank Option and the BankAmerica Option, respectively, are
sometimes individually referred to as the "ISSUER," (iii) NationsBank and
BankAmerica, as the holder of the BankAmerica Option and the NationsBank Option,
respectively, are sometimes individually referred to as the "OPTIONEE," (iv) the
NationsBank Option or the BankAmerica Option, as the case may be, is sometimes
referred to as the "ISSUER OPTION" and (v) NationsBank Common Stock and
BankAmerica Common Stock is referred to as "ISSUER COMMON STOCK."
The Stock Option Agreements are intended to increase the likelihood that
the Merger will be consummated in accordance with the terms of the Merger
Agreement. Consequently, certain aspects of the Stock Option Agreements may have
the effect of discouraging persons who might now or at any other time prior to
the Effective Time be interested in acquiring all of or a significant interest
in NationsBank or BankAmerica from considering or proposing such an acquisition,
even if any such person was prepared to offer to pay consideration that had a
higher current market price. The acquisition of NationsBank or BankAmerica could
cause the NationsBank Option or the BankAmerica Option, as the case may be, to
become exercisable. The existence of the Issuer Options could significantly
increase the cost to a potential acquiror of acquiring either Issuer compared to
its cost had the Stock Option Agreements and the Merger Agreement not been
entered into. Such increased cost might discourage a potential acquiror from
considering or proposing an acquisition or might result in a potential acquiror
proposing to pay a lower per share price to acquire such Issuer than it might
otherwise have proposed to pay. Moreover, following consultation with their
respective independent accountants, BankAmerica and NationsBank believe that the
exercise or repurchase of either of the Issuer Options is likely to prohibit any
other acquiror of an Issuer from accounting for an acquisition of such Issuer
using the "pooling of interests" accounting method for a period of two years.
The NationsBank Stock Option Agreement gives BankAmerica an option to
purchase 191,975,012 shares (the "NATIONSBANK OPTION SHARES" or the "ISSUER
OPTION SHARES," as the case may be) of NationsBank Common Stock at an exercise
price of $76.4375 per share (the closing price of NationsBank Common Stock on
the last trading day preceding the execution of the Merger Agreement), payable
in cash. The NationsBank Option Shares, if issued pursuant to the NationsBank
Stock Option Agreement, will in no event exceed 19.9% of the NationsBank Common
Stock issued and outstanding without giving effect to the issuance of any
NationsBank Common Stock subject to the NationsBank Option.
The BankAmerica Stock Option Agreement gives NationsBank an option to
purchase 135,840,487 shares (the "BANKAMERICA OPTION SHARES" or the "ISSUER
OPTION SHARES," as the case may be) of BankAmerica Common Stock at an exercise
price of $86.50 per share (the closing price of BankAmerica Common Stock on the
last trading day preceding the execution of the Merger Agreement), payable in
cash. The BankAmerica
THE MERGER
52
Option Shares, if issued pursuant to the BankAmerica Stock Option Agreement,
will in no event exceed 19.9% of the BankAmerica Common Stock issued and
outstanding without giving effect to the issuance of any BankAmerica Common
Stock subject to the BankAmerica Option.
The number of shares of Issuer Common Stock subject to the applicable
Issuer Option will be increased or decreased, as appropriate, to the extent that
additional shares of Issuer Common Stock are either (i) issued or otherwise
become outstanding (other than pursuant to the Issuer Option Agreement or as
permitted under the Merger Agreement) or (ii) redeemed, repurchased, retired or
otherwise cease to be outstanding after April 10, 1998, such that, after such
issuance, the number of BankAmerica Option Shares will continue to equal 19.9%
of the BankAmerica Common Stock then issued and outstanding in the case of the
BankAmerica Stock Option and the number of NationsBank Option Shares will
continue to equal 19.9% of the NationsBank Common Stock then issued and
outstanding in the case of the NationsBank Option, in each case, without giving
effect to the issuance of any stock subject to the applicable Issuer Option. In
the event of any change in, or distributions in respect of, the number of shares
of Issuer Common Stock by reason of a stock dividend, split-up, merger,
recapitalization, combination, subdivision, conversion, exchange of shares,
distribution on or in respect of such Issuer Common Stock that would be
prohibited by the Merger Agreement, or similar transaction, the type and number
of Issuer Option Shares purchasable upon exercise of the applicable Issuer
Option, and the applicable option price will also be adjusted in such a manner
as will fully preserve the economic benefits of the Issuer Option.
Each Issuer Option Agreement provides that the Optionee or any other holder
or holders of the Issuer Option (as used in this section, collectively, the
"HOLDER") may exercise the Issuer Option, in whole or in part, subject to
regulatory approval, only if both an Initial Triggering Event (as defined
herein) and a Subsequent Triggering Event (as defined herein) has occurred prior
to the occurrence of an Exercise Termination Event (as defined herein); provided
that the Holder has sent to the Issuer written notice of such exercise within 90
days following such Subsequent Triggering Event (subject to extension as
provided in each Issuer Option Agreement). The terms "Initial Triggering Event"
and "Subsequent Triggering Event" generally relate to attempts by one or more
third parties to acquire a significant interest in the Issuer. Any exercise of
the Issuer Option will be deemed to occur on the date such notice is sent.
For purposes of each Issuer Option Agreement:
(i) The term "INITIAL TRIGGERING EVENT" means the occurrence of any of
the following events or transactions after April 10, 1998: (a) the Issuer
or any subsidiary of the Issuer, without the Optionee's prior written
consent, enters into an agreement to engage in, or the Issuer's Board of
Directors recommends that shareholders of the Issuer approve or accept, an
Acquisition Transaction (as defined herein) with any person or group (other
than as contemplated by the Merger Agreement); (b) the Issuer or any
subsidiary of the Issuer, without the Optionee's prior written consent,
authorizes, recommends, proposes or publicly announces its intention to
authorize, recommend or propose to engage in an Acquisition Transaction, or
the Issuer's Board of Directors publicly withdraws or modifies, or publicly
announces its intention to withdraw or modify, in any manner adverse to the
Optionee, its recommendation that its shareholders approve the Agreement in
anticipation of engaging in an Acquisition Transaction; (c) any person,
other than the Optionee, any subsidiary of the Optionee or any Issuer
subsidiary acting in a fiduciary capacity in the ordinary course of
business acquires beneficial ownership, or the right to acquire beneficial
ownership, of 10% or more of the outstanding shares of the Issuer's Common
Stock; (d) any person other than the Optionee or any subsidiary of the
Optionee made a bona fide proposal to the Issuer or its shareholders by
public announcement or written communication that becomes the subject of
public disclosure to engage in an Acquisition Transaction; (e) the Issuer
breaches any covenant or obligation in the Agreement after any person,
other than the Optionee or any subsidiaries of the Optionee, has proposed
an Acquisition Transaction, and such breach (1) would entitle the Optionee
to terminate the Agreement and (2) is not remedied prior to the date of the
Optionee's notice to the Issuer of the exercise of the Option; or (f) any
person other than the Optionee or any subsidiary of the Optionee, other
than in connection with a transaction to which the Optionee has given its
prior written consent, files an application or notice with the Federal
Reserve Board, or other federal or state
THE MERGER
53
bank regulatory authority, which application or notice has been accepted
for processing, for approval to engage in an Acquisition Transaction.
(ii) For purposes of each Issuer Option Agreement, the term
"ACQUISITION TRANSACTION" means (a) a merger or consolidation, or any
similar transaction with the Issuer or any of its Significant Subsidiaries
(as defined in Rule 1-02 of Regulation S-X of the Commission); (b) a
purchase, lease or other acquisition or assumption of all or substantially
all of the assets or deposits of the Issuer or any of its Significant
Subsidiaries; (c) a purchase or other acquisition of securities
representing 10% or more of the voting power of the Issuer; or (d) any
substantially similar transaction, provided, however, that in no event will
any merger, consolidation, purchase or similar transaction involving only
the Issuer and one or more of its subsidiaries or involving only any two or
more of such subsidiaries, be deemed to be an Acquisition Transaction,
provided that any such transaction is not entered into in violation of the
terms of the Merger Agreement.
(iii) The term "SUBSEQUENT TRIGGERING EVENT" means the occurrence of
either of the following events or transactions after April 10, 1998: (a)
the acquisition by any person of beneficial ownership of 20% or more of the
then-outstanding shares of Issuer Common Stock; or (b) the occurrence of
the Initial Triggering Event described above in clause (i)(a), except that
the percentage referred to in clause (ii)(c) of the definition of
"Acquisition Transaction" set forth above will be 20%.
Each Issuer Option will expire upon the occurrence of an "EXERCISE
TERMINATION EVENT," which includes: (i) the Effective Time; (ii) termination of
the Merger Agreement in accordance with the provisions thereof if such
termination occurs prior to the occurrence of an Initial Triggering Event,
except in the case of the termination of the Merger Agreement by the Optionee as
a result of an uncured material breach by the Issuer of any of its
representations, warranties, covenants or agreements unless the breach by the
Issuer is non-volitional; or (iii) the date that is 12 months after the
termination of the Merger Agreement if such termination occurs after the
occurrence of an Initial Triggering Event or is a termination by the Optionee as
a result of an uncured material breach by the Issuer of any of its
representations, warranties, covenants or agreements unless the breach by the
Issuer is non-volitional (provided that, if an Initial Triggering Event
continues or occurs beyond such termination of the Merger Agreement and prior to
the passage of such 12-month period, the Issuer Option will terminate 12 months
from the expiration of the last Initial Triggering Event to expire, but in no
event more than 18 months after such termination of the Merger Agreement).
As of the date of this Joint Proxy Statement-Prospectus, to the best
knowledge of NationsBank and BankAmerica, no Initial Triggering Event or
Subsequent Triggering Event has occurred.
Each Issuer Option Agreement binds the Issuer to repurchase the Issuer
Option upon occurrence of a Repurchase Event. A "REPURCHASE EVENT" is deemed to
have occurred (i) upon the consummation of an Acquisition Transaction or (ii)
upon the acquisition by any person of the beneficial ownership of 50% or more of
the then outstanding Issuer Common Stock, provided that a Subsequent Triggering
Event has occurred prior to an Exercise Termination Event.
Immediately prior to the occurrence of a Repurchase Event (as defined
herein), (i) following a request of a Holder, delivered prior to an Exercise
Termination Event, the Issuer (or any successor thereto) will repurchase the
Issuer Option from the Holder at a price (the "ISSUER OPTION REPURCHASE PRICE")
equal to the amount by which (a) the market/offer price (as defined herein)
exceeds (b) the option price, multiplied by the number of shares for which the
Issuer Option may then be exercised and (ii) at the request of the owner of
Issuer Option Shares from time to time (the "OWNER"), delivered within 90 days
of such occurrence (or such later period as provided in Section 10 of each of
the Stock Option Agreements), the Issuer will repurchase such number of the
Issuer Option Shares from the Owner as the Owner will designate at a price (the
"ISSUER OPTION SHARE REPURCHASE PRICE") equal to the market/offer price
multiplied by the number of Option Shares so designated. Any repurchase by
BankAmerica of the BankAmerica Option, any Substitute Option (as defined
herein), or any BankAmerica Common Stock underlying the BankAmerica Option may
require the approval of the BankAmerica Shareholders in accordance with the
provisions of the BankAmerica Certificate of Incorporation. See "Comparative
Rights of Shareholders of NationsBank, BankAmerica and the Combined Company."
THE MERGER
54
The term "MARKET/OFFER PRICE" means the highest of (i) the price per share
of Issuer Common Stock at which a tender offer or exchange offer therefor has
been made, (ii) the price per share of Issuer Common Stock to be paid by any
third party pursuant to an agreement with Issuer, (iii) the highest closing
price for shares of Issuer Common Stock within the six-month period immediately
preceding the date the Holder gives notice of the required repurchase of the
Issuer Option or the Owner gives notice of the required repurchase of Issuer
Option Shares, as the case may be, or (iv) in the event of a sale of all or a
substantial portion of the Issuer's assets, the sum of the price paid in such
sale for such assets and the current market value of the remaining assets of the
Issuer as determined by a nationally recognized investment banking firm selected
by the Holder or the Owner, as the case may be, and the Issuer, divided by the
number of shares of Issuer Common Stock outstanding at the time of such sale. In
determining the market/offer price, the value of consideration other than cash
will be determined by a nationally recognized investment banking firm selected
by the Holder or Owner, as the case may be, who is reasonably acceptable to the
Issuer. However, if the Issuer at any time after delivery of a notice of
repurchase as described in this paragraph is prohibited under applicable law or
regulation from delivering to the Holder and/or the Owner, as appropriate, the
Issuer Option Repurchase Price and the Issuer Option Share Repurchase Price,
respectively, in full, the Holder or Owner may revoke its notice of repurchase
of the Issuer Option or the Issuer Option Shares, either in whole or to the
extent of the prohibition, whereupon, in the latter case, the Issuer will
promptly (i) deliver to the Holder and/or the Owner, as appropriate, that
portion of the Issuer Option Repurchase Price or the Issuer Option Share
Repurchase Price that the Issuer is not prohibited from delivering and (ii)
deliver, as appropriate, (a) to the Holder, a new Issuer Option Agreement
evidencing the right of the Holder to purchase that number of shares of the
Issuer Common Stock obtained by multiplying the number of shares of the Issuer
Common Stock for which the surrendered Issuer Option Agreement was exercisable
at the time of delivery of the notice of repurchase by a fraction, the numerator
of which is the Issuer Option Repurchase Price less the portion thereof
theretofore delivered to the Holder and the denominator of which is the Issuer
Option Repurchase Price, and (b) to the Owner, a certificate for the Issuer
Option Shares it is then so prohibited from repurchasing.
If, prior to an Exercise Termination Event, the Issuer enters into any
agreement (i) to consolidate with or merge into any person, other than the
Optionee or one of its subsidiaries, such that Issuer is not the continuing or
surviving corporation of such consolidation or merger; (ii) to permit any
person, other than the Optionee or one of its subsidiaries, to merge into the
Issuer and the Issuer is the continuing or surviving corporation, but, in
connection with such consolidation or merger, the outstanding shares of the
Issuer Common Stock are changed into or exchanged for stock or other securities
of any other person or cash or any other property, or the then-outstanding
shares of Issuer Common Stock after such merger will represent less than 50% of
the outstanding voting shares and voting share equivalents of the merged
corporation; or (iii) to sell or otherwise transfer all or substantially all of
its assets to any person, other than the Optionee or any of its subsidiaries,
then, and in each such case, the agreement governing such transaction must
provide that, upon consummation of such transaction and upon terms and
conditions set forth in the Issuer Option Agreement, the Option will be
converted into, or exchanged for, an option having substantially the same terms
as the Option (the "SUBSTITUTE OPTION") to purchase securities, at the election
of the Holder, of either the acquiring person or any person that controls the
acquiring person. At the request of the Holder of the Substitute Option, the
issuer of the Substitute Option will repurchase it at a price, and subject to
such other terms and conditions, as set forth in the Issuer Option Agreement.
Within 90 days after the occurrence of a Subsequent Triggering Event that
occurs prior to an Exercise Termination Date (subject to extension as provided
in the Issuer Option Agreement), the Optionee may request the Issuer to prepare,
file and keep current with respect to the Option Shares, a registration
statement with the Commission. The Issuer is required to use its reasonable best
efforts to cause such registration statement to become effective and then to
remain effective for 180 days or such shorter time as may be reasonably
necessary to effect such sales or other disposition of Option Shares. The
Optionee has the right to demand two such registrations.
Neither the Issuer nor the Optionee may assign any of its rights and
obligations under the Issuer Option Agreements or the Issuer Option to any other
person without the express written consent of the other party, except that, if a
Subsequent Triggering Event occurs prior to an Exercise Termination Event, the
Optionee,
THE MERGER
55
subject to the terms of the Issuer Option Agreement, may assign, in whole or in
part, its rights and obligations thereunder, within 90 days (subject to
extension as provided in the Issuer Option Agreement) of such Subsequent
Triggering Event; provided that, until the date 15 days after the date on which
the Federal Reserve Board approves an application by the Optionee to acquire the
Issuer Option Shares, the Optionee may not assign its rights under the Issuer
Option except in (i) a widely dispersed public distribution, (ii) a private
placement in which no one party acquires the right to purchase in excess of 2%
of the voting shares of the Issuer, (iii) an assignment to a single party for
the purpose of conducting a widely dispersed public distribution on the
Optionee's behalf, or (iv) any other manner approved by the Federal Reserve
Board.
Certain rights and obligations of the Optionee and the Issuer under the
Stock Option Agreements are subject to receipt of required regulatory approvals.
The approval of the Federal Reserve Board is required for the acquisition by the
Optionee of more than 5% of the outstanding shares of Issuer Common Stock.
Accordingly, the Optionee has included or will include in its applications with
the Federal Reserve Board a request for approval of the right of the Optionee to
exercise its rights under the Issuer Option Agreement, including its right to
purchase more than 5% of the outstanding shares of Issuer Common Stock. See
"-- Regulatory Matters."
ACCOUNTING TREATMENT
It is intended that the Reorganization will be accounted for as a "pooling
of interests" under GAAP and the receipt by each party of an opinion of its
independent certified public accountants that the Reorganization will qualify
for such accounting treatment is a condition to the parties' obligations to
consummate the Reorganization. In conjunction with the Merger Agreement,
BankAmerica rescinded its share repurchase program. NationsBank has not had a
share repurchase program in effect since its August 1997 announcement of its
agreement to merge with Barnett. The unaudited pro forma financial information
included in this Joint Proxy Statement-Prospectus reflects the Reorganization
using the "pooling of interests" method of accounting. See "Comparative
Unaudited Per Share Data," "Selected Financial Data" and "Unaudited Pro Forma
Condensed Financial Information."
REGULATORY MATTERS
Federal Reserve Board. The Merger is subject to prior approval by the
Federal Reserve Board under the Bank Holding Company Act of 1956, as amended
(the "BHCA"). The BHCA requires the Federal Reserve Board, when approving a
transaction such as the Merger, to take into consideration the financial and
managerial resources (including the competence, experience and integrity of the
officers, directors and principal shareholders) and future prospects of the
existing and proposed institutions and the convenience and needs of the
communities to be served. In considering financial resources and future
prospects, the Federal Reserve Board will, among other things, evaluate the
adequacy of the capital levels of the parties to a proposed transaction.
The BHCA prohibits the Federal Reserve Board from approving a merger if it
would result in a monopoly or be in furtherance of any combination or conspiracy
to monopolize or to attempt to monopolize the business of banking in any part of
the United States, or if its effect in any section of the country would be
substantially to lessen competition or to tend to create a monopoly, or if it
would in any other manner result in a restraint of trade, unless the Federal
Reserve Board finds that the anti-competitive effects of a merger are clearly
outweighed in the public interest by the probable effect of the transaction in
meeting the convenience and needs of the communities to be served. In addition,
under the Community Reinvestment Act of 1977, as amended, the Federal Reserve
Board must take into account the record of performance of the existing
depository institutions in meeting the credit needs of the entire community,
including low- and moderate-income neighborhoods, served by such institutions.
The Merger generally may not be consummated until 30 days (which may be
shortened to 15 days with the consent of the U.S. Department of Justice (the
"DOJ")) following the date of Federal Reserve Board approval, during which time
the DOJ may challenge the Merger on antitrust grounds. The commencement of an
antitrust action by the DOJ would stay the effectiveness of the Federal Reserve
Board's approval unless a court specifically ordered otherwise. NationsBank and
BankAmerica expect that a small level of divestitures
THE MERGER
56
may be required in connection with antitrust review by the DOJ and the Federal
Reserve Board. Other than the foregoing, NationsBank and BankAmerica believe
that the Merger does not raise substantial antitrust or other significant
regulatory concerns and that any divestitures that may be required in order to
consummate the Merger will not be material to the financial condition or results
of operations of the Combined Company after the Effective Time.
Other Authorities. The Merger may be subject to the approval of or notice
to certain other state and foreign regulatory authorities.
Status of Regulatory Approvals and Other Information. NationsBank and
BankAmerica have filed (or will promptly file) all applications and notices and
have taken (or will promptly take) other appropriate action with respect to any
requisite approvals or other action of any governmental authority. The Merger
Agreement provides that the obligation of each of NationsBank and BankAmerica to
consummate the Reorganization is conditioned upon the receipt of all requisite
regulatory approvals, including the approvals of the Federal Reserve Board and
certain state and foreign regulatory authorities. There can be no assurance that
any governmental agency will approve or take any required action with respect to
the Reorganization, and, if approvals are received or action is taken, there can
be no assurance as to the date of such approvals or action, that such approvals
or action will not be conditioned upon matters that would cause the parties to
mutually consent to abandon the Reorganization or that no action will be brought
challenging such approvals or action, including a challenge by the DOJ or, if
such a challenge is made, the result thereof. To date, applications or
notifications have been filed with the Federal Reserve Board, the Texas
Department of Banking, and the Georgia Commissioner of Banking, among others.
All of the foregoing domestic applications are pending at this time.
NationsBank and BankAmerica are not aware of any governmental approvals or
actions that may be required for consummation of the Merger other than as
described above. Should any other approval or action be required, NationsBank
and BankAmerica currently contemplate that such approval or action would be
sought.
THE MERGER CANNOT PROCEED IN THE ABSENCE OF THE REQUISITE REGULATORY
APPROVALS. THERE CAN BE NO ASSURANCE THAT THE REGULATORY APPROVALS WILL BE
OBTAINED OR AS TO THE DATES OF ANY SUCH APPROVALS. SEE "--CONDITIONS TO THE
MERGER." THERE CAN LIKEWISE BE NO ASSURANCE THAT THE DOJ OR OTHER GOVERNMENTAL
AUTHORITIES WILL NOT CHALLENGE THE MERGER, OR, IF SUCH A CHALLENGE IS MADE, AS
TO THE RESULT THEREOF.
See "--The Effective Time," "--Conditions to the Merger" and "--Termination
of the Agreement."
RESTRICTIONS ON RESALES BY AFFILIATES
The shares of Combined Company Common Stock issuable to BankAmerica
Shareholders upon consummation of the Merger have been registered under the
Securities Act and the shares of Combined Company Common Stock and Combined
Company Preferred Stock issuable to NationsBank Shareholders in the
Reincorporation Merger are not required to be registered under the Securities
Act. Such securities may be traded freely without restriction by those
shareholders who are not deemed to be "affiliates" (as defined in the rules
promulgated under the Securities Act) of NationsBank or BankAmerica.
Shares of Combined Company Common Stock received by those BankAmerica
Shareholders and NationsBank Shareholders who are deemed to be affiliates of
BankAmerica or NationsBank at the time of the Meetings may be resold without
registration under the Securities Act only as permitted by Rule 145 under the
Securities Act or as otherwise permitted thereunder. Shares of Combined Company
Common Stock received by persons who are deemed to be "affiliates" of the
Combined Company may be sold by them only in transactions permitted under the
provisions of Rule 144 under the Securities Act, or as otherwise permitted under
the Securities Act.
Commission guidelines regarding qualifying for the "pooling of interests"
method of accounting also limit sales of shares of the acquiring and acquired
company by affiliates of either company in a business combination. Commission
guidelines also indicate that the "pooling of interests" method of accounting
generally will not be challenged on the basis of sales by affiliates of the
acquiring or acquired company if such
THE MERGER
57
affiliates do not dispose of any of the shares of the corporation they own, or
shares of a corporation they receive in connection with a merger, during the
period beginning 30 days before the merger is consummated and ending when
financial results covering at least 30 days of post-merger operations of the
combined companies have been published.
Each of NationsBank and BankAmerica has agreed to use its reasonable best
efforts to cause each person who is an "affiliate" (for purposes of Rule 145
under the Securities Act and for purposes of qualifying the Merger for "pooling
of interests" accounting treatment) of such party to deliver to the other party
a written agreement intended to ensure compliance with the Securities Act (in
the case of BankAmerica affiliates) and to preserve the ability of the Merger to
be accounted for as a "pooling of interests."
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLANS
NationsBank has a dividend reinvestment and stock purchase plan called the
"NationsBank SharesDirect Plan" that provides, for those NationsBank
Shareholders who elect to participate, that dividends on NationsBank Common
Stock will be used to purchase either original issue shares or shares in the
open market at the market value of NationsBank Common Stock on a quarterly
basis. The plan also permits participants to invest in additional shares of
NationsBank Common Stock through optional cash payments, within certain dollar
limitations, at the then-current market price of such stock at the time of
purchase. Optional cash investment purchases will be made on behalf of plan
participants by the plan administrator at least once each week. It is
anticipated that the NationsBank SharesDirect Plan will be continued by the
Combined Company and that BankAmerica Shareholders who receive shares of
Combined Company Common Stock in the Merger will be eligible to participate in
this plan.
BankAmerica has a Shareholder Investment Plan which allows BankAmerica
Shareholders to elect to reinvest dividends on BankAmerica Common Stock. Shares
may be purchased either in the open market or directly from BankAmerica.
Participants may also elect to invest in additional shares of BankAmerica Common
Stock through optional cash payments, within certain dollar limitations.
Participants pay fair market value per share and pay no brokerage commissions or
service charges. It is anticipated that BankAmerica will suspend or terminate
the plan at or prior to the Effective Time and that participants will be
enrolled in the successor plan of the Combined Company referred to above unless
they choose not to participate in the successor plan.
RIGHTS OF DISSENTING SHAREHOLDERS
Under Article 13 of the NCBCA, certain shareholders of North Carolina
corporations are permitted to dissent from, and obtain the value of, his or her
shares in the event of certain corporate actions. Only holders of NationsBank
ESOP Preferred Stock, NationsBank Series B Preferred Stock, and NationsBank
Series BB Preferred Stock ("ELIGIBLE DISSENTERS") may exercise such dissenters'
rights with respect to the Reorganization.
The following is a summary of the rights of Eligible Dissenters under
Article 13 of the NCBCA. Any Eligible Dissenter who intends to dissent from the
Merger should carefully review the text and comply with the requirements of
Article 13 of the NCBCA (attached as Appendix G to this Joint Proxy Statement-
Prospectus), as well as consult with an attorney. FAILURE TO COMPLY WITH THE
PROCEDURES PRESCRIBED BY APPLICABLE LAW WILL RESULT IN THE LOSS OF DISSENTERS'
RIGHTS. No further notice of the events giving rise to dissenters' rights or any
steps associated therewith will be furnished to Eligible Dissenters and no
notice of approval of the Merger will be given to a NationsBank Dissenter (as
defined below).
The Reorganization gives rise to shareholder dissenter's rights which may
be summarized as follows:
(i) An Eligible Dissenter who intends to dissent from the
Reorganization must give NationsBank, and NationsBank must actually
receive, before the vote is taken, written notice of his or her intent to
demand payment for his or her shares if the Reorganization is effected
("DISSENTING SHARES," held by "NATIONSBANK DISSENTERS"). An Eligible
Dissenter's notice to NationsBank should be mailed to Corporate Secretary,
NationsBank Corporation, 100 North Tryon Street, Charlotte, North Carolina
28255. A vote against the Merger Agreement will not be deemed to satisfy
the notice requirement.
THE MERGER
58
(ii) A NationsBank Dissenter must not vote his or her Dissenting
Shares in favor of the Merger Agreement but must instead either vote
against or abstain from voting on the Merger Agreement. Any Eligible
Dissenter who returns a signed proxy but fails to provide instructions as
to the manner in which such shares are to be voted will be deemed to have
voted in favor of the Merger Agreement and will not be entitled to assert
dissenters' rights of appraisal.
(iii) No later than ten days after the Reorganization is effected,
NationsBank must send to NationsBank Dissenters, by registered or certified
mail, return receipt requested, (a) a written dissenters' notice stating
where the payment demand must be sent and where and when certificates for
certificated Dissenting Shares must be deposited, (b) information as to the
restrictions on transfer of Dissenting Shares, (c) a form for demanding
payment, and (d) a date by which NationsBank must receive the payment
demand, which shall not be fewer than 30 nor more than 60 days after the
date such notice is mailed. NationsBank must also provide NationsBank
Dissenters with a copy of Article 13 of the NCBCA. NationsBank Dissenters
receiving such notice must then demand payment and deposit their
certificates in accordance with the terms of the notice provided by
NationsBank. NationsBank Dissenters who demand payment and deposit their
share certificates in accordance with Article 13 of the NCBCA retain all
other rights of a shareholder until the rights are cancelled or modified by
the Merger being effected. A shareholder who does not demand payment or
deposit his or her share certificates where required, each by the date set
in the dissenters' notice, is not entitled to payment for his or her shares
under Article 13 of the NCBCA.
(iv) As soon as the Reorganization is effected, or within 30 days
after receipt of a payment demand, NationsBank shall pay each NationsBank
Dissenter who has complied with the requirements of the statute the amount
NationsBank estimates to be the fair value of the NationsBank Dissenter's
Dissenting Shares, plus interest accrued to the date of payment. The
payment must be accompanied by (a) NationsBank's balance sheet as of
December 31, 1997, (b) an income statement for the fiscal year ending
December 31, 1997, (c) a statement of cash flows for the fiscal year ending
December 31, 1997, (d) the latest available interim financial statements,
if any, (e) an explanation of how NationsBank estimated the fair value of
the Dissenting Shares, (f) an explanation of how the interest was
calculated, (g) a statement of the NationsBank Dissenter's rights to demand
payment and (h) a copy of Article 13 of the NCBCA.
(v) If the NationsBank Dissenter believes the amount paid by
NationsBank is less than the fair value of his or her Dissenting Shares or
the interest was incorrectly calculated or NationsBank fails to make
payment as soon as the Reorganization is effected or within 30 days of
receipt of a payment demand, the NationsBank Dissenter may notify
NationsBank in writing of his or her own estimate of the fair value of his
or her Dissenting Shares and the amount of interest due, and demand payment
of the amount in excess of the payment by NationsBank for the fair value of
his or her shares and interest due. The notice must be given within 30 days
after NationsBank makes payment or fails to perform. A NationsBank
Dissenter who fails to notify NationsBank in writing of his or her demand
for payment within the 30 day period shall be deemed to have withdrawn his
or her dissent and demand for payment.
(vi) If demand for payment remains unsettled, the NationsBank
Dissenter may commence a proceeding by filing a complaint with the North
Carolina Superior Court Division of the General Court of Justice to
determine the fair value of the shares and accrued interest. The complaint
must be filed 60 days after the earlier of (a) the date payment is made or
(b) the date of the NationsBank Dissenter's payment demand. A NationsBank
Dissenter who takes no action within the 60-day period shall be deemed to
have withdrawn his or her dissent and demand for payment.
Under North Carolina law, holders of NationsBank Common Stock are not
entitled to dissenters' rights. Under Delaware law, BankAmerica Shareholders are
not entitled to dissenters' rights.
THE MERGER
59
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60
MANAGEMENT AND OPERATIONS AFTER THE MERGER
DIRECTORS AFTER THE MERGER
As of the Effective Time, the Board of Directors of the Combined Company
will consist of 20 directors, consisting of 11 of the current directors of
NationsBank and nine of the current directors of BankAmerica. The directors of
the Combined Company will be elected annually. The only members of the Board of
Directors of the Combined Company named to date are Mr. McColl and Mr. Coulter.
MANAGEMENT AFTER THE MERGER
NationsBank and BankAmerica expect that Mr. McColl will be Chairman and
Chief Executive Officer and Mr. Coulter will be President of the Combined
Company after the Effective Time. It is the present intention of the boards of
directors and of Mr. McColl that Mr. Coulter will succeed Mr. McColl as Chairman
and Chief Executive Officer of the Combined Company when Mr. McColl retires from
that position. In addition, the following persons will hold the offices in the
Combined Company as follows: James H. Hance, Jr., Vice Chairman and Chief
Financial Officer; Kenneth D. Lewis, President of Consumer and Commercial
Banking; Michael J. Murray, President of Global Corporate and Investment
Banking; and Michael E. O'Neill, President of Wealth Management and Principal
Investing.
The Policy Committee of the Combined Company will consist of Messrs.
McColl, Coulter, Hance, Lewis, Murray and O'Neill.
CONSOLIDATION OF OPERATIONS; ANTICIPATED COST SAVINGS
Although no assurance can be given either that any specific level of cost
savings will be achieved or as to the timing thereof, NationsBank and
BankAmerica currently expect to achieve savings in operating costs by
consolidating certain operations and eliminating redundant expenses. Such
savings are expected to be realized over time as such consolidation is
completed. Currently, the combined global work force within NationsBank and
BankAmerica is approximately 180,000 employees. NationsBank and BankAmerica
expect that the combined work force will be reduced by 5,000 to 8,000 positions
in addition to some positions reduced as a result of attrition.
Delivery systems optimization is maximizing the efficiency of the branch
network by sale of overlapping facilities and increasing usage of alternative
delivery channels such as ATMs and in-store facilities. It also includes
leveraging the combined call centers. Corporate overhead cost savings are
expected to result from combining staff areas such as finance, accounting, human
resources and legal, and consolidating marketing and risk management staff
areas. The pay scale for these positions is typically higher than the average
position. Business line consolidations generate savings from combining
businesses where economies of scale can be gained. These areas include treasury
management, trading, mortgage, credit card, asset management and consumer, small
business and corporate lending. Infrastructure leverage is obtained in the
transaction processing and technology units. Savings are generated by running
the combined volumes through the existing infrastructure while downsizing the
overlapping facilities. Examples include check processing, wire transfer,
Automated Clearing House, transportation networks, data processing, systems
support and telecommunications. Vendor leverage savings are generated by working
with suppliers to obtain a lower per unit cost resulting from increased volume
of the combined entities. Specific areas are checks, ATMs, record storage and
real estate management services.
A projected annual after-tax expense savings of $1.3 billion is expected to
be realized from the Reorganization as a result of consolidation of the consumer
and commercial banking businesses, the global corporate and investment banking
businesses, corporate operations, and the consolidation of other duplicative
operations of NationsBank and BankAmerica.
The extent to which such expense savings will be achieved is dependent upon
various factors, a number of which are beyond the control of NationsBank and
BankAmerica, including regulatory requirements attendant
MANAGEMENT AND OPERATIONS AFTER THE MERGER
61
to the consummation of the Reorganization, the general regulatory environment,
economic conditions, and unanticipated changes in business conditions and
inflation, and no assurances can be given with respect to the ultimate level and
composition of expense savings to be realized or that such savings will be
realized in the time frame currently anticipated. These amounts have not been
included in any of the unaudited pro forma financial information included in
this Joint Proxy Statement-Prospectus.
In connection with the Reorganization, the Combined Company expects to
incur pre-tax merger and restructuring items of approximately $1.3 billion ($800
million after-tax), which will include severance and change in control expenses,
conversion and related costs and occupancy and equipment expenses (primarily
lease exit costs and the elimination of duplicate facilities and other
capitalized assets), exit costs related to contract terminations and other
Reorganization costs (including legal and investment banking fees). The pro
forma adjustments represent management's best estimates based on available
information at this time. Actual adjustments will differ from those reflected in
the unaudited Pro Forma Condensed Financial Information. See "Unaudited Pro
Forma Condensed Financial Information".
For additional information regarding management and operations of the
Combined Company, see "Information About NationsBank and NationsBank (DE)" and
"Information About BankAmerica."
MANAGEMENT AND OPERATIONS AFTER THE MERGER
62
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
MARKET PRICES
NationsBank Common Stock is listed on the NYSE and the Pacific Stock
Exchange, Inc. (the "PCX") under the trading symbol "NB." NationsBank Common
Stock is also listed on the London Stock Exchange (the "LSE") and certain shares
are listed on the Tokyo Stock Exchange (the "TSE"). As of July 29, 1998,
NationsBank Common Stock was held of record by approximately 173,273 persons.
The following table sets forth the high and low closing market prices of the
NationsBank Common Stock as reported on the NYSE Composite Transactions List for
the periods indicated.
BankAmerica Common Stock is listed on the NYSE, the PCX, and the Chicago
Stock Exchange, Inc. under the symbol "BAC." BankAmerica Common Stock is also
listed on the LSE. As of July 29, 1998, BankAmerica Common Stock was held of
record by approximately 136,968 persons. The following table sets forth the high
and low market prices for BankAmerica Common Stock as reported by the NYSE
Composite Transactions List for the periods indicated.
NATIONSBANK BANKAMERICA
MARKET PRICES(1) MARKET PRICES(2)
----------------- -----------------
HIGH LOW HIGH LOW
------ ----- ------ -----
YEAR ENDED DECEMBER 31, 1995:
First Quarter............................................ $25 7/8 $22 5/16 $24 13/16 $19 3/4
Second Quarter........................................... 28 7/8 24 13/16 27 5/8 24 3/16
Third Quarter............................................ 34 7/16 26 7/8 30 9/16 26 1/4
Fourth Quarter........................................... 37 3/8 32 34 1/4 28 1/2
YEAR ENDED DECEMBER 31, 1996:
First Quarter............................................ 40 11/16 32 3/16 39 9/16 29 3/8
Second Quarter........................................... 42 5/16 37 3/8 40 3/16 34 7/8
Third Quarter............................................ 47 1/16 38 3/16 42 5/8 36
Fourth Quarter........................................... 52 5/8 43 1/8 51 15/16 41 1/16
YEAR ENDED DECEMBER 31, 1997:
First Quarter............................................ 65 48 61 7/8 47 11/16
Second Quarter........................................... 70 54 69 49 9/16
Third Quarter............................................ 71 11/16 56 5/8 77 7/8 64 9/16
Fourth Quarter........................................... 66 3/8 55 81 15/16 66 1/4
YEAR ENDED DECEMBER 31, 1998:
First Quarter............................................ 75 1/8 56 1/4 87 1/8 61 1/2
Second Quarter........................................... 85 72 1/16 96 79 1/2
Third Quarter (through July 31, 1998).................... 88 7/16 77 100 1/8 86 3/4
- ---------------
(1) Adjusted to reflect 2-for-1 stock split completed in February 1997.
(2) Adjusted to reflect 2-for-1 stock split completed in June 1997.
63
DIVIDENDS
The following table sets forth dividends declared per share of NationsBank
Common Stock and BankAmerica Common Stock, respectively, for the periods
indicated. The ability of either NationsBank or BankAmerica to pay dividends to
its respective shareholders is subject to certain restrictions. See "Supervision
and Regulation of NationsBank and BankAmerica."
NATIONSBANK BANKAMERICA
DIVIDENDS(1) DIVIDENDS(2)
------------ ------------
YEAR ENDED DECEMBER 31, 1995:
First Quarter............................................. $.25 $ .23
Second Quarter............................................ .25 .23
Third Quarter............................................. .25 .23
Fourth Quarter............................................ .29 .23
YEAR ENDED DECEMBER 31, 1996:
First Quarter............................................. .29 .27
Second Quarter............................................ .29 .27
Third Quarter............................................. .29 .27
Fourth Quarter............................................ .33 .27
YEAR ENDED DECEMBER 31, 1997:
First Quarter............................................. .33 .305
Second Quarter............................................ .33 .305
Third Quarter............................................. .33 .305
Fourth Quarter............................................ .38 .305
YEAR ENDED DECEMBER 31, 1998:
First Quarter............................................. .38 .345
Second Quarter............................................ .38 .345
Third Quarter (through July 31, 1998)..................... N/A N/A
- ---------------
(1) Adjusted to reflect 2-for-1 stock split completed in February 1997.
(2) Adjusted to reflect 2-for-1 stock split completed in June 1997.
INFORMATION ABOUT NATIONSBANK AND NATIONSBANK (DE)
GENERAL
NationsBank is a multi-bank holding company established as a North Carolina
corporation in 1968 and is registered under the BHCA, with its principal assets
being the stock of its subsidiaries. Through its banking subsidiaries and its
various nonbanking subsidiaries, NationsBank provides banking and
banking-related services, primarily throughout the Mid-Atlantic, Midwest,
Southeast and Southwest. The principal executive offices of NationsBank are
located at NationsBank Corporate Center in Charlotte, North Carolina 28255. Its
telephone number is (704) 386-5000.
NationsBank and its subsidiaries are subject to regulation by various U.S.
federal and state regulatory authorities. NationsBank (DE) is a wholly owned
subsidiary of NationsBank organized in 1998 under the laws of the State of
Delaware to effect the Reorganization. It has not conducted any substantial
business activities to date. The business of NationsBank (DE) at the
consummation of the Reorganization will be the combined businesses of
NationsBank and BankAmerica immediately prior to the Merger, and NationsBank
(DE) will be renamed "BankAmerica Corporation" at the consummation of the
Reorganization. See "Supervision and Regulation of NationsBank and BankAmerica."
64
BUSINESS SEGMENT OPERATIONS
NationsBank provides a diversified range of banking and certain nonbanking
financial services and products through its various subsidiaries. Management
reports the results of NationsBank's operations through four business segments:
Consumer Banking, Middle Market, Asset Management, and Corporate Finance.
The Consumer Banking segment provides comprehensive retail banking services
through multiple delivery channels including approximately 3,000 banking centers
and 7,000 automated teller machines ("ATMs") providing fully automated, 24 hour
cash dispensing and deposit services. These delivery channels are located
throughout NationsBank's franchise and serve 16 million households in 15 states
and the District of Columbia. In addition, this segment provides specialized
services such as the origination and servicing of residential mortgage loans,
issuance and servicing of credit cards, direct banking via telephone and
personal computer, student lending and certain insurance services. The consumer
finance component provides personal, mortgage, home equity and automobile loans
to consumers, retail finance programs to dealers and lease financing to
purchasers of new and used cars. Consumer Banking also provides commercial
banking services to companies and other commercial entities with annual revenues
of less than $10 million.
The Middle Market segment provides a broad array of commercial banking
services for companies and other commercial entities with revenues between $10
million and $250 million annually including: commercial lending, treasury and
cash management services, asset-backed lending, leasing and factoring. Also
included in this segment is NationsCredit Commercial Corporation, which provides
commercial financing activities including: equipment loans and leases, loans for
debt restructuring, mergers and working capital, real estate and health care
financing and inventory financing to manufacturers, distributors and dealers.
The Asset Management segment includes businesses that provide full service
and discount brokerage, investment advisory, investment management and advisory
services for the Nations Funds family of mutual funds. Within the Asset
Management segment, the Private Client Group provides asset management, banking
and trust services for wealthy individuals, business owners and corporate
executives and the private foundations established by them.
Corporate Finance provides a broad array of banking and investment banking
products and services to domestic and international corporations, institutions
and other customers through its Capital Markets, Real Estate and Transaction
Products units. The Corporate Finance segment serves as a principal lender and
investor, as well as an advisor, and manages treasury and trade transactions for
clients and customers. Loan origination and syndication, asset-backed lending,
project finance and mergers and acquisitions consulting are representative of
the services provided. These services are provided through various domestic and
international offices. Through its Section 20 subsidiary, NationsBanc Montgomery
Securities LLC, Corporate Finance is a primary dealer of U.S. Government
Securities and underwrites, distributes and makes markets in high-grade and
high-yield debt securities and equity securities. Additionally, Corporate
Finance is a market maker in derivative products which include swap agreements,
option contracts, forward settlement contracts, financial futures and other
derivative products in certain interest rate, foreign exchange, commodity and
equity markets. In support of these activities, Corporate Finance takes
positions to support client demands and its own account. Major centers for the
above activities are Charlotte, Chicago, London, New York, San Francisco,
Singapore and Tokyo.
MANAGEMENT AND ADDITIONAL INFORMATION
Certain information relating to executive compensation, various benefit
plans (including stock option plans), voting securities and the principal
holders thereof, certain relationships and related transactions and other
related matters as to NationsBank is incorporated by reference or set forth in
the NationsBank Annual Report on Form 10-K for the year ended December 31, 1997,
and is incorporated herein by reference, as amended by the NationsBank Current
Report on Form 8-K filed April 16, 1998 and the NationsBank Current Report on
Form 8-K filed April 17, 1998. NationsBank Shareholders or BankAmerica
Shareholders desiring copies of such documents may contact NationsBank at its
address or telephone number indicated under "Where You Can Find More
Information."
65
INFORMATION ABOUT BANKAMERICA
GENERAL
BankAmerica is a bank holding company registered under the BHCA,
incorporated in Delaware on October 7, 1968. At March 31, 1998, BankAmerica,
including its consolidated subsidiaries, was the fifth largest bank holding
company in the United States, based on total assets of $265.4 billion.
BankAmerica's largest subsidiary, based on total assets, is Bank of America
National Trust and Savings Association, a national banking association ("BANK OF
AMERICA"). Bank of America was founded by A. P. Giannini in San Francisco,
California, and began business in San Francisco, California as "Bank of Italy"
on October 17, 1904, offering banking services to individuals and small
businesses in the community. Bank of America adopted its present name on
November 1, 1930, and became a subsidiary of BankAmerica on April 1, 1969. The
capital stock of Bank of America is the principal asset of BankAmerica.
BankAmerica's principal executive offices are located at 555 California
Street, San Francisco, California 94104 (telephone (415) 622-3530).
BUSINESS SEGMENT OPERATIONS
BankAmerica, through its various subsidiaries, provides a diversified range
of banking and other financial services throughout the United States and in
selected international markets. BankAmerica manages its business activities
through two principal business groups: the Global Retail Bank and the Global
Wholesale Bank.
The Global Retail Bank offers retail deposit, credit card, home mortgage,
auto loan and various other consumer finance products. It provides a full range
of deposit and loan products to individuals and small businesses through
full-service branches and ATMs as well as telephone and other delivery channels.
The Global Retail Bank operates approximately 1,800 full-service branches in the
states of Alaska, Arizona, California, Idaho, Illinois, Nevada, New Mexico,
Oregon, Texas, and Washington. It also offers remote account access services
through a network of almost 7,700 ATMs in 34 states. In California,
BankAmerica's largest market, the Global Retail Bank operates approximately 970
branches and 7,000 ATMs. The Global Retail Bank also conducts retail banking
operations in Asia.
The Global Wholesale Bank provides wholesale banking and financial products
and services throughout the United States and selected overseas markets to
business customers, including large corporations, middle market companies,
governments and other institutions. These products and services encompass
corporate lending, capital-raising, leasing, cash management services, and trade
finance products, investment banking services (including interest rate risk and
foreign exchange management products), capital markets products, and financial
advisory and venture capital services. These services are provided through 69
offices located in 38 countries in North and South America, Europe, Africa, the
Middle East, Asia and Australia.
MANAGEMENT AND ADDITIONAL INFORMATION
Certain information relating to executive compensation, various benefit
plans (including stock option plans), voting securities and the principal
holders thereof, certain relationships and related transactions and other
related matters as to BankAmerica is set forth in the BankAmerica Annual Report
on Form 10-K for the year ended December 31, 1997, and is incorporated herein by
reference. Shareholders of BankAmerica or NationsBank desiring copies of such
documents may contact BankAmerica at its address or telephone number indicated
under "Where You Can Find More Information."
66
SUPERVISION AND REGULATION OF NATIONSBANK
AND BANKAMERICA
General. As registered bank holding companies, NationsBank and BankAmerica
are subject to the supervision of, and to regular inspection by, the Federal
Reserve Board. The bank subsidiaries of both NationsBank and BankAmerica are
organized as national banking associations, which are subject to regulation,
supervision and examination by the Officer of the Comptroller of Currency (the
"COMPTROLLER"), or as state chartered banks, which are subject to regulation,
supervision and examination by the relevant state regulators. These banks are
also subject to regulation by the Federal Reserve Board and the Federal Deposit
Insurance Corporation (the "FDIC"), and other U.S. federal regulatory agencies.
BankAmerica also owns a federal savings bank subject to supervision, regulation
and examination by the Office of Thrift Supervision (the "OTS"). In addition to
banking laws, regulations and regulatory agencies, NationsBank and BankAmerica
and their subsidiaries and affiliates are subject to various other laws and
regulations and supervision and examination by other regulatory agencies, all of
which, directly or indirectly, affect the operations and management of
NationsBank and BankAmerica and their ability to make distributions. The
following discussion summarizes certain aspects of those laws and regulations
that affect NationsBank and BankAmerica.
The activities of NationsBank and BankAmerica and those of companies that
each controls or in which either holds more than 5% of the voting stock are
limited to banking, managing or controlling banks, furnishing services to or
performing services for their subsidiaries or any other activity that the
Federal Reserve Board determines to be so closely related to banking or managing
or controlling banks as to be a proper incident thereto. In making such
determinations, the Federal Reserve Board is required to consider whether the
performance of such activities by a bank holding company or its subsidiaries can
reasonably be expected to produce benefits to the public such as greater
convenience, increased competition or gains in efficiency that outweigh possible
adverse effects, such as undue concentration of resources, decreased or unfair
competition, conflicts of interest or unsound banking practices. Generally, bank
holding companies, such as NationsBank and BankAmerica, are required to obtain
prior approval of the Federal Reserve Board to engage in any new activity or to
acquire more than 5% of any class of voting stock of any company.
Bank holding companies are also required to obtain the prior approval of
the Federal Reserve Board before acquiring more than 5% of any class of voting
stock of any bank that is not already majority owned by the bank holding
company. Pursuant to the Riegle-Neal Interstate Banking and Branching Efficiency
Act of 1994 (the "INTERSTATE BANKING AND BRANCHING ACT"), bank holding companies
became able to acquire banks in states other than its home state beginning
September 29, 1995, without regard to the permissibility of such acquisitions
under state law, but subject to any state requirement that the bank has been
organized and operating for a minimum period of time, not to exceed five years,
and the requirement that the bank holding company, prior to or following the
proposed acquisition, controls no more than 10% of the total amount of deposits
of insured depository institutions in the United States and less than 30% of
such deposits in that state (or such lesser or greater amount set by state law).
The Interstate Banking and Branching Act also authorizes banks to merge
across state lines, subject to certain restrictions, thereby creating interstate
branches. Pursuant to the Interstate Banking and Branching Act, a bank is now
able to open new branches in a state in which it does not already have banking
operations if the state enacts a law permitting such de novo branching.
NationsBank currently operates two interstate banks (i.e., banks with
banking centers in more than one state): NationsBank, N.A., headquartered in
Charlotte, North Carolina, with offices in Arkansas, Florida, Georgia, Illinois,
Iowa, Kansas, Maryland, Missouri, New Mexico, North Carolina, Oklahoma, South
Carolina, Texas, Virginia and the District of Columbia; and Barnett Bank, N.A.,
headquartered in Jacksonville, Florida (which NationsBank expects to merge into
NationsBank, N.A. in the fourth quarter of 1998), with offices in Florida and
Georgia. Separate banks continue to operate in Delaware, Florida, Kentucky
(which NationsBank has agreed to sell), and Tennessee.
BankAmerica currently operates one interstate bank, Bank of America
National Trust and Savings Association, headquartered in San Francisco,
California, with offices in Alaska, Arizona, California, Florida,
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Idaho, Illinois, Nevada, New Mexico, New York, Oregon and Washington.
BankAmerica also has separate banks that operate in Arizona, California and
Texas and a federal savings bank with offices in numerous states.
Proposals to change the laws and regulations governing the banking industry
are frequently introduced in the U.S. Congress, in the state legislatures and
before the various bank regulatory agencies. The likelihood and timing of any
such proposals or bills being enacted and the impact they might have on the
Combined Company, NationsBank, BankAmerica and their subsidiaries cannot be
determined at this time.
Capital and Operational Requirements. The Federal Reserve Board, the
Comptroller, the OTS and the FDIC have issued substantially similar risk-based
and leverage capital guidelines applicable to U.S. banking organizations. In
addition, those regulatory agencies may from time to time require that a banking
organization maintain capital above the minimum levels, whether because of its
financial condition or actual or anticipated growth. The Federal Reserve Board
risk-based guidelines define a two-tier capital framework. "TIER 1 CAPITAL"
consists of common and qualifying preferred shareholders' equity, less certain
intangibles and other adjustments. "TIER 2 CAPITAL" consists of subordinated and
other qualifying debt, and the allowance for credit losses up to 1.25% of
risk-weighted assets. The sum of Tier 1 capital and Tier 2 capital less
investments in unconsolidated subsidiaries represents qualifying "total
capital," at least 50% of which must consist of Tier 1 capital. Risk-based
capital ratios are calculated by dividing Tier 1 capital and total capital by
risk-weighted assets. Assets and off-balance sheet exposures are assigned to one
of four categories of risk weights, based primarily on relative credit risk. The
minimum Tier 1 capital ratio is 4% and the minimum total capital ratio is 8%.
NationsBank's Tier 1 capital and total risk-based capital ratios under these
guidelines at March 31, 1998 were 6.80% and 11.19%, respectively, and
BankAmerica's were 7.49% and 11.41%, respectively.
The "LEVERAGE RATIO" is determined by dividing Tier 1 capital by adjusted
average total assets. Although the stated minimum ratio is 3%, most banking
organizations are required to maintain ratios of at least 100 to 200 basis
points above 3%. NationsBank's and BankAmerica's leverage ratios at March 31,
1998 were 7.61% and 11.56%, respectively.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), among other things, identifies five capital categories for insured
depository institutions (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized) and requires the respective U.S. federal regulatory agencies
to implement systems for "prompt corrective action" for insured depository
institutions that do not meet minimum capital requirements within such
categories. FDICIA imposes progressively more restrictive constraints on
operations, management and capital distributions, depending on the category in
which an institution is classified. Failure to meet the capital guidelines could
also subject a banking institution to capital raising requirements. An
"undercapitalized" bank must develop a capital restoration plan and its parent
holding company must guarantee that bank's compliance with the plan. The
liability of the parent holding company under any such guarantee is limited to
the lesser of 5% of the bank's assets at the time it became undercapitalized or
the amount needed to comply with the plan. Furthermore, in the event of the
bankruptcy of the parent holding company, such guarantee would take priority
over the parent's general unsecured creditors. In addition, FDICIA requires the
various regulatory agencies to prescribe certain non-capital standards for
safety and soundness related generally to operations and management, asset
quality and executive compensation and permits regulatory action against a
financial institution that does not meet such standards.
The various regulatory agencies have adopted substantially similar
regulations that define the five capital categories identified by FDICIA, using
the total risk-based capital, Tier 1 risk-based capital and leverage capital
ratios as the relevant capital measures. Such regulations establish various
degrees of corrective action to be taken when an institution is considered
undercapitalized. Under the regulations, a "well capitalized" institution must
have a Tier 1 capital ratio of at least 6%, a total capital ratio of at least
10% and a leverage ratio of a least 5% and not be subject to a capital directive
order. An "adequately capitalized" institution must have a Tier 1 capital ratio
of at least 4%, a total capital ratio of at least 8% and a leverage ratio of at
least 4%, or 3% in some cases. Under these guidelines, each of the banking
subsidiaries of NationsBank and BankAmerica is considered "well capitalized."
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Banking agencies have also adopted regulations which mandate that
regulators take into consideration concentrations of credit risk and risks from
non-traditional activities, as well as an institution's ability to manage those
risks, when determining the adequacy of an institution's capital. That
evaluation will be made as a part of the institution's regular safety and
soundness examination. Banking agencies also have adopted final regulations
requiring regulators to consider interest rate risk (when the interest rate
sensitivity of an institution's assets does not match the sensitivity of its
liabilities or its off-balance sheet position) in the determination of a bank's
capital adequacy. Concurrently, banking agencies have proposed a methodology for
evaluating interest rate risk. After gaining experience with the proposed
measurement process, those banking agencies intend to propose further
regulations to establish an explicit risk-based capital charge for interest rate
risk.
Distributions. NationsBank and BankAmerica both derive funds for cash
distributions to their respective shareholders from a variety of sources,
including cash and temporary investments. The primary source of such funds,
however, is dividends received from their banking subsidiaries. Each of their
banking subsidiaries is subject to various general regulatory policies and
requirements relating to the payment of dividends, including requirements to
maintain capital above regulatory minimums. The appropriate U.S. federal
regulatory authority is authorized to determine under certain circumstances
relating to the financial condition of the bank or bank holding company that the
payment of dividends would be an unsafe or unsound practice and to prohibit
payment thereof.
In addition to the foregoing, the ability of NationsBank, BankAmerica, the
Combined Company and their respective banking subsidiaries to pay dividends may
be affected by the various minimum capital requirements and the capital and
non-capital standards established under FDICIA, as described above. The right of
NationsBank, BankAmerica, the Combined Company, their respective shareholders
and their respective creditors to participate in any distribution of the assets
or earnings of their respective subsidiaries is further subject to the prior
claims of creditors of the respective subsidiaries.
"Source of Strength" Policy. According to Federal Reserve Board policy,
bank holding companies are expected to act as a source of financial strength to
each subsidiary bank and to commit resources to support each such subsidiary.
This support may be required at times when a bank holding company may not be
able to provide such support. Similarly, under the cross-guarantee provisions of
the Federal Deposit Insurance Act, in the event of a loss suffered or
anticipated by the FDIC -- either as a result of default of a banking or thrift
subsidiary of a bank holding company such as the Combined Company, NationsBank
or BankAmerica or related to FDIC assistance provided to a subsidiary in danger
of default -- the other banking subsidiaries of such bank holding company may be
assessed for the FDIC's loss, subject to certain exceptions.
CAPITAL STOCK OF THE COMBINED COMPANY
General. The Combined Company Certificate will be substantially the same
as the NationsBank Articles, except as described herein, including the fact that
the authorized capitalization of the Combined Company will be increased from its
current level. As of the Effective Time, the authorized capital stock of the
Combined Company will consist of 5,000,000,000 shares of Combined Company Common
Stock, par value $0.01 per share, and 100,000,000 shares of Combined Company
Preferred Stock. As of July 29, 1998, there were issued and outstanding
962,509,438 shares of NationsBank Common Stock and 1,988,134 shares of
NationsBank Preferred Stock, which will be converted in the Reincorporation
Merger into the same number of shares of Combined Company Common Stock and
Combined Company Preferred Stock, and 686,450,826 shares of BankAmerica Common
Stock, which will be converted in the Merger at the Exchange Ratio into
approximately 776,787,755 shares of Combined Company Common Stock. As of July
29, 1998, 105,907,211 shares of NationsBank Common Stock were reserved for
issuance under various employee and director benefit plans of NationsBank and
upon conversion of the 6.25% Convertible Debentures, due 2011, the NationsBank
ESOP Preferred Stock or NationsBank Series BB Preferred Stock, and pursuant to
the NationsBank SharesDirect Plan, and 129,213,998 shares of BankAmerica Common
Stock (equivalent to 146,218,560 shares of Combined Company Common Stock at the
Exchange Ratio) were reserved for issuance under various employee benefit plans
of BankAmerica and pursuant to the BankAmerica Shareholder Investment
69
Plan. After taking into account the shares reserved as described above, the
Combined Company will have approximately 3,000,000,000 authorized shares of
Combined Company Common Stock available for other corporate purposes as of the
Effective Time. The availability for issue of shares by the directors of the
Combined Company without further action by shareholders (except as may be
required by applicable stock exchange requirements) would enable the Board of
the Combined Company to consider additional transactions, including mergers and
acquisitions, in which shares of the Combined Company are to be issued, and
could also be viewed as enabling the directors to take certain actions,
including issuing shares, warrants or rights to acquire shares which might make
it more difficult for persons seeking to obtain control of the Combined Company.
NationsBank and BankAmerica have no present plans for the Combined Company to
issue any shares other than as described herein, pursuant to the Merger
Agreement and employee benefit plans of the Combined Company.
COMBINED COMPANY COMMON STOCK
NationsBank Common Stock is listed on the NYSE and the PCX under the
trading symbol "NB," and BankAmerica Common Stock is listed on the NYSE, the PCX
and the Chicago Stock Exchange under the trading symbol "BAC." NationsBank
Common Stock is also listed on the LSE and certain shares of NationsBank Common
Stock are listed on the Tokyo Stock Exchange. BankAmerica Common Stock is also
listed on the LSE. It is contemplated that the Combined Company Common Stock
will be listed on the NYSE and the PCX and certain other stock exchanges.
Voting and Other Rights. The holders of Combined Company Common Stock are
entitled to one vote per share, and, in general, a majority of votes cast with
respect to a matter will be sufficient to authorize action upon routine matters.
Directors are to be elected by a plurality of the votes cast, and shareholders
do not have the right to cumulate their votes in the election of directors. In
general, however, (i) amendments to the Combined Company Certificate must be
approved by the affirmative vote of the holders of a majority of the voting
power of the outstanding voting shares and the affirmative vote of the holders
of a majority of the outstanding shares of each class entitled to vote thereon
as a class, and (ii) a merger or dissolution of the Combined Company, or the
sale of all or substantially all of its assets, must be approved by the
affirmative vote of the holders of a majority of the voting power of the
outstanding voting shares.
In the event of liquidation, holders of Combined Company Common Stock would
be entitled to receive pro rata any assets legally available for distribution to
shareholders of the Combined Company with respect to shares held by them,
subject to any prior rights of any Combined Company Preferred Stock (as
described below) then outstanding.
Combined Company Common Stock does not have any preemptive rights,
redemption privileges, sinking fund privileges or conversion rights. Upon
issuance in the Reincorporation Merger and the Merger, the shares of Combined
Company Common Stock to be issued will be validly issued, fully paid and
nonassessable.
ChaseMellon Shareholder Services, L.L.C. will act as transfer agent and
registrar for the Combined Company Common Stock.
Distributions. The holders of Combined Company Common Stock are entitled
to receive such dividends or distributions as the Combined Company's Board of
Directors may declare out of funds legally available for such payments. The
payment of distributions by the Combined Company is subject to the restrictions
of Delaware law applicable to the declaration of distributions by a corporation.
A corporation generally may not authorize and make distributions if, after
giving effect thereto, it would be unable to meet its debts as they become due
in the usual course of business or if the corporation's total assets would be
less than the sum of its total liabilities plus the amount that would be needed,
if it were to be dissolved at the time of distribution, to satisfy claims upon
dissolution of shareholders who have preferential rights superior to the rights
of the holders of its common stock. In addition, the payment of distributions to
shareholders is subject to any prior rights of outstanding preferred stock.
As a bank holding company, the ability of the Combined Company to pay
distributions will be affected by the ability of its banking subsidiaries to pay
dividends. The ability of such banking subsidiaries, as well as of
70
the Combined Company, to pay dividends in the future currently is, and could be
further, influenced by bank regulatory requirements and capital guidelines. See
"Supervision and Regulation of NationsBank and BankAmerica."
COMBINED COMPANY PREFERRED STOCK
The Combined Company will have authorized 100,000,000 shares of Combined
Company Preferred Stock and may issue such preferred stock in one or more
series, each with such preferences, limitations, designations, conversion
rights, voting rights, distribution rights, voluntary and involuntary
liquidation rights and other rights as it may determine. NationsBank has
designated (i) 35,045 shares of NationsBank Series B Preferred Stock, of which
8,836 shares were issued and outstanding as of July 29, 1998, (ii) 3,000,000
shares of NationsBank ESOP Preferred Stock, of which 1,972,730 shares were
issued and outstanding as of July 29, 1998 and (iii) 20,000,000 shares of
NationsBank Series BB Preferred Stock, of which 6,568 shares were issued and
outstanding as of July 29, 1998. In the Reincorporation Merger, each share of
NationsBank Preferred Stock (less Dissenting Shares) will be converted into a
share of Combined Company Preferred Stock with identical preferences, rights and
designations (except that the Combined Company Preferred Stock will be issued
under and governed by Delaware law instead of North Carolina law).
THE FOLLOWING SUMMARIES OF THE COMBINED COMPANY ESOP PREFERRED STOCK,
COMBINED COMPANY SERIES B PREFERRED STOCK AND COMBINED COMPANY SERIES BB
PREFERRED STOCK, WHICH SUMMARIES DESCRIBE THEIR MATERIAL PROVISIONS, ARE
QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THEIR COMPLETE TERMS CONTAINED IN
THE COMBINED COMPANY CERTIFICATE THE FORM OF WHICH IS ATTACHED AS APPENDIX H TO
THIS JOINT PROXY STATEMENT-PROSPECTUS, AND INCORPORATED HEREIN BY REFERENCE.
COMBINED COMPANY ESOP PREFERRED STOCK
Combined Company ESOP Preferred Stock will be issued in the Reincorporation
Merger in exchange for NationsBank ESOP Preferred Stock. All shares of
NationsBank ESOP Preferred Stock are, and shares of Combined Company ESOP
Preferred Stock will be, held by the trustee of the ESOP Trust under the 401(k)
Plan, which will be assumed by the Combined Company. Combined Company ESOP
Preferred Stock ranks senior to Combined Company Common Stock, but ranks junior
to Combined Company Series B Preferred Stock with respect to dividends and
distributions upon liquidation.
Preferential Rights. Shares of Combined Company ESOP Preferred Stock have
no preemptive or preferential rights to purchase or subscribe for shares of
Combined Company capital stock of any class, and are not subject to any sinking
fund or other obligation of Combined Company to repurchase or retire the series,
except as discussed below.
Dividends. Each share of Combined Company ESOP Preferred Stock is entitled
to an annual dividend, subject to certain adjustments, of $3.30 per share,
payable semiannually. Unpaid dividends accumulate as of the date on which they
first became payable, without interest. So long as any shares of Combined
Company ESOP Preferred Stock are outstanding, no dividend may be declared, paid
or set apart for payment on any other series of stock ranking on a parity with
Combined Company ESOP Preferred Stock as to dividends, unless like dividends
have been declared and paid, or set apart for payment, on Combined Company ESOP
Preferred Stock for all dividend payment periods ending on or before the
dividend payment date for such parity stock, ratably in proportion to their
respective amounts of accumulated and unpaid dividends. The Combined Company
generally may not declare, pay or set apart for payment any dividends (except
for, among other things, dividends payable solely in shares of stock ranking
junior to Combined Company ESOP Preferred Stock as to dividends or upon
liquidation) on, make any other distribution on, or make payment on account of
the purchase, redemption or other retirement of, any other class or series of
Combined Company capital stock ranking junior to Combined Company ESOP Preferred
Stock as to dividends or upon liquidation, until full cumulative dividends on
the Combined Company ESOP Preferred Stock have been declared and paid or set
apart for payment when due.
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Voting Rights. A holder of Combined Company ESOP Preferred Stock is
entitled to vote on all matters submitted to a vote of the holders of Combined
Company Common Stock and votes together with the holders of Combined Company
Common Stock as one class. Except as otherwise required by applicable law, the
holder of Combined Company ESOP Preferred Stock has no special voting rights. To
the extent that the holder of such shares is entitled to vote, each share is
entitled to the number of votes equal to the number of shares of Combined
Company Common Stock into which such share of Combined Company ESOP Preferred
Stock could be converted on the record date for determining the shareholders
entitled to vote, rounded to the nearest whole vote.
Shares of the NationsBank ESOP Preferred Stock currently are convertible
into NationsBank Common Stock (and, unless the conversion rate is adjusted,
after the Effective Time shares of Combined Company ESOP Preferred Stock will be
convertible into Combined Company Common Stock) at a conversion rate equal to
1.68 shares of NationsBank Common Stock per share of NationsBank ESOP Preferred
Stock, subject to certain customary anti-dilution adjustments. Accordingly, each
share of NationsBank ESOP Preferred Stock is (and, unless the conversion rate is
adjusted, each share of Combined Company ESOP Preferred Stock will be) entitled
to two votes on all matters submitted to a vote of shareholders.
Distributions. In the event of any voluntary or involuntary dissolution,
liquidation or winding-up of Combined Company, a holder of the Combined Company
ESOP Preferred Stock will be entitled to receive out of the assets of the
Combined Company available for distribution to shareholders, subject to the
rights of the holders of any Combined Company Preferred Stock ranking senior to
or on a parity with Combined Company ESOP Preferred Stock as to distributions
upon liquidation, dissolution or winding-up but before any amount will be paid
or distributed among the holders of Combined Company Common Stock or any other
shares ranking junior to Combined Company ESOP Preferred Stock as to such
distributions, liquidating distributions of $42.50 per share plus all accrued
and unpaid dividends thereon to the date fixed for distribution. If, upon any
voluntary or involuntary dissolution, liquidation or winding-up of the Combined
Company, the amounts payable with respect to Combined Company ESOP Preferred
Stock and any other stock ranking on a parity therewith as to any such
distribution are not paid in full, the holder of Combined Company ESOP Preferred
Stock and such other stock will share ratably in any distribution of assets in
proportion to the full respective preferential amounts to which they are
entitled. After payment of the full amount of the liquidating distribution to
which it is entitled, a holder of Combined Company ESOP Preferred Stock will not
be entitled to any further distribution of assets by the Combined Company.
Neither a merger or consolidation of the Combined Company with or into any other
corporation, nor a merger or consolidation of any other corporation with or into
the Combined Company nor a sale, transfer or lease of all or any portion of the
Combined Company's assets, will be deemed to be a dissolution, liquidation or
winding-up of the Combined Company.
Redemption. Combined Company ESOP Preferred Stock is redeemable, in whole
or in part, at the option of the Combined Company, at any time. The redemption
price for the shares of Combined Company ESOP Preferred Stock will depend upon
the time of redemption. Specifically, the redemption price for the 12-month
period that began on July 1, 1998 is $42.83 per share and, on and after July 1,
1999, the redemption price will be $42.50 per share. The redemption price may be
paid in cash or shares of Combined Company Common Stock. In each case, the
redemption price also must include all accrued and unpaid dividends to the date
of redemption. To the extent that Combined Company ESOP Preferred Stock is
treated as Tier 1 capital for bank regulatory purposes, the approval of the
Federal Reserve Board may be required for redemption of Combined Company ESOP
Preferred Stock.
The Combined Company is required to redeem shares of Combined Company ESOP
Preferred Stock at the option of the holder of such shares to the extent
necessary either to provide for distributions required to be made under the
401(k) Plan or to make payments of principal, interest or premium due and
payable on any indebtedness incurred by the holder of the shares for the benefit
of the ESOP Trust under the 401(k) Plan. The redemption price in such case will
be the greater of $42.50 per share plus accrued and unpaid dividends to the date
of redemption or the fair market value of the aggregate number of shares of
Combined Company Common Stock into which a share of Combined Company ESOP
Preferred Stock then is convertible.
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COMBINED COMPANY SERIES B PREFERRED STOCK
The Combined Company Series B Preferred Stock will be issued in the
Reincorporation Merger in exchange for NationsBank Series B Preferred Stock,
which was issued in connection with the merger of NationsBank and Boatmen's
Bancshares, Inc. ("BOATMEN'S").
Preferential Rights. The Combined Company may, without the consent of
holders of Combined Company Series B Preferred Stock, issue preferred stock with
superior or equal rights or preferences. The shares of Combined Company Series B
Preferred Stock rank prior to Combined Company ESOP Preferred Stock and Combined
Company Common Stock.
Dividends. Holders of shares of Combined Company Series B Preferred Stock
are entitled to receive, when and as declared by the Combined Company Board, out
of any funds legally available for such purpose, cumulative cash dividends at an
annual dividend rate per share of 7% of the stated value thereof, payable
quarterly. Dividends on Combined Company Series B Preferred Stock are
cumulative, and no cash dividends can be declared or paid on any shares of
Combined Company Common Stock unless full cumulative dividends on Combined
Company Series B Preferred Stock have been paid or declared and funds sufficient
for the payment thereof set apart.
Voting Rights. Each share of Combined Company Series B Preferred Stock has
equal voting rights, share for share, with each share of Combined Company Common
Stock.
Distributions. In the event of the dissolution, liquidation or winding up
of the Combined Company, the holders of Combined Company Series B Preferred
Stock are entitled to receive, after payment of the full liquidation preference
on shares of any class of preferred stock ranking superior to Combined Company
Series B Preferred Stock (if any such shares are then outstanding) but before
any distribution on shares of Combined Company Common Stock, liquidating
dividends of $100 per share plus accumulated dividends.
Redemption. Shares of Combined Company Series B Preferred Stock are
redeemable, in whole or in part, at the option of the holders thereof, at the
redemption price of $100 per share plus accumulated dividends, provided that (i)
full cumulative dividends have been paid, or declared and funds sufficient for
payment set apart, upon any class or series of preferred stock ranking superior
to Combined Company Series B Preferred Stock; and (ii) the Combined Company is
not then in default or arrears with respect to any sinking or analogous fund or
call for tenders obligation or agreement for the purchase or any class or series
of preferred stock ranking superior to Combined Company Series B Preferred
Stock.
COMBINED COMPANY SERIES BB PREFERRED STOCK
Combined Company Series BB Preferred Stock will be issued in the
Reincorporation Merger in exchange for NationsBank Series BB Preferred Stock,
which was issued in connection with the merger of NationsBank and Barnett.
Dividends. Holders of the Combined Company Series BB Preferred Stock are
entitled to receive, when and as declared by the Combined Company Board, out of
assets of the Combined Company legally available for payment, an annual dividend
of $2.50 per share. Dividends are payable quarterly on January 1, April 1, July
1, and October 1 of each year. Dividends on the Combined Company Series BB
Preferred Stock are cumulative from the date of issue. Each dividend is payable
to holders of record as it appears on the stock register of the Combined Company
on the record dates fixed by the Combined Company Board. No interest, or sum of
money in lieu of interest, is payable in respect of any dividend payment or
payments on the Combined Company Series BB Preferred Stock which may be in
arrears.
Conversion Rights. Subject to the terms and conditions set forth below,
holders of shares of Combined Company Series BB Preferred Stock have the right,
at their option, to convert such shares into shares of Combined Company Common
Stock at any time into fully paid and nonassessable shares of Combined Company
Common Stock (calculated as to each conversion to the nearest 1/1,000 of a
share) at the rate of 6.17215 shares of Combined Company Common Stock for each
share of Combined Company Series BB Preferred Stock surrendered for conversion
(the "CONVERSION RATE"). The Conversion Rate is subject to
73
adjustment from time to time to reflect Combined Company Common Stock splits and
similar alterations in Combined Company Common Stock.
Redemption. Shares of Combined Company Series BB Preferred Stock are
redeemable at the option of the Combined Company, in whole or in part, at a
redemption price of $25 per share plus accrued and unpaid dividends to the
redemption date. Shares of Combined Company Series BB Preferred Stock are not
subject to a sinking fund.
Liquidation Rights. In the event of any liquidation, dissolution or
winding up of the affairs of the Combined Company, whether voluntary or
involuntary, holders of Combined Company Series BB Preferred Stock will be
entitled to receive out of the assets of the Combined Company available for
distribution to shareholders an amount equal to $25 per share plus an amount
equal to accrued and unpaid dividends thereon to and including the date of such
distribution, and no more, before any distribution will be made to the holders
of any class of stock of the Combined Company ranking junior to the Combined
Company Series BB Preferred Stock as to the distribution of assets.
Voting. Holders of Combined Company Series BB Preferred Stock have no
voting rights except as required by law or if any quarterly dividend payable on
the Combined Company Series BB Preferred Stock is in arrears, in which case
holders of Combined Company Series BB Preferred Stock are entitled to vote
together with the holders of Combined Company Common Stock at the next meeting
of Combined Company Shareholders and at each subsequent meeting of Combined
Company Shareholders unless all dividends in arrears have been paid or declared
and set apart for payment prior to the date of the meeting. In those cases where
holders of Combined Company Series BB Preferred Stock are entitled to vote, each
holder is entitled to cast the number of votes equal to the number of whole
shares of Combined Company Common Stock into which his or her Combined Company
Series BB Preferred Stock is then convertible.
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COMPARATIVE RIGHTS OF SHAREHOLDERS
OF NATIONSBANK, BANKAMERICA AND THE COMBINED COMPANY
The Combined Company will be a Delaware corporation governed by the DGCL.
The Combined Company Certificate will be substantially the same as the
NationsBank Articles, except as described herein. The form of the Combined
Company Certificate is attached as Appendix H to this Joint Proxy Statement-
Prospectus and is incorporated herein by reference.
NationsBank is currently a North Carolina corporation subject to the
provisions of the NCBCA, and BankAmerica is a Delaware corporation subject to
the provisions of the DGCL. Both BankAmerica Shareholders, whose rights are
currently governed by the Certificate of Incorporation of BankAmerica, the
By-laws of BankAmerica (the "BANKAMERICA BY-LAWS") and the DGCL, and NationsBank
Shareholders, whose rights are currently governed by the NationsBank Articles,
the By-laws of NationsBank (the "NATIONSBANK BY-LAWS") and the NCBCA, will, upon
consummation of the Merger, become shareholders of the Combined Company, and
their rights will be governed by the Combined Company Certificate, the Combined
Company By-laws and the DGCL.
Set forth below are the material differences between the rights of
BankAmerica Shareholders under the BankAmerica Certificate of Incorporation, the
BankAmerica By-laws and the DGCL, and the rights of NationsBank Shareholders
under the NationsBank Articles, the NationsBank By-laws and the NCBCA, in each
case as compared with the rights that holders of Combined Company stock will
have following the Reorganization. The description set forth below summarizes
the material differences which may affect the rights of shareholders of
BankAmerica and NationsBank but does not purport to be a complete statement of
all such differences, and is qualified in its entirety by reference to the
relevant provisions of the laws and documents discussed below.
BOARD OF DIRECTORS
Election. The rights of Combined Company Shareholders with respect to
election of directors will not differ materially from the rights of current
shareholders of NationsBank and BankAmerica. As is currently the case for
BankAmerica and NationsBank, at the Effective Time the Board of Directors of the
Combined Company will not be classified; each director must be elected at the
annual meeting of directors by a plurality of the votes cast, and votes cast in
the election of directors may not be cumulated.
Removal. The DGCL provides that, in the absence of cumulative voting or a
classified board, unless the certificate of incorporation provides that any
director or the entire board of directors may be removed only for cause, any
director or the entire board may be removed, with or without cause, by the
holders of a majority of the shares then entitled to vote in an election of
directors. Since the Combined Company Certificate does not include any such
limitation, shareholders may remove one or all of the directors of the Combined
Company with or without cause.
NationsBank. Under the NCBCA and the NationsBank Articles, a director may
be removed with or without cause by the affirmative vote of the holders of a
majority of votes cast for such purpose. Additionally, the entire board of
directors may be removed with or without cause by the holders of a majority of
the shares entitled to elect such directors. In addition, the NCBCA provides
that an appropriate court can remove a director upon petition of the holders of
at least 10% of the outstanding shares of any class of stock of a corporation
upon certain findings by such court.
BankAmerica. The BankAmerica Certificate of Incorporation does not include
any limitation on the removal of directors without cause. Accordingly, the
shareholders of BankAmerica may remove one or all of the directors of
BankAmerica with or without cause by the vote of the holders of a majority of
the shares then entitled to vote.
SHAREHOLDER VOTE REQUIRED FOR BUSINESS COMBINATIONS
The DGCL generally requires that any merger, consolidation or sale of
substantially all the assets of a corporation be approved by a vote of the
holders of a majority of all outstanding shares entitled to vote thereon.
COMPARATIVE RIGHTS OF SHAREHOLDERS
75
Although the certificate of incorporation of a Delaware corporation may provide
for a greater vote, the Combined Company Certificate does not require a greater
vote.
NationsBank. The NCBCA provides that, unless a corporation's governance
documents provide otherwise, certain business combinations (including mergers)
require the approval of a majority of the outstanding shares of each voting
group of the corporation entitled to vote on the subject transaction. The
NationsBank Articles and the NationsBank By-laws do not require a greater vote.
BankAmerica. The BankAmerica Certificate of Incorporation does not require
a greater vote for the approval of such fundamental transactions.
SHAREHOLDER RIGHTS PLAN
On April 22, 1998, the Rights Agreement dated as of April 11, 1988, by and
between BankAmerica and Manufacturers Hanover Trust Company of California, as
rights agent, expired in accordance with its terms. NationsBank does not have a
shareholder rights plan.
SHAREHOLDER PROPOSAL AND NOMINATION PROCEDURES
Combined Company. The DGCL does not contain any specific provisions
regarding notice of shareholders' proposals or nominations for directors. The
Combined Company By-laws require that any Shareholder proposals submitted
outside of the processes of Rule 14a-8 under the Securities Exchange Act of 1934
be received at least 75 days before the date the proxy materials for the prior
year's annual shareholders meeting were mailed.
NationsBank. Neither the NCBCA nor the NationsBank Articles or NationsBank
By-laws contain any specific provisions regarding notice of NationsBank
shareholders' proposals or nominations for directors.
BankAmerica. The BankAmerica By-laws establish certain procedures that
must be followed for BankAmerica Shareholders to nominate individuals to the
BankAmerica Board or to propose business at an annual meeting of shareholders.
DISSENTERS' RIGHTS
Under the DGCL, which governs dissenters' appraisal rights for the Combined
Company and for BankAmerica, appraisal rights are available in connection with
the consummation of a plan of merger or consolidation that requires a
shareholder vote. However, unless otherwise provided in the certificate of
incorporation, no appraisal rights are available in connection with a plan of
merger to holders of shares of any class or series that is either: (i) listed on
a national securities exchange or designated as a national market system
security on an inter-dealer quotation system by the National Association of
Securities Dealers, Inc. or (ii) held of record by more than 2,000 shareholders.
The BankAmerica Certificate of Incorporation has no provisions regarding
appraisal rights, and, because the BankAmerica Common Stock was listed on the
NYSE on the BankAmerica Record Date, BankAmerica Shareholders will not have
appraisal rights in connection with the Merger.
The NCBCA generally provides dissenters' rights for mergers and share
exchanges that require shareholder approval, sales of substantially all the
assets (other than sales that are in the usual and regular course of business
and certain liquidations and court-ordered sales), and certain types of
amendments to the articles of incorporation of a North Carolina corporation.
However, unless otherwise provided in the articles of incorporation, no
dissenters' rights are available in connection with a plan of merger, share
exchange, or sale or exchange of property, to holders of shares of any class or
series that is either: (i) listed on a national securities exchange or (ii) held
of record by more than 2,000 shareholders. The NationsBank Articles have no
provisions regarding dissenters' rights, and, because the NationsBank Common
Stock was listed on the NYSE on the NationsBank Record Date, holders of
NationsBank Common Stock will not have dissenters' rights in connection with the
Reincorporation Merger or the Merger, although certain holders of NationsBank
Preferred Stock will have dissenters' rights in connection with the
Reincorporation Merger. See "The Merger -- Rights of Dissenting Shareholders."
COMPARATIVE RIGHTS OF SHAREHOLDERS
76
TAKEOVER STATUTES
North Carolina has two anti-takeover statutes, the North Carolina
Shareholder Protection Act and the North Carolina Control Share Acquisition Act,
which restrict business combinations with, and the accumulation of shares of
voting stock of, North Carolina corporations. NationsBank has taken action to
irrevocably "opt out" of the restrictions imposed by these statutes. Neither the
NCBCA nor the NationsBank Articles or the NationsBank By-laws contain any
similar provisions.
Under Section 203 of the DGCL, certain business combinations (as defined
below) between a Delaware corporation, whose stock generally is publicly traded
or held of record by more than 2,000 shareholders, and an "interested
stockholder" (as defined below) are prohibited for a three-year period following
the date that the shareholder became an interested stockholder, unless (i) the
business combination was approved by the board of directors of the corporation
before the other party to the transaction became an interested stockholder, (ii)
upon consummation of the transaction that made it an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the commencement of the transaction (excluding voting stock owned
by directors who are also officers or held in employee benefit plans in which
the employees do not have a confidential right to tender or vote stock held by
the plan), or (iii) the business combination was approved by the board of
directors of the corporation and ratified by holders of 66 2/3% of the voting
stock which the interested stockholder did not own. The three-year prohibition
also does not apply to certain business combinations proposed by an interested
stockholder following the announcement or notification of certain extraordinary
transactions involving the corporation and a person who had not been an
interested stockholder during the previous three years or who became an
interested stockholder with the approval of a majority of the corporation's
directors.
The term "BUSINESS COMBINATION" includes mergers or consolidations between
a Delaware corporation and an interested stockholder, transactions with an
interested stockholder involving the assets or stock of the corporation or its
majority-owned subsidiaries and transactions which increase an interested
stockholder's percentage ownership of stock. The term "INTERESTED STOCKHOLDER"
means any shareholder who becomes the beneficial owner of 15% or more of a
Delaware corporation's outstanding voting stock.
SPECIAL MEETING OF SHAREHOLDERS
Combined Company. Under the DGCL, special shareholder meetings of a
corporation may be called by its board of directors, or by any person or persons
authorized to do so by its certificate of incorporation or by-laws. The Combined
Company By-laws provide that a special meeting of Combined Company Shareholders
may be called for any purpose by the Combined Company Board, or by the Chairman,
the Chief Executive Officer or President of the Combined Company.
NationsBank. Under the NCBCA, unless provided in the articles of
incorporation or by-laws of a corporation, shareholders of the corporation do
not have the right to call a special meeting of shareholders. The NationsBank
Articles and the NationsBank By-laws provide that a special meeting of
NationsBank Shareholders may be called for any purpose by the NationsBank Board,
by the Chairman of NationsBank or by the NationsBank Chief Executive Officer or
President.
BankAmerica. The BankAmerica By-laws provides that a special meeting of
BankAmerica Shareholders may be called only by BankAmerica's Chairman or
President, and shall be called by the Chairman of the Board or the President or
Secretary at the request in writing of a majority of the Board of Directors, or
at the request in writing of shareholders owning a majority in amount of the
entire capital stock of the Corporation issued and outstanding and entitled to
vote.
SHAREHOLDER ACTION BY WRITTEN CONSENT
Combined Company. The DGCL provides that, unless otherwise specified in a
company's certificate of incorporation, its shareholders may take action by the
written consent of holders of outstanding shares having not less than the
minimum number of votes that would be necessary to take such action at a meeting
of shareholders at which all shares eligible to vote were present and voting.
The Combined Company Certificate
COMPARATIVE RIGHTS OF SHAREHOLDERS
77
provides that shareholders of the Combined Company may take action by written
consent without a meeting only if consents are signed by all shareholders
entitled to vote on the action.
NationsBank. Under the NCBCA, shareholders may take action by written
consent without a meeting only if consents are signed by all shareholders
entitled to vote on the action.
BankAmerica. The BankAmerica Certificate of Incorporation precludes the
taking of shareholder action by written consent.
DIRECTOR'S LIABILITY
Combined Company. Under the DGCL, a corporation's certificate of
incorporation may eliminate or limit a director's personal liability to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except for (i) any breach of the director's duty of loyalty
to the corporation or its shareholders; (ii) acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of the law; (iii)
unlawful distributions; or (iv) any transaction from which the director derived
an improper personal benefit. The Combined Company Certificate provides that to
the fullest extent permitted by the DGCL, a director of the Combined Company
shall not be personally liable to the Combined Company, its shareholders or
otherwise for monetary damages for breach of his duty as a director.
NationsBank. Under the NCBCA, a corporation, through its articles of
incorporation or by-laws or by contract or resolution, may eliminate or limit a
director's personal liability to the corporation or its shareholders for any
monetary damages for breach of duty, except for (i) acts or omissions that the
director at the time of such breach knew or believed were clearly in conflict
with the best interests of the corporation, (ii) unlawful distributions, (iii)
any transaction from which the director derived an improper personal benefit, or
(iv) a proceeding by or in the right of the corporation in which the director
was adjudged liable to the corporation. The NationsBank Articles provide that to
the fullest extent permitted by the NCBCA, a director of NationsBank shall not
be personally liable to NationsBank, its shareholders or otherwise for monetary
damages for breach of his or her duty as a director.
BankAmerica. The BankAmerica Certificate of Incorporation provides that to
the fullest extent permitted by the DGCL, a director of BankAmerica shall not be
personally liable to BankAmerica, its shareholders or otherwise.
AMENDMENTS TO ARTICLES OF INCORPORATION
Combined Company. Under the DGCL, a corporation may amend its certificate
of incorporation upon the submission of a proposed amendment to shareholders by
the board of directors and the subsequent receipt of the affirmative vote of the
holders of a majority of its outstanding voting shares and the affirmative vote
of the holders of a majority of the outstanding shares of each class entitled to
vote thereon as a class. The Combined Company Certificate provides that the
Combined Company reserves the right at any time from time to time to amend or
repeal any provision of the Combined Company Certificate and that all rights
conferred thereby are granted subject to such right of the Combined Company, but
does not contain any provisions altering the standards for amendment.
NationsBank. The NCBCA provides that a corporation's board of directors
may adopt certain minor amendments to a corporation's articles of incorporation
without a shareholder vote. Other proposed amendments to the articles of
incorporation must be submitted to the shareholders by the board of directors
and such amendments must be approved by (i) a majority of the votes entitled to
be cast on the amendment by any voting group with respect to which the amendment
would create dissenters rights; and (ii) for shares entitled to vote as a
separate voting group, a majority of those shares, provided that a quorum of the
voting group is present. The NationsBank Articles do not contain any special
provisions regarding their amendment.
BankAmerica. The BankAmerica Certificate of Incorporation does not contain
any special provisions regarding its amendment.
COMPARATIVE RIGHTS OF SHAREHOLDERS
78
AMENDMENT TO THE NATIONSBANK CORPORATION
KEY EMPLOYEE STOCK PLAN
NationsBank maintains the Stock Plan. The Stock Plan reserves a number of
shares of NationsBank Common Stock for issuance to certain key employees of
NationsBank in the form of stock options, stock appreciation rights ("SARS"),
restricted stock and performance shares. After the Effective Time, the Stock
Plan will be the Stock Plan of the Combined Company.
When the Merger occurs, the number of key employees will be significantly
increased. As a result, the Stock Plan's formula for determining the number of
shares reserved for issuance (which was designed without the Merger in mind)
would not result in an adequate pool of shares. The NationsBank Board has
therefore approved, subject to shareholder approval, an amendment and
restatement of the Stock Plan that would add 11.5 million additional shares to
the shares otherwise available for issuance for grants under the Stock Plan
(which represents the approximate number of shares currently available for
grants under the BankAmerica Stock Plans after adjustment for the Exchange
Ratio) and would also increase the current Stock Plan formula for adding more
shares in future years. NationsBank's obligation to consummate the Merger is not
conditioned upon shareholder approval of the Stock Plan.
The following is a summary of the material terms of the Stock Plan as
proposed to be amended.
NUMBER OF SHARES
Under the Stock Plan as presently approved by the NationsBank Voting
Shareholders, the number of shares of NationsBank Common Stock authorized for
issuance under the Stock Plan is 0.75% of the outstanding shares of NationsBank
Common Stock as of the first business day of each calendar year beginning with
calendar year 1995 and continuing through calendar year 2004. An additional
7,224,102 shares of NationsBank Common Stock were authorized for issuance under
the Stock Plan in connection with the termination of the NationsBank Corporation
1986 Restricted Stock Award Plan (the "RESTRICTED STOCK PLAN") effective January
31, 1995. An additional 10 million shares of NationsBank Common Stock were
authorized for issuance under the Stock Plan in connection with the acquisition
of Boatmen's and another 10 million shares were authorized in connection with
the merger with Barnett.
Under the Stock Plan as amended and restated, an additional 11.5 million
shares (which represents the approximate number of shares currently available
for grants under the BankAmerica Stock Plans after adjustment for the Exchange
Ratio) would be authorized for issuance under the Stock Plan for the reasons
discussed above. Also, for calendar years 1999 through 2004, the formula for
adding shares would be increased to 1.5% of the outstanding shares of Combined
Company Common Stock as of the last day of the immediately preceding calendar
year as reported in the Combined Company's annual report to shareholders or
annual report on Form 10-K.
All shares available for granting awards in any year that are not used, as
well as shares allocated to awards under both the Stock Plan and the Restricted
Stock Plan that are canceled or forfeited, are available for use in subsequent
years.
ADMINISTRATION
The Stock Plan is administered by the Stock Option Committee of the
NationsBank Board (the Combined Company Board after the Effective Time) (the
"COMMITTEE"). It is intended that all of the members of the Committee be
"non-employee directors" within the meaning of Rule 16b-3 promulgated under
Section 16(b) of the Exchange Act and "outside directors" within the meaning of
Code Section 162(m). The amendment and restatement would allow the Committee to
designate an individual or committee of individuals (who need not be directors)
to act as the "Committee" under the Stock Plan for awards to key employees who
are not "insiders" subject to Section 16 of the Exchange Act or "covered
employees" subject to Code Section 162(m). Under the Stock Plan, the Committee
(i) selects the key employees to receive awards from time to time, (ii) makes
awards in such amounts as it determines,
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(iii) imposes such limitations, restrictions and conditions upon awards as it
deems appropriate, (iv) establishes performance targets and allocation formulas
for awards of restricted stock or performance shares intended to be "qualified
performance-based compensation" under Code Section 162(m), (v) certifies the
attainment of performance goals, if applicable, as required by Code Section
162(m), (vi) interprets the Stock Plan and adopts, amends and rescinds
administrative guidelines and other rules and regulations relating to the Stock
Plan, (vii) corrects any defect or omission or reconciles any inconsistency in
the Stock Plan or any award granted thereunder and (viii) makes all other
determinations and takes all other actions necessary or advisable for the
implementation and administration of the Stock Plan. The Committee also has the
authority to accelerate the vesting and/or waive any restrictions of any
outstanding awards. No awards would be made under the Stock Plan after December
31, 2004. Under the amended and restated Stock Plan, in no event could an
individual receive awards under the Stock Plan for a given calendar year
covering in excess of 2.0 million shares.
ELIGIBILITY
Only "key employees" may participate in the Stock Plan. "KEY EMPLOYEES" are
those employees who occupy managerial or other important positions and who have
made, or who are expected to make, important business contributions, as
determined by the Committee, including persons employed outside the United
States. After the consummation of the Merger, approximately 20,000 employees are
expected to be eligible to participate. As mentioned above, the Committee in its
discretion selects which key employees would in fact receive any awards from
time to time.
AWARDS OF STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
The Stock Plan provides for the grant of options to purchase shares of
stock at option prices which are not less than the fair market value of the
shares at the close of business on the date of grant. (The fair market value of
a share of NationsBank Common Stock as of July 31, 1998 was $79.75.) The Stock
Plan also provides for the grant of SARs (either in tandem with stock options or
freestanding), which entitle holders upon exercise to receive either cash or
shares or a combination thereof, as the Committee in its discretion shall
determine, with a value equal to the difference between (i) the fair market
value on the exercise date of the shares with respect to which an SAR is
exercised and (ii) fair market value of such shares on the date of grant (or, if
different, the exercise price of the related option in the case of a tandem
SAR).
Awards of options under the Stock Plan, which may be either incentive stock
options (which qualify for special tax treatment) or non-qualified stock
options, are determined by the Committee. However, under the Stock Plan as
amended and restated, over the ten-year term of the Stock Plan the total number
of shares that may be issued in the aggregate as incentive stock options would
be limited to 1.5% of the outstanding shares of NationsBank Common Stock as of
the first business day of 1998 multiplied by ten. The terms and conditions of
each option and of any SAR are to be determined by the Committee at the time of
grant.
Exercise of an option (or SAR) will result in the cancellation of any
related SAR (or option) to the extent of the number of shares in respect of
which such option or SAR has been exercised. Options and SARs granted under the
Stock Plan will expire not more than ten years from the date of grant, and the
option agreements entered into with the optionees will specify the extent to
which options and SARs may be exercised during their respective terms, including
in the event of the optionee's death, disability or termination of employment.
Payment for shares issuable pursuant to the exercise of an option may be
made either in cash or by tendering shares of NationsBank Common Stock (after
the Merger, Combined Company Common Stock) with a fair market value at the date
of the exercise equal to the portion of the exercise price which is not paid in
cash.
AWARDS OF RESTRICTED STOCK AND PERFORMANCE SHARES
The Stock Plan provides for the issuance of shares of Restricted Stock to
such key employees and on such terms and conditions as determined from time to
time by the Committee. The Restricted Stock award agreement with the participant
will set forth the terms of the award, including the applicable restrictions.
The
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restrictions may include the continued service of the participant with the
company, the attainment of specified performance goals or any other conditions
deemed appropriate by the Committee. For Restricted Stock intended to vest
solely on the basis of the passage of time, the shares will not vest more
quickly than ratably over a three-year period beginning on the anniversary of
the award, except that the shares may vest more quickly in the event of the
employee's death, disability or retirement, as a result of a "Change in Control"
of NationsBank (after the Merger, the Combined Company) or in connection with
establishing the terms and conditions of employment of a key employee as the
result of a business acquisition or combination.
The stock certificates evidencing the Restricted Stock will bear an
appropriate legend and will be held in custody until the applicable restrictions
have been satisfied. The participant cannot sell, transfer, pledge, assign or
otherwise alienate or hypothecate shares of Restricted Stock until the
applicable restrictions have been satisfied. Once the restrictions are
satisfied, the shares of stock will be delivered to the participant. During the
period of restriction, the participant may exercise full voting rights with
respect to the Restricted Stock. The participant will also be credited with
dividends with respect to the Restricted Stock. Such dividends may be payable
currently or subject to additional restrictions as determined by the Committee
and set forth in the award agreement.
In addition to Restricted Stock, the Committee may award performance shares
("PERFORMANCE SHARES") to selected key employees. The value of a Performance
Share will equal the fair market value of a share of stock of the employee's
company at the time of the award. The Stock Plan provides that the number of
Performance Shares granted and/or the vesting of granted Performance Shares can
be contingent on the attainment of certain goals or other conditions over a
period of time (called the "performance period"), all as determined by the
Committee and evidenced by an award agreement. During the performance period,
the Committee would determine what number (if any) of Performance Shares have
been earned. Earned Performance Shares may be paid in cash, shares or a
combination thereof having an aggregate fair market value equal to the value of
the earned Performance Shares as of the payment date. Shares used to pay earned
Performance Shares may have additional restrictions as determined by the
Committee. In addition, the Committee may cancel any earned Performance Shares
and replace them with stock options determined by the Committee to be of
equivalent value based on a conversion formula specified in the participant's
Performance Share award agreement. Earned but unpaid Performance Shares may have
dividend equivalents rights as determined by the Committee and evidenced in the
award agreement.
CERTAIN STOCK PLAN AWARDS
The following persons have entered into employment agreements with
NationsBank to become effective upon consummation of the Merger, pursuant to
which they will receive shares of Restricted Stock as follows: David A. Coulter,
300,000 shares; James H. Hance, Jr., 200,000 shares; Kenneth D. Lewis, 200,000
shares; Michael J. Murray, 200,000 shares; and Michael E. O'Neill, 200,000
shares. The Restricted Stock will vest in five equal annual installments
beginning on the first anniversary of the consummation of the Merger, subject to
accelerated vesting upon a change in control of the Combined Company or in the
event of certain qualifying terminations as described in the employment
agreements. See "The Merger--Interests of Certain Persons in the Merger." During
1998, the Committee granted the following non-qualified stock option awards
under the existing Stock Plan to the following NationsBank executive officers:
Mr. Hance, 300,000 shares; Mr. Lewis, 300,000 shares; and Mr. F. William
Vandiver, Jr., 200,000 shares. Because awards under the Stock Plan are
discretionary, no other awards are determinable at this time.
CODE SECTION 162(m)
Code Section 162(m) precludes a publicly held corporation from claiming a
compensation deduction for compensation in excess of $1.0 million paid to the
chief executive officer or any of the four most highly compensated officers
other than the chief executive officer. This limitation does not apply, however,
to "qualified performance-based compensation." Because stock options and SARs
granted under the Stock Plan must have an exercise price equal at least to the
fair market value at the date of grant and because the Stock Plan limits the
number of shares that may be the subject of awards granted to any employee
during any
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calendar year, compensation from the exercise of stock options and SARs should
be treated as "qualified performance-based compensation" for Code Section 162(m)
purposes.
In addition, the Stock Plan authorizes the Committee to make awards of
Restricted Stock or Performance Shares that are conditioned on the satisfaction
of certain performance criteria. For awards intended to result in "qualified
performance-based compensation," the Committee will establish prior to or within
90 days after the start of the applicable performance period the applicable
performance conditions. The Committee may select from the following performance
measures: (i) return on average common shareholders' equity, (ii) return on
average assets, (iii) net income, (iv) earnings per common share and (v) total
shareholder return. The performance conditions will be stated in the form of an
objective, nondiscretionary formula, and the Committee will certify in writing
the attainment of performance conditions prior to any payout with respect to
awards. The Committee in its discretion may reduce the amount of any
performance-based award.
WITHHOLDING FOR PAYMENT OF TAXES
The Stock Plan provides for the withholding and payment by a participant of
any payroll or withholding taxes required by applicable law. The Stock Plan
permits a participant to satisfy this requirement, with the approval of the
Committee and subject to the terms of the Stock Plan, by withholding from the
participant a number of shares otherwise issuable under the award having a fair
market value equal to the amount of applicable payroll and withholding taxes.
CHANGES IN CAPITALIZATION AND SIMILAR CHANGES
In the event of any change in the outstanding shares by reason of any stock
dividend, split, spin-off, recapitalization, merger, consolidation, combination,
exchange of shares or otherwise, the aggregate number of shares with respect to
which awards may be made under the Stock Plan, the annual limit on individual
awards and the limit on incentive stock options and the terms, types of shares
and number of shares of any outstanding awards under the Stock Plan may be
equitably adjusted by the Committee in its discretion to preserve the benefit of
the award for the company and the participant.
CHANGES IN CONTROL
The Stock Plan provides that in the event of a change in control of the
company, all options and SARs will be fully exercisable as of the date of the
change in control and shall remain exercisable through their full term.
Outstanding awards of Restricted Stock and Performance Shares will become
immediately vested, and any applicable performance conditions shall be deemed
satisfied (at the target performance condition, if applicable) as of the date of
the change in control. The Merger would not constitute a change in control under
the Stock Plan.
AMENDMENT AND TERMINATION OF THE PLAN
The NationsBank Board (after the Merger, the Combined Company Board) has
the power to amend, modify or terminate the Stock Plan on a prospective basis.
Shareholder approval will be obtained for any change to the material terms of
the Stock Plan to the extent required by Code Section 162(m) or other applicable
law.
FEDERAL INCOME TAX TREATMENT
Incentive Stock Options. Incentive stock options ("ISOS") granted under
the Stock Plan will be subject to the applicable provisions of the Code,
including Code Section 422. If shares of stock issued to an optionee upon the
exercise of an ISO, and if no "disqualifying disposition" of the shares is made
by such optionee within one year after the exercise of the ISO or within two
years after the date the ISO was granted, then (i) no income will be recognized
by the optionee at the time of the grant of the ISO, (ii) no income, for regular
income tax purposes, will be realized by the optionee at the date of exercise,
(iii) upon sale of the
AMENDMENT TO THE NATIONSBANK CORPORATION KESOP
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shares acquired by exercise of the ISO, any amount realized in excess of the
option price will be taxed to the optionee, for regular income tax purposes, as
a capital gain (at varying rates depending upon the optionee's holding period in
the shares and income level) and any loss sustained will be a capital loss, and
(iv) no deduction will be allowed to NationsBank for federal income tax
purposes. If a "disqualifying disposition" of the shares is made, the optionee
will realize taxable ordinary income in an amount equal to the excess of the
fair market value of the shares purchased at the time of exercise over the
option price (the bargain purchase element) and NationsBank will be entitled to
a federal income tax deduction equal to that amount. The amount of any gain in
excess of the bargain purchase element realized upon a "disqualifying
disposition" will be taxable as capital gain to the holder (at varying rates
depending upon such holder's holding period in the shares and income level), for
which NationsBank will not be entitled a federal tax deduction. Upon exercise of
an ISO, the optionee may be subject to alternative minimum tax.
Nonqualified Stock Options. With respect to nonqualified stock options
("NQSOS") granted to optionees under the Stock Plan, (i) no income is realized
by the optionee at the time the NQSO is granted, (ii) at exercise, ordinary
income is realized by the optionee in an amount equal to the difference between
the option price and the fair market value of the shares on the date of
exercise, and NationsBank receives a tax deduction for the same amount, and
(iii) on disposition, appreciation or depreciation after the date of exercise is
treated as capital gain or loss and taxed at varying rates depending upon the
holder's holding period in the shares and income level.
Restricted Stock. Upon becoming entitled to receive shares at the end of
the applicable restriction period without a forfeiture, the recipient has
ordinary income in an amount equal to the fair market value of the shares at
that time. However, a recipient who wishes to be taxed as of the date of grant
may make an election under Code Section 83(b) within 30 days of the date of the
grant. The recipient will then have ordinary income on the date of the grant
equal to the fair market value of the shares of Restricted Stock as if the
shares were unrestricted and could be sold immediately. If the shares subject to
such election are forfeited, the recipient will not be entitled to any
deduction, refund or loss for tax purposes. Upon the sale of the shares after
the forfeiture period has expired, the holding period to determine whether the
recipient has long-term or short-term capital gain or loss begins when the
restriction period expires, and the tax basis will be equal to the fair market
value of the shares when the restricted period expires. However, if the
recipient timely elects to be taxed as of the date of grant, the holding period
commences on the date of the grant and the tax basis will be equal to the fair
market value of the shares on the date of the grant as if the shares were then
unrestricted and could be sold immediately. The company generally will be
entitled to a deduction equal to the amount that is taxable as ordinary
compensation income to the recipient.
Performance Shares. A participant who is awarded Performance Shares will
not recognize income and the company will not be allowed a deduction at the time
the award is made. When a participant receives payment for Performance Shares in
cash or shares, the amount of the cash and the fair market value of the shares
received will be ordinary income to the participant and will be allowed as a
deduction for federal income tax purposes to the company. However, if there is a
substantial risk that any shares used to pay out earned Performance Shares will
be forfeited (for example, because the Committee conditions such shares on the
performance of future services), the taxable event is deferred until the risk of
forfeiture lapses. In this case, the participant can elect to make a Code
Section 83(b) election as previously described. The company can take the
deduction at the time the income is recognized by the participant.
The affirmative vote of a majority of the votes cast is required for
approval of the Plan amendment, subject to the applicable quorum requirements.
See "NationsBank Special Meeting."
THE NATIONSBANK BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
PROPOSAL TO AMEND AND RESTATE THE STOCK PLAN.
AMENDMENT TO THE NATIONSBANK CORPORATION KESOP
83
LEGAL OPINION
The legality of the Combined Company Common Stock to be issued in
connection with the Merger will be passed upon by Paul J. Polking, Executive
Vice President and General Counsel of NationsBank. As of the date of this Joint
Proxy Statement-Prospectus, Mr. Polking beneficially owned approximately 140,000
shares of NationsBank Common Stock.
EXPERTS
The consolidated financial statements of NationsBank incorporated in this
Joint Proxy Statement-Prospectus by reference to the NationsBank Current Report
on Form 8-K filed April 16, 1998 that contains the financial statements of
NationsBank for the years ended December 31, 1997 and 1996, and for each of the
three years ended December 31, 1997, restated to give effect to the merger with
Barnett on January 9, 1998, have been so incorporated in reliance on the report
of PricewaterhouseCoopers LLP, independent accountants, given on the authority
of the firm as experts in auditing and accounting.
The consolidated financial statements of BankAmerica at December 31, 1997
and 1996, and for each of the three years in the period ended December 31, 1997
incorporated in this Joint Proxy Statement-Prospectus by reference to the
BankAmerica Annual Report on Form 10-K for the year ended December 31, 1997,
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report with respect thereto, and are included herein by reference in
reliance upon that report, given on the authority of the firm as experts in
accounting and auditing.
Representatives of PricewaterhouseCoopers LLP are expected to be present at
the NationsBank Special Meeting, and representatives of Ernst & Young LLP are
expected to be present at the BankAmerica Special Meeting. In each case, such
representatives will have the opportunity to make a statement if they desire to
do so and are expected to be available to respond to appropriate questions.
SHAREHOLDER PROPOSALS
Shareholders of NationsBank (or the Combined Company) who intend to present
proposals for consideration at the 1999 Annual Meeting of the shareholders of
NationsBank (or the Combined Company) are hereby advised that any such proposals
must be received by the Secretary of NationsBank (or the Combined Company) no
later than the close of business on November 23, 1998, if such proposal is to be
considered for inclusion in the 1999 proxy materials of NationsBank (or the
Combined Company).
BankAmerica will hold a 1999 Annual Meeting of BankAmerica Shareholders
only if the Merger is not consummated before the time of such meeting. In the
event that such a meeting is held, any proposals of BankAmerica Shareholders
intended to be presented at the 1999 Annual Meeting of BankAmerica Shareholders
must have been received by the Secretary of BankAmerica no later than November
23, 1998 in order to be considered for inclusion in the BankAmerica 1999 proxy
materials.
OTHER MATTERS
As of the date of this Joint Proxy Statement-Prospectus, the BankAmerica
Board and the NationsBank Board know of no matters that will be presented for
consideration at the Meetings other than as described in this Joint Proxy
Statement-Prospectus. If any other matters shall properly come before either the
NationsBank Special Meeting or the BankAmerica Special Meeting or any
adjournments or postponements thereof and be voted upon, the enclosed proxies
will be deemed to confer discretionary authority on the individuals named as
proxies therein to vote the shares represented by such proxies as to any such
matters. The persons named as proxies intend to vote or not to vote in
accordance with the recommendation of the respective managements of BankAmerica
and NationsBank.
84
WHERE YOU CAN FIND MORE INFORMATION
NationsBank and BankAmerica file annual, quarterly and special reports,
proxy statements and other information with the Commission. You may read and
copy any reports, statements or other information that the companies file with
the Commission at the Commission's public reference rooms in Washington, D.C.,
New York, New York and Chicago, Illinois. Please call the Commission at
1-800-SEC-0330 for further information on the public reference rooms. These
Commission filings are also available to the public from commercial document
retrieval services and at the Internet world wide web site maintained by the
Commission at "http://www.sec.gov." Reports, proxy statements and other
information should also be available for inspection at the offices of the NYSE.
NationsBank filed a Registration Statement on Form S-4 (the "REGISTRATION
STATEMENT") to register with the Commission the Combined Company Common Stock to
be issued to BankAmerica Shareholders in the Merger. This Joint Proxy
Statement-Prospectus is a part of that Registration Statement and constitutes a
prospectus of NationsBank. As allowed by Commission rules, this Joint Proxy
Statement-Prospectus does not contain all the information you can find in
NationsBank's Registration Statement or the exhibits to that Registration
Statement.
The Commission allows BankAmerica and NationsBank to "incorporate by
reference" information into this Joint Proxy Statement-Prospectus, which means
that the companies can disclose important information to you by referring you to
another document filed separately with the Commission. The information
incorporated by reference is considered part of this Joint Proxy
Statement-Prospectus, except for any information superseded by information
contained directly in this Joint Proxy Statement-Prospectus or in later filed
documents incorporated by reference in this Joint Proxy Statement-Prospectus.
This Joint Proxy Statement-Prospectus incorporates by reference the
documents set forth below that BankAmerica and NationsBank have previously filed
with the Commission. These documents contain important information about
BankAmerica and NationsBank and their finances. Some of these filings have been
amended by later filings, which are also listed.
BANKAMERICA COMMISSION FILINGS (FILE NO. 1-7377) PERIOD/AS OF DATE
- ------------------------------------------------ -----------------
Annual Report on Form 10-K Year ended December 31, 1997
Quarterly Report on Form 10-Q Quarter ended March 31, 1998
Current Reports on Form 8-K January 21, 1998; February 2, 1998; March 4, 1998;
April 10, 1998 (as amended on May 14, 1998 and May
20, 1998); April 15, 1998; and July 15, 1998
NATIONSBANK COMMISSION FILINGS (FILE NO. 1-6523) PERIOD/AS OF DATE
- ------------------------------------------------ -----------------
Annual Report on Form 10-K Year ended December 31, 1997
Quarterly Report on Form 10-Q Quarter ended March 31, 1998
Current Reports on Form 8-K January 14, 1998; January 22, 1998;
February 3, 1998; March 13, 1998;
March 23, 1998; April 15, 1998;
April 16, 1998; April 17, 1998
(as amended on April 24, 1998 and May 18, 1998);
May 6, 1998; May 13, 1998; July 7, 1998; July 13,
1998; and July 23, 1998
BankAmerica and NationsBank also incorporate by reference additional
documents that may be filed with the Commission between the date of this Joint
Proxy Statement-Prospectus and the consummation of the Merger or the termination
of the Merger Agreement. These include periodic reports, such as Annual Reports
on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as
well as proxy statements.
NationsBank has supplied all information contained or incorporated by
reference in this Joint Proxy Statement-Prospectus relating to NationsBank, and
BankAmerica has supplied all such information relating to BankAmerica.
85
As noted in the "Exchange of Certificates" section of this Joint Proxy
Statement/Prospectus, BankAmerica Shareholders should not send in their
BankAmerica certificates until they receive the transmittal materials from the
exchange agent. Registered BankAmerica Shareholders who have further questions
about their share certificates, the conversion of certificates into book-entry
form or the exchange of their BankAmerica Common Stock for Combined Company
Common Stock should call the stock transfer agent at 1-800-642-9880.
If you are a shareholder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them through the companies,
the Commission or the Commission's Internet web site as described above.
Documents incorporated by reference are available from the companies without
charge, excluding all exhibits, except that if the companies have specifically
incorporated by reference an exhibit in this Joint Proxy Statement-Prospectus,
the exhibit will also be available without charge. Shareholders may obtain
documents incorporated by reference in this Joint Proxy Statement-Prospectus by
requesting them in writing or by telephone from the appropriate company at the
following addresses:
NationsBank Corporation BankAmerica Corporation
NationsBank Corporate Center Bank of America Center
100 North Tryon Street 555 California Street
Charlotte, North Carolina 28255 San Francisco, California 94104
Attn.: Treasurer Attn.: Corporate Secretary's Office #13018
Telephone: (704) 386-5972 Telephone: (415) 622-3530
You should rely only on the information contained or incorporated by
reference in this Joint Proxy Statement-Prospectus. We have not authorized
anyone to provide you with information that is different from what is contained
in this Joint Proxy Statement-Prospectus. This Joint Proxy Statement-Prospectus
is dated August 4, 1998. You should not assume that the information contained in
this Joint Proxy Statement-Prospectus is accurate as of any date other than that
date. Neither the mailing of this Joint Proxy Statement-Prospectus to
shareholders nor the issuance of Combined Company Common Stock in the Merger
creates any implication to the contrary.
86
UNAUDITED PRO FORMA CONDENSED
FINANCIAL INFORMATION
The following Unaudited Pro Forma Condensed Balance Sheet as of March 31,
1998 combines the historical consolidated balance sheets of NationsBank and
BankAmerica as if the Reorganization had been effective on March 31, 1998, after
giving effect to certain adjustments described in the attached Notes to the
Unaudited Pro Forma Condensed Financial Information. NationsBank's historical
financial statements, restated to give retroactive effect to the merger of
NationsBank with Barnett on January 9, 1998, are included in NationsBank's
Current Report on Form 8-K filed with the Commission on April 16, 1998. In
addition, NationsBank's historical interim financial statements for the three
months ended March 31, 1998 are included in NationsBank's Form 10-Q as filed
with the Commission on May 15, 1998. BankAmerica's historical financial
statements are incorporated by reference in its Annual Report on Form 10-K for
the year ended December 31, 1997 as filed with the Commission on March 16, 1998
and its Form 10-Q for the three months ended March 31, 1998 as filed with the
Commission on May 14, 1998. The unaudited pro forma condensed financial
information should be read in conjunction with the historical financial
statements of NationsBank and BankAmerica.
The Unaudited Pro Forma Condensed Statements of Income for the three months
ended March 31, 1998 and the years ended December 31, 1997, 1996 and 1995
present the combined results of operations of NationsBank and BankAmerica as if
the Reorganization had been effective at January 1, 1995, after giving effect to
certain adjustments described in the attached Notes to the Unaudited Pro Forma
Condensed Financial Information.
The unaudited pro forma condensed financial information and accompanying
notes to the Unaudited Pro Forma Condensed Financial Information reflect the
application of the pooling of interests method of accounting for the
Reorganization. Under this method of accounting, the recorded assets,
liabilities, shareholders' equity, income and expenses of NationsBank and
BankAmerica are combined and reflected at their historical amounts.
NationsBank's acquisition of Boatmen's on January 7, 1997 was accounted for
using the purchase method of accounting. Accordingly, the results of operations
of Boatmen's have been included in the NationsBank historical financial
statements from the date of acquisition. Under the purchase method of
accounting, the purchase price was allocated to assets acquired and liabilities
assumed based on their estimated fair values at the closing date of the
transaction.
The Combined Company expects to achieve certain Merger benefits in the form
of operating cost savings that may be significant. The pro forma earnings, which
do not reflect any direct costs or potential savings that are expected to result
from the consolidation of operations of NationsBank and BankAmerica, may not be
indicative of the results of future operations. The unaudited pro forma earnings
for the years ended December 31, 1997, 1996 and 1995 do not reflect any direct
costs or potential savings from the consolidation of operations of Barnett. No
assurance can be given with respect to the ultimate level of expense savings.
The merger and restructuring items reflected in the pro forma condensed balance
sheet include severance and change in control and other employee-related
expenses, conversion and related costs and occupancy and equipment expenses
(primarily lease exit costs and the elimination of duplicate facilities and
other capitalized assets), exit costs related to contract terminations and other
merger and restructuring costs (including legal and investment banking fees).
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
87
NATIONSBANK/BANKAMERICA
PRO FORMA CONDENSED BALANCE SHEET
(Unaudited)
AT MARCH 31, 1998
------------------------------------------------------
NATIONSBANK
PRO FORMA BANKAMERICA
NATIONSBANK BANKAMERICA ADJUSTMENTS COMBINED
----------- ----------- ----------- -----------
(DOLLARS IN MILLIONS)
ASSETS
Cash and cash equivalents..................... $ 13,421 $ 14,699 $ (614)(5) $ 27,506
Time deposits placed.......................... 1,841 5,737 -- 7,578
Investment securities......................... 51,299 15,973 -- 67,272
Federal funds sold and securities purchased
under agreements to resell.................. 10,914 12,927 -- 23,841
Trading account assets........................ 23,751 30,675 -- 54,426
Loans, leases and factored accounts
receivable, net of unearned income.......... 179,486 165,520 -- 345,006
Allowance for credit losses................... (3,245) (3,517) -- (6,762)
-------- -------- ------- --------
Loans, leases and factored accounts
receivable, net of unearned income and
allowance for credit losses................. 176,241 162,003 -- 338,244
Premises and equipment, net................... 4,272 3,831 -- 8,103
Customers' acceptance liability............... 1,089 3,374 -- 4,463
Intangible assets............................. 11,757 6,032 -- 17,789
Other assets.................................. 19,918 10,185 -- 30,103
-------- -------- ------- --------
Total assets.................................. $314,503 $265,436 $ (614) $579,325
======== ======== ======= ========
LIABILITIES
Deposits...................................... $170,046 $173,890 $ -- $343,936
Borrowed funds................................ 57,956 28,422 -- 86,378
Trading account liabilities................... 17,991 13,013 -- 31,004
Acceptances outstanding....................... 1,089 3,374 -- 4,463
Accrued expenses and other liabilities........ 9,949 10,630 800(2) 21,379
Trust preferred securities.................... 2,705 2,212 -- 4,917
Long-term debt................................ 29,547 14,011 -- 43,558
-------- -------- ------- --------
Total liabilities............................. 289,283 245,552 800 535,635
SHAREHOLDERS' EQUITY
Preferred stock............................... 91 614 (614)(5) 91
Common stock.................................. 10,202 1,210 3,702(4) 15,114
Additional paid-in capital.................... -- 7,994 (7,994)(4) --
Retained earnings............................. 14,724 14,292 (800)(2) 28,216
Common stock in treasury, at cost............. -- (4,292) 4,292(4) --
Other, including loan to ESOP trust........... 203 66 -- 269
-------- -------- ------- --------
Total shareholders' equity.................... 25,220 19,884 (1,414) 43,690
-------- -------- ------- --------
Total liabilities and shareholders' equity.... $314,503 $265,436 $ (614) $579,325
======== ======== ======= ========
See "Notes to the Unaudited Pro Forma Condensed Financial Information."
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
88
NATIONSBANK/BANKAMERICA
PRO FORMA CONDENSED INCOME STATEMENT
(Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 1998
-----------------------------------------------------
NATIONSBANK
PRO FORMA BANKAMERICA
NATIONSBANK BANKAMERICA ADJUSTMENTS COMBINED
----------- ----------- ----------- -----------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
INTEREST INCOME
Interest and fees on loans and leases........... $ 3,775 $ 3,388 $ -- $ 7,163
Interest and dividends on securities............ 842 283 -- 1,125
Federal funds sold and securities purchased
under agreements to resell.................... 176 241 -- 417
Trading account securities...................... 356 383 -- 739
Other interest income........................... 120 108 -- 228
-------- -------- ------- ----------
Total interest income...................... 5,269 4,403 -- 9,672
INTEREST EXPENSE
Deposits........................................ 1,203 1,489 -- 2,692
Borrowed funds.................................. 821 491 -- 1,312
Trading account liabilities..................... 194 80 -- 274
Long-term debt.................................. 521 287 -- 808
-------- -------- ------- ----------
Total interest expense..................... 2,739 2,347 -- 5,086
-------- -------- ------- ----------
Net interest income............................. 2,530 2,056 -- 4,586
Provision for credit losses..................... 265 245 -- 510
-------- -------- ------- ----------
NET CREDIT INCOME............................... 2,265 1,811 -- 4,076
Gains on sales of debt securities............... 152 61 -- 213
Noninterest income.............................. 1,776 1,752 -- 3,528
Foreclosed properties expense (income).......... 5 (7) -- (2)
Merger and restructuring items.................. 900 -- -- 900
Other noninterest expense....................... 2,452 2,256 -- 4,708
-------- -------- ------- ----------
INCOME BEFORE INCOME TAXES...................... 836 1,375 -- 2,211
Income tax expense.............................. 339 540 -- 879
-------- -------- ------- ----------
NET INCOME BEFORE PREFERRED DIVIDENDS........... 497 835 -- 1,332
Preferred dividends............................. 2 10 -- 12
-------- -------- ------- ----------
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS..... $ 495 $ 825 $ -- $ 1,320
======== ======== ======= ==========
Basic earnings per share........................ $ 0.52 $ 1.21 $ 0.77
======== ======== ==========
Diluted earnings per share...................... $ 0.51 $ 1.17 $ 0.75
======== ======== ==========
Average common shares--Basic (in thousands)..... 949,641 684,737 1,724,489
======== ======== ==========
Average common shares--Diluted (in thousands)... 973,561 706,481 1,773,015
======== ======== ==========
See "Notes to the Unaudited Pro Forma Condensed Financial Information."
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
89
NATIONSBANK/BANKAMERICA
PRO FORMA CONDENSED INCOME STATEMENT
(Unaudited)
FOR THE YEAR ENDED DECEMBER 31, 1997
-----------------------------------------------------
NATIONSBANK
PRO FORMA BANKAMERICA
NATIONSBANK BANKAMERICA ADJUSTMENTS COMBINED
----------- ----------- ----------- -----------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
INTEREST INCOME
Interest and fees on loans and leases............... $ 15,270 $ 13,932 $ -- $ 29,202
Interest and dividends on securities................ 2,140 1,123 -- 3,263
Federal funds sold and securities purchased under
agreements to resell.............................. 699 817 -- 1,516
Trading account securities.......................... 1,352 1,230 -- 2,582
Other interest income............................... 226 415 -- 641
-------- -------- -------- ---------
Total interest income..................... 19,687 17,517 -- 37,204
INTEREST EXPENSE
Deposits............................................ 4,891 5,793 -- 10,684
Borrowed funds...................................... 2,435 1,676 -- 4,111
Trading account liabilities......................... 678 297 -- 975
Long-term debt...................................... 1,966 1,166 -- 3,132
-------- -------- -------- ---------
Total interest expense.................... 9,970 8,932 -- 18,902
-------- -------- -------- ---------
NET INTEREST INCOME................................. 9,717 8,585 -- 18,302
Provision for credit losses......................... 954 950 -- 1,904
-------- -------- -------- ---------
NET CREDIT INCOME................................... 8,763 7,635 -- 16,398
Gains on sales of debt securities................... 155 26 -- 181
Noninterest income.................................. 5,929 6,042 -- 11,971
Foreclosed properties expense (income).............. 9 (22) -- (13)
Merger and restructuring charge..................... 374 -- -- 374
Other noninterest expense........................... 9,234 8,399 -- 17,633
-------- -------- -------- ---------
INCOME BEFORE INCOME TAXES.......................... 5,230 5,326 -- 10,556
Income tax expense.................................. 1,898 2,116 -- 4,014
-------- -------- -------- ---------
NET INCOME BEFORE PREFERRED DIVIDENDS............... 3,332 3,210 -- 6,542
Preferred dividends................................. 11 100 -- 111
-------- -------- -------- ---------
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS......... $ 3,321 $ 3,110 $ -- $ 6,431
======== ======== ======== =========
Basic earnings per share............................ $ 3.53 $ 4.45 $ 3.71
======== ======== =========
Diluted earnings per share.......................... $ 3.44 $ 4.32 $ 3.61
======== ======== =========
Average common shares--Basic (in thousands)......... 941,992 699,189 1,733,194
======== ======== =========
Average common shares--Diluted (in thousands)....... 967,672 719,777 1,782,172
======== ======== =========
See "Notes to the Unaudited Pro Forma Condensed Financial Information."
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
90
NATIONSBANK/BANKAMERICA
PRO FORMA CONDENSED INCOME STATEMENT
(Unaudited)
FOR THE YEAR ENDED DECEMBER 31, 1996
--------------------------------------------------------
NATIONSBANK
PRO FORMA BANKAMERICA
NATIONSBANK BANKAMERICA ADJUSTMENTS COMBINED
----------- ----------- ----------- -----------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
INTEREST INCOME
Interest and fees on loans and leases...... $ 13,121 $ 13,412 $ -- $ 26,533
Interest and dividends on securities....... 1,618 1,160 -- 2,778
Federal funds sold and securities purchased
under agreements to resell............... 689 682 -- 1,371
Trading account securities................. 1,228 1,001 -- 2,229
Other interest income...................... 176 453 -- 629
-------- -------- -------- ----------
Total interest income................. 16,832 16,708 -- 33,540
INTEREST EXPENSE
Deposits................................... 4,246 5,359 -- 9,605
Borrowed funds............................. 2,274 1,430 -- 3,704
Trading account liabilities................ 653 227 -- 880
Long-term debt............................. 1,435 1,063 -- 2,498
-------- -------- -------- ----------
Total interest expense................ 8,608 8,079 -- 16,687
-------- -------- -------- ----------
NET INTEREST INCOME........................ 8,224 8,629 -- 16,853
Provision for credit losses................ 760 885 -- 1,645
NET CREDIT INCOME.......................... 7,464 7,744 -- 15,208
Gains on sales of debt securities.......... 86 27 -- 113
Noninterest income......................... 4,408 5,336 -- 9,744
Foreclosed properties expense.............. 21 1 -- 22
Merger and restructuring charge............ 118 280 -- 398
Other noninterest expense.................. 7,283 8,053 -- 15,336
-------- -------- -------- ----------
INCOME BEFORE INCOME TAXES................. 4,536 4,773 -- 9,309
Income tax expense......................... 1,597 1,900 -- 3,497
-------- -------- -------- ----------
NET INCOME BEFORE PREFERRED DIVIDENDS...... 2,939 2,873 -- 5,812
Preferred dividends........................ 17 185 -- 202
-------- -------- -------- ----------
NET INCOME AVAILABLE TO COMMON
SHAREHOLDERS............................. $ 2,922 $ 2,688 $ -- $ 5,610
======== ======== ======== ==========
Basic earnings per share................... $ 3.56 $ 3.72 $ 3.42
======== ======== ==========
Diluted earnings per share................. $ 3.50 $ 3.65 $ 3.36
======== ======== ==========
Average common shares -- Basic (in
thousands)............................... 820,945 722,373 1,638,382
======== ======== ==========
Average common shares -- Diluted (in
thousands)............................... 837,706 736,055 1,670,626
======== ======== ==========
See "Notes to the Unaudited Pro Forma Condensed Financial Information."
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
91
NATIONSBANK/BANKAMERICA
PRO FORMA CONDENSED INCOME STATEMENT
(Unaudited)
FOR THE YEAR ENDED DECEMBER 31, 1995
--------------------------------------------------------
NATIONSBANK
PRO FORMA BANKAMERICA
NATIONSBANK BANKAMERICA ADJUSTMENTS COMBINED
----------- ----------- ----------- -----------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
INTEREST INCOME
Interest and fees on loans and leases..... $ 12,134 $ 12,760 $ -- $ 24,894
Interest and dividends on securities...... 1,844 1,276 -- 3,120
Federal funds sold and securities
purchased
under agreements to resell.............. 942 650 -- 1,592
Trading account securities................ 1,100 741 -- 1,841
Other interest income..................... 166 466 -- 632
-------- -------- -------- ----------
Total interest income................ 16,186 15,893 -- 32,079
INTEREST EXPENSE
Deposits.................................. 4,274 4,923 -- 9,197
Borrowed funds............................ 2,858 1,160 -- 4,018
Trading account liabilities............... 896 182 -- 1,078
Long-term debt............................ 964 1,113 -- 2,077
-------- -------- -------- ----------
Total interest expense............... 8,992 7,378 -- 16,370
-------- -------- -------- ----------
NET INTEREST INCOME....................... 7,194 8,515 -- 15,709
Provision for credit losses............... 505 440 -- 945
-------- -------- -------- ----------
NET CREDIT INCOME......................... 6,689 8,075 -- 14,764
Gains on sales of debt securities......... 34 24 -- 58
Noninterest income........................ 3,787 4,469 -- 8,256
Foreclosed properties expense............. 30 18 -- 48
Merger and restructuring charge........... -- -- -- --
Other noninterest expense................. 6,670 7,983 -- 14,653
-------- -------- -------- ----------
INCOME BEFORE INCOME TAXES................ 3,810 4,567 -- 8,377
Income tax expense........................ 1,327 1,903 -- 3,230
-------- -------- -------- ----------
NET INCOME BEFORE PREFERRED DIVIDENDS..... 2,483 2,664 -- 5,147
Preferred dividends....................... 24 227 -- 251
-------- -------- -------- ----------
NET INCOME AVAILABLE TO COMMON
SHAREHOLDERS............................ $ 2,459 $ 2,437 $ -- $ 4,896
======== ======== ======== ==========
Basic earnings per share.................. $ 3.18 $ 3.28 $ 3.03
======== ======== ==========
Diluted earnings per share................ $ 3.10 $ 3.24 $ 2.98
======== ======== ==========
Average common shares -- Basic (in
thousands).............................. 773,799 741,963 1,613,404
======== ======== ==========
Average common shares -- Diluted (in
thousands).............................. 800,104 751,112 1,650,062
======== ======== ==========
See "Notes to the Unaudited Pro Forma Condensed Financial Information."
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
92
NOTES TO THE UNAUDITED PRO FORMA
CONDENSED FINANCIAL INFORMATION
NOTE 1--BASIS OF PRESENTATION
On April 10, 1998, NationsBank entered into the Merger Agreement with
BankAmerica. The Reorganization will create a new Delaware holding company that
will be headquartered in Charlotte, North Carolina. Each outstanding share of
BankAmerica Common Stock will be converted into 1.1316 shares of the Combined
Company Common Stock and each share of NationsBank Common Stock will continue as
one share of Combined Company Common Stock.
The unaudited pro forma condensed financial information has been prepared
assuming that the Reorganization will be accounted for under the "pooling of
interests" method of accounting and is based on the historical consolidated
financial statements of NationsBank and BankAmerica. Certain amounts in the
historical financial statements of BankAmerica have been reclassified to conform
with NationsBank's historical financial statement presentation.
The pro forma adjustments represent management's best estimates based on
available information at this time. Actual adjustments will differ from those
reflected in the unaudited pro forma condensed financial information.
NationsBank and BankAmerica are still in the process of reviewing their
respective accounting policies relative to those followed by the other entity.
As a result of this review, it may be necessary to restate certain amounts in
NationsBank's or BankAmerica's financial statements to conform to those
accounting policies that are most appropriate. In management's opinion, any such
restatements will not be material.
On January 9, 1998, NationsBank completed its merger with Barnett,
headquartered in Jacksonville, Florida, resulting in the issuance of
approximately 233 million shares of NationsBank Common Stock. The transaction
was accounted for under the "pooling of interests" method of accounting, and,
accordingly, the historical financial statements of NationsBank reflect the
merger with Barnett for all periods presented.
On January 7, 1997, NationsBank completed the acquisition of Boatmen's,
headquartered in St. Louis, Missouri, resulting in the issuance of approximately
195 million shares of NationsBank Common Stock valued at $9.4 billion and
aggregate cash payments of $371 million to Boatmen's shareholders. At the
acquisition date, Boatmen's total assets and deposits were approximately $41.2
billion and $32.0 billion, respectively. The acquisition was accounted for under
the purchase method of accounting, and, accordingly, is included in
NationsBank's historical financial statements from the date of acquisition.
The unaudited pro forma condensed financial information should be read in
conjunction with the historical consolidated financial statements and the
related notes thereto of each of NationsBank and BankAmerica. NationsBank's
historical financial statements, restated to give retroactive effect to the
merger of NationsBank with Barnett, are included in NationsBank's Current Report
on Form 8-K filed with the Commission on April 16, 1998. In addition,
NationsBank's historical interim financial statements for the three months ended
March 31, 1998 are included in NationsBank's Form 10-Q as filed with the
Commission on May 15, 1998. BankAmerica's historical financial statements are
incorporated by reference in the BankAmerica Annual Report on Form 10-K for the
year ended December 31, 1997 as filed with the Commission on March 16, 1998 and
its Form 10-Q for the three months ended March 31, 1998 as filed with the
Commission on May 14, 1998.
NOTE 2--MERGER AND RESTRUCTURING ITEMS
In connection with the Reorganization, the Combined Company expects to
incur pre-tax merger and restructuring items of approximately $1.3 billion ($800
million after-tax), which will include severance and change in control and other
employee-related items, conversion and related costs and occupancy and equipment
expenses (primarily lease exit costs and the elimination of duplicate facilities
and other capitalized assets), exit costs related to contract terminations and
other Reorganization costs (including legal and investment banking fees). The
pro forma adjustments represent management's best estimates based on
NOTES TO THE UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
93
available information at this time. Actual adjustments will differ from those
reflected in the unaudited Pro Forma Condensed Financial Information.
The following table presents the major components of the estimated pre-tax
merger and restructuring items (dollars in millions):
Severance, change in control and other employee-related
items..................................................... $ 450
Occupancy and equipment expenses............................ $ 250
Conversion and related costs................................ $ 200
Contract terminations....................................... $ 200
Other....................................................... $ 200
-----------
$ 1,300
NOTE 3--DIVESTITURES
The Combined Company anticipates that, to comply with what the Federal
Reserve Board, the DOJ and certain state authorities may require in connection
with their review of the Reorganization, certain branches of NationsBank and
BankAmerica may need to be divested in various markets where each of NationsBank
and BankAmerica have a combined share of deposits. The impact of anticipated
branch divestitures on the Combined Company's financial condition and results of
operations is not expected to be material.
NOTE 4--SHAREHOLDERS' EQUITY
In conjunction with the Reorganization, a new holding company will be
established, NationsBank (DE). Each outstanding share of BankAmerica Common
Stock will be converted into 1.1316 shares of Combined Company Common Stock and
each share of NationsBank Common Stock will continue as one share of the
Combined Company Common Stock. Each share of the Combined Company Common Stock
will have a par value of $0.01 per share. NationsBank and BankAmerica had
approximately 955 million and 683 million shares of common stock outstanding as
of March 31, 1998, respectively. The pro forma average common share amounts used
to calculate pro forma basic and diluted earnings per share were derived from
the actual average share amounts for NationsBank and the average share amounts
for BankAmerica as adjusted for the exchange ratio of 1.1316. The common stock
in the Unaudited Pro Forma Condensed Balance Sheet has been adjusted to reflect
the reclassification of BankAmerica's additional paid-in capital and treasury
stock to conform to NationsBank's presentation. Unaudited pro forma retained
earnings reflects the estimated adjustment for anticipated merger and
restructuring costs as described above.
NOTE 5--PREFERRED STOCK REDEMPTION
In April 1998, the BankAmerica Board authorized the redemption of
BankAmerica Preferred Stock. All 5,178,000 shares of BankAmerica Series A
Preferred Stock and 3,546,100 shares of the BankAmerica Series B Preferred Stock
were redeemed at $50.00 per share and $100.00 per share, respectively, on June
29, 1998. The BankAmerica Preferred Stock has certain voting rights in only
specific limited situations and is not convertible into BankAmerica Common
Stock.
NOTE 6--OPERATING COST SAVINGS
The Combined Company expects to achieve a certain level of cost savings
through the optimization of delivery systems, reduction of corporate overhead,
elimination of redundant staff functions, consolidation of business lines, data
processing and back office operations, infrastructure and vendor leverage and
the elimination of certain duplicate or excess facilities. No adjustment has
been included in the unaudited Pro Forma Condensed Financial Information for the
anticipated operating cost savings. There can be no assurance that anticipated
operating cost savings will be achieved in the expected amounts or at the times
anticipated.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
94
APPENDIX A
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF REORGANIZATION
BY AND BETWEEN
BANKAMERICA CORPORATION
AND
NATIONSBANK CORPORATION
DATED AS OF APRIL 10, 1998
- --------------------------------------------------------------------------------
APPENDIX A
A-1
TABLE OF CONTENTS
PAGE
----
ARTICLE I CERTAIN DEFINITIONS......................................... 4
ARTICLE II THE REINCORPORATION MERGER.................................. 7
2.1 The Reincorporation Merger.................................. 7
2.2 Effective Time.............................................. 8
2.3 Effects of the Reincorporation Merger....................... 8
2.4 Conversion of NationsBank Common Stock; NationsBank 8
Preferred Stock.............................................
2.5 NationsBank (DE) Common Stock............................... 8
2.6 Dissenting Shares........................................... 9
2.7 Options..................................................... 9
2.8 Certificate of Incorporation................................ 9
2.9 By-Laws..................................................... 9
2.10 Board of Directors; Management.............................. 9
ARTICLE III THE MERGER.................................................. 10
3.1 The Merger.................................................. 10
3.2 Effective Time.............................................. 10
3.3 Effects of the Merger....................................... 10
3.4 Conversion of BankAmerica Common Stock; BankAmerica 10
Preferred Stock.............................................
3.5 NationsBank (DE) Common Stock............................... 11
3.6 Options..................................................... 11
3.7 Certificate of Incorporation................................ 11
3.8 By-Laws..................................................... 12
3.9 Tax and Accounting Consequences............................. 12
3.10 Board of Directors.......................................... 12
ARTICLE IV CLOSING AND EXCHANGE OF SHARES.............................. 12
4.1 Closing..................................................... 12
4.2 NationsBank (DE) to Make Shares Available................... 12
4.3 Exchange of Shares.......................................... 12
ARTICLE V ACTIONS PENDING MERGER...................................... 14
5.1 Ordinary Course............................................. 14
5.2 Capital Stock............................................... 14
5.3 Dividends, Stock Splits, Etc................................ 14
5.4 Compensation; Employment Agreements; Etc.................... 14
5.5 Benefit Plans............................................... 15
5.6 Acquisitions and Dispositions............................... 15
5.7 Amendments.................................................. 15
5.8 Accounting Methods.......................................... 15
5.9 Adverse Actions............................................. 15
5.10 Claims...................................................... 15
5.11 Agreements.................................................. 15
ARTICLE VI REPRESENTATIONS AND WARRANTIES.............................. 15
6.1 Disclosure Schedules........................................ 15
6.2 Standard.................................................... 16
6.3 Representations and Warranties.............................. 16
APPENDIX A
A-2
PAGE
----
ARTICLE VII COVENANTS................................................... 21
7.1 Reasonable Best Efforts..................................... 21
7.2 Stockholder Approvals....................................... 22
7.3 Registration Statement...................................... 22
7.4 Press Releases.............................................. 23
7.5 Access; Information......................................... 23
7.6 Acquisition Proposals....................................... 23
7.7 Affiliate Agreements........................................ 23
7.8 Takeover Laws............................................... 23
7.9 No Rights Triggered......................................... 24
7.10 Shares Listed............................................... 24
7.11 Regulatory Applications..................................... 24
7.12 Indemnification; Directors' and Officers' Insurance......... 24
7.13 Benefits Plans.............................................. 26
7.14 Notification of Certain Matters............................. 26
ARTICLE VIII CONDITIONS TO CONSUMMATION OF THE REORGANIZATION............ 26
8.1 Shareholder Vote............................................ 26
8.2 Regulatory Approvals........................................ 26
8.3 Third-Party Consents........................................ 26
8.4 No Injunction, Etc.......................................... 27
8.5 Representations, Warranties and Covenants of NationsBank.... 27
8.6 Representations, Warranties and Covenants of BankAmerica.... 27
8.7 Effective Registration Statement............................ 27
8.8 Tax Opinion................................................. 27
8.9 NYSE Listing................................................ 28
8.10 Accounting Treatment........................................ 28
ARTICLE IX TERMINATION................................................. 28
9.1 Termination................................................. 28
9.2 Effect of Termination and Abandonment....................... 29
ARTICLE X MISCELLANEOUS............................................... 29
10.1 Survival.................................................... 29
10.2 Waiver; Amendment........................................... 29
10.3 Counterparts................................................ 29
10.4 Governing Law............................................... 29
10.5 Expenses.................................................... 29
10.6 Confidentiality............................................. 29
10.7 Notices..................................................... 29
10.8 Entire Understanding; No Third Party Beneficiaries.......... 30
10.9 Interpretations............................................. 30
EXHIBIT A Form of Stock Option Agreement with respect to Option Issued
by BankAmerica Corporation
EXHIBIT B Form of Stock Option Agreement with respect to Option Issued
by NationsBank Corporation
EXHIBIT C Form of NationsBank (DE) Certificate of Incorporation
EXHIBIT D Form of NationsBank (DE) By-Laws
EXHIBIT E Form of BankAmerica Affiliate Letter
EXHIBIT F Form of NationsBank Affiliate Letter
APPENDIX A
A-3
AGREEMENT AND PLAN OF REORGANIZATION, dated as of April 10, 1998 (this
"Agreement"), by and between BankAmerica Corporation, a Delaware corporation
("BankAmerica"), and NationsBank Corporation, a North Carolina corporation
("NationsBank").
WITNESSETH:
WHEREAS, the Boards of Directors of BankAmerica and NationsBank have
determined that it is in the best interests of their respective companies and
their stockholders to consummate the strategic business combination transaction
provided for herein in which, subject to the terms and conditions set forth
herein, (i) NationsBank will form a new Delaware subsidiary ("NationsBank (DE)")
and will merge (the "Reincorporation Merger") with and into NationsBank (DE),
with NationsBank (DE) as the surviving corporation in the Reincorporation Merger
and (ii) BankAmerica will thereafter merge (the "Merger," and together with the
Reincorporation Merger, the "Reorganization") with and into NationsBank (DE),
with NationsBank (DE) as the surviving corporation in the Merger;
WHEREAS, in connection with the execution of this Agreement, BankAmerica
and NationsBank will enter into a stock option agreement, with BankAmerica as
issuer and NationsBank as grantee (the "BankAmerica Stock Option Agreement") in
the form attached hereto as Exhibit A; and
WHEREAS, in connection with the execution of this Agreement, NationsBank
and BankAmerica will enter into a stock option agreement, with NationsBank as
issuer and BankAmerica as Grantee (the "NationsBank Stock Option Agreement," and
together with the BankAmerica Stock Option Agreement, the "Stock Option
Agreements") in the form attached hereto as Exhibit B; and
WHEREAS, the parties desire to make certain representations, warranties and
agreements in connection with the Reorganization and also to prescribe certain
conditions to the Reorganization;
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements contained herein, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the meanings set
forth below:
"BankAmerica Preferred Stock" shall mean, collectively, BankAmerica Series
A Preferred Stock and BankAmerica Series B Preferred Stock.
"BankAmerica Rights Agreement" shall mean the Rights Agreement, dated as of
April 11, 1988, by and between BankAmerica and Manufacturers Hanover Trust
Company of California, as rights agent, as amended.
"BankAmerica Series A Preferred Stock" shall mean the Cumulative Adjustable
Preferred Stock, Series A, of BankAmerica.
"BankAmerica Series B Preferred Stock" shall mean the Cumulative Adjustable
Preferred Stock, Series B, of BankAmerica.
"BankAmerica Stock" shall mean BankAmerica Common Stock and BankAmerica
Preferred Stock.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Confidentiality Agreement" shall mean the Confidentiality Agreement, dated
April 3, 1998, between BankAmerica and NationsBank.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
APPENDIX A
A-4
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"Federal Reserve Board" shall mean the Board of Governors of the Federal
Reserve System.
"Liens" shall mean any charge, mortgage, pledge, security interest,
restriction, claim, lien, or encumbrance.
"Material Adverse Effect" shall mean with respect to BankAmerica or
NationsBank, respectively, any effect that (i) is material and adverse to the
financial position, results of operations or business of BankAmerica and its
Subsidiaries taken as a whole, or NationsBank and its Subsidiaries taken as a
whole, respectively, or (ii) would materially impair the ability of BankAmerica
or NationsBank, respectively, to perform its obligations under this Agreement or
otherwise materially threaten or materially impede the consummation of the
Reorganization and the other transactions contemplated by this Agreement;
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 or savings associations and their holding companies
generally, (C) actions or omissions of BankAmerica or NationsBank taken with the
prior written consent of BankAmerica or NationsBank, as applicable, in
contemplation of the transactions contemplated hereby, (D) circumstances
affecting banks or savings associations and their holding companies generally,
and (E) the effects of the Reorganization and compliance by either party with
the provisions of this Agreement on the business, financial condition or results
of operations of such party and its Subsidiaries, or the other party and its
Subsidiaries, as the case may be.
"NationsBank ESOP Preferred Stock" shall mean the ESOP Convertible
Preferred Stock, Series C, of NationsBank.
"NationsBank Preferred Stock" shall mean, collectively, NationsBank ESOP
Preferred Stock, NationsBank Series B Preferred Stock, and NationsBank Series BB
Preferred Stock.
"NationsBank Series B Preferred Stock" shall mean the 7% Cumulative
Redeemable Preferred Stock, Series B, of NationsBank.
"NationsBank Series BB Preferred Stock" shall mean the $2.50 Cumulative
Convertible Preferred Stock, Series BB, of NationsBank.
"NationsBank Stock" shall mean NationsBank Common Stock and NationsBank
Preferred Stock.
"NationsBank (DE) ESOP Preferred Stock" shall mean the ESOP Convertible
Preferred Stock, Series C, of NationsBank (DE).
"NationsBank (DE) Preferred Stock" shall mean, collectively, the
NationsBank (DE) ESOP Preferred Stock, NationsBank (DE) Series A Preferred
Stock, NationsBank (DE) Series B Preferred Stock, NationsBank (DE) Series BB
Preferred Stock, and NationsBank (DE) Series D Preferred Stock.
"NationsBank (DE) Series A Preferred Stock" shall mean the Cumulative
Adjustable Preferred Stock, Series A, of NationsBank (DE).
"NationsBank (DE) Series B Preferred Stock" shall mean the 7% Cumulative
Redeemable Preferred Stock, Series B, of NationsBank (DE).
"NationsBank (DE) Series BB Preferred Stock" shall mean the $2.50
Cumulative Convertible Preferred Stock, Series BB, of NationsBank (DE).
"NationsBank (DE) Series D Preferred Stock" shall mean the Cumulative
Adjustable Preferred Stock, Series D, of NationsBank (DE).
"OCC" shall mean the Office of the Comptroller of the Currency.
APPENDIX A
A-5
"OTS" shall mean the Office of Thrift Supervision.
"Person" or "person" shall mean any individual, bank, corporation,
partnership, association, joint-stock company, business trust or unincorporated
organization.
"Previously Disclosed" by a party shall mean information set forth in its
Disclosure Schedule.
"Rights" shall mean, 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.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Subsidiary" and "Significant Subsidiary" shall have the meanings ascribed
to them in Rule 1-02 of Regulation S-X of the SEC.
"Taxes" shall mean all taxes, charges, fees, levies or other assessments,
including, without limitation, all net income, gross income, gross receipts,
sales, use, ad valorem, goods and services, capital, transfer, franchise,
profits, license, withholding, payroll, employment, employer health, excise,
estimated, severance, stamp, occupation, property or other taxes, custom duties,
fees, assessments or charges of any kind whatsoever, together with any interest
and any penalties, additions to tax or additional amounts imposed by any taxing
authority.
Each of the following terms is defined in the Section of this Agreement set
forth opposite such term:
TERM SECTION
- ---- -------
Affiliate................................................. 7.7(a)
Agreement................................................. Preamble
BankAmerica............................................... Preamble
BankAmerica Common Stock.................................. 3.4(a)
BankAmerica Meeting....................................... 7.2
BankAmerica Rights........................................ 6.3(n)
BankAmerica Stock Option Agreement........................ Recitals
BankAmerica Treasury Shares............................... 3.4(a)
Certificate............................................... 3.4(e)
Certificate of Merger..................................... 3.2
Claim..................................................... 7.12(a)
Closing................................................... 4.1
Closing Date.............................................. 4.1
Common Certificate........................................ 3.4(c)
Compensation and Benefit Plans............................ 6.3(l)
Delaware Secretary........................................ 2.2
DGCL...................................................... 2.1
Disclosure Schedule....................................... 6.1
Dissenting Shares......................................... 2.6
DPC Shares................................................ 3.4(a)
Effective Time............................................ 3.2
Environmental Laws........................................ 6.3(o)
ERISA Affiliate........................................... 6.3(l)
Exchange Agent............................................ 4.2
Exchange Fund............................................. 4.2
Exchange Ratio............................................ 3.4(a)
APPENDIX A
A-6
TERM SECTION
---- -------
GAAP...................................................... 3.9
Indemnified Party......................................... 7.12(a)
Joint Proxy Statement..................................... 7.3
Meeting................................................... 7.2
Merger.................................................... Recitals
Multiemployer Plans....................................... 6.3(1)
NationsBank............................................... Preamble
NationsBank Articles...................................... 2.4(d)
NationsBank Common Certificate............................ 2.4(b)
NationsBank Common Stock.................................. 2.4(a)
NationsBank Meeting....................................... 7.2
NationsBank Preferred Stock Certificates.................. 2.4(e)
NationsBank Stock Option Agreement........................ Recitals
NationsBank Treasury Shares............................... 2.4(a)
NationsBank (DE).......................................... Recitals
NationsBank (DE) Common Stock............................. 2.4(a)
NationsBank (DE) Stock.................................... 3.4(a)
NCBCA..................................................... 2.1
North Carolina Secretary.................................. 2.2
NYSE...................................................... 4.3(e)
Pension Plan.............................................. 6.3(1)
Plans..................................................... 5.3(1)
Preferred Stock Certificate............................... 3.4(e)
Registration Statement.................................... 7.3
Regulatory Authorities.................................... 6.3(h)
Reincorporation Merger.................................... Recitals
Reincorporation Merger Effective Time..................... 2.2
Reincorporation Merger Exchange Ratio..................... 2.4(a)
Reorganization............................................ Recitals
SEC Documents............................................. 6.3(g)
Stock Option Agreements................................... Recitals
Takeover Laws............................................. 6.3(n)
Tax Returns............................................... 6.3(p)
Trust Account Shares...................................... 3.4(a)
Year 2000 Issues.......................................... 6.3(s)
ARTICLE II
THE REINCORPORATION MERGER
2.1 The Reincorporation Merger. Subject to the terms and conditions of
this Agreement, in accordance with the Business Corporation Act of the State of
North Carolina (the "NCBCA") and the General Corporation Law of the State of
Delaware (the "DGCL"), at the Reincorporation Merger Effective Time, NationsBank
shall merge with and into NationsBank (DE). NationsBank (DE) shall be the
surviving corporation in the Reincorporation Merger, and shall continue its
corporate existence under the laws of the State of Delaware. Upon consummation
of the Reincorporation Merger, the separate corporate existence of NationsBank
shall terminate.
APPENDIX A
A-7
2.2 Effective Time. The Reincorporation Merger shall become effective as
set forth in the articles of merger which shall be filed with the Secretary of
State of the State of North Carolina (the "North Carolina Secretary") and the
certificate of merger which shall be filed with the Secretary of State of the
State of Delaware (the "Delaware Secretary") on the Closing Date. The term
"Reincorporation Merger Effective Time" shall be the date and time when the
Reincorporation Merger becomes effective, as set forth in the certificate of
merger and articles of merger referred to in this Section 2.2.
2.3 Effects of the Reincorporation Merger. At and after the
Reincorporation Merger Effective Time, the Reincorporation Merger shall have the
effects set forth in Section 11-06 of the NCBCA and Sections 259 and 261 of the
DGCL.
2.4 Conversion of NationsBank Common Stock; NationsBank Preferred
Stock. (a) At the Reincorporation Merger Effective Time, by virtue of the
Reincorporation Merger and without any action on the part of NationsBank,
NationsBank (DE) or the holder of capital stock of NationsBank or NationsBank
(DE), each share of the common stock, without par value, of NationsBank (the
"NationsBank Common Stock") issued and outstanding immediately prior to the
Reincorporation Merger Effective Time (other than Dissenting Shares) shall be
converted into one share (the "Reincorporation Merger Exchange Ratio") of the
common stock, without par value, of NationsBank (DE) (the "NationsBank (DE)
Common Stock").
(b) All of the shares of NationsBank Common Stock converted into
NationsBank (DE) Common Stock pursuant to this Article II shall no longer be
outstanding and shall automatically be canceled and shall cease to exist as of
the Reincorporation Merger Effective Time, and each certificate (each a
"NationsBank Common Certificate") previously representing any such shares of
NationsBank Common Stock shall thereafter represent, without the requirement of
any exchange thereof, only the number of shares of NationsBank (DE) Common Stock
into which the shares of NationsBank Common Stock represented by such
NationsBank Common Certificate have been converted pursuant to this Section 2.4.
(c) Each share of NationsBank Series B Preferred Stock, excluding
Dissenting Shares, issued and outstanding immediately prior to the
Reincorporation Merger Effective Time shall be converted into one share of
NationsBank (DE) Series B Preferred Stock. The terms of the NationsBank (DE)
Series B Preferred Stock shall be substantially identical to the terms of the
NationsBank Series B Preferred Stock.
(d) Each share of NationsBank ESOP Preferred Stock and NationsBank Series
BB Preferred Stock, excluding Dissenting Shares, issued and outstanding
immediately prior to the Reincorporation Merger Effective Time, shall become and
be converted into the right to receive one share of NationsBank (DE) ESOP
Convertible Preferred Stock or NationsBank (DE) Series BB Preferred Stock,
respectively, in each case having terms substantially identical to those of the
NationsBank ESOP Preferred Stock and the NationsBank Series BB Preferred Stock,
respectively, except that each share of NationsBank (DE) ESOP Preferred Stock
and NationsBank (DE) Series BB Preferred shall be convertible into shares of
NationsBank (DE) Common Stock at a conversion rate adjusted to take into account
the Reincorporation Merger Exchange Ratio, pursuant to and subject to the rights
of the holders thereof set forth in Article 3 of the Amended and Restated
Articles of Incorporation of NationsBank (the "NationsBank Articles").
(e) All of the shares of NationsBank Preferred Stock converted into the
right to receive NationsBank (DE) Preferred Stock pursuant to this Article II
shall no longer be outstanding and shall automatically be canceled and shall
cease to exist as of the Reincorporation Merger Effective Time, and the
certificates (the "NationsBank Preferred Stock Certificates") previously
representing such shares of NationsBank Preferred Stock shall thereafter
represent, without the requirement of any exchange thereof, only the right to
receive the number of shares and series of NationsBank (DE) Preferred Stock into
which the shares of NationsBank Preferred Stock represented by such NationsBank
Preferred Stock Certificates have been converted pursuant to this Section 2.4.
2.5 NationsBank (DE) Common Stock. At and after the Reincorporation Merger
Effective Time, each share of NationsBank (DE) Common Stock issued and
outstanding immediately prior to the Reincorporation Merger Effective Time shall
be canceled and retired and shall resume the status of authorized and unissued
APPENDIX A
A-8
shares of NationsBank (DE) Common Stock, and no shares of NationsBank (DE)
Common Stock or other securities of NationsBank (DE) shall be issued in respect
thereof.
2.6 Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, shares of NationsBank Common Stock, NationsBank Series B Preferred
Stock and NationsBank ESOP Preferred Stock which are outstanding immediately
prior to the Reincorporation Merger Effective Time and with respect to which
dissenters' rights shall have been properly demanded in accordance with Article
13 of the NCBCA("Dissenting Shares") shall not be converted into NationsBank
(DE) Common Stock, NationsBank (DE) Series B Preferred Stock or NationsBank (DE)
ESOP Preferred Stock, as the case may be; instead, the holders thereof shall be
entitled to payment of the appraised value of such Dissenting Shares in
accordance with the provisions of Article 13 of the NCBCA; provided, however,
that (i) if any holder of Dissenting Shares shall subsequently deliver a written
withdrawal of such holder's demand for appraisal of such shares, or (ii) if any
holder fails to establish such holder's entitlement to dissenters' rights as
provided in Article 13 of the NCBCA, such holder or holders (as the case may be)
shall forfeit the right to appraisal of such shares of NationsBank Common Stock
or NationsBank Preferred Stock, as the case may be, and each of such shares
shall thereupon be deemed to have been converted into the right to receive, and
to have become exchangeable for, as of the Effective Time, shares of NationsBank
(DE) Common Stock or NationsBank (DE) Preferred Stock, as provided in Section
2.4.
2.7 Options. At the Reincorporation Merger Effective Time, each option
granted by NationsBank to purchase shares of NationsBank Common Stock which is
outstanding and unexercised immediately prior thereto shall cease to represent a
right to acquire shares of NationsBank Common Stock and shall be converted
automatically into an option to purchase a number of shares of NationsBank (DE)
Common Stock equal to the number of shares of NationsBank Common Stock subject
to such option immediately prior to the Reincorporation Merger Effective Time at
an exercise price per share of NationsBank (DE) Common Stock equal to the
exercise price per share of NationsBank Common Stock in effect immediately prior
to the Reincorporation Merger Effective Time and otherwise subject to the terms
of the NationsBank Stock Plans under which such options were issued and the
agreements evidencing grants thereunder. The adjustment provided herein with
respect to any options which are "incentive stock options" (as defined in
Section 422 of the Code shall be and is intended to be effected in a manner
which is consistent with Section 424(a) of the Code. The duration and other
terms of the new option shall be the same as the original option except that all
references to NationsBank shall be deemed to be references to NationsBank (DE).
2.8 Certificate of Incorporation. Subject to the terms and conditions of
this Agreement, at the Reincorporation Merger Effective Time, the Certificate of
Incorporation of NationsBank (DE) (which shall be in substantially the form
attached hereto as Exhibit C with such modifications as BankAmerica and
NationsBank shall mutually determine and shall include provisions for the
NationsBank (DE) Stock as contemplated by this Agreement) shall be the
Certificate of Incorporation of the surviving corporation in the Reincorporation
Merger until thereafter amended in accordance with applicable law.
2.9 By-Laws. Subject to the terms and conditions of this Agreement, at the
Reincorporation Merger Effective Time, the By-laws of NationsBank (DE) (which
shall be in substantially the form attached hereto as Exhibit D with such
modifications as BankAmerica and NationsBank shall mutually determine) shall be
the By-laws of the surviving corporation in the Reincorporation Merger until
thereafter amended in accordance with applicable law.
2.10 Board of Directors; Management. From and after the Reincorporation
Merger Effective Time, until duly altered pursuant hereto or otherwise in
accordance with applicable law, the directors of NationsBank shall be the
directors of Nations Bank (DE), and the officers of NationsBank shall be the
officers of NationsBank (DE).
APPENDIX A
A-9
ARTICLE III
THE MERGER
3.1 The Merger. Subject to the terms and conditions of this Agreement, in
accordance with the DGCL, at the Effective Time, BankAmerica shall merge with
and into NationsBank (DE). NationsBank (DE) shall be the surviving corporation
in the Merger, and shall continue its corporate existence under the laws of the
State of Delaware. Upon consummation of the Merger, the separate corporate
existence of BankAmerica shall terminate.
3.2 Effective Time. The Merger shall become effective as set forth in the
certificate of merger (the "Certificate of Merger") which shall be filed with
the Delaware Secretary on the Closing Date. The term "Effective Time" shall be
the date and time when the Merger becomes effective, as set forth in the
Certificate of Merger. The Effective Time shall be immediately following the
Reincorporation Merger Effective Time.
3.3 Effects of the Merger. At and after the Effective Time, the Merger
shall have the effects set forth in Sections 259 and 261 of the DGCL.
3.4 Conversion of BankAmerica Common Stock; BankAmerica Preferred
Stock. At the Effective Time, by virtue of the Merger and without any action on
the part of NationsBank (DE), BankAmerica or the holder of any of the following
securities:
(a) Subject to Section 4.3(e), each share of the common stock, par value
$1.5625 per share, of BankAmerica (the "BankAmerica Common Stock") issued and
outstanding immediately prior to the Effective Time (other than BankAmerica
Treasury Shares) shall be converted into the right to receive 1.1316 shares (the
"Exchange Ratio") of NationsBank (DE) Common Stock (the NationsBank (DE) Common
Stock and the NationsBank (DE) Preferred Stock being referred to herein as the
"NationsBank (DE) Stock"). The term "BankAmerica Treasury Shares" shall mean
shares of BankAmerica Stock held in BankAmerica's treasury or directly or
indirectly by NationsBank or BankAmerica or any of their respective wholly owned
Subsidiaries, except for any shares held in a fiduciary or custodial capacity
for the benefit of third parties ("Trust Account Shares"), any shares held in
respect of a debt or other obligation previously contracted ("DPC Shares"), and
any shares held by BankAmerica or its affiliates which the parties reasonably
determine prior to the Effective Time ought to be converted in the Merger.
(b) Each share of BankAmerica Series A Preferred Stock and each share of
BankAmerica Series B Preferred Stock, excluding BankAmerica Treasury Shares,
issued and outstanding immediately prior to the Effective Time shall be
converted into the right to receive one share of NationsBank (DE) Series A
Preferred Stock and one share of NationsBank (DE) Series D Preferred Stock,
respectively. The terms of the NationsBank (DE) Series A Preferred Stock and the
NationsBank (DE) Series D Preferred Stock shall be substantially the same as the
terms of the BankAmerica Series A Preferred Stock and the BankAmerica Series B
Preferred Stock, respectively.
(c) All of the shares of BankAmerica Common Stock converted into the right
to receive NationsBank (DE) Common Stock pursuant to this Article III shall no
longer be outstanding and shall automatically be canceled and shall cease to
exist as of the Effective Time, and each certificate (each a "Common
Certificate") previously representing any such shares of BankAmerica Common
Stock shall thereafter represent only the right to receive (i) a certificate
representing the number of whole shares of NationsBank (DE) Common Stock and
(ii) cash in lieu of fractional shares into which the shares of BankAmerica
Common Stock represented by such Common Certificate have been converted pursuant
to this Section 3.4 and Section 4.3(e). Common Certificates previously
representing shares of BankAmerica Common Stock shall be exchanged for
certificates representing whole shares of NationsBank (DE) Common Stock and cash
in lieu of fractional shares issued in consideration therefor upon the surrender
of such Common Certificates in accordance with Section 4.3, without any interest
thereon. If, prior to the Effective Time, the outstanding shares of BankAmerica
Common Stock or NationsBank Common Stock (or, following the consummation of the
Reincorporation Merger, the outstanding shares of NationsBank (DE) Common Stock)
shall have been increased, decreased, changed into or exchanged for a different
number or kind of shares or securities as a
APPENDIX A
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result of a reorganization, recapitalization, reclassification, stock dividend,
stock split, reverse stock split, or other similar change in capitalization
(other than solely as a result of the Reincorporation Merger), an appropriate
and proportionate adjustment shall be made to the Exchange Ratio.
(d) At the Effective Time, all BankAmerica Treasury Shares shall be
canceled and shall cease to exist and no stock of NationsBank (DE) or other
consideration shall be delivered in exchange therefor. All shares of NationsBank
(DE) Common Stock that are owned by BankAmerica or any of its wholly-owned
Subsidiaries (other than Trust Account Shares, DPC Shares, and any shares held
by BankAmerica or its affiliates which the parties reasonably determine prior to
the Effective Time ought to be converted in the Merger) shall become treasury
stock of NationsBank (DE).
(e) All of the shares of BankAmerica Preferred Stock converted into
NationsBank (DE) Preferred Stock pursuant to this Article III shall no longer be
outstanding and shall automatically be canceled and shall cease to exist as of
the Effective Time, and each certificate (each a "Preferred Stock Certificate";
and together with a Common Certificate, a "Certificate") previously representing
any such shares of BankAmerica Preferred Stock shall thereafter represent the
right to receive a certificate representing the number of shares of
corresponding NationsBank (DE) Preferred Stock into which the shares of
BankAmerica Preferred Stock represented by such Preferred Stock Certificate have
been converted pursuant to this Section 3.4. Preferred Stock Certificates
previously representing shares of BankAmerica Preferred Stock shall be exchanged
for certificates representing shares of corresponding NationsBank (DE) Preferred
Stock issued in consideration therefor upon the surrender of such Preferred
Stock Certificates in accordance with Section 4.3 hereof, without any interest
thereon.
3.5 NationsBank (DE) Common Stock. At and after the Effective Time, each
share of NationsBank (DE) Common Stock issued and outstanding immediately prior
to the Effective Time shall remain an issued and outstanding share of common
stock of the Surviving Corporation and shall not be affected by the Merger.
3.6 Options. (a) At the Effective Time, each option granted by BankAmerica
to purchase shares of BankAmerica Common Stock which is outstanding and
unexercised immediately prior thereto shall cease to represent a right to
acquire shares of BankAmerica Common Stock and shall be converted automatically
into an option to purchase shares of NationsBank (DE) Common Stock in an amount
and at an exercise price determined as provided below (and otherwise, in the
case of options, subject to the terms of the BankAmerica Stock plans under which
they were issued and the agreements evidencing grants thereunder):
(i) The number of shares of NationsBank (DE) Common Stock to be
subject to the new option shall be equal to the product of the number of
shares of BankAmerica Common Stock subject to the original option
immediately prior to the Effective Time and the Exchange Ratio, provided
that any fractional shares of NationsBank (DE) Common Stock resulting from
such multiplication shall be rounded to the nearest whole share; and
(ii) The exercise price per share of NationsBank (DE) Common Stock
under the new option shall be equal to the exercise price per share of
BankAmerica Common Stock under the original option immediately prior to the
Effective Time divided by the Exchange Ratio, provided that such exercise
price shall be rounded down to the nearest whole cent.
(b) The adjustment provided herein with respect to any options which are
"incentive stock options" (as defined in Section 422 of the Code) shall be and
is intended to be effected in a manner which is consistent with Section 424(a)
of the Code. The duration and other terms of the new option shall be the same as
the original option except that all references to BankAmerica shall be deemed to
be references to NationsBank (DE).
3.7 Certificate of Incorporation. Subject to the terms and conditions of
this Agreement, at the Effective Time, the Certificate of Incorporation of
NationsBank (DE) shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter amended in accordance with applicable law, except
that the Certificate of Incorporation of NationsBank (DE) shall be amended in
connection with the Merger to provide that the name of the Surviving Corporation
shall be "BankAmerica Corporation."
APPENDIX A
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3.8 By-laws. Subject to the terms and conditions of this Agreement, at the
Effective Time, the Bylaws of NationsBank (DE) shall be the By-laws of the
Surviving Corporation until thereafter amended in accordance with applicable
law.
3.9 Tax and Accounting Consequences. It is intended that the
Reincorporation Merger and the Merger shall each constitute a "reorganization"
within the meaning of Section 368(a) of the Code, that this Agreement shall
constitute a "plan of reorganization" for the purposes of Sections 354 and 361
of the Code and that the Reorganization be accounted for as a "pooling of
interests" under generally accepted accounting principles ("GAAP").
3.10 Board of Directors. As of the Effective Time, the board of directors
of NationsBank (DE) shall be determined as set forth on Schedule 3.10.
ARTICLE IV
CLOSING AND EXCHANGE OF SHARES
4.1 Closing. Subject to the terms and conditions of this Agreement and the
Stock Option Agreements, the closing of the Merger (the "Closing") shall take
place at 10:00 a.m. on a date (the "Closing Date") and at a place to be
specified by the parties, which shall be (i) no later than five business days
after the satisfaction or waiver (subject to applicable law) of the latest to
occur of the conditions (other than those conditions to be satisfied or waived
at the Closing) set forth in Article VIII hereof; or (ii) at such other time as
mutually agreed by the parties.
4.2 NationsBank (DE) to Make Shares Available. At or prior to the
Effective Time, NationsBank (DE) shall deposit, or shall cause to be deposited,
with a bank or trust company reasonably acceptable to each of NationsBank and
BankAmerica (the "Exchange Agent"), for the benefit of the holders of
Certificates, for exchange in accordance with this Article IV, certificates
representing the shares of NationsBank (DE) Common Stock and NationsBank (DE)
Preferred Stock, and cash in lieu of any fractional shares (such cash and
certificates for shares of NationsBank (DE) Common Stock and NationsBank (DE)
Preferred Stock, together with any dividends or distributions with respect
thereto (the "Exchange Fund"), to be issued pursuant to Section 3.4 and paid
pursuant to Section 4.3(a) in exchange for outstanding shares of BankAmerica
Stock.
4.3 Exchange of Shares. (a) As soon as practicable after the Effective
Time, and in no event later than five business days thereafter, the Exchange
Agent shall mail to each holder of record of one or more Certificates a letter
of transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent) and instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing the
shares of NationsBank (DE) Common Stock, NationsBank (DE) Preferred Stock and
any cash in lieu of fractional shares into which the shares of BankAmerica
Common Stock or BankAmerica Preferred Stock represented by such Certificate or
Certificates shall have been converted pursuant to this Agreement. Upon proper
surrender of a Certificate for exchange and cancellation to the Exchange Agent,
together with such properly completed letter of transmittal, duly executed, the
holder of such Certificate shall be entitled to receive in exchange therefor, as
applicable, (i) a certificate representing that number of whole shares of
NationsBank (DE) Common Stock or NationsBank (DE) Preferred Stock to which such
holder of BankAmerica Common Stock or BankAmerica Preferred Stock shall have
become entitled pursuant to the provisions of Article III and (ii) a check
representing the amount of any cash in lieu of fractional shares which such
holder has the right to receive in respect of the Certificate surrendered
pursuant to the provisions of this Article IV, and the Certificate so
surrendered shall forthwith be canceled. No interest will be paid or accrued on
any cash in lieu of fractional shares or on any unpaid dividends and
distributions payable to holders of Certificates.
(b) No dividends or other distributions declared with respect to
NationsBank (DE) Common Stock or NationsBank (DE) Preferred Stock shall be paid
to the holder of any unsurrendered Certificate until the holder thereof shall
surrender such Certificate in accordance with this Article IV. After the
surrender of a
APPENDIX A
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Certificate in accordance with this Article IV, the record holder thereof 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
NationsBank (DE) Common Stock or NationsBank (DE) Preferred Stock represented by
such Certificate.
(c) If any certificate representing shares of NationsBank (DE) Common Stock
or NationsBank (DE) Preferred Stock is to be issued in a name other than that in
which the Certificate surrendered in exchange therefor is registered, it shall
be a condition of the issuance thereof that the Certificate so surrendered shall
be properly endorsed (or accompanied by an appropriate instrument of transfer)
and otherwise in proper form for transfer, and that the person requesting such
exchange shall pay to the Exchange Agent in advance any transfer or other taxes
required by reason of the issuance of a certificate representing shares of
NationsBank (DE) Common Stock or NationsBank (DE) Preferred Stock in any name
other than that of the registered holder of the Certificate surrendered, or
required for any other reason, or shall establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not payable.
(d) After the Effective Time, there shall be no transfers on the stock
transfer books of BankAmerica of the shares of BankAmerica Common Stock or
BankAmerica Preferred Stock which were issued and outstanding immediately prior
to the Effective Time. If, after the Effective Time, Certificates representing
such shares are presented for transfer to the Exchange Agent, they shall be
canceled and exchanged for certificates representing shares of NationsBank (DE)
Common Stock or NationsBank (DE) Preferred Stock as provided in this Article IV.
(e) Notwithstanding anything to the contrary contained herein, no
certificates or scrip representing fractional shares of NationsBank (DE) Common
Stock shall be issued upon the surrender for exchange of Certificates, no
dividend or distribution with respect to NationsBank (DE) Common Stock shall be
payable on or with respect to any fractional share, and such fractional share
interests shall not entitle the owner thereof to vote or to any other rights of
a stockholder of NationsBank (DE). In lieu of the issuance of any such
fractional share, NationsBank (DE) shall pay to each former stockholder of
BankAmerica who otherwise would be entitled to receive such fractional share an
amount in cash determined by multiplying (i) the average of the closing sale
prices of NationsBank Common Stock on the New York Stock Exchange, Inc. (the
"NYSE") as reported by The Wall Street Journal for the five trading days
immediately preceding the date of the Effective Time by (ii) the fraction of a
share (rounded to the nearest thousandth when expressed in decimal form) of
NationsBank (DE) Common Stock to which such holder would otherwise be entitled
to receive pursuant to Section 3.4.
(f) Any portion of the Exchange Fund that remains unclaimed by the
stockholders of BankAmerica for 12 months after the Effective Time shall be paid
to NationsBank (DE). Any former stockholders of BankAmerica who have not
theretofore complied with this Article IV shall thereafter look only to
NationsBank (DE) for payment of the shares of NationsBank (DE) Common Stock or
NationsBank (DE) Preferred Stock, cash in lieu of any fractional shares and any
unpaid dividends and distributions on the NationsBank (DE) Common Stock or
NationsBank (DE) Preferred Stock deliverable in respect of each share of
BankAmerica Common Stock or BankAmerica Preferred Stock, as the case may be,
such stockholder holds as determined pursuant to this Agreement, in each case,
without any interest thereon. Notwithstanding the foregoing, none of
NationsBank, NationsBank (DE), BankAmerica, the Exchange Agent or any other
person shall be liable to any former holder of shares of BankAmerica Common
Stock or BankAmerica Preferred Stock for any amount delivered in good faith to a
public official pursuant to applicable abandoned property, escheat or similar
laws.
(g) In the event any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if reasonably required by
NationsBank (DE), the posting by such person of a bond in such amount as
NationsBank (DE) may determine is reasonably necessary as indemnity against any
claim that may be made against it with respect to such Certificate, the Exchange
Agent will issue in exchange for such lost, stolen or destroyed Certificate the
shares of NationsBank (DE) Stock and any cash in lieu of fractional shares
deliverable in respect thereof pursuant to this Agreement.
APPENDIX A
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ARTICLE V
ACTIONS PENDING MERGER
From the date hereof until the Effective Time, except as expressly
contemplated by this Agreement, without the prior written consent of NationsBank
(which consent shall not be unreasonably withheld or delayed) BankAmerica will
not, and will cause each of its Subsidiaries not to, and (ii) without the prior
written consent of BankAmerica (which consent shall not be unreasonably withheld
or delayed) NationsBank will not, and will cause each of its Subsidiaries not
to:
5.1 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 required for the transactions
contemplated hereby or (ii) adversely affect its ability to perform any of its
material obligations under this Agreement.
5.2 Capital Stock. Other than (i) pursuant to Rights or other stock
options or stock-based awards Previously Disclosed in its Disclosure Schedule,
(ii) upon conversion of shares of BankAmerica Preferred Stock or NationsBank
Preferred Stock pursuant to the terms thereof, (iii) pursuant to the BankAmerica
Stock Option Agreement or the NationsBank Stock Option Agreement, (iv) pursuant
to the BankAmerica Rights Agreement, (v) trust originated preferred stock issued
in the ordinary course of business or (vi) as otherwise set forth in Section 5.2
of the BankAmerica Disclosure Schedule or Section 5.2 of the NationsBank
Disclosure Schedule, (x) issue, sell or otherwise permit to become outstanding,
or authorize the creation of, any additional shares of capital stock, any stock
appreciation rights or any Rights, (y) enter into any agreement with respect to
the foregoing, or (z) 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.
5.3 Dividends, Stock Splits, Etc. (i) Adjust, split, combine or reclassify
any capital stock, (ii) make, declare or pay any dividend on or in respect of,
or declare or make any distribution on any shares of its capital stock (other
than (A) in the case of BankAmerica, (1) quarterly cash dividends on BankAmerica
Common Stock in an amount not to exceed the rate payable on such BankAmerica
Common Stock as of the date hereof (with any increase in such dividend as is
consistent with past practice) and dividends payable on BankAmerica Preferred
Stock at a rate not exceeding the rate provided for in the terms thereof, and
(2) dividends from greater than 95%-owned Subsidiaries to BankAmerica or to
another greater than 95%-owned Subsidiary of BankAmerica, as applicable, and (B)
in the case of NationsBank, (1) quarterly cash dividends on NationsBank Common
Stock in an amount not to exceed the rate payable on such NationsBank Common
Stock as of the date hereof (with any increase in such dividend as is consistent
with past practice) and dividends payable on NationsBank Preferred Stock at a
rate not exceeding the rate provided for in the terms thereof, and (2) dividends
from greater than 95%-owned Subsidiaries to NationsBank or to another greater
than 95%-owned Subsidiary of NationsBank, as applicable), or (iii) other than
(A) as Previously Disclosed in its Disclosure Schedule, or (B) in the ordinary
course pursuant to employee benefit plans, directly or indirectly combine,
redeem, reclassify, purchase or otherwise acquire, any shares of its capital
stock. After the date of this Agreement, each of NationsBank and BankAmerica
shall coordinate with the other the declaration of any dividends in respect of
NationsBank Common Stock and BankAmerica Common Stock and the record dates and
payment dates relating thereto, it being the intention of the parties hereto
that holders of NationsBank Common Stock or BankAmerica Common Stock shall not
receive two dividends, or fail to receive one dividend, for any single calendar
quarter with respect to their shares of NationsBank Common Stock and/or
BankAmerica Common Stock and any shares of NationsBank (DE) Common Stock any
such holder receives in exchange therefor in the Reorganization.
5.4 Compensation; Employment Agreements; Etc. Except as set forth on
Section 5.4 of the BankAmerica Disclosure Schedule and Section 5.4 of the
NationsBank Disclosure Schedule, (i) enter into or amend any written employment,
severance or similar agreements or arrangements with any of its directors or
executive officers, (ii) enter into or amend any material written employment,
severance or similar agreements or
APPENDIX A
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arrangements with any of its officers or employees, or (iii) grant any salary or
wage increase or increase any employee benefit (including incentive or bonus
payments), except for (A) normal individual increases in compensation to
employees in the ordinary course of business consistent with past practice or
(B) other changes as are provided for herein or as may be required by law or to
satisfy contractual obligations existing as of the date hereof or additional
grants of awards to newly hired employees consistent with past practice.
5.5 Benefit Plans. Except as set forth on Section 5.5 of the BankAmerica
Disclosure Schedule and Section 5.5 of the NationsBank Disclosure Schedule,
enter into or amend (except as may be required by applicable law, to satisfy
contractual obligations existing as of the date hereof or amendments which,
either individually or in the aggregate, would not reasonably be expected to
result in a material liability to BankAmerica, NationsBank or their respective
Subsidiaries) 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
that accelerates the vesting or exercise of any benefits payable thereunder.
5.6 Acquisitions And Dispositions. Except as Previously Disclosed in its
Disclosure Schedule, dispose of or discontinue any portion of its assets,
business or properties, which is material to it and its Subsidiaries taken as a
whole, or acquire (other than by way of foreclosures or acquisitions of control
in a bona fide 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.
5.7 Amendments. Amend its Articles of Incorporation or by-laws or, except
as provided in Section 6.3(n) and 7.9, amend or waive any rights under the
BankAmerica Rights Agreement.
5.8 Accounting Methods. Implement or adopt any change in its accounting
principles, practices or methods, other than as may be required by GAAP.
5.9 Adverse Actions. (i) Knowingly take any action that would, or would be
reasonably likely to, prevent or impede the Reorganization from qualifying as a
"reorganization" within the meaning of Section 368(a) of the Code or for
"pooling of interests" accounting treatment under GAAP; or (ii) knowingly take
any action that is intended or is reasonably likely to result in (A) any of its
representations and warranties set forth in this Agreement being or becoming
untrue in any material respect at any time prior to the Effective Time, (B) any
of the conditions to the Reorganization set forth in Article VIII not being
satisfied or (C) a material violation of any provision of this Agreement except,
in each case, as may be required by applicable law.
5.10 Claims. Settle any material claim, action or proceeding, except in
the ordinary course of business consistent with past practice.
5.11 Agreements. Agree or commit to do anything prohibited by Sections 5.1
through 5.10.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.1 Disclosure Schedules. On or prior to the date hereof, each of
NationsBank and BankAmerica has delivered to the other a schedule (respectively,
its "Disclosure Schedule") setting forth, among other things, items the
disclosure of which is necessary or appropriate in relation to any or all of its
representations and warranties set forth in this Agreement; provided, that (i)
no such item is required to be set forth in a Disclosure Schedule as an
exception to a representation or warranty if its absence is not reasonably
likely to result in the related representation or warranty being deemed untrue
or incorrect under the standard established by Section 6.2, and (ii) the mere
inclusion of an item in a Disclosure Schedule 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.
APPENDIX A
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6.2 Standard. No representation or warranty of NationsBank or BankAmerica
contained in Section 6.3 shall be deemed untrue or incorrect, and no party
hereto shall be deemed to have breached any such representation or warranty, as
a consequence of the existence of any fact, circumstance or event unless such
fact, circumstance or event, individually or taken together with all other
facts, circumstances or events inconsistent with any paragraph of Section 6.3,
has had or is reasonably expected to have a Material Adverse Effect.
6.3 Representations and Warranties. Subject to Sections 6.1 and 6.2 and
except as Previously Disclosed in its Disclosure Schedule, BankAmerica hereby
represents and warrants to NationsBank, and NationsBank hereby represents and
warrants to BankAmerica, to the extent applicable, in each case with respect to
itself and its Subsidiaries, as follows:
(a) Organization, Standing and Authority. Such party is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. Such party 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.
(b) Shares. (i) As of March 31, 1998, the authorized capital stock of
BankAmerica consists solely of 1,400,000,000 shares of BankAmerica Common Stock,
of which, as of March 31, 1998, 682,615,512 shares were outstanding, and
70,000,000 shares of BankAmerica Preferred Stock, of which 8,724,100 shares were
outstanding as of March 31, 1998. As of March 31, 1998, the authorized capital
stock of NationsBank consists solely of 1,250,000,000 shares of NationsBank
Common Stock, of which, as of March 31, 1998, 964,698,552 shares were
outstanding, and 45,000,000 shares of NationsBank Preferred Stock, of which
2,133,127 shares were outstanding as of March 31, 1998. As of March 31, 1998, no
shares of NationsBank Common Stock and no shares of NationsBank Preferred Stock
were held in treasury, and 92,077,391 shares of BankAmerica Common Stock and no
shares of BankAmerica Preferred Stock were held in treasury. The outstanding
shares of such party's capital stock are validly issued and outstanding, fully
paid and nonassessable, and subject to no preemptive rights (and were not issued
in violation of any preemptive rights). As of the date hereof, except as
Previously Disclosed, there are no shares of such party's capital stock
authorized and reserved for issuance, such party does not have any Rights issued
or outstanding with respect to its capital stock, and such party does not have
any commitment to authorize, issue or sell any such shares or Rights, except
pursuant to this Agreement, the Stock Option Agreements and the BankAmerica
Rights Agreement, as the case may be. Since March 31, 1998, neither NationsBank
nor BankAmerica has issued shares of its capital stock or rights in respect
thereof or reserved any shares for such purposes except pursuant to plans or
commitments Previously Disclosed in its Disclosure Schedule.
(ii) The number of shares of BankAmerica Common Stock which are
issuable and reserved for issuance upon exercise of stock options and other
rights (other than the BankAmerica Stock Option Agreement) of BankAmerica
as of March 31, 1998 has been Previously Disclosed in BankAmerica's
Disclosure Schedule, and the number of shares of NationsBank Common Stock
which are issuable and reserved for issuance upon exercise of stock options
and other rights (other than the NationsBank Stock Option Agreement) of
NationsBank as of March 31, 1998 has been Previously Disclosed in
NationsBank's Disclosure Schedule.
(c) Subsidiaries. (i) (A) Except as otherwise Previously Disclosed in its
Disclosure Schedule, such party has listed in its Annual Report on Form 10-K for
the fiscal year ended December 31, 1997 all of its Subsidiaries, (B) it owns,
directly or indirectly at least 99% of the issued and outstanding shares of each
of its Significant Subsidiaries, (C) no equity securities of any of its
Significant Subsidiaries are or may become required to be issued (other than to
it or a Subsidiary of it) by reason of any Rights, (D) 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 Subsidiaries (other than to it or a
Subsidiary of it), (E) 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),
APPENDIX A
A-16
and (F) 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.
Sec. 55 or equivalent state statutes in the case of bank Subsidiaries)
nonassessable and are owned by it or its Subsidiaries free and clear of any
Liens.
(ii) Each of such party's Significant Subsidiaries has been duly
organized and is validly existing in good standing under the laws of the
jurisdiction of its organization, and is duly qualified to do business and
in good standing in the jurisdictions where its ownership or leasing of
property or the conduct of its business requires it to be so qualified.
Each of such Significant Subsidiaries 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.
(d) Corporate Power. Such party and each of its Significant Subsidiaries
has the corporate power and authority to carry on its business as it is now
being conducted and to own all its properties and assets; and it has the
corporate power and authority to execute, deliver and perform its obligations
under this Agreement and the Stock Option Agreements and to consummate the
transactions contemplated hereby and thereby.
(e) Corporate Authority. Subject, in the case of this Agreement, to
approval by the holders of a majority of the shares of BankAmerica Common Stock
entitled to vote (in the case of BankAmerica) and by the holders of a majority
of the shares of NationsBank Common Stock, NationsBank Series B Preferred Stock
and NationsBank ESOP Preferred Stock entitled to vote thereon, voting as a
single group (in the case of NationsBank), each of this Agreement and the Stock
Option Agreements and the transactions contemplated hereby and thereby have been
authorized by all necessary corporate action of it, and each of this Agreement
and the Stock Option Agreements is a legal, valid and binding agreement of it,
enforceable in accordance with its terms (except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar laws of general applicability relating to or
affecting creditors' rights or by general equity principles).
(f) No Defaults. Subject to receipt of the regulatory approvals and
expiration of the waiting periods referred to in Section 8.2 and the required
filings under federal and state securities laws, the execution, delivery and
performance of this Agreement and the Stock Option Agreements and the
consummation of the transactions contemplated hereby and thereby by it do not
and will not (i) constitute a breach or violation of, or a default 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
Significant Subsidiaries or to which it or any of its Significant Subsidiaries
or properties is subject or bound, (ii) constitute a breach or violation of, or
a default under, its articles or certificate of incorporation or by-laws, or
(iii) require any consent or approval under any such law, rule, regulation,
judgment, decree, order, governmental permit or license agreement, indenture,
contract, agreement or instrument.
(g) Financial Reports and SEC Documents. Its Annual Report on Form 10-K,
as amended through the date hereof, for the fiscal year ended December 31, 1997,
and all other reports, registration statements, definitive proxy statements or
information statements filed or to be filed by it or any of its Subsidiaries
subsequent to December 31, 1995 under the Securities Act, or under Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act, in the form filed, or to be
filed (collectively, its "SEC Documents"), with the SEC (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 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 contained 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 SEC 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 to
which it relates, in each case in accordance with GAAP consistently applied
during the
APPENDIX A
A-17
periods involved, except, in each case, as may be noted therein, subject to
normal year-end audit adjustments in the case of unaudited statements.
(h) Litigation; Regulatory Action. (i) No litigation, claim or other
proceeding 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,
claim or other proceeding has been threatened.
(ii) 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 court or any federal or state
governmental agency or authority charged with the supervision or regulation
of financial institutions or issuers of securities or engaged in the
insurance of deposits (including, without limitation, the OCC, the Federal
Reserve Board, the FDIC and the OTS) or the supervision or regulation of it
or any of its Subsidiaries (collectively, the "Regulatory Authorities").
(iii) 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 of understanding,
commitment letter or similar submission.
(i) Compliance With Laws. It and each of its Subsidiaries:
(i) in the conduct of its business, is in compliance with all
applicable federal, state, local and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders or decrees applicable thereto or to
the employees conducting such businesses, including, without limitation,
the Equal Credit Opportunity Act, the Fair Housing Act, the Community
Reinvestment Act, the Home Mortgage Disclosure Act and all other applicable
fair lending laws and other laws relating to discriminatory business
practices;
(ii) 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 them to conduct
their businesses substantially as presently conducted, and 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
(iii) has received, since December 31, 1994, no notification or
communication from any Regulatory Authority (A) 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, (B)
threatening to revoke any license, franchise, permit, or governmental
authorization, (C) 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 (D) failing to approve any proposed acquisition, or stating its
intention not to approve acquisitions proposed to be effected by it within
a certain time period or indefinitely.
(j) Defaults. 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.
(k) No Brokers. 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 with respect to the transactions contemplated by this
Agreement, excluding, in the case of BankAmerica, fees to be paid to Goldman,
Sachs & Co. and, in the case of NationsBank, fees to be paid to Merrill Lynch,
Pierce, Fenner & Smith Incorporated, in each case pursuant to letter agreements
which have been heretofore disclosed to the other party.
(l) Employee Benefit Plans. (i) Each party has made available to the other
all material written bonus, vacation, deferred compensation, pension,
retirement, profit-sharing, thrift, savings, employee stock ownership, stock
bonus, stock purchase, restricted stock and stock option plans, all material
employment or severance
APPENDIX A
A-18
contracts, all material medical, dental, disability, health and life insurance
plans, all other material employee benefit and fringe benefit plans, contracts
or arrangements and any material 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, employees, directors,
or the beneficiaries of any of the foregoing (collectively, "Compensation and
Benefit Plans").
(ii) True and complete copies of its Compensation and Benefit Plans,
including, but not limited to, any trust instruments and/or insurance
contracts, if any, forming a part thereof, and all amendments thereto have
been made available to the other party.
(iii) Each of its Compensation and Benefit Plans has been administered
in all material respects in accordance with the terms thereof. All
"employee benefit plans" within the meaning of Section 3(3) of ERISA, other
than "multiemployer plans" within the meaning of Section 3(37) of ERISA
("Multiemployer Plans"), covering employees or former employees of it and
its Subsidiaries (its "Plans"), to the extent subject to ERISA, are in
material compliance with ERISA, the Code, the Age Discrimination in
Employment Act and other applicable laws. Each Compensation and Benefit
Plan of it or its Subsidiaries which is an "employee pension benefit plan"
within the meaning of Section 3(2) of ERISA ("Pension Plan") and which is
intended to be qualified under Section 401(a) of the Code has received a
favorable determination letter from the Internal Revenue Service, and it is
not aware of any circumstances reasonably likely to result in the
revocation or denial of any such favorable determination letter. There is
no pending or, to its knowledge, threatened litigation or governmental
audit, examination or investigation relating to the Plans.
(iv) No material liability under Title IV of ERISA has been or is
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)(5) of ERISA, currently or formerly maintained by
any of them, or the single-employer plan of any entity which is considered
one employer with it under Section 4001(a)(5) of ERISA or Section 414 of
the Code (an "ERISA Affiliate"). Neither it nor any of its Subsidiaries
presently contributes to a Multiemployer Plan, nor have they contributed to
such a plan within the past five calendar years. 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 Pension Plan of it or any of its Subsidiaries or by any ERISA
Affiliate within the past 12 months.
(v) All contributions, premiums and payments required to be made under
the terms of any Compensation and Benefit Plan of it or any of its
Subsidiaries have been made. Neither any Pension Plan of it or any of its
Subsidiaries nor any single-employer plan of an ERISA Affiliate of it or
any of its Subsidiaries has an "accumulated funding deficiency" (whether or
not waived) within the meaning of Section 412 of the Code or Section 302 of
ERISA. Neither it nor any of its Subsidiaries has provided, or is required
to provide, security to any Pension Plan or to any single-employer plan of
an ERISA Affiliate pursuant to Section 401(a)(29) of the Code.
(vi) Under each Pension Plan of it or any of its Subsidiaries which is
a single-employer plan, as of the last day of the most recent plan year
ended prior to the date hereof, 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
the Plan's most recent actuarial valuation) did not exceed the then current
value of the assets of such Plan, and there has been no adverse change in
the financial condition of such Plan (with respect to either assets or
benefits) since the last day of the most recent Plan year.
(vii) Neither it nor any of its Subsidiaries has any obligations under
any Compensation and Benefit Plans to provide benefits, including death or
medical benefits, with respect to employees of it or its Subsidiaries
beyond their retirement or other termination of service other than (A)
coverage mandated by Part 6 of Title I of ERISA or Section 4980B of the
Code, (B) retirement or death benefits under any employee pension benefit
plan (as defined under Section 3(2) of ERISA), (C) disability benefits
under any employee welfare plan that have been fully provided for by
insurance or otherwise, or (D) benefits in the nature of severance pay.
APPENDIX A
A-19
(viii) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (A) result in any
payment (including, without limitation, severance, unemployment
compensation, golden parachute or otherwise) becoming due to any director
or any employee of it or any of its Subsidiaries under any Compensation and
Benefit Plan or otherwise from it or any of its Subsidiaries, (B) increase
any benefits otherwise payable under any Compensation and Benefit Plan or
(C) result in any acceleration of the time of payment or vesting of any
such benefit.
(m) 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
Subsidiaries has committed an unfair labor practice (within the meaning of the
National Labor Relations Act) or seeking to compel it or such Subsidiaries to
bargain with any labor organization as to wages and conditions of employment.
(n) Takeover Laws; Rights Plans. (i) It has taken all action required to
be taken by it in order to exempt this Agreement and the Stock Option Agreements
and the transactions contemplated hereby and thereby from, and this Agreement
and the Stock Option Agreements and the transactions contemplated hereby and
thereby are exempt from, the requirements of any "moratorium," "control share,"
"fair price" or other anti-takeover laws and regulations (collectively,
"Takeover Laws") of (A) the State of Delaware, in the case of the
representations and warranties of BankAmerica, including Section 203 of the
DGCL, and (B) the State of North Carolina, in the case of the representations
and warranties of NationsBank, including Sections 55-9-02 and 55-9A-01 of the
NCBCA.
(ii) In the case of the representations and warranties of BankAmerica,
it has (A) duly approved an appropriate amendment to the BankAmerica Rights
Agreement and (B) taken all other action necessary or appropriate so that
the entering into of this Agreement, and the consummation of the
transactions contemplated hereby (including, without limitation, the
Reorganization) do not and will not result in the ability of any person to
exercise any Rights, as defined in the BankAmerica Rights Agreement (the
"BankAmerica Rights"), or enable or require the BankAmerica Rights to
separate from the shares of BankAmerica Common Stock to which they are
attached or to be triggered or become exercisable.
(iii) In the case of the representations and warranties of
BankAmerica, no "Distribution Date" or "Shares Acquisition Date" (as such
terms are defined in the BankAmerica Rights Plan) has occurred, and the
"Final Expiration Date" (as such term is defined in the BankAmerica Rights
Plan) is April 22, 1998.
(o) Environmental Matters. (i) As used in this Agreement, "Environmental
Laws" means all applicable local, state and federal environmental, health and
safety laws and regulations, including, without limitation, the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response,
Compensation, and Liability Act, the Clean Water Act, the Federal Clean Air Act,
and the Occupational Safety and Health Act, each as amended, regulations
promulgated thereunder, and state counterparts.
(ii) Neither the conduct nor operation of such party or its
Subsidiaries nor any condition of any property presently or previously
owned, leased or operated by any of them violates or violated Environmental
Laws and no condition has existed or event has occurred with respect to any
of them or any such property that, with notice or the passage of time, or
both, is reasonably likely to result in liability under Environmental Laws.
Neither such party nor any of its Subsidiaries has received any notice from
any person or entity that it or its Subsidiaries or the operation or
condition of any property ever owned, leased, operated, held as collateral
or held as a fiduciary by any of them are or were in violation of or
otherwise are alleged to have liability under any Environmental Law,
including, but not limited to, responsibility (or potential responsibility)
for the cleanup or other remediation of any pollutants, contaminants, or
hazardous or toxic wastes, substances or materials at, on, beneath, or
originating from any such property.
(p) Tax Matters. (i) All material returns, declarations, reports,
estimates, information returns and statements required to be filed under
federal, state, local or any foreign tax laws ("Tax Returns") with respect
APPENDIX A
A-20
to it or any of its Subsidiaries, have been timely filed, or requests for
extensions have been timely filed and have not expired; (ii) all Tax Returns
filed by it are complete and accurate in all material respects; (iii) all Taxes
shown to be due on such Tax Returns have been paid or adequate reserves have
been established for the payment of such Taxes; and (iv) except as previously
disclosed, there is no audit, examination, deficiency or refund litigation or
matter in controversy with respect to any Taxes that might reasonably be
expected to result in a determination, the effect of which would be a Material
Adverse Effect.
(q) Tax Treatment; Accounting Treatment. As of the date hereof, it is
aware of no reason why the Reorganization will fail to qualify as a
"reorganization" under Section 368(a) of the Code or may not be accounted for as
a "pooling of interests" under GAAP.
(r) Regulatory Approvals. The approval of the following regulatory
authorities (among others) is necessary to consummate the Reorganization: the
Federal Reserve Board, OTS, and the regulatory authorities of the states and
foreign jurisdictions in which BankAmerica, NationsBank, and their respective
Subsidiaries operate. As of the date hereof, neither of BankAmerica nor
NationsBank is aware of any reason why the approvals of such regulatory
authorities will not be received.
(s) Year 2000. None of BankAmerica, NationsBank, or any of their
respective Subsidiaries has received, or reasonably expects to receive, a "Year
2000 Deficiency Notification Letter" (as such term is employed in the Federal
Reserve's Supervision and Regulation Letter No. SR-98-3(SUP), dated March 4,
1998). NationsBank has made available to BankAmerica, and BankAmerica has made
available to NationsBank, a complete and accurate copy of their respective
plans, including an estimate of the anticipated associated costs, for addressing
the issues ("Year 2000 Issues") set forth in the statements of the Federal
Financial Institutions Examination Council, dated May 5, 1997, entitled "Year
2000 Project Management Awareness," and December 1997, entitled "Safety and
Soundness Guidelines Concerning the Year 2000 Business Risk," as such issues
affect BankAmerica, NationsBank and their respective Subsidiaries. Between the
date hereof and the Effective Time, NationsBank and BankAmerica shall use their
commercially practicable efforts to implement their respective plans.
(t) No Material Adverse Effect. Since December 31, 1997, except as
disclosed in its SEC Documents filed with the SEC on or before the date hereof,
(i) it and its Subsidiaries have conducted their respective businesses in the
ordinary and usual course (excluding the incurrence of expenses related to this
Agreement 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 this
Section 6.3 or otherwise), is reasonably likely to have a Material Adverse
Effect with respect to it.
ARTICLE VII
COVENANTS
BankAmerica hereby covenants to and agrees with NationsBank, and
NationsBank hereby covenants to and agrees with BankAmerica, that:
7.1 Reasonable Best Efforts. Subject to the terms and conditions of this
Agreement, 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 Reorganization as promptly as practicable and
otherwise to enable consummation of the transactions contemplated hereby
including, without limitation, using its reasonable best efforts to obtain (and
cooperating with the other party hereto to obtain) 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 BankAmerica or NationsBank
or any of their respective Subsidiaries in connection with the Reorganization
and the other transactions contemplated by this Agreement, and using reasonable
best 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 best 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. NationsBank shall
incorporate NationsBank (DE) as
APPENDIX A
A-21
a subsidiary, and NationsBank shall cause NationsBank (DE) to adopt and ratify
this Agreement and to take all action necessary to consummate the transaction
contemplated hereby.
7.2 Stockholder Approvals. Each of them shall take, in accordance with
applicable law, applicable stock exchange rules and its respective articles or
certificate of incorporation and by-laws, all action necessary to convene,
respectively, an appropriate meeting of shareholders of NationsBank to consider
and vote upon the approval of this Agreement and any other matters required to
be approved by NationsBank shareholders for consummation of the Reorganization
(including any adjournment or postponement, the "NationsBank Meeting"), and an
appropriate meeting of stockholders of BankAmerica to consider and vote upon the
approval of this Agreement and any other matters required to be approved by
BankAmerica's stockholders for consummation of the Reorganization (including any
adjournment or postponement, the "BankAmerica Meeting"; and each of the
NationsBank Meeting and BankAmerica Meeting, a "Meeting"), respectively, as
promptly as practicable after the date hereof. The Board of Directors of each of
NationsBank and BankAmerica shall recommend such approval, and each of
NationsBank and BankAmerica shall take all reasonable lawful action to solicit
such approval by its respective stockholders. Prior to the Reincorporation
Merger Effective Time, NationsBank shall approve this Agreement and the
transactions contemplated thereby as sole stockholder of NationsBank (DE).
7.3 Registration Statement. (a) Each of NationsBank and BankAmerica agrees
to cooperate in the preparation of a registration statement on Form S-4 (the
"Registration Statement") to be filed by NationsBank and NationsBank (DE) with
the SEC in connection with the issuance of NationsBank (DE) Stock in the
Reorganization (including the joint proxy statement and prospectus and other
proxy solicitation materials of NationsBank and BankAmerica constituting a part
thereof (the "Joint Proxy Statement") and all related documents). BankAmerica
and NationsBank agree to use their reasonable best efforts to file the
Registration Statement with the SEC as promptly as practicable. Each of
BankAmerica and NationsBank agrees to use, and NationsBank agrees to cause
NationsBank (DE) to use, reasonable best efforts to cause the Registration
Statement to be declared effective under the Securities Act as promptly as
reasonably practicable after filing thereof. NationsBank also agrees to use, and
to cause NationsBank (DE) to use, reasonable best efforts to obtain all
necessary state securities law or "Blue Sky" permits and approvals required to
carry out the transactions contemplated by this Agreement.
(b) Each of BankAmerica and NationsBank 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 NationsBank Meeting and
BankAmerica Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading or any statement which, in the light of the
circumstances under which such statement is made, will be false or misleading
with respect to any material fact, or which will omit to state any material fact
necessary in order to make the statements therein not false or misleading or
necessary to correct any statement in any earlier statement in the Joint Proxy
Statement or any amendment or supplement thereto. Each of BankAmerica and
NationsBank further agrees that if it shall become aware prior to the Effective
Time of any information that would cause any of the statements in the Joint
Proxy Statement to be false or misleading with respect to any material fact, or
to omit to state any material fact necessary to make the statements therein not
false or misleading, to promptly inform the other party thereof and to take the
necessary steps to correct the Joint Proxy Statement.
(c) In the case of NationsBank, NationsBank will advise BankAmerica,
promptly after NationsBank 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 NationsBank 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.
APPENDIX A
A-22
7.4 Press Releases. Neither party will, without the prior approval of the
other party hereto, issue any press release or written statement for general
circulation relating to the transactions contemplated hereby, except as
otherwise required by applicable law or regulation or the rules of the NYSE.
7.5 Access; Information. (a) Upon reasonable notice and subject to
applicable laws relating to the exchange of information, it shall, and shall
cause its Subsidiaries to, afford the other parties and their officers,
employees, counsel, accountants and other authorized representatives, access,
during normal business hours throughout the period prior to the Closing Date, to
all of its properties, books, contracts, commitments and records, and to its
officers, employees, accountants, counsel or other representatives, and, during
such period, it shall, and shall cause its Subsidiaries to, furnish promptly to
such other parties and representatives (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 (other than reports or documents that
NationsBank or BankAmerica, or their respective Subsidiaries, as the case may
be, are not permitted to disclose under applicable law), and (ii) all other
information concerning the business, properties and personnel of it as the other
may reasonably request. Neither NationsBank nor BankAmerica 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 privilege of the
institution in possession or control of such information or contravene any law,
rule, regulation, order, judgment, decree, fiduciary duty or binding agreement
entered into prior to the date of this Agreement. The parties hereto will make
appropriate substitute disclosure arrangements under the circumstances in which
the restrictions of the preceding sentence apply.
(b) It will not use any information obtained pursuant to this Section 7.5
for any purpose unrelated to the consummation of the transactions contemplated
by this Agreement and, if this Agreement is terminated, will hold all
information and documents obtained pursuant to this paragraph in confidence (as
provided in, and subject to the provisions of, the Confidentiality Agreement, as
if it were the Receiving Party (as defined therein)). 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
Agreement, or the conditions to either party's obligation to consummate the
transactions contemplated by this Agreement.
7.6 Acquisition Proposals. Without the prior written consent of the other
party hereto, it shall not, and shall cause its Subsidiaries and its and its
Subsidiaries' officers, directors, agents, advisors and affiliates not to,
solicit or encourage inquiries or proposals with respect to, or engage in any
negotiations concerning, or provide any confidential information to, or have any
discussions with, any such 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 of, or any merger or consolidation with, it
or any of its Subsidiaries.
7.7 Affiliate Agreements. (a) Not later than the 15th day prior to the
mailing of the Joint Proxy Statement, BankAmerica shall deliver to NationsBank
and NationsBank shall deliver to BankAmerica, 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 relevant Meeting, deemed to be an "affiliate" of it (each, an "Affiliate")
as that term is used in SEC Accounting Series Releases 130 and 135 and, in the
case of BankAmerica only, in Rule 145 under the Securities Act.
(b) BankAmerica and NationsBank shall each use its respective reasonable
best efforts to cause each person who may be deemed to be an Affiliate of
BankAmerica or NationsBank, as the case may be, to execute and deliver to
BankAmerica and NationsBank on or before the date of mailing of the Joint Proxy
Statement an agreement to comply with SEC Accounting Series Releases 130 and 135
and, in the case of a BankAmerica Affiliate only, with Rule 145 under the
Securities Act. Such agreements shall be in the forms set forth in Exhibit E (in
the case of BankAmerica) and Exhibit F (in the case of NationsBank).
7.8 Takeover Laws. Neither party shall take any action that would cause
the transactions contemplated by this Agreement and 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 Agreement and the Stock
Option Agreements from, or if necessary challenge the validity or applicability
of, any applicable Takeover Law, as now or hereafter in effect,
APPENDIX A
A-23
including, without limitation, Section 203 of the DGCL, Sections 55-9-02 and
55-9A-01 of the NCBCA and Takeover Laws of any other state that purport to apply
to this Agreement, the Stock Option Agreements or the transactions contemplated
hereby or thereby.
7.9 No Rights Triggered. Each of BankAmerica and NationsBank shall take
all steps necessary to ensure that the entering into of this Agreement and the
consummation of the transactions contemplated hereby and any other action or
combination of actions, or any other transactions contemplated hereby, do not
and will not result in the grant of any rights to any person (i) under its
articles or certificate of incorporation or by-laws, (ii) under any material
agreement to which it or any of its Subsidiaries is a party (including, without
limitation, in the case of BankAmerica, the BankAmerica Rights Agreement) or
(iii) in the case of BankAmerica, to exercise or receive certificates for
Rights, or acquire any property in respect of Rights, under the BankAmerica
Rights Agreement.
7.10 Shares Listed. NationsBank and BankAmerica shall use, and NationsBank
shall cause NationsBank (DE) to use, their reasonable best efforts to list,
prior to the Closing Date, on the NYSE, upon official notice of issuance, (i)
the shares of NationsBank (DE) Common Stock to be issued in the Reorganization
and (ii) the shares of NationsBank (DE) Preferred Stock into which shares of
BankAmerica Preferred Stock which are listed on the NYSE are to be converted.
7.11 Regulatory Applications. (a) NationsBank and BankAmerica and their
respective Subsidiaries shall cooperate and use their respective reasonable best
efforts (i) to prepare and execute all documentation (including, in the case of
NationsBank, such documentation on behalf of NationsBank (DE) as may be
necessary in connection with the Reincorporation Merger), to effect all filings,
and to obtain all permits, consents, approvals and authorizations of all third
parties and Regulatory Authorities necessary to consummate the transactions
contemplated by this Agreement, including, without limitation, any such
approvals or authorizations required by the Federal Reserve Board, the OTS and
the regulatory authorities of the states and foreign jurisdictions in which
BankAmerica, NationsBank and their respective Subsidiaries operate, (ii) to
comply with the terms and conditions of such permits, consents, approvals and
authorizations, and (iii) to cause the Reorganization to be consummated as
expeditiously as practicable. NationsBank agrees to use its reasonable best
efforts to file the requisite applications to be filed by it with the Federal
Reserve Board and the regulatory authorities of the states and foreign
jurisdictions in which BankAmerica and its Subsidiaries operate as promptly as
practicable. Each of NationsBank and BankAmerica 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 Agreement. In exercising the foregoing right, each of the parties hereto
agrees to act reasonably and as promptly as practicable. Each party hereto
agrees that it will consult with the other parties 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 Agreement and each party will keep the
other parties apprised of the status of material matters relating to completion
of the transactions contemplated hereby.
(b) Each party agrees, upon request, to furnish the other party with all
information concerning itself, its Subsidiaries, directors, officers and
stockholders and such other matters as may be reasonably necessary or advisable
in connection with the Registration Statement, the Joint Proxy Statement or any
filing, notice or application made by or on behalf of such other party or any of
its Subsidiaries to any Regulatory Authority in connection with the transactions
contemplated hereby.
7.12 Indemnification; Directors' and Officers' Insurance. (a) In the event
of any threatened or actual claim, action, suit, proceeding or investigation,
whether civil, criminal or administrative, including, without limitation, any
such claim, action, suit, proceeding or investigation in which any person who is
now, or has been at any time prior to the date of this Agreement, or who becomes
prior to the Effective Time, a director, officer or employee of BankAmerica,
NationsBank or any of their respective Subsidiaries (the "Indemnified Parties")
is, or is threatened to be, made a party based in whole or in part on, or
arising in whole or in part out of, or pertaining to (i) the fact that he or she
is or was a director, officer or employee of BankAmerica,
APPENDIX A
A-24
NationsBank, their respective Subsidiaries or any of their respective
predecessors or was prior to the Effective Time serving at the request of any
such party as a director, officer, employee, fiduciary or agent of another
corporation, partnership, trust or other enterprise or (ii) this Agreement, the
Stock Option Agreements, or any of the transactions contemplated hereby and
thereby and all actions taken by an Indemnified Party in connection herewith or
therewith, whether in any case asserted or arising before or after the Effective
Time, the parties hereto agree to cooperate and use their best efforts to defend
against and respond thereto. It is understood and agreed that after the
Effective Time, NationsBank (DE) shall indemnify and hold harmless, as and to
the fullest extent permitted by law, each such Indemnified Party against any
losses, claims, damages, liabilities, costs, expenses (including reasonable
attorneys' fees and expenses in advance of the final disposition of any claim,
suit, proceeding or investigation to each Indemnified Party to the fullest
extent permitted by law upon receipt of an undertaking from such Indemnified
Party to repay such advanced expenses if it is finally determined (with no
further rights of appeal) that such Indemnified Party was not entitled to
indemnification hereunder), judgments, fines and amounts paid in settlement in
connection with any such threatened or actual claim, action, suit, proceeding or
investigation, and in the event of any such threatened or actual claim, action,
suit, proceeding or investigation (whether asserted or arising before or after
the Effective Time), the Indemnified Parties may retain counsel reasonably
satisfactory to them after consultation with NationsBank (DE); provided,
however, that (A) NationsBank (DE) shall have the right to assume the defense
thereof and upon such assumption NationsBank (DE) shall not be liable to any
Indemnified Party for any legal expenses of other counsel or any other expenses
subsequently incurred by any Indemnified Party in connection with the defense
thereof, except that if NationsBank (DE) elects not to assume such defense, or
counsel for the Indemnified Parties reasonably advises the Indemnified Parties
that there are or may be (whether or not any have yet actually arisen) issues
which raise conflicts of interest between NationsBank (DE) and the Indemnified
Parties, the Indemnified Parties may retain counsel reasonably satisfactory to
them, and NationsBank (DE) shall pay the reasonable fees and expenses of such
counsel for the Indemnified Parties, (B) NationsBank (DE) shall be obligated
pursuant to this paragraph to pay for only one firm of counsel for all
Indemnified Parties, (C) NationsBank (DE) shall not be liable for any settlement
effected without its prior written consent (which consent shall not be
unreasonably withheld) and (D) NationsBank (DE) shall have no obligation
hereunder to any Indemnified Party when and if a court of competent jurisdiction
shall ultimately determine, and such determination shall have become final and
nonappealable, that indemnification of such Indemnified Party in the manner
contemplated hereby is prohibited by applicable law. Any Indemnified Party
wishing to claim indemnification under this Section 7.12, upon learning of any
such claim, action, suit, proceeding or investigation, shall notify NationsBank
(DE) thereof, provided that the failure to so notify shall not affect the
obligations of NationsBank (DE) under this Section 7.12 except (and only) to the
extent such failure to notify materially prejudices NationsBank (DE).
NationsBank (DE)'s obligations under this Section 7.12 shall continue in full
force and effect for a period of six (6) years from the Effective Time;
provided, however, that all rights to indemnification in respect of any claim (a
"Claim") asserted or made within such period shall continue until the final
disposition of such Claim.
(b) Without limiting any of the obligations under paragraph (a) of this
Section 7.12, NationsBank (DE) agrees that all rights to indemnification and all
limitations of liability existing in favor of the Indemnified Parties as
provided in BankAmerica's Amended and Restated Articles of Incorporation or
Bylaws or in the similar governing documents of any of BankAmerica's
Subsidiaries as in effect as of the date of this Agreement with respect to
matters occurring on or prior to the Effective Time shall survive the
Reorganization and shall continue in full force and effect, without any
amendment thereto, for a period of six (6) years from the Effective Time;
provided, however, that all rights to indemnification in respect of any Claim
asserted or made within such period shall continue until the final disposition
of such Claim; provided further, however, that nothing contained in this Section
7.12(b) shall be deemed to preclude the liquidation, consolidation or merger of
BankAmerica or any BankAmerica Subsidiary, in which case all of such rights to
indemnification and limitations on liability shall be deemed to so survive and
continue notwithstanding any such liquidation, consolidation or merger and shall
constitute rights which may be asserted against NationsBank (DE). Nothing
contained in this Section 7.12(b) shall be deemed to preclude any rights to
indemnification or limitations on liability provided in BankAmerica's Amended
and Restated Articles of Incorporation or Bylaws or the similar governing
documents of any of BankAmerica's Subsidiaries with respect to matters occurring
APPENDIX A
A-25
subsequent to the Effective Time to the extent that the provisions establishing
such rights or limitations are not otherwise amended to the contrary.
(c) NationsBank (DE) shall use its best efforts to cause the persons
serving as officers and directors of BankAmerica and NationsBank immediately
prior to the Effective Time (or, in the case of NationsBank, the Reincorporation
Merger Effective Time) to be covered for a period of six (6) years from the
Effective Time by a directors' and officers' liability insurance policy (which
policy shall provide for at least the same coverage and amounts as the greater
of BankAmerica's and NationsBank's existing policies and shall contain terms and
conditions which are not less advantageous to such directors and officers of
BankAmerica and NationsBank than the terms and conditions of BankAmerica's and
NationsBank's existing policies) with respect to acts or omissions occurring
prior to the Effective Time.
(d) In the event NationsBank (DE) or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) transfers or conveys all or substantially all of its properties and
assets to any person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of NationsBank
(DE) shall assume the obligations set forth in this Section 7.12.
(e) The provisions of this Section 7.12 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party and his or her heirs and
representatives.
7.13 Benefits Plans. (a) Subject to Section 7.13 (c), NationsBank (DE)
shall honor, in accordance with their terms, all benefit obligations to, and
contractual rights of, current and former employees of NationsBank and
BankAmerica existing as of the Effective Time (or, in the case of NationsBank,
the Reincorporation Merger Effective Time), as well as all employment or
severance agreements, plans or policies of NationsBank or BankAmerica.
(b) NationsBank (DE) shall cause each employee benefit plan, program,
policy or arrangement of the combined company to take into account for purposes
of eligibility and vesting thereunder the service of employees of NationsBank
and BankAmerica to the same extent as such service was credited for such purpose
by BankAmerica and NationsBank, respectively, under comparable compensation and
benefit plans.
(c) NationsBank and BankAmerica agree to cooperate to establish for the
combined company benefit plans which are appropriate for the nature of the
combined company's organization with respect to periods after the Effective
Time.
7.14 Notification of Certain Matters. Each of BankAmerica and NationsBank
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.
ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE REORGANIZATION
The obligations of each of the parties to consummate the Reorganization are
conditioned upon the satisfaction at or prior to the Effective Time of each of
the following:
8.1 Shareholder Vote. Approval of the transactions contemplated by this
Agreement by the requisite votes of the stockholders of BankAmerica and of
NationsBank, respectively.
8.2 Regulatory Approvals. All regulatory approvals required to consummate
the transactions contemplated hereby, including, without limitation, those
specified in Section 6.3(r), shall have been obtained and shall remain in full
force and effect and all statutory waiting periods in respect thereof shall have
expired.
8.3 Third-Party Consents. All consents or approvals of all persons (other
than Regulatory Authorities) required for the consummation of the Reorganization
shall have been obtained and shall be in full force and
APPENDIX A
A-26
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 BankAmerica or NationsBank, as the case may be.
8.4 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 any of the transactions contemplated hereby; provided,
however, that each of NationsBank and BankAmerica shall have used its reasonable
best efforts to prevent any such rule, regulation, injunction, decree or other
order, and to appeal as promptly as possible any injunction, decree or other
order that may be entered.
8.5 Representations, Warranties and Covenants of NationsBank. In the case
of BankAmerica's obligation to consummate the Reorganization: (i) each of the
representations and warranties contained herein of NationsBank shall be true and
correct as of the date of this Agreement and upon the Closing Date with the same
effect as though all such representations and warranties had been made on the
Closing 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 standard set forth in Section 6.2, (ii) each and all of the
agreements and covenants of NationsBank to be performed and complied with
pursuant to this Agreement on or prior to the Closing Date shall have been duly
performed and complied with in all material respects, and (iii) BankAmerica
shall have received a certificate signed by the Chief Financial Officer of
NationsBank, dated the Closing Date, to the effect set forth in clauses (i) and
(ii) of this Section 8.5.
8.6 Representations, Warranties and Covenants of BankAmerica. In the case
of NationsBank's obligation to consummate the Reorganization: (i) each of the
representations and warranties contained herein of BankAmerica shall be true and
correct as of the date of this Agreement and upon the Closing Date with the same
effect as though all such representations and warranties had been made on the
Closing 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 standard set forth in Section 6.2, (ii) each and all of the
agreements and covenants of BankAmerica to be performed and complied with
pursuant to this Agreement on or prior to the Closing Date shall have been duly
performed and complied with in all material respects, and (iii) NationsBank
shall have received a certificate signed by the Chief Financial Officer of
BankAmerica, dated the Closing Date, to the effect set forth in clauses (i) and
(ii) of this Section 8.6.
8.7 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.
8.8 Tax Opinion. NationsBank and BankAmerica shall have received an
opinion from Wachtell, Lipton, Rosen & Katz dated in each case as of the Closing
Date, substantially to the effect that, on the basis of the facts,
representations and assumptions set forth in such opinion which are consistent
with the state of facts existing at the Reincorporation Merger Effective Time
and at the Effective Time, each of the Reincorporation Merger and the Merger
will be treated for Federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code and that accordingly:
(i) No gain or loss will be recognized by NationsBank, NationsBank
(DE) or BankAmerica as a result of the Reincorporation Merger or the
Merger;
(ii) No gain or loss will be recognized by the stockholders of
BankAmerica who exchange all of their BankAmerica Common Stock solely for
NationsBank (DE) Common Stock pursuant to the Merger (except with respect
to cash received in lieu of a fractional share interest in NationsBank (DE)
Common Stock);
(iii) No gain or loss will be recognized by the stockholders of
NationsBank who exchange all of their NationsBank Common Stock solely for
NationsBank (DE) Common Stock pursuant to the Reincorporation Merger;
APPENDIX A
A-27
(iv) The aggregate tax basis of the NationsBank (DE) Common Stock
received by stockholders who exchange all of their BankAmerica Common Stock
solely for NationsBank (DE) Common Stock in the Merger will be the same as
the aggregate tax basis of BankAmerica Common Stock surrendered in exchange
therefor (reduced by any amount allocable to a fractional share interest
for which cash is received); and
(v) the aggregate tax basis of the NationsBank (DE) Common Stock
received by stockholders who exchange all of their NationsBank Common Stock
solely for NationsBank (DE) Common Stock in the Reincorporation Merger will
be the same as the aggregate tax basis of the NationsBank Common Stock
surrendered in exchange therefor.
In rendering such opinions, such counsel may require and rely upon
representations and covenants including those contained in certificates of
officers of NationsBank, NationsBank (DE), BankAmerica and others, reasonably
satisfactory in form and substance to such counsel.
8.9 NYSE Listing. The shares of NationsBank (DE) Common Stock issuable
pursuant to this Agreement shall have been approved for listing on the NYSE,
subject to official notice of issuance.
8.10 Accounting Treatment. BankAmerica and NationsBank shall have received
letters stating that, in its opinion, the Reorganization shall qualify for
"pooling of interests" accounting treatment, dated as of or shortly before the
Closing Date, from (i) in the case of NationsBank, Price Waterhouse LLP,
independent public accountants for NationsBank, and (ii) in the case of
BankAmerica, Ernst & Young LLP, independent public accountants for BankAmerica.
It is specifically provided, however, that a failure to satisfy any of the
conditions set forth in Section 8.6 shall only constitute a condition if
asserted by NationsBank, and a failure to satisfy the condition set forth in
Section 8.5 shall only constitute a condition if asserted by BankAmerica.
ARTICLE IX
TERMINATION
9.1 Termination. This Agreement may be terminated, and the Reorganization
may be abandoned:
(a) Mutual Consent. At any time prior to the Effective Time, by the mutual
consent of NationsBank and BankAmerica in a written instrument, 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 NationsBank or
BankAmerica (provided that the terminating party is not then in material breach
of any representation, warranty, covenant or other agreement contained herein),
if its Board of Directors so determines by vote of a majority of the members of
its entire Board of Directors, in the event of either: (i) a breach by the other
party of any representation or warranty contained herein (subject to the
standard set forth in Section 6.2), which breach cannot be or has not been cured
within 45 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
45 days after the giving of written notice to the breaching party of such
breach.
(c) Delay. At any time prior to the Effective Time, by NationsBank or
BankAmerica, if its Board of Directors so determines by vote of a majority of
the members of its entire Board, in the event that the Reorganization is not
consummated by April 30, 1999, except to the extent that the failure of the
Reorganization then to be consummated arises out of or results from the failure
of the party seeking to terminate this Agreement to perform or observe the
covenants and agreements of such party set forth herein.
(d) No Approval. By BankAmerica or NationsBank, if its Board of Directors
so determines by a vote of a majority of the members of its entire Board of
Directors, in the event (i) the approval of the Federal Reserve Board required
for consummation of the Reorganization and the other transactions contemplated
by the Reorganization shall have been denied by final nonappealable action of
such Regulatory Authority or any
APPENDIX A
A-28
governmental entity of competent jurisdiction shall have issued a final
nonappealable order enjoining or otherwise prohibiting the consummation of the
transactions contemplated by this Agreement; or (ii) any stockholder approval
required by Section 8.1 is not obtained at the BankAmerica Meeting or the
NationsBank Meeting.
9.2 Effect of Termination and Abandonment. In the event of termination of
this Agreement and the abandonment of the Reorganization pursuant to this
Article IX, no party to this Agreement shall have any liability or further
obligation to any other party hereunder except (i) as set forth in Section 10.1
and (ii) that termination will not relieve a breaching party from liability for
any willful breach of this Agreement giving rise to such termination.
ARTICLE X
MISCELLANEOUS
10.1 Survival. All representations, warranties, agreements and covenants
contained in this Agreement shall not survive the Effective Time or termination
of this Agreement if this Agreement is terminated prior to the Effective Time;
provided, however, if the Effective Time occurs, the agreements of the parties
in Articles III and IV, Sections 7.12 and 7.13, and Article X shall survive the
Effective Time, and if this Agreement is terminated prior to the Effective Time,
the agreements of the parties in Sections 7.5(b) and 9.2, and Article X, shall
survive such termination.
10.2 Waiver; Amendment. Subject to compliance with applicable law, prior
to the Effective Time, any provision of this Agreement may be (i) waived by the
party benefited by the provision, or (ii) amended or modified at any time, by an
agreement in writing between the parties hereto approved by their respective
Boards of Directors and executed in the same manner as this Agreement.
10.3 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original.
10.4 Governing Law. This Agreement shall be governed by, and interpreted
in accordance with, the laws of the State of Delaware, without regard to the
conflict of law principles thereof (except to the extent that mandatory
provisions of Federal law govern).
10.5 Expenses. Each party hereto will bear all expenses incurred by it in
connection with this Agreement and the transactions contemplated hereby, except
that printing expenses and SEC filing and registration fees shall be shared
equally between BankAmerica and NationsBank.
10.6 Confidentiality. Each of the parties hereto and their respective
agents, attorneys and accountants will maintain the confidentiality of all
information provided in connection herewith in accordance, and subject to the
limitations of, the Confidentiality Agreement.
10.7 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 NationsBank, to:
NationsBank Corporation
NationsBank Corporate Center
Charlotte, North Carolina 28255
Attention: Paul J. Polking, Esq.
Telecopier: (704) 386-6453
APPENDIX A
A-29
With copy to:
Smith, Helms, Mulliss & Moore L.L.P.
201 North Tryon Street
Charlotte, North Carolina 28231
Attention: Boyd C. Campbell, Jr., Esq.
If to BankAmerica, to:
BankAmerica Corporation
Bank of America Center
San Francisco, California 94104
Attention: James N. Roethe, Esq.
Telecopier: (415) 622-6291
With copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Edward D. Herlihy, Esq.
10.8 Entire Understanding; No Third Party Beneficiaries. Except for the
Confidentiality Agreement, which shall remain in effect, and the Stock Option
Agreements, this Agreement (including the Exhibits and Schedules hereto)
represents the entire understanding of the parties hereto with reference to the
transactions contemplated hereby and thereby and supersedes any and all other
oral or written agreements heretofore made. Except for Section 7.12, nothing in
this Agreement, expressed or implied, is intended to confer upon any person,
other than the parties hereto or their respective successors, any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
10.9 Interpretations. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of,
Exhibit or Schedule to, this Agreement unless otherwise indicated. The headings
contained in this Agreement are for reference purposes only and are not part of
this Agreement. Whenever the words "include," "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation." No provision of this Agreement shall be construed to require
NationsBank, BankAmerica or any of their respective Subsidiaries, Affiliates, or
directors to take any action which would violate applicable law (whether
statutory or common law), rule or regulation.
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.
BANKAMERICA CORPORATION NATIONSBANK CORPORATION
By: /s/ DAVID A. COULTER By: /s/ HUGH L. MCCOLL, JR.
------------------------------------------------- -------------------------------------------------
Name: David A. Coulter Name: Hugh L. McColl, Jr.
Title: Chairman of the Board, Title: Chief Executive Officer
President, and Chief
Executive Officer
APPENDIX A
A-30
APPENDIX B
- --------------------------------------------------------------------------------
PLAN OF REINCORPORATION MERGER
BY AND BETWEEN
NATIONSBANK CORPORATION
AND
NATIONSBANK (DE) CORPORATION
- --------------------------------------------------------------------------------
APPENDIX B
B-1
PLAN OF REINCORPORATION MERGER dated as of August 3, 1998, by and between
NationsBank Corporation, a North Carolina corporation ("NationsBank"), and
NationsBank (DE) Corporation, a Delaware corporation ("NationsBank (DE)").
WITNESSETH:
WHEREAS, NationsBank and BankAmerica Corporation, a Delaware corporation
("BankAmerica") have entered into an Agreement and Plan of Reorganization dated
as of April 10, 1998 (the "Merger Agreement"), pursuant to which (i) NationsBank
agreed to form NationsBank (DE) and to merge (the "Reincorporation Merger") with
and into NationsBank (DE), with NationsBank (DE) as the surviving corporation in
the Reincorporation Merger and (ii) BankAmerica agreed to merge (the "Merger")
with and into NationsBank (DE) after the Reincorporation Merger, with
NationsBank (DE) as the surviving corporation in the Merger;
WHEREAS, the Boards of Directors of NationsBank and NationsBank (DE) have
approved and adopted this Plan of Reincorporation Merger and submitted it to
their respective shareholders for approval.
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements contained herein, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the meanings set
forth below, and all capitalized terms used without definition herein, shall
have the meanings ascribed to them in the Merger Agreement:
"NationsBank Common Stock" shall mean the Common Stock, without par value,
of NationsBank.
"NationsBank ESOP Preferred Stock" shall mean the ESOP Convertible
Preferred Stock, Series C, of NationsBank.
"NationsBank Preferred Stock" shall mean, collectively, the NationsBank
ESOP Preferred Stock, NationsBank Series B Preferred Stock and NationsBank
Series BB Preferred Stock.
"NationsBank Series B Preferred Stock" shall mean the 7% Cumulative
Redeemable Preferred Stock, Series B, of NationsBank.
"NationsBank Series BB Preferred Stock" shall mean the $2.50 Cumulative
Convertible Preferred Stock, Series BB, of NationsBank.
"NationsBank Stock" shall mean the NationsBank Common Stock and NationsBank
Preferred Stock.
"NationsBank (DE) ESOP Preferred Stock" shall mean the ESOP Convertible
Preferred Stock, Series C, of NationsBank (DE).
"NationsBank (DE) Preferred Stock" shall mean, collectively, the
NationsBank (DE) ESOP Preferred Stock, NationsBank (DE) Series B Preferred
Stock, and NationsBank (DE) Series BB Preferred Stock.
"NationsBank (DE) Series B Preferred Stock" shall mean the 7% Cumulative
Redeemable Preferred Stock, Series B, of NationsBank (DE).
"NationsBank (DE) Series BB Preferred Stock" shall mean the $2.50
Cumulative Convertible Preferred Stock, Series BB, of NationsBank (DE).
APPENDIX B
B-2
ARTICLE II
THE REINCORPORATION MERGER
2.1 The Reincorporation Merger. Subject to the terms and conditions of the
Merger Agreement, in accordance with the Business Corporation Act of the State
of North Carolina (the "NCBCA") and the General Corporation Law of the State of
Delaware (the "DGCL"), at the Reincorporation Merger Effective Time (as defined
below), NationsBank shall merge with and into NationsBank (DE). Upon
consummation of the Reincorporation Merger, the separate corporate existence of
NationsBank shall terminate. NationsBank (DE) shall be the surviving corporation
in the Reincorporation Merger, and shall continue its corporate existence under
the laws of the State of Delaware.
2.2 Effective Time. The Reincorporation Merger shall become effective as
set forth in the articles of merger which shall be filed with the Secretary of
State of the State of North Carolina (the "North Carolina Secretary") and the
certificate of merger which shall be filed with the Secretary of State of the
State of Delaware (the "Delaware Secretary") on or before the Closing Date. The
term "Reincorporation Merger Effective Time" shall be the date and time when the
Reincorporation Merger becomes effective, as set forth in the certificate of
merger and articles of merger referred to in this Section 2.2.
2.3 Effects of the Reincorporation Merger. At and after the
Reincorporation Merger Effective Time, the Reincorporation Merger shall have the
effects set forth in Section 55-11-06 of the NCBCA and Sections 259 and 261 of
the DGCL.
2.4 Conversion of NationsBank Common Stock; NationsBank Preferred
Stock. (a) At the Reincorporation Merger Effective Time, by virtue of the
Reincorporation Merger and without any action on the part of NationsBank,
NationsBank (DE) or the holders of capital stock of NationsBank or NationsBank
(DE), each share of NationsBank Common Stock issued and outstanding immediately
prior to the Reincorporation Merger Effective Time shall be converted into one
share (the "Reincorporation Merger Exchange Ratio") of the common stock, par
value $.01 per share, of NationsBank (DE) (the "NationsBank (DE) Common Stock").
(b) All of the shares of NationsBank Common Stock converted into
NationsBank (DE) Common Stock pursuant to this Article II shall no longer be
outstanding and shall automatically be canceled and shall cease to exist as of
the Reincorporation Merger Effective Time, and each certificate (each a
"NationsBank Common Certificate") previously representing any such shares of
NationsBank Common Stock shall thereafter represent, without the requirement of
any exchange thereof, only the number of shares of NationsBank (DE) Common Stock
into which the shares of NationsBank Common Stock represented by such
NationsBank Common Certificate have been converted pursuant to this Section 2.4.
(c) Each share of NationsBank Series B Preferred Stock, excluding
Dissenting Shares (as defined below), issued and outstanding immediately prior
to the Reincorporation Merger Effective Time shall be converted into one share
of NationsBank (DE) Series B Preferred Stock. The terms of the NationsBank (DE)
Series B Preferred Stock shall be substantially identical to the terms of the
NationsBank Series B Preferred Stock.
(d) Each share of NationsBank ESOP Preferred Stock and NationsBank Series
BB Preferred Stock, excluding Dissenting Shares, issued and outstanding
immediately prior to the Reincorporation Merger Effective Time, shall become and
be converted into the right to receive one share of NationsBank (DE) ESOP
Convertible Preferred Stock or NationsBank (DE) Series BB Preferred Stock,
respectively, in each case having terms substantially identical to those of the
NationsBank ESOP Preferred Stock and the NationsBank Series BB Preferred Stock,
respectively, except that each share of NationsBank (DE) ESOP Preferred Stock
and NationsBank (DE) Series BB Preferred shall be convertible into shares of
NationsBank (DE) Common Stock at a conversion rate adjusted to take into account
the Reincorporation Merger Exchange Ratio, pursuant to and subject to the rights
of the holders thereof set forth in Article 3 of the Amended and Restated
Articles of Incorporation of NationsBank (the "NationsBank Articles").
APPENDIX B
B-3
(e) All of the shares of NationsBank Preferred Stock converted into the
right to receive NationsBank (DE) Preferred Stock pursuant to this Article II
shall no longer be outstanding and shall automatically be canceled and shall
cease to exist as of the Reincorporation Merger Effective Time, and the
certificates (the "NationsBank Preferred Stock Certificates") previously
representing such shares of NationsBank Preferred Stock shall thereafter
represent, without the requirement of any exchange thereof, only the right to
receive the number of shares and series of NationsBank (DE) Preferred Stock into
which the shares of NationsBank Preferred Stock represented by such NationsBank
Preferred Stock Certificates have been converted pursuant to this Section 2.4.
2.5 NationsBank (DE) Common Stock. At and after the Reincorporation Merger
Effective Time, each share of NationsBank (DE) Common Stock issued and
outstanding immediately prior to the Reincorporation Merger Effective Time shall
be canceled and retired and shall resume the status of authorized and unissued
shares of NationsBank (DE) Common Stock, and no shares of NationsBank (DE)
Common Stock or other securities of NationsBank (DE) shall be issued in respect
thereof.
2.6 Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, shares of NationsBank Preferred Stock which are outstanding
immediately prior to the Reincorporation Merger Effective Time and with respect
to which dissenters' rights shall have been properly demanded in accordance with
Article 13 of the NCBCA("Dissenting Shares") shall not be converted into a
corresponding series of NationsBank (DE) Preferred Stock; instead, the holders
thereof shall be entitled to payment of the appraised value of such Dissenting
Shares in accordance with the provisions of Article 13 of the NCBCA; provided,
however, that (i) if any holder of Dissenting Shares shall subsequently deliver
a written withdrawal of such holder's demand for appraisal of such shares, or
(ii) if any holder fails to establish such holder's entitlement to dissenters'
rights as provided in Article 13 of the NCBCA, such holder or holders (as the
case may be) shall forfeit the right to appraisal of such shares of NationsBank
Preferred Stock, and each of such shares shall thereupon be deemed to have been
converted into the right to receive, and to have become exchangeable for, as of
the Effective Time, shares of NationsBank (DE) Preferred Stock, as provided in
Section 2.4.
2.7 Options. At the Reincorporation Merger Effective Time, each option
granted by NationsBank to purchase shares of NationsBank Common Stock which is
outstanding and unexercised immediately prior thereto shall cease to represent a
right to acquire shares of NationsBank Common Stock and shall be converted
automatically into an option to purchase a number of shares of NationsBank (DE)
Common Stock equal to the number of shares of NationsBank Common Stock subject
to such option immediately prior to the Reincorporation Merger Effective Time at
an exercise price per share of NationsBank (DE) Common Stock equal to the
exercise price per share of NationsBank Common Stock in effect immediately prior
to the Reincorporation Merger Effective Time and otherwise subject to the terms
of the NationsBank Stock Plans under which such options were issued and the
agreements evidencing grants thereunder. The adjustment provided herein with
respect to any options which are "incentive stock options" (as defined in
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code")) shall
be and is intended to be effected in a manner which is consistent with Section
424(a) of the Code. The duration and other terms of the new option shall be the
same as the original option except that all references to NationsBank shall be
deemed to be references to NationsBank (DE).
2.8 Certificate of Incorporation. Subject to the terms and conditions of
this Agreement, at the Reincorporation Merger Effective Time, the Certificate of
Incorporation of NationsBank (DE) (which shall be in substantially the form
attached hereto as Exhibit A with such modifications as BankAmerica and
NationsBank shall mutually determine and shall include provisions for the
NationsBank (DE) Stock as contemplated by this Agreement) shall be the
Certificate of Incorporation of the surviving corporation in the Reincorporation
Merger until thereafter amended in accordance with applicable law.
2.9 Board of Directors; Management. From and after the Reincorporation
Merger Effective Time, until duly altered in accordance with applicable law, the
directors of NationsBank shall be the directors of NationsBank (DE), and the
officers of NationsBank shall be the officers of NationsBank (DE).
APPENDIX B
B-4
* * *
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.
NATIONSBANK CORPORATION NATIONSBANK (DE) CORPORATION
By: /s/ HUGH L. MCCOLL, JR. By: /s/ HUGH L. MCCOLL, JR.
------------------------------- ------------------------------
Name: Hugh L. McColl, Jr. Name: Hugh L. McColl, Jr.
Title: Chief Executive Officer Title: Chief Executive Officer
APPENDIX B
B-5
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APPENDIX C
- --------------------------------------------------------------------------------
STOCK OPTION AGREEMENT
DATED AS OF APRIL 10, 1998
BETWEEN
BANKAMERICA CORPORATION,
AS ISSUER,
AND NATIONSBANK CORPORATION,
AS GRANTEE
- --------------------------------------------------------------------------------
APPENDIX C
C-1
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND TO
RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated April 10, 1998, between BankAmerica
Corporation, a Delaware corporation ("Issuer"), and NationsBank Corporation, a
North Carolina corporation ("Grantee").
WITNESSETH:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Reorganization of even date herewith (the "Merger Agreement"), which agreement
has been executed by the parties hereto immediately prior to this Stock Option
Agreement (the "Agreement"); and
WHEREAS, as a condition to Grantee's entering into the Merger Agreement and
in consideration therefor, Issuer has agreed to grant Grantee the Option (as
hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable option
(the "Option") to purchase, subject to the terms hereof, up to 135,840,487 fully
paid and non-assessable shares of Issuer's Common Stock, without par value
("Common Stock"), at a price of $86.50 per share (the "Option Price"); provided,
however, that in no event shall the number of shares of Common Stock for which
this Option is exercisable exceed 19.9% of the Issuer's issued and outstanding
shares of Common Stock without giving effect to any shares subject to or issued
pursuant to the Option. The number of shares of Common Stock that may be
received upon the exercise of the Option and the Option Price are subject to
adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are either (i)
issued or otherwise become outstanding after the date of this Agreement (other
than pursuant to this Agreement) or (ii) redeemed, repurchased, retired or
otherwise cease to be outstanding after the date of the Agreement, the number of
shares of Common Stock subject to the Option shall be increased or decreased, as
appropriate, so that, after such issuance, such number equals 19.9% of the
number of shares of Common Stock then issued and outstanding without giving
effect to any shares subject or issued pursuant to the Option. Nothing contained
in this Section 1(b) or elsewhere in this Agreement shall be deemed to authorize
Issuer or Grantee to breach any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the Option, in
whole or part, and from time to time, if, but only if, both an Initial
Triggering Event (as hereinafter defined) and a Subsequent Triggering Event (as
hereinafter defined) shall have occurred prior to the occurrence of an Exercise
Termination Event (as hereinafter defined), provided that the Holder shall have
sent the written notice of such exercise (as provided in subsection (e) of this
Section 2) within 90 days following such Subsequent Triggering Event. Each of
the following shall be an "Exercise Termination Event": (i) the Effective Time
(as defined in the Merger Agreement) of the Merger; (ii) termination of the
Merger Agreement in accordance with the provisions thereof if such termination
occurs prior to the occurrence of an Initial Triggering Event except a
termination by Grantee pursuant to Section 9.1(b) of the Merger Agreement
(unless the breach by Issuer giving rise to such right of termination is
non-volitional); or (iii) the passage of 12 months after termination of the
Merger Agreement if such termination follows the occurrence of an Initial
Triggering Event or is a termination by Grantee pursuant to Section 9.1(b) of
the Merger Agreement (unless the breach by Issuer giving rise to such right of
termination is non-volitional) (provided that if an Initial Triggering Event
continues or occurs beyond such termination and prior to the passage of such
12-month period, the Exercise Termination Event shall be 12 months from the
expiration of the Last Triggering Event but in no event more than 18 months
after such termination). The "Last Triggering Event" shall mean the last Initial
Triggering Event to expire. The term "Holder" shall mean the holder or holders
of the Option.
APPENDIX C
C-2
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) Issuer or any of its Subsidiaries (each an "Issuer Subsidiary"),
without having received Grantee's prior written consent, shall have entered
into an agreement to engage in an Acquisition Transaction (as hereinafter
defined) with any person (the term "person" for purposes of this Agreement
having the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and the rules
and regulations thereunder) other than Grantee or any of its Subsidiaries
(each a "Grantee Subsidiary") or the Board of Directors of Issuer shall
have recommended that the stockholders of Issuer approve or accept any
Acquisition Transaction. For purposes of this Agreement, "Acquisition
Transaction" shall mean (w) a merger or consolidation, or any similar
transaction, involving Issuer or any Significant Subsidiary (as defined in
Rule 1-02 of Regulation S-X promulgated by the Securities and Exchange
Commission (the "SEC")) of Issuer, (x) a purchase, lease or other
acquisition or assumption of all or a substantial portion of the assets or
deposits of Issuer or any Significant Subsidiary of Issuer, (y) a purchase
or other acquisition (including by way of merger, consolidation, share
exchange or otherwise) of securities representing 10% or more of the voting
power of Issuer, or (z) any substantially similar transaction; provided,
however, that in no event shall any merger, consolidation, purchase or
similar transaction involving only the Issuer and one or more of its
Subsidiaries or involving only any two or more of such Subsidiaries, be
deemed to be an Acquisition Transaction, provided that any such transaction
is not entered into in violation of the terms of the Merger Agreement;
(ii) Issuer or any Issuer Subsidiary, without having received
Grantee's prior written consent, shall have authorized, recommended,
proposed or publicly announced its intention to authorize, recommend or
propose, to engage in an Acquisition Transaction with any person other than
Grantee or a Grantee Subsidiary, or the Board of Directors of Issuer shall
have publicly withdrawn or modified, or publicly announced its intention to
withdraw or modify, in any manner adverse to Grantee, its recommendation
that the stockholders of Issuer approve the transactions contemplated by
the Merger Agreement in anticipation of engaging in an Acquisition
Transaction;
(iii) Any person other than Grantee, any Grantee Subsidiary or any
Issuer Subsidiary acting in a fiduciary capacity in the ordinary course of
its business shall have acquired beneficial ownership or the right to
acquire beneficial ownership of 10% or more of the outstanding shares of
Common Stock (the term "beneficial ownership" for purposes of this
Agreement having the meaning assigned thereto in Section 13(d) of the 1934
Act, and the rules and regulations thereunder);
(iv) Any person other than Grantee or any Grantee Subsidiary shall
have made a bona fide proposal to Issuer or its stockholders by public
announcement or written communication that is or becomes the subject of
public disclosure to engage in an Acquisition Transaction;
(v) After an overture is made by a third party to Issuer or its
stockholders to engage in an Acquisition Transaction, Issuer shall have
breached any covenant or obligation contained in the Merger Agreement and
such breach (x) would entitle Grantee to terminate the Merger Agreement and
(y) shall not have been cured prior to the Notice Date (as defined below);
or
(vi) Any person other than Grantee or any Grantee Subsidiary, other
than in connection with a transaction to which Grantee has given its prior
written consent, shall have filed an application or notice with the Federal
Reserve Board, or other federal or state bank regulatory authority, which
application or notice has been accepted for processing, for approval to
engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean either of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person of beneficial ownership of 20% or
more of the then outstanding Common Stock; or
APPENDIX C
C-3
(ii) The occurrence of the Initial Triggering Event described in
paragraph (i) of subsection (b) of this Section 2, except that the
percentage referred to in clause (y) shall be 20%.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of
any Initial Triggering Event or Subsequent Triggering Event of which it has
notice (together, a "Triggering Event"), it being understood that the giving of
such notice by Issuer shall not be a condition to the right of the Holder to
exercise the Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option, it shall send to Issuer a written notice (the date of which being herein
referred to as the "Notice Date") specifying (i) the total number of shares it
will purchase pursuant to such exercise and (ii) a place and date not earlier
than three business days nor later than 60 business days from the Notice Date
for the closing of such purchase (the "Closing Date"); provided that if prior
notification to or approval of the Federal Reserve Board or any other regulatory
agency is required in connection with such purchase, the Holder shall promptly
file the required notice or application for approval and shall expeditiously
process the same and the period of time that otherwise would run pursuant to
this sentence shall run instead from the date on which any required notification
periods have expired or been terminated or such approvals have been obtained and
any requisite waiting period or periods shall have passed. Any exercise of the
Option shall be deemed to occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section 2, the
Holder shall pay to Issuer the aggregate purchase price for the shares of Common
Stock purchased pursuant to the exercise of the Option in immediately available
funds by wire transfer to a bank account designated by Issuer, provided that
failure or refusal of Issuer to designate such a bank account shall not preclude
the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable hereunder, and the Holder
shall deliver to Issuer a copy of this Agreement and a letter agreeing that the
Holder will not offer to sell or otherwise dispose of such shares in violation
of applicable law or the provisions of this Agreement.
(h) Certificates for Common Stock delivered at a closing hereunder may be
endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is subject
to certain provisions of an agreement between the registered holder
hereof and Issuer and to resale restrictions arising under the
Securities Act of 1933, as amended. A copy of such agreement is on
file at the principal office of Issuer and will be provided to the
holder hereof without charge upon receipt by Issuer of a written
request therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "1933 Act"), in the above legend
shall be removed by delivery of substitute certificate(s) without such reference
if the Holder shall have delivered to Issuer a copy of a letter from the staff
of the SEC, or an opinion of counsel, in form and substance reasonably
satisfactory to Issuer, to the effect that such legend is not required for
purposes of the 1933 Act; (ii) the reference to the provisions of this Agreement
in the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the shares have been sold or transferred in compliance
with the provisions of this Agreement and under circumstances that do not
require the retention of such reference; and (iii) the legend shall be removed
in its entirety if the conditions in the preceding clauses (i) and (ii) are both
satisfied. In addition, such certificates shall bear any other legend as may be
required by law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder. Issuer shall
pay
APPENDIX C
C-4
all expenses, and any and all United States federal, state and local taxes and
other charges that may be payable in connection with the preparation, issue and
delivery of stock certificates under this Section 2 in the name of the Holder or
its assignee, transferee or designee.
3. Issuer agrees: (i) that it will not, by charter amendment or through
reorganization, consolidation, merger, dissolution or sale of assets, or by any
other voluntary act, avoid or seek to avoid the observance or performance of any
of the covenants, stipulations or conditions to be observed or performed
hereunder by Issuer; (ii) promptly to take all action as may from time to time
be required (including (x) complying with all premerger notification, reporting
and waiting period requirements specified in 15 U.S.C. sec. 18a and regulations
promulgated thereunder and (y) in the event, under the Bank Holding Company Act
of 1956, as amended (the "BHCA"), or the Change in Bank Control Act of 1978, as
amended, or any state banking law, prior approval of or notice to the Federal
Reserve Board or to any state regulatory authority is necessary before the
Option may be exercised, cooperating fully with the Holder in preparing such
applications or notices and providing such information to the Federal Reserve
Board or such state regulatory authority as they may require) in order to permit
the Holder to exercise the Option and Issuer duly and effectively to issue
shares of Common Stock pursuant hereto; (iii) that if both an Initial Triggering
Event and a Subsequent Triggering Event shall have occurred prior to the
occurrence of an Exercise Termination Event, the Issuer shall use its best
efforts to obtain additional authorized but unissued shares which are free of
preemptive rights so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock and
(iv) promptly to take all action provided herein to protect the rights of the
Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable, without
expense, at the option of the Holder, upon presentation and surrender of this
Agreement at the principal office of Issuer, for other Agreements providing for
Options of different denominations entitling the holder thereof to purchase, on
the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Stock Option
Agreements and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common Stock
that are purchasable upon exercise of the Option pursuant to Section 1 of this
Agreement, the number of shares of Common Stock purchasable upon the exercise of
the Option and the Option Price shall be subject to adjustment from time to time
as provided in this Section 5. In the event of any change in, or distributions
in respect of, the Common Stock by reason of stock dividends, splitups, mergers,
recapitalizations, combinations, subdivisions, conversions, exchanges of shares,
distributions on or in respect of the Common Stock that would be prohibited
under the terms of the Merger Agreement, or the like, the type and number of
shares of Common Stock purchasable upon exercise hereof and the Option Price
shall be appropriately adjusted in such manner as shall fully preserve the
economic benefits provided hereunder and proper provision shall be made in any
agreement governing any such transaction to provide for such proper adjustment
and the full satisfaction of the Issuer's obligations hereunder.
6. Upon the occurrence of a Subsequent Triggering Event that occurs prior
to an Exercise Termination Event, Issuer shall, at the request of Grantee
delivered within 90 days of such Subsequent Triggering Event (whether on its own
behalf or on behalf of any subsequent holder of this Option (or part thereof) or
any of the shares of Common Stock issued pursuant hereto), promptly prepare,
file and keep current a shelf registration statement under the 1933 Act covering
this Option and any shares issued and issuable pursuant to this Option and shall
use its reasonable best efforts to cause such registration statement to become
effective and remain current in order to permit the sale or other disposition of
this Option and any shares of Common Stock issued upon total or partial exercise
of this Option ("Option Shares") in accordance with any plan of disposition
APPENDIX C
C-5
requested by Grantee. Issuer will use its reasonable best efforts to cause such
registration statement first to become effective and then to remain effective
for such period not in excess of 180 days from the day such registration
statement first becomes effective or such shorter time as may be reasonably
necessary to effect such sales or other dispositions. Grantee shall have the
right to demand two such registrations. The foregoing notwithstanding, if, at
the time of any request by Grantee for registration of the Option or Option
Shares as provided above, Issuer is in registration with respect to an
underwritten public offering of shares of Common Stock, and if in the good faith
judgment of the managing underwriter or managing underwriters, or, if none, the
sole underwriter or underwriters, of such offering the inclusion of the Holder's
Option or Option Shares would interfere with the successful marketing of the
shares of Common Stock offered by Issuer, the number of Option Shares otherwise
to be covered in the registration statement contemplated hereby may be reduced;
and provided, however, that after any such required reduction the number of
Option Shares to be included in such offering for the account of the Holder
shall constitute at least 25% of the total number of shares to be sold by the
Holder and Issuer in the aggregate; and provided further, however, that if such
reduction occurs, then the Issuer shall file a registration statement for the
balance as promptly as practicable and no reduction shall thereafter occur. Each
such Holder shall provide all information reasonably requested by Issuer for
inclusion in any registration statement to be filed hereunder. If requested by
any such Holder in connection with such registration, Issuer shall become a
party to any underwriting agreement relating to the sale of such shares, but
only to the extent of obligating itself in respect of representations,
warranties, indemnities and other agreements customarily included in secondary
offering underwriting agreements for the Issuer. Upon receiving any request
under this Section 6 from any Holder, Issuer agrees to send a copy thereof to
any other person known to Issuer to be entitled to registration rights under
this Section 6, in each case by promptly mailing the same, postage prepaid, to
the address of record of the persons entitled to receive such copies.
Notwithstanding anything to the contrary contained herein, in no event shall
Issuer be obligated to effect more than two registrations pursuant to this
Section 6 by reason of the fact that there shall be more than one Grantee as a
result of any assignment or division of this Agreement.
7. (a) Immediately prior to the occurrence of a Repurchase Event (as
defined below), (i) following a request of the Holder, delivered prior to an
Exercise Termination Event, Issuer (or any successor thereto) shall repurchase
the Option from the Holder at a price (the "Option Repurchase Price") equal to
the amount by which (A) the Market/Offer Price (as defined below) exceeds (B)
the Option Price, multiplied by the number of shares for which this Option may
then be exercised (provided that, notwithstanding anything to the contrary, if
the Issuer shall not have sufficient additional authorized but unissued shares
or treasury shares of Common Stock so that the Option may be exercised in full,
the Option Repurchase Price shall be calculated as if there were sufficient
shares which were authorized but unissued so that the Option could be exercised
in full) and (ii) at the request of the owner of Option Shares from time to time
(the "Owner"), delivered within 90 days of such occurrence (or such later period
as provided in Section 10), Issuer shall repurchase such number of the Option
Shares from the Owner as the Owner shall designate at a price (the "Option Share
Repurchase Price") equal to the Market/Offer Price multiplied by the number of
Option Shares so designated. The term "Market/Offer Price" shall mean the
highest of (i) the price per share of Common Stock at which a tender offer or
exchange offer therefor has been made, (ii) the price per share of Common Stock
to be paid by any third party pursuant to an agreement with Issuer, (iii) the
highest closing price for shares of Common Stock within the six-month period
immediately preceding the date the Holder gives notice of the required
repurchase of this Option or the Owner gives notice of the required repurchase
of Option Shares, as the case may be, or (iv) in the event of a sale of all or a
substantial portion of Issuer's assets, the sum of the price paid in such sale
for such assets and the current market value of the remaining assets of Issuer
as determined by a nationally recognized investment banking firm selected by the
Holder or the Owner, as the case may be, and reasonably acceptable to the
Issuer, divided by the number of shares of Common Stock of Issuer outstanding at
the time of such sale. In determining the Market/Offer Price, the value of
consideration other than cash shall be determined by a nationally recognized
investment banking firm selected by the Holder or Owner, as the case may be, and
reasonably acceptable to the Issuer.
(b) The Holder and the Owner, as the case may be, may exercise its right to
require Issuer to repurchase the Option and any Option Shares pursuant to this
Section 7 by surrendering for such purpose to Issuer, at its principal office, a
copy of this Agreement or certificates for Option Shares, as applicable,
accompanied by a
APPENDIX C
C-6
written notice or notices stating that the Holder or the Owner, as the case may
be, elects to require Issuer to repurchase this Option and/or the Option Shares
in accordance with the provisions of this Section 7. Within the latter to occur
of (x) five business days after the surrender of the Option and/or certificates
representing Option Shares and the receipt of such notice or notices relating
thereto and (y) the time that is immediately prior to the occurrence of a
Repurchase Event, Issuer shall deliver or cause to be delivered to the Holder
the Option Repurchase Price and/or to the Owner the Option Share Repurchase
Price therefor or the portion thereof, if any, that Issuer is not then
prohibited under applicable law and regulation from so delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation from repurchasing the Option and/or the Option Shares in full, Issuer
shall immediately so notify the Holder and/or the Owner and thereafter deliver
or cause to be delivered, from time to time, to the Holder and/or the Owner, as
appropriate, the portion of the Option Repurchase Price and the Option Share
Repurchase Price, respectively, that it is no longer prohibited from delivering,
within five business days after the date on which Issuer is no longer so
prohibited; provided, however, that if Issuer at any time after delivery of a
notice of repurchase pursuant to paragraph (b) of this Section 7 is prohibited
under applicable law or regulation from delivering to the Holder and/or the
Owner, as appropriate, the Option Repurchase Price and the Option Share
Repurchase Price, respectively, in full (and Issuer hereby undertakes to use its
best efforts to obtain all required regulatory and legal approvals and to file
any required notices, in each case as promptly as practicable in order to
accomplish such repurchase), the Holder or Owner may revoke its notice of
repurchase of the Option or the Option Shares either in whole or to the extent
of the prohibition, whereupon, in the latter case, Issuer shall promptly (i)
deliver to the Holder and/or the Owner, as appropriate, that portion of the
Option Repurchase Price or the Option Share Repurchase Price that Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Holder, a new Stock Option Agreement evidencing the right of the Holder to
purchase that number of shares of Common Stock obtained by multiplying the
number of shares of Common Stock for which the surrendered Stock Option
Agreement was exercisable at the time of delivery of the notice of repurchase by
a fraction, the numerator of which is the Option Repurchase Price less the
portion thereof theretofore delivered to the Holder and the denominator of which
is the Option Repurchase Price, or (B) to the Owner, a certificate for the
Option Shares it is then so prohibited from repurchasing.
(d) For purposes of this Section 7, a Repurchase Event shall be deemed to
have occurred (i) upon the consummation of any merger, consolidation or similar
transaction involving Issuer or any purchase, lease or other acquisition of all
or a substantial portion of the assets of Issuer, other than any such
transaction which would not constitute an Acquisition Transaction pursuant to
the provisos to Section 2(b)(i) hereof or (ii) upon the acquisition by any
person of beneficial ownership of 50% or more of the then outstanding shares of
Common Stock, provided that no such event shall constitute a Repurchase Event
unless a Subsequent Triggering Event shall have occurred prior to an Exercise
Termination Event. The parties hereto agree that Issuer's obligations to
repurchase the Option or Option Shares under this Section 7 shall not terminate
upon the occurrence of an Exercise Termination Event unless no Subsequent
Triggering Event shall have occurred prior to the occurrence of an Exercise
Termination Event.
8. (a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any person,
other than Grantee or one of its Subsidiaries, and shall not be the continuing
or surviving corporation of such consolidation or merger, (ii) to permit any
person, other than Grantee or one of its Subsidiaries, to merge into Issuer and
Issuer shall be the continuing or surviving corporation, but, in connection with
such merger, the then outstanding shares of Common Stock shall be changed into
or exchanged for stock or other securities of any other person or cash or any
other property or the then outstanding shares of Common Stock shall after such
merger represent less than 50% of the outstanding voting shares and voting share
equivalents of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Grantee or one of its
Subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of the Holder, of either (x) the Acquiring Corporation
(as hereinafter defined) or (y) any person that controls the Acquiring
Corporation.
APPENDIX C
C-7
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or surviving
corporation of a consolidation or merger with Issuer (if other than
Issuer), (ii) Issuer in a merger in which Issuer is the continuing or
surviving person, and (iii) the transferee of all or substantially all of
Issuer's assets.
(2) "Substitute Common Stock" shall mean the common stock issued by
the issuer of the Substitute Option upon exercise of the Substitute Option.
(3) "Assigned Value" shall mean the Market/Offer Price, as defined in
Section 7.
(4) "Average Price" shall mean the average closing price of a share of
the Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day preceding
such consolidation, merger or sale; provided that if Issuer is the issuer
of the Substitute Option, the Average Price shall be computed with respect
to a share of common stock issued by the person merging into Issuer or by
any company which controls or is controlled by such person, as the Holder
may elect.
(c) The Substitute Option shall have the same terms as the Option,
provided, that if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to the Holder. The issuer of the Substitute Option shall
also enter into an agreement with the then Holder or Holders of the Substitute
Option in substantially the same form as this Agreement, which shall be
applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares of
Substitute Common Stock as is equal to the Assigned Value multiplied by the
number of shares of Common Stock for which the Option is then exercisable,
divided by the Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock for which the Option is then exercisable and the denominator of
which shall be the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than 19.9% of the
shares of Substitute Common Stock outstanding prior to exercise but for this
clause (e), the issuer of the Substitute Option (the "Substitute Option Issuer")
shall make a cash payment to Holder equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in this clause (e)
over (ii) the value of the Substitute Option after giving effect to the
limitation in this clause (e). This difference in value shall be determined by a
nationally recognized investment banking firm selected by the Holder or the
Owner, as the case may be, and reasonably acceptable to the Acquiring
Corporation.
(f) Issuer shall not enter into any transaction described in subsection (a)
of this Section 8 unless the Acquiring Corporation and any person that controls
the Acquiring Corporation assume in writing all the obligations of Issuer
hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the Substitute Option Issuer shall repurchase the
Substitute Option from the Substitute Option Holder at a price (the "Substitute
Option Repurchase Price") equal to (x) the amount by which (i) the Highest
Closing Price (as hereinafter defined) exceeds (ii) the exercise price of the
Substitute Option, multiplied by the number of shares of Substitute Common Stock
for which the Substitute Option may then be exercised plus (y) Grantee's
reasonable out-of-pocket expenses (to the extent not previously reimbursed), and
at the request of the owner (the "Substitute Share Owner") of shares of
Substitute Common Stock (the "Substitute Shares"), the Substitute Option Issuer
shall repurchase the Substitute Shares at a price (the "Substitute Share
Repurchase Price") equal to (x) the Highest Closing Price multiplied by the
number of Substitute Shares so designated plus (y) Grantee's reasonable
Out-of-Pocket Expenses (to the extent not previously reimbursed). The term
"Highest Closing Price" shall mean the highest closing price for shares of
Substitute
APPENDIX C
C-8
Common Stock within the six-month period immediately preceding the date the
Substitute Option Holder gives notice of the required repurchase of the
Substitute Option or the Substitute Share Owner gives notice of the required
repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as the
case may be, may exercise its respective right to require the Substitute Option
Issuer to repurchase the Substitute Option and the Substitute Shares pursuant to
this Section 9 by surrendering for such purpose to the Substitute Option Issuer,
at its principal office, the agreement for such Substitute Option (or, in the
absence of such an agreement, a copy of this Agreement) and certificates for
Substitute Shares accompanied by a written notice or notices stating that the
Substitute Option Holder or the Substitute Share Owner, as the case may be,
elects to require the Substitute Option Issuer to repurchase the Substitute
Option and/or the Substitute Shares in accordance with the provisions of this
Section 9. As promptly as practicable, and in any event within five business
days after the surrender of the Substitute Option and/or certificates
representing Substitute Shares and the receipt of such notice or notices
relating thereto, the Substitute Option Issuer shall deliver or cause to be
delivered to the Substitute Option Holder the Substitute Option Repurchase Price
and/or to the Substitute Share Owner the Substitute Share Repurchase Price
therefor or, in either case, the portion thereof which the Substitute Option
Issuer is not then prohibited under applicable law and regulation from so
delivering.
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation from repurchasing the Substitute Option and/or the
Substitute Shares in part or in full, the Substitute Option Issuer following a
request for repurchase pursuant to this Section 9 shall immediately so notify
the Substitute Option Holder and/or the Substitute Share Owner and thereafter
deliver or cause to be delivered, from time to time, to the Substitute Option
Holder and/or the Substitute Share Owner, as appropriate, the portion of the
Substitute Share Repurchase Price, respectively, which it is no longer
prohibited from delivering, within five business days after the date on which
the Substitute Option Issuer is no longer so prohibited; provided, however, that
if the Substitute Option Issuer is at any time after delivery of a notice of
repurchase pursuant to subsection (b) of this Section 9 prohibited under
applicable law or regulation from delivering to the Substitute Option Holder
and/or the Substitute Share Owner, as appropriate, the Substitute Option
Repurchase Price and the Substitute Share Repurchase Price, respectively, in
full (and the Substitute Option Issuer shall use its best efforts to obtain all
required regulatory and legal approvals, in each case as promptly as practicable
in order to accomplish such repurchase), the Substitute Option Holder or
Substitute Share Owner may revoke its notice of repurchase of the Substitute
Option or the Substitute Shares either in whole or to the extent of the
prohibition, whereupon, in the latter case, the Substitute Option Issuer shall
promptly (i) deliver to the Substitute Option Holder or Substitute Share Owner,
as appropriate, that portion of the Substitute Option Repurchase Price or the
Substitute Share Repurchase Price that the Substitute Option Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Substitute Option Holder, a new Substitute Option evidencing the right of the
Substitute Option Holder to purchase that number of shares of the Substitute
Common Stock obtained by multiplying the number of shares of the Substitute
Common Stock for which the surrendered Substitute Option was exercisable at the
time of delivery of the notice of repurchase by a fraction, the numerator of
which is the Substitute Option Repurchase Price less the portion thereof
theretofore delivered to the Substitute Option Holder and the denominator of
which is the Substitute Option Repurchase Price, or (B) to the Substitute Share
Owner, a certificate for the Substitute Common Shares it is then so prohibited
from repurchasing.
10. The 90-day period for exercise of certain rights under Sections 2, 6, 7
and 13 shall be extended: (i) to the extent necessary to obtain all regulatory
approvals for the exercise of such rights, and for the expiration of all
statutory waiting periods; and (ii) to the extent necessary to avoid liability
under Section 16(b) of the 1934 Act by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of Issuer and no other corporate
proceedings on the part of Issuer are necessary to
APPENDIX C
C-9
authorize this Agreement or to consummate the transactions so contemplated.
This Agreement has been duly and validly executed and delivered by Issuer.
(b) Subject to Section 3, Issuer has taken all necessary corporate
action to authorize and reserve and to permit it to issue, and at all times
from the date hereof through the termination of this Agreement in
accordance with its terms will have reserved for issuance upon the exercise
of the Option, that number of shares of Common Stock equal to the maximum
number of shares of Common Stock at any time and from time to time issuable
hereunder, and all such shares, upon issuance pursuant hereto, will be duly
authorized, validly issued, fully paid, nonassessable, and will be
delivered free and clear of all claims, liens, encumbrance and security
interests and not subject to any preemptive rights.
(c) Issuer has taken all action (including if required redeeming all
of the Rights or amending or terminating the Rights Agreement) so that the
entering into of this Option Agreement, the acquisition of shares of Common
Stock hereunder and the other transactions contemplated hereby do not and
will not result in the grant of any rights to any person under the Rights
Agreement or enable or require the Rights to be exercised, distributed or
triggered.
12. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals or consents referred to
herein, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of Grantee. This Agreement has been duly executed and
delivered by Grantee.
(b) The Option is not being, and any shares of Common Stock or other
securities acquired by Grantee upon exercise of the Option will not be,
acquired with a view to the public distribution thereof and will not be
transferred or otherwise disposed of except in a transaction registered or
exempt from registration under the Securities Act.
13. Neither of the parties hereto may assign any of its rights or
obligations under this Option Agreement or the Option created hereunder to any
other person, without the express written consent of the other party, except
that in the event a Subsequent Triggering Event shall have occurred prior to an
Exercise Termination Event, Grantee, subject to the express provisions hereof,
may assign in whole or in part its rights and obligations hereunder within 90
days following such Subsequent Triggering Event (or such later period as
provided in Section 10); provided, however, that until the date 15 days
following the date on which the Federal Reserve Board approves an application by
Grantee under the BHCA to acquire the shares of Common Stock subject to the
Option, Grantee may not assign its rights under the Option except in (i) a
widely dispersed public distribution, (ii) a private placement in which no one
party acquires the right to purchase in excess of 2% of the voting shares of
Issuer, (iii) an assignment to a single party (e.g., a broker or investment
banker) for the purpose of conducting a widely dispersed public distribution on
Grantee's behalf, or (iv) any other manner approved by the Federal Reserve
Board.
14. Each of Grantee and Issuer will use its best efforts to make all
filings with, and to obtain consents of, all third parties and governmental
authorities necessary to the consummation of the transactions contemplated by
this Agreement, including without limitation making application to list the
shares of Common Stock issuable hereunder on the New York Stock Exchange upon
official notice of issuance and applying to the Federal Reserve Board under the
BHCA for approval to acquire the shares issuable hereunder, but Grantee shall
not be obligated to apply to state banking authorities for approval to acquire
the shares of Common Stock issuable hereunder until such time, if ever, as it
deems appropriate to do so.
15. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief.
16. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder
APPENDIX C
C-10
of the terms, provisions and covenants and restrictions contained in this
Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or regulatory
agency determines that the Holder is not permitted to acquire, or Issuer is not
permitted to repurchase pursuant to Section 7, the full number of shares of
Common Stock provided in Section 1(a) hereof (as adjusted pursuant to Section
1(b) or 5 hereof), it is the express intention of Issuer to allow the Holder to
acquire or to require Issuer to repurchase such lesser number of shares as may
be permissible, without any amendment or modification hereof.
17. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
cable, telegram, telecopy or telex, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Merger Agreement.
18. This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.
19. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
20. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
21. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors except as
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided herein.
22. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
BANKAMERICA CORPORATION NATIONSBANK CORPORATION
By: /s/ DAVID A. COULTER By: /s/ HUGH L. MCCOLL, JR.
--------------------------------------- ------------------------------
Name: David A. Coulter Name: Hugh L. McColl, Jr.
Title: Chairman of the Board, President Title: Chief Executive Officer
and Chief Executive Officer
APPENDIX C
C-11
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APPENDIX C
APPENDIX D
- --------------------------------------------------------------------------------
STOCK OPTION AGREEMENT
DATED AS OF APRIL 10, 1998
BETWEEN
NATIONSBANK CORPORATION,
AS ISSUER,
AND BANKAMERICA CORPORATION,
AS GRANTEE
- --------------------------------------------------------------------------------
APPENDIX D
D-1
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND TO
RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated April 10, 1998, between NationsBank
Corporation, a North Carolina corporation ("Issuer"), and BankAmerica
Corporation, a Delaware corporation ("Grantee").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Reorganization of even date herewith (the "Merger Agreement"), which agreement
has been executed by the parties hereto immediately prior to this Stock Option
Agreement (the "Agreement"); and
WHEREAS, as a condition to Grantee's entering into the Merger Agreement and
in consideration therefor, Issuer has agreed to grant Grantee the Option (as
hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable option
(the "Option") to purchase, subject to the terms hereof, up to 191,975,012 fully
paid and non-assessable shares of Issuer's Common Stock, without par value
("Common Stock"), at a price of $76.4375 per share (the "Option Price");
provided, however, that in no event shall the number of shares of Common Stock
for which this Option is exercisable exceed 19.9% of the Issuer's issued and
outstanding shares of Common Stock without giving effect to any shares subject
to or issued pursuant to the Option. The number of shares of Common Stock that
may be received upon the exercise of the Option and the Option Price are subject
to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are either (i)
issued or otherwise become outstanding after the date of this Agreement (other
than pursuant to this Agreement) or (ii) redeemed, repurchased, retired or
otherwise cease to be outstanding after the date of the Agreement, the number of
shares of Common Stock subject to the Option shall be increased or decreased, as
appropriate, so that, after such issuance, such number equals 19.9% of the
number of shares of Common Stock then issued and outstanding without giving
effect to any shares subject or issued pursuant to the Option. Nothing contained
in this Section 1(b) or elsewhere in this Agreement shall be deemed to authorize
Issuer or Grantee to breach any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the Option, in
whole or part, and from time to time, if, but only if, both an Initial
Triggering Event (as hereinafter defined) and a Subsequent Triggering Event (as
hereinafter defined) shall have occurred prior to the occurrence of an Exercise
Termination Event (as hereinafter defined), provided that the Holder shall have
sent the written notice of such exercise (as provided in subsection (e) of this
Section 2) within 90 days following such Subsequent Triggering Event. Each of
the following shall be an "Exercise Termination Event": (i) the Effective Time
(as defined in the Merger Agreement) of the Merger; (ii) termination of the
Merger Agreement in accordance with the provisions thereof if such termination
occurs prior to the occurrence of an Initial Triggering Event except a
termination by Grantee pursuant to Section 9.1(b) of the Merger Agreement
(unless the breach by Issuer giving rise to such right of termination is
non-volitional); or (iii) the passage of 12 months after termination of the
Merger Agreement if such termination follows the occurrence of an Initial
Triggering Event or is a termination by Grantee pursuant to Section 9.1(b) of
the Merger Agreement (unless the breach by Issuer giving rise to such right of
termination is non-volitional) (provided that if an Initial Triggering Event
continues or occurs beyond such termination and prior to the passage of such
12-month period, the Exercise Termination Event shall be 12 months from the
expiration of the Last Triggering Event but in no event more than 18 months
after such termination). The "Last Triggering Event" shall mean the last Initial
Triggering Event to expire. The term "Holder" shall mean the holder or holders
of the Option.
APPENDIX D
D-2
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) Issuer or any of its Subsidiaries (each an "Issuer Subsidiary"),
without having received Grantee's prior written consent, shall have entered
into an agreement to engage in an Acquisition Transaction (as hereinafter
defined) with any person (the term "person" for purposes of this Agreement
having the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and the rules
and regulations thereunder) other than Grantee or any of its Subsidiaries
(each a "Grantee Subsidiary") or the Board of Directors of Issuer shall
have recommended that the stockholders of Issuer approve or accept any
Acquisition Transaction. For purposes of this Agreement, "Acquisition
Transaction" shall mean (w) a merger or consolidation, or any similar
transaction, involving Issuer or any Significant Subsidiary (as defined in
Rule 1-02 of Regulation S-X promulgated by the Securities and Exchange
Commission (the "SEC")) of Issuer, (x) a purchase, lease or other
acquisition or assumption of all or a substantial portion of the assets or
deposits of Issuer or any Significant Subsidiary of Issuer, (y) a purchase
or other acquisition (including by way of merger, consolidation, share
exchange or otherwise) of securities representing 10% or more of the voting
power of Issuer, or (z) any substantially similar transaction; provided,
however, that in no event shall any merger, consolidation, purchase or
similar transaction involving only the Issuer and one or more of its
Subsidiaries or involving only any two or more of such Subsidiaries, be
deemed to be an Acquisition Transaction, provided that any such transaction
is not entered into in violation of the terms of the Merger Agreement;
(ii) Issuer or any Issuer Subsidiary, without having received
Grantee's prior written consent, shall have authorized, recommended,
proposed or publicly announced its intention to authorize, recommend or
propose, to engage in an Acquisition Transaction with any person other than
Grantee or a Grantee Subsidiary, or the Board of Directors of Issuer shall
have publicly withdrawn or modified, or publicly announced its intention to
withdraw or modify, in any manner adverse to Grantee, its recommendation
that the stockholders of Issuer approve the transactions contemplated by
the Merger Agreement in anticipation of engaging in an Acquisition
Transaction;
(iii) Any person other than Grantee, any Grantee Subsidiary or any
Issuer Subsidiary acting in a fiduciary capacity in the ordinary course of
its business shall have acquired beneficial ownership or the right to
acquire beneficial ownership of 10% or more of the outstanding shares of
Common Stock (the term "beneficial ownership" for purposes of this
Agreement having the meaning assigned thereto in Section 13(d) of the 1934
Act, and the rules and regulations thereunder);
(iv) Any person other than Grantee or any Grantee Subsidiary shall
have made a bona fide proposal to Issuer or its stockholders by public
announcement or written communication that is or becomes the subject of
public disclosure to engage in an Acquisition Transaction;
(v) After an overture is made by a third party to Issuer or its
stockholders to engage in an Acquisition Transaction, Issuer shall have
breached any covenant or obligation contained in the Merger Agreement and
such breach (x) would entitle Grantee to terminate the Merger Agreement and
(y) shall not have been cured prior to the Notice Date (as defined below);
or
(vi) Any person other than Grantee or any Grantee Subsidiary, other
than in connection with a transaction to which Grantee has given its prior
written consent, shall have filed an application or notice with the Federal
Reserve Board, or other federal or state bank regulatory authority, which
application or notice has been accepted for processing, for approval to
engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean either of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person of beneficial ownership of 20% or
more of the then outstanding Common Stock; or
APPENDIX D
D-3
(ii) The occurrence of the Initial Triggering Event described in
paragraph (i) of subsection (b) of this Section 2, except that the
percentage referred to in clause (y) shall be 20%.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of
any Initial Triggering Event or Subsequent Triggering Event of which it has
notice (together, a "Triggering Event"), it being understood that the giving of
such notice by Issuer shall not be a condition to the right of the Holder to
exercise the Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option, it shall send to Issuer a written notice (the date of which being herein
referred to as the "Notice Date") specifying (i) the total number of shares it
will purchase pursuant to such exercise and (ii) a place and date not earlier
than three business days nor later than 60 business days from the Notice Date
for the closing of such purchase (the "Closing Date"); provided that if prior
notification to or approval of the Federal Reserve Board or any other regulatory
agency is required in connection with such purchase, the Holder shall promptly
file the required notice or application for approval and shall expeditiously
process the same and the period of time that otherwise would run pursuant to
this sentence shall run instead from the date on which any required notification
periods have expired or been terminated or such approvals have been obtained and
any requisite waiting period or periods shall have passed. Any exercise of the
Option shall be deemed to occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section 2, the
Holder shall pay to Issuer the aggregate purchase price for the shares of Common
Stock purchased pursuant to the exercise of the Option in immediately available
funds by wire transfer to a bank account designated by Issuer, provided that
failure or refusal of Issuer to designate such a bank account shall not preclude
the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable hereunder, and the Holder
shall deliver to Issuer a copy of this Agreement and a letter agreeing that the
Holder will not offer to sell or otherwise dispose of such shares in violation
of applicable law or the provisions of this Agreement.
(h) Certificates for Common Stock delivered at a closing hereunder may be
endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is subject
to certain provisions of an agreement between the registered holder
hereof and Issuer and to resale restrictions arising under the
Securities Act of 1933, as amended. A copy of such agreement is on
file at the principal office of Issuer and will be provided to the
holder hereof without charge upon receipt by Issuer of a written
request therefor."
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act of 1933, as amended (the "1933 Act"), in the
above legend shall be removed by delivery of substitute certificate(s) without
such reference if the Holder shall have delivered to Issuer a copy of a letter
from the staff of the SEC, or an opinion of counsel, in form and substance
reasonably satisfactory to Issuer, to the effect that such legend is not
required for purposes of the 1933 Act; (ii) the reference to the provisions of
this Agreement in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the shares have been sold or
transferred in compliance with the provisions of this Agreement and under
circumstances that do not require the retention of such reference; and (iii) the
legend shall be removed in its entirety if the conditions in the preceding
clauses (i) and (ii) are both satisfied. In addition, such certificates shall
bear any other legend as may be required by law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder. Issuer shall
pay
APPENDIX D
D-4
all expenses, and any and all United States federal, state and local taxes and
other charges that may be payable in connection with the preparation, issue and
delivery of stock certificates under this Section 2 in the name of the Holder or
its assignee, transferee or designee.
3. Issuer agrees: (i) that it will not, by charter amendment or through
reorganization, consolidation, merger, dissolution or sale of assets, or by any
other voluntary act, avoid or seek to avoid the observance or performance of any
of the covenants, stipulations or conditions to be observed or performed
hereunder by Issuer; (ii) promptly to take all action as may from time to time
be required (including (x) complying with all premerger notification, reporting
and waiting period requirements specified in 15 U.S.C. sec. 18a and regulations
promulgated thereunder and (y) in the event, under the Bank Holding Company Act
of 1956, as amended (the "BHCA"), or the Change in Bank Control Act of 1978, as
amended, or any state banking law, prior approval of or notice to the Federal
Reserve Board or to any state regulatory authority is necessary before the
Option may be exercised, cooperating fully with the Holder in preparing such
applications or notices and providing such information to the Federal Reserve
Board or such state regulatory authority as they may require) in order to permit
the Holder to exercise the Option and Issuer duly and effectively to issue
shares of Common Stock pursuant hereto; (iii) that if both an Initial Triggering
Event and a Subsequent Triggering Event shall have occurred prior to the
occurrence of an Exercise Termination Event, the Issuer shall use its best
efforts to obtain additional authorized but unissued shares which are free of
preemptive rights so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock and
(iv) promptly to take all action provided herein to protect the rights of the
Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable, without
expense, at the option of the Holder, upon presentation and surrender of this
Agreement at the principal office of Issuer, for other Agreements providing for
Options of different denominations entitling the holder thereof to purchase, on
the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Stock Option
Agreements and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common Stock
that are purchasable upon exercise of the Option pursuant to Section 1 of this
Agreement, the number of shares of Common Stock purchasable upon the exercise of
the Option and the Option Price shall be subject to adjustment from time to time
as provided in this Section 5. In the event of any change in, or distributions
in respect of, the Common Stock by reason of stock dividends, splitups, mergers,
recapitalizations, combinations, subdivisions, conversions, exchanges of shares,
distributions on or in respect of the Common Stock that would be prohibited
under the terms of the Merger Agreement, or the like, the type and number of
shares of Common Stock purchasable upon exercise hereof and the Option Price
shall be appropriately adjusted in such manner as shall fully preserve the
economic benefits provided hereunder and proper provision shall be made in any
agreement governing any such transaction to provide for such proper adjustment
and the full satisfaction of the Issuer's obligations hereunder.
6. Upon the occurrence of a Subsequent Triggering Event that occurs prior
to an Exercise Termination Event, Issuer shall, at the request of Grantee
delivered within 90 days of such Subsequent Triggering Event (whether on its own
behalf or on behalf of any subsequent holder of this Option (or part thereof) or
any of the shares of Common Stock issued pursuant hereto), promptly prepare,
file and keep current a shelf registration statement under the 1933 Act covering
this Option and any shares issued and issuable pursuant to this Option and shall
use its reasonable best efforts to cause such registration statement to become
effective and remain current in order to permit the sale or other disposition of
this Option and any shares of Common Stock issued upon total or partial exercise
of this Option ("Option Shares") in accordance with any plan of disposition
APPENDIX D
D-5
requested by Grantee. Issuer will use its reasonable best efforts to cause such
registration statement first to become effective and then to remain effective
for such period not in excess of 180 days from the day such registration
statement first becomes effective or such shorter time as may be reasonably
necessary to effect such sales or other dispositions. Grantee shall have the
right to demand two such registrations. The foregoing notwithstanding, if, at
the time of any request by Grantee for registration of the Option or Option
Shares as provided above, Issuer is in registration with respect to an
underwritten public offering of shares of Common Stock, and if in the good faith
judgment of the managing underwriter or managing underwriters, or, if none, the
sole underwriter or underwriters, of such offering the inclusion of the Holder's
Option or Option Shares would interfere with the successful marketing of the
shares of Common Stock offered by Issuer, the number of Option Shares otherwise
to be covered in the registration statement contemplated hereby may be reduced;
and provided, however, that after any such required reduction the number of
Option Shares to be included in such offering for the account of the Holder
shall constitute at least 25% of the total number of shares to be sold by the
Holder and Issuer in the aggregate; and provided further, however, that if such
reduction occurs, then the Issuer shall file a registration statement for the
balance as promptly as practical and no reduction shall thereafter occur. Each
such Holder shall provide all information reasonably requested by Issuer for
inclusion in any registration statement to be filed hereunder. If requested by
any such Holder in connection with such registration, Issuer shall become a
party to any underwriting agreement relating to the sale of such shares, but
only to the extent of obligating itself in respect of representations,
warranties, indemnities and other agreements customarily included in secondary
offering underwriting agreements for the Issuer. Upon receiving any request
under this Section 6 from any Holder, Issuer agrees to send a copy thereof to
any other person known to Issuer to be entitled to registration rights under
this Section 6, in each case by promptly mailing the same, postage prepaid, to
the address of record of the persons entitled to receive such copies.
Notwithstanding anything to the contrary contained herein, in no event shall
Issuer be obligated to effect more than two registrations pursuant to this
Section 6 by reason of the fact that there shall be more than one Grantee as a
result of any assignment or division of this Agreement.
7. (a) Immediately prior to the occurrence of a Repurchase Event (as
defined below), (i) following a request of the Holder, delivered prior to an
Exercise Termination Event, Issuer (or any successor thereto) shall repurchase
the Option from the Holder at a price (the "Option Repurchase Price") equal to
the amount by which (A) the Market/Offer Price (as defined below) exceeds (B)
the Option Price, multiplied by the number of shares for which this Option may
then be exercised (provided that, notwithstanding anything to the contrary, if
the Issuer shall not have sufficient additional authorized but unissued shares
or treasury shares of Common Stock so that the Option may be exercised in full,
the Option Repurchase Price shall be calculated as if there were sufficient
shares which were authorized but unissued so that the Option could be exercised
in full) and (ii) at the request of the owner of Option Shares from time to time
(the "Owner"), delivered within 90 days of such occurrence (or such later period
as provided in Section 10), Issuer shall repurchase such number of the Option
Shares from the Owner as the Owner shall designate at a price (the "Option Share
Repurchase Price") equal to the Market/Offer Price multiplied by the number of
Option Shares so designated. The term "Market/Offer Price" shall mean the
highest of (i) the price per share of Common Stock at which a tender offer or
exchange offer therefor has been made, (ii) the price per share of Common Stock
to be paid by any third party pursuant to an agreement with Issuer, (iii) the
highest closing price for shares of Common Stock within the six-month period
immediately preceding the date the Holder gives notice of the required
repurchase of this Option or the Owner gives notice of the required repurchase
of Option Shares, as the case may be, or (iv) in the event of a sale of all or a
substantial portion of Issuer's assets, the sum of the price paid in such sale
for such assets and the current market value of the remaining assets of Issuer
as determined by a nationally recognized investment banking firm selected by the
Holder or the Owner, as the case may be, and reasonably acceptable to the
Issuer, divided by the number of shares of Common Stock of Issuer outstanding at
the time of such sale. In determining the Market/Offer Price, the value of
consideration other than cash shall be determined by a nationally recognized
investment banking firm selected by the Holder or Owner, as the case may be, and
reasonably acceptable to the Issuer.
(b) The Holder and the Owner, as the case may be, may exercise its right to
require Issuer to repurchase the Option and any Option Shares pursuant to this
Section 7 by surrendering for such purpose to Issuer, at its principal office, a
copy of this Agreement or certificates for Option Shares, as applicable,
accompanied by a
APPENDIX D
D-6
written notice or notices stating that the Holder or the Owner, as the case may
be, elects to require Issuer to repurchase this Option and/or the Option Shares
in accordance with the provisions of this Section 7. Within the latter to occur
of (x) five business days after the surrender of the Option and/or certificates
representing Option Shares and the receipt of such notice or notices relating
thereto and (y) the time that is immediately prior to the occurrence of a
Repurchase Event, Issuer shall deliver or cause to be delivered to the Holder
the Option Repurchase Price and/or to the Owner the Option Share Repurchase
Price therefor or the portion thereof, if any, that Issuer is not then
prohibited under applicable law and regulation from so delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation from repurchasing the Option and/or the Option Shares in full, Issuer
shall immediately so notify the Holder and/or the Owner and thereafter deliver
or cause to be delivered, from time to time, to the Holder and/or the Owner, as
appropriate, the portion of the Option Repurchase Price and the Option Share
Repurchase Price, respectively, that it is no longer prohibited from delivering,
within five business days after the date on which Issuer is no longer so
prohibited; provided, however, that if Issuer at any time after delivery of a
notice of repurchase pursuant to paragraph (b) of this Section 7 is prohibited
under applicable law or regulation from delivering to the Holder and/or the
Owner, as appropriate, the Option Repurchase Price and the Option Share
Repurchase Price, respectively, in full (and Issuer hereby undertakes to use its
best efforts to obtain all required regulatory and legal approvals and to file
any required notices, in each case as promptly as practicable in order to
accomplish such repurchase), the Holder or Owner may revoke its notice of
repurchase of the Option or the Option Shares either in whole or to the extent
of the prohibition, whereupon, in the latter case, Issuer shall promptly (i)
deliver to the Holder and/or the Owner, as appropriate, that portion of the
Option Repurchase Price or the Option Share Repurchase Price that Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Holder, a new Stock Option Agreement evidencing the right of the Holder to
purchase that number of shares of Common Stock obtained by multiplying the
number of shares of Common Stock for which the surrendered Stock Option
Agreement was exercisable at the time of delivery of the notice of repurchase by
a fraction, the numerator of which is the Option Repurchase Price less the
portion thereof theretofore delivered to the Holder and the denominator of which
is the Option Repurchase Price, or (B) to the Owner, a certificate for the
Option Shares it is then so prohibited from repurchasing.
(d) For purposes of this Section 7, a Repurchase Event shall be deemed to
have occurred (i) upon the consummation of any merger, consolidation or similar
transaction involving Issuer or any purchase, lease or other acquisition of all
or a substantial portion of the assets of Issuer, other than any such
transaction which would not constitute an Acquisition Transaction pursuant to
the provisos to Section 2(b)(i) hereof or (ii) upon the acquisition by any
person of beneficial ownership of 50% or more of the then outstanding shares of
Common Stock, provided that no such event shall constitute a Repurchase Event
unless a Subsequent Triggering Event shall have occurred prior to an Exercise
Termination Event. The parties hereto agree that Issuer's obligations to
repurchase the Option or Option Shares under this Section 7 shall not terminate
upon the occurrence of an Exercise Termination Event unless no Subsequent
Triggering Event shall have occurred prior to the occurrence of an Exercise
Termination Event.
8. (a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any person,
other than Grantee or one of its Subsidiaries, and shall not be the continuing
or surviving corporation of such consolidation or merger, (ii) to permit any
person, other than Grantee or one of its Subsidiaries, to merge into Issuer and
Issuer shall be the continuing or surviving corporation, but, in connection with
such merger, the then outstanding shares of Common Stock shall be changed into
or exchanged for stock or other securities of any other person or cash or any
other property or the then outstanding shares of Common Stock shall after such
merger represent less than 50% of the outstanding voting shares and voting share
equivalents of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Grantee or one of its
Subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of the Holder, of either (x) the Acquiring Corporation
(as hereinafter defined) or (y) any person that controls the Acquiring
Corporation.
APPENDIX D
D-7
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or surviving
corporation of a consolidation or merger with Issuer (if other than
Issuer), (ii) Issuer in a merger in which Issuer is the continuing or
surviving person, and (iii) the transferee of all or substantially all of
Issuer's assets.
(2) "Substitute Common Stock" shall mean the common stock issued by
the issuer of the Substitute Option upon exercise of the Substitute Option.
(3) "Assigned Value" shall mean the Market/Offer Price, as defined in
Section 7.
(4) "Average Price" shall mean the average closing price of a share of
the Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day preceding
such consolidation, merger or sale; provided that if Issuer is the issuer
of the Substitute Option, the Average Price shall be computed with respect
to a share of common stock issued by the person merging into Issuer or by
any company which controls or is controlled by such person, as the Holder
may elect.
(c) The Substitute Option shall have the same terms as the Option,
provided, that if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to the Holder. The issuer of the Substitute Option shall
also enter into an agreement with the then Holder or Holders of the Substitute
Option in substantially the same form as this Agreement, which shall be
applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares of
Substitute Common Stock as is equal to the Assigned Value multiplied by the
number of shares of Common Stock for which the Option is then exercisable,
divided by the Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock for which the Option is then exercisable and the denominator of
which shall be the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than 19.9% of the
shares of Substitute Common Stock outstanding prior to exercise but for this
clause (e), the issuer of the Substitute Option (the "Substitute Option Issuer")
shall make a cash payment to Holder equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in this clause (e)
over (ii) the value of the Substitute Option after giving effect to the
limitation in this clause (e). This difference in value shall be determined by a
nationally recognized investment banking firm selected by the Holder or the
Owner, as the case may be, and reasonably acceptable to the Acquiring
Corporation.
(f) Issuer shall not enter into any transaction described in subsection (a)
of this Section 8 unless the Acquiring Corporation and any person that controls
the Acquiring Corporation assume in writing all the obligations of Issuer
hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the Substitute Option Issuer shall repurchase the
Substitute Option from the Substitute Option Holder at a price (the "Substitute
Option Repurchase Price") equal to (x) the amount by which (i) the Highest
Closing Price (as hereinafter defined) exceeds (ii) the exercise price of the
Substitute Option, multiplied by the number of shares of Substitute Common Stock
for which the Substitute Option may then be exercised plus (y) Grantee's
reasonable out-of-pocket expenses (to the extent not previously reimbursed), and
at the request of the owner (the "Substitute Share Owner") of shares of
Substitute Common Stock (the "Substitute Shares"), the Substitute Option Issuer
shall repurchase the Substitute Shares at a price (the "Substitute Share
Repurchase Price") equal to (x) the Highest Closing Price multiplied by the
number of Substitute Shares so designated plus (y) Grantee's reasonable
Out-of-Pocket Expenses (to the extent not previously reimbursed). The term
"Highest Closing Price" shall mean the highest closing price for shares of
Substitute
APPENDIX D
D-8
Common Stock within the six-month period immediately preceding the date the
Substitute Option Holder gives notice of the required repurchase of the
Substitute Option or the Substitute Share Owner gives notice of the required
repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as the
case may be, may exercise its respective right to require the Substitute Option
Issuer to repurchase the Substitute Option and the Substitute Shares pursuant to
this Section 9 by surrendering for such purpose to the Substitute Option Issuer,
at its principal office, the agreement for such Substitute Option (or, in the
absence of such an agreement, a copy of this Agreement) and certificates for
Substitute Shares accompanied by a written notice or notices stating that the
Substitute Option Holder or the Substitute Share Owner, as the case may be,
elects to require the Substitute Option Issuer to repurchase the Substitute
Option and/or the Substitute Shares in accordance with the provisions of this
Section 9. As promptly as practicable, and in any event within five business
days after the surrender of the Substitute Option and/or certificates
representing Substitute Shares and the receipt of such notice or notices
relating thereto, the Substitute Option Issuer shall deliver or cause to be
delivered to the Substitute Option Holder the Substitute Option Repurchase Price
and/or to the Substitute Share Owner the Substitute Share Repurchase Price
therefor or, in either case, the portion thereof which the Substitute Option
Issuer is not then prohibited under applicable law and regulation from so
delivering.
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation from repurchasing the Substitute Option and/or the
Substitute Shares in part or in full, the Substitute Option Issuer following a
request for repurchase pursuant to this Section 9 shall immediately so notify
the Substitute Option Holder and/or the Substitute Share Owner and thereafter
deliver or cause to be delivered, from time to time, to the Substitute Option
Holder and/or the Substitute Share Owner, as appropriate, the portion of the
Substitute Share Repurchase Price, respectively, which it is no longer
prohibited from delivering, within five business days after the date on which
the Substitute Option Issuer is no longer so prohibited; provided, however, that
if the Substitute Option Issuer is at any time after delivery of a notice of
repurchase pursuant to subsection (b) of this Section 9 prohibited under
applicable law or regulation from delivering to the Substitute Option Holder
and/or the Substitute Share Owner, as appropriate, the Substitute Option
Repurchase Price and the Substitute Share Repurchase Price, respectively, in
full (and the Substitute Option Issuer shall use its best efforts to obtain all
required regulatory and legal approvals, in each case as promptly as practicable
in order to accomplish such repurchase), the Substitute Option Holder or
Substitute Share Owner may revoke its notice of repurchase of the Substitute
Option or the Substitute Shares either in whole or to the extent of the
prohibition, whereupon, in the latter case, the Substitute Option Issuer shall
promptly (i) deliver to the Substitute Option Holder or Substitute Share Owner,
as appropriate, that portion of the Substitute Option Repurchase Price or the
Substitute Share Repurchase Price that the Substitute Option Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Substitute Option Holder, a new Substitute Option evidencing the right of the
Substitute Option Holder to purchase that number of shares of the Substitute
Common Stock obtained by multiplying the number of shares of the Substitute
Common Stock for which the surrendered Substitute Option was exercisable at the
time of delivery of the notice of repurchase by a fraction, the numerator of
which is the Substitute Option Repurchase Price less the portion thereof
theretofore delivered to the Substitute Option Holder and the denominator of
which is the Substitute Option Repurchase Price, or (B) to the Substitute Share
Owner, a certificate for the Substitute Common Shares it is then so prohibited
from repurchasing.
10. The 90-day period for exercise of certain rights under Sections 2, 6, 7
and 13 shall be extended: (i) to the extent necessary to obtain all regulatory
approvals for the exercise of such rights, and for the expiration of all
statutory waiting periods; and (ii) to the extent necessary to avoid liability
under Section 16(b) of the 1934 Act by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of Issuer and no other corporate
proceedings on the part of Issuer are necessary to
APPENDIX D
D-9
authorize this Agreement or to consummate the transactions so contemplated.
This Agreement has been duly and validly executed and delivered by Issuer.
(b) Subject to Section 3, Issuer has taken all necessary corporate
action to authorize and reserve and to permit it to issue, and at all times
from the date hereof through the termination of this Agreement in
accordance with its terms will have reserved for issuance upon the exercise
of the Option, that number of shares of Common Stock equal to the maximum
number of shares of Common Stock at any time and from time to time issuable
hereunder, and all such shares, upon issuance pursuant hereto, will be duly
authorized, validly issued, fully paid, nonassessable, and will be
delivered free and clear of all claims, liens, encumbrance and security
interests and not subject to any preemptive rights.
(c) Issuer has taken all action (including if required redeeming all
of the Rights or amending or terminating the Rights Agreement) so that the
entering into of this Option Agreement, the acquisition of shares of Common
Stock hereunder and the other transactions contemplated hereby do not and
will not result in the grant of any rights to any person under the Rights
Agreement or enable or require the Rights to be exercised, distributed or
triggered.
12. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals or consents referred to
herein, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of Grantee. This Agreement has been duly executed and
delivered by Grantee.
(b) The Option is not being, and any shares of Common Stock or other
securities acquired by Grantee upon exercise of the Option will not be,
acquired with a view to the public distribution thereof and will not be
transferred or otherwise disposed of except in a transaction registered or
exempt from registration under the Securities Act.
13. Neither of the parties hereto may assign any of its rights or
obligations under this Option Agreement or the Option created hereunder to any
other person, without the express written consent of the other party, except
that in the event a Subsequent Triggering Event shall have occurred prior to an
Exercise Termination Event, Grantee, subject to the express provisions hereof,
may assign in whole or in part its rights and obligations hereunder within 90
days following such Subsequent Triggering Event (or such later period as
provided in Section 10); provided, however, that until the date 15 days
following the date on which the Federal Reserve Board approves an application by
Grantee under the BHCA to acquire the shares of Common Stock subject to the
Option, Grantee may not assign its rights under the Option except in (i) a
widely dispersed public distribution, (ii) a private placement in which no one
party acquires the right to purchase in excess of 2% of the voting shares of
Issuer, (iii) an assignment to a single party (e.g., a broker or investment
banker) for the purpose of conducting a widely dispersed public distribution on
Grantee's behalf, or (iv) any other manner approved by the Federal Reserve
Board.
14. Each of Grantee and Issuer will use its best efforts to make all
filings with, and to obtain consents of, all third parties and governmental
authorities necessary to the consummation of the transactions contemplated by
this Agreement, including without limitation making application to list the
shares of Common Stock issuable hereunder on the New York Stock Exchange upon
official notice of issuance and applying to the Federal Reserve Board under the
BHCA for approval to acquire the shares issuable hereunder, but Grantee shall
not be obligated to apply to state banking authorities for approval to acquire
the shares of Common Stock issuable hereunder until such time, if ever, as it
deems appropriate to do so.
15. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief.
16. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder
APPENDIX D
D-10
of the terms, provisions and covenants and restrictions contained in this
Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or regulatory
agency determines that the Holder is not permitted to acquire, or Issuer is not
permitted to repurchase pursuant to Section 7, the full number of shares of
Common Stock provided in Section 1(a) hereof (as adjusted pursuant to Section
1(b) or 5 hereof), it is the express intention of Issuer to allow the Holder to
acquire or to require Issuer to repurchase such lesser number of shares as may
be permissible, without any amendment or modification hereof.
17. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
cable, telegram, telecopy or telex, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Merger Agreement.
18. This Agreement shall be governed by and construed in accordance with
the laws of the State of North Carolina, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof.
19. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
20. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
21. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors except as
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided herein.
22. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
NATIONSBANK CORPORATION BANKAMERICA CORPORATION
By: /s/ HUGH L. MCCOLL, JR. By: /s/ DAVID A. COULTER
------------------------------ ---------------------------------------
Name: Hugh L. McColl, Jr. Name: David A. Coulter
Title: Chief Executive Officer Title: Chairman of the Board, President
and Chief Executive Officer
APPENDIX D
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APPENDIX D
APPENDIX E
[MERRILL LYNCH LETTERHEAD]
August 4, 1998
Board of Directors
NationsBank Corporation
100 North Tryon
Charlotte, NC 28255
Members of the Board:
We understand that NationsBank Corporation ("NationsBank") and BankAmerica
Corporation ("BankAmerica") have entered into an Agreement and Plan of
Reorganization (the "Agreement"), dated April 10, 1998, pursuant to which
NationsBank will be merged with and into a newly formed subsidiary of
NationsBank incorporated in Delaware ("NationsBank (DE)") and, thereafter
BankAmerica is to be merged with and into NationsBank (DE) (collectively, such
mergers are referred to herein as the "Merger"). Pursuant to the Merger, each
outstanding share of NationsBank's common stock, no par value (the "NationsBank
Shares"), other than shares with respect to which dissenter's rights have been
properly demanded ("Dissenting Shares"), will be converted into one share of the
common stock, no par value, of NationsBank (DE) (the "NationsBank (DE) Shares"),
each outstanding share of NationsBank's 7% Cumulative Redeemable Preferred
Stock, Series B (other than Dissenting Shares), will be converted into the right
to receive one share of 7% Cumulative Redeemable Preferred Stock, Series B, of
NationsBank (DE), each outstanding share of NationsBank's ESOP Convertible
Preferred Stock, Series C (other than Dissenting Shares), will be converted into
the right to receive one share of ESOP Convertible Preferred Stock, Series C, of
NationsBank (DE), each outstanding share of NationsBank's $2.50 Cumulative
Convertible Preferred Stock, Series BB (other than Dissenting Shares), will be
converted into the right to receive one share of $2.50 Cumulative Convertible
Preferred Stock, Series BB, of NationsBank (DE), each outstanding share of
BankAmerica's common stock, par value $1.5625 per share (the "BankAmerica
Shares") other than certain shares held in treasury and shares held by
NationsBank or BankAmerica or any of their respective subsidiaries (subject to
certain exceptions set forth in the Agreement) (the "Excluded Shares"), will be
converted into the right to receive 1.1316 shares (the "Exchange Ratio") of
NationsBank (DE) Shares, each outstanding share of BankAmerica's Cumulative
Adjustable Preferred Stock, Series A (other than Excluded Shares), will be
converted into the right to receive one share of Cumulative Adjustable Preferred
Stock, Series A, of NationsBank (DE) and each outstanding share of BankAmerica's
Cumulative Adjustable Preferred Stock Series B (other than Excluded Shares),
will be converted into the right to receive one share of Cumulative Adjustable
Preferred Stock, Series D, of NationsBank (DE), all as set forth more fully in
the Agreement.
You have asked us whether, in our opinion, the Exchange Ratio is fair to
the shareholders of NationsBank from a financial point of view.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly available business and financial
information relating to BankAmerica and NationsBank that we deemed to be
relevant;
APPENDIX E
E-1
(2) Reviewed certain information, including financial forecasts,
relating to the respective businesses, earnings, assets, liabilities and
prospects of BankAmerica and NationsBank furnished to us by senior
management of BankAmerica and NationsBank as well as the amount and timing
of the cost savings and related expenses expected to result from the Merger
furnished to us by senior management of BankAmerica and NationsBank (the
"Expected Synergies");
(3) Conducted discussions with members of senior management of
BankAmerica and NationsBank concerning the matters described in clauses (1)
and (2), including the respective businesses, prospects, regulatory
condition and contingencies of BankAmerica and NationsBank before and after
giving effect to the Merger and the Expected Synergies;
(4) Reviewed the market prices and valuation multiples for the
BankAmerica Shares and the NationsBank Shares and compared them with those
of certain publicly traded companies which we deemed to be relevant;
(5) Reviewed the results of operations of BankAmerica and NationsBank
and compared them with those of certain publicly traded companies which we
deemed to be relevant;
(6) Compared the proposed financial terms of the Merger with the
financial terms of certain other transactions which we deemed to be
relevant;
(7) Reviewed the potential pro forma impact of the Merger;
(8) Reviewed the Agreement dated April 10, 1998; and
(9) Reviewed such other financial studies and analyses and took into
account such other matters as we deemed necessary under the circumstances,
including our assessment of general economic, market and monetary
conditions.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have not
assumed responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of the assets or liabilities
of BankAmerica or NationsBank or been furnished any such evaluation or
appraisal. We are not experts in the evaluation of allowances for loan losses,
and we have neither made an independent evaluation of the adequacy of the
allowance for loan losses of BankAmerica or NationsBank, nor reviewed any
individual credit files relating to BankAmerica or NationsBank, and, as a
result, we have assumed that the aggregate allowance for loan losses for both
BankAmerica and NationsBank is adequate to cover such losses and will be
adequate on a pro forma basis for the combined entity. In addition, we have not
assumed any obligation to conduct, nor have we conducted, any physical
inspection of the properties or facilities of BankAmerica or NationsBank. With
respect to the financial forecast information and Expected Synergies furnished
to or discussed with us by BankAmerica or NationsBank, we have assumed that they
have been reasonably prepared and reflect the best currently available estimates
and judgements of the senior management of BankAmerica and NationsBank as to the
future financial performance of BankAmerica, NationsBank or the combined entity,
as the case may be, and the Expected Synergies. We have further assumed that the
Merger will be accounted for as a pooling-of-interests under generally accepted
accounting principles and that it will qualify as a tax-free reorganization for
U.S. federal income tax purposes.
Our opinion is necessarily based upon market, economic and other conditions
as in effect, and on the information made available to us as of, the date
hereof. For the purposes of rendering this opinion, we have assumed, in all
respects material to our analysis, that the representations and warranties of
each party in the Agreement and all related documents and instruments
(collectively, the "Documents") contained therein are true and correct, that
each party to the Documents will perform all of the covenants and agreements
required to be performed by such party under such Documents, and that all
conditions to the consummation of the
APPENDIX E
E-2
Merger will be satisfied without waiver thereof. We have also assumed that in
the course of obtaining the necessary regulatory or other consents or approvals
(contractual or otherwise) for the Merger, no restrictions, including any
divestiture requirements or amendment or modifications, will be imposed that
will have a material adverse affect on the contemplated benefits of the Merger,
including the Expected Synergies.
We have been retained by the Board of Directors of NationsBank to act as
financial advisor to NationsBank in connection with the Merger and will receive
a fee for our services, a significant portion of which is contingent upon the
consummation of the Merger. In addition, NationsBank has agreed to indemnify us
for certain liabilities arising out of our engagement. We have in the past two
years provided financial advisory, investment banking and other services to
BankAmerica and NationsBank and received customary fees for the rendering of
such services. In the ordinary course of our securities business, we also may
actively trade debt and/or equity securities of BankAmerica and NationsBank and
their respective affiliates for our own account and the accounts of our
customers, and we therefore may from time to time hold a long or short position
in such securities.
This opinion is for the use and benefit of the Board of Directors of
NationsBank. Our opinion does not address the merits of the underlying decision
by NationsBank to engage in the Merger and does not constitute a recommendation
to any shareholder as to how such shareholder should vote on the proposed
Merger.
We are not expressing any opinion herein as to the prices at which
NationsBank Shares will trade following the announcement of the Merger or the
prices at which NationsBank (DE) Shares will trade following the consummation of
the Merger.
On the basis of and subject to the foregoing, we are of the opinion that,
as the date hereof, the Exchange Ratio is fair to the shareholders of
NationsBank from a financial point of view.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
/s/
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
APPENDIX E
E-3
(This page intentionally left blank)
APPENDIX F
- --------------------------------------------------------------------------------
(GOLDMAN, SACHS & CO. LETTERHEAD)
(GOLDMAN, SACHS LOGO)
- --------------------------------------------------------------------------------
August 4, 1998
Board of Directors
BankAmerica Corporation
555 California Street
San Francisco, California 94104
Ladies and Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of Common Stock, par value $1.5625
per share (the "Company Shares"), of BankAmerica Corporation (the "Company") of
the exchange ratio of 1.1316 shares of common stock, without par value, (the
"NationsBank Shares") of NationsBank Corporation ("NationsBank") to be received
for each Company Share (the "Exchange Ratio") pursuant to the merger (the
"Merger") contemplated by the Agreement and Plan of Reorganization by and
between the Company and NationsBank dated as of April 10, 1998 (the
"Agreement").
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with the Company having provided certain investment banking services to
the Company from time to time including having acted as a lead manager of the
initial public offering of BA Merchant Services, Inc. in December 1996, as
financial advisor in connection with the sale of BankAmerica Housing Services
announced in April 1998, as financial advisor in connection with the sale of
BancAmerica Robertson Stephens announced in May 1998, as lead or co-manager of
selected senior and subordinated debt and capital securities offerings with
varying maturities and coupons and having acted as its financial advisor in
connection with, and having participated in certain of the negotiations leading
to, the Agreement. We also have provided certain investment banking services to
NationsBank from time to time including having acted as financial advisor to
NationsBank in its acquisition of Barnett Banks, Inc. and as lead or co-manager
of selected senior and subordinated debt offerings with varying maturities and
coupons. We may provide investment banking services to NationsBank in the
future.
(GOLDMAN, SACHS & CO. FOOT)
APPENDIX F
F-1
BankAmerica Corporation
August 4, 1998
Page Two
In connection with this opinion, we have reviewed, among other things, the
Registration Statement on Form S-4 of NationsBank dated August 4, 1998 which
includes the Joint Proxy Statement-Prospectus relating to the Merger; the
Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of the
Company and NationsBank for the five years ended December 31, 1997; certain
interim reports to stockholders and Quarterly Reports on Form 10-Q of the
Company and NationsBank; certain other communications from the Company and
NationsBank to their respective stockholders; and certain internal financial
analyses and forecasts for the Company and NationsBank prepared by their
respective managements including forecasts of certain cost savings (the
"Synergies") expected to be achieved as a result of the Merger. We also have
held discussions with members of the senior management of the Company and
NationsBank regarding the strategic rationale for, and the potential benefits
of, the Merger and the past and current business operations, regulatory
relationships, financial condition and future prospects of their respective
companies. In addition, we have reviewed the reported price and trading activity
for the Company Shares and the NationsBank Shares, compared certain financial
and stock market information for the Company and NationsBank with similar
information for certain other companies the securities of which are publicly
traded, reviewed the financial terms of certain recent business combinations in
the commercial banking industry specifically and in other industries generally
and performed such other studies and analyses as we considered appropriate.
We have relied upon the accuracy and completeness of all of the financial
and other information reviewed by us and have assumed such accuracy and
completeness for purposes of rendering this opinion. In that regard, we have
assumed, with your consent, that the financial forecasts, including, without
limitation, the Synergies and projections regarding under-performing and
non-performing assets and net charge-offs have been reasonably prepared on a
basis reflecting the best currently available judgments and estimates of the
Company and NationsBank and that such forecasts will be realized in the amounts
and at the times contemplated thereby. We are not experts in the evaluation of
loan and lease portfolios for purposes of assessing the adequacy of the
allowances for losses with respect thereto and have assumed, with your consent,
that such allowances for each of the Company and NationsBank are in the
aggregate adequate to cover all such losses. In addition, we have not reviewed
individual credit files nor have we made an independent evaluation or appraisal
of the assets and liabilities of the Company, NationsBank or any of their
subsidiaries and we have not been furnished with any such evaluation or
appraisal. We also have assumed, with your consent, that the Merger will be
accounted for as a pooling of interests under generally accepted accounting
principles and that obtaining any necessary regulatory approvals and third party
consents for the Merger or otherwise will not have an adverse effect on the
Company, NationsBank or the combined company pursuant to the Merger.
Our advisory services and the opinion expressed herein are provided for the
information and assistance of the Board of Directors of the Company in
connection with its consideration of the Merger and such opinion does not
constitute a recommendation as to how any holder of Company Shares should vote
with respect to such transaction.
Based upon and subject to the foregoing and based upon such other matters
as we consider relevant, it is our opinion that as of the date hereof the
Exchange Ratio pursuant to the Agreement is fair from a financial point of view
to the holders of Company Shares.
Very truly yours,
/s/ Goldman, Sachs & Co.
- ---------------------------------------------------------
GOLDMAN, SACHS & CO.
APPENDIX F
F-2
APPENDIX G
ARTICLE 13.
DISSENTERS' RIGHTS.
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES.
SS. 55-13-01. DEFINITIONS.
In this Article:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under G.S. 55-13-02 and who exercises that right when and in
the manner required by G.S. 55-13-20 through 55-13-28.
(3) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances, giving due consideration to the rate currently paid by the
corporation on its principal bank loans, if any, but not less than the rate
provided in G.S. 24-l.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder. (1925, c. 77, s. 1; 1943, c. 270; G.S., s. 55-167; 1955, c. 1371,
s. 1; 1969, c. 751. s. 39; 1973, c. 469, ss. 36, 37; 1989, c. 265, s. 1.)
SS. 55-13-02. RIGHT TO DISSENT.
(a) In addition to any rights granted under Article 9, a shareholder is
entitled to dissent from, and obtain payment of the fair value of his shares in
the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation (other
than a parent corporation in a merger under G.S. 55-11-04) is a party
unless (i) approval by the shareholders of that corporation is not required
under G.S. 55-1l-03(g) or (ii) such shares are then redeemable by the
corporation at a price not greater than the cash to be received in exchange
for such shares;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, unless such
shares are then redeemable by the corporation at a price not greater than
the cash to be received in exchange for such shares;
(3) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than as permitted by G.S.
55-12-01, including a sale in dissolution, but not including a sale
pursuant to court order or a sale pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed in
cash to the shareholders within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it (i)
alters or abolishes a preferential right of the shares; (ii) creates,
alters, or abolishes a right in respect of redemption, including a
provision respecting a sinking fund for the redemption or repurchase, of
the shares; (iii) alters or abolishes a preemptive right of the
APPENDIX G
G-1
holder of the shares to acquire shares or other securities; (iv) excludes
or limits the right of the shares to vote on any matter, or to cumulate
votes; (v) reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under G.S. 55-6-04; or (vi) changes the corporation into a
nonprofit corporation or cooperative organization;
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this Article may not challenge the corporate action creating his
entitlement, including without limitation a merger solely or partly in exchange
for cash or other property, unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
(c) Notwithstanding any other provision of this Article, there shall be no
right of dissent in favor of holders of shares of any class or series which, at
the record date fixed to determine the shareholders entitled to receive notice
of and to vote at the meeting at which the plan of merger or share exchange or
the sale or exchange of property is to be acted on, were (i) listed on a
national securities exchange or (ii) held by at least 2,000 record shareholders,
unless in either case:
(1) The articles of incorporation of the corporation issuing the
shares provide otherwise;
(2) In the case of a plan of merger or share exchange, the holders of
the class or series are required under the plan of merger or share exchange
to accept for the shares anything except:
a. Cash;
b. Shares, or shares and cash in lieu of fractional shares of the
surviving or acquiring corporation, or of any other corporation which,
at the record date fixed to determine the shareholders entitled to
receive notice of and vote at the meeting at which the plan of merger or
share exchange is to be acted on, were either listed subject to notice
of issuance on a national securities exchange or held of record by at
least 2,000 record shareholders; or
c. A combination of cash and shares as set forth in
sub-subdivisions a. and b. of this subdivision.
(1925, c. 77, s. 1; c. 235; 1929, c. 269; 1939, c. 279; 1943, c. 270; G.S., ss.
55-26, 55-167; 1955, c. 1371, s. 1; 1959, c. 1316, ss. 30, 31; 1969, c. 751, ss.
36, 39; 1973, c. 469, ss. 36, 37; c. 476, s. 193; 1989, c. 265, s. 1; 1989 (Reg.
Sess., 1990), c. 1024, s. 12.18; 1991, c. 645, s. 12, 1997-202, s. 1.)
SS. 55-13-03. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the
beneficial shareholder. (1925, c. 77, s. 1; 1943, ss. c. 270; G.S., s.
55-167; 1955, c. 1371, s. 1; 1969, c. 751, s. 39; 1973, c. 469, ss. 36, 37;
1988, c. 265, s. 1.)
APPENDIX G
G-2
SS. 55-13-04 TO 55-13-19. Reserved for future codification purposes.
PART 2. PROCEDURES FOR EXERCISE OF DISSENTERS' RIGHTS.
SS. 55-13-20. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this Article and be accompanied by a copy of this Article.
(b) If corporate action creating dissenters' rights under G.S. 55-13-02 is
taken without a vote of shareholders, the corporation shall no later than 10
days thereafter notify in writing all shareholders entitled to assert
dissenters' rights that the action was taken and send them the dissenters'
notice described in G.S. 55-13-22.
(c) If a corporation fails to comply with the requirements of this section,
such failure shall not invalidate any corporate action taken; but any
shareholder may recover from the corporation any damage which he suffered from
such failure in a civil action brought in his own name within three years after
the taking of the corporate action creating dissenters' rights under G.S.
55-13-02 unless he voted for such corporate action. (1925, c. 77, s. 1; c. 235;
1929, c. 269; 1939, c. 5; c. 279; 1943, c. 270, G.S., ss. 55-26, 55-165, 55-167,
1955, c. 1371, s. 1; 1969, c. 751, s. 39; 1973, c. 469, ss. 36, 37; 1989, c.
265, s. 1.)
SS. 55-13-21. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(1) Must give to the corporation, and the corporation must actually
receive, before the vote is taken written notice of his intent to demand
payment for his shares if the proposed action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this Article. (1925, c. 77, s.
1; 1943, c. 270; G.S., s. 55-167; 1955, c. 1371, s. 1; 1969, c. 751, s. 39;
1973, c. 469, ss. 36, 37; 1989, c. 265, s. 1.)
SS. 55-13-22. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is authorized at a shareholders' meeting, the corporation shall mail by
registered or certified mail, return receipt requested, a written dissenters'
notice to all shareholders who satisfied the requirements of G.S. 55-13-21.
(b) The dissenters' notice must be sent no later than 10 days after
shareholder approval, or if no shareholder approval is required, after the
approval of the board of directors, of the corporate action creating dissenters'
rights under G.S. 55-13-02, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the subsection (a) notice is mailed; and
APPENDIX G
G-3
(5) Be accompanied by a copy of this Article. (1925, c. 77, s. 1;
1943, c. 270; G.S., s. 55-167; 1955, c. 1371, s. 1; 1969, c. 751, s. 39;
1973, c. 469, ss. 36, 37; 1989, c. 265, s. 1; 1997-485, s. 4.)
SS. 55-13-23. DUTY TO DEMAND PAYMENT.
(a) A shareholder sent a dissenters' notice described in G.S. 55-13-22 must
demand payment and deposit his share certificates in accordance with the terms
of the notice.
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are cancelled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this Article. (1925, c. 77, s. 1;
1943, c. 270; G.S., s. 55-167; 1955, c. 1371, s. 1; 1969, c. 751, s. 39; 1973,
c. 469, ss. 36, 37; 1989, c. 265, s. 1.)
SS. 55-13-24. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under G.S. 55-13-26.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are cancelled or modified by the taking of the proposed corporate action.
(1925, c. 77, s. 1; 1943, c. 270; G.S., s. 55-167; 1955, c. 1371, s. 1; 1969, c.
751, s. 39; 1973, c. 469, ss. 36, 37; 1989, c. 265, s. 1.)
SS. 55-13-25. PAYMENT.
(a) As soon as the proposed corporate action is taken, or within 30 days
after receipt of a payment demand, the corporation shall pay each dissenter who
complied with G.S. 55-13-23 the amount the corporation estimates to be the fair
value of his shares, plus interest accrued to the date of payment.
(b) The payment shall be accompanied by:
(1) The corporation's most recent available balance sheet as of the
end of a fiscal year ending not more than 16 months before the date of
payment, an income statement for that year, a statement of cash flows for
that year, and the latest available interim financial statements, if any;
(2) An explanation of how the corporation estimated the fair value of
the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under G.S.
55-13-28; and
(5) A copy of this Article. (1925, c. 77, s. 1; 1943, c. 270; G.S., s.
55-167; 1955, c. 1371, s. 1; 1969, c. 751, s. 39; 1973, c. 469, ss. 36, 37;
1989, c. 265, s. 1; c. 770, s. 69; 1997-202, s. 2.)
SS. 55-13-26. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under G.S. 55-13-22 and repeat the payment demand procedure.
(1925, c. 77 s. 1; 1943; c. 270; G.S., s. 55-167; 1955, c. 1371, s. 1; 1969, c.
751, s. 39; 1973, c. 469, ss. 36, 37; 1989, c. 265, s. 1.)
APPENDIX G
G-4
SS. 55-13-27. Reserved for future codification purposes.
SS. 55-13-28. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH CORPORATION'S PAYMENT
OR FAILURE TO PERFORM.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of the amount in excess of the payment by the corporation under G.S. 55-13-25
for the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount paid under G.S. 55-13-25 is
less than the fair value of his shares or that the interest due is
incorrectly calculated;
(2) The corporation fails to make payment under G.S. 55-13-25; or
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notifies the corporation of his demand in writing (i) under
subdivision (a)(1) within 30 days after the corporation made payment for his
shares or (ii) under subdivisions (a)(2) and (a)(3) within 30 days after the
corporation has failed to perform timely. A dissenter who fails to notify the
corporation of his demand under subsection (a) within such 30-day period shall
be deemed to have withdrawn his dissent and demand for payment. (1925, c. 77, s.
1; 1943, c. 270; G.S., s. 55-167; 1955, c. 1371, s. 1; 1969, c. 751, s. 39;
1973, c. 469. ss. 36, 37; 1989, c. 265, s. 1; 1997-202, s. 3.)
SS. 55-13-29. Restricted for future codification purposes.
PART 3. JUDICIAL APPRAISAL OF SHARES.
SS. 55-13-30. COURT ACTION.
(A) (SEE EDITOR'S NOTE) If a demand for payment under G.S. 55-13-28 remains
unsettled, the dissenter may commence a proceeding within 60 days after the
earlier of (i) the date payment is made under G.S. 55-13-25, or (ii) the date of
the dissenter's payment demand under G.S. 55-13-28 by filing a complaint with
the Superior Court Division of the General Court of Justice to determine the
fair value of the shares and accrued interest. A dissenter who takes no action
within the 60-day period shall be deemed to have withdrawn his dissent and
demand for payment.
(a) Repealed by Session Laws 1997-202, s. 4, effective October 1, 1997.
(b) Reserved for future codification purposes.
(c) The court shall have the discretion to make all dissenters (whether or
not residents of this State) whose demands remain unsettled parties to the
proceeding as in an action against their shares and all parties must be served
with a copy of the complaint. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(d) The jurisdiction of the superior court in which the proceeding is
commenced under subsection (a) is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The parties are entitled to
the same discovery rights as parties in other civil proceedings. The proceeding
shall be tried as in other civil actions. However, in a proceeding by a
dissenter in a corporation that was a public corporation immediately prior to
consummation of the corporate action giving rise to the right of dissent under
G.S. 55-13-02, there is no right to a trial by jury.
APPENDIX G
G-5
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the fair value of his shares,
plus interest, exceeds the amount paid by the corporation. (1925, c. 77, s. 1;
1943, c. 270; G.S., s. 55-167; 1955, c. 1371, s. 1; 1969, c. 751, s. 39; 1973,
c. 469, ss. 36, 37; 1989, c. 265, s. 1; 1997-202, s. 4; 1997-485, ss. 5, 51.)
SS. 55-13-31. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under G.S. 55-13-30
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, and shall assess
the costs as it finds equitable.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of G.S. 55-13-20 through 55-13-28; or
(2) Against either the corporation or a dissenter, in favor of either
or any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this Article.
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to those counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited. (1925, c. 77, s. 1; 1943, c. 270; G.S., s.
55-167; 1955, c. 1371, s. 1; 1969. c. 751, s. 39; 1973, c. 469, ss. 36, 37;
1989, c. 265, s. 1.)
APPENDIX G
G-6
APPENDIX H
- --------------------------------------------------------------------------------
CERTIFICATE OF INCORPORATION
OF THE
COMBINED COMPANY
- --------------------------------------------------------------------------------
APPENDIX H
H-1
CERTIFICATE OF INCORPORATION
OF
NATIONSBANK (DE) CORPORATION*
------------------------
I, the undersigned, for the purpose of incorporating and organizing a
corporation (which is hereinafter referred to as the "Corporation") under the
General Corporation Law of the State of Delaware, do hereby execute this
Certificate of Incorporation and do hereby certify as follows:
1. The name of the Corporation is NationsBank (DE) Corporation.
2. The purposes for which the Corporation is organized are to engage in any
lawful act or activity for which corporations may be organized and incorporated
under the General Corporation Law of the State of Delaware.
3. The number of shares, par value $.01 per share, the Corporation is
authorized to issue is Five Billion One Hundred Million (5,100,000,000), divided
into the following classes:
CLASS NUMBER OF SHARES
----- ----------------
Common............................................... 5,000,000,000
Preferred............................................ 100,000,000
The class of common ("Common Stock") has unlimited voting rights and, after
satisfaction of claims, if any, of the holders of preferred shares, is entitled
to receive the net assets of the Corporation upon distribution.
The Board of Directors of the Corporation shall have full power and
authority to establish one or more series within the class of preferred shares
(the "Preferred Shares"), to define the designations, preferences, limitations
and relative rights (including conversion rights) of shares within such class
and to determine all variations between series.
The Board of Directors of the Corporation has designated, established and
authorized the following series of Preferred Shares:
(a) 7% Cumulative Redeemable Preferred Stock, Series B.
A. Designation.
The designation of this series is "7% Cumulative Redeemable Preferred
Stock, Series B" (hereinafter referred to as the "Series B Preferred Stock") and
the number of shares constituting such series is Thirty-Five Thousand Forty-Five
(35,045). Shares of Series B Preferred Stock shall have a stated value of
$100.00 per share.
B. Dividends.
The holders of record of the shares of the Series B Preferred Stock shall
be entitled to receive, when and as declared by the Board of Directors of the
Corporation, out of any funds legally available for such purpose, cumulative
cash dividends at an annual dividend rate per share of 7% of the stated value
thereof, which amount is $7.00 per annum, per share, and no more. Such dividends
shall be payable each calendar quarter at the rate of $1.75 per share on such
dates as shall be fixed by resolution of the Board of Directors of the
Corporation. The date from which dividends on such shares shall be cumulative
shall be the first day after said shares are issued. Accumulations of dividends
shall not bear interest. No cash dividend shall be declared, paid or set apart
for any shares of Common Stock unless all dividends on all shares of the Series
B Preferred Stock at the time outstanding for all past dividend periods and for
the then current dividend shall have been paid, or shall have been declared and
a sum sufficient for the payment thereof, shall have been set apart. Subject to
the foregoing provisions of this paragraph B, cash dividends or other cash
distributions as may be determined by
- ---------------
* At the Effective Time of the Merger, the Combined Company's name will be
"BankAmerica Corporation."
APPENDIX H
H-2
the Board of Directors of the Corporation may be declared and paid upon the
shares of the Common Stock of the Corporation from time to time out of funds
legally available therefor, and the shares of the Series B Preferred Stock shall
not be entitled to participate in any such cash dividend or other such cash
distribution so declared and paid or made on such shares of Common Stock.
C. Redemption.
From and after October 31, 1988, any holder may, by written request, call
upon the Corporation to redeem all or any part of said holder's shares of said
Series B Preferred Stock at a redemption price of $100.00 per share plus
accumulated unpaid dividends to the date said request for redemption is received
by the Corporation and no more (the "Redemption Price"). Any such request for
redemption shall be accompanied by the certificates for which redemption is
requested, duly endorsed or with appropriate stock power attached, in either
case with signature guaranteed. Upon receipt by the Corporation of any such
request for redemption from any holder of the Series B Preferred Stock, the
Corporation shall forthwith redeem said stock at the Redemption Price, provided
that: (i) full cumulative dividends have been paid or declared and set apart for
payment upon all shares of any series of preferred stock ranking superior to the
Series B Preferred Stock as to dividends or other distributions (collectively
the "Superior Stock"); and (ii) the Corporation is not then in default or in
arrears with respect to any sinking or analogous fund or call for tenders
obligation or agreement for the purchase, redemption or retirement of any shares
of Superior Stock. In the event that, upon receipt of a request for redemption,
either or both of the conditions set forth in clauses (i) and (ii) above are not
met, the Corporation shall forthwith return said request to the submitting
shareholder along with a statement that the Corporation is unable to honor such
request and explanation of the reasons therefor. From and after the receipt by
the Corporation of a request for redemption from any holder of said Series B
Preferred Stock, which request may be honored consistent with the foregoing
provisions, all rights of such holder in the Series B Preferred Stock for which
redemption is requested shall cease and terminate, except only the right to
receive the Redemption Price thereof, but without interest.
D. Liquidation Preference.
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, the holders of the Series B Preferred Stock shall
be entitled to receive, subject to the provisions of paragraph G and before any
payment shall be made to the holders of the shares of Common Stock, the amount
of $100.00 per share, plus accumulated dividends. After payment to the holders
of the Series B Preferred Stock of the full amount as aforesaid, the holders of
the Series B Preferred Stock as such shall have no right or claim to any of the
remaining assets which shall be distributed ratably to the holders of the Common
Stock. If, upon any such liquidation, dissolution or winding up, the assets
available therefor are not sufficient to permit payments to the holders of
Series B Preferred Stock of the full amount as aforesaid, then subject to the
provisions of paragraph G, the holders of the Series B Preferred Stock then
outstanding shall share ratably in the distribution of assets in accordance with
the sums which would be payable if such holders were to receive the full amounts
as aforesaid.
E. Sinking Fund.
There shall be no sinking fund applicable to the shares of Series B
Preferred Stock.
F. Conversion.
The shares of Series B Preferred Stock shall not be convertible into any
shares of Common Stock or any other class of shares, nor exchanged for any
shares of Common Stock or any other class of shares.
G. Superior Stock.
The Corporation may issue stock with preferences superior or equal to the
shares of the Series B Preferred Stock without the consent of the holders
thereof.
APPENDIX H
H-3
H. Voting Rights.
Each share of the Series B Preferred Stock shall be entitled to equal
voting rights, share for share, with each share of the Common Stock.
(b) ESOP Convertible Preferred Stock, Series C.
The shares of the ESOP Convertible Preferred Stock, Series C, of the
Corporation shall be designated "ESOP Convertible Preferred Stock, Series C,"
and the number of shares constituting such series shall be 3,000,000. The ESOP
Convertible Preferred Stock, Series C, shall hereinafter be referred to as the
"ESOP Preferred Stock."
A. Special Purpose Restricted Transfer Issue.
Shares of ESOP Preferred Stock shall be issued only to a trustee acting on
behalf of an employee stock ownership plan or other employee benefit plan of the
Corporation or any subsidiary of the Corporation. In the event of any transfer
of shares of ESOP Preferred Stock to any person other than any such plan trustee
or the Corporation, the shares of ESOP Preferred Stock so transferred, upon such
transfer and without any further action by the Corporation or the holder, shall
be automatically converted into shares of Common Stock on the terms otherwise
provided for the conversion of shares of ESOP Preferred Stock into shares of
Common Stock pursuant to paragraph E hereof and no such transferee shall have
any of the voting powers, preferences and relative, participating, optional or
special rights ascribed to shares of ESOP Preferred Stock hereunder but, rather,
only the powers and rights pertaining to the Common Stock into which such shares
of ESOP Preferred Stock shall be so converted. Certificates representing shares
of ESOP Preferred Stock shall be legended to reflect such restrictions on
transfer. Notwithstanding the foregoing provisions of this paragraph A, shares
of ESOP Preferred Stock (i) may be converted into shares of Common Stock as
provided by paragraph E hereof and the shares of Common Stock issued upon such
conversion may be transferred by the holder thereof as permitted by law and (ii)
shall be redeemable by the Corporation upon the terms and conditions provided by
paragraphs F, G and H hereof.
B. Dividends and Distributions.
(1) Subject to the provisions for adjustment hereinafter set forth, the
holders of shares of ESOP Preferred Stock shall be entitled to receive, when, as
and if declared by the Board of Directors out of funds legally available
therefor, cash dividends ("Preferred Dividends") in an amount equal to $3.30 per
share per annum, and no more, payable semi-annually, one-half on the first day
of January and one-half on the first day of July of each year (each a "Dividend
Payment Date") to holders of record at the start of business on such Dividend
Payment Date. Preferred Dividends shall accrue on a daily basis whether or not
the Corporation shall have earnings or surplus at the time, but Preferred
Dividends on the shares of ESOP Preferred Stock for any period less than a full
semi-annual period between Dividend Payment Dates shall be computed on the basis
of a 360-day year of 30-day months. Accumulated but unpaid Preferred Dividends
shall accumulate as of the Dividend Payment Date on which they first become
payable, but no interest shall accrue on accumulated but unpaid Preferred
Dividends.
(2) So long as any ESOP Preferred Stock shall be outstanding, no dividend
shall be declared or paid or set apart for payment on any other series of stock
ranking on a parity with the ESOP Preferred Stock as to dividends, unless there
shall also be or have been declared and paid or set apart for payment on the
ESOP Preferred Stock, like dividends for all dividend payment periods of the
ESOP Preferred Stock ending on or before the dividend payment date of such
parity stock, ratably in proportion to the respective amounts of dividends
accumulated and unpaid through such dividend payment period on the ESOP
Preferred Stock and accumulated and unpaid or payable on such parity stock
through the dividend payment period on such parity stock next preceding such
Dividend Payment Date. In the event that full cumulative dividends on the ESOP
Preferred Stock have not been declared and paid or set apart for payment when
due, the Corporation shall not declare or pay or set apart for payment any
dividends or make any other distributions on, or make any payment on account of
the purchase, redemption or other retirement of any other class of stock or
series thereof of the Corporation ranking, as to dividends or as to
distributions in the event of a liquidation, dissolution or winding-
APPENDIX H
H-4
up of the Corporation, junior to the ESOP Preferred Stock until full cumulative
dividends on the ESOP Preferred Stock shall have been paid or declared and
provided for; provided, however, that the foregoing shall not apply to (i) any
dividend payable solely in any shares of any stock ranking, as to dividends or
as to distributions in the event of the liquidation, dissolution or winding-up
of the Corporation, junior to the ESOP Preferred Stock, or (ii) the acquisition
of shares of any stock ranking, as to dividends or as to distributions in the
event of a liquidation, dissolution or winding-up of the Corporation, junior to
the ESOP Preferred Stock either (A) pursuant to any employee or director
incentive or benefit plan or arrangement (including any employment, severance or
consulting agreement) of the Corporation or any subsidiary of the Corporation
heretofore or hereafter adopted or (B) in exchange solely for shares of any
other stock ranking junior to the ESOP Preferred Stock.
C. Voting Rights.
The holders of shares of ESOP Preferred Stock shall have the following
voting rights:
(1) The holders of ESOP Preferred Stock shall be entitled to vote on all
matters submitted to a vote of the holders of Common Stock of the Corporation,
voting together with the holders of Common Stock as one class. Each share of the
ESOP Preferred Stock shall be entitled to the number of votes equal to the
number of shares of Common Stock into which such share of ESOP Preferred Stock
could be converted on the record date for determining the shareholders entitled
to vote, rounded to the nearest whole vote; it being understood that whenever
the "Conversion Ratio" (as defined in paragraph E hereof) is adjusted as
provided in paragraph I hereof, the voting rights of the ESOP Preferred Stock
shall also be similarly adjusted.
(2) Except as otherwise required by the General Corporation Law of the
State of Delaware or set forth in paragraph C(l), holders of ESOP Preferred
Stock shall have no special voting rights and their consent shall not be
required for the taking of any corporate action.
D. Liquidation, Dissolution or Winding-Up.
(1) Upon any voluntary or involuntary liquidation, dissolution or
winding-up of the Corporation, the holders of ESOP Preferred Stock shall be
entitled to receive out of the assets of the Corporation which remain after
satisfaction in full of all valid claims of creditors of the Corporation and
which are available for payment to shareholders and subject to the rights of the
holders of any stock of the Corporation ranking senior to or on a parity with
the ESOP Preferred Stock in respect of distributions upon liquidation,
dissolution or winding-up of the Corporation, before any amount shall be paid or
distributed among the holders of Common Stock or any other shares ranking junior
to the ESOP Preferred Stock in respect of the distributions upon liquidation,
dissolution or winding-up of the Corporation, liquidating distributions in the
amount of $42.50 per share, plus an amount equal to all accrued and unpaid
dividends thereon to the date fixed for distribution, and no more. If upon any
liquidation, dissolution or winding-up of the Corporation, the amounts payable
with respect to the ESOP Preferred Stock and any other stock ranking as to any
such distribution on a parity with the ESOP Preferred Stock are not paid in
full, the holders of the ESOP Preferred Stock and such other stock shall share
ratably in any distribution of assets in proportion to the full respective
preferential amounts to which they are entitled. After payment of the full
amount to which they are entitled as provided by the foregoing provisions of
this paragraph D(l), the holders of shares of ESOP Preferred Stock shall not be
entitled to any further right or claim to any of the remaining assets of the
Corporation.
(2) Neither the merger or consolidation of the Corporation with or into any
other corporation, nor the merger or consolidation of any other corporation with
or into the Corporation, nor the sale, transfer or lease of all or any portion
of the assets of the Corporation, shall be deemed to be a dissolution,
liquidation or winding-up of the affairs of the Corporation for purposes of this
paragraph D, but the holders of ESOP Preferred Stock shall nevertheless be
entitled in the event of any such merger or consolidation to the rights provided
by paragraph H hereof.
(3) Written notice of any voluntary or involuntary liquidation, dissolution
or winding-up of the Corporation, stating the payment date or dates when, and
the place or places where, the amounts distributable to holders of ESOP
Preferred Stock in such circumstances shall be payable, shall be given by
first-class mail,
APPENDIX H
H-5
postage prepaid, mailed not less than twenty (20) days prior to any payment date
stated therein, to the holders of ESOP Preferred Stock, at the address shown on
the books of the Corporation or any transfer agent for the ESOP Preferred Stock.
E. Conversion into Common Stock.
(1) A holder of shares of ESOP Preferred Stock shall be entitled, at any
time prior to the close of business on the date fixed for redemption of such
shares pursuant to paragraph F, G or H hereof, to cause any or all of such
shares to be converted into shares of Common Stock at a conversion rate equal to
the ratio of 1.0 share of ESOP Preferred Stock to 1.68 shares of Common Stock
(as adjusted as hereinafter provided, the "Conversion Ratio"). The Conversion
Ratio set forth above is subject to adjustment pursuant to this Certificate of
Incorporation.
(2) Any holder of shares of ESOP Preferred Stock desiring to convert such
shares into shares of Common Stock shall surrender the certificate or
certificates representing the shares of ESOP Preferred Stock being converted,
duly assigned or endorsed for transfer to the Corporation (or accompanied by
duly executed stock powers relating thereto), at the principal executive office
of the Corporation or the offices of the transfer agent for the ESOP Preferred
Stock or such office or offices in the continental United States of an agent for
conversion as may from time to time be designated by notice to the holders of
the ESOP Preferred Stock by the Corporation or the transfer agent for the ESOP
Preferred Stock, accompanied by written notice of conversion. Such notice of
conversion shall specify (i) the number of shares of ESOP Preferred Stock to be
converted and the name or names in which such holder wishes the certificate or
certificates for Common Stock and for any shares of ESOP Preferred Stock not to
be so converted to be issued, and (ii) the address to which such holder wishes
delivery to be made of such new certificates to be issued upon such conversion.
(3) Upon surrender of a certificate representing a share or shares of ESOP
Preferred Stock for conversion, the Corporation shall issue and send by hand
delivery (with receipt to be acknowledged) or by first-class mail, postage
prepaid, to the holder thereof or to such holder's designee, at the address
designated by such holder, a certificate or certificates for the number of
shares of Common Stock to which such holder shall be entitled upon conversion.
In the event that there shall have been surrendered a certificate or
certificates representing shares of ESOP Preferred Stock, only part of which are
to be converted, the Corporation shall issue and deliver to such holder or such
holder's designee a new certificate or certificates representing the number of
shares of ESOP Preferred Stock which shall not have been converted.
(4) The issuance by the Corporation of shares of Common Stock upon a
conversion of shares of ESOP Preferred Stock into shares of Common Stock made at
the option of the holder thereof shall be effective as of the earlier of (i) the
delivery to such holder or such holder's designee of the certificate or
certificates representing the shares of Common Stock issued upon conversion
thereof or (ii) the commencement of business on the second business day after
the surrender of the certificate or certificates for the shares of ESOP
Preferred Stock to be converted, duly assigned or endorsed for transfer to the
corporation (or accompanied by duly executed stock powers relating thereto) as
provided hereby. On and after the effective date of conversion, the person or
persons entitled to receive the Common Stock issuable upon such conversion shall
be treated for all purposes as the record holder or holders of such shares of
Common Stock, but no allowance or adjustment shall be made in respect of
dividends payable to holders of Common Stock in respect of any period prior to
such effective date. The Corporation shall not be obligated to pay any dividends
which shall have been declared and shall be payable to holders of shares of ESOP
Preferred Stock on a Dividend Payment Date if such Dividend Payment Date for
such dividend shall coincide with or be on or subsequent to the effective date
of conversion of such shares.
(5) The Corporation shall not be obligated to deliver to holders of ESOP
Preferred Stock any fractional share or shares of Common Stock issuable upon any
conversion of such shares of ESOP Preferred Stock, but in lieu thereof may make
a cash payment in respect thereof in any manner permitted by law.
(6) The Corporation shall at all times reserve and keep available out of
its authorized and unissued Common Stock, solely for issuance upon the
conversion of shares of ESOP Preferred Stock as herein provided, free from any
preemptive rights, such number of shares of Common Stock as shall from time to
time
APPENDIX H
H-6
be issuable upon the conversion of all shares of ESOP Preferred Stock then
outstanding. The Corporation shall prepare and shall use its best efforts to
obtain and keep in force such governmental or regulatory permits or other
authorizations as may be required by law, and shall comply with all requirements
as to registration or qualification of the Common Stock, in order to enable the
Corporation lawfully to issue and deliver to each holder of record of ESOP
Preferred Stock such number of shares of its Common Stock as shall from time to
time be sufficient to effect the conversion of all shares of ESOP Preferred
Stock then outstanding and convertible into shares of Common Stock.
F. Redemption At the Option of the Corporation.
(1) The ESOP Preferred Stock shall be redeemable, in whole or in part, at
the option of the Corporation at any time, at a redemption price per share
(except as to redemption pursuant to paragraph F(3)) of $42.83 prior to July 1,
1999 and $42.50 thereafter, plus, in each case, an amount equal to all accrued
and unpaid dividends thereon to the date fixed for redemption. Payment of the
redemption price shall be made by the Corporation in cash or shares of Common
Stock, or a combination thereof, as permitted by paragraph F(5). From and after
the date fixed for redemption, dividends on shares of ESOP Preferred Stock
called for redemption will cease to accrue, such shares will no longer be deemed
to be outstanding and all rights in respect of such shares of the Corporation
shall cease, except the right to receive the redemption price. If less than all
of the outstanding shares of ESOP Preferred Stock are to be redeemed, the
Corporation shall either redeem a portion of the shares of each holder
determined pro rata based on the number of shares held by each holder or shall
select the shares to be redeemed by lot, as may be determined by the Board of
Directors of the Corporation.
(2) Unless otherwise required by law, notice of redemption will be sent to
the holders of ESOP Preferred Stock at the address shown on the books of the
Corporation or any transfer agent for the ESOP Preferred Stock by first-class
mail, postage prepaid, mailed not less than twenty (20) days nor more than sixty
(60) days prior to the redemption date. Each such notice shall state: (i) the
redemption date; (ii) the total number of shares of the ESOP Preferred Stock to
be redeemed and, if fewer than all the shares held by such holder are to be
redeemed, the number of such shares to be redeemed from such holder; (iii) the
redemption price; (iv) the place or places where certificates for such shares
are to be surrendered for payment of the redemption price; (v) that dividends on
the shares to be redeemed will cease to accrue on such redemption date; and (vi)
the conversion rights of the shares to be redeemed, the period within which
conversion rights may be exercised, and the Conversion Ratio and number of
shares of Common Stock issuable upon conversion of a share of ESOP Preferred
Stock at the time. These notice provisions may be supplemented if necessary in
order to comply with optional redemption provisions for preferred stock which
may be required under the Internal Revenue Code of 1986, as amended, or the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Upon
surrender of the certificates for any shares so called for redemption and not
previously converted (properly endorsed or assigned for transfer, if the Board
of Directors of the Corporation shall so require and the notice shall so state),
such shares shall be redeemed by the Corporation at the date fixed for
redemption and at the applicable redemption price set forth in this paragraph F.
(3) In the event of a change in the federal tax law of the United States of
America which has the effect of precluding the Corporation from claiming any of
the tax deductions for dividends paid on the ESOP Preferred Stock when such
dividends are used as provided under Section 404(k)(2) of the Internal Revenue
Code of 1986, as amended and in effect on the date shares of ESOP Preferred
Stock are initially issued, the Corporation may, within 180 days following the
effective date of such tax legislation and implementing regulations of the
Internal Revenue Service, if any, in its sole discretion and notwithstanding
anything to the contrary in paragraph F(l), elect to redeem any or all such
shares for the amount payable in respect of the shares upon liquidation of the
Corporation pursuant to paragraph D.
(4) In the event the C&S/Sovran Retirement Savings, ESOP and Profit Sharing
Plan (as amended, together with any successor plan, the "Plan") is terminated,
the Corporation shall, notwithstanding anything to the contrary in paragraph
F(l), redeem all shares of ESOP Preferred Stock for the amount payable in
respect of the shares upon redemption of the ESOP Preferred Stock pursuant to
paragraph F(1) hereof.
APPENDIX H
H-7
(5) The Corporation, at its option, may make payment of the redemption
price required upon redemption of shares of ESOP Preferred Stock in cash or in
shares of Common Stock, or in a combination of such shares and cash, any such
shares to be valued for such purpose at their Fair Market Value (as defined in
paragraph I(7) hereof).
G. Other Redemption Rights.
Shares of ESOP Preferred Stock shall be redeemed by the Corporation at a
price which is the greater of the Conversion Value (as defined in paragraph I)
of the ESOP Preferred Stock on the date fixed for redemption or a redemption
price of $42.50 per share plus accrued and unpaid dividends thereon to the date
fixed for redemption, for shares of Common Stock (any such shares of Common
Stock to be valued for such purpose as provided by paragraph F(5) hereof), at
the option of the holder, at any time and from time to time upon notice to the
Corporation given not less than five (5) business days prior to the date fixed
by the Corporation in such notice for such redemption, when and to the extent
necessary (i) to provide for distributions required to be made under, or to
satisfy an investment election provided to participants in accordance with, the
Plan to participants in the Plan or (ii) to make payment of principal, interest
or premium due and payable (whether as scheduled or upon acceleration) on any
indebtedness incurred by the holder or Trustee under the Plan for the benefit of
the Plan.
H. Consolidation, Merger, etc.
(1) In the event that the Corporation shall consummate any consolidation or
merger or similar transaction, however named, pursuant to which the outstanding
shares of Common Stock are by operation of law exchanged solely for or changed,
reclassified or converted solely into stock of any successor or resulting
company (including the Corporation and any company that directly or indirectly
owns all of the outstanding capital stock of such successor or resulting
company) that constitutes "qualifying employer securities" with respect to a
holder of ESOP Preferred Stock within the meaning of Section 409(1) of the
Internal Revenue Code of 1986, as amended, and Section 407(d)(5) of ERISA, or
any successor provisions of law, and, if applicable, for a cash payment in lieu
of fractional shares, if any, the shares of ESOP Preferred Stock of such holder
shall be assumed by and shall become preferred stock of such successor or
resulting company, having in respect of such company insofar as possible the
same powers, preferences and relative, participating, optional or other special
rights (including the redemption rights provided by paragraphs F, G and H
hereof), and the qualifications, limitations or restrictions thereon, that the
ESOP Preferred Stock had immediately prior to such transaction, except that
after such transaction each share of the ESOP Preferred Stock shall be
convertible, otherwise on the terms and conditions provided by paragraph E
hereof, into the qualifying employer securities so receivable by a holder of the
number of shares of Common Stock into which such shares of ESOP Preferred Stock
could have been converted immediately prior to such transaction if such holder
of Common Stock failed to exercise any rights of election to receive any kind or
amount of stock, securities, cash or other property (other than such qualifying
employer securities and a cash payment, if applicable, in lieu of fractional
shares) receivable upon such transaction (provided that, if the kind or amount
of qualifying employer securities receivable upon such transaction is not the
same for each non-electing share, then the kind and amount of qualifying
employer securities receivable upon such transaction for each non-electing share
shall be the kind and amount so receivable per share by a plurality of the
non-electing shares). The rights of the ESOP Preferred Stock as preferred stock
of such successor or resulting company shall successively be subject to
adjustments pursuant to paragraph I hereof after any such transaction as nearly
equivalent to the adjustments provided for by such paragraph prior to such
transaction. The Corporation shall not consummate any such merger, consolidation
or similar transaction unless all then outstanding shares of the ESOP Preferred
Stock shall be assumed and authorized by the successor or resulting company as
aforesaid.
(2) In the event that the Corporation shall consummate any consolidation or
merger or similar transaction, however named, pursuant to which the outstanding
shares of Common Stock are by operation of law exchanged for or changed,
reclassified or converted into other stock or securities or cash or any other
property, or any combination thereof, other than any such consideration which is
constituted solely of qualifying employer securities (as referred to in
paragraph H(l)) and cash payments, if applicable, in lieu of
APPENDIX H
H-8
fractional shares, all outstanding shares of ESOP Preferred Stock shall, without
any action on the part of the Corporation or any holder thereof (but subject to
paragraph H(3)), be deemed converted by virtue of such merger, consolidation or
similar transaction immediately prior to such consummation into the number of
shares of Common Stock into which such shares of ESOP Preferred Stock could have
been converted at such time, and each share of ESOP Preferred Stock shall, by
virtue of such transaction and on the same terms as apply to the holders of
Common Stock, be converted into or exchanged for the aggregate amount of stock,
securities, cash or other property (payable in like kind) receivable by a holder
of the number of shares of Common Stock into which such shares of ESOP Preferred
Stock could have been converted immediately prior to such transaction if such
holder of Common Stock failed to exercise any rights of election as to the kind
or amount of stock, securities, cash or other property receivable upon such
transaction (provided that, if the kind or amount of stock, securities, cash or
other property receivable upon such transaction is not the same for each
non-electing share, then the kind and amount of stock, securities, cash or other
property receivable upon such transaction for each non-electing share shall be
the kind and amount so receivable per share by a plurality of the non-electing
shares).
(3) In the event the Corporation shall enter into any agreement providing
for any consolidation or merger or similar transaction described in paragraph
H(2), then the Corporation shall as soon as practicable thereafter (and in any
event at least ten (10) business days before consummation of such transaction)
give notice of such agreement and the material terms thereof to each holder of
ESOP Preferred Stock and each such holder shall have the right to elect, by
written notice to the Corporation, to receive, upon consummation of such
transaction (if and when such transaction is consummated), from the Corporation
or the successor of the Corporation, in redemption and retirement of such ESOP
Preferred Stock, a cash payment equal to the amount payable in respect of shares
of ESOP Preferred Stock upon redemption pursuant to paragraph F(l) hereof. No
such notice of redemption shall be effective unless given to the Corporation
prior to the close of business on the second business day prior to consummation
of such transaction, unless the Corporation or the successor of the Corporation
shall waive such prior notice, but any notice of redemption so given prior to
such time may be withdrawn by notice of withdrawal given to the Corporation
prior to the close of business on the second business day prior to consummation
of such transaction.
I. Anti-dilution Adjustments.
(1) In the event the Corporation shall, at any time or from time to time
while any of the shares of the ESOP Preferred Stock are outstanding, (i) pay a
dividend or make a distribution in respect of the Common Stock in shares of
Common Stock, (ii) subdivide the outstanding shares of Common Stock, or (iii)
combine the outstanding shares of Common Stock into a smaller number of shares,
in each case whether by reclassification of shares, recapitalization of the
Corporation (including a recapitalization effected by a merger or consolidation
to which paragraph H hereof does not apply) or otherwise, the Conversion Ratio
in effect immediately prior to such action shall be adjusted by multiplying such
Conversion Ratio by the fraction the numerator of which is the number of shares
of Common Stock outstanding immediately before such event and the denominator of
which is the number of shares of Common Stock outstanding immediately after such
event. An adjustment made pursuant to this paragraph I(1) shall be given effect,
upon payment of such a dividend or distribution, as of the record date for the
determination of shareholders entitled to receive such dividend or distribution
(on a retroactive basis) and in the case of a subdivision or combination shall
become effective immediately as of the effective date thereof.
(2) In the event that the Corporation shall, at any time or from time to
time while any of the shares of ESOP Preferred Stock are outstanding, issue to
holders of shares of Common Stock as a dividend or distribution, including by
way of a reclassification of shares or a recapitalization of the Corporation,
any right or warrant to purchase shares of Common Stock (but not including as
such a right or warrant any security convertible into or exchangeable for shares
of Common Stock) at a purchase price per share less than the Fair Market Value
(as hereinafter defined) of a share of Common Stock on the date of issuance of
such right or warrant, then, subject to the provisions of paragraphs I(5) and
I(6), the Conversion Ratio shall be adjusted by multiplying such Conversion
Ratio by the fraction the numerator of which shall be the number of shares of
Common Stock outstanding immediately before such issuance of rights or warrants
plus the number of shares
APPENDIX H
H-9
of Common Stock which could be purchased at the Fair Market Value of a share of
Common Stock at the time of such issuance for the maximum aggregate
consideration payable upon exercise in full of all such rights or warrants and
the denominator of which shall be the number of shares of Common Stock
outstanding immediately before such issuance of rights or warrants plus the
maximum number of shares of Common Stock that could be acquired upon exercise in
full of all such rights and warrants.
(3) In the event the Corporation shall, at any time and from time to time
while any of the shares of ESOP Preferred Stock are outstanding, issue, sell or
exchange shares of Common Stock (other than pursuant to any right or warrant to
purchase or acquire shares of Common Stock (including as such a right or warrant
any security convertible into or exchangeable for shares of Common Stock) and
other than pursuant to any dividend reinvestment plan or employee or director
incentive or benefit plan or arrangement, including any employment, severance or
consulting agreement, of the Corporation or any subsidiary of the Corporation
heretofore or hereafter adopted) for a consideration having a Fair Market Value
on the date of such issuance, sale or exchange less than the Fair Market Value
of such shares on the date of such issuance, sale or exchange, then, subject to
the provisions of paragraphs I(5) and (6), the Conversion Ratio shall be
adjusted by multiplying such Conversion Ratio by the fraction the numerator of
which shall be the sum of (i) the Fair Market Value of all the shares of Common
Stock outstanding on the day immediately preceding the first public announcement
of such issuance, sale or exchange plus (ii) the Fair Market Value of the
consideration received by the Corporation in respect of such issuance, sale or
exchange of shares of Common Stock, and the denominator of which shall be the
product of (i) the Fair Market Value of a share of Common Stock on the day
immediately preceding the first public announcement of such issuance, sale or
exchange multiplied by (ii) the sum of the number of shares of Common Stock
outstanding on such day plus the number of shares of Common Stock so issued,
sold or exchanged by the Corporation. In the event the Corporation shall, at any
time or from time to time while any shares of ESOP Preferred Stock are
outstanding, issue, sell or exchange any right or warrant to purchase or acquire
shares of Common Stock (including as such a right or warrant any security
convertible into or exchangeable for shares of Common Stock), other than any
such issuance to holders of shares of Common Stock as a dividend or distribution
(including by way of a reclassification of shares or a recapitalization of the
Corporation) and other than pursuant to any dividend reinvestment plan or
employee or director incentive or benefit plan or arrangement (including any
employment, severance or consulting agreement) of the Corporation or any
subsidiary of the Corporation heretofore or hereafter adopted, for a
consideration having a Fair Market Value on the date of such issuance, sale or
exchange less than the Non-Dilutive Amount (as hereinafter defined), then,
subject to the provisions of paragraphs I(5) and (6), the Conversion Ratio shall
be adjusted by multiplying such Conversion Ratio by a fraction the numerator of
which shall be the sum of (a) the Fair Market Value of all the shares of Common
Stock outstanding on the day immediately preceding the first public announcement
of such issuance, sale or exchange plus (b) the Fair Market Value of the
consideration received by the Corporation in respect of such issuance, sale or
exchange of such right or warrant plus (c) the Fair Market Value at the time of
such issuance of the consideration which the Corporation would receive upon
exercise in full of all such rights or warrants, and the denominator of which
shall be the product of (a) the Fair Market Value of a share of Common Stock on
the day immediately preceding the first public announcement of such issuance,
sale or exchange multiplied by (b) the sum of the number of shares of Common
Stock outstanding on such day plus the maximum number of shares of Common Stock
which could be acquired pursuant to such right or warrant at the time of the
issuance, sale or exchange of such right or warrant (assuming shares of Common
Stock could be acquired pursuant to such right or warrant at such time).
(4) In the event the Corporation shall, at any time or from time to time
while any of the shares of ESOP Preferred Stock are outstanding, make any
Extraordinary Distribution (as hereinafter defined) in respect of the Common
Stock, whether by dividend, distribution, reclassification of shares or
recapitalization of the Corporation (including a recapitalization or
reclassification effected by a merger or consolidation to which paragraph H
hereof does not apply) or effect a Pro Rata Repurchase (as hereinafter defined)
of Common Stock, the Conversion Ratio in effect immediately prior to such
Extraordinary Distribution or Pro Rata Repurchase shall, subject to paragraphs
I(5) and (6), be adjusted by multiplying such Conversion Ratio by a fraction the
numerator of which shall be (a) the product of (i) the number of shares of
Common Stock outstanding immediately before such Extraordinary Distribution or
Pro Rata Repurchase multiplied by
APPENDIX H
H-10
(ii) the Fair Market Value (as herein defined) of a share of Common Stock on the
Valuation Date (as hereinafter defined) with respect to an Extraordinary
Distribution, or on the applicable expiration date (including all extensions
thereof) of any tender offer which is a Pro Rata Repurchase, or on the date of
purchase with respect to any Pro Rata Repurchase which is not a tender offer, as
the case may be, minus (b) the Fair Market Value of the Extraordinary
Distribution or the aggregate purchase price of the Pro Rata Repurchase, as the
case may be, and the denominator of which shall be the product of (i) the number
of shares of Common Stock outstanding immediately before such Extraordinary
Distribution or Pro Rata Repurchase minus, in the case of a Pro Rata Repurchase,
the number of shares of Common Stock repurchased by the Corporation multiplied
by (ii) the Fair Market Value of a share of Common Stock on the record date with
respect to an Extraordinary Distribution or on the applicable expiration date
(including all extensions thereof) of any tender offer which is a Pro Rata
Repurchase or on the date of purchase with respect to any Pro Rata Repurchase
which is not a tender offer, as the case may be. The Corporation shall send each
holder of ESOP Preferred Stock (x) notice of its intent to make any
Extraordinary Distribution and (y) notice of any offer by the Corporation to
make a Pro Rata Repurchase, in each case at the same time as, or as soon as
practicable after, such offer is first communicated (including by announcement
of a record date in accordance with the rules of any stock exchange on which the
Common Stock is listed or admitted to trading) to holders of Common Stock. Such
notice shall indicate the intended record date and the amount and nature of such
dividend or distribution, or the number of shares subject to such offer for a
Pro Rata Repurchase and the purchase price payable by the Corporation pursuant
to such offer, as well as the Conversion Ratio and the number of shares of
Common Stock into which a share of ESOP Preferred Stock may be converted at such
time.
(5) Notwithstanding any other provisions of this paragraph I, the
Corporation shall not be required to make any adjustment of the Conversion Ratio
unless such adjustment would require an increase or decrease of at least one
percent (1%) in the Conversion Ratio. Any lesser adjustment shall be carried
forward and shall be made no later than the time of, and together with, the next
subsequent adjustment which, together with any adjustment or adjustments so
carried forward, shall amount to an increase or decrease of at least one percent
(1%) in the Conversion Ratio.
(6) If the Corporation shall make any dividend or distribution on the
Common Stock or issue any Common Stock, other capital stock or other security of
the Corporation or any rights or warrants to purchase or acquire any such
security, which transaction does not result in an adjustment to the Conversion
Ratio pursuant to the foregoing provisions of this paragraph I, the Board of
Directors of the Corporation shall consider whether such action is of such a
nature that an adjustment to the Conversion Ratio should equitably be made in
respect of such transaction. If in such case the Board of Directors of the
Corporation determines that the adjustment to the Conversion Ratio should be
made, an adjustment shall be made effective as of such date, as determined by
the Board of Directors of the Corporation. The determination of the Board of
Directors of the Corporation as to whether an adjustment to the Conversion Ratio
should be made pursuant to the foregoing provisions of this paragraph I(6), and,
if so, as to what adjustment should be made and when, shall be final and binding
on the Corporation and all shareholders of the Corporation. The Corporation
shall be entitled to make such additional adjustments in the Conversion Ratio,
in addition to those required by the foregoing provisions of this paragraph I,
as shall be necessary in order that any dividend or distribution in shares of
capital stock of the Corporation, subdivision, reclassification or combination
of shares of stock of the Corporation or any recapitalization of the Corporation
shall not be taxable to holders of the Common Stock.
(7) For purposes of this paragraph I, the following definitions shall
apply:
"Conversion Value" shall mean the Fair Market Value of the aggregate
number of shares of Common Stock into which a share of ESOP Preferred Stock
is convertible.
"Extraordinary Distribution" shall mean any dividend or other
distribution (effected while any of the shares of ESOP Preferred Stock are
outstanding) (a) of cash, where the aggregate amount of such cash dividend
and distribution together with the amount of all cash dividends and
distributions made during the preceding period of 12 months, when combined
with the aggregate amount of all Pro Rata Repurchases (for this purpose,
including only that portion of the aggregate purchase price of such Pro
APPENDIX H
H-11
Rata Repurchase which is in excess of the Fair Market Value of the Common
Stock repurchased as determined on the applicable expiration date
(including all extensions thereof) of any tender offer or exchange offer
which is a Pro Rata Repurchase, or the date of purchase with respect to any
other Pro Rata Repurchase which is not a tender offer or exchange offer
made during such period), exceeds Twelve and One-Half percent (12.5%) of
the aggregate Fair Market Value of all shares of Common Stock outstanding
on the record date for determining the shareholders entitled to receive
such Extraordinary Distribution and (b) any shares of capital stock of the
Corporation (other than shares of Common Stock), other securities of the
Corporation (other than securities of the type referred to in paragraph
I(2)), evidence of indebtedness of the Corporation or any other person or
any other property (including shares of any subsidiary of the Corporation),
or any combination thereof. The Fair Market Value of an Extraordinary
Distribution for purposes of paragraph I(4) shall be the sum of the Fair
Market Value of such Extraordinary Distribution plus the amount of any cash
dividends which are not Extraordinary Distributions made during such
twelve-month period and not previously included in the calculation of an
adjustment pursuant to paragraph I(4).
"Fair Market Value" shall mean, as to shares of Common Stock or any
other class of capital stock or securities of the Corporation or any other
issuer which are publicly traded, the average of the Current Market Prices
(as hereinafter defined) of such shares or securities for each day of the
Adjustment Period (as hereinafter defined). "Current Market Price" of
publicly traded shares of Common Stock or any other class of capital stock
or other security of the Corporation or any other issuer for a day shall
mean the last reported sales price, regular way, or, in case no sale takes
place on such day, the average of the reported closing bid and asked
prices, regular way, in either case as reported on the New York Stock
Exchange Composite Tape or, if such security is not listed or admitted to
trading on the New York Stock Exchange, on the principal national
securities exchange on which such security is listed or admitted to trading
or, if not listed or admitted to trading on any national securities
exchange, on The Nasdaq National Market or, if such security is not quoted
on Nasdaq, the average of the closing bid and asked prices on each such day
in the over-the-counter market as reported by Nasdaq or, if bid and asked
prices for such security on each such day shall not have been reported
through Nasdaq, the average of the bid and asked prices for such day as
furnished by any New York Stock Exchange member firm selected for such
purpose by the Board of Directors of the Corporation or a committee thereof
on each trading day during the Adjustment Period. "Adjustment Period" shall
mean the period of five (5) consecutive trading days preceding the date as
of which the Fair Market Value of a security is to be determined. The "Fair
Market Value" of any security which is not publicly traded or of any other
property shall mean the fair value thereof as determined by an independent
investment banking or appraisal firm experienced in the valuation of such
securities or property selected in good faith by the Board of Directors of
the Corporation or a committee thereof, or, if no such investment banking
or appraisal firm is in the good faith judgment of the Board of Directors
or such committee available to make such determination, as determined in
good faith by the Board of Directors of the Corporation or such committee.
"Non-Dilutive Amount" in respect of an issuance, sale or exchange by
the Corporation of any right or warrant to purchase or acquire shares of
Common Stock (including any security convertible into or exchangeable for
shares of Common Stock) shall mean the remainder of (a) the product of the
Fair Market Value of a share of Common Stock on the day preceding the first
public announcement of such issuance, sale or exchange multiplied by the
maximum number of shares of Common Stock which could be acquired on such
date upon the exercise in full of such rights and warrants (including upon
the conversion or exchange of all such convertible or exchangeable
securities), whether or not exercisable (or convertible or exchangeable) at
such date, minus (b) the aggregate amount payable pursuant to such right or
warrant to purchase or acquire such maximum number of shares of Common
Stock; provided, however, that in no event shall the Non-Dilutive Amount be
less than zero. For purposes of the foregoing sentence, in the case of a
security convertible into or exchangeable for shares of Common Stock, the
amount payable pursuant to a right or warrant to purchase or acquire shares
of Common Stock shall be the Fair Market Value of such security on the date
of the issuance, sale or exchange of such security by the Corporation.
APPENDIX H
H-12
"Pro Rata Repurchase" shall mean any purchase of shares of Common
Stock by the Corporation or any subsidiary thereof, whether for cash,
shares of capital stock of the Corporation, other securities of the
Corporation, evidences of indebtedness of the Corporation or any other
person or any other property (including shares of a subsidiary of the
Corporation), or any combination thereof, effected while any of the shares
of ESOP Preferred Stock are outstanding, pursuant to any tender offer or
exchange offer subject to Section 13(e) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or any successor provision of law,
or pursuant to any other offer available to substantially all holders of
Common Stock; provided, however, that no purchase of shares by the
Corporation or any subsidiary thereof made in open market transactions
shall be deemed a Pro Rata Repurchase. For purposes of this paragraph I(7),
shares shall be deemed to have been purchased by the Corporation or any
subsidiary thereof "in open market transactions" if they have been
purchased substantially in accordance with the requirements of Rule 10b-18
as in effect under the Exchange Act, on the date shares of ESOP Preferred
Stock are initially issued by the Corporation or on such other terms and
conditions as the Board of Directors of the Corporation or a committee
thereof shall have determined are reasonably designed to prevent such
purchases from having a material effect on the trading market for the
Common Stock.
"Valuation Date" with respect to an Extraordinary Distribution shall
mean the date that is five (5) business days prior to the record date for
such Extraordinary Distribution.
(8) Whenever an adjustment to the Conversion Ratio is required pursuant
hereto, the Corporation shall forthwith place on file with the transfer agent
for the Common Stock and the ESOP Preferred Stock if there be one, and with the
Secretary of the Corporation, a statement signed by two officers of the
Corporation, stating the adjusted Conversion Ratio determined as provided herein
and the voting rights (as appropriately adjusted) of the ESOP Preferred Stock.
Such statement shall set forth in reasonable detail such facts as shall be
necessary to show the reason and the manner of computing such adjustment,
including any determination of Fair Market Value involved in such computation.
Promptly after each adjustment to the Conversion Ratio and the related voting
rights of the ESOP Preferred Stock, the Corporation shall mail a notice thereof
to each holder of shares of the ESOP Preferred Stock.
J. Ranking; Retirement of Shares.
(1) The ESOP Preferred Stock shall rank (a) senior to the Common Stock as
to the payment of dividends and the distribution of assets on liquidation,
dissolution and winding-up of the Corporation and (b) unless otherwise provided
in the Articles of Incorporation of the Corporation or an amendment to such
Articles of Incorporation relating to a subsequent series of Preferred Shares,
junior to all other series of Preferred Shares as to the payment of dividends
and the distribution of assets on liquidation, dissolution or winding-up.
(2) Any shares of ESOP Preferred Stock acquired by the Corporation by
reason of the conversion or redemption of such shares as provided hereby, or
otherwise so acquired, shall be retired as shares of ESOP Preferred Stock and
restored to the status of authorized but unissued shares of Preferred Shares,
undesignated as to series, and may thereafter be reissued as part of a new
series of such Preferred Shares as permitted by law.
K. Miscellaneous.
(1) All notices referred to herein shall be in writing, and all notices
hereunder shall be deemed to have been given upon the earlier of receipt thereof
or three (3) business days after the mailing thereof if sent by registered mail
(unless first-class mail shall be specifically permitted for such notice under
the terms hereof) with postage prepaid, addressed: (a) if to the Corporation, to
its office at NationsBank Corporate Center, Charlotte, North Carolina 28255
(Attention: Treasurer) or to the transfer agent for the ESOP Preferred Stock, or
other agent of the Corporation designated as permitted hereby or (b) if to any
holder of the ESOP Preferred Stock or Common Stock, as the case may be, to such
holder at the address of such holder as listed in the stock record books of the
Corporation (which may include the records of any transfer agent for the ESOP
APPENDIX H
H-13
Preferred Stock or Common Stock, as the case may be) or (c) to such other
address as the Corporation or any such holder, as the case may be, shall have
designated by notice similarly given.
(2) The term "Common Stock" as used herein means the Corporation's Common
Stock, as the same existed at the date of filing of the Amendment to the
Corporation's Articles of Incorporation relating to the ESOP Preferred Stock or
any other class of stock resulting from successive changes or reclassification
of such Common Stock consisting solely of changes in par value, or from par
value to no par value. In the event that, at any time as a result of an
adjustment made pursuant to paragraph I hereof, the holder of any share of the
ESOP Preferred Stock upon thereafter surrendering such shares for conversion
shall become entitled to receive any shares or other securities of the
Corporation other than shares of Common Stock, the Conversion Ratio in respect
of such other shares or securities so receivable upon conversion of shares of
ESOP Preferred Stock shall thereafter be adjusted, and shall be subject to
further adjustment from time to time, in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to Common Stock
contained in paragraph I hereof, and the provisions of paragraphs A through H,
J, and K hereof with respect to the Common Stock shall apply on like or similar
terms to any such other shares or securities.
(3) The Corporation shall pay any and all stock transfer and documentary
stamp taxes that may be payable in respect of any issuance or delivery of shares
of ESOP Preferred Stock or shares of Common Stock or other securities issued on
account of ESOP Preferred Stock pursuant hereto or certificates representing
such shares or securities. The Corporation shall not, however, be required to
pay any such tax which may be payable in respect of any transfer involved in the
issuance or delivery of shares of ESOP Preferred Stock or Common Stock or other
securities in a name other than that in which the shares of ESOP Preferred Stock
with respect to which such shares or other securities are issued or delivered
were registered, or in respect of any payment to any person with respect to any
such shares or securities other than a payment to the registered holder thereof,
and shall not be required to make any such issuance, delivery or payment unless
and until the person otherwise entitled to such issuance, delivery or payment
has paid to the Corporation the amount of any such tax or has established, to
the satisfaction of the Corporation, that such tax has been paid or is not
payable.
(4) In the event that a holder of shares of ESOP Preferred Stock shall not
by written notice designate the name in which shares of Common Stock to be
issued upon conversion of such shares should be registered or to whom payment
upon redemption of shares of ESOP Preferred Stock should be made or the address
to which the certificate or certificates representing such shares, or such
payment, should be sent, the Corporation shall be entitled to register such
shares, and make such payment, in the name of the holder of such ESOP Preferred
Stock as shown on the records of the Corporation and to send the certificate or
certificates representing such shares, or such payment, to the address of such
holder shown on the records of the Corporation.
(5) The Corporation may appoint, and from time to time discharge and
change, a transfer agent for the ESOP Preferred Stock. Upon any such appointment
or discharge of a transfer agent, the Corporation shall send notice thereof by
first-class mail, postage prepaid, to each holder of record of ESOP Preferred
Stock.
APPENDIX H
H-14
(c) $2.50 Cumulative Convertible Preferred Stock, Series BB.
A. Designation.
The designation of this series is "$2.50 Cumulative Convertible Preferred
Stock, Series BB" (hereinafter referred to as the "Series BB Preferred Stock"),
and the initial number of shares constituting such series shall be 20,000,000,
which number may be increased or decreased (but not below the number of shares
then outstanding) from time to time by the Board of Directors. The Series BB
Preferred Stock shall rank prior to each of the Common Stock, the Series B
Preferred Stock and the ESOP Preferred Stock with respect to the payment of
dividends and the distribution of assets.
B. Dividend Rights.
(1) The holders of shares of Series BB Preferred Stock shall be entitled to
receive, when and as declared by the Board of Directors, out of funds legally
available therefor, cumulative preferential cash dividends, accruing from
January 1, 1998, at the annual rate of $2.50 per share, and no more, payable
quarterly on the first day of January, April, July and October of each year
(each of the quarterly periods ending on the last day of March, June, September
and December being hereinafter referred to as a "dividend period"). Dividends on
the Series BB Preferred Stock shall first become payable on the first day of
January, April, July or October, as the case may be, next following the date of
issuance; provided, however, that if the first dividend period ends within 20
days of the date of issuance, such initial dividend shall be payable at the
completion of the first full dividend period.
(2) Dividends on shares of Series BB Preferred Stock shall be cumulative
from January 1, 1998, whether or not there shall be funds legally available for
the payment thereof. Accumulations of dividends on the Series BB Preferred Stock
shall not bear interest. The Corporation shall not (i) declare or pay or set
apart for payment any dividends or distributions on any stock ranking as to
dividends junior to the Series BB Preferred Stock (other than dividends paid in
shares of such junior stock) or (ii) make any purchase or redemption of, or any
sinking fund payment for the purchase or redemption of, any stock ranking as to
dividends junior to the Series BB Preferred Stock (other than a purchase or
redemption made by issue or delivery of such junior stock) unless all dividends
payable on all outstanding shares of Series BB Preferred Stock for all past
dividend periods shall have been paid in full or declared and a sufficient sum
set apart for payment thereof; provided, however, that any moneys theretofore
deposited in any sinking fund with respect to any preferred stock of the
Corporation in compliance with the provisions of such sinking fund may
thereafter be applied to the purchase or redemption of such preferred stock in
accordance with the terms of such sinking fund regardless of whether at the time
of such application all dividends payable on all outstanding shares of Series BB
Preferred Stock for all past dividend periods shall have been paid in full or
declared and a sufficient sum set apart for payment thereof.
(3) All dividends declared on shares of Series BB Preferred Stock and any
other class of preferred stock or series thereof ranking on a parity as to
dividends with the Series BB Preferred Stock shall be declared pro rata, so that
the amounts of dividends declared on the Series BB Preferred Stock and such
other preferred stock for the same dividend period, or for the dividend period
of the Series BB Preferred Stock ending within the dividend period of such other
stock, shall, in all cases, bear to each other the same ratio that accrued
dividends on the shares of Series BB Preferred Stock and such other stock bear
to each other.
C. Liquidation Preference.
(1) In the event of any liquidation, dissolution or winding up of the
affairs of the Corporation, whether voluntary or involuntary, the holders of
Series BB Preferred Stock shall be entitled to receive out of the assets of the
Corporation available for distribution to shareholders an amount equal to $25
per share plus an amount equal to accrued and unpaid dividends thereon to and
including the date of such distribution, and no more, before any distribution
shall be made to the holders of any class of stock of the Corporation ranking
junior to the Series BB Preferred Stock as to the distribution of assets.
APPENDIX H
H-15
(2) In the event the assets of the Corporation available for distribution
to shareholders upon any liquidation, dissolution or winding up of the affairs
of the Corporation, whether voluntary or involuntary, shall be insufficient to
pay in full the amounts payable with respect to the Series BB Preferred Stock
and any other shares of preferred stock of the Corporation ranking on a parity
with the Series BB Preferred Stock as to the distribution of assets, the holders
of Series BB Preferred Stock and the holders of such other preferred stock shall
share ratably in any distribution of assets of the Corporation in proportion to
the full respective preferential amounts to which they are entitled.
(3) The merger or consolidation of the Corporation into or with any other
corporation, the merger or consolidation of any other corporation into or with
the Corporation or the sale of the assets of the Corporation substantially as an
entirety shall not be deemed a liquidation, dissolution or winding up of the
affairs of the Corporation within the meaning of this paragraph C.
D. Redemption.
(1) The Corporation, at its option, may redeem all or any shares of the
Series BB Preferred Stock at any time at a redemption price (the "Redemption
Price") consisting of the sum of (i) $25 per share and (ii) an amount equal to
accrued and unpaid dividends thereon to and including the date of redemption.
(2) If less than all the outstanding shares of Series BB Preferred Stock
are to be redeemed, the shares to be redeemed shall be selected pro rata as
nearly as practicable or by lot, as the Board of Directors may determine.
(3) Notice of any redemption shall be given by first class mail, postage
prepaid, mailed not less than 60 nor more than 90 days prior to the date fixed
for redemption to the holders of record of the shares of Series BB Preferred
Stock to be redeemed, at their respective addresses appearing on the books of
the Corporation. Notice so mailed shall be conclusively presumed to have been
duly given whether or not actually received. Such notice shall state: (1) the
date fixed for redemption; (2) the Redemption Price; (3) the right of the
holders of Series BB Preferred Stock to convert such stock into Common Stock
until the close of business on the 15th day prior to the redemption date (or the
next succeeding business day, if the 15th day is not a business day); (4) if
less than all the shares held by such holder are to be redeemed, the number of
shares to be redeemed from such holder; and (5) the place(s) where certificates
for such shares are to be surrendered for payment of the Redemption Price. If
such notice is mailed as aforesaid, and if on or before the date fixed for
redemption funds sufficient to redeem the shares called for redemption are set
aside by the Corporation in trust for the account of the holders of the shares
to be redeemed, notwithstanding the fact that any certificate for shares called
for redemption shall not have been surrendered for cancellation, on and after
the redemption date the shares represented thereby so called for redemption
shall be deemed to be no longer outstanding, dividends thereon shall cease to
accrue, and all rights of the holders of such shares as shareholders of the
corporation shall cease, except the right to receive the Redemption Price,
without interest, upon surrender of the certificate(s) representing such shares.
Upon surrender in accordance with the aforesaid notice of the certificate(s) for
any shares so redeemed (duly endorsed or accompanied by appropriate instruments
of transfer, if so required by the Corporation in such notice), the holders of
record of such shares shall be entitled to receive the Redemption Price, without
interest.
(4) At the option of the Corporation, if notice of redemption is mailed as
aforesaid, and if prior to the date fixed for redemption funds sufficient to pay
in full the Redemption Price are deposited in trust, for the account of the
holders of the shares to be redeemed, with a bank or trust company named in such
notice doing business in the Borough of Manhattan, the City of New York, State
of New York or the City of Charlotte, State of North Carolina and having
capital, surplus and undivided profits of at least $3 million, which bank or
trust company also may be the Transfer Agent and/or Paying Agent for the Series
BB Preferred Stock, notwithstanding the fact that any certificate for shares
called for redemption shall not have been surrendered for cancellation, on and
after such date of deposit the shares represented thereby so called for
redemption shall be deemed to be no longer outstanding, and all rights of the
holders of such shares as shareholders of the Corporation shall cease, except
the right of the holders thereof to convert such shares in accordance with the
provisions of paragraph F at any time prior to the close of business on the 15th
day prior to the redemption
APPENDIX H
H-16
date (or the next succeeding business day, if the 15th day is not a business
day), and the right of the holders thereof to receive out of the funds so
deposited in trust the Redemption Price, without interest, upon surrender of the
certificate(s) representing such shares. Any funds so deposited with such bank
or trust company in respect of shares of Series BB Preferred Stock converted
before the close of business on the 15th day prior to the redemption date (or
the next succeeding business day, if the 15th day is not a business day) shall
be returned to the Corporation upon such conversion. Any funds so deposited with
such a bank or trust company which shall remain unclaimed by the holders of
shares called for redemption at the end of six years after the redemption date
shall be repaid to the Corporation, on demand, and thereafter the holder of any
such shares shall look only to the Corporation for the payment, without
interest, of the Redemption Price.
(5) Any provisions of paragraph D or E to the contrary notwithstanding, in
the event that any quarterly dividend payable on the Series BB Preferred Stock
shall be in arrears and until all such dividends in arrears shall have been paid
or declared and set apart for payment, the Corporation shall not redeem any
shares of Series BB Preferred Stock unless all outstanding shares of Series BB
Preferred Stock are simultaneously redeemed and shall not purchase or otherwise
acquire any shares of Series BB Preferred Stock except in accordance with a
purchase offer made by the Corporation on the same terms to all holders of
record of Series BB Preferred Stock for the purchase of all outstanding shares
thereof.
E. Purchase by the Corporation.
(1) Except as provided in paragraph D(5), the Corporation shall be
obligated to purchase shares of Series BB Preferred Stock tendered by the holder
thereof for purchase hereunder, at a purchase price consisting of the sum of (i)
$25 per share and (ii) an amount equal to accrued and unpaid dividends thereon
to and including the date of purchase. In order to exercise his right to require
the Corporation to purchase his shares of Series BB Preferred Stock, the holder
thereof shall surrender the Certificate(s) therefor duly endorsed if the
Corporation shall so require or accompanied by appropriate instruments of
transfer satisfactory to the Corporation, at the office of the Transfer Agent(s)
for the Series BB Preferred Stock, or at such other office as may be designated
by the Corporation, together with written notice that such holder irrevocably
elects to sell such shares to the Corporation. Shares of Series BB Preferred
Stock shall be deemed to have been purchased by the Corporation immediately
prior to the close of business on the date such shares are tendered for sale to
the Corporation and notice of election to sell the same is received by the
Corporation in accordance with the foregoing provisions. As of such date the
shares so tendered for sale shall be deemed to be no longer outstanding,
dividends thereon shall cease to accrue and all rights of the holder of such
shares as a shareholder of the Corporation shall cease, except the right to
receive the purchase price.
F. Conversion Rights.
The holders of shares of Series BB Preferred Stock shall have the right, at
their option, to convert such shares into shares of Common Stock on the
following terms and conditions:
(1) Shares of Series BB Preferred Stock shall be convertible at any time
into fully paid and nonassessable shares of Common Stock (calculated as to each
conversion to the nearest 1/1,000 of a share) at the initial rate of 6.17215
shares of Common Stock for each share of Series BB Preferred Stock surrendered
for conversion (the "Conversion Rate"). The Conversion Rate shall be subject to
adjustment from time to time as hereinafter provided. No payment or adjustment
shall be made on account of any accrued and unpaid dividends on shares of Series
BB Preferred Stock surrendered for conversion prior to the record date for the
determination of shareholders entitled to such dividends or on account of any
dividends on the Common Stock issued upon such conversion subsequent to the
record date for the determination of shareholders entitled to such dividends. If
any shares of Series BB Preferred Stock shall be called for redemption, the
right to convert the shares designated for redemption shall terminate at the
close of business on the 15th day prior to the redemption date (or the next
succeeding business day, if the 15th day is not a business day) unless default
be made in the payment of the Redemption Price. In the event of default in the
payment of the Redemption Price, the right to convert the shares designated for
redemption shall terminate at the close of business on the business day
immediately preceding the date that such default is cured.
APPENDIX H
H-17
(2) In order to convert shares of Series BB Preferred Stock into Common
Stock, the holder thereof shall surrender the certificate(s) therefor, duly
endorsed if the Corporation shall so require, or accompanied by appropriate
instruments of transfer satisfactory to the Corporation, at the office of the
Transfer Agent(s) for the Series BB Preferred Stock, or at such other office as
may be designated by the Corporation, together with written notice that such
holder irrevocably elects to convert such shares. Such notice shall also state
the name(s) and address(es) in which such holder wishes the certificate(s) for
the shares of Common Stock issuable upon conversion to be issued. As soon as
practicable after receipt of the certificate(s) representing the shares of
Series BB Preferred Stock to be converted and the notice of election to convert
the same, the Corporation shall issue and deliver at said office a certificate
or certificates for the number of whole shares of Common Stock issuable upon
conversion of the shares of Series BB Preferred Stock surrendered for
conversion, together with a cash payment in lieu of any fraction of a share, as
hereinafter provided, to the person(s) entitled to receive the same. Shares of
Series BB Preferred Stock shall be deemed to have been converted immediately
prior to the close of business on the date such shares are surrendered for
conversion and notice of election to convert the same is received by the
Corporation in accordance with the foregoing provisions, and the person(s)
entitled to receive the Common Stock issuable upon such conversion shall be
deemed for all purposes as record holder(s) of such Common Stock as of such
date.
(3) No fractional shares of Common Stock shall be issued upon conversion of
any shares of Series BB Preferred Stock. If more than one share of Series BB
Preferred Stock is surrendered at one time by the same holder, the number of
full shares issuable upon conversion thereof shall be computed on the basis of
the aggregate number of shares so surrendered. If the conversion of any shares
of Series BB Preferred Stock results in a fractional share of Common Stock, the
Corporation shall pay cash in lieu thereof in an amount equal to such fraction
multiplied times the closing price of the Common Stock on the date on which the
shares of Series BB Preferred Stock were duly surrendered for conversion, or if
such date is not a trading date, on the next succeeding trading date. The
closing price of the Common Stock for any day shall mean the last reported sales
price regular way on such day or, in case no such sale takes place on such day,
the average of the reported closing bid and asked prices, regular way, on the
New York Stock Exchange, or, if the Common Stock is not then listed on such
Exchange, on the principal national securities exchange on which the Common
Stock is listed for trading, or, if not then listed for trading on any national
securities exchange, the average of the closing bid and asked prices of the
Common Stock as furnished by the National Quotation Bureau, Inc., or if the
National Quotation Bureau, Inc. ceases to furnish such information, by a
comparable independent securities quotation service.
(4) In the event the Corporation shall at any time (i) pay a dividend or
make a distribution to holders of Common Stock in shares of Common Stock, (ii)
subdivide its outstanding shares of Common Stock into a larger number of shares,
or (iii) combine its outstanding shares of Common Stock into a smaller number of
shares, the Conversion Rate in effect at the time of the record date for such
dividend or distribution or the effective date of such subdivision or
combination shall be adjusted so that the holder of any shares of Series BB
Preferred Stock surrendered for conversion after such record date or effective
date shall be entitled to receive the number of shares of Common Stock which he
would have owned or have been entitled to receive immediately following such
record date or effective date had such shares of Series BB Preferred Stock been
converted immediately prior thereto.
(5) Whenever the Conversion Rate shall be adjusted as herein provided (i)
the Corporation shall forthwith keep available at the office of the Transfer
Agent(s) for the Series BB Preferred Stock a statement describing in reasonable
detail the adjustment, the facts requiring such adjustment and the method of
calculation used; and (ii) the Corporation shall cause to be mailed by first
class mail, postage prepaid, as soon as practicable to each holder of record of
shares of Series BB Preferred Stock a notice stating that the Conversion Rate
has been adjusted and setting forth the adjusted Conversion Rate.
(6) In the event of any consolidation of the Corporation with or merger of
the Corporation into any other corporation (other than a merger in which the
Corporation is the surviving corporation) or a sale of the assets of the
Corporation substantially as an entirety, the holder of each share of Series BB
Preferred Stock shall have the right, after such consolidation, merger or sale
to convert such share into the number and kind of shares of stock or other
securities and the amount and kind of property receivable upon such
consolidation,
APPENDIX H
H-18
merger or sale by a holder of the number of shares of Common Stock issuable upon
conversion of such share of Series BB Preferred Stock immediately prior to such
consolidation, merger or sale. Provision shall be made for adjustments in the
Conversion Rate which shall be as nearly equivalent as may be practicable to the
adjustments provided for in paragraph F(4). The provisions of this paragraph
F(6) shall similarly apply to successive consolidations, mergers and sales.
(7) The Corporation shall pay any taxes that may be payable in respect of
the issuance of shares of Common Stock upon conversion of shares of Series BB
Preferred Stock, but the Corporation shall not be required to pay any taxes
which may be payable in respect of any transfer involved in the issuance of
shares of Common Stock in a name other than that in which the shares of Series
BB Preferred Stock so converted are registered, and the Corporation shall not be
required to issue or deliver any such shares unless and until the person(s)
requesting such issuance shall have paid to the Corporation the amount of any
such taxes, or shall have established to the satisfaction of the Corporation
that such taxes have been paid.
(8) The Corporation shall at all times reserve and keep available out of
its authorized but unissued Common Stock the full number of shares of Common
Stock issuable upon the conversion of all shares of Series BB Preferred Stock
then outstanding.
(9) In the event that:
(i) The Corporation shall declare a dividend or any other distribution
on its Common Stock, payable otherwise than in cash out of retained
earnings; or
(ii) The Corporation shall authorize the granting to the holders of
its Common Stock of rights to subscribe for or purchase any shares of
capital stock of any class or of any other rights; or
(iii) The Corporation shall propose to effect any consolidation of the
Corporation with or merger of the Corporation with or into any other
corporation or a sale of the assets of the company substantially as an
entirety which would result in an adjustment under paragraph F(6),
the Corporation shall cause to be mailed to the holders of record of Series BB
Preferred Stock at least 20 days prior to the applicable date hereinafter
specified a notice stating (x) the date on which a record is to be taken for the
purpose of such dividend, distribution or rights or, if a record is not to be
taken, the date as of which the holders of Common Stock of record to be entitled
to such dividend, distribution or rights are to be determined or (y) the date on
which such consolidation, merger or sale is expected to become effective, and
the date as of which it is expected that holders of Common Stock of record shall
be entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such consolidation, merger or sale. Failure to give
such notice, or any defect therein, shall not affect the legality or validity of
such dividend, distribution, consolidation, merger or sale.
G. Voting Rights.
Holders of Series BB Preferred Stock shall have no voting rights except as
required by law and as follows: in the event that any quarterly dividend payable
on the Series BB Preferred Stock is in arrears, the holders of Series BB
Preferred Stock shall be entitled to vote together with the holders of Common
Stock at the Corporation's next meeting of shareholders and at each subsequent
meeting of shareholders unless all dividends in arrears have been paid or
declared and set apart for payment prior to the date of such meeting. For the
purpose of this paragraph G, each holder of Series BB Preferred Stock shall be
entitled to cast the number of votes equal to the number of whole shares of
Common Stock into which his Series BB Preferred Stock is then convertible.
H. Reacquired Shares.
Shares of Series BB Preferred Stock converted, redeemed, or otherwise
purchased or acquired by the Corporation shall be restored to the status of
authorized but unissued shares of preferred stock without designation as to
series.
APPENDIX H
H-19
I. No Sinking Fund.
Shares of Series BB Preferred Stock are not subject to the operation of a
sinking fund.
4. The address of the Corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street in the City of
Wilmington, County of New Castle. The name of the Corporation's registered agent
at such address is The Corporation Trust Company.
5. No holder of any stock of the Corporation of any class now or hereafter
authorized shall have any preemptive right to purchase, subscribe for, or
otherwise acquire any shares of stock of the Corporation of any class now or
hereafter authorized, or any securities exchangeable for or convertible into any
such shares, or any warrants or other instruments evidencing rights or options
to subscribe for, purchase or otherwise acquire any such shares whether such
shares, securities, warrants or other instruments be unissued, or issued and
thereafter acquired by the Corporation.
6. To the fullest extent permitted by the General Corporation Law of the
State of Delaware, as the same exists or may hereafter be amended, a director of
the Corporation shall not be personally liable to the Corporation, its
shareholders or otherwise for monetary damage for breach of his duty as a
director. Any repeal or modification of this Article shall be prospective only
and shall not adversely affect any limitation on the personal liability of a
director of the Corporation existing at the time of such repeal or modification.
7. In furtherance and not in limitation of the powers conferred by law, the
Board of Directors of the Corporation is expressly authorized and empowered to
make, alter and repeal the By-Laws of the Corporation by a majority vote at any
regular or special meeting of the Board of Directors or by written consent,
subject to the power of the stockholders of the Corporation to alter or repeal
any By-Laws made by the Board of Directors.
8. The Corporation reserves the right at any time from time to time to
amend or repeal any provision contained in this Certificate of Incorporation,
and to add any other provisions authorized by the laws of the State of Delaware
at the time in force; and all rights, preferences and privileges conferred upon
stockholders, directors or any other persons by and pursuant to this Certificate
of Incorporation in its present form or as hereafter amended are granted subject
to the rights reserved in this Article.
9. Unless and except to the extent that the By-Laws of the Corporation
shall so require, the election of directors of the Corporation need not be by
written ballot.
10. Any action required or permitted to be taken by the stockholders of the
Corporation must be effected at a duly called annual or special meeting of
stockholders of the Corporation or may be effected by consent in writing in lieu
of a meeting of such stockholders if consents are signed by all stockholders of
the Corporation entitled to vote on such action.
11. The name and mailing address of the incorporator
is .
NAME ADDRESS
---- -------
Trevor Norwitz c/o Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
IN WITNESS WHEREOF, I, the undersigned, being the incorporator hereinbefore
named, do hereby further certify that the facts hereinabove stated are truly set
forth and, accordingly, I have hereunto set my hand this 31st day of July, 1998.
/s/ TREVOR S. NORWITZ
--------------------------------------
Incorporator
APPENDIX H
H-20
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant is currently incorporated in North Carolina. Sections
55-8-50 through 55-8-58 of the North Carolina Business Corporation Act (the
"NCBCA") contain provisions prescribing the extent to which directors and
officers shall or may be indemnified. Section 55-8-51 of the NCBCA permits a
corporation, with certain exceptions, to indemnify a present or former director
against liability if (i) the director conducted himself or herself in good
faith, (ii) the director reasonably believed (x) that the director's conduct in
the director's official capacity with the corporation was in its best interests
and (y) in all other cases the director's conduct was at least not opposed to
the corporation's best interests, and (iii) in the case of any criminal
proceeding, the director had no reasonable cause to believe the director's
conduct was unlawful. A corporation may not indemnify a director in connection
with a proceeding by or in the right of the corporation in which the director
was adjudged liable to the corporation or in connection with a proceeding
charging improper personal benefit to the director in which the director was
adjudged liable. The above standard of conduct is determined by the board of
directors, or a committee or special legal counsel or the shareholders as
prescribed in Section 55-8-55.
Sections 55-8-52 and 55-8-56 of the NCBCA require a corporation to
indemnify a director or officer for reasonable expenses incurred in the defense
of any proceeding to which the director or officer was a party when the director
or officer is wholly successful in the director's or officer's defense, unless
the articles of incorporation provide otherwise. Upon application, the court may
order indemnification of the director or officer if the director or officer is
adjudged fairly and reasonably so entitled under Section 55-8-54. In addition,
Section 55-8-57 permits a corporation to provide for indemnification of
directors, officers, employees or agents, in its articles of incorporation or
by-laws or by contract or resolution, against liability in various proceedings,
provided that the corporation may not indemnify such person against liability
for expenses incurred on account of activities that such person knew or believed
to be clearly in conflict with the best interests of the corporation. In
addition, a corporation may purchase and maintain insurance policies on behalf
of these individuals whether or not the corporation would have the power to
indemnify them against the same liability.
The foregoing is only a general summary of certain aspects of North
Carolina law dealing with indemnification of directors and officers and does not
purport to be complete. It is qualified in its entirety by reference to the
relevant statutes, which contain detailed specific provisions regarding the
circumstances under which and the person for whose benefit indemnification shall
or may be made.
The Registrant's Articles of Incorporation prevent the recovery by the
Registrant of monetary damages against its directors to the fullest extent
permitted by the NCBCA. However, in accordance with the provisions of the NCBCA,
the Registrant's By-laws provide that, in addition to the indemnification of
directors and officers otherwise provided by the NCBCA, the Registrant shall,
under certain circumstances, indemnify its current or former directors and
officers against any and all liability and expenses, including reasonable
attorney's fees, in any proceeding arising out of their status or activities as
directors and officers, except for liability or litigation expense incurred on
account of activities that were at the time known or believed by such director
or officer to be clearly in conflict with the best interests of the Registrant.
Pursuant to such By-laws, the Registrant may also maintain, and the Registrant
does maintain, insurance on behalf of its directors and officers against
liability asserted against such persons in such capacity whether or not such
directors or officers have the right to indemnification pursuant to the By-laws
or otherwise.
If the Reincorporation Merger and the Merger with BankAmerica are approved,
the Registrant will reincorporate from North Carolina to Delaware and will be
governed by the Delaware General Corporation Law (the "DGCL") and the
Certificate of Incorporation and By-laws of the Combined Company. Subsection (a)
of Section 145 of the DGCL empowers a corporation to indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation) by
reason of the fact that such person is or was a director, officer, employee or
agent of the corporation, or is or
II-1
was serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding if such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his or her conduct was
unlawful. Subsection (b) of Section 145 of the DGCL empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by such person in
connection with the defense or settlement of such action or suit if such person
acted in accordance with the above standards, except that no indemnification may
be made in respect to any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the extent
that the Court of Chancery or the court in which the action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnification for such expenses which the Court of
Chancery or such other court shall deem proper.
Section 145 of the DGCL further provides that, to the extent that a
director or officer of a corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in
subsections (a) and (b) of Section 145, or in the defense of any claim, issue or
matter therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him or her in connection
therewith; and that indemnification provided by, or granted pursuant to, Section
145 shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled. Section 145 further empowers the corporation to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against any liability asserted against him or her and incurred by him or her in
any such capacity, or arising out of such person's status as such, whether or
not the corporation would have the power to indemnify such person against such
liabilities under Section 145 of the DGCL.
Section 102(b)(7) of the DGCL provides that provisions in a corporation's
certificate of incorporation eliminating or limiting the personal liability of a
director to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director shall not eliminate or limit the liability of a
director for (i) any breach of the director's duty of loyalty to the corporation
or its stockholders; (ii) acts or omissions not in good faith or which involved
intentional misconduct or a knowing violation of law; (iii) willful or negligent
unlawful payment of a dividend or stock purchase or redemption; or (iv) any
transaction from which the director derived an improper personal benefit.
The foregoing is only a general summary of certain aspects of Delaware law
dealing with indemnification of directors and officers and does not purport to
be complete. It is qualified in its entirety by reference to the relevant
statutes, which contain detailed specific provisions regarding the circumstances
under which and the person for whose benefit indemnification shall or may be
made.
The Certificate of Incorporation of the Combined Company that will be in
effect if the Reincorporation Merger is consummated will prevent the recovery by
the Combined Company of monetary damages against its directors to the fullest
extent permitted by the DGCL. The By-laws of the Combined Company that will be
in effect if the Reincorporation Merger is consummated will provide for the
indemnification of directors and officers of the Combined Company in the same
manner as the current By-laws and board resolutions of the Registrant, except as
otherwise required by applicable law. In addition, the Merger Agreement provides
that the Combined Company will, for six years after the Effective Time,
indemnify directors, officers and employees of BankAmerica, the Registrant, or
any of their respective subsidiaries against certain liabilities in connection
with such persons' status as such or in connection with the Merger Agreement,
the Stock Option Agreements or any of the transactions contemplated thereby.
Pursuant to the Merger Agreement, the Combined Company will also, for six years
after the Effective Time and with respect to events occurring prior
II-2
to the Effective Time, honor all rights to indemnification and limitations of
liability existing in favor of the foregoing persons as provided in the
governing documents of the Registrant, BankAmerica or their respective
subsidiaries. The By-laws of BankAmerica provide for indemnification of
directors and officers to the fullest extent permitted by the DGCL as a contract
right.
The Registrant and BankAmerica have also agreed that, for six years after
the Effective Time, the Combined Company will use its best efforts to cause the
directors and officers of BankAmerica and the Registrant to be covered (with
respect to acts or omissions taking place prior to the Effective Time) by
directors' and officers' liability insurance policies as favorable as
BankAmerica's and the Registrant's current policies, or by substantially similar
policies in substitution therefor.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following exhibits are filed herewith or incorporated herein by
reference.
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
2.1 -- Agreement and Plan of Reorganization by and between
BankAmerica Corporation and NationsBank Corporation, dated
as of April 10, 1998. (Included as Appendix A to the
accompanying Joint Proxy Statement-Prospectus.)
2.2 -- Plan of Reincorporation Merger by and between NationsBank
Corporation and NationsBank (DE) Corporation, dated as of
August 3, 1998. (Included as Appendix B to the accompanying
Joint Proxy Statement-Prospectus.)
3.1 -- Certificate of Incorporation of the Combined Company,
executed on July 31, 1998. (Included as Appendix H to the
accompanying Joint Proxy Statement-Prospectus.)
3.2 -- By-laws of the Combined Company.
5.1 -- Opinion of Paul J. Polking, Esq., Executive Vice President
and General Counsel of NationsBank Corporation, as to the
validity of the shares of Combined Company Common Stock.
8.1 -- Opinion of Wachtell, Lipton, Rosen & Katz as to certain tax
matters.
10.1 -- Employment Agreement, dated as of April 10, 1998, by and
between NationsBank Corporation and David A. Coulter.
10.2 -- Employment Agreement, dated as of April 10, 1998, by and
between NationsBank Corporation and Michael J. Murray.
10.3 -- Employment Agreement, dated as of April 10, 1998, by and
between NationsBank Corporation and Michael E. O'Neill.
10.4 -- Employment Agreement, dated as of April 10, 1998, by and
between NationsBank Corporation and James H. Hance, Jr.
10.5 -- Employment Agreement, dated as of April 10, 1998, by and
between NationsBank Corporation and Kenneth D. Lewis.
10.6 -- Form of Amended and Restated NationsBank Corporation Key
Employee Stock Plan.
23.1 -- Consent of Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
23.2 -- Consent of Goldman, Sachs & Co.
23.3 -- Consent of Paul J. Polking, Esq., Executive Vice President
and General Counsel of NationsBank Corporation. (Included in
Exhibit 5.1 to this Registration Statement.)
23.4 -- Consent of Wachtell, Lipton, Rosen & Katz. (Included in
Exhibit 8.1 to this Registration Statement.)
23.5 -- Consent of Ernst & Young LLP.
23.6 -- Consent of PricewaterhouseCoopers LLP.
II-3
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
24.1 -- Power of Attorney and Certified Resolutions.
99.1 -- Stock Option Agreement, dated as of April 10, 1998, by and
between BankAmerica Corporation (as issuer) and NationsBank
Corporation (as grantee). (Included as Appendix C to the
accompanying Joint Proxy Statement-Prospectus.)
99.2 -- Stock Option Agreement, dated as of April 10, 1998, by and
between NationsBank Corporation (as issuer) and BankAmerica
Corporation (as grantee). (Included as Appendix D to the
accompanying Joint Proxy Statement-Prospectus.)
99.3 -- Notice of Special Meeting of Shareholders of NationsBank
Corporation. (Included in the accompanying Joint Proxy
Statement-Prospectus.)
99.4 -- Chief Executive Officer's Letter to Shareholders of
NationsBank Corporation. (Included in the accompanying Joint
Proxy Statement-Prospectus.)
99.5 -- Notice of Special Meeting of Shareholders of BankAmerica
Corporation. (Included in the accompanying Joint Proxy
Statement-Prospectus.)
99.6 -- Chairman's Letter to Shareholders of BankAmerica
Corporation. (Included in the accompanying Joint Proxy
Statement-Prospectus.)
99.7 -- Form of Proxy for Special Meeting of Shareholders of
NationsBank Corporation.
99.8 -- Form of Proxy for Special Meeting of Shareholders of
BankAmerica Corporation.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change in such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by
II-4
any person or party who is deemed to be an underwriter within the meaning of
Rule 145(c), the issuer undertakes that such reoffering prospectus will contain
the information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(d) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (c) immediately preceding, or (ii) that purports to meet
the requirements of Sections 10(a)(3) of the Securities Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(e) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(f) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
(g) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Charlotte, State of North
Carolina, this 4th day of August, 1998.
NATIONSBANK CORPORATION
(Registrant)
By: *
------------------------------------
Hugh L. McColl, Jr.
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on this 4th day of August, 1998.
SIGNATURE CAPACITY
--------- --------
* Chief Executive Officer and Director
- --------------------------------------------------- (Principal Executive Officer)
Hugh L. McColl, Jr.
* Director, Vice Chairman and Chief Financial
- --------------------------------------------------- Officer
James H. Hance, Jr. (Principal Financial Officer)
* Executive Vice President and Chief Accounting
- --------------------------------------------------- Officer (Principal Accounting Officer)
Marc D. Oken
* Chairman of the Board and Director
- ---------------------------------------------------
Charles E. Rice
* Director
- ---------------------------------------------------
Ray C. Anderson
* Director
- ---------------------------------------------------
Rita Bornstein
* Director
- ---------------------------------------------------
B.A. Bridgewater, Jr.
Director
- ---------------------------------------------------
Thomas E. Capps
Director
- ---------------------------------------------------
Alvin R. Carpenter
Director
- ---------------------------------------------------
Charles W. Coker
* Director
- ---------------------------------------------------
Thomas G. Cousins
* Director
- ---------------------------------------------------
Andrew B. Craig, III
* Director
- ---------------------------------------------------
Alan T. Dickson
* Director
- ---------------------------------------------------
Paul Fulton
II-6
SIGNATURE CAPACITY
--------- --------
* Director
- ---------------------------------------------------
C. Ray Holman
* Director
- ---------------------------------------------------
W. W. Johnson
* President and Director
- ---------------------------------------------------
Kenneth D. Lewis
* Director
- ---------------------------------------------------
Russell W. Meyer, Jr.
* Director
- ---------------------------------------------------
Richard B. Priory
* Director
- ---------------------------------------------------
John C. Slane
* Director
- ---------------------------------------------------
O. Temple Sloan, Jr.
* Director
- ---------------------------------------------------
Meredith R. Spangler
* Director
- ---------------------------------------------------
Albert E. Suter
* Director
- ---------------------------------------------------
Ronald Townsend
* Director
- ---------------------------------------------------
Jackie M. Ward
* Director
- ---------------------------------------------------
John A. Williams
* Director
- ---------------------------------------------------
Virgil R. Williams
* By: /s/ CHARLES M. BERGER
--------------------------------------------
Charles M. Berger, Attorney-in-fact
II-7
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
2.1 -- Agreement and Plan of Reorganization by and between
BankAmerica Corporation and NationsBank Corporation, dated
as of April 10, 1998. (Included as Appendix A to the
accompanying Joint Proxy Statement-Prospectus.)
2.2 -- Plan of Reincorporation Merger by and between NationsBank
Corporation and NationsBank (DE) Corporation, dated as of
August 3, 1998. (Included as Appendix B to the accompanying
Joint Proxy Statement-Prospectus.)
3.1 -- Certificate of Incorporation of the Combined Company,
executed on July 31, 1998. (Included as Appendix H to the
accompanying Joint Proxy Statement-Prospectus.)
3.2 -- By-laws of the Combined Company.
5.1 -- Opinion of Paul J. Polking, Esq., Executive Vice President
and General Counsel of NationsBank Corporation, as to the
validity of the shares of Combined Company Common Stock.
8.1 -- Opinion of Wachtell, Lipton, Rosen & Katz as to certain tax
matters.
10.1 -- Employment Agreement, dated as of April 10, 1998, by and
between NationsBank Corporation and David A. Coulter.
10.2 -- Employment Agreement, dated as of April 10, 1998, by and
between NationsBank Corporation and Michael J. Murray.
10.3 -- Employment Agreement, dated as of April 10, 1998, by and
between NationsBank Corporation and Michael E. O'Neill.
10.4 -- Employment Agreement, dated as of April 10, 1998, by and
between NationsBank Corporation and James H. Hance, Jr.
10.5 -- Employment Agreement, dated as of April 10, 1998, by and
between NationsBank Corporation and Kenneth D. Lewis.
10.6 -- Form of Amended and Restated NationsBank Corporation Key
Employee Stock Plan.
23.1 -- Consent of Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
23.2 -- Consent of Goldman, Sachs & Co.
23.3 -- Consent of Paul J. Polking, Esq., Executive Vice President
and General Counsel of NationsBank Corporation. (Included in
Exhibit 5.1 to this Registration Statement.)
23.4 -- Consent of Wachtell, Lipton, Rosen & Katz. (Included in
Exhibit 8.1 to this Registration Statement.)
23.5 -- Consent of Ernst & Young LLP.
23.6 -- Consent of PricewaterhouseCoopers LLP.
24.1 -- Power of Attorney and Certified Resolutions.
99.1 -- Stock Option Agreement, dated as of April 10, 1998, by and
between BankAmerica Corporation (as issuer) and NationsBank
Corporation (as grantee). (Included as Appendix C to the
accompanying Joint Proxy Statement-Prospectus.)
99.2 -- Stock Option Agreement, dated as of April 10, 1998, by and
between NationsBank Corporation (as issuer) and BankAmerica
Corporation (as grantee). (Included as Appendix D to the
accompanying Joint Proxy Statement-Prospectus.)
99.3 -- Notice of Special Meeting of Shareholders of NationsBank
Corporation. (Included in the accompanying Joint Proxy
Statement-Prospectus.)
99.4 -- Chief Executive Officer's Letter to Shareholders of
NationsBank Corporation. (Included in the accompanying Joint
Proxy Statement-Prospectus.)
99.5 -- Notice of Special Meeting of Shareholders of BankAmerica
Corporation. (Included in the accompanying Joint Proxy
Statement-Prospectus.)
99.6 -- Chairman's Letter to Shareholders of BankAmerica
Corporation. (Included in the accompanying Joint Proxy
Statement-Prospectus.)
99.7 -- Form of Proxy for Special Meeting of Shareholders of
NationsBank Corporation.
99.8 -- Form of Proxy for Special Meeting of Shareholders of
BankAmerica Corporation.
II-8