SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant / /
Filed by a Party other than the Registrant /x/
Check the appropriate box:
/x/ Preliminary Proxy Statement / / Confidential, for the use of the
Commission only (as permitted by
Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-12
WACHOVIA CORPORATION
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(Name of Registrant As Specified In Its Charter)
SUNTRUST BANKS, INC.
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/x/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11: (set forth the amount on which the filing fee is
calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
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/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
1) Amount previously paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing party:
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4) Date filed:
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REVISED PRELIMINARY COPY - SUBJECT TO COMPLETION
DATED JUNE 12, 2001
[SUNTRUST BANKS, INC. LOGO]
June , 2001
Dear Wachovia Stockholder:
On May 14, 2001, SunTrust Banks, Inc. announced that it had delivered a
letter to your board of directors proposing a business combination between
SunTrust and Wachovia Corporation that we believe is superior to Wachovia's
proposed merger with First Union Corporation. Under our proposal, Wachovia and
SunTrust would combine in a merger in which each share of common stock of
Wachovia would be converted into 1.081 shares of SunTrust common stock. Based on
June [ ], 2001 closing stock prices, our proposal has a value of $[ ] per share
and represents a premium over the implied value of Wachovia's proposed merger
with First Union as of such date. Pursuant to our merger proposal, SunTrust also
would increase its annual per share dividend to $2.22 so that Wachovia
stockholders would receive on a pro forma equivalent basis the same $2.40 annual
per share dividend that they currently enjoy.
As you know, Wachovia has entered into a merger agreement with First
Union providing for a merger in which each outstanding share of Wachovia common
stock would be converted into two shares of First Union common stock, and, as
more fully described below, the right to receive, at your election, either a
cash payment of $0.48 or preferred stock of First Union that is designed to
provide a dividend which, when added to the dividends on the First Union common
stock, would equal on a pro forma equivalent basis a $2.40 annual dividend per
share of Wachovia common stock. In connection with the proposed First Union
merger, Wachovia has scheduled its 2001 annual meeting of stockholders for
August 3, 2001, at [ ], at [ ] a.m., local time. The Wachovia Board of Directors
is soliciting your vote to approve its proposed merger with First Union at that
meeting.
AS DISCUSSED IN THE ACCOMPANYING PROXY STATEMENT, WE BELIEVE OUR
PROPOSED MERGER IS A SUPERIOR ALTERNATIVE TO THE PROPOSED FIRST UNION/WACHOVIA
MERGER. However, our proposal requires that the proposed First Union/Wachovia
merger NOT be approved by the stockholders of Wachovia. Accordingly, we are
soliciting your proxy to vote AGAINST the proposed First Union/Wachovia merger.
WE BELIEVE THE SUNTRUST PROPOSAL IS SUPERIOR TO THE PROPOSED FIRST
UNION/WACHOVIA MERGER FOR THE FOLLOWING REASONS:
o HIGHER CURRENT VALUE. Our proposed merger would provide a premium
for your Wachovia shares over what First Union is proposing to
pay. Based on June [ ], 2001 closing prices, the SunTrust merger
proposal would provide you with $[ ] per share in
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value, representing a premium of $[ ] per share (or almost [ ]%)
over the implied value of the proposed First Union/Wachovia
merger. Because the exchange ratios in the SunTrust merger
proposal and the proposed First Union/Wachovia merger are fixed,
the implied values of the SunTrust merger proposal and the
proposed First Union/Wachovia merger will fluctuate based on
changes in the respective market prices of the companies' stocks.
o STRONGER CURRENCY. Our merger proposal would provide Wachovia
shareholders an opportunity to invest in SunTrust common stock,
which has demonstrated stronger performance and delivered more
attractive total returns than First Union's common stock over the
past 1, 5 and 10-year periods. Through March 31, 2001, SunTrust
produced one-year, five-year and ten-year total returns to
stockholders of 15.3%, 98.2% and 493.0%, respectively. Based on
historical results and First Call consensus estimates for 2001,
SunTrust's core earnings per share reflect a five-year compounded
annual growth rate of 12% from 1996-2001.
o SIMPLER AND BETTER DIVIDEND. Under SunTrust's proposal, SunTrust
would increase the annual per share dividend on its common stock
to $2.22 so that Wachovia stockholders would receive on a pro
forma equivalent basis the same $2.40 annual per share dividend
that they currently enjoy. SunTrust has had consistent dividend
growth (five-year compounded annual growth rate of 14% in
dividends per share), has never cut its dividend and has
additional capacity to increase its dividend.
First Union's proposed merger with Wachovia would provide you with
an ongoing annual per share dividend of $1.92 on a pro-forma
equivalent basis, which represents a 20% decrease from Wachovia's
current annual per share dividend. However, to make up this
difference, First Union is offering you a choice of also receiving
either a one-time cash payment of $0.48 per share at closing to
cover the dividend shortfall for the first year after closing, or
preferred shares of First Union that are designed to pay a
dividend sufficient to provide on a pro forma equivalent basis a
$2.40 annual dividend per share of Wachovia common stock.
We believe the dividend component of the SunTrust merger proposal
is simpler and better. We believe it's simpler because you don't
have to hold any security other than your shares of SunTrust
common stock to receive the full dividend. We believe it's better
than First Union's $0.48 cash payment alternative because under
that alternative, First Union would have to increase its current
dividend by 25% by the beginning of the second year after its
merger in order for you to continue receiving the same per share
dividend you currently enjoy. And we believe the dividend
component of our proposal is better than First Union's preferred
stock alternative because you may not be able to realize value
through a sale of your preferred shares if a liquid market for the
preferred shares does not develop.
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If the proposed First Union Merger is not approved by Wachovia
shareholders, we would expect your board of directors to meet with us to discuss
our merger proposal. However, because there can be no assurance that your board
of directors will meet with us even if the proposed First Union Merger is not
approved, we are soliciting your vote to approve an amendment to Wachovia's
bylaws that would provide shareholders collectively owning 10% or more of the
outstanding Wachovia common stock the right to call a special meeting of
stockholders. If this bylaw is approved and the proposed First Union/Wachovia
merger is not approved, then following receipt of necessary regulatory
approvals, we would seek to call a special meeting of Wachovia stockholders in
order to expand the size of the Wachovia board and elect nominees who, subject
to their fiduciary duties as Wachovia directors and subject to Wachovia's Merger
Agreement with First Union, would be committed to pursuing a merger of Wachovia
with SunTrust unless a strategic alternative were then available providing
superior value to Wachovia shareholders from a financial point of view, taking
into account current and long-term value, strategic and cultural fit, and the
impact on Wachovia's customers, employees and communities.
YOUR VOTE IS ESSENTIAL! IF THE FIRST UNION/WACHOVIA MERGER IS APPROVED,
YOU WILL NOT HAVE THE OPPORTUNITY TO RECEIVE THE VALUE REPRESENTED BY OUR MERGER
PROPOSAL. WE URGE YOU TO VOTE AGAINST THE PROPOSED FIRST UNION/WACHOVIA MERGER
AND FOR THE PROPOSED AMEND MENT TO WACHOVIA'S BYLAWS BY SIGNING, DATING AND
RETURNING THE ACCOMPANYING BLUE PROXY CARD TODAY. IF YOU ARE A REGISTERED HOLDER
OF WACHOVIA SHARES, YOU MAY ALSO VOTE BY TELEPHONE OR THROUGH THE INTERNET BY
FOLLOWING THE INSTRUCTIONS ON THE ENCLOSED PROXY CARD.
Even if you previously have submitted a proxy card furnished by the
Wachovia Board, it is not too late to change your vote by simply signing, dating
and returning the enclosed BLUE proxy card today.
WE URGE YOU TO PROTECT YOUR INTERESTS - PLEASE SIGN, DATE AND RETURN
THE BLUE PROXY CARD TODAY.
Thank you for your consideration and support.
Sincerely,
L. Phillip Humann
Chairman, President and Chief Executive Officer
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THIS PROXY STATEMENT RELATES SOLELY TO THE SOLICITATION OF PROXIES IN
OPPOSITION TO THE PROPOSED FIRST UNION/WACHOVIA MERGER AND IN FAVOR OF
SUNTRUST'S PROPOSED AMENDMENT TO WACHOVIA'S BYLAWS AND IS NEITHER AN OFFER TO
SELL ANY SHARES OF SUNTRUST COMMON STOCK NOR A REQUEST FOR THE TENDER OF
WACHOVIA COMMON STOCK. THE ISSUANCE OF SUNTRUST COMMON STOCK IN CONNECTION WITH
SUNTRUST'S PROPOSED MERGER WITH WACHOVIA WILL HAVE TO BE REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY ONLY BE MADE BY MEANS OF A PROSPECTUS COMPLYING
WITH THE REQUIREMENTS OF SUCH ACT.
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IMPORTANT
1. If your Wachovia shares are held in your own name, please sign, date
and mail the enclosed BLUE proxy card to Innisfree M&A Incorporated in
the postage-paid envelope provided.
2. If your Wachovia shares are held in "street-name," only your broker or
bank can vote your shares and only upon receipt of your specific
instructions. If your shares are held in "street- name," deliver the
enclosed BLUE proxy card to your broker or bank and contact the person
responsible for your account to vote on your behalf and to ensure that
a BLUE proxy card is submitted on your behalf. SunTrust urges you to
confirm in writing your instructions to the person responsible for your
account and to provide a copy of those instructions to SunTrust in care
of Innisfree M&A Incorporated, so that SunTrust will be aware of all
instructions given and can attempt to ensure that such instructions are
followed.
3. Only stockholders of record on June 12, 2001 are entitled to vote at
the annual meeting of Wachovia stockholders. SunTrust urges each
stockholder to ensure that the record holder of his or her shares
signs, dates and returns the enclosed BLUE proxy card as soon as
possible.
4. If you are a registered holder of Wachovia shares, you may also vote by
telephone or through the Internet by following the instructions on the
enclosed BLUE proxy card.
Do not sign or return any white proxy card you may receive from
Wachovia.
If you have any questions or need assistance in voting your shares,
please call:
INNISFREE M&A INCORPORATED
501 Madison Avenue, 20th Floor
New York, New York 10022
CALL TOLL-FREE 1-877-750-9501
Banks and Brokers call collect: 212-750-5833
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REVISED PRELIMINARY COPY - SUBJECT TO COMPLETION
DATED JUNE 11, 2001
2001 ANNUAL MEETING OF STOCKHOLDERS
OF
WACHOVIA CORPORATION
TO BE HELD ON AUGUST 3, 2001
PROXY STATEMENT
OF
SUNTRUST BANKS, INC.
SOLICITATION OF PROXIES
IN OPPOSITION TO THE PROPOSED MERGER OF
WACHOVIA CORPORATION AND FIRST UNION CORPORATION
AND FOR APPROVAL OF A PROPOSED AMENDMENT
TO THE BYLAWS OF WACHOVIA CORPORATION
This Proxy Statement and the enclosed BLUE proxy card are furnished by
SunTrust Banks, Inc., a Georgia corporation ("SunTrust"), in connection with its
solicitation of proxies to be used at the 2001 annual meeting (the "Annual
Meeting") of stockholders of Wachovia Corporation, a North Carolina corporation
("Wachovia"), to be held on August 3, 2001, at [ ], at [ ]a.m., local time, and
at any adjournments, postponements or reschedulings thereof. Pursuant to this
Proxy Statement, SunTrust is soliciting proxies from holders of shares of common
stock, par value $5.00 per share, of Wachovia ("Wachovia Common Stock") to vote
AGAINST the proposed merger (the "Proposed First Union Merger") of Wachovia with
and into First Union Corporation, a North Carolina corporation ("First Union"),
and to vote FOR a proposed amendment to the Amended and Restated Bylaws of
Wachovia (the "Wachovia Bylaws") as described below under "Proposed Amendment to
Wachovia's Bylaws." Wachovia has set the close of business on June 12, 2001 as
the record date (the "Record Date") for determining those stockholders who will
be entitled to vote at the Annual Meeting. This Proxy Statement and the enclosed
BLUE proxy are first being sent or given to stockholders of Wachovia on or about
[ ], 2001. Wachovia's corporate headquarters are located at 100 North Main
Street, Winston-Salem, North Carolina 27150, telephone (336) 770-5000 and 191
Peachtree Street, N.E., Atlanta, Georgia 30303, telephone (404) 332-5000.
THE SUNTRUST MERGER PROPOSAL
On May 14, 2001, SunTrust delivered a letter to the Board of Directors
of Wachovia proposing a business combination that SunTrust believes constitutes
a superior transaction for holders of Wachovia
Common Stock. Under SunTrust's proposal (the "SunTrust Merger Proposal"),
Wachovia and SunTrust would combine in a merger (the "Proposed SunTrust Merger")
in which each share of Wachovia Common Stock would be converted into 1.081
shares of common stock, par value $1.00 per share ("SunTrust Common Stock"), of
SunTrust. SunTrust also would increase its annual per share dividend to $2.22 so
that Wachovia shareholders would receive on a pro forma equivalent basis the
same $2.40 annual per share dividend that they currently enjoy.
Based on the closing price of SunTrust Common Stock on the New York
Stock Exchange ("NYSE") on June [ ], 2001, the SunTrust Merger Proposal had a
value of $[ ] per Wachovia share, which represents a 3% premium over the implied
value of the Proposed First Union Merger of $[ ] (based on the 2.0 exchange
ratio in that transaction and the $[ ] closing price of First Union common stock
on June [ ], 2001). Because the number of shares of SunTrust common stock that
Wachovia shareholders would receive pursuant to the SunTrust Merger Proposal and
the number of shares of First Union Common Stock that Wachovia shareholders
would receive in the Proposed First Union Merger are fixed, the implied values
of the SunTrust Merger Proposal and the Proposed First Union Merger will
fluctuate based on changes in the market prices of the companies' stocks.
The Proposed SunTrust Merger would be tax-free to Wachovia shareholders
and would be accounted for as a purchase. See "Unaudited Pro Forma Condensed
Combined Financial Information" on Schedule IV to this Proxy Statement. SunTrust
contemplates providing leadership roles in the combined company for numerous
members of Wachovia's management, and Wachovia would have appropriate
representation on the board of directors of the combined company. In this
regard, SunTrust's determination of the extent of Wachovia representation on the
board of directors of the combined company would be based on various
considerations, including the timing of any merger of SunTrust and Wachovia, an
analysis of the relative contributions of each company to the combined company's
prospective earnings, and negotiations with Wachovia. The combined company would
be headquartered in Atlanta, Georgia, and Winston-Salem, North Carolina would
become the headquarters for the combined company's North and South Carolina
banking franchise.
The SunTrust Merger Proposal is subject to certain conditions, including
(i) the valid termination of the Agreement and Plan of Merger, dated April 15,
2001, between First Union and Wachovia (as amended, the "First Union Merger
Agreement"), (ii) an update and completion of the due diligence investigation
performed by SunTrust in December 2000, (iii) the execution of a definitive
merger agreement by SunTrust and Wachovia providing for the Proposed SunTrust
Merger, and (iv) the invalidation of the stock option agreement entered into by
Wachovia and First Union and the related option granted by Wachovia to First
Union thereunder (collectively, the "First Union Option"), or, alternatively,
the surrender by First Union of the First Union Option in exchange for a cash
payment equal to the in-the-money value of the First Union Option, subject to
the minimum surrender value of the option of $375 million and the maximum profit
of $780 million (the "First Union Option Condition"). See "Certain Information
Concerning the First Union Option." SunTrust believes the First Union Option
contains several excessive and unprecedented features and has commenced
litigation challenging the validity of that option. SunTrust is
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also challenging the First Union Merger Agreement insofar as it prevents
Wachovia from terminating that agreement if its shareholders fail to approve the
Proposed First Union Merger. See "Certain Litigation."
SunTrust would be willing to enter into a definitive merger agreement
with Wachovia that is similar in all material respects (including with respect
to closing conditions) to the First Union Merger Agreement, except that the
financial terms of such agreement would reflect the financial terms of the
SunTrust Merger Proposal, and such agreement, unlike the First Union Merger
Agreement, would permit Wachovia to terminate such agreement unilaterally in the
event the Wachovia shareholders were to vote against the Proposed SunTrust
Merger instead of forcing Wachovia to wait until the termination date of such
agreement. The material conditions that SunTrust would expect to be contained in
a merger agreement with Wachovia would be the approval of such merger agreement
by the shareholders of both SunTrust and Wachovia and the receipt of all
required regulatory approvals. See "Regulatory Approvals Required for the
Proposed SunTrust Merger."
There can be no assurance as to the timing or satisfaction of the
conditions to the SunTrust Merger Proposal or as to the timing or satisfaction
of the conditions that would be contained in a merger agreement between SunTrust
and Wachovia. While certain conditions to the SunTrust Merger Proposal are
within the control of the Wachovia Board of Directors, the First Union Option
Condition is not within the control of the Wachovia Board of Directors. However,
SunTrust intends to vigorously pursue its rights to challenge the validity of
the First Union Option as expeditiously as possible. See "Certain Litigation."
SunTrust has filed an application with the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board") under the Bank Holding Company Act
of 1956, as amended, and expects to file within the next several days other
required applications with the appropriate regulatory authorities and believes
there is no reason why such applications will not be approved in the ordinary
and usual course. Accordingly, absent certain impediments described above and
below, SunTrust believes the Proposed SunTrust Merger could close without any
material delays beyond the timing of any proposed closing of the Proposed First
Union Merger.
SunTrust believes that if Wachovia's shareholders do not approve the
Proposed First Union Merger, First Union's interest will be in realizing value
for the First Union Option. In such a circumstance, and assuming Wachovia was
willing to enter into merger discussions with SunTrust, SunTrust believes First
Union would enter into negotiations with SunTrust with respect to the First
Union Option and if SunTrust and First Union were to agree on a surrender value
for the First Union Option, First Union would agree with Wachovia to terminate
the First Union Merger Agreement. See "Certain Information Concerning the First
Union Option." However, even if Wachovia were willing to enter into merger
discussions with SunTrust, Wachovia would need First Union's consent under the
First Union Merger Agreement to enter into such discussions with SunTrust
because even if Wachovia's shareholders fail to approve the Proposed First Union
Merger, Wachovia may not terminate the First Union Merger Agreement until
January 2002 unless Wachovia and First Union were to mutually agree to terminate
that agreement earlier. Accordingly, there can be no assurance that First Union
would consent to Wachovia engaging in merger discussions with SunTrust, that
First Union would mutually agree with Wachovia to terminate the First Union
Merger
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Agreement, or that SunTrust will be successful in its litigation challenging the
First Union Merger Agreement insofar as it does not permit Wachovia to terminate
that agreement even if Wachovia's shareholders fail to approve the Proposed
First Union Merger. In such a case, Wachovia would be unable to enter into
merger discussions with SunTrust or anyone else until January 16, 2002.
In addition, there can be no assurance that Wachovia would be willing
to enter into merger discussions with SunTrust even if Wachovia shareholders
failed to approve the Proposed First Union Merger. There can also be no
assurance that First Union would be willing to enter into discussions with
SunTrust concerning the surrender of the First Union Option for a cash payment
of less than $780 million (because, as a result of the effect of an
anti-dilution provision in the First Union Option, First Union may have a
financial incentive not to agree to surrender the First Union Option for less
than $780 million if First Union believes that SunTrust will not be successful
in its litigation seeking to invalidate the First Union Option -- See "Certain
Litigation"), or that SunTrust and First Union would be able to reach an
agreement on a surrender value for the First Union Option, or that SunTrust will
be successful in its litigation challenging the validity of the First Union
Option. In such a case, SunTrust would have to waive the First Union Option
Condition, which it currently does not intend to do, in order to proceed with
the SunTrust Merger Proposal. If the First Union Option Condition is neither
satisfied nor waived by SunTrust, SunTrust would not proceed with the SunTrust
Merger Proposal. If SunTrust determined to waive the First Union Option
Condition and First Union were to decide to exercise the First Union Option, in
whole or in part, and acquire shares of Wachovia Common Stock following the
execution by SunTrust and Wachovia of a merger agreement, then such exercise
could have adverse effects on Wachovia and the SunTrust Merger Proposal,
including making it more difficult for Wachovia to obtain the vote of Wachovia
shareholders necessary to complete the Proposed SunTrust Merger, requiring
SunTrust to issue more shares in the Proposed SunTrust Merger and requiring
Wachovia to accept securities issued by First Union in payment of the exercise
price. For these reasons, SunTrust does not currently intend to waive the First
Union Option Condition.
As discussed more fully below under "Proposed Amendment to Wachovia's
Bylaws," SunTrust is soliciting proxies for approval of a proposal to amend the
Wachovia Bylaws to provide holders of 10% or more of the outstanding shares of
Wachovia Common Stock with the right to call a special meeting of shareholders
(the "Proposed Bylaw Amendment"). If SunTrust's solicitation against the
Proposed First Union Merger is successful, SunTrust believes that Wachovia's
Board of Directors should respect the results of that shareholder vote and,
subject to the First Union Merger Agreement, enter into discussions with
SunTrust with respect to the SunTrust Merger Proposal. However, there can be no
assurance that Wachovia's Board of Directors will enter into discussions with
SunTrust in such circumstances. If the Wachovia Board of Directors does not
enter into such discussions, then, following receipt by SunTrust of the
necessary regulatory approvals and assuming the Proposed Bylaw Amendment is
approved by Wachovia shareholders, SunTrust intends to seek to call a special
meeting of Wachovia shareholders for the purpose of increasing the number of
directors on the Wachovia Board of Directors and electing a slate of nominees to
fill the resulting vacancies. If elected, SunTrust anticipates that such
nominees, subject to their fiduciary duties as directors of Wachovia and subject
to Wachovia's merger agreement with First
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Union, would pursue a merger with SunTrust unless a strategic alternative were
then available providing superior value from a financial point of view taking
into account current and long-term value, strategic and cultural fit, and the
impact on Wachovia's customers, employees and communities.
By voting "against" the Proposed First Union Merger, Wachovia
shareholders can demonstrate their support for the proposed combination of
SunTrust and Wachovia and send a strong message to the Wachovia Board that they
want to preserve the opportunity to consider the SunTrust Merger Proposal. By
voting "for" the Proposed Bylaw Amendment, Wachovia shareholders can take a step
towards securing their ability to consider the Proposed SunTrust Merger.
While SunTrust is committed to helping Wachovia shareholders realize the
value of the SunTrust Merger Proposal, the SunTrust Merger Proposal cannot go
forward unless the Wachovia shareholders do not approve the Proposed First Union
Merger and the First Union Merger Agreement is terminated. Accordingly, a vote
for the Proposed First Union Merger could leave Wachovia shareholders without a
viable alternative to the Proposed First Union Merger because SunTrust will not
proceed with the SunTrust Merger Proposal if the Proposed First Union Merger is
approved by Wachovia shareholders. However, there can be no assurance as to the
occurrence or timing of the termination of the First Union Merger Agreement or
that the conditions to the Proposed SunTrust Merger will be satisfied. As a
result, even if the Proposed First Union Merger is not approved by Wachovia
shareholders, Wachovia shareholders could still be without a viable alternative
to the Proposed First Union Merger if the conditions to the Proposed SunTrust
Merger are not satisfied.
REASONS TO VOTE AGAINST THE PROPOSED FIRST UNION MERGER
SunTrust urges you to vote your shares of Wachovia Common Stock AGAINST
the Proposed First Union Merger for the following reasons:
o A VOTE AGAINST THE PROPOSED FIRST UNION MERGER MOVES YOU ONE STEP
CLOSER TO RECEIVING THE SUPERIOR SUNTRUST MERGER PROPOSAL.
SunTrust believes that the combination of SunTrust and Wachovia is
superior to the Proposed First Union Merger and would provide substantial
benefits to Wachovia shareholders, including the following:
(1) Higher Current Value. Based on June [ ], 2001 closing prices, the
SunTrust Merger Proposal represents a premium of approximately [
]% over the implied value of the Proposed First Union Merger. The
amount of this premium will fluctuate based on changes in the
market prices of SunTrust Common Stock and First Union Common
Stock. Based on closing stock prices on May 11, 2001, the last
trading day prior to the announcement of the SunTrust Merger
Proposal, the SunTrust Merger Proposal had a
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value of $70.06 per Wachovia share and represented a premium of
17% over the implied value of the Proposed First Union Merger. We
note that as of June [ ], 2001 the 52-week high closing price for
SunTrust Common Stock is $[ ], and the 52-week high closing price
for Wachovia Common Stock is $[ ].
(2) Stronger Currency. SunTrust has demonstrated stronger stock price
performance and delivered more attractive total returns to its
stockholders than First Union over the past 1, 5 and 10-year
periods. Through March 31, 2001, SunTrust produced one- year,
five-year and ten-year total returns to stockholders of 15.3%,
98.2% and 493.0%, respectively. Based on historical results and
First Call consensus estimates for 2001, SunTrust's core earnings
per share reflect a five-year compounded annual growth rate
("CAGR") of 12% from 1996 to 2001. A comparison of the foregoing
data to similar data for First Union is set forth in the second
table below. Historical data concerning stock price performance,
earnings per share and other operating results are not necessarily
indicative of future results. Stockholder return data is presented
for periods ending on March 31, 2001 in order to eliminate any
potential effects on the stock prices of the companies
attributable to the Proposed First Union Merger or the SunTrust
Merger Proposal.
(3) Simpler and Better Dividend. Under the SunTrust Merger Proposal,
SunTrust would increase the annual per share dividend on its
common stock to $2.22 so that Wachovia shareholders would receive
on a pro forma equivalent basis the same $2.40 annual per share
dividend that they currently enjoy. SunTrust has had consistent
dividend growth (five-year CAGR of 14% in dividends per share, as
set forth in the second table below), has never cut its dividend
and has additional capacity to increase its dividend. SunTrust's
current annual dividend of $1.60 per share is funded out of
current operating earnings, and the proposed dividend increase to
$2.22 per share annually would be funded out of the combined
operations of SunTrust and Wachovia.
First Union's proposed merger with Wachovia would provide you
with an ongoing annual per share dividend of $1.92 on a pro-forma
equivalent basis, which represents a 20% decrease from Wachovia's
current annual per share dividend. However, to make up this
difference, First Union is offering you a choice of also receiving
either a one-time payment of $0.48 per share in cash at closing to
cover the dividend shortfall for the first year after closing, or
preferred shares of First Union that are designed to pay a
dividend sufficient to ensure that you receive on a pro forma
equivalent basis a $2.40 annual dividend per share of Wachovia
common stock (the "Preferred Stock Election Feature").
We believe the dividend component of the SunTrust Merger
Proposal is simpler and better. We believe it's simpler because
you would not have to hold any security other than your shares of
SunTrust Common Stock to receive the full dividend. We believe
it's better than First Union's one-time special dividend
alternative because, under that
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alternative, First Union would have to increase its current
dividend by 25% by the beginning of the second year after its
merger in order for you to continue receiving the same per share
dividend you currently enjoy. And we believe the dividend
component of our proposal is better than First Union's Preferred
Stock Election Feature because you may not be able to realize
value through a sale of your preferred shares if a liquid market
for the preferred shares does not develop.
Dividends are payable on SunTrust Common Stock when, as and
if declared by the Board of Directors of SunTrust out of funds
legally available therefor. Accordingly, any declaration of
dividends on SunTrust Common Stock in the future will be at the
discretion of the SunTrust Board of Directors and will depend upon
SunTrust's future earnings and financial condition and other
factors. While SunTrust has not reduced the dividend on its common
stock at any time in the past, there can be no assurance that
SunTrust will continue to pay dividends on SunTrust Common Stock
in the amounts set forth above or otherwise.
(4) Proven Execution Record. SunTrust believes it has a proven track
record of executing strategic initiatives. SunTrust's successful
integration of Crestar Financial Corporation evidences its
conservative and disciplined approach to the execution of a major
merger transaction through setting achievable cost savings
targets, retaining a focus on customers and minimizing revenue
loss. Based on independent market research data compiled from
surveys of commercial banking clients in the markets served by
Crestar, SunTrust achieved equal or higher lead bank penetration
in the commercial banking markets formerly served by Crestar
following the closing of that transaction. Furthermore, a
comparison of deposit data from April 1999 to deposit data from
April 2000 indicates that SunTrust's systems conversion of the
former Crestar franchise in May 1999 had no meaningful adverse
effects on SunTrust's retail franchise in Crestar's markets.
SunTrust's total retail deposits in these markets increased by
approximately 3% in the year ended April 30, 2000, which, due to
growth in total deposits in these markets, represented a slight
decline of approxi mately 1% in retail market share. In addition,
SunTrust's actual earnings for 2000 (excluding non-recurring
items) did not differ materially from SunTrust's earnings
estimates projected for 2000 at the time of announcement of the
Crestar transaction. SunTrust has fully completed the integration
process on the Crestar acquisition and now has a "clean slate" for
purposes of allocating the management resources necessary to
execute a major merger transaction.
While the Proposed SunTrust Merger would represent a larger
transaction than the Crestar acquisition and would entail more
in-market integration than the Crestar acquisition, SunTrust
believes it has gained the expertise necessary for the
integration of Wachovia through its experience in the Crestar
transaction and other significant corporate projects. For
example, SunTrust has managed the consolidation of its 29 bank
subsidiaries and its Y2K project, both of which involved multiple
large systems conversions.
7
SunTrust's bank consolidation project also has involved staff
realignment and reductions, customer and employee retention
programs and standardization of policies and procedures among
SunTrust's separate bank subsidiaries. In the past year, SunTrust
also has closed approximately 40 branches in the ordinary course
of business, which required transferring the customers of these
branches to other SunTrust retail locations. SunTrust believes
that through these experiences it has gained the core project
management and systems integration competencies necessary to
manage the integration effort in connection with a combination
with Wachovia. SunTrust also believes there is an excellent
cultural fit between SunTrust and Wachovia and that the two
companies' business models and management philosophies are
compatible. SunTrust believes these factors should help minimize
the execution risk in combining SunTrust and Wachovia.
SunTrust also does not believe that its proposed merger
with Wachovia poses the types of risks generally perceived by
some to be associated with "hostile" transactions in the banking
industry, most notably the Wells Fargo/First Interstate merger.
Based on previous merger discussions with Wachovia over the
years, SunTrust knows Wachovia's operations well and is quite
familiar with its manage ment and employees, its business and
operating structure, and its philosophy (see "Background"),
whereas Wells Fargo is reported to have performed little or no
due diligence prior to its acquisition of First Interstate.
SunTrust's integration of Wachovia would be based on reasonable
and conservative assumptions and would take place over a
reasonable time period, while the Wells Fargo transaction was
based on aggressive cost savings targets and a nine-month
integration schedule. And SunTrust and Wachovia have similar
operational structures, while in the Wells Fargo transaction
Wells Fargo essentially undertook an overhaul of First
Interstate's entire approach to retail banking.
The table below compares key financial aspects of the SunTrust Merger
Proposal to those of the Proposed First Union Merger:
First Union/Wachovia SunTrust/Wachovia
-------------------- -----------------
Implied Value (1)................. $[ ] $[ ]
Implied Ongoing Dividend Per
Wachovia Share.................... $2.40(2) $2.40(3)
Cost Savings / % Wachovia Core
Expense Base (4).................. $890MM / 42% $500MM / 23%
Wachovia Pro Forma Ownership(5)... 30% 44%
8
--------------
(1) Based on closing prices on June [ ], 2001.
(2) On May 22, 2001, First Union announced that it would provide Wachovia
shareholders the option to elect to receive, in addition to the First
Union Common Stock to be received in the Proposed First Union Merger,
either a cash payment of $0.48 per share or preferred shares of First
Union that are designed to pay a dividend that, when added to the
dividends on the First Union Common Stock, would provide Wachovia
shareholders with a $2.40 annual per share dividend on a pro forma
equivalent basis following completion of the Proposed First Union
Merger.
(3) If the Proposed SunTrust Merger is consummated, SunTrust intends to
increase the annual dividend on its common stock to $2.22 per share.
(4) Wachovia's estimated core expense base is pro forma to reflect the
impact of Wachovia's acquisition of Republic Security Financial
Corporation and Wachovia's pending transaction for the disposition of
its credit card operations. Wachovia has asserted in public communica
tions that Wachovia and SunTrust, during their December merger
discussions, had "agreed upon" $400 million in cost savings in
connection with a possible SunTrust/Wachovia merger. However, Wachovia
failed to disclose that it had advised SunTrust that Wachovia believed
that cost savings of more than $500 million were obtainable in a
SunTrust/Wachovia merger. See "Background." SunTrust's cost savings
estimate was based in part upon its merger discussions with Wachovia in
December 2000. SunTrust's costs savings estimate was also based on its
experience in the Crestar acquisition and its review of data from
selected comparable transactions in the banking industry with an
in-market component which reflected that the 23% of Wachovia's
non-interest expense base represented by SunTrust's costs savings
estimate was at the low-end of the range of cost savings estimates for
these transactions. SunTrust expects to derive its estimated cost
savings primarily from the elimination of duplicative or redundant
staff and administrative functions, data processing systems and
facilities and equipment. SunTrust estimates that the consolidation of
branch banking offices of Wachovia and SunTrust will result in the
closing of 150 to 175 branch banking offices during the three-year
integration period following completion of the proposed SunTrust
Merger. SunTrust has determined that there are approximately 138
Wachovia branch banking offices within 1/2 mile of a SunTrust branch
banking office and approximately 213 Wachovia branch banking offices
within 1 mile of a SunTrust branch banking office. (Source: SNL
Securities). In addition, SunTrust has estimated that the consolidation
of its operations with those of Wachovia will result in 4,000 staff
reductions during the three-year integration period following
completion of the merger. SunTrust estimates that its cost savings will
be phased in 40% in the first year following closing, 70% in the second
year following closing and 100% in the third year following closing.
(5) Based on common shares outstanding on 3/31/01.
The following table presents certain historical financial and
shareholder return data for both SunTrust and First Union, including a
comparison of 5-year compounded annual growth rates for specified items for the
two companies. This data has been presented solely for the purpose of providing
a
9
comparison of the historical financial and stock performance of SunTrust to that
of First Union. SunTrust believes that this comparison reflects SunTrust's
superior track record with respect to operating results and shareholder returns
and that this superior track record is an important consideration for
shareholders in determining whether or not to make an investment in First Union
through their vote on the Proposed First Union Merger. Although SunTrust
believes this data reflects SunTrust's superior track record in delivering value
to its shareholders, SunTrust cautions you that historical data are not
necessarily indicative of future results.
A compounded annual growth rate, or "CAGR," measures the annual growth
rate of a particular item, such as core earnings per share, over a specified
number of measurement periods. SunTrust is presenting 5-year CAGRs for both
SunTrust and First Union below and elsewhere in this Proxy Statement because
Wall Street analysts often look at 5-year CAGRs to measure long-term trends.
However, while 5-year CAGRs are used to reflect long-term trends, they will not
capture trends for selected shorter periods within the 5-year measurement
period.
SunTrust advises you that the First Quarter '01 Return on Average Equity
figure for SunTrust set forth below is based on SunTrust's total "realized"
shareholders' equity rather than total shareholders' equity as computed in
accordance with GAAP. See footnote (8) to the table below. In addition, SunTrust
advises you that the earnings data used to calculate the First Quarter '01
Return on Average Assets and the First Quarter '01 Return on Average Equity data
for First Union and SunTrust set forth below exclude all non-recurring items,
including restructuring and merger-related charges and one-time gains. SunTrust
believes that the exclusion of non-recurring items from the calculation of these
performance measures for a company provides a return measure that more
accurately reflects the performance of the company's underlying business.
SunTrust advises you that this data may not be comparable to return on average
equity and return on average assets measures reported by other companies to the
extent such other companies have included non-recurring items in calculating
these measures.
First Union SunTrust
----------- --------
1-Year Total Stockholder Return(1).................... (6.2%) 15.3%
5-Year Total Stockholder Return(1).................... 31.1% 98.2%
10-Year Total Stockholder Return(1)................... 376.5% 493.0%
5-Year Core Earnings Per Share CAGR(2) (3)............ (4%)(4) 12%
5-Year Net Income Per Share CAGR(3) .................. (1%)(4) 11%
5-Year Net Revenue Per Share CAGR (5)................. 0%(4) 8%
5-Year Dividends Per Share CAGR(6).................... (3%)(4) 14%
Restructuring Charges--Last 5 Years(7)................ $7,210MM $365MM
First Quarter '01 Return on Average Assets (2)........ 1.0% 1.2%
10
First Union SunTrust
----------- --------
First Quarter '01 Return on Average Equity (2)(8)..... 15.6% 19.5%
First Quarter '01 Efficiency Ratio(9)................. 62.8% 57.2%
First Quarter '01 Tangible Common Ratio(10)........... 5.0% 6.8%
------------------------------
(1) Through March 31, 2001. Assumes reinvestment of dividends. An end date
of March 31, 2001 was used for stockholder return data to eliminate any
potential effects on that data attributable to the SunTrust Merger
Proposal or the Proposed First Union Merger.
(2) Excludes restructuring and merger-related charges and other
non-recurring items.
(3) CAGR based on 1996 to 2001 actual and estimated EPS based on Wall Street
consensus estimates for 2001 (First Call).
(4) Adjusted for 1997 2-for-1 stock split.
(5) Excludes non-recurring items. CAGR based on 1996 to 2001, with first
quarter 2001 net revenue per share annualized.
(6) CAGR based on 1996 to 2001, with first quarter 2001 dividend annualized.
(7) Through March 31, 2001. Includes restructuring, merger-related and other
charges.
(8) SunTrust's return on average equity of 19.5% is computed using
SunTrust's average "realized" shareholders' equity, which is SunTrust's
total shareholders' equity less all unrealized gains and losses on
securities and derivatives reported under "Accumulated other
comprehensive income." SunTrust has reported its return on equity based
on realized shareholders' equity since the adoption of FAS 115, which
requires the inclusion in total shareholders' equity of unrealized
after-tax gains and losses in equity securities and debt securities held
for sale. SunTrust believes this measure is comparable to return on
equity as reported by other bank holding companies because SunTrust is
in a unique situation as a result of its ownership of approximately 48
million shares of common stock of The Coca- Cola Company since 1919. At
March 31, 2001, "Accumulated other comprehensive income" was $1.6
billion or approximately 20% of SunTrust's total shareholders' equity
and included SunTrust's unrealized after-tax gain in its investment in
Coca-Cola common stock of $1.4 billion, or approximately 17% of
SunTrust's total shareholders' equity. By comparison, at March 31, 2001,
First Union's "Accumulated other comprehensive income" of $222 million
constituted only 1.4% of total shareholders' equity as of that date.
SunTrust believes its use of this measure of return on equity has been
accepted by Wall Street analysts in comparing SunTrust's return on
equity to the return on equity figures of its peers. SunTrust's return
on average equity for the three months ended March 31, 2001, as
calculated under GAAP without adjusting for unrealized gains and losses
in securities and derivatives or non-recurring items of income or
expense, was 16.9%. (9) Calculated as non-interest expense excluding
amortization of intangible and foreclosed property expenses, as a
percentage of fully-taxable equivalent net revenue excluding securities
gains. (10) At period end. Total equity less intangibles, divided by
total assets less intangibles.
11
o A VOTE AGAINST THE PROPOSED FIRST UNION MERGER WILL HELP
SATISFY A CONDITION TO THE SUNTRUST MERGER PROPOSAL.
One condition of the SunTrust Merger Proposal is that the Wachovia
shareholders do not approve the Proposed First Union Merger and the First Union
Merger Agreement is validly terminated. The Proposed SunTrust Merger cannot go
forward unless this condition is satisfied. Accordingly, your vote against the
Proposed First Union Merger can help to satisfy this condition to the SunTrust
Merger Proposal.
While SunTrust is committed to helping Wachovia shareholders realize the
value of the SunTrust Merger Proposal, the SunTrust Merger Proposal cannot go
forward unless the Wachovia shareholders do not approve the Proposed First Union
Merger and the First Union Merger Agreement is validly terminated. Accordingly,
a vote for the Proposed First Union Merger could leave Wachovia shareholders
without a viable alternative to the Proposed First Union Merger because SunTrust
will not proceed with the SunTrust Merger Proposal if the Proposed First Union
Merger is approved by Wachovia shareholders. However, there can be no assurance
as to the occurrence or timing of the termination of the First Union Merger
Agreement or that the conditions to the Proposed SunTrust Merger will be
satisfied. As a result, even if the Proposed First Union Merger is not approved
by Wachovia shareholders, Wachovia shareholders could still be without a viable
alternative to the Proposed First Union Merger if the conditions to the Proposed
SunTrust Merger are not satisfied.
o A VOTE AGAINST THE PROPOSED FIRST UNION MERGER SENDS A STRONG
MESSAGE TO THE WACHOVIA BOARD OF DIRECTORS THAT YOU WANT TO
PRESERVE THE OPPORTUNITY TO ACCEPT THE SUNTRUST MERGER
PROPOSAL.
By voting against the Proposed First Union Merger, Wachovia shareholders
can demonstrate their support for the proposed combination of Wachovia and
SunTrust and send a strong message to the Wachovia Board of Directors that they
want the opportunity to accept the value offered by the SunTrust Merger
Proposal. A vote against the Proposed First Union Merger moves Wachovia
shareholders closer to being able to benefit from the SunTrust Merger Proposal.
On the other hand, if Wachovia shareholders approve the Proposed First Union
Merger, it is likely that the Proposed First Union Merger will be consummated.
12
The SunTrust Merger Proposal is subject to certain risks and
uncertainties, including the following:
o the SunTrust Merger Proposal is conditioned on the valid
termination of the First Union Merger Agreement and the surrender
by First Union of the First Union Option for a cash payment equal
to its "in-the-money" value or the invalidation of that option,
and there can be no assurance that First Union will cooperate
toward the satisfaction of these conditions;
o the SunTrust Merger Proposal contemplates the negotiation of a
definitive merger agreement between SunTrust and Wachovia, but
there can be no assurance that Wachovia will enter into
discussions with SunTrust with respect to the SunTrust Merger
Proposal if the First Union Merger is not approved by Wachovia
shareholders;
o the exchange ratio in the SunTrust Merger Proposal is fixed, so
the per share value of the SunTrust Merger Proposal will change
as a result of changes in the market price of SunTrust Common
Stock and could be lower in the future than the per share value
of the SunTrust Merger Proposal as disclosed in this Proxy
Statement;
o SunTrust has no prior experience making an unsolicited merger
proposal of the type contemplated by the SunTrust Merger
Proposal, and accordingly, the integration of the businesses of
SunTrust and Wachovia may be more difficult, costly or time-
consuming than anticipated, which could result in SunTrust not
realizing all of the anticipated benefits of the Proposed
SunTrust Merger or in the combined company experiencing greater
than expected deposit runoff, integration costs and customer,
client or employee attrition;
o the cost savings actually realized by SunTrust as a result of the
Proposed SunTrust Merger may be less than SunTrust's estimated
cost savings, and the restructuring and merger-related charges
incurred by SunTrust as a result of the Proposed SunTrust Merger
could be greater than those estimated by SunTrust; and
o the Proposed SunTrust Merger will be subject to a number of
conditions, including the approval of the shareholders of both
SunTrust and Wachovia and the receipt of all regulatory approvals
required for completion of the Proposed SunTrust Merger, and
there can be no assurance that these approvals will be obtained
in the time frame anticipated.
IMPORTANT
IF YOU WANT TO HAVE THE OPPORTUNITY TO CONSIDER THE PROPOSED SUNTRUST
MERGER WE URGE YOU TO PROMPTLY SIGN, DATE AND MAIL THE ENCLOSED BLUE PROXY TO
VOTE AGAINST THE PROPOSED FIRST UNION MERGER AND FOR THE PROPOSED AMENDMENT TO
WACHOVIA'S BYLAWS. WE URGE YOU TO EXECUTE AND MAIL THE BLUE PROXY CARD AS SOON
AS POSSIBLE.
REJECTION OF THE PROPOSED FIRST UNION MERGER IS A CRITICAL STEP IN
SECURING THE SUCCESS OF THE SUNTRUST MERGER PROPOSAL.
13
EVEN IF YOU HAVE ALREADY SENT A PROXY TO THE BOARD OF DIRECTORS OF
WACHOVIA, YOU HAVE EVERY RIGHT TO CHANGE YOUR VOTE. YOU MAY REVOKE THAT PROXY
AND VOTE AGAINST THE PROPOSED FIRST UNION MERGER AND FOR THE PROPOSED AMENDMENT
TO WACHOVIA'S BYLAWS BY SIGNING, DATING AND MAILING THE ENCLOSED BLUE PROXY IN
THE ENCLOSED ADDRESSED ENVELOPE. NO POSTAGE IS NECESSARY IF YOUR PROXY IS MAILED
IN THE UNITED STATES. IF YOU ARE A REGISTERED OWNER, YOU MAY ALSO VOTE BY
TELEPHONE OR THROUGH THE INTERNET BY FOLLOWING THE INSTRUCTIONS ON THE ENCLOSED
PROXY CARD.
THIS PROXY STATEMENT RELATES SOLELY TO THE SOLICITATION OF PROXIES IN
OPPOSITION TO THE PROPOSED FIRST UNION/WACHOVIA MERGER AND FOR THE PROPOSED
AMENDMENT TO WACHOVIA'S BYLAWS AND IS NEITHER AN OFFER TO SELL ANY SHARES OF
SUNTRUST COMMON STOCK NOR A REQUEST FOR THE TENDER OF WACHOVIA COMMON STOCK. THE
ISSUANCE OF SUNTRUST COMMON STOCK IN CONNECTION WITH SUNTRUST'S PROPOSED MERGER
WITH WACHOVIA WILL HAVE TO BE REGISTERED UNDER THE SECURITIES ACT OF 1933 AND
MAY ONLY BE MADE BY MEANS OF A PROSPECTUS COMPLYING WITH THE REQUIRE MENTS OF
SUCH ACT.
14
BACKGROUND
From time to time in the past, SunTrust and Wachovia have engaged in
discussions concerning the possibility of a business combination transaction
between the parties. Discussions were initiated between the parties most
recently in early November of 2000, at a meeting in Atlanta between L. Phillip
Humann, Chairman, President and Chief Executive Officer of SunTrust, and L.M.
Baker, Jr., the Chairman, President and Chief Executive Officer of Wachovia, at
which Messrs. Humann and Baker discussed the possibility of a business
combination transaction between SunTrust and Wachovia. Later that month, John W.
Spiegel, Chief Financial Officer of SunTrust, and Robert S. McCoy, Chief
Financial Officer and Treasurer of Wachovia, discussed matters relative to a
potential business combination transaction between the parties, including
revisiting previous discussions between them in 1997 regarding the financial
aspects and benefits of a combination of SunTrust and Wachovia, including the
cost savings that should be obtainable in such a combination. Messrs. Spiegel
and McCoy mutually agreed that, based on those discussions, there was no reason
that the parties should not proceed with their consideration of a transaction.
On December 2, 2000, Mr. Spiegel met with several members of senior
management of Wachovia to establish a plan for conducting due diligence and
information sharing between the parties. That weekend, representatives of
SunTrust and Wachovia and their respective financial and legal advisors
commenced their due diligence investigations in connection with the proposed
transaction. These due diligence efforts continued on an ongoing basis
throughout the next couple of weeks and included meetings between key members of
senior management of the two companies, several off-site meetings involving
large due diligence teams and the continuous exchange of information between the
two companies. Also during this time, SunTrust and Wachovia and their respective
legal advisors substantially negotiated the terms of the proposed transaction
and the draft merger documents, and representatives of SunTrust and Wachovia,
with the assistance of their respective financial advisors, prepared an analyst
presentation for purposes of describing the transaction to the investment
community. SunTrust and Wachovia had set December 18, 2000 as the targeted
announcement date of the proposed transaction.
With a few days remaining before the targeted announcement date, the
following material terms of the transaction had been agreed to:
Name: Wachovia
Headquarters: Atlanta, Georgia
Price: 1.03 SunTrust shares per Wachovia share (12% premium based on
12/15/00 closing prices)
Board: 50/50 split between SunTrust and Wachovia directors
15
Management: Chairman and CEO: L.M. Baker, Jr. - CEO until 2003 Annual
Meeting and Chairman until 2004 Annual Meeting
President and COO: L. Phillip Humann - to become CEO at 2003
Annual Meeting and Chairman at 2004 Annual Meeting
Other management roles and individuals from
SunTrust and Wachovia to fill those roles had been
identified
Dividend: SunTrust dividend increase to ensure no reduction in dividends to
Wachovia shareholders on a pro forma equivalent basis
Over the course of the discussions, Mr. Baker communicated only one area
of concern to Mr. Humann relative to the compatibility of the two companies. Mr.
Baker indicated to Mr. Humann that the specialists in Wachovia's wealth
management business (tax and estate planning, portfolio managers, etc.) reported
to a centralized business unit whereas SunTrust's wealth management specialists
reported on the basis of geography. Mr. Humann indicated that SunTrust had in
effect dual reporting lines, both on the basis of geography and to a centralized
business unit which set and implemented overall policy with respect to uniform
practices and standards. Mr. Humann advised Mr. Baker that he did not believe
there was a practical difference in how these specialists functioned on a
day-to-day basis, but nevertheless advised Mr. Baker that SunTrust was prepared
to shift to Wachovia's operating structure for the wealth management business.
Mr. Baker also questioned the proposed reporting line of the wealth management
business, preferring that this business unit report to Mr. Humann as the
proposed president and chief operating officer instead of to a vice chairman to
whom multiple business lines would report. Mr. Humann advised Mr. Baker that
SunTrust's position on this issue was based on SunTrust's view that the wealth
management business can benefit greatly through interaction with other business
lines, and that SunTrust had realized substantial success with this approach.
Late in the morning on December 14, 2000, Mr. Baker telephoned Mr.
Humann and advised him that Wachovia was withdrawing from further discussions
based on the issue raised by Mr. Baker with respect to the reporting
relationship of the combined company's wealth management business. Messrs.
Humann and Baker decided to speak again after their respective Board of
Directors meetings which had been scheduled for the following afternoon.
On December 15, 2000, following their respective Board of Directors
meetings, Mr. Humann and Mr. Baker spoke again, but Mr. Baker indicated that he
did not want to take up the merger discussions again until some time after the
holidays. Mr. Humann concluded that the prospect for a constructive dialogue
with Mr. Baker concerning a potential business combination would be improved if
he allowed some amount of time to elapse before resuming Merger discussions with
Mr. Baker, and accordingly determined not to contact Mr. Baker immediately
following the holidays. In early February 2001, following the announcement by
Wachovia of its plans to initiate an evaluation of strategic alternatives for
its credit
16
card business, Mr. Humann decided, in light of the fact that a sale of the
credit card business would be a significant transaction for Wachovia, that he
would not attempt to resume discussions with Mr. Baker until Wachovia had
completed that process.
On April 13, 2001, Mr. Humann learned of rumors that Wachovia was in
merger negotiations with First Union. At that time, members of SunTrust's senior
management contacted representatives of SunTrust's legal and financial advisors
to assist SunTrust in evaluating its alternatives (principally whether or not to
submit a merger proposal to Wachovia) in light of the possibility that Wachovia
was in merger negotiations with First Union.
On April 14, 2001, Mr. Humann telephoned Mr. Baker, and Mr. Spiegel
telephoned Mr. McCoy, to inquire as to whether Wachovia was engaged in merger
discussions with First Union, and, in the event that Wachovia confirmed these
discussions, to deliver a merger proposal to Wachovia. At the same time, members
of SunTrust's senior management and its legal and financial advisors prepared a
letter to be delivered to Wachovia in the event that the responses to the
inquiries made by Messrs. Humann and Spiegel confirmed that First Union and
Wachovia were in discussions.
Mr. Spiegel spoke by telephone with Mr. McCoy, who confirmed that he was
also aware of the rumors. Mr. Spiegel reminded Mr. McCoy of SunTrust's interest
in a business combination transaction with Wachovia, and Mr. McCoy acknowledged
that he was aware of SunTrust's interest. Later in the day, Mr. Humann reached
Mr. Baker, who acknowledged his awareness of the rumors but attributed them to
internet message boards and chat rooms and pointed out that these same message
boards and chat rooms had similar rumors concerning a transaction between
SunTrust and Wachovia. Mr. Humann then stated that the two of them had agreed
that they would be getting together again to resume their discussions from
December, and Mr. Baker confirmed that this was what they had agreed to. Mr.
Humann understood Mr. Baker's response to be an indication that Wachovia was not
in discussions with First Union.
On April 16, 2001, First Union and Wachovia jointly announced that they
had entered into a low-premium, merger-of-equals transaction. See "Certain
Information Concerning the Proposed First Union Merger."
During the weeks following the announcement of the Proposed First Union
Merger, members of senior management of SunTrust, with the advice and assistance
of its legal and financial advisors, periodically met to discuss SunTrust's
alternatives in light of the announcement of the Proposed First Union Merger.
On May 11, 2001, the SunTrust Board of Directors unanimously approved
the SunTrust Merger Proposal and related matters.
17
On May 14, 2001, SunTrust delivered the following letter to the Board of
Directors of Wachovia:
[LETTERHEAD OF SUNTRUST BANKS, INC.]
May 14, 2001
The Board of Directors
Wachovia Corporation
100 North Main Street
Winston-Salem, North Carolina 27150
Dear Members of the Board:
As you know, we have long been interested in a business combination with
Wachovia Corporation. We have enormous respect for all of you, many of whom are
well acquainted with members of our Board, and we have always been impressed
with the quality of Wachovia's management with whom we have developed excellent
relationships over the years. Our respective management philosophies and
corporate cultures are highly compatible, and we both share a commitment to
superior customer service and relationship-based banking that sets us apart from
our competitors.
Since the announcement of your proposed merger with First Union
Corporation, we have again given serious consideration to a combination of
SunTrust and Wachovia. By this letter, we are proposing a transaction that
provides superior value to Wachovia's shareholders. We remain convinced that a
combination of our companies is a compelling transaction in light of the
strategic and financial benefits for each of us and our respective shareholders.
Our proposal provides Wachovia's shareholders a significant premium over both
Wachovia's current market price and the current value of the First Union
transaction. Our proposal also maintains Wachovia's current dividend and
provides Wachovia shareholders with an investment in SunTrust, a high quality,
high performing company. We believe our offer is a "Superior Proposal" as that
term is defined under your merger agreement with First Union. Accordingly, we
would like to meet with you as soon as possible to discuss the terms of our
offer in greater detail.
Under our proposal, Wachovia and SunTrust would combine in a merger in
which each share of common stock of Wachovia would be converted into 1.081
shares of SunTrust common stock, having an implied value of $70.06 per Wachovia
share. Based on May 11, 2001 closing prices, our offer represents a 17% premium
over the implied value of your proposed merger with First Union and a 15%
premium over Wachovia's closing price. SunTrust also would increase its annual
per share dividend to $2.22 so that Wachovia shareholders would receive on a pro
forma equivalent basis the same $2.40 annual per share dividend that they
currently enjoy. Our transaction would
18
be tax-free to Wachovia shareholders and would be accounted for as a purchase.
Completion of the merger would require receipt of regulatory and shareholder
approvals and the satisfaction of other customary conditions. We have attached a
brief financial presentation outlining the significant financial benefits of our
proposal.
We would propose that the board of directors of the combined company
include appropriate representation from Wachovia's current board of directors.
In addition, we would anticipate leadership roles for numerous members of
Wachovia's management, and we would anticipate putting in place appropriate
incentives and retention arrangements for key members of management of Wachovia.
While the headquarters of the combined company would be in Atlanta, Georgia, we
are prepared to make Winston-Salem the headquarters for our Carolinas bank, and
we would maintain meaningful operations there. Our proposal is also more
attractive for your employees in North and South Carolina, where we would
anticipate substantially fewer job losses than under your proposed merger with
First Union.
We believe the strategic rationale for combining SunTrust and Wachovia
is compelling for a number of reasons, including the following:
o Shared focus on superior customer service and
relationship-based banking;
o Leadership position in high growth and affluent southeastern
geographic markets;
o Enhanced scale in high growth/high margin businesses;
o SunTrust has clean slate to execute transaction;
o Superior financial strength and credit risk management; and
o Opportunity for reinvestment of excess capital.
A merger of SunTrust and Wachovia would combine two companies that
possess highly compatible operating philosophies and corporate cultures, a
similar management structure and a shared commitment to operating a customer
relationship-based financial services franchise. Both SunTrust and Wachovia have
a matrix management structure which is based on both business lines and
geography. Both companies provide significant autonomy to local managers who
best understand and manage local customer relationships. For these reasons, we
believe the integration of our businesses can be accomplished in a virtually
seamless manner with no meaningful customer loss or disruption.
Most important for Wachovia's shareholders is the strength of SunTrust's
currency. SunTrust has demonstrated consistently strong stock price performance
and has delivered attractive total returns to its shareholders. Based on last
Friday's closing stock price, SunTrust has produced a five-year total return to
shareholders of 100%, and, based on First Call consensus estimates for 2001,
SunTrust's core earnings per share will produce a five-year CAGR of 12% from
1996-2001. SunTrust has had consistent dividend growth (5-year CAGR of 14% in
dividends per share), has never cut its dividend and has significant additional
capacity to increase its payout ratio. As noted
19
above, our proposal provides that SunTrust would increase its dividend to ensure
no dividend reduction for Wachovia shareholders.
In addition to strong performance and a focused strategy, the strength
of our currency derives from prudent management practices. SunTrust has never
had to pre-announce an earnings shortfall or major write-down and, other than
the $115 million loss taken in 1999 in connection with repositioning its
securities portfolio, has never taken a restructuring charge that was not
merger- related. We have retained an ongoing focus on credit and risk
management. Our five-year average net charge-off ratio is the lowest among the
twenty largest U.S. banks at 0.29%.* Additionally, our holding company currently
enjoys A1/A+ ratings from Moody's and S&P, respectively, for its long- term
unsecured debt, with a positive outlook from Moody's and a stable outlook from
S&P, and our bank carries Aa3/AA- ratings from Moody's and S&P, respectively.
With respect to executing strategic transactions, SunTrust has a
superior track record. Our integration of Crestar Financial Corporation is
regarded as a successful execution of a major bank merger transaction. All
significant operations were smoothly integrated, with virtually no measurable
customer run-off or revenue loss. This is in stark contrast to the history of
the mergers integrated by many of our competitors. Moreover, because of the
excellent strategic fit between SunTrust and Wachovia and our consistent
business models, and based on our previous discussions, we believe there is
limited execution risk in combining SunTrust and Wachovia. It bears noting that
our cost saving estimates project 3,000 fewer staff reductions and approximately
125-150 fewer branch closures than the First Union transaction -- figures which
suggest materially less execution risk in connection with our proposal.
Our interest in this transaction is a reflection of our firm belief
that a combination of our companies would be highly beneficial financially to
both of our shareholder groups and accretive to SunTrust's earnings per share.
In sum, we believe our proposal is superior to your proposed transaction with
First Union based on its higher current value, maintenance of the Wachovia
dividend and the opportunity for Wachovia shareholders to share in the earnings
accretion deriving from a stronger combined franchise.
Our proposal requires the valid termination of your merger agreement
with First Union, and we are filing preliminary proxy materials with the SEC
today to enable us to seek proxies from the Wachovia shareholders to vote
against the First Union transaction. The stock option you granted to First Union
contains several excessive and unprecedented features, and we reserve the right
to challenge the validity of that option. Nevertheless, in the interest of
facilitating a transaction, our
--------
* Largest twenty banks by market capitalization, excluding Northern Trust
Corporation and State Street Corporation, as these banks have business
lines that are materially different from those of the other banks in the
group.
20
proposal assumes a payment to First Union of the "in-the-money" value of the
option, subject to the cap set forth in the option agreement. Our proposal also
requires an update and completion of the due diligence investigation we
performed in December.
We were both disappointed and surprised by the announcement of your
proposed merger. We were disappointed because we (and, we believe, the market)
are convinced that a merger of our companies is a better fit and provides more
compelling strategic benefits than your proposed transaction with First Union.
And we were surprised because Wachovia did not make any effort to revisit the
substantially completed merger negotiations that we conducted this past
December. As you no doubt recall, our then-proposed merger was put on hold only
days before it was to be announced. The transaction documents, including
employment agreements, were essentially in final form; due diligence was
substantially completed; and our financial advisors were working to finalize the
investor presentation. It bears noting that the pricing we agreed to in
December, which represented a 12% premium to Wachovia's then-current market
price and included an increase in SunTrust's dividend to preserve Wachovia's
dividend on a pro forma equivalent basis, would have provided greater value to
Wachovia's shareholders than the value to be received in the First Union
transaction. In any event, because of all the work that was done in December, we
are extremely confident that we can reach definitive terms with you, as well as
update and complete our due diligence, expeditiously.
My clear recollection is that our December transaction was put on hold
by Wachovia solely because of concerns over two issues relating to the
organization of the combined company's wealth management line of business. One
of the issues concerned the reporting structure of the specialists (i.e., tax
and estate planning, portfolio management, etc.) within that business. At
SunTrust, the specialists in effect have dual reporting on the basis of
geography and to a centralized unit (to implement uniform standards, investment
policy and the like), whereas at Wachovia the specialists report only to a
centralized business unit. As a practical matter, we do not believe these
businesses function very differently on a day-to-day basis, and the difference
in organizational structure does not in our view pose any particularly difficult
integration issues. Importantly, I had advised Wachovia at the time that we were
prepared to accept your operating structure for this business line. The second
issue concerned the reporting relationship of the wealth management business --
whether this business should report to a vice-chairman to whom multiple business
lines would be reporting (which was SunTrust's preference), or to me as
president and chief operating officer, as Wachovia proposed. SunTrust's position
on this issue was based upon our view that the wealth management line can
benefit greatly through interaction with other lines of business, and our
success in this area has demonstrated this. At any rate, this too appeared to us
to be an eminently solvable issue.
In all events, we are confident that we can implement an approach to
operating the wealth management business on a combined basis that captures the
best features of both SunTrust and Wachovia.
21
The Board of Directors of SunTrust has unanimously approved this
proposal and has authorized our management team to proceed. We have engaged
Morgan Stanley; Skadden, Arps, Slate, Meagher & Flom LLP; and King & Spalding to
advise us in this transaction.
We would like to meet with you as soon as possible to discuss our
proposal in greater detail. Please feel free to contact me at my office number
or to have your respective financial or legal advisors contact Bill Weiant of
Morgan Stanley or Bill Rubenstein of Skadden Arps regarding the matters set
forth herein. We look forward to meeting with you soon.
Sincerely,
/s/ L. Phillip Humann
L. Phillip Humann
Also on May 14, 2001 SunTrust issued a press release announcing the
SunTrust Merger Proposal and conducted an investor presentation which discussed
the SunTrust Merger Proposal in detail.
On May 15, 2001, Theodore J. Hoepner, a shareholder of Wachovia for
over ten years, a participant in this proxy solicitation and a Vice Chairman of
SunTrust, delivered a letter to Wachovia demanding certain corporate records and
documents of Wachovia pursuant to his rights under the North Carolina Business
Corporation Act and North Carolina common law. As of the date of this Proxy
Statement, Wachovia has not complied with Mr. Hoepner's demand.
On May 18, 2001, Mr. Baker announced that the First Union Merger
Agreement had been amended so as to delete any increase in retirement
compensation for Mr. Baker in connection with the Proposed First Union Merger.
On May 22, 2001, First Union announced the Preferred Stock Election
Feature. On the same day, Wachovia issued a press release announcing that its
board of directors had rejected the SunTrust Merger Proposal and had reaffirmed
its commitment to the Proposed First Union Merger. According to an article in
The Wall Street Journal on May 24, 2001, Morris Offit, a Wachovia director,
dissented from the decision of the Wachovia Board to reject the SunTrust Merger
Proposal. According to that article, people familiar with the meeting said that
when it came time for the Wachovia Board of Directors to vote, Mr. Offit
explained he would not reject the SunTrust Merger Proposal because he liked the
SunTrust business model and thought the cultural compatibility of SunTrust and
Wachovia was better than that of First Union and Wachovia. Mr. Offit also
reportedly raised concerns earlier in the meeting about whether Wachovia
management and its advisers had adequately disclosed details of SunTrust's
overtures. Mr. Offit, a Wachovia director, employee and significant shareholder,
joined the Wachovia Board of Directors in 1999 after selling his New York trust
bank, Offitbank Holdings Inc., to Wachovia. Mr. Offit currently owns
22
directly or indirectly 489,201 Wachovia shares. In terms of outright share
ownership, Mr. Offit is by far the largest shareholder among Wachovia's
directors, holding almost 40% more shares than the holdings of all of the other
Wachovia directors combined.
In a letter to Wachovia shareholders dated May 22, 2001, Mr. Baker made
four allegations regarding the SunTrust Merger Proposal: (1) a combined
SunTrust/Wachovia will not provide adequate future earnings growth, (2) there is
serious implementation risk in the SunTrust Merger Proposal, (3) the SunTrust
Merger Proposal does not compensate Wachovia shareholders for SunTrust's
inadequate future earnings growth and serious implementation risk, and (4) there
is no dividend advantage to the SunTrust Merger Proposal.
On May 22, 2001, Mr. Baker sent a letter to the SunTrust Board in which
he expressed Wachovia's disappointment at what he perceived to be SunTrust's
efforts to take over Wachovia and asked SunTrust to respect the Wachovia Board's
decision rejecting the SunTrust Merger Proposal and to withdraw the SunTrust
Merger Proposal.
On the evening of May 22, 2001, SunTrust issued a press release
indicating that it was disappointed by the decision of the Wachovia Board to
reject the SunTrust Merger Proposal and that it would continue with its plan to
solicit Wachovia shareholders to vote against the Proposed First Union Merger.
The press release also announced that SunTrust was initiating litigation in
state and federal court in Georgia. See "Certain Litigation." Also on May 22,
2001, First Union initiated litigation against SunTrust in state court in North
Carolina. On May 23, 2001, First Union filed an amended complaint in its
litigation in North Carolina adding Wachovia as a plaintiff. See "Certain
Litigation."
On Saturday, May 26, 2001, First Union and Wachovia announced the
record dates for their annual meetings and the dates on which those meetings
would be held.
On May 30, 2001, First Union and Wachovia amended the terms of their
proposed merger for the third time in less than two weeks. Among other things,
the new amendments revised certain terms of the First Union Option in order to
limit the profit realizable under the First Union Option to $780 million and to
limit the consideration that may be used to pay the exercise price of the First
Union Option to cash or readily marketable debt or preferred stock issued by the
holder of the First Union Option having a fair market value equal to the option
exercise price as agreed upon by both parties' investment banking firms. See
"Certain Information Concerning the First Union Option."
On May 30, 2001, Mr. Hoepner initiated litigation in state court in
North Carolina in order to enforce his rights under the North Carolina Business
Corporation Act and North Carolina common law to obtain a stockholder list and
certain related records of Wachovia. See "Certain Litigation."
On June 1, 2001, SunTrust and the plaintiffs in the litigation in North
Carolina state court entered into a consent stipulation agreeing to take
appropriate action to have the North Carolina state action
23
transferred to the North Carolina Business Court. SunTrust also agreed to
dismiss its Georgia state court action with the intention of reasserting its
claims as counterclaims in the North Carolina Business Court. On June 4, 2001,
SunTrust dismissed the Georgia state court action without prejudice. On June 7,
2001 SunTrust filed its answer and counterclaim in the North Carolina Business
Court. See "Certain Litigation."
On June 4, 2001, SunTrust delivered a notice to Wachovia of its
intention to propose a bylaw amendment for approval by Wachovia shareholders at
the Annual Meeting. See "Proposed Amendment to Wachovia's Bylaws." Later that
day, Wachovia announced that it would consider SunTrust's proposal in due
course. By letter dated June 8, 2001, counsel for Wachovia advised the North
Carolina Business Court that Wachovia's management is considering its response
to SunTrust's Proposed Bylaw Amendment and that Wachovia will provide SunTrust
with Wachovia's definitive response no later than June 15, 2001. SunTrust
believes there is no legitimate basis whatsoever for Wachovia to exclude the
Proposed Bylaw Amendment from consideration by shareholders at the Annual
Meeting.
CERTAIN INFORMATION CONCERNING THE PROPOSED FIRST UNION MERGER
On April 15, 2001, First Union and Wachovia entered into the First
Union Merger Agreement. The First Union Merger Agreement provides for a merger
of Wachovia with and into First Union pursuant to which each outstanding share
of Wachovia Common Stock would be converted into 2.0 shares of First Union
common stock. In addition, on May 22, 2001, First Union announced that it is
offering to Wachovia shareholders two alternatives that purport to guarantee
that their dividend payments will remain at the current Wachovia level of $2.40
per share per annum. In connection with the Proposed First Union Merger,
Wachovia shareholders would have the option to receive, in addition to two
shares of First Union Common Stock, either (1) a one-time payment at closing of
$0.48 per Wachovia share (as previously contemplated by the Proposed First Union
Merger), or (2) shares of preferred stock (the "Preferred Shares") that are
designed to pay quarterly dividends in an amount equal to the difference between
Wachovia's current quarterly per share dividend and the pro forma equivalent
quarterly dividend per Wachovia share paid on the common stock of the combined
Wachovia/First Union. Specifically, the new second alternative would provide
Wachovia shareholders with two Preferred Shares, each of which would initially
pay a quarterly cash dividend of $0.06 per share, so that Wachovia shareholders
who elect this alternative would receive, on a pro forma equivalent per share
basis, $0.48 in quarterly dividends on First Union common stock and $0.12 in
quarterly dividends on the Preferred Shares, or the same $0.60 quarterly
dividend per share currently paid by Wachovia. The dividend on the Preferred
Shares would decline as the common dividend of the new Wachovia/First Union
increases, until the new entity's common dividend equals or exceeds $1.20 per
share (or $2.40 per Wachovia share on a pro forma equivalent basis).
The obligations of Wachovia and First Union to complete the Proposed
First Union Merger are subject to various conditions, including the approval of
the stockholders of First Union and Wachovia,
24
receipt of all required regulatory approvals without any conditions that could
have a material adverse effect on the combined company, and the satisfaction of
other customary closing conditions.
The foregoing description of the First Union Merger Agreement is not
complete and is qualified in its entirety by reference to the full text of the
First Union Merger Agreement, a copy of which has been included as an Annex to
the joint proxy statement-prospectus filed as part of Amendment No. 1 to First
Union's Registration Statement on Form S-4 filed with the SEC on June 1, 2001
(the "Joint Proxy Statement-Prospectus").
CERTAIN INFORMATION CONCERNING THE FIRST UNION OPTION
In connection with the execution of the First Union Merger Agreement,
Wachovia and First Union also entered into the First Union Option, pursuant to
which First Union has the right, upon the occurrence of certain events, to
purchase up to 19.9% of the issued and outstanding shares of Wachovia Common
Stock at the close of business on April 12, 2001, at a price per share of
$59.482, subject to certain adjustments.
The First Union Option originally provided that the exercise price
could be paid through the delivery to Wachovia of cash, securities or other
tangible personal or real property having a value determined to equal the
exercise price. SunTrust believes that this provision could have resulted in
Wachovia issuing more than $2.5 billion in common stock to First Union in
exchange for assets of unknown identity and as to which Wachovia would not be
contractually entitled to perform any due diligence. On May 30, 2001, First
Union and Wachovia announced that they had amended their agreement to provide
that the exercise price of the First Union Option may be paid in cash or readily
marketable debt securities or preferred stock issued by the option holder having
a value agreed upon by an investment banking firm selected by Wachovia and an
investment banking firm selected by the holder exercising the option.
First Union may exercise the First Union Option if both an "initial
triggering event" and a "subsequent triggering event" occur prior to the
occurrence of an event that would terminate the First Union Option. An initial
triggering event occurred on May 30, 2001 when SunTrust filed its application
under the Bank Holding Company Act for Federal Reserve Board approval of the
Proposed SunTrust Merger. A subsequent triggering event will occur if any person
acquires beneficial ownership of 25% or more of the outstanding voting
securities of Wachovia or if Wachovia enters into an agreement with respect to,
or the Wachovia Board otherwise recommends that the Wachovia shareholders
approve or accept, any transaction with a third party (other than First Union)
involving a merger or consolidation of, or a sale of more than 25% of the
business, assets or deposits of, or a purchase or other acquisition of
securities constituting more than 25% of the voting power of, Wachovia or any of
its subsidiaries. The execution by Wachovia of a definitive agreement providing
for the Proposed SunTrust Merger would constitute a subsequent triggering event
and would result in the First Union Option becoming exercisable.
25
Upon the occurrence of a "Repurchase Event" as defined in the First
Union Option, upon the request of First Union, Wachovia would be required to
repurchase from First Union the First Union Option and any shares issued under
the First Union Option. The repurchase price is determined pursuant to a formula
that is generally designed to capture the difference in value between (i) the
$59.482 exercise price per share of the First Union Option and (ii) the highest
of (a) the price at which a tender or exchange offer has been made, (b) the
price per share of Wachovia common stock to be paid by a third party pursuant to
an agreement with Wachovia and (c) the highest closing price of Wachovia common
stock within the six-month period immediately preceding the date that the holder
of the First Union Option gives notice to Wachovia of its desire to have
Wachovia repurchase the First Union Option. Such difference in value, multiplied
by the number of shares of Wachovia Common Stock subject to the First Union
Option, is the repurchase price for the First Union Option (the "Repurchase
Formula"). In addition, upon the occurrence of a Repurchase Event, First Union
may surrender the First Union Option and any shares issued under the First Union
Option held by First Union for a cash fee equal to $375 million (the "Minimum
Surrender Value"), reduced correspondingly if there have been purchases of stock
under the First Union Option and gains on the sale of such stock.
The First Union Option originally provided that First Union's "total
profit" may not exceed $780 million. The term "total profit" was originally
defined in the First Union Option as "the aggregate amount (before taxes) of the
following: (1) the excess of (A) the net cash amounts or fair market value of
any property received by [the holder of the First Union Option] pursuant to the
sale of Option Shares (or any other securities into which such Option Shares are
converted or exchanged) to any unaffiliated party, other than any amount
received by [the holder of the First Union Option] upon the repurchase of Option
Shares by [Wachovia] pursuant to Section 7, after payment of applicable
brokerage or sales commissions and discounts, over (B) [the holder of the First
Union Option]'s aggregate purchase price for such Option Shares (or other
securities), plus (2) all amounts received by [the holder of the First Union
Option] upon the repurchase of the Option by [Wachovia] pursuant to Section 7,
plus (3) all equivalent amounts with respect to the Substitute Option and any
amounts paid pursuant to Section 9, minus (4) all amounts of cash previously
paid to [Wachovia] pursuant to Section 16(a)(3) and the value of all Option
Shares (or other securities) previously delivered to [Wachovia] for cancellation
pursuant to Section 16(a)(2), which value shall be deemed to be the purchase
price by [Wachovia] for such Option Shares or other securities." SunTrust
believed that this "total profit" provision did not operate to limit the value
of the First Union Option to $780 million in all circumstances. For example,
while clause (2) would take into account the value realized by First Union on a
repurchase by Wachovia of the First Union Option, clause (1) specifically
provides that value realized by First Union as a result of the repurchase by
Wachovia of shares of Wachovia Common Stock acquired upon exercise of the First
Union Option is not to be taken into account in calculating the "total profit."
On May 30, 2001, First Union and Wachovia amended this definition in the First
Union Option to provide that additional potential sources of value to a holder
of the First Union Option, including a repurchase by Wachovia of shares
purchased upon exercise of the First Union Option, would be subject to the $780
million profit limitation.
26
The SunTrust Merger Proposal is subject to certain conditions,
including the First Union Option Condition. To satisfy the First Union Option
Condition, either the First Union Option must be judicially invalidated or First
Union must surrender the First Union Option for a cash payment equal to the
in-the-money value of the First Union Option, subject to the Minimum Surrender
Value of $375 million and the "cap" of $780 million. For purposes of the First
Union Option Condition, SunTrust regards the in-the-money value of the First
Union Option as equivalent to the value that would be determined under the
Repurchase Formula. Because SunTrust has neither executed an agreement with
Wachovia to acquire any shares of Wachovia Common Stock nor commenced an
exchange offer to purchase shares of Wachovia Common Stock, the relevant price
for purposes of the Repurchase Formula would be the highest closing price of
Wachovia Common Stock during the six-month period preceding the date that the
holder of the First Union Option gives notice to Wachovia of its desire to have
Wachovia repurchase the First Union Option. SunTrust believes the highest
closing price of Wachovia Common Stock during the six-month period preceding the
date of this Proxy Statement is $69.21. Accordingly, for purposes of the First
Union Option Condition, the in-the-money value of the First Union Option as of
the date of this Proxy Statement based on the Repurchase Formula is
approximately $407 million ($69.21 minus the exercise price of $59.482,
multiplied by the approximately 41.85 million shares of Wachovia common stock
subject to the First Union Option).
In the event Wachovia was willing to enter into a definitive agreement
with SunTrust with respect to the SunTrust Merger Proposal, and the implied
value of the SunTrust Merger Proposal per share of Wachovia Common Stock at that
time was higher than the highest closing price of Wachovia Common Stock during
the preceding six-month period, then SunTrust would calculate the in-the-money
value of the First Union Option for purposes of the First Union Option Condition
based on the higher implied value of the SunTrust Merger Proposal. For example,
if the implied value of the SunTrust Merger Proposal per share of Wachovia
Common Stock were $70 at the time Wachovia was willing to enter into a
definitive agreement with SunTrust with respect to the SunTrust Merger Proposal,
the value of the First Union Option based on the Repurchase Formula would be
approximately $440 million. Because $440 million is more than the Minimum
Surrender Value of $375 million and less than the"cap" of $780 million, the
in-the-money value of the First Union Option for purposes of the First Union
Option Condition would be $440 million. As noted above, because the exchange
ratio in the SunTrust Merger Proposal is fixed, the implied value of the
SunTrust Merger Proposal will fluctuate based on changes in the market prices
for SunTrust Common Stock. In addition, the highest closing price of Wachovia's
Common Stock on a trailing six-months basis will vary over time. Accordingly,
the in-the-money value of the First Union Option for purposes of the First Union
Option Condition will fluctuate.
As a practical matter, if Wachovia's shareholders do not approve the
Proposed First Union Merger and Wachovia enters into merger discussions with
SunTrust, SunTrust believes that it and First Union would enter into
negotiations with respect to the appropriate surrender value of the First Union
Option. However, there can be no assurance that Wachovia will enter into merger
discussions with SunTrust, or that First Union would enter into any such
negotiations with respect to the First Union Option or that the parties would
agree on the appropriate surrender value of the First Union Option. In this
regard, the First
27
Union Option contains an anti-dilution provision that would apply in the case of
a merger of Wachovia with a third party. This anti-dilution provision is not
designed to preserve the inherent value of the First Union Option in the case of
a merger involving Wachovia, but rather is designed to materially inflate the
value of the option above its inherent value. In the case of a merger with
SunTrust, the anti-dilution provision would operate to increase the inherent
value of the option above the $780 million cap (without giving effect to the
"cap" provision). Accordingly, there can be no assurance that First Union would
agree to a surrender value below $780 million. There also can be no assurance
that First Union will agree to terminate the First Union Merger Agreement in the
event that Wachovia's shareholders do not approve the Proposed First Union
Merger, in which case Wachovia would not be permitted to enter into merger
discussions with SunTrust prior to January 16, 2002 without the consent of First
Union.
SunTrust has filed a counterclaim in the North Carolina Business Court
against Wachovia, certain of Wachovia's directors and First Union seeking to
invalidate the First Union Option because, among other things, SunTrust believes
that the $780 million value of the option constitutes an excessive penalty and,
accordingly, that the Wachovia Board of Directors breached their fiduciary
duties in entering into the First Union Option. See "Certain Litigation."
In connection with the execution of the First Union Merger Agreement,
Wachovia and First Union also entered into a Stock Option Agreement pursuant to
which First Union granted Wachovia an option (the "Wachovia Option") to purchase
up to 19.9% of the issued and outstanding shares of First Union Common Stock at
the close of business on April 12, 2001, at a price per share of $31.892,
subject to certain adjustments. The terms of the Wachovia Option are
substantially the same as the terms of the First Union Option.
The foregoing description of the First Union Option and the Wachovia
Option is not complete and is qualified in its entirety by reference to the full
text of the First Union Option and the Wachovia Option, copies of which have
been included as annexes to the Joint Proxy Statement- Prospectus.
REGULATORY APPROVALS REQUIRED FOR THE PROPOSED SUNTRUST MERGER
The completion of the Proposed SunTrust Merger will be conditioned on
obtaining all regulatory approvals required for the merger and the expiration of
all applicable waiting periods with respect thereto. These approvals and the
expiration of any statutory waiting periods related to these approvals are
referred to herein as the "requisite regulatory approvals." These include
approval from the Federal Reserve Board and various state regulatory
authorities. SunTrust has filed its application with the Federal Reserve Board
and intends to complete the filing as promptly as practicable after the date of
this Proxy Statement of other applications and notifications required to obtain
the requisite regulatory approvals. The Proposed SunTrust Merger cannot be
consummated in the absence of the requisite regulatory approvals. SunTrust
cannot assure Wachovia shareholders as to whether or when the requisite
regulatory approvals will be obtained, and, if obtained, SunTrust cannot assure
Wachovia shareholders as to the date of receipt of any of these approvals or the
absence of any litigation challenging them. Likewise, SunTrust cannot assure
Wachovia
28
shareholders that the United States Department of Justice (the "DOJ") or a state
attorney general will not attempt to challenge the Proposed SunTrust Merger on
antitrust grounds, or, if such a challenge is made, as to the result of that
challenge.
SunTrust is not aware of any other material governmental approvals or
actions that are required prior to the consummation of the Proposed SunTrust
Merger other than those described below. SunTrust presently contemplates that if
any additional governmental approvals or actions are required, these approvals
or actions will be sought. However, SunTrust cannot assure Wachovia shareholders
that any of these additional approvals or actions will be obtained.
Federal Reserve Board. The Proposed SunTrust Merger is subject to
approval by the Federal Reserve Board under the Bank Holding Company Act.
SunTrust filed its application for approval of the Proposed SunTrust Merger with
the Federal Reserve Board on May 30, 2001. By letter dated June 6, 2001, the
Federal Reserve Bank of Atlanta advised SunTrust that its application had been
accepted for processing and that it anticipated that SunTrust's application
would be acted upon by July 30, 2001. Assuming the Federal Reserve Board
approves the Proposed SunTrust Merger, the merger may not be consummated for 30
days, during which time the DOJ may challenge the merger on antitrust grounds
and seek divestiture of certain assets and liabilities. With agreement of the
Federal Reserve Board and the DOJ, this waiting period may be reduced to no
fewer than 15 days.
The Federal Reserve Board is prohibited from approving any transaction
under the applicable statutes that would result in a monopoly, or that would 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 that
may have the effect in any section of the United States of substantially
lessening competition, or tending to create a monopoly, or resulting in a
restraint of trade, unless the Federal Reserve Board finds that the
anti-competitive effects of the transaction 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.
Also, in reviewing a transaction under the Bank Holding Company Act,
the Federal Reserve Board will consider the financial and managerial resources
of SunTrust and Wachovia and their respective subsidiary banks and the
convenience and needs of the communities to be served. As part of its
consideration of these factors, SunTrust expects that the Federal Reserve Board
will consider the regulatory status of SunTrust and Wachovia, including legal
and regulatory compliance, and the overall capital and safety and soundness
standards established by the Federal Deposit Insurance Corporation Improvement
Act of 1991, as amended, and the regulations issued under that statute.
Under the Community Reinvestment Act of 1977, as amended, the Federal
Reserve Board will take into account the records of performance of SunTrust and
Wachovia in meeting the credit needs of the entire communities, including low-
and moderate-income neighborhoods, served by them. Each of the banking
subsidiaries of SunTrust and Wachovia has received at least a satisfactory
rating in its most recent Community Reinvestment Act examinations from their
federal regulator with respect to this criterion.
29
The Federal Reserve Board will furnish notice and a copy of the
application for approval of the Proposed SunTrust Merger to the Office of the
Comptroller of the Currency, the Federal Deposit Insurance Corporation and the
appropriate state regulatory authorities. These agencies have 30 days to submit
their views and recommendations to the Federal Reserve Board. The Federal
Reserve Board is required to hold a public hearing in the event it receives a
written recommendation of disapproval of the application from any of these
agencies within this 30-day period. Furthermore, the Bank Holding Company Act
and Federal Reserve Board regulations require published notice of, and the
opportunity for public comment on, the application submitted by SunTrust for
approval of the Proposed SunTrust Merger, and authorize the Federal Reserve
Board to hold a public hearing or meeting if the Federal Reserve Board
determines that a hearing or meeting would be appropriate. Any hearing or
meeting or comments provided by third parties could prolong the period during
which the application is under review by the Federal Reserve Board.
If the DOJ were to commence an antitrust action, that action would stay
the effectiveness of Federal Reserve Board approval of the Proposed SunTrust
Merger unless a court specifically orders otherwise. In reviewing the Proposed
SunTrust Merger, the DOJ could analyze the Proposed SunTrust Merger's effect on
competition differently than the Federal Reserve Board, and thus it is possible
that the DOJ could reach a different conclusion than the Federal Reserve Board
regarding the Proposed SunTrust Merger's effects on competition. In particular,
the DOJ may focus on the impact of the Proposed SunTrust Merger on competition
for loans and other financial services to small and middle market businesses. A
determination by the DOJ not to object to the merger may not prevent the filing
of antitrust actions by private persons or state attorneys general.
SunTrust estimates that SunTrust and Wachovia will need to make
divestitures of deposits of up to approximately $1.5 billion, and related loans,
in order to avoid a determination by the Federal Reserve Board or the DOJ that
the Proposed SunTrust Merger would have a significantly adverse effect on
competition in the relevant markets in those states. This estimate is based on
Federal Reserve Board decisions in other cases and published deposit figures.
Although there can be no assurances, SunTrust believes that the divestitures
would not have a material negative effect on the combined company. Under Federal
Reserve Board policy, the Proposed SunTrust Merger cannot be completed until
there is an executed definitive agreement for the divestitures.
Other Regulatory Authorities. Applications or notifications are being
filed with various state and/or foreign regulatory authorities and
self-regulatory organizations in connection with acquisitions or changes in
control of subsidiaries of SunTrust and/or Wachovia, including banks,
broker-dealers and insurance subsidiaries, that may be deemed to result from the
Proposed SunTrust Merger. In addition, the Proposed SunTrust Merger may be
reviewed by the attorneys general in the various states in which SunTrust and
Wachovia own banking subsidiaries. These authorities may be empowered under the
applicable state laws and regulations to investigate or disapprove the Proposed
SunTrust Merger under the circumstances and based upon the review provided for
in applicable state laws and regulations.
30
Antitrust. Because the Proposed SunTrust Merger involves activities
that are not subject to review by the Federal Reserve Board under Sections 3 or
4 of the Bank Holding Company Act, it is partially subject to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"). The HSR Act prohibits the completion of large transactions unless the
parties notify the Federal Trade Commission (the "FTC") or the DOJ in advance
and a specified waiting period expires. SunTrust intends to file premerger
notification and report forms with the FTC and the Antitrust Division of the
DOJ, and expects that Wachovia will fulfil its independent obligation to make
such filings. A transaction or portion of a transaction that is notifiable under
the HSR Act may not be consummated until the expiration of a 30 calendar-day
waiting period, or the early termination of that waiting period, following the
filing of premerger notification and report forms by the parties with the FTC
and DOJ. If either the FTC or the DOJ were to request additional information or
documentary material with respect to the Proposed SunTrust Merger from the
parties prior to the expiration of the waiting period, the waiting period would
expire at 11:59 p.m., New York City time, on the 20th calendar day after the
date of substantial compliance with that request. At any time before or after
the completion of the Proposed SunTrust Merger and the exchange of shares, the
FTC or the DOJ could take whatever action under the antitrust laws it deems
necessary or desirable in the public interest, including seeking to enjoin the
Proposed SunTrust Merger, or seeking a divestiture of shares or assets.
No assurance can be provided as to if, or when, any of the required
regulatory approvals necessary to consummate the Proposed SunTrust Merger will
be obtained.
CERTAIN LITIGATION
Federal Securities Litigation. On May 22, 2001, SunTrust commenced an
action in United States District Court for the Northern District of Georgia
against Wachovia and First Union seeking to enjoin Wachovia and First Union from
continuing to engage in alleged violations of the federal securities laws in
furtherance of their efforts to solicit Wachovia shareholders to vote in favor
of the Proposed First Union Merger. The complaint, as amended, alleges
violations of Section 14(a) of the Securities Exchange Act of 1934, 15 U.S.C.
ss. 78n(a), and the rules promulgated thereunder in connection with certain
public statements made in connection with the Proposed First Union Merger and
the Proposed SunTrust Merger.
State Court Litigation. On May 23, 2001, SunTrust commenced an action
in the Superior Court in Fulton County, Georgia against Wachovia, members of the
Wachovia board of directors and First Union. The complaint alleges, among other
things, breach of fiduciary duty and violations of Georgia law in connection
with the First Union Option and a certain provision of the First Union Merger
Agreement. On May 24, 2001, SunTrust was temporarily enjoined from prosecuting
this action by order of the Superior Court in Mecklenburg County, North
Carolina, as discussed below.
On May 22, 2001, First Union and First Union National Bank commenced
an action against SunTrust in the Superior Court, Mecklenburg County, North
Carolina alleging violation of the North
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Carolina Unfair Practices Act, G.S. ss. 75-1.1 et seq. and tortious interference
with prospective economic advantage in connection with certain conduct allegedly
engaged in by SunTrust in connection with the Proposed First Union Merger and
the Proposed SunTrust Merger. Among other things, Wachovia and First Union seek
an order granting unspecified injunctive relief and a declaratory judgment that
the First Union Option is valid and enforceable. The complaint also included a
jury demand. The complaint was amended on May 23, 2001 to add Wachovia as a
plaintiff and to add a claim for breach of contract. SunTrust believes the
complaint is without merit and intends to defend it vigorously.
On May 24, 2001, SunTrust removed the North Carolina state court
action to the United States District Court for the Western District of North
Carolina. However, before the removal notice was filed in the North Carolina
Superior Court, that court granted plaintiffs' motion for a temporary
restraining order ("TRO") restraining SunTrust from prosecuting the action in
Georgia state court. The North Carolina Superior Court also ordered the parties
to appear on June 1, 2001 to show cause why the TRO should not be continued as a
preliminary injunction. On May 25, SunTrust filed a motion in the North Carolina
federal court for an expedited hearing and to dissolve the TRO entered by the
North Carolina state court. At a hearing on May 30, 2001, the North Carolina
federal court remanded the action back to the North Carolina Superior Court.
Because the federal court decided not to exercise jurisdiction over the action,
it did not consider SunTrust's motion to dissolve the TRO entered by the North
Carolina state court.
On May 24, 2001, when the North Carolina state court granted the TRO,
it also ordered the parties to appear on June 1, 2001 to show cause why the TRO
should not be continued as a preliminary injunction. Before the June 1, 2001
hearing, however, SunTrust, First Union, FUNB and Wachovia signed a Consent
Stipulation agreeing to take appropriate actions to have the North Carolina
state action transferred to the North Carolina Business Court. SunTrust also
agreed to dismiss its Georgia state court action with the intention of
reasserting its claims as counterclaims in the North Carolina Business Court.
The Consent Stipulation did not affect SunTrust's action in the federal district
court in Georgia. On June 4, 2001, SunTrust dismissed the Georgia state court
action without prejudice.
On June 7, 2001, SunTrust filed its Answer and Counterclaim in the North
Carolina Business Court. In its Counterclaim, SunTrust included a claim not
previously asserted in the Georgia state court action. Specifically, SunTrust
has timely proposed an amendment to the Wachovia bylaws and seeks to enforce its
right, pursuant to Section 1.10 of Wachovia's bylaws, to have that proposed
amendment presented for approval at the Annual Meeting. See "Proposed Amendment
to Wachovia's Bylaws." The Proposed Bylaw Amendment would allow Wachovia
shareholders holding 10% or more of Wachovia's outstanding shares to call a
special shareholders' meeting . As of the date of this Proxy Statement, Wachovia
has not yet confirmed that the Proposed Bylaw Amendment will be put to a
shareholder vote at the Annual Meeting.
On June 8, 2001, the parties and their counsel met with Judge Tennille
of the North Carolina Business Court for a scheduling conference. The court and
the parties agreed to brief and resolve certain
32
preliminary issues on an expedited basis before commencing discovery on the
merits of the parties' respective claims. Oral argument on these preliminary
issues is set to take place on June 18, 2001.
Hoepner Litigation. On May 31, 2001, Theodore J. Hoepner, a Vice
Chairman of SunTrust and a participant in this solicitation, commenced an action
in the North Carolina Superior Court, Forsyth County, against Wachovia seeking
to obtain a shareholder list and related materials that were the subject of a
shareholder demand made by Mr. Hoepner on May 15, 2001 pursuant to North
Carolina statutory and common law. The complaint seeks declaratory and
injunctive relief, including an order requiring Wachovia to provide the
shareholder list and related materials to Mr. Hoepner, and costs and attorneys'
fees.
Other Litigation. According to disclosure contained in the Joint Proxy
Statement-Prospectus, since the announcement of the Proposed First Union Merger,
eight separate purported class action lawsuits have been filed by shareholders
of Wachovia against Wachovia and some or all of the members of its board of
directors, alleging, among other things, breach of fiduciary duty by the
director defendants.
PROPOSED AMENDMENT TO WACHOVIA'S BYLAWS
SunTrust is soliciting proxies for approval of its proposal to amend
Article I, Section 1.4 of the Amended and Restated Bylaws of Wachovia to provide
that a special meeting of shareholders shall be called by Wachovia upon the
written request of holders of 10% or more of all votes entitled to be cast on
any issue proposed to be considered at the special meeting, and that no advance
notice (pursuant to Article I, Section 1.10 or Article II, Section 2.2 of the
Bylaws or otherwise) will be required with respect to any matter to be
considered or voted upon at any such special meeting. The Proposed Bylaw
Amendment is "Proposal Four" on the enclosed proxy card. The full text of the
Proposed Bylaw Amendment is set forth on Schedule III to this Proxy Statement.
The purpose of the Proposed Bylaw Amendment is to provide Wachovia
shareholders holding 10% or more of all votes entitled to be cast on any issue
at a special meeting of shareholders with the right to call such a special
meeting for the purpose of voting on such matter or matters as such shareholders
deem appropriate, including, without limitation, matters relating to the future
direction of Wachovia. The purpose of the second sentence of the Proposed Bylaw
Amendment is to ensure that there are no impediments to the ability of the
shareholders demanding a special meeting to propose matters to be considered and
voted upon by the Wachovia shareholders at such special meeting.
Wachovia's bylaws currently do not provide shareholders with any ability
to call a special shareholders meeting. If the Proposed Bylaw Amendment is
approved by Wachovia shareholders at the Annual Meeting, then Wachovia's Bylaws
would provide that Wachovia would be required to call a special shareholders
meeting upon delivery to Wachovia's secretary of one or more written demands
signed and dated by shareholders collectively owning 10% or more of the
outstanding shares of Wachovia Common
33
Stock and describing the purpose or purposes for the meeting. The 10% ownership
threshold necessary for shareholders to call a special meeting pursuant to the
Proposed Bylaw Amendment is identical to the 10% threshold necessary for
shareholders to call a special meeting pursuant to Section 55-7-02 of the North
Carolina Business Corporation Act. As discussed above, the Proposed Bylaw
Amendment furthers the ability of Wachovia shareholders to bring important
matters of mutual shareholder interest before all shareholders for a vote, while
ensuring that only shareholders who collectively hold a meaningful stake in
Wachovia will have the ability to call a shareholders' meeting.
If SunTrust's solicitation against the Proposed First Union Merger is
successful and that merger is not approved by Wachovia shareholders at the
Annual Meeting, SunTrust believes that Wachovia's Board of Directors should
respect the results of that shareholder vote and, subject to the requirements of
the merger agreement between Wachovia and First Union, enter into discussions
with SunTrust with respect to the SunTrust Merger Proposal. However, if the
Wachovia Board of Directors does not enter into such discussions, then,
following receipt by SunTrust of the necessary regulatory approvals and assuming
the Proposed Bylaw Amendment is approved by Wachovia shareholders, SunTrust
intends to seek to call a special meeting of Wachovia shareholders for the
purpose of increasing the number of directors on the Wachovia Board of Directors
and electing a slate of nominees to fill the resulting vacancies. If elected,
SunTrust anticipates that such nominees, subject to their fiduciary duties as
directors of Wachovia and subject to Wachovia's merger agreement with First
Union, would pursue a merger with SunTrust unless a strategic alternative is
then available to Wachovia that provides superior value from a financial point
of view taking into account current and long-term value, strategic and cultural
fit and the impact on Wachovia's customers, employees and communities. For
purposes of the foregoing, SunTrust regards "strategic alternative" as a
business combination transaction.
SUNTRUST RECOMMENDS THAT YOU VOTE FOR THE PROPOSED BYLAW AMENDMENT BY
SIGNING, DATING AND RETURNING THE ENCLOSED BLUE PROXY CARD TODAY.
VOTING INFORMATION
GENERAL
According to information contained in the Joint Proxy
Statement-Prospectus, as of the Record Date there were [ ] shares of Wachovia
Common Stock outstanding. On each matter properly submitted to Wachovia
shareholders, each Wachovia shareholder is entitled to one vote for each
outstanding share of Wachovia Common Stock held as of the close of business on
the Record Date.
34
PROPOSED FIRST UNION MERGER AND PROPOSED BYLAW AMENDMENT
Approval of the Proposed First Union Merger requires the affirmative
vote of holders of a majority of all outstanding shares of Wachovia Common Stock
entitled to vote at the Annual Meeting. Broker non-votes and abstentions will
have the same effect as votes against the Proposed First Union Merger. Approval
of the Proposed Bylaw Amendment requires that the votes cast by holders of
Wachovia Common Stock in favor of the Proposed Bylaw Amendment exceed the votes
cast opposing the Proposed Bylaw Amendment. Broker non-votes and abstentions
will not count as votes cast and therefore will have no effect on the outcome of
the vote on the Proposed Bylaw Amendment.
The accompanying BLUE proxy will be voted in accordance with the
shareholder's instructions on such BLUE proxy. Shareholders may vote against the
Proposed First Union Merger (Item 1 on the enclosed proxy card) and for the
Proposed Bylaw Amendment (Item 4 on the enclosed proxy card) by marking the
proper boxes on the BLUE proxy. If no instructions are given with respect to
Item 1 or Item 4, the BLUE proxy will be voted AGAINST the Proposed First Union
Merger and FOR the Proposed Bylaw Amendment.
Whether or not you plan to attend the Annual Meeting, we urge you to
vote AGAINST the Proposed First Union Merger and FOR the Proposed Bylaw
Amendment on the enclosed BLUE proxy and immediately mail it in the enclosed
envelope. You may do this even if you have already sent in a different proxy
solicited by Wachovia's Board of Directors. IT IS YOUR LATEST DATED PROXY THAT
COUNTS. Execution and delivery of a proxy by a record holder of shares of
Wachovia Common Stock will be presumed to be a proxy with respect to all shares
held by such record holder unless the proxy specifies otherwise.
You may revoke your proxy at any time prior to its exercise by
attending the Annual Meeting and voting in person, by submitting a duly executed
later dated proxy or by submitting a written, signed and dated notice of
revocation which clearly identifies the proxy being revoked to SunTrust's
Secretary at 303 Peachtree Street, NE, Atlanta, GA 30308. Unless revoked in the
manner set forth above, duly executed proxies in the form enclosed will be voted
at the Annual Meeting on the Proposed First Union Merger in accordance with your
instructions. In the absence of such instructions, such proxies will be voted
AGAINST the Proposed First Union Merger and FOR the Proposed Bylaw Amendment.
SUNTRUST STRONGLY RECOMMENDS A VOTE AGAINST THE PROPOSED FIRST UNION
MERGER AND A VOTE FOR THE PROPOSED BYLAW AMENDMENT.
YOUR VOTE IS IMPORTANT. PLEASE SIGN, DATE AND RETURN THE
BLUE PROXY TODAY.
35
IF YOU ALREADY HAVE SENT A PROXY TO WACHOVIA, YOU MAY REVOKE THAT PROXY
AND VOTE AGAINST THE PROPOSED FIRST UNION MERGER AND FOR THE PROPOSED
BYLAW AMENDMENT BY SIGNING, DATING AND MAILING THE ENCLOSED BLUE PROXY.
If you have any questions about the voting of your shares, please call:
INNISFREE M&A INCORPORATED
501 Madison Avenue, 20th Floor
New York, New York 10022
CALL TOLL-FREE 1-877-750-9501
Banks and Brokers call collect: 212-750-5833
OTHER PROPOSALS TO BE CONSIDERED AT THE ANNUAL MEETING
As set forth in the Joint Proxy Statement-Prospectus, at the Annual
Meeting, Wachovia shareholders will be asked to approve (in addition to the
Proposed First Union Merger and the Proposed Bylaw Amendment) (i) the election
of five director candidates named in the Joint Proxy Statement-Prospectus,
listed as Item 2 on the enclosed proxy, (ii) ratification of the appointment of
Ernst & Young LLP as the independent auditors of Wachovia for the year 2001,
listed as Item 3 on the enclosed proxy (collectively, the "Other Proposals"),
and (iii) such other matters as may properly come before the Annual Meeting or
any adjournment or postponement thereof. SunTrust is not making any
recommendations on the Other Proposals.
According to information contained in the Joint Proxy
Statement-Prospectus, election of the nominees for director requires a plurality
of the votes cast at the Annual Meeting, and ratification of the appointment of
Ernst & Young LLP as independent auditors requires the affirmative vote of a
majority of the votes cast at the Annual Meeting.
The accompanying BLUE proxy card will be voted in accordance with your
instructions on such card. You may vote for approval of one or both of the Other
Proposals, or vote against, or abstain from voting on, one or both of the Other
Proposals, by marking the proper box on the BLUE proxy card. IF NO DIRECTION IS
INDICATED WITH REGARD TO EITHER OF THE OTHER PROPOSALS, YOU WILL BE DEEMED TO
HAVE GIVEN A DIRECTION TO ABSTAIN FROM VOTING THE SHARES REPRESENTED BY THE BLUE
PROXY CARD ON SUCH OTHER PROPOSAL.
Except as set forth above, SunTrust is not aware of any other matter to
be considered at the Annual Meeting. However, if any other matter properly comes
before the Annual Meeting, SunTrust will vote all proxies held by it as
SunTrust, in its sole discretion, may determine.
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CERTAIN INFORMATION ABOUT SUNTRUST
SunTrust is a Georgia corporation with its principal executive offices
located at 303 Peachtree Street, NE, Atlanta, Georgia 30308. The telephone
number of SunTrust at such location is (404) 588-7711.
SunTrust, with assets of $103.5 billion, is among the nation's largest
financial holding companies. Its principal subsidiary, SunTrust Bank, offers a
full line of financial services for consumers and businesses. SunTrust serves
more than 3.7 million customer households through a regional organizational
structure that encompasses more than 1,100 branches and 1,900 ATMs in six states
- Alabama, Florida, Georgia, Maryland, Tennessee and Virginia - plus the
District of Columbia. SunTrust also offers 24-hour delivery channels including
internet and telephone banking. In addition to traditional deposit, credit and
trust and investment services offered by SunTrust Bank, other SunTrust
subsidiaries provide mortgage banking, commercial and auto leasing,
credit-related insurance, asset management, discount brokerage and capital
market services. As of December 31, 2000, SunTrust had total trust assets of
$138.4 billion, including more than $91.6 billion in discretionary trust assets,
and a mortgage-servicing portfolio in excess of $42.3 billion.
SunTrust is subject to the informational filing requirements of the
Securities Exchange Act of 1934, as amended, and, in accordance therewith, is
obligated to file reports, proxy statements and other information with the SEC
relating to its business, financial condition and other matters. Information as
of particular dates concerning SunTrust's directors and officers, their
remuneration, options granted to them, the principal holders of SunTrust's
securities and any material interests of such persons in transactions with
SunTrust is required to be disclosed in proxy statements distributed to
SunTrust's stockholders and filed with the SEC. Such reports, proxy statements
and other information should be available for inspection at the public reference
facilities of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the regional offices of the SEC located at Seven World Trade Center, Suite 1300,
New York, NY 10048 and 500 West Madison Street, Suite 1400, Chicago, IL 60661
(call 1-800-SEC-0330 for hours). Copies of such information should be obtainable
by mail, upon payment of the SEC's customary charges, by writing to the SEC's
principal office at 450 Fifth Street, N.W., Washington, D.C. 20549-6009. The SEC
also maintains an Internet website at http://www.sec.gov that contains the
reports, proxy statements and other information filed electronically by
SunTrust. SunTrust Common Stock is listed on the NYSE under the symbol "STI,"
and reports, proxy statements and other information concerning SunTrust should
also be available at the offices of the NYSE located at 20 Broad Street, New
York, NY 10005.
37
DISSENTER'S RIGHTS
The following description of dissenter's rights of Wachovia shareholders
in connection with the Proposed First Union Merger is copied from the Joint
Proxy Statement-Prospectus and assumes that the Proposed First Union Merger is
completed. SunTrust does not anticipate that dissenter's rights would be
available in a merger between SunTrust and Wachovia.
According to the Joint Proxy Statement-Prospectus, if the Proposed First
Union Merger is completed, a Wachovia shareholder of record who objects to the
First Union Merger and who fully complies with Sections 55-13-01 through
55-13-31 of the North Carolina Business Corporation Act (the "BCA") will be
entitled to demand and receive payment in cash of an amount equal to the fair
value of all, but not less than all, of such holder's shares of Wachovia Common
Stock. A shareholder of record may assert dissenters' rights as to fewer than
all of the shares registered in that shareholder's name only if that shareholder
dissents with respect to all shares beneficially owned by any one beneficial
owner and notifies Wachovia in writing of the name and address of each person on
whose behalf that registered shareholder asserts dissenter's rights.
If you are a Wachovia shareholder and desire to dissent and receive cash
payment of the fair value of your Wachovia Common Stock you must comply with the
procedural requirements of the BCA, including, without limitation: (1)
delivering to Wachovia, prior to the shareholder vote on the Proposed First
Union Merger, a written notice of your intent to demand payment for your shares
if the Proposed First Union Merger is completed; (2) not voting your shares in
favor of the Proposed First Union Merger; and (3) demanding payment and
depositing your stock certificates with Wachovia in accordance with the terms of
a dissenters' notice to be sent to all dissenting shareholders within 10 days
after the Proposed First Union Merger is approved by the Wachovia shareholders.
Within 30 days after First Union pays for the shares of a dissenting
shareholder, or within 30 days of First Union failing to timely act in
accordance with the BCA, the dissenting shareholder may notify First Union that
he or she does not accept the estimate of fair value of the shares and interest
due on that fair value and that the shareholder demands payment in the amount of
the shareholder's own estimate of the fair value of the shares and interest due.
If, within 60 days of First Union's payment, or dissenting shareholder's demand
for payment of a different amount, whichever is earlier, the payment amount has
not been settled, the dissenting shareholder may file an action in the Superior
Court Division of the General Court of Justice, requesting that the fair value
of the dissenting shareholder's shares be determined. The court will have
discretion to make all dissenting shareholders whose demand remain unsettled
parties to the proceeding. If a dissenting shareholder does not begin the
proceeding within the 60-day period, he will be deemed to have withdrawn his
dissent and demand for payment.
Voting against, abstaining from voting or failing to vote on the
proposal to approve the Proposed First Union Merger is not enough to satisfy the
requirements of the BCA. You must also comply with all of the conditions
relating to the separate written notice of intent to dissent to the
merger, the separate
38
written demand for payment of the fair value of your shares of Wachovia Common
Stock and the deposit of your stock certificates.
SOLICITATION OF PROXIES
Proxies will be solicited by mail, telephone, telefax, telegraph, the
Internet, newspapers and other publications of general distribution and in
person. Directors, officers and certain employees of SunTrust and the other
participants listed on Schedule II hereto may assist in the solicitation of
proxies without any additional remuneration (except as otherwise set forth in
this Proxy Statement).
SunTrust has retained Innisfree M&A Incorporated ("Innisfree") for
solicitation and advisory services in connection with solicitations relating to
the Annual Meeting, for which Innisfree is to receive a fee estimated not to
exceed $400,000 in connection with the solicitation of proxies for the Annual
Meeting. Up to 200 people may be employed by Innisfree in connection with the
solicitation of proxies for the Annual Meeting. SunTrust has also agreed to
reimburse Innisfree for out-of- pocket expenses and to indemnify Innisfree
against certain liabilities and expenses, including reasonable legal fees and
related charges. Innisfree will solicit proxies for the Annual Meeting from
individuals, brokers, banks, bank nominees and other institutional holders.
Directors, officers and certain employees of SunTrust may assist in the
solicitation of proxies without any additional remuneration. The entire expense
of soliciting proxies for the Annual Meeting by or on behalf of SunTrust is
being borne by SunTrust.
SunTrust has retained Morgan Stanley to act as its financial advisor in
connection with the SunTrust Merger Proposal. Pursuant to a Letter Agreement
between Morgan Stanley and SunTrust, SunTrust has agreed to pay Morgan Stanley
for its financial advisory services in connection with the SunTrust Merger
Proposal a financial advisory fee of (1) $5 million upon public announcement of
the SunTrust Merger Proposal, and (2) additional fees, in varying amounts
payable periodically or upon the occurrence of certain events, of up to $25
million (less all amounts previously paid or payable as described in (1) above).
SunTrust has also agreed to reimburse Morgan Stanley for its reasonable
expenses, including the fees and expenses of their legal counsel incurred in
connection with Morgan Stanley's engagement by SunTrust. In addition, SunTrust
has agreed to indemnify Morgan Stanley and certain related persons against
certain liabilities, including certain liabilities under the federal securities
laws, arising out of their engagement.
In connection with Morgan Stanley's engagement as financial advisor,
SunTrust anticipates that certain employees of Morgan Stanley may communicate in
person, by telephone or otherwise with a limited number of institutions, brokers
or other persons who are Wachovia shareholders for the purpose of assisting in
the solicitation of proxies for the Annual Meeting. Morgan Stanley will not
receive any fee for or in connection with such solicitation activities apart
from the fees which it is otherwise entitled to receive as described above.
39
SunTrust intends to deliver a proxy statement and form of proxy to
holders of at least the percentage of Wachovia's voting shares required under
applicable law to adopt the Proposed Bylaw Amendment. SunTrust has notified
Wachovia of this intention.
FORWARD-LOOKING STATEMENTS
This Proxy Statement contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Such statements
include, but are not limited to, (i) statements about the benefits of the
Proposed SunTrust Merger, including future financial and operating results, cost
savings and accretion to reported and cash earnings that may be realized from
such merger; (ii) statements with respect to SunTrust's plans, objectives,
expectations and intentions and other statements that are not historical facts;
and (iii) other statements identified by words such as "believes", "expects",
"anticipates", "estimates", "intends", "plans", "targets", "projects" and
similar expressions. These statements are based upon the current beliefs and
expectations of SunTrust's management and are subject to significant risks and
uncertainties. Actual results may differ from those set forth in the
forward-looking statements.
The following factors, among others, could cause actual results to
differ materially from the anticipated results or other expectations expressed
in the forward-looking statements: (1) the businesses of SunTrust and Wachovia
may not be integrated successfully or such integration may be more difficult,
time-consuming or costly than expected; (2) expected revenue synergies and cost
savings from the Proposed SunTrust Merger may not be fully realized or realized
within the expected time frame; (3) revenues following the Proposed SunTrust
Merger may be lower than expected; (4) deposit attrition, operating costs,
customer loss and business disruption, including, without limitation,
difficulties in maintaining relationships with employees, customers, clients or
suppliers, may be greater than expected following the Proposed SunTrust Merger;
(5) the regulatory approvals required for the Proposed SunTrust Merger may not
be obtained on the proposed terms or on the anticipated schedule; (6) SunTrust's
or Wachovia's stockholders may fail to approve the Proposed SunTrust Merger; (7)
competitive pressures among depository and other financial institutions may
increase significantly and may have an effect on pricing, spending, third-party
relationships and revenues; (8) the strength of the United States economy in
general and the strength of the local economies in which the combined company
will conduct operations may be different than expected, resulting in, among
other things, a deterioration in credit quality or a reduced demand for credit,
including the resultant effect on the combined company's loan portfolio and
allowance for loan losses; (9) changes in the U.S. and foreign legal and
regulatory framework; and (10) adverse conditions in the stock market, the
public debt market and other capital markets (including changes in interest rate
conditions) and the impact of such conditions on the combined company's capital
markets and asset management activities. Additional factors that could cause
SunTrust's results to differ materially from those described in the
forward-looking statements can be found in SunTrust's reports (such as Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form
8-K) filed with the Securities and Exchange Commission and available at the
SEC's Internet site (http://www.sec.gov). All subsequent written and oral
forward-looking statements concerning the proposed transaction or other
40
matters attributable to SunTrust or any person acting on its behalf are
expressly qualified in their entirety by the cautionary statements above.
SunTrust does not undertake any obligation to update any forward-looking
statement to reflect circumstances or events that occur after the date the
forward-looking statements are made.
SHAREHOLDER PROPOSALS
The following description of the requirements for proposing business and
director nominations at Wachovia shareholders meetings was copied from the Joint
Proxy Statement-Prospectus:
In order to be considered for inclusion in the proxy statement for
Wachovia's 2002 annual meeting of shareholders, which is presently scheduled (if
it is to be held at all) for April 26, 2002, shareholder proposals would need to
be received by the Secretary of Wachovia no later than November 19, 2001.
Wachovia's by-laws contain procedures that shareholders must follow to
present business at an annual meeting of shareholders. A Wachovia shareholder
may obtain a copy of these procedures from Wachovia's Secretary. In addition to
other applicable requirements, for business to be properly brought before the
2002 annual meeting of Wachovia shareholders, a Wachovia shareholder must give
notice of the matter to be presented at the meeting in a proper written form to
Wachovia's Secretary. The Secretary must receive this written notice at the
principal offices of Wachovia not earlier than December 27, 2001 and not later
than January 26, 2002. Shareholder proposals not made in accordance with these
requirements may be disregarded by the Chairman of the meeting.
Shareholders who wish to nominate persons for election as directors at
the 2002 annual meeting of Wachovia shareholders, which is presently scheduled
to be held on April 26, 2002, must give written notice in accordance with the
requirements of Wachovia's by-laws to Wachovia's Secretary not earlier than
December 27, 2001 and not later than January 26, 2002. Each notice must set
forth (1) the name and address of the shareholder who proposes to make the
nomination and the name and address of the person to be nominated; (2) a
representation that the shareholder is a holder of shares of common stock
entitled to vote at the meeting and intends to appear in person or by proxy at
the meeting to nominate the person specified in the notice; (3) a description of
all arrangements or understandings between the shareholder and each nominee and
any other person or persons (naming such person or persons) pursuant to which
the nomination is to be made; (4) such other information regarding each nominee
as would be required to be included in a proxy statement pursuant to the proxy
rules of the SEC if the nominee had been nominated by the board of directors or
a board committee; and (5) the written consent of each nominee to serve as a
director if so elected. Nominations not made in accordance with these
requirements may be disregarded by the Chairman of the meeting.
OTHER INFORMATION
41
All information concerning Wachovia, First Union and the Proposed First
Union Merger contained herein has been taken from or based upon, and is
qualified in its entirety by, the Joint Proxy Statement-Prospectus and other
publicly available documents on file with the SEC and other publicly available
information. SunTrust does not take any responsibility for the accuracy or
completeness of such information or for any failure by Wachovia to disclose
events that may have occurred and may affect the significance or accuracy of any
such information.
SunTrust Banks, Inc.
Dated: [ ], 2001
If you have any questions or need assistance in voting your shares,
please call:
INNISFREE M&A INCORPORATED
501 Madison Avenue, 20th Floor
New York, New York 10022
CALL TOLL-FREE 1-877-750-9501
Banks and Brokers call collect: 212-750-5833
42
SCHEDULE I
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS,
DIRECTORS AND MANAGEMENT OF WACHOVIA
According to information contained in Wachovia's Proxy Statement filed
with the SEC on March 19, 2001 (the "March Proxy Statement"), as of February 20,
2001, there were 204,036,945 shares of Wachovia Common Stock outstanding.
Pursuant to the First Union Option Agreement, Wachovia granted First Union an
option to purchase up to 19.9% of the issued and outstanding shares of Wachovia
Common Stock at the close of business on April 12, 2001. The information
contained in this Schedule I has been copied from the March Proxy Statement.
SunTrust does not take any responsibility for the accuracy or completeness of
such information or for any failure by Wachovia to disclose events that may have
occurred and may affect the significance or accuracy of any such information.
The following table was copied from the March Proxy Statement and sets
forth, as of February 20, 2001, the number of shares of Wachovia Common Stock
held by each director or nominee for director of Wachovia and each executive
officer named in the March Proxy Statement's Summary Compensation Table, and by
all directors and executive officers of Wachovia as a group. Unless otherwise
noted, each individual has sole voting and investment authority with respect to
the number of shares set forth opposite his or her name.
Amount and Nature
of Beneficial Ownership Percent of
Name of Common Stock (1) Shares Outstanding (2)
---- -------------------- ----------------------
F. Duane Ackerman................... 2,223 *
Leslie M. Baker, Jr. (3)............ 498,645 *
James S. Balloun.................... 2,250 *
Peter C. Browning................... 1,450 *
John T. Casteen, III................ 2,137 *
Jean E. Davis (3)................... 56,466 *
Mickey W. Dry (3) (4) (5)........... 242,929 *
Thomas K. Hearn, Jr................. 3,148 *
George W. Henderson, III (5)........ 3,459 *
W. Hayne Hipp....................... 7,770 *
Robert A. Ingram.................... 1,700 *
George R. Lewis..................... 6,439 *
Elizabeth Valk Long................. 2,100 *
Robert S. McCoy, Jr. (3) (5)........ 178,369 *
Lloyd U. Noland, III (6)............ 90,348 *
Morris W. Offit (7)................. 489,201 *
G. Joseph Prendergast (3) (8)....... 237,325 *
I-1
Amount and Nature
of Beneficial Ownership Percent of
Name of Common Stock (1) Shares Outstanding (2)
---- -------------------- ----------------------
Sherwood H. Smith, Jr. (5) (9)...... 9,129 *
John C. Whitaker, Jr................ 5,522 *
Dona Davis Young.................... 400 *
All Directors and Executive
Officers as a Group (26
persons).......................... 2,301,194 1.12%
* Less than 1%
(1) Includes the following number of shares of common stock that could have
been acquired within 60 days of February 20, 2001 through the exercise
of stock options or stock appreciation rights that are settled in
shares of common stock, or the vesting of restricted stock awards under
one or more of Wachovia's stock plans: Mr. Baker, 353,098 shares; Ms.
Davis, 50,900 shares; Mr. Dry, 130,331 shares; Mr. McCoy, 122,000
shares; Mr. Prendergast, 157,000 shares; and all directors and
executive officers as a group, 1,188,736 shares.
(2) Based on the number of shares outstanding at, or acquirable within 60
days of, February 20, 2001.
(3) Includes shares held by Wachovia Bank, as Trustee under Wachovia's
Retirement Savings and Profit-Sharing Plan, as follows: Mr. Baker, 164
shares; Ms. Davis, 3,488 shares; Mr. Dry, 129 shares; Mr. McCoy, 11,111
shares; Mr. Prendergast, 164 shares; and all executive officers as a
group, 21,796 shares.
(4) Retired as of January 31, 2001.
(5) Excludes shares owned by or for the benefit of family members of the
following directors and executive officers, each of whom disclaims
beneficial ownership of such shares: Mr. Dry, 3,000 shares; Mr.
Henderson, 1,668 shares; Mr. McCoy, 973 shares; and Mr. Smith, 3,000
shares.
(6) Includes 848 shares held in trusts of which Mr. Noland is a co-trustee.
Excludes 2,970 units held by Wachovia Bank, as Trustee under the
Central Fidelity Directors Plan, for Mr. Noland. The units are
equivalent to shares of common stock and do not have voting rights. The
units will be settled in stock according to Mr. Noland's election under
the plan.
(7) Includes 114,200 shares held by a family limited liability company of
which Mr. Offit is a member. Excludes 99,200 shares held by a
charitable remainder trust of which Mr. Offit's spouse is a co-trustee
and of which Mr. Offit's adult children have a remainder interest.
(8) Retired as of January 1, 2001.
(9) Retired as of April 27, 2001.
I-2
The following table sets forth information for each person who, as of
February 20, 2001, beneficially owned more than 5% of Wachovia's common stock.
According to the March Proxy Statement, to the best of Wachovia's knowledge, no
other person owned more than 5% of Wachovia's common stock as of February 20,
2001.
Amount and Nature
of Beneficial
Ownership of
Name and Address of Shares of Percent of
Beneficial Owner Common Stock Common Stock
------------------ ------------ ------------
Wachovia Corporation (1) 13,449,686 (1) 6.61%
Wachovia Bank, National Association
Wachovia Securities, Inc.
100 North Main Street
Winston-Salem, NC 27101
Wellington Management Company, LLP 12,604,294 (2) 6.19%(2)
75 State Street
Boston, MA 02109
------------
(1) Wachovia Bank, National Association ("Wachovia Bank") and Wachovia
Securities, Inc. are each wholly owned subsidiaries of Wachovia. All of
the shares of Wachovia's common stock held by these two companies are
held in fiduciary or representative capacities for the benefit of other
persons. These two companies have, in the aggregate, sole voting power
for 5,481,847 shares, shared voting power for 3,180,907 shares, sole
dispositive power for 3,912,005 shares and shared dispositive power for
8,547,387 shares. This information is based on Wachovia's Form 13G
dated February 12, 2001.
(2) Wellington Management Company, LLP ("Wellington") is a registered
investment adviser and holds shares of Wachovia's common stock on
behalf of its investment advisory clients. Wellington has shared voting
power for 4,698,206 shares and shared dispositive power for 12,604,294
shares. This information is based on Wellington's Form 13G dated
February 14, 2001.
I-3
SCHEDULE II
INFORMATION CONCERNING
DIRECTORS AND EXECUTIVE OFFICERS OF SUNTRUST
AND OTHER PERSONS WHO MAY SOLICIT PROXIES
The following tables set forth the name and the title of persons who may
be deemed to be participants on behalf of SunTrust in the solicitation of
proxies from the stockholders of Wachovia.
DIRECTORS AND EXECUTIVE OFFICERS OF SUNTRUST
NAME POSITION
-----------------------------------------------------------------------------------------------
L. Phillip Humann Chairman of the Board, President and Chief Executive Officer
J. Hyatt Brown Director
Alston D. Correll Director
Douglas N. Daft Director
A.W. Dahlberg Director
Patricia C. Frist Director
David H. Hughes Director
M. Douglas Ivester Director
Summerfield K. Johnston, Jr. Director
Joseph L. Lanier, Jr. Director
G. Gilmer Minor, III Director
Larry L. Prince Director
R. Randall Rollins Director
Frank S. Royal, M.D. Director
James B. Williams Director
John W. Clay, Jr. Vice Chairman
Theodore J. Hoepner Vice Chairman
John W. Spiegel Vice Chairman, Chief Financial Officer
James M. Wells, III Vice Chairman
Ray Fortin General Counsel
Don Heroman Senior Vice President and Treasurer
Gary Peacock Director of Investor Relations
Barry Koling Public Relations Director
Richard Blumberg Senior Vice President
II-1
Robert H. Coords Executive Vice President
Donald S. Downing Executive Vice President
Samuel O. Franklin, III Chairman of SunTrust Bank, Nashville and SunTrust Banks of Tennessee, Inc.
C.T. Hill Chairman, President and Chief Executive Officer, SunTrust Bank, Mid-Atlantic
Craig J. Kelly Executive Vice President
George W. Koehn Chairman, President and Chief Executive Officer, SunTrust Bank, Florida
Carl F. Mentzer Executive Vice President
Joy Wilder Morgan Senior Vice President
Dennis M. Patterson Executive Vice President
William H. Rogers, Jr. Executive Vice President
R. Charles Shufeldt Executive Vice President
Robert C. Whitehead President and Chief Executive Officer, Enterprise Information Services
E. Jenner Wood, III Chief Executive Officer, SunTrust Bank, Atlanta and
SunTrust Bank, Georgia
Thomas H. Yochum Chief Executive Officer and President, Central Florida
Banking Unit
William H. Davison Chief Executive Officer and President, East Central
Florida Banking Unit
Ray L. Sandhagen Chief Executive Officer and President, Gulf Coast Bank
ing Unit
John P. Hashagen Chief Executive Officer and President, Miami Banking
Unit
Charles W. McPherson Chief Executive Officer and President, Mid-Florida Bank
ing Unit
James H. Kimbrough Chief Executive Officer and President, Nature Coast
Banking Unit
William H. Evans Chief Executive Officer and President, North Central
Florida Banking Unit
John R. Schmitt Chief Executive Officer and President, North Florida
Banking Unit
Thomas G. Kuntz Chief Executive Officer and President, South Florida
Banking Unit
Charles K. Idelson Chief Executive Officer and President, Southwest Florida
Banking Unit
II-2
Daniel W. Mahurin Chief Executive Officer and President, Tampa Bay Bank
ing Unit
David B. Ramsay Chief Executive Officer and President, Northwest Florida
Banking Unit
William R. Thompson Chief Executive Officer and President, Augusta Banking
Unit
James B. Patton Chief Executive Officer and President, Middle Georgia
Banking Unit
Robert D. Bishop Chief Executive Officer and President, Northeast Georgia
Banking Unit
William H. Pridgen Chief Executive Officer and President, Northwest Georgia Banking Unit
William B. Haile Chief Executive Officer and President, Savannah Banking
Unit
Willis D. Sims Chief Executive Officer and President, South Georgia
Banking Unit
Jack E. Hartman Chief Executive Officer and President, Southeast Georgia
Banking Unit
Frank S. Etheridge, III Chief Executive Officer and President, West Georgia
Banking Unit
A. Dale Cannady Chief Executive Officer and President, Central Virginia
Banking Unit
Peter F. Nostrand Chief Executive Officer and President, Greater Washington Banking Unit
William K. Butler II Chief Executive Officer and President, Hampton Roads
Banking Unit
J. Scott Wilfong Chief Executive Officer and President, Maryland Banking
Unit
Robert C. Lawson, Jr. Chief Executive Officer and President, Western Virginia
Banking Unit
Robert J. Sudderth, Jr. Chief Executive Officer and President, Chattanooga
Banking Unit
R. King Purnell Chief Executive Officer and President, East Tennessee
Banking Unit
W. David Jones Chief Executive Officer and President, South Central
Tennessee Banking Unit
II-3
As of the date of this Proxy Statement, SunTrust beneficially owns 1,000
shares of Wachovia Common Stock, 500 of which are held of record by SunTrust.
As of the date of this Proxy Statement, the following participants in
the solicitation of proxies had the interests in Wachovia, by security holdings
or otherwise, set forth opposite their names:
NAME INTEREST
--------------------------------- --------------------------------------------
Joseph L. Lanier, Jr. 10,000 shares of common stock*
R. Randall Rollins 8,200 shares of common stock
John W. Clay, Jr. 25 shares of common stock
Theodore J. Hoepner 280 shares of common stock
John W. Spiegel Two mortgage loans at market rate
Samuel O. Franklin, III 100 shares of common stock
E. Jenner Wood, III 3,652 shares of common stock
Charles K. Idelson 300 shares of common stock
William B. Haile Loans secured by real estate
Robert J. Sudderth, Jr. 251 shares of common stock
In addition, each of the following directors of SunTrust is also a director or
officer of the company set forth opposite his name, which company has normal
commercial banking relationships with Wachovia Corporation:
NAME COMPANY
-------------------------- --------------------------------------------------
Alston D. Correll Georgia-Pacific Corporation
Douglas N. Daft The Coca-Cola Company
A.W. Dahlberg Mirant Corporation
R. Randall Rollins Rollins, Inc.
Other than as set forth herein, as of the date of this Proxy Statement, neither
SunTrust nor any of the other participants listed above has any substantial
interest, direct or indirect, by security holdings or otherwise, in Wachovia.
--------
* Held by SunTrust as agent for co-executors under will of J.L. Lanier,
Sr., of which Mr. Lanier, Jr. is a co-executor.
II-4
OTHER PERSONS WHO MAY ALSO SOLICIT PROXIES
Representatives of Morgan Stanley:
NAME POSITION
------------------------- ---------------------------------------------------
Gregory Kennedy Vice President
Gary Parr Managing Director
Jonathan Pruzan Principal
William Weiant Managing Director
Shane Zhang Associate
Morgan Stanley engages in a full range of investment banking,
securities trading, market- making and brokerage services for institutional and
individual clients. In the normal course of its business, Morgan Stanley may
trade the debt and equity securities of Wachovia for its own account and the
accounts of its customers, and, accordingly, may at any time hold a long or
short position in such securities. Morgan Stanley has informed SunTrust that, as
of the close of business on May 10, 2001, Morgan Stanley, for its own account,
held a net long position of 139,885 shares of Wachovia Common Stock and owned $2
million aggregate principal amount of Wachovia's 6.605% subordinated notes due
2025. Morgan Stanley and certain of its affiliates also may have voting and
dispositive power with respect to certain shares of Wachovia Common Stock held
in asset management, brokerage and other accounts. Morgan Stanley and such
affiliates disclaim beneficial ownership of such shares of Wachovia Common
Stock. Morgan Stanley does not admit that it or any of its partners, directors,
officers, employees, affiliates or controlling persons, if any, is a
"participant" as defined in Schedule 14A promulgated under the Exchange Act, in
the solicitation of proxies, or that Schedule 14A requires the disclosure of
certain information concerning it or them. Morgan Stanley's principal business
address is 1585 Broadway, New York, New York 10036.
II-5
SCHEDULE III
PROPOSED AMENDMENT TO ARTICLE I, SECTION 1.4
OF THE BYLAWS OF WACHOVIA CORPORATION
RESOLVED, that Section 1.4 of Article I of the Company's
Bylaws be amended by adding the following after the last sentence thereof:
The corporation shall hold a special meeting of shareholders
in accordance with the applicable provisions of the North
Carolina Business Corporation Act upon the delivery to the
corporation's secretary of one or more written demands signed
and dated by the holders of ten percent (10%) or more of all
votes entitled to be cast on any issue proposed to be
considered at the proposed special meeting describing the
purpose or purposes for which such meeting is to be held.
Notwithstanding anything to the contrary contained in these
bylaws, nothing contained in these bylaws, including without
limitation Section 1.10 or Section 2.2 hereof, shall require
that any advance notice be delivered to the corporation with
respect to any matter (including any director nominations) to
be considered or voted upon at any special meeting of
shareholders of the corporation held pursuant to a
shareholder demand made pursuant to this Section 1.4.
III-1
SCHEDULE IV
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial
information and explanatory notes are presented to show the impact of the
Proposed SunTrust Merger on the historical financial positions and results of
operations of SunTrust and Wachovia under the purchase method of accounting.
Under this method of accounting, the assets and liabilities of the company not
surviving the merger are, as of the effective date of the merger, recorded at
their respective fair values and added to those of the surviving corporation.
The unaudited pro forma condensed combined financial information combines the
historical financial information of SunTrust and Wachovia as of and for the
three months ended March 31, 2001, and for the year ended December 31, 2000. The
unaudited pro forma condensed combined balance sheet as of March 31, 2001
assumes the Proposed SunTrust Merger was consummated on that date. The unaudited
pro forma condensed combined statements of income give effect to the Proposed
SunTrust Merger as if the merger had been consummated at the beginning of each
period presented.
SunTrust has not had access to proprietary and confidential corporate
financial and other information of Wachovia in connection with the Proposed
SunTrust Merger and has not had an opportunity to undertake any current due
diligence procedures. Such information and procedures may provide SunTrust with
additional information that could materially affect the assumptions and pro
forma adjustments and, accordingly, the purchase price allocation and remaining
net tangible assets.
The unaudited pro forma condensed combined financial information is
based on and derived from, and should be read in conjunction with, the
historical consolidated financial statements and the related notes of both
SunTrust and Wachovia, which have been filed previously with the SEC. SunTrust
also has reviewed Amendment No. 1 to the Registration Statement on Form S-4 of
First Union Corporation filed on June 1, 2001, in connection with the Proposed
First Union Merger. That filing included unaudited pro forma combined financial
information for First Union and Wachovia as if the Proposed First Union Merger
had occurred on certain specified dates. Certain pro forma adjustments that
SunTrust noted in reviewing this unaudited pro forma condensed combined
financial information have not been incorporated in the accompanying unaudited
pro forma condensed combined financial information because information necessary
to make or assess such adjustments is not available to SunTrust.
Furthermore, the ultimate purchase price for the acquisition of
Wachovia may change significantly from the current estimate. For purposes of the
unaudited pro forma condensed combined financial information, the purchase price
has been estimated based upon the average closing price of SunTrust Common Stock
two days prior to and two days after the announcement of the SunTrust Merger
Proposal on May 14, 2001, times the exchange ratio of 1.081 shares of SunTrust
Common Stock for each share of Wachovia Common Stock in the Proposed SunTrust
Merger. The final purchase price would be based on the average market price of
SunTrust Common Stock surrounding the date that a definitive merger agreement is
entered into by SunTrust and Wachovia. As a result, the final determination and
allocation of
IV-1
purchase price may materially differ from the amounts assumed in
this unaudited pro forma condensed combined financial information.
The unaudited pro forma condensed combined financial information is
presented for illustrative purposes only and is not necessarily indicative of
the operating results that would have occurred or what the financial position of
SunTrust would have been had the Proposed SunTrust Merger been completed at the
beginning of the period or as of the date for which the pro forma data are
presented, nor is it necessarily indicative of future operating results or
financial position of the combined company.
IV-2
SUNTRUST BANKS, INC. AND WACHOVIA CORPORATION
PRO FORMA CONDENSED COMBINED BALANCE SHEET
MARCH 31, 2001
(UNAUDITED)
MARCH 31, 2001
------------------------------------------------------------
PRO FORMA
ADJUSTMENTS PRO FORMA
(IN MILLIONS) SUNTRUST WACHOVIA (NOTE 4) COMBINED
------------- ------------ -------------- --------------
ASSETS
Cash and due from banks................................$ 3,260 $ 3,015
-- -- (407)
-- -- (100)
-- -- (1,500)
------------- ------------ --------------
Total Cash and due from banks................. 3,260 3,015 (2,007) 4,268
Interest-bearing deposits in banks..................... 242 238 -- 480
Funds sold............................................. 997 592 -- 1,589
------------- ------------ -------------- --------------
Total Cash and Cash Equivalents............... 4,499 3,845 (2,007) 6,337
------------- ------------ -------------- --------------
Trading account........................................ 1,441 884 -- 2,325
Investment securities.................................. 20,274 9,051 -- 29,325
Loans.................................................. 70,360 56,703 -- 127,063
Reserve for loan losses................................ (872) (851) (1,723)
------------- ------------ -------------- --------------
Loans, net.................................... 69,488 55,852 125,340
------------- ------------ -------------- --------------
Mortgage loans held for sale........................... 2,537 -- -- 2,537
Premises and equipment................................. 1,605 957 (75) 2,487
Customer acceptances................................... 108 79 -- 187
Intangible assets...................................... 869 1,506
-- -- 8,354
-- -- (1,506)
-- -- 2,000
------------- ------------ --------------
Total Intangible Assets....................... 869 1,506 8,848 11,223
Other assets........................................... 2,905 3,432 -- 6,337
------------- ------------ -------------- --------------
Total Assets..................................$ 103,726 $ 75,606 $ 6,766 $ 186,098
============= ============ ============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing.................................$ 13,532 $ 8,884 $ (315) $ 22,101
Interest-bearing.................................... 49,190 36,733 (1,185) 84,738
------------- ------------ -------------- --------------
Total Deposits................................ 62,722 45,617 (1,500) 106,839
Short-term borrowings.................................. 16,041 9,516 -- 25,557
Acceptances outstanding................................ 108 79 -- 187
Other liabilities...................................... 4,499 2,816
-- -- 75
-- -- 700
-- -- 150
------------- ------------ --------------
Total Other Liabilities....................... 4,499 2,816 925 8,240
Long-term debt......................................... 12,526 10,713 -- 23,239
------------- ------------ -------------- --------------
Total Liabilities............................. 95,896 68,741 (575) 164,062
------------- ------------ -------------- --------------
IV-3
MARCH 31, 2001
------------------------------------------------------------
PRO FORMA
ADJUSTMENTS PRO FORMA
(IN MILLIONS) SUNTRUST WACHOVIA (NOTE 4) COMBINED
------------- ------------ --------------- -------------
STOCKHOLDERS' EQUITY
Preferred stock; none issued........................... -- -- -- --
Common stock........................................... 323 1,052
-- -- 227
-- -- (1,052)
------------- ------------ --------------
Total Common Stock............................ 323 1,052 (825) 550
Additional paid-in capital............................. 1,271 1,142
-- -- 14,206
-- -- 4,596
-- -- 75
-- -- (6,865)
-- -- 825
------------- ------------ --------------
Total Additional paid-in capital.............. 1,271 1,142 12,837 15,250
Retained earnings...................................... 6,532 4,596 (4,596) 6,532
Accumulated other comprehensive income................. 1,608 75 (75) 1,608
Treasury stock......................................... (1,904) -- -- (1,904)
------------- ------------ -------------- --------------
Total Stockholders' Equity.................... 7,830 6,865 7,341 22,036
------------- ------------ -------------- --------------
Total Liabilities and Stockholders' Equity....$ 103,726 $ 75,606 $ 6,766 $ 186,098
============= ============ ============== ==============
See accompanying notes to pro forma financial information.
IV-4
SUNTRUST BANKS, INC. AND WACHOVIA CORPORATION
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 2001
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2001
---------------------------------------------------------
PRO FORMA
ADJUSTMENTS PRO FORMA
(IN MILLIONS) SUNTRUST WACHOVIA (NOTE 5) COMBINED
------------- ------------ ------------- -----------
Interest income...............................................$ 1,744 $ 1,350 $ $ 3,094
Interest expense.............................................. 939 721 -- 1,660
------------- ------------ ------------- -----------
Net interest income........................................... 805 629 -- 1,434
Provision for loan losses..................................... 67 121 -- 188
------------- ------------ ------------- -----------
Net interest income after provision for loan losses........... 738 508 -- 1,246
Securities transactions--portfolio............................. 57 9 -- 66
Fees and other noninterest income............................. 469 491 -- 960
Restructuring and merger-related charges...................... -- 13 -- 13
Noninterest expense........................................... 743 618 221 1,582
------------- ------------ ------------- -----------
Income before income taxes.................................... 521 377 (221) 679
Income taxes.................................................. 183 135 (48) 270
------------- ------------ ------------- -----------
Net Income.............................................$ 338 $ 242 $(173) $ 407
============= ============ ============= ===========
PER COMMON SHARE DATA (Note 6)
Basic.........................................................$ 1.16 $ 1.17 $ 0.79
Diluted....................................................... 1.14 1.17 0.78
============= ============ ===========
Average common shares outstanding (in thousands)
Basic......................................................... 291,805 206,061 16,691 514,557
Diluted....................................................... 295,832 207,569 16,813 520,214
See accompanying notes to pro forma financial information.
IV-5
SUNTRUST BANKS, INC. AND WACHOVIA CORPORATION
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 2000
(UNAUDITED)
YEAR ENDED DECEMBER 31, 2001
---------------------------------------------------------
PRO FORMA
ADJUSTMENTS PRO FORMA
(IN MILLIONS) SUNTRUST WACHOVIA (NOTE 5) COMBINED
------------- ------------ ------------- -----------
Interest income...............................................$ 6,845 $ 5,345 $ -- $ 12,190
Interest expense.............................................. 3,737 2,830 -- 6,567
------------- ------------ ------------- -----------
Net interest income........................................... 3,108 2,515 -- 5,623
Provision for loan losses..................................... 134 588 -- 722
------------- ------------ ------------- -----------
Net interest income after provision for loan losses........... 2,974 1,927 -- 4,901
Securities transactions--portfolio............................. 7 -- -- 7
Fees and other noninterest income............................. 1,767 1,931 -- 3,698
Restructuring and merger-related charges...................... 42 136 -- 178
Noninterest expense........................................... 2,787 2,447 834 6,068
------------- ------------ ------------- -----------
Income before income taxes.................................... 1,919 1,275 (834) 2,360
Income taxes.................................................. 625 443 (175) 893
------------- ------------ ------------- -----------
Net Income.............................................$ 1,294 $ 832 $ (659) $ 1,467
============= ============ ============= ===========
PER COMMON SHARE DATA (Note 6)
Basic.........................................................$ 4.35 $ 4.10 $ 2.84
Diluted....................................................... 4.30 4.07 2.81
============= ============ ===========
Average common shares outstanding (in thousands)
Basic......................................................... 297,834 202,989 16,442 517,265
Diluted....................................................... 300,956 204,450 16,560 521,966
See accompanying notes to pro forma financial information.
IV-6
SUNTRUST BANKS, INC. AND WACHOVIA CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL INFORMATION
THREE MONTHS ENDED MARCH 31, 2001 AND YEAR ENDED DECEMBER 31, 2000
(UNAUDITED)
(1) The Proposed SunTrust Merger will be accounted for using the
purchase method of accounting, and accordingly, the assets and liabilities of
Wachovia will be recorded at their respective fair values on the date the merger
is completed. The shares of SunTrust Common Stock issued to effect the Proposed
SunTrust Merger will be recorded at $67.54 per share which is the purchase price
per Wachovia share (giving effect to the exchange ratio of 1.081 shares of
SunTrust Common Stock for each share of Wachovia Common Stock) based on
SunTrust's closing stock prices for the two days prior and two days after the
announcement of the SunTrust Merger Proposal on May 14, 2001. The final purchase
price will be based on the average market price of SunTrust Common Stock
surrounding the date that a definitive merger agreement is entered into by
SunTrust and Wachovia. As a result, the final determination and allocation of
the purchase price may materially differ from the amounts assumed in this
unaudited pro forma condensed combined financial information.
The pro forma financial information includes estimated adjustments to
record certain assets and liabilities of Wachovia at their respective fair
values only to the extent known and reasonably available to SunTrust from
historical public information of Wachovia. Currently, we estimate that we will
record approximately $1.4 billion of restructuring charges, merger-related
charges and purchase accounting adjustments given the limited current
information available. These consist of $807 million of purchase accounting
adjustments which are reflected in the pro forma balance sheet adjustments and
$600 million in merger-related and restructuring charges which will be expensed
when incurred. See notes (2) and (9), where these charges are discussed further.
The pro forma adjustments included herein are subject to change to the extent
additional information is made available to SunTrust. Certain other assets and
liabilities of Wachovia, principally loans, borrowings and investment securities
will also be subject to adjustment to their respective fair values.
The unaudited pro forma financial information includes the impact of
required deposit divestitures estimated for purposes of such financial
information to be $1.5 billion. We expect to realize revenue enhancements and
cost savings following completion of the Proposed SunTrust Merger which also are
not reflected in this pro forma financial information. No assurance can be given
with the respect to the ultimate level of such revenue enhancements or cost
savings.
The final allocation of the purchase price would be determined after the
Proposed SunTrust Merger is completed and after completion of a thorough
analysis to determine the fair values of Wachovia's tangible and identifiable
intangible assets and liabilities as of the date the Proposed SunTrust Merger is
completed. Any change in the fair value of the net assets of Wachovia will
change the amount of the purchase price
IV-7
allocable to goodwill. Additionally, changes to Wachovia's stockholders' equity
including net income from April 1, 2001 through the date the Proposed SunTrust
Merger is completed, will also change the amount of goodwill recorded. In
addition, the final adjustments may be materially different from the unaudited
pro forma adjustments presented herein.
(2) The pro forma income statement for the Proposed SunTrust Merger is
included for the year ended December 31, 2000 and three months ended March 31,
2001. The pro forma adjustments herein reflect an exchange ratio of 1.081 shares
of SunTrust Common Stock for each of the 210,335,000 shares of Wachovia Common
Stock that were outstanding at March 31, 2001. The unaudited pro forma
information presented in the pro forma condensed combined financial statements
is not necessarily indicative of the results of operations or the combined
financial position that would have resulted had the Proposed SunTrust Merger
been completed at the beginning of the applicable period presented, nor is it
necessarily indicative of the results of operations in future periods or the
future financial position of the combined company.
The pro forma condensed combined financial information reflects the
addition of 227,372,000 shares of SunTrust Common Stock with an aggregate par
value of $227 million, an increase in paid-in capital of $12.8 billion for the
excess of the fair value of the shares over the par value, and goodwill and
deposit base intangible of $8.4 billion and $2.0 billion, respectively.
The pro forma balance sheet adjustments include $775 million in purchase
accounting adjustments which are broken down as follows:
(in millions)
Payment for surrender of First Union Option $407
Adjustment of tax liabilities 150
Lease and contract termination charges 55
Transaction costs 45
Adjustments to fair value-premises and equipment 75
Other purchase accounting liabilities 75
----
Total $807
====
In addition to the purchase accounting adjustments described above, we
expect to incur estimated merger related and restructuring charges, which are
not included in the pro forma condensed combined financial statements, totaling
$600 million which are broken down as follows:
(in millions)
System integration and conversion costs $310
Staff retention, development, and severance 290
----
Total $600
====
IV-8
A portion of these expenses may be classified as additional purchase
accounting adjustments, as additional information becomes available.
The restructuring and merger related charges of $600 million are not
included in the pro forma condensed combined financial statements since they
will be recorded in the combined results of operations after the completion of
the Proposed SunTrust Merger and are not indicative of what the historical
results of the combined company would have been had the companies actually been
combined during the periods presented.
The pro forma condensed combined balance sheet does not include an
estimated $450 million addition to the allowance for loan losses. This estimated
addition to the allowance for loan losses will be recorded as a provision for
loan losses in the results of operations of the combined company for the
reporting period immediately following the date the Proposed SunTrust Merger is
completed.
(3) The computation of the purchase price, the allocation of the
purchase price to the net assets of Wachovia based on fair values estimated at
March 31, 2001, the basis for determining the amount of the deposit base premium
allocated to the purchase price and the resulting amount of goodwill are
presented below.
(IN MILLIONS) MARCH 31, 2001
------------ ---------------
Wachovia common stock outstanding (in thousands)......................................... 210,335
Purchase price per share (includes 1.081 exchange ratio)................................. $ 67.54
-------------
Total purchase price..................................................................... $ 14,206
Add
Wachovia goodwill and other intangible assets........................................ 1,506
Estimated purchase accounting adjustments
Premises and equipment--adjustment to fair value................................... 75
Payment for surrender of First Union option....................................... 407
Contract and lease termination costs 55
Transaction costs 45
Other merger-related costs 75 657
-------------
Deferred income taxes
Estimated deposit base intangible................................................. 2,000
Income tax rate............................................................... 0.35 700
-------------
Other tax liabilities................................................................ 150
Deduct
Wachovia stockholders' equity........................................................ (6,865)
Estimated deposit base intangible
Wachovia deposits.................................................................... 45,617
Premium rate...................................................................... 0.0438 (2,000)
------------- -------------
IV-9
(IN MILLIONS) March 31, 2001
-------------
Goodwill...................................................................... $ 8,354
=============
(4) The pro forma adjustments related to the pro forma balance sheet
at March 31, 2001, are presented below.
(IN MILLIONS) MARCH 31, 2001
------------ ---------------
Cash
Payment for surrender of First Union option..........................................$ (407)
Lease and contract termination charges and other transaction costs................... (100)
Cash-assumed deposit divestiture..................................................... (1,500)
-------------
Total Cash Adjustments............................................................ (2,007)
Premises and equipment--adjustment to fair value.......................................... (75)
Goodwill and other intangible assets--adjustment
Goodwill (Note 3).................................................................... 8,354
Wachovia goodwill and other intangible assets........................................ (1,506)
Deposit base intangible.............................................................. 2,000
-------------
Goodwill and other tangible assets adjustment, net................................... 8,848
-------------
Total Assets...................................................................... $ 6,766
=============
Deposits
Non-interest bearing--assumed divestiture of 21 percent of $1.5 billion of
deposits.......................................................................... $ (315)
Interest bearing--assumed divestiture of 79 percent of $1.5 billion of deposits....... (1,185)
-------------
Total deposit adjustment.......................................................... (1,500)
-------------
Other liabilities
Other................................................................................ 75
Purchase accounting adjustments...................................................... 700
Other tax liabilities................................................................ 150
-------------
Total other liabilities adjustment................................................ 925
-------------
Total liabilities adjustment...................................................... $ (575)
=============
Stockholders' equity
Common stock adjustment (shares to be issued at SunTrust's $1.00 par value).......... $ 227
Less Wachovia common stock........................................................... (1,052)
-------------
Common stock adjustment........................................................... (825)
-------------
Paid-in capital adjustment
Purchase price....................................................................... 14,206
Wachovia retained earnings........................................................... 4,596
IV-10
Wachovia accumulated other comprehensive income...................................... 75
Wachovia stockholders' equity........................................................ (6,865)
Common stock adjustment.............................................................. 825
-------------
12,837
-------------
(IN MILLIONS) March 31, 2001
Retained earnings adjustment
Elimination of Wachovia retained earnings............................................ (4,596)
-------------
Retained earnings adjustment...................................................... (4,596)
-------------
Elimination of Wachovia accumulated other comprehensive income........................... (75)
-------------
Stockholders' equity adjustment................................................... 7,341
-------------
Total............................................................................. $ 6,766
=============
(5) The following pro forma adjustments related to the unaudited pro
forma condensed combined statements of income reflect amortization on a
seven-year sum-of-years' digits method for the deposit base intangible and a
25-year straight-line amortization method for goodwill.
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
(IN MILLIONS) 2001 2000
------------------------- --------------------------
Noninterest expense adjustment
Deposit base intangible amortization............................ $ 137 $ 500
Goodwill amortization........................................... 84 334
----------- -----------
Total noninterest expense adjustment......................... 221 834
----------- -----------
Reduction in income before taxes.................................... (221) (834)
----------- -----------
Income tax adjustment
Deposit base intangible amortization............................ 137 500
Income tax rate................................................. 0.35 0.35
----------- -----------
Total income tax adjustment..................................... (48) (175)
----------- -----------
Reduction in income................................................. $ (173) $ (659)
=========== ===========
(6) The pro forma computation of basic and diluted earnings per share
for the three months ended March 31, 2001, and for the year ended December 31,
2000, is presented below.
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
(IN MILLIONS, EXCEPT PER SHARE DATA) 2001 2000
----------------------- -------------------------
Net Income............................................................ $ 408 $ 1,468
============ ============
Basic earnings per share.............................................. $ 0.79 $ 2.84
Diluted earnings per share............................................ 0.78 2.81
Average shares--basic (in thousands)................................... 514,557 517,265
Average shares--diluted (in thousands)................................. 520,214 521,966
============ ============
IV-11
(7) On March 1, 2001, Wachovia completed the purchase of Republic
Security Financial Corporation, a bank holding company headquartered in West
Palm Beach, Florida. Republic Security had assets of $3.1 billion and deposits
of $2.1 billion at December 31, 2000. The transaction was accounted for as a
purchase and resulted in intangible assets of approximately $260 million and the
issuance of 6.1 million shares of Wachovia Common Stock. The historical
financial information for Wachovia includes this acquisition as of and for the
one month ended March 31, 2001, and the pro forma condensed combined financial
information presented herein is not adjusted for this acquisition on a pro forma
basis.
On April 9, 2001, Wachovia announced an agreement to sell its consumer
credit card portfolio, which will be recorded as a discontinued operation by
Wachovia. The portfolio includes 2.8 million customer accounts and managed
balances of $8 billion. The transaction is expected to close in the second
quarter of 2001, subject to regulatory approval, and is expected to result in a
pre-tax gain of approximately $1.4 billion. This transaction is not included in
the pro forma condensed combined financial information presented herein.
(8) The Financial Accounting Standards Board has issued a Proposed
Statement of Financial Accounting Standards addressing the accounting for
business combinations and acquired intangible assets. Under this proposed
standard, goodwill and certain other intangible assets would not be subject to
amortization, but rather would be subject to periodic testing for impairment.
Deposit base intangibles would continue to be subject to amortization. The FASB
currently expects to issue a final standard by mid-July; however, there is no
assurance that they will issue the final standard in accordance with that
timetable or that the final standard will have the same provisions as currently
proposed.
(9) At this time, SunTrust's plan for merger and restructuring expenses
is general in nature. The details of the plan will be determined after
SunTrust's due diligence review and assessments of the two companies' personnel,
benefit plans, premises, equipment, computer systems and service contracts. At
that time SunTrust will be able to better determine where the companies can take
advantage of redundancies or where it will be beneficial or necessary to convert
to one system.
Certain decisions arising from these assessments may involve
involuntary termination of Wachovia employees, vacating Wachovia leased
premises, canceling contracts between Wachovia and certain service providers and
selling or otherwise disposing of certain premises, furniture and equipment
owned by Wachovia. The costs associated with such decisions will be recorded as
purchase accounting adjustments, which have the effect of increasing the amount
of the purchase price allocable to goodwill. It is expected that all such costs
will be identified and recorded within one year of completion of Proposed
SunTrust
IV-12
Merger and all such actions required to effect these decisions would be taken
within one year after finalization of SunTrust's plans.
In addition to the costs described above, SunTrust expects to incur
estimated merger-related charges of $310 million for conversion costs and $290
million for staff retention and development, and severance. A portion of these
expenses may be classified as restructuring charges or additional purchase
accounting adjustments. To the extent that these charges are not classified as
restructuring or purchase accounting adjustments, these amounts would be
recorded over the estimated three-year period subsequent to the completion of
the Proposed SunTrust Merger as the operations of the two companies are
combined. These amounts have not been included in the pro forma condensed
combined financial information.
IV-13
IMPORTANT
If your shares are held in your own name, please sign, date and return
the enclosed BLUE proxy card today. If your shares are held in "Street-Name,"
only your broker or bank can vote your shares and only upon receipt of your
specific instructions. Please return the enclosed BLUE proxy card to your broker
or bank and contact the person responsible for your account to ensure that a
BLUE proxy is voted on your behalf.
Do not sign any white proxy card you may receive from Wachovia.
If you have any questions or need assistance in voting your shares,
please call:
INNISFREE M&A INCORPORATED
501 Madison Avenue, 20th Floor
New York, New York 10022
CALL TOLL-FREE 1-877-750-9501
Banks and Brokers call collect: 212-750-5833
P
R THIS PROXY IS SOLICITED ON BEHALF OF SUNTRUST BANKS, INC.
O IN OPPOSITION TO THE SOLICITATION BY THE WACHOVIA BOARD OF DIRECTORS
X FOR USE AT THE ANNUAL MEETING OF SHAREHOLDERS
Y OF WACHOVIA CORPORATION
TO BE HELD ON AUGUST 3, 2001
The undersigned shareholder of Wachovia Corporation ("Wachovia") hereby
appoints [ ] and [ ] and each or any of them, attorneys and proxies of
the undersigned, with full power of substitution, to vote all of the
shares of common stock, par value $5.00 per share, of Wachovia which
the undersigned is entitled to vote at the Annual Meeting of
Shareholders of Wachovia to be held on August 3, 2001, at [ ], at [ ]
a.m., local time, and at any adjournments, postponements, continuations
or reschedulings thereof (the "Annual Meeting"), with all the powers
the undersigned would possess if personally present at the Annual
Meeting, as directed on the reverse side.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER AND AT THE DISCRETION OF THE
PROXY HOLDERS AS TO ANY OTHER BUSINESS THAT MAY PROPERLY COME BEFORE
THE ANNUAL MEETING. IF NO DIRECTION IS INDICATED FOR ITEM 1, THIS PROXY
WILL BE VOTED AGAINST APPROVAL OF THE WACHOVIA/FIRST UNION PLAN OF
MERGER. IF NO DIRECTION IS INDICATED ON ITEMS 2 OR 3, THIS PROXY WILL
ABSTAIN FROM VOTING WITH RESPECT TO THOSE ITEMS. IF NO DIRECTION IS
INDICATED FOR ITEM 4, THIS PROXY WILL BE VOTED FOR APPROVAL OF THE
PROPOSED AMENDMENT TO WACHOVIA'S BYLAWS.
THIS PROXY REVOKES ALL PRIOR PROXIES GIVEN BY THE UNDERSIGNED WITH
RESPECT TO THE MATTERS COVERED HEREBY.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
-------------------------------------------------------------------------------
TO VOTE BY MAIL, PLEASE DETACH HERE.
YOUR VOTE IS IMPORTANT!
PLEASE VOTE TODAY
SEE REVERSE SIDE FOR THREE EASY WAYS TO VOTE.
If you have any questions or need
assistance in voting your shares,
please call our proxy solicitor,
INNISFREE M&A INCORPORATED
TOLL-FREE at 877-750-9501
---------------------
X Please mark your
vote as this
example
---------------------
PLEASE SIGN, DATE AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED, POSTAGE-PAID
ENVELOPE.
SUNTRUST RECOMMENDS THAT YOU VOTE AGAINST ITEM 1 BELOW
-------
AND FOR ITEM 4 BELOW
AGAINST FOR ABSTAIN
1. Approval of the plan of merger contained / / / / / /
in the Agreement and Plan of Merger, dated
April 15, 2001, between Wachovia Corporation,
a North Carolina corporation and First Union
Corporation, a North Carolina corporation
FOR all WITHHOLD ABSTAIN
nominees AUTHORITY
listed for all
below nominees
(except as listed
indicated)* below
2. Election of directors of Wachovia / / / / / /
Corporation
James S. Balloun Peter C. Browning W. Hayne Hipp
Lloyd U. Noland, III Dona Davis Young
*INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE
FOR ANY INDIVIDUAL NOMINEE, STRIKE THROUGH THAT
INDIVIDUAL'S NAME
FOR AGAINST ABSTAIN
3. Ratification of the appointment of Ernst &
Young LLP as Wachovia Corporation's / / / / / /
independent auditors for the year 2001
FOR AGAINST ABSTAIN
4. Approval of the proposed amendment to / / / / / /
Article I, Section 1.4 of the Bylaws
of Wachovia Corporation
5. The proxies are authorized to vote in PLEASE SIGN, DATE AND RETURN their
discretion upon all such other matters as may properly come before the
Annual Meeting.
DATED____________________, 2001
SIGNATURE____________________________________________________________________
SIGNATURE (if held jointly) _________________________________________________
TITLE(S) ____________________________________________________________________
Please sign your name exactly as it appears hereon. When signing as attorney,
executor, administrator, trustee or guardian please give your full title. If a
corporation, please sign in full corporate name by the president or other
authorized officer. If a partnership, please sign the partnership name by
authorized person(s).
If you need assistance in voting your shares, please call Innisfree M&A
Incorporated, SunTrust's proxy solicitor, toll free at 1-877-750-9501
--------------------------------------------------------------------------------
TO VOTE BY MAIL, PLEASE DETACH HERE
YOUR VOTE IS IMPORTANT.
Please take a moment now to vote your shares as recommended by Sun Trust at the
upcoming Annual Meeting of Stockholders of Wachovia Corporation.
YOU CAN VOTE TODAY IN ONE OF THREE WAYS:
1. VOTE BY TELEPHONE - You will be asked to enter the Control Number
below. Then, if you wish to vote as recommended by SunTrust, simply
press 1. If you do not wish to vote as SunTrust recommends, you need
only respond to a few simple prompts. Your vote will be confirmed and
cast as you directed. (Telephone voting is available for residents of
the U.S. and Canada only.)
YOUR CONTROL NUMBER IS:
CALL TOLL-FREE AT 1-866-849-8135
ON A TOUCH-TONE TELEPHONE.
OR
2. VOTE BY INTERNET - Access http://www.proxyvotenow.com/wb1 and respond
to a few simple prompts after entering the Control Number above.
YOU MAY VOTE BY TELEPHONE OR INTERNET 24 HOURS A DAY, 7 DAYS A
WEEK. YOUR TELEPHONE OR INTERNET VOTE AUTHORIZES THE NAMED PROXIES IN
THE SAME MANNER
AS IF YOU HAD EXECUTED A PROXY CARD.
OR
3. VOTE BY MAIL - If you prefer, you may sign, date and return the proxy
card in the envelope provided to: SunTrust Banks, Inc., c/o Innisfree
M&A Incorporated, P.O. Box 5156, New York, NY 10150-5156.