<PAGE> 1
Filed Pursuant to Rule 424(b)(4)
Registration No. 333-09015
Leader Financial Letterhead
[LEADER FINANCIAL CORPORATION LOGO]
August 8, 1996
To the Shareholders of Leader Financial Corporation:
You are cordially invited to attend a Special Meeting of the Shareholders
(the "Special Meeting") of Leader Financial Corporation ("Leader") to be held at
the Dixon Gallery & Gardens, 4339 Park Avenue, Memphis, Tennessee, on Thursday,
September 26, 1996, at 10:00 a.m., local time, notice of which is enclosed.
At the Special Meeting, you will be asked to consider and vote on a
proposal to approve an Agreement and Plan of Merger (the "Agreement") by and
between Leader and Union Planters Corporation ("UPC") and a related Plan of
Merger pursuant to which a newly formed subsidiary of UPC ("UPC Merger
Subsidiary") would be merged with and into Leader (the "Merger"). Upon
consummation of the Merger, each share of Leader common stock issued and
outstanding immediately prior to the effective time of the Merger (except for
certain shares held by Leader or UPC, or their respective subsidiaries, in each
case other than shares held in a fiduciary capacity or in satisfaction of debts
previously contracted) will be exchanged for 1.525 shares of UPC common stock
(subject to possible adjustment as described in the accompanying Joint Proxy
Statement/Prospectus), with cash being paid in lieu of issuing fractional
shares.
The accompanying Joint Proxy Statement/Prospectus includes a description of
the proposed Merger and provides other specific information concerning the
Special Meeting. Please read these materials carefully and consider thoughtfully
the information set forth in them.
The Merger has been approved by your Board of Directors and is recommended
by the Board to you for approval. Your Board believes that, among other
benefits, the Merger will result in a company with greater financial strength
and increased opportunity and flexibility for profitable expansion and
diversification. Consummation of the Merger is subject to certain conditions,
including approval of the Agreement and the related Plan of Merger by the Leader
shareholders, approval of the issuance of shares of UPC common stock pursuant to
the Agreement by the UPC shareholders, approval of the Merger by various
regulatory agencies, and satisfaction or waiver of certain other contractual
conditions to closing.
It is important to understand that approval of the Agreement and the
related Plan of Merger will require the affirmative vote of a majority of the
votes entitled to be cast at the Special Meeting by the holders of the issued
and outstanding shares of Leader common stock. Accordingly, whether or not you
plan to attend the Special Meeting, you are urged to complete, sign, and return
promptly the enclosed proxy card. If you attend the Special Meeting, you may
vote in person if you wish, even if you previously have returned your proxy
card. The proposed Merger of UPC Merger Subsidiary with and into Leader is a
significant step for Leader and your vote on this matter is of great importance.
ON BEHALF OF THE BOARD OF DIRECTORS, I URGE YOU TO VOTE FOR APPROVAL OF THE
AGREEMENT AND THE RELATED PLAN OF MERGER BY MARKING THE ENCLOSED PROXY CARD
"FOR" PROPOSAL 1.
We look forward to seeing you at the Special Meeting.
Sincerely,
/s/Edgar H. Bailey
Edgar H. Bailey
Chairman and Chief Executive Officer
<PAGE> 2
LEADER FINANCIAL CORPORATION
158 Madison Avenue
Memphis, Tennessee 38103
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 26, 1996
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the "Special
Meeting") of Leader Financial Corporation ("Leader") will be held at the Dixon
Gallery & Gardens located at 4339 Park Avenue, Memphis, Tennessee, on Thursday,
September 26, 1996, at 10:00 a.m., local time, for the following purposes:
1. Merger. To consider and vote upon a proposal to approve an
Agreement and Plan of Merger, dated as of March 8, 1996, (the "Agreement"),
by and between Leader and Union Planters Corporation, a Tennessee
corporation ("UPC"), and the related Plan of Merger (the "Plan of Merger"),
by and between Leader and a wholly owned subsidiary of UPC to be formed
under the laws of the State of Tennessee ("UPC Merger Subsidiary"),
pursuant to which (i) UPC Merger Subsidiary would merge (the "Merger") with
and into Leader; (ii) each share of the $1.00 par value common stock of UPC
Merger Subsidiary issued and outstanding immediately prior to the effective
time of the Merger would cease to be outstanding and would be converted
into one share of the $1.00 par value common stock of Leader ("Leader
Common Stock"); (iii) each share of Leader Common Stock (except for certain
shares held by UPC or Leader, or their respective subsidiaries, in each
case other than shares held in a fiduciary capacity or in satisfaction of
debts previously contracted) issued and outstanding immediately prior to
the effective time of the Merger would be exchanged for 1.525 shares of the
$5.00 par value common stock of UPC, including the associated "Preferred
Share Rights" (as defined in the accompanying Joint Proxy
Statement/Prospectus), subject to possible adjustment, and cash in lieu of
any fractional share; and (iv) UPC would assume the obligations of Leader
under various stock plans and programs and adopt substitute plans where
appropriate, all as more fully described in the accompanying Joint Proxy
Statement/Prospectus.
2. Other Business. To transact such other business as may come
properly before the Special Meeting.
Only shareholders of record at the close of business on July 26, 1996, will
be entitled to receive notice of, and to vote at, the Special Meeting or any
adjournment or postponement thereof. Approval of the Agreement and the Plan of
Merger requires the affirmative vote of a majority of the votes entitled to be
cast at the Special Meeting by holders of the issued and outstanding shares of
Leader Common Stock.
THE BOARD OF DIRECTORS OF LEADER RECOMMENDS THAT SHAREHOLDERS VOTE FOR
APPROVAL OF THE AGREEMENT AND THE PLAN OF MERGER.
BY ORDER OF THE BOARD OF DIRECTORS
/s/Catherine C. Stallings
Catherine C. Stallings
Corporate Secretary
Memphis, Tennessee
August 8, 1996
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE,
DATE, AND SIGN THE ENCLOSED FORM OF PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
POSTAGE-PAID RETURN ENVELOPE IN ORDER TO ENSURE THAT YOUR SHARES WILL BE
REPRESENTED AT THE SPECIAL MEETING.
<PAGE> 3
UNION PLANTERS LETTERHEAD
August 8, 1996
To the Shareholders of Union Planters Corporation:
You are cordially invited to attend a Special Meeting of the Shareholders
(the "Special Meeting") of Union Planters Corporation ("UPC") to be held at the
Union Planters Administrative Center located at 7130 Goodlett Farms Parkway,
Memphis, Tennessee, on Thursday, September 26, 1996, at 10:00 a.m., local time,
notice of which is enclosed.
At the Special Meeting, you will be asked to consider and vote on a
proposal to approve the issuance of shares of UPC common stock in connection
with the proposed acquisition of Leader Financial Corporation ("Leader") by UPC
pursuant to the merger (the "Merger") of a newly formed subsidiary of UPC with
and into Leader in accordance with the terms of the Agreement and Plan of Merger
(the "Agreement") by and between UPC and Leader. Upon consummation of the
Merger, each share of Leader common stock issued and outstanding immediately
prior to the effective time of the Merger (except for certain shares held by UPC
or Leader, or their respective subsidiaries, in each case other than shares held
in a fiduciary capacity or in satisfaction of debts previously contracted) will
be exchanged for 1.525 shares of UPC common stock (subject to possible
adjustment as described in the accompanying Joint Proxy Statement/Prospectus),
with cash being paid in lieu of issuing fractional shares.
The accompanying Joint Proxy Statement/Prospectus includes a description of
the proposed Merger and provides other specific information concerning the
Special Meeting. Please read these materials carefully and consider thoughtfully
the information set forth in them.
The Merger has been approved by your Board of Directors and is recommended
by the Board to you for approval of the issuance of shares of UPC common stock
incident thereto. Your Board believes that, among other benefits, the Merger
will result in a company with greater financial strength and increased
opportunity and flexibility for profitable expansion and diversification.
Consummation of the Merger is subject to certain conditions, including approval
of the Agreement and the related Plan of Merger by the Leader shareholders,
approval of the issuance of shares of UPC common stock pursuant to the Agreement
by the UPC shareholders, approval of the Merger by various regulatory agencies,
and satisfaction or waiver of certain other contractual conditions to closing.
Like UPC, Leader has built its franchise on community banking, local
relationships, and sound lending principles. UPC's management believes that the
addition of Leader's 23 Tennessee branches and one Mississippi branch to the UPC
banking system can only enhance UPC's expansion strategy in its market area.
It is important to understand that approval of the Agreement will require
the affirmative vote of a majority of the votes cast in person or by proxy at
the Special Meeting, assuming a quorum is present. Accordingly, whether or not
you plan to attend the Special Meeting, you are urged to complete, sign, and
return promptly the enclosed proxy card. If you attend the Special Meeting, you
may vote in person if you wish, even if you previously have returned your proxy
card. The proposed Merger with Leader is a significant step for UPC and your
vote on this matter is of great importance.
ON BEHALF OF THE BOARD OF DIRECTORS, I URGE YOU TO VOTE FOR APPROVAL OF THE
ISSUANCE OF SHARES OF UPC COMMON STOCK PURSUANT TO THE AGREEMENT BY MARKING THE
ENCLOSED PROXY CARD "FOR" PROPOSAL 1.
We look forward to seeing you at the Special Meeting.
Sincerely,
/s/ Benjamin W. Rawlins, Jr.
Benjamin W. Rawlins, Jr.
Chairman and Chief Executive Officer
<PAGE> 4
UNION PLANTERS CORPORATION
7130 Goodlett Farms Parkway
Memphis, Tennessee 38018
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 26, 1996
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the "Special
Meeting") of Union Planters Corporation ("UPC") will be held at the Union
Planters Administrative Center located at 7130 Goodlett Farms Parkway, Memphis,
Tennessee, on Thursday September 26, 1996, at 10:00 a.m., local time, for the
following purposes:
1. Issuance of Shares. To consider and vote upon a proposal to
approve the issuance of shares of the $5.00 par value common stock of UPC
("UPC Common Stock") in connection with the proposed acquisition of Leader
Financial Corporation, a Tennessee corporation ("Leader"), by UPC in
accordance with the Agreement and Plan of Merger, dated as of March 8,
1996, (the "Agreement"), by and between UPC and Leader, pursuant to which
(i) a wholly owned subsidiary of UPC to be formed under the laws of the
State of Tennessee ("UPC Merger Subsidiary") would merge (the "Merger")
with and into Leader; (ii) each share of the $1.00 par value common stock
of UPC Merger Subsidiary issued and outstanding immediately prior to the
effective time of merger would cease to be outstanding and would be
converted into one share of the $1.00 par value common stock of Leader
("Leader Common Stock"); (iii) each share of Leader Common Stock (except
for certain shares held by UPC or Leader, or their respective subsidiaries,
in each case other than shares held in a fiduciary capacity or in
satisfaction of debts previously contracted) issued and outstanding
immediately prior to the effective time of the Merger would be exchanged
for 1.525 shares of UPC Common Stock, including the associated "Preferred
Share Rights" (as defined in the accompanying Joint Proxy
Statement/Prospectus), subject to possible adjustment, and cash in lieu of
any fractional share; and (iv) UPC would assume the obligations of Leader
under various stock plans and programs and adopt substitute plans where
appropriate, all as more fully described in the accompanying Joint Proxy
Statement/Prospectus.
2. Other Business. To transact such other business as may come
properly before the Special Meeting.
Only shareholders of record at the close of business on July 26, 1996, will
be entitled to receive notice of, and to vote at the Special Meeting or any
adjournment or postponement thereof. Approval of the issuance of shares of UPC
Common Stock pursuant to the Agreement requires the affirmative vote of a
majority of the votes cast in person or by proxy by the holders of UPC Common
Stock at the Special Meeting, assuming a quorum is present.
THE BOARD OF DIRECTORS OF UPC RECOMMENDS THAT SHAREHOLDERS VOTE FOR
APPROVAL OF THE ISSUANCE OF SHARES OF UPC COMMON STOCK PURSUANT TO THE
AGREEMENT.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ E.J. House, Jr.
E.J. House, Jr.
Corporate Secretary
Memphis, Tennessee
August 8, 1996
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE,
DATE, AND SIGN THE ENCLOSED FORM OF PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
POSTAGE-PAID RETURN ENVELOPE IN ORDER TO ENSURE THAT YOUR SHARES WILL BE
REPRESENTED AT THE SPECIAL MEETING.
<PAGE> 5
PROSPECTUS
UNION PLANTERS CORPORATION
COMMON STOCK, $5.00 PAR VALUE
------------------
JOINT PROXY STATEMENT
<TABLE>
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UNION PLANTERS CORPORATION LEADER FINANCIAL CORPORATION
7130 Goodlett Farms Parkway 158 Madison Avenue
Memphis, Tennessee 38018 Memphis, Tennessee 38103
</TABLE>
This Joint Proxy Statement/Prospectus of Union Planters Corporation, a
multi-state bank holding company and savings and loan holding company, organized
and existing under the laws of the State of Tennessee ("UPC"), relates to
approximately 16,600,000 shares of UPC common stock, having a par value of $5.00
per share (together with the associated "Preferred Share Rights" (as hereinafter
defined), "UPC Common Stock") which are issuable to the shareholders of Leader
Financial Corporation, a savings and loan holding company organized and existing
under the laws of the State of Tennessee ("Leader"), upon consummation of the
proposed merger (the "Merger") described herein by which a wholly owned
subsidiary of UPC to be formed under the laws of the State of Tennessee ("UPC
Merger Subsidiary") would merge with and into Leader pursuant to the terms of
the Agreement and Plan of Merger dated as of March 8, 1996 [together with the
Supplemental Letter (the "Supplemental Letter") dated as of March 8, 1996,
between UPC and Leader, the "Agreement"] by and between UPC and Leader, and the
related Plan of Merger (the "Plan of Merger"), by and between UPC Merger
Subsidiary and Leader.
At the effective time of the Merger (the "Effective Time"), except as
described herein, each issued and outstanding share of common stock, par value
$1.00 per share, of Leader ("Leader Common Stock") outstanding immediately prior
to the Effective Time would be converted into and exchanged for 1.525 shares of
UPC Common Stock, subject to certain possible adjustments described herein (the
"Exchange Ratio").
The Exchange Ratio is adjustable upward only if certain conditions are met
concerning the quoted price of UPC Common Stock, and then only with the
concurrence of both Leader and UPC. The Board of Directors of Leader has the
right to elect to terminate the Agreement if such conditions should occur, in
which case UPC would be required to determine whether to proceed with the Merger
at a higher Exchange Ratio. In making this determination, the principal factors
UPC would consider include without limitation the projected effect of the Merger
on UPC's pro forma earnings and book value per share and whether UPC's
assessment of Leader's earning potential as part of UPC justifies the issuance
of a greater number of UPC's shares. If UPC should decline to adjust the
Exchange Ratio, Leader may elect to proceed without adjustment. In making such
determination, the principal factors the Board of Directors of Leader would
consider include, without limitation, whether the Merger remains in the best
interest of Leader and its shareholders, despite a decline in the UPC Common
Stock price, and whether the consideration to be received by the holders of
Leader Common Stock remains fair from a financial point of view. In the event
UPC should decline to adjust the Exchange Ratio and Leader should determine to
proceed without adjustment, UPC and Leader intend to review the circumstances
prevailing at the time to determine whether to resolicit the Leader shareholders
at such time. See "DESCRIPTION OF THE TRANSACTION -- Possible Adjustment of
Exchange Ratio."
This Prospectus also serves as a Joint Proxy Statement of Leader and UPC
and is being furnished to the shareholders of Leader and UPC in connection with
the solicitation of proxies by the Board of Directors of Leader for use at its
special meeting of shareholders (including any adjournments or postponements
thereof, the "Leader Special Meeting"), and by the Board of Directors of UPC for
use at its special meeting of shareholders (including any adjournments or
postponements thereof, the "UPC Special Meeting"), each to be held on Thursday,
September 26, 1996, to consider and vote upon the Agreement and the Plan of
Merger in the case of Leader and upon the issuance of shares of UPC Common Stock
pursuant to the Agreement in the case of UPC (collectively, the "Special
Meetings"). This Joint Proxy Statement/Prospectus ("Joint Proxy Statement") is
being mailed to shareholders of Leader and UPC on or about August 8, 1996.
------------------
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS, SAVINGS ACCOUNTS, OR OTHER
OBLIGATIONS OF A DEPOSITORY INSTITUTION AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION") OR ANY STATE SECURITIES COMMISSION
NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS JOINT PROXY STATEMENT/PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS JOINT PROXY STATEMENT IS AUGUST 8, 1996.
<PAGE> 6
AVAILABLE INFORMATION
UPC and Leader are each subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, are required to file reports, proxy statements, and other
information with the Securities and Exchange Commission (the "Commission").
Copies of such reports, proxy statements, and other information can be obtained,
at prescribed rates, from the Commission by addressing written requests for such
copies to the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Judiciary Plaza, Washington, D.C. 20549. In addition, such reports, proxy
statements, and other information can be inspected at the public reference
facilities referred to above, at the regional offices of the Commission at Room
1024, 7 World Trade Center, 13th Floor, New York, New York 10048 and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661, or, if such reports or proxy statements have been filed
electronically, through the Internet Web site maintained by the Commission at
(http://www.sec.gov.). In addition, UPC Common Stock and Leader Common Stock are
listed and traded on the New York Stock Exchange and NASDAQ National Market
System, respectively. Reports, proxy statements, and other information
concerning UPC and Leader may be inspected at the offices of the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005 and the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20006, respectively.
This Joint Proxy Statement constitutes part of the Registration Statement
on Form S-4 of UPC (including any exhibits, appendices and amendments thereto,
the "Registration Statement") filed with the Commission under the Securities Act
of 1933, as amended (the "Securities Act"), relating to the securities offered
hereby. This Joint Proxy Statement does not include all of the information in
the Registration Statement, certain portions of which have been omitted
consistent with the rules and regulations of the Commission. For further
information about UPC and the securities offered hereby, reference is made to
the Registration Statement. The Registration Statement may be inspected and
copied, at prescribed rates, at the Commission's public reference facilities at
the addresses set forth above.
Certain financial and other information relating to UPC and Leader is
contained in the documents indicated below under "DOCUMENTS INCORPORATED BY
REFERENCE."
All information contained in this Joint Proxy Statement or incorporated
herein by reference with respect to UPC was supplied by UPC and all information
contained in this Joint Proxy Statement or incorporated herein by reference with
respect to Leader was supplied by Leader. Although neither UPC nor Leader has
actual knowledge that would indicate that any statements or information
(including financial statements) relating to the other party contained or
incorporated herein are inaccurate or incomplete, neither UPC nor Leader
warrants the accuracy or completeness of such statements or information as they
relate to the other party.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS JOINT PROXY
STATEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS JOINT PROXY STATEMENT DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, THE
SECURITIES OFFERED BY THIS JOINT PROXY STATEMENT IN ANY JURISDICTION TO OR FROM
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS JOINT PROXY STATEMENT NOR ANY
DISTRIBUTION OF THE SECURITIES BEING OFFERED PURSUANT TO THIS JOINT PROXY
STATEMENT SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF UPC OR LEADER OR THE INFORMATION SET FORTH
HEREIN SINCE THE DATE OF THIS JOINT PROXY STATEMENT.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents previously filed with the Commission by UPC
pursuant to the Exchange Act (Commission File No. 1-10160 except as otherwise
indicated) are hereby incorporated by reference herein:
(a) UPC's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995;
(b) UPC's Quarterly Report on Form 10-Q for the three months ended
March 31, 1996;
i
<PAGE> 7
(c) UPC's Current Reports on Form 8-K dated January 5, 1996, March 8,
1996, April 1, 1996, April 2, 1996, April 18, 1996, May 21, 1996, May 22,
1996, and July 18, 1996;
(d) The description of the current management and Board of Directors
contained in the Proxy Statement pursuant to Section 14(a) of the Exchange
Act for UPC's Annual Meeting of Shareholders held April 25, 1996;
(e) UPC's Registration Statement on Form 8-A dated January 19, 1989,
filed on February 1, 1989 (Commission File Number 0-6919), in connection
with UPC's designation and authorization of its Series A Preferred Stock;
and
(f) The description of the UPC Common Stock contained in UPC's
Registration Statement under Section 12(b) of the Exchange Act and any
amendment or report filed for the purpose of updating such description.
UPC's Annual Report on Form 10-K for the year ended December 31, 1995,
incorporates by reference specific portions of UPC's Annual Report to
Shareholders for that year (UPC's "Annual Report to Shareholders" which is
Exhibit 13 to said Form 10-K) but does not incorporate other portions of UPC's
Annual Report to Shareholders. The portion of UPC's Annual Report to
Shareholders captioned "Letter to Shareholders" and certain other portions of
UPC's Annual Report to Shareholders not specifically incorporated into UPC's
Annual Report on Form 10-K are not incorporated herein and are not a part of the
Registration Statement.
The following documents previously filed with the Commission by Leader
pursuant to the Exchange Act (Commission File No. 0-22484) are hereby
incorporated by reference herein:
(a) Leader's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995;
(b) Leader's Quarterly Report on Form 10-Q for the three months ended
March 31, 1996; and
(c) Leader's Current Report on Form 8-K dated March 8, 1996.
Leader's Annual Report on Form 10-K for the year ended December 31, 1995,
incorporates by reference certain specific portions of Leader's Annual Report to
Shareholders for that year (the "Leader Annual Report to Shareholders" which is
Exhibit 13 to said Form 10-K), but does not incorporate other portions of the
Leader Annual Report to Shareholders. The portion of the Leader Annual Report to
Shareholders captioned "Shareholders' Letter" and other portions of the Leader
Annual Report to Shareholders not specifically incorporated into Leader's Annual
Report on Form 10-K are not incorporated herein and are not a part of the
Registration Statement.
All documents filed by UPC and Leader pursuant to Sections 13(a), 13(c),
14, or 15(d) of the Exchange Act after the date of this Joint Proxy Statement
and prior to the date of the Special Meetings shall be deemed to be incorporated
by reference in this Joint Proxy Statement and to be a part hereof from the date
of filing of such documents. Any statement contained herein or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes hereof to the extent that a statement
contained herein or in any subsequently filed document which also is, or is
deemed to be, incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed to
constitute a part hereof, except as so modified or superseded.
THIS JOINT PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE
NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF THESE DOCUMENTS (OTHER
THAN EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE) ARE AVAILABLE WITHOUT CHARGE, UPON THE WRITTEN OR
ORAL REQUEST OF ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS JOINT
PROXY STATEMENT IS DELIVERED. SUCH REQUESTS FOR DOCUMENTS RELATING TO UPC SHOULD
BE DIRECTED TO UNION PLANTERS CORPORATION, POST OFFICE BOX 387, MEMPHIS,
TENNESSEE 38147 (TELEPHONE (901) 383-6584), ATTENTION: E. JAMES HOUSE, JR.,
SECRETARY. SUCH REQUESTS FOR DOCUMENTS RELATING TO LEADER SHOULD BE DIRECTED TO
LEADER FINANCIAL CORPORATION, 158 MADISON AVENUE, MEMPHIS, TENNESSEE 38103
(TELEPHONE (901) 578-2414), ATTENTION: CATHERINE C. STALLINGS, SECRETARY. IN
ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY
SEPTEMBER 19, 1996.
ii
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
SUMMARY............................................................................... 1
The Parties......................................................................... 1
Meetings of Shareholders............................................................ 2
The Merger.......................................................................... 3
Selected Consolidated Financial Data................................................ 7
Equivalent and Pro Forma Per Share Data............................................. 11
Selected Pro Forma Consolidated Financial Data for UPC and Leader................... 13
Pro Forma Condensed Consolidated Financial Information.............................. 15
MEETINGS OF SHAREHOLDERS.............................................................. 21
Date, Place, Time, and Purpose...................................................... 21
Record Dates, Voting Rights, Required Votes, and Revocability of Proxies............ 21
Proxy Solicitation.................................................................. 23
DESCRIPTION OF TRANSACTION............................................................ 23
General............................................................................. 23
Possible Adjustment of Exchange Ratio............................................... 24
Effect of the Merger on Stock Rights................................................ 26
Background of and Reasons for the Merger............................................ 27
Opinion of Leader's Financial Advisor............................................... 31
Opinion of UPC's Financial Advisor.................................................. 36
Effective Time of the Merger........................................................ 39
Distribution of UPC Stock Certificates.............................................. 40
Conditions to Consummation of the Merger............................................ 40
Representations and Warranties...................................................... 41
Regulatory Approvals................................................................ 41
Waiver, Amendment, and Termination.................................................. 42
Dissenters' Rights.................................................................. 43
Conduct of Business Pending the Merger.............................................. 43
Management and Operations after the Merger.......................................... 45
Effect on Certain Employees and Benefit Plans....................................... 45
Interests of Certain Persons in the Merger.......................................... 47
Certain Federal Income Tax Consequences............................................. 51
Accounting Treatment................................................................ 51
Expenses and Fees................................................................... 52
Resales of UPC Common Stock......................................................... 52
Option Agreement.................................................................... 52
Other Related Transactions.......................................................... 54
EFFECT OF THE MERGER ON RIGHTS OF SHAREHOLDERS........................................ 55
Antitakeover Provisions Generally................................................... 55
Authorized Capital Stock............................................................ 55
Amendment of Charter and Bylaws..................................................... 56
Classified Board of Directors and Absence of Cumulative Voting...................... 57
Director Removal and Vacancies...................................................... 57
Limitations on Director Liability................................................... 57
Indemnification..................................................................... 57
Special Meetings of Shareholders.................................................... 58
Business Combinations with Certain Persons.......................................... 58
Mergers, Consolidations, and Sales of Assets Generally.............................. 60
COMPARATIVE MARKET PRICES AND DIVIDENDS............................................... 61
</TABLE>
iii
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<TABLE>
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BUSINESS OF LEADER.................................................................... 62
General............................................................................. 62
Recent Developments................................................................. 63
BUSINESS OF UPC....................................................................... 64
General............................................................................. 64
Recent Developments................................................................. 65
CERTAIN REGULATORY CONSIDERATIONS..................................................... 69
General............................................................................. 69
Payment of Dividends................................................................ 70
Capital Adequacy.................................................................... 71
Support of Subsidiary Banks......................................................... 72
Prompt Corrective Action............................................................ 72
FDIC Insurance Assessments.......................................................... 74
Proposed Legislation................................................................ 74
DESCRIPTION OF UPC COMMON AND PREFERRED STOCK......................................... 75
UPC Common Stock.................................................................... 75
UPC Preferred Stock................................................................. 76
SHAREHOLDER PROPOSALS................................................................. 76
EXPERTS............................................................................... 76
OPINIONS.............................................................................. 77
INDEX TO APPENDICES................................................................... 78
</TABLE>
APPENDICES:
Appendix I -- Agreement and Plan of Merger between Union Planters Corporation
and Leader Financial Corporation, dated as of March 8, 1996,
together with the Supplemental Letter, dated as of March 8, 1996,
and the Stock Option Agreement dated March 9, 1996
Appendix II -- Form of Plan of Merger of UPC Merger Subsidiary, Inc. with and
into Leader Financial Corporation
Appendix III -- Fairness opinion of Sandler O'Neill & Partners, L.P.
Appendix IV -- Fairness opinion of Stifel, Nicolaus & Company, Incorporated
iv
<PAGE> 10
SUMMARY
The following is a summary of certain information contained in this Joint
Proxy Statement and the documents incorporated herein by reference. This summary
is not intended to be a complete description of the matters covered in this
Joint Proxy Statement and is qualified in its entirety by the more detailed
information appearing elsewhere or incorporated by reference in this Joint Proxy
Statement. Shareholders are urged to read carefully the entire Joint Proxy
Statement, including the Appendices. As used in this Joint Proxy Statement, the
terms "UPC" and "Leader" refer to those entities, respectively and, where the
context requires, to those entities and their respective subsidiaries.
THE PARTIES
Union Planters Corporation. UPC is a multi-state bank holding company and
savings and loan holding company headquartered in Memphis, Tennessee. At March
31, 1996, UPC had total consolidated assets of approximately $11.4 billion,
total consolidated loans of approximately $7.1 billion, total consolidated
deposits of approximately $9.5 billion and total consolidated shareholders'
equity of approximately $993 million. As of that date, UPC was the
second-largest independent bank holding company headquartered in Tennessee as
measured by total consolidated assets.
UPC conducts its business activities through its principal bank subsidiary,
the $2.2-billion asset Union Planters National Bank, founded in 1869 and
headquartered in Memphis, Tennessee, 33 other bank subsidiaries and two savings
bank subsidiaries located in Tennessee, Mississippi, Missouri, Arkansas,
Louisiana, Alabama and Kentucky (collectively, the "UPC Banking Subsidiaries").
Through the UPC Banking Subsidiaries, UPC provides a diversified range of
financial services in the communities in which it operates, including
traditional banking services, consumer, commercial and corporate lending, retail
banking and mortgage banking. UPC also is engaged in mortgage servicing,
investment management and trust services, the issuance and servicing of credit
and debit cards, and the origination, packaging and securitization of the
government-guaranteed portions of Small Business Administration loans.
Through the UPC Banking Subsidiaries, UPC operates approximately 402
banking offices. UPC's assets are allocable by state to its banking offices
(before consolidating adjustments) approximately as follows: $6.0 billion in
Tennessee, $2.4 billion in Mississippi, $1.0 billion in Missouri, $915 million
in Arkansas, $548 million in Louisiana, $249 million in Alabama and $110 million
in Kentucky.
Acquisitions have been, and are expected to continue to be, an important
part of the expansion of UPC's business. UPC completed four acquisitions in
1992, 12 in 1993, 13 in 1994, and three in 1995 adding approximately $1.6
billion in total assets in 1992, $1.3 billion in 1993, $3.8 billion in 1994, and
$1.3 billion in 1995. UPC has completed two acquisitions in 1996 (the "Recently
Completed Acquisitions"), adding approximately $122 million in assets. Prior to
the date hereof, UPC had entered into definitive agreements to acquire five
additional financial institutions with total assets of $966 million
(collectively, the "Other Pending Acquisitions"). For additional information
regarding the Other Pending Acquisitions, see "-- Pro Forma Condensed
Consolidated Financial Information" and "BUSINESS OF UPC -- Recent
Developments." For a discussion of UPC's acquisition program and UPC
management's philosophy on that subject, see the caption "Acquisitions" (on page
6) and Note 2 to UPC's audited consolidated financial statements for the years
ended December 31, 1995, 1994 and 1993 (on pages 41 through 43) contained in
UPC's Annual Report to Shareholders which is Exhibit 13 to UPC's Annual Report
on Form 10-K for the year ended December 31, 1995, which Exhibit 13 is
incorporated by reference herein to the extent indicated.
UPC expects to continue to take advantage of the consolidation of the
financial services industry by further developing its franchise through the
acquisition of financial institutions. Future acquisitions may entail the
payment by UPC of consideration in excess of the book value of the underlying
net assets acquired, may result in the issuance of additional shares of UPC
capital stock or the incurring of additional indebtedness by UPC, and could have
a dilutive effect on the earnings or book value per share of UPC Common Stock.
Moreover, significant charges against earnings are sometimes required incidental
to acquisitions. For a description of acquisitions which are currently pending
and a discussion of potential significant charges against earnings, see
"BUSINESS OF UPC -- Recent Developments."
<PAGE> 11
UPC's corporate office is located at 7130 Goodlett Farms Parkway, Memphis,
Tennessee 38018, and its telephone number is (901) 383-6000. Additional
information concerning UPC is included in the documents incorporated by
reference in this Joint Proxy Statement. See "AVAILABLE INFORMATION" and
"DOCUMENTS INCORPORATED BY REFERENCE."
Leader Financial Corporation. Leader was incorporated under the laws of
the State of Tennessee in March 1993 to become a savings and loan holding
company with Leader Federal Bank for Savings ("Leader Federal") as its sole
first tier subsidiary. In September 1993, Leader acquired all of the capital
stock of Leader Federal issued in connection with Leader Federal's conversion
from mutual to stock form. In conjunction with Leader Federal's conversion,
Leader issued 10,752,500 shares of Leader Common Stock at a price of $10.00 per
share. Leader is classified as a unitary savings and loan holding company and is
subject to regulation by the Office of Thrift Supervision ("OTS"). Leader's
principal business is the business of Leader Federal and its subsidiaries, which
is described below.
Leader Federal was incorporated as a Tennessee building and loan
association in 1928 and converted to a federal mutual savings and loan
association in 1934 and to a federal mutual savings bank in 1989. Leader
Federal's conversion from mutual to stock form was completed on September 30,
1993. Leader Federal is headquartered in Memphis, Tennessee and operates through
24 retail branch offices of which 16 are located in and around Memphis, four are
located in the Nashville area and four are located in upper east Tennessee
(Johnson City, Bristol and Kingsport). One branch office in the Memphis area is
located in DeSoto County, Mississippi. Leader Federal also has two operations
centers in Memphis. Leader Federal Mortgage Inc. ("Leader Mortgage"), a wholly
owned mortgage banking subsidiary of Leader Federal, is active in Memphis and
Nashville, Tennessee, DeSoto County, Mississippi and in Orlando and Melbourne,
Florida. In addition, Leader Mortgage also participates in the Birmingham,
Alabama market through its investment in a mortgage banking limited liability
company located in Birmingham, Alabama and plans to invest in a mortgage banking
limited liability company headquartered in Indianapolis, Indiana prior to the
Effective Time. Based on total assets at March 31, 1996, Leader Federal was the
largest thrift institution headquartered in the State of Tennessee and the fifth
largest depository institution in Tennessee.
Leader Federal and its subsidiaries offer a broad range of financial
services and products including retail banking services and products, a variety
of one- to four-family mortgage loans, commercial real estate, executive
banking, warehouse and construction and consumer lending products. Through its
wholly owned subsidiary, Leader Services, Inc. ("Leader Services"), Leader
Federal offers various types of insurance products.
As of March 31, 1996, Leader had total consolidated assets of $3.2 billion,
total consolidated deposits of $1.6 billion and total consolidated shareholders'
equity of $255 million. Leader's principal executive office is located at 158
Madison Avenue, Memphis, Tennessee 38103 and its telephone number at such
address is (901) 578-2000.
Additional information with respect to Leader and its subsidiaries is
included in documents incorporated by reference in this Joint Proxy Statement.
See "AVAILABLE INFORMATION" and "DOCUMENTS INCORPORATED BY REFERENCE."
MEETINGS OF SHAREHOLDERS
Leader. This Joint Proxy Statement is being furnished to the holders of
Leader Common Stock in connection with the solicitation by the Leader Board of
Directors of proxies for use at the Leader Special Meeting at which Leader
shareholders will be asked to vote upon a proposal to approve the Agreement and
the Plan of Merger. The Leader Special Meeting will be held at the Dixon Gallery
& Gardens, 4339 Park Avenue, Memphis, Tennessee, on Thursday, September 26,
1996, at 10:00 a.m. local time. See "MEETINGS OF SHAREHOLDERS -- Date, Place,
Time, and Purpose."
Leader's Board of Directors has fixed the close of business on July 26,
1996, as the record date (the "Leader Record Date") for determination of the
shareholders entitled to notice of, and to vote at the Leader Special Meeting.
Only holders of record of shares of Leader Common Stock on the Leader Record
Date will
2
<PAGE> 12
be entitled to notice of, and to vote at the Leader Special Meeting. Each share
of Leader Common Stock is entitled to one vote. Shareholders who execute proxies
retain the right to revoke them at any time prior to being voted at the Leader
Special Meeting. On the Leader Record Date, there were 9,962,545 shares of
Leader Common Stock issued and outstanding. See "MEETINGS OF
SHAREHOLDERS -- Record Dates, Voting Rights, Required Votes, and Revocability of
Proxies."
Approval of the Agreement and the Plan of Merger requires the affirmative
vote of a majority of the votes entitled to be cast at the Leader Special
Meeting by the holders of the issued and outstanding shares of Leader Common
Stock. See "MEETINGS OF SHAREHOLDERS -- Record Dates, Voting Rights, Required
Votes, and Revocability of Proxies."
UPC. This Joint Proxy Statement is likewise being furnished to the holders
of UPC Common Stock in connection with the solicitation by the UPC Board of
Directors of proxies for use at the UPC Special Meeting at which UPC
shareholders will be asked to vote upon a proposal to approve the issuance of
shares of UPC Common Stock pursuant to the Agreement. The UPC Special Meeting
will be held at the Union Planters Administrative Center located at 7130
Goodlett Farms Parkway, Memphis, Tennessee, on Thursday, September 26, 1996, at
10:00 a.m. local time. See "MEETINGS OF SHAREHOLDERS -- Date, Place, Time, and
Purpose."
UPC's Board of Directors has fixed the close of business on July 26, 1996,
as the record date (the "UPC Record Date") for determination of the shareholders
entitled to notice of, and to vote at the UPC Special Meeting. Only holders of
record of shares of UPC Common Stock on the UPC Record Date will be entitled to
notice of, and to vote at the UPC Special Meeting. Each share of UPC Common
Stock is entitled to one vote. Shareholders who execute proxies retain the right
to revoke them at any time prior to being voted at the UPC Special Meeting. On
the UPC Record Date, there were 46,121,289 shares of UPC Common Stock issued and
outstanding. See "MEETINGS OF SHAREHOLDERS -- Record Dates, Voting Rights,
Required Votes, and Revocability of Proxies."
Approval of the issuance of shares of UPC Common Stock pursuant to the
Agreement requires the affirmative vote of a majority of the votes cast at the
UPC Special Meeting by the holders of the issued and outstanding shares of UPC
Common Stock. See "MEETINGS OF SHAREHOLDERS -- Record Dates, Voting Rights,
Required Votes, and Revocability of Proxies."
THE MERGER
General. The Agreement provides for the acquisition of Leader by UPC
through the merger of UPC Merger Subsidiary with and into Leader which would
survive the Merger. At the Effective Time, each share of Leader Common Stock
issued and outstanding immediately prior to the Effective Time (excluding shares
held by Leader, UPC, or their respective subsidiaries, in each case other than
shares held in a fiduciary capacity or in satisfaction of debts previously
contracted) will be converted into, and exchanged for 1.525 shares of UPC Common
Stock (subject to possible adjustment as described in the following paragraph)
(the "Exchange Ratio").
In the event (i) the "Average Closing Price," defined in the Agreement as
the average of the daily last sale prices of UPC Common Stock on the New York
Stock Exchange ("NYSE") (as reported by The Wall Street Journal or, if not
reported thereby, another authoritative source as selected by UPC) for the
twenty consecutive full trading days on which such shares are traded on the NYSE
ending at the close of trading on the date on which the consent of the Board of
Governors of the Federal Reserve System ("Federal Reserve") or the OTS to the
Merger (whichever shall be the later to occur) shall become effective (the
"Determination Date"), shall be less than $26.39 and (ii) (1) the quotient
obtained by dividing the Average Closing Price by $29.50 (the "UPC Ratio") shall
be less than (2) the quotient obtained by dividing the weighted average of the
closing prices (the "Index Price") of 16 bank holding companies designated in
the Agreement (the "Index Group") on the Determination Date by the Index Price
on March 14, 1996, less 0.15 (the "Index Ratio"), then Leader would have the
right to terminate the Agreement unless UPC should elect to adjust the Exchange
Ratio in the manner described under "DESCRIPTION OF TRANSACTION -- Possible
Adjustment of Exchange Ratio." Under no circumstances would the Exchange Ratio
be less than 1.525 shares of
3
<PAGE> 13
UPC Common Stock for each share of Leader Common Stock. The possible upward
adjustment of the Exchange Ratio depends on the factors mentioned above and is
not subject to a contractual limit. See "DESCRIPTION OF TRANSACTION -- Possible
Adjustment of Exchange Ratio."
No fractional shares of UPC Common Stock will be issued. Rather, cash
(without interest) will be paid in lieu of any fractional share interest
remaining after aggregating all shares and fractional shares to which any Leader
shareholder would be entitled upon consummation of the Merger, in an amount
equal to such fractional part of a share of UPC Common Stock multiplied by the
market value of one share of UPC Common Stock at the Effective Time. The market
value of one share of UPC Common Stock at the Effective Time shall be the
closing price of the UPC Common Stock on the NYSE-Composite Transactions List
(as reported by The Wall Street Journal or, if not reported thereby, by another
authoritative source as selected by UPC) on the last trading day preceding the
Effective Time. See "DESCRIPTION OF TRANSACTION -- General."
The Agreement also contemplates that at the Effective Time each award,
option, or other right to purchase or acquire shares of Leader Common Stock
pursuant to stock options, stock appreciation rights, or restricted stock awards
("Leader Rights") granted by Leader under the Leader Stock Plans, as that term
is defined in the Agreement, which are outstanding at the Effective Time,
whether or not exercisable, will be converted into and become rights with
respect to UPC Common Stock on a basis adjusted to reflect the Exchange Ratio.
See "DESCRIPTION OF TRANSACTION -- Effect of the Merger on Stock Rights."
As of the Leader Record Date, Leader had 9,962,545 shares of Leader Common
Stock issued and outstanding and 909,308 additional shares of Leader Common
Stock were subject to Leader Rights. Taking into account the Exchange Ratio of
1.525 shares of UPC Common Stock for each share of Leader Common Stock, it is
anticipated that upon consummation of the Merger, UPC would issue approximately
15,192,881 shares of UPC Common Stock excluding shares subject to options or
other Leader Rights assumed by UPC. Accordingly, UPC would then have issued and
outstanding approximately 61,314,170 shares of UPC Common Stock based on the
number of shares of UPC Common Stock issued and outstanding on the UPC Record
Date and without taking into account any additional shares of UPC Common Stock
subject to Leader Rights assumed by UPC or issuable in connection with
consummating the Other Pending Acquisitions.
Reasons for the Merger; Recommendations of the Boards of Directors of
Leader and UPC. The Board of Directors of Leader believes that the Agreement,
the Plan of Merger, and the Merger are in the best interests of Leader and its
shareholders, and the Board of Directors of UPC believes that the Agreement, the
Merger, and the issuance of shares of UPC Common Stock pursuant to the Agreement
are in the best interests of UPC and its shareholders. Each Board has approved
the matters to be approved by its respective shareholders. The Leader directors
recommend that Leader shareholders vote FOR approval of the Agreement and the
Plan of Merger. The UPC directors recommend that UPC shareholders vote FOR the
issuance of shares of UPC Common Stock pursuant to the Agreement. The Boards of
Directors of Leader and UPC believe that, among other things, the Merger will
result in a company with expanded opportunities for profitable growth and that
the combined resources and capital of Leader and UPC will provide an enhanced
ability to compete in the changing and competitive financial services industry.
See "DESCRIPTION OF TRANSACTION -- Background of and Reasons for the Merger."
In approving the Agreement and the Plan of Merger and the issuance of UPC
Common Stock pursuant to the Agreement, respectively, Leader's directors and
UPC's directors considered, among other things, Leader's and UPC's financial
condition, respectively, the financial terms and the income tax consequences of
the Merger, the likelihood of the Merger being approved by regulatory
authorities without undue conditions or delay, legal advice concerning the
proposed Merger, the views of Sandler O'Neill & Partners, L.P. ("Sandler
O'Neill") and Stifel, Nicolaus & Company, Incorporated ("Stifel Nicolaus"),
respectively, as to the fairness of the Exchange Ratio, from a financial point
of view, to the shareholders of Leader and the shareholders of UPC, and in
general the fairness of the terms of the Merger to Leader shareholders and UPC
shareholders, respectively. See "DESCRIPTION OF TRANSACTION -- Background of and
Reasons for the Merger."
4
<PAGE> 14
Opinion of Financial Advisors. Sandler O'Neill has rendered an opinion to
Leader that, based on and subject to the procedures, matters, and limitations
described in its opinion and such other matters as it considered relevant as of
the date of its opinion, the Exchange Ratio is fair, from a financial point of
view, to the shareholders of Leader. The opinion of Sandler O'Neill is attached
as Appendix III to this Joint Proxy Statement. Leader shareholders are urged to
read the opinion in its entirety. For a description of the procedures followed,
matters considered, and limitations on the reviews undertaken in connection
therewith, see "DESCRIPTION OF TRANSACTION -- Opinion of Leader's Financial
Advisor."
Similarly, Stifel Nicolaus has rendered an opinion to UPC that, based on
and subject to the procedures, matters, and limitations described in its opinion
and such other matters as it considered relevant, as of the date of its opinion,
the Exchange Ratio is fair, from a financial point of view, to the shareholders
of UPC. The opinion of Stifel Nicolaus is attached as Appendix IV to this Joint
Proxy Statement. UPC shareholders are urged to read the opinion in its entirety.
For a description of the procedures followed, matters considered, and
limitations on the reviews undertaken in connection therewith, see "DESCRIPTION
OF TRANSACTION -- Opinion of UPC's Financial Advisor."
Effective Time. Subject to the satisfaction of the conditions to the
obligations of the parties to effect the Merger, the Effective Time will occur
on the date and at the time that the Tennessee Articles of Merger become
effective with the Tennessee Secretary of State. Unless otherwise agreed upon by
Leader and UPC, and subject to the satisfaction of the conditions to the
obligations of the parties to effect the Merger, the parties will use their
reasonable efforts to cause the Effective Time to occur within thirty days (as
designated by UPC) following the last to occur of (i) the effective date
(including the expiration of any applicable waiting period) of the last consent
of any regulatory authority required lawfully to consummate the Merger; (ii) the
date on which the shareholders of Leader and UPC shall have approved the matters
relating to the Agreement and the Plan of Merger required to be approved by such
shareholders by applicable law or regulation; and (iii) the date on which all
other conditions precedent to each party's obligations under the Agreement shall
have been satisfied or waived (to the extent waivable by such party), provided
the Effective Time may not occur prior to October 1, 1996. See "DESCRIPTION OF
TRANSACTION -- Effective Time of the Merger," "-- Conditions to Consummation of
the Merger," and "-- Waiver, Amendment, and Termination."
Notwithstanding the foregoing, the parties have agreed to cooperate in
selecting the Effective Time to ensure that, with respect to the quarterly
period in which the Effective Time occurs, the holders of Leader Common Stock
will not be entitled to receive both a dividend in respect of their Leader
Common Stock and a dividend in respect of UPC Common Stock or fail to receive
any dividend. See "DESCRIPTION OF TRANSACTION -- Conduct of Business Pending the
Merger."
NO ASSURANCE CAN BE PROVIDED THAT THE NECESSARY SHAREHOLDER AND REGULATORY
APPROVALS CAN BE OBTAINED OR THAT THE OTHER CONDITIONS PRECEDENT TO THE MERGER
CAN OR WILL BE SATISFIED. LEADER AND UPC ANTICIPATE THAT ALL CONDITIONS TO THE
CONSUMMATION OF THE MERGER WILL BE SATISFIED SO THAT THE MERGER CAN BE
CONSUMMATED DURING THE LAST QUARTER OF 1996. HOWEVER, DELAYS IN THE CONSUMMATION
OF THE MERGER COULD OCCUR.
Exchange of Stock Certificates. Promptly after the Effective Time, UPC
will cause Union Planters National Bank, Memphis, Tennessee, acting in its
capacity as exchange agent for UPC (the "Exchange Agent"), to mail to each
holder of record of a certificate or certificates (collectively, the
"Certificates"), which, immediately prior to the Effective Time, represented
outstanding shares of Leader Common Stock, a letter of transmittal and
instructions for use in effecting the surrender and cancellation of the
Certificates in exchange for certificates representing shares of UPC Common
Stock. Cash will be paid to the holders of Leader Common Stock in lieu of the
issuance of any fractional shares of UPC Common Stock. In no event will the
holder of any surrendered Certificate(s) be entitled to receive interest on any
cash to be paid to such holder and in no event will Leader, UPC, or the Exchange
Agent be liable to any holder of Leader Common Stock for any UPC Common Stock or
dividends thereon or cash delivered in good faith to a public official pursuant
to any applicable abandoned property, escheat, or similar law.
Regulatory Approvals And Other Conditions. The Merger is subject to
approval by the Federal Reserve and the OTS. Applications have been filed with
each of these agencies for the requisite approvals and approval has been
received from the Federal Reserve. THERE CAN BE NO ASSURANCE THAT APPROVAL FROM
THE OTS WILL BE
5
<PAGE> 15
OBTAINED OR AS TO THE TIMING OF SUCH APPROVAL. THERE ALSO CAN BE NO ASSURANCE
THAT SUCH APPROVAL WILL NOT IMPOSE CONDITIONS THAT WOULD BE DEEMED MATERIALLY
BURDENSOME BY UPC (AS DEFINED IN THE AGREEMENT). As of the date hereof, a number
of protests to the Merger have been submitted to the OTS in connection with the
application. Such protests are under consideration. The effect of such protests
may be to delay the processing of the application. See "DESCRIPTION OF
TRANSACTION -- Regulatory Approvals."
Consummation of the Merger is subject to various other conditions,
including receipt of the required approval of Leader shareholders, receipt of
the required approval of UPC shareholders, receipt of an opinion of counsel as
to the tax-free nature of certain aspects of the Merger, receipt of a letter
from the independent accountants of UPC that the Merger will qualify for pooling
of interests accounting treatment, and certain other conditions. See
"DESCRIPTION OF TRANSACTION -- Conditions to Consummation of the Merger."
Waiver, Amendment, And Termination. The Agreement may be terminated and
the Merger abandoned at any time prior to the Effective Time by mutual action of
the Boards of Directors of Leader and UPC, or by the action of the Board of
Directors of either company under certain circumstances, including (i) if the
Merger is not consummated by March 1, 1997, unless the failure to consummate by
such time is due to a breach of the Agreement by the party seeking to terminate
or (ii) in certain circumstances, if adjustments are not made to the Exchange
Ratio. If for any reason the Merger should not be consummated, Leader will
continue to operate as a savings and loan holding company under its present
management. See "DESCRIPTION OF TRANSACTION -- Possible Adjustment of Exchange
Ratio" and "-- Waiver, Amendment, and Termination."
Dissenters' Rights. The Tennessee Business Corporation Act ("Tennessee
Act") denies the holders of Leader Common Stock and the holders of UPC Common
Stock dissenters' rights with respect to the Merger or to the issuance of shares
of UPC Common Stock, as applicable, pursuant to the Agreement. See "DESCRIPTION
OF TRANSACTION -- Dissenters' Rights."
Interests of Certain Persons in the Merger. Certain members of Leader's
management and Board of Directors have interests in the Merger in addition to
their interests as shareholders of Leader generally. Those interests relate to,
among other things, certain liquidating payments and severance arrangements,
employment agreements and provisions in the Agreement regarding indemnification
and eligibility for certain UPC employee benefits. See "DESCRIPTION OF
TRANSACTION -- Interests of Certain Persons in the Merger."
Certain Federal Income Tax Consequences of the Merger. It is intended that
the Merger will be treated as a reorganization within the meaning of Section 368
of the Internal Revenue Code of 1986, as amended (the "Code"). Accordingly, no
gain or loss will be recognized by a Leader shareholder upon the exchange of
such shareholder's Leader Common Stock solely for shares of UPC Common Stock.
Subject to the provisions and limitations of Section 302(a) of the Code, gain or
loss will be recognized with respect to cash received in lieu of fractional
shares. Gain recognition, if any, will not be in excess of the amount of cash
received. See "DESCRIPTION OF TRANSACTION -- Certain Federal Income Tax
Consequences." Consummation of the Merger is conditioned upon receipt by Leader
and UPC of an opinion of Alston & Bird substantially to this effect. DUE TO THE
INDIVIDUAL NATURE OF THE TAX CONSEQUENCES OF THE MERGER, LEADER SHAREHOLDERS ARE
URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE EFFECT OF THE MERGER ON
THEM UNDER FEDERAL, STATE, LOCAL, AND FOREIGN TAX LAWS. For a further discussion
of the federal income tax consequences of the Merger, see "DESCRIPTION OF
TRANSACTION -- Certain Federal Income Tax Consequences."
Accounting Treatment. It is intended that the Merger will be accounted for
as a pooling of interests for accounting and financial reporting purposes. See
"DESCRIPTION OF TRANSACTION -- Accounting Treatment."
Certain Differences in Shareholders' Rights. At the Effective Time, Leader
shareholders, whose rights are governed by Leader's Charter and Bylaws will
automatically become UPC shareholders, and their rights as UPC shareholders will
be determined by UPC's Restated Charter ("UPC's Charter") and Amended and
6
<PAGE> 16
Restated Bylaws ("UPC's Bylaws"). The rights of UPC shareholders differ from the
rights of Leader shareholders in certain important respects. See "EFFECT OF THE
MERGER ON RIGHTS OF SHAREHOLDERS."
Option Agreement. Leader, as issuer, and UPC, as grantee, entered into a
stock option agreement (the "Option Agreement") pursuant to which Leader granted
UPC an option to purchase, under certain circumstances and subject to certain
adjustments and limitations, up to 1,973,600 shares of Leader Common Stock at a
price of $41.50 per share. The Option Agreement is exercisable upon the
occurrence of certain events that create the potential for another party to
acquire control of Leader. To the best knowledge of Leader, no such event which
would permit exercise of the Option Agreement had occurred as of the date of
this Joint Proxy Statement. The Option Agreement was granted by Leader as a
condition of, and in consideration for, UPC's entering into the Agreement and is
intended to increase the likelihood that the Merger will be effected by making
it more difficult and more expensive for a third party to acquire control of
Leader. See "DESCRIPTION OF TRANSACTION -- Option Agreement."
Comparative Market Prices Of Common Stock. UPC Common Stock is traded on
the NYSE. Leader Common Stock is traded in the over-the-counter market and
quoted on the NASDAQ National Market System. The following table sets forth the
reported closing sale prices per share for Leader Common Stock and UPC Common
Stock and the equivalent per share prices (as explained below) for Leader Common
Stock on March 7, 1996, the last full business day preceding the public
announcement of the execution of the Agreement, and on August 5, 1996, the
latest practicable date prior to the mailing of this Joint Proxy Statement.
<TABLE>
<CAPTION>
LEADER
LEADER UPC EQUIVALENT PER
MARKET PRICE PER SHARE AT: COMMON STOCK COMMON STOCK SHARE PRICE
---------------------------------------------- ------------ ------------ --------------
<S> <C> <C> <C>
March 7, 1996................................. $38.00 $31.50 $48.04
August 5, 1996................................ $45.88 $30.25 $46.13
</TABLE>
The "Leader Equivalent Per Share Price" of a share of Leader Common Stock
at each specified date represents the closing sale price of a share of UPC
Common Stock on such date multiplied by the Exchange Ratio (or 1.525). See
"COMPARATIVE MARKET PRICES AND DIVIDENDS."
There can be no assurance as to what the market price of the UPC Common
Stock will be if and when the Merger is consummated.
SELECTED CONSOLIDATED FINANCIAL DATA
The following tables present for both UPC and Leader, selected consolidated
financial data for the five year period ended December 31, 1995, and for the
three month periods ended March 31, 1996 and 1995. The information for UPC has
been derived from the consolidated financial statements of UPC, including the
unaudited consolidated financial statements of UPC incorporated in this Joint
Proxy Statement by reference to UPC's Quarterly Report on Form 10-Q for the
three months ended March 31, 1996 and the audited consolidated financial
statements of UPC incorporated in this Joint Proxy Statement by reference to
UPC's 1995 Annual Report on Form 10-K for the year ended December 31, 1995, and
should be read in conjunction therewith and with the notes thereto. The
information for Leader has been derived from the consolidated financial
statements of Leader, including the unaudited consolidated financial statements
of Leader incorporated in this Joint Proxy Statement by reference to Leader's
Quarterly Report on Form 10-Q for the three months ended March 31, 1996, and the
audited consolidated financial statements of Leader incorporated in this Joint
Proxy Statement by reference to Leader's 1995 Annual Report on Form 10-K for the
year ended December 31, 1995 and should be read in conjunction therewith and
with the notes thereto. See "DOCUMENTS INCORPORATED BY REFERENCE." Historical
results are not necessarily indicative of results to be expected for any future
period. In the opinions of the management of both UPC and Leader, all
adjustments, consisting only of normal recurring adjustments necessary to arrive
at a fair statement of interim results of operations of UPC and Leader, have
been included. See "BUSINESS OF UPC -- Recent Developments" for information
concerning UPC's recently completed and pending acquisitions.
7
<PAGE> 17
UPC SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,(1) YEARS ENDED DECEMBER 31,
------------------------- ----------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net interest income............... $ 115,473 $ 108,839 $ 447,431 $ 423,114 $ 375,033 $ 305,211 $ 256,537
Provision for losses on loans..... 7,981 2,222 22,231 4,894 17,950 29,071 35,960
Investment securities gains
(losses)........................ 60 (21) 476 (20,298) 4,506 14,019 2,633
Other noninterest income.......... 40,137 36,100 157,176 121,103 123,056 103,506 95,415
Noninterest expense............... 89,152 90,665 382,164 427,697 346,450 297,665 255,906
----------- ----------- ----------- ----------- ---------- ---------- ----------
Earnings before income taxes,
extraordinary item, and
accounting changes.............. 58,537 52,031 200,688 91,328 138,195 96,000 62,719
Applicable income taxes........... 19,393 16,374 65,286 25,467 41,168 27,048 14,443
----------- ----------- ----------- ----------- ---------- ---------- ----------
Earnings before extraordinary item
and accounting changes.......... 39,144 35,657 135,402 65,861 97,027 68,952 48,276
Extraordinary item -- defeasance
of
debt, net of taxes.............. -- -- -- -- (3,206) -- --
Accounting changes, net of
taxes........................... -- -- -- -- 5,782 -- --
----------- ----------- ----------- ----------- ---------- ---------- ----------
Net earnings...................... $ 39,144 $ 35,657 $ 135,402 $ 65,861 $ 99,603 $ 68,952 $ 48,276
========== ========== ========== ========== ========= ========= =========
PER COMMON SHARE DATA
Primary
Earnings before extraordinary
item and accounting changes... $ 0.82 $ 0.75 $ 2.82 $ 1.28 $ 2.24 $ 1.75 $ 1.35
Extraordinary item -- defeasance
of debt, net of taxes......... -- -- -- -- (0.08) -- --
Accounting changes, net of
taxes......................... -- -- -- -- 0.15 -- --
Net earnings.................... 0.82 0.75 2.82 1.28 2.31 1.75 1.35
Fully diluted
Earnings before extraordinary
item and accounting changes... 0.78 0.72 2.70 1.28 2.18 1.73 1.35
Extraordinary item -- defeasance
of debt, net of taxes......... -- -- -- -- (0.07) -- --
Accounting changes, net of
taxes......................... -- -- -- -- 0.13 -- --
Net earnings.................... 0.78 0.72 2.70 1.28 2.24 1.73 1.35
Cash dividends.................... 0.27 0.23 0.98 0.88 0.72 0.60 0.48
Book value........................ 19.76 17.13 19.24 16.08 16.25 14.08 12.88
BALANCE SHEET DATA (AT PERIOD END)
Total assets...................... $11,368,682 $10,784,332 $11,277,116 $10,985,020 $9,919,944 $8,331,073 $6,566,973
Loans, net of unearned income..... 7,091,737 6,797,363 7,069,853 6,721,597 5,293,850 4,193,149 3,613,945
Allowance for losses on loans..... 136,277 135,410 133,487 133,966 125,499 100,282 74,739
Investment securities............. 2,951,092 2,836,777 2,774,890 3,084,110 3,431,081 2,935,665 1,864,871
Deposits.......................... 9,522,876 9,133,076 9,447,736 9,253,165 8,445,760 7,171,191 5,698,062
Short-term borrowings............. 236,220 222,415 241,023 455,010 300,414 343,452 244,513
Long-term debt(3)
Parent company.................. 214,761 114,803 214,758 114,790 114,729 74,292 38,163
Subsidiary banks................ 257,705 321,074 270,500 241,218 212,149 38,463 18,790
Total shareholders' equity........ 992,865 860,488 966,331 805,147 751,844 595,106 475,128
Average assets.................... 11,275,752 10,853,933 10,954,895 10,948,979 9,706,356 7,586,827 6,555,009
Average shareholders' equity...... 956,499 850,666 899,615 850,934 707,788 551,650 442,756
Average shares outstanding (in
thousands)
Primary......................... 45,752 44,515 45,008 43,741 38,914 35,463 34,569
Fully diluted................... 50,463 48,995 49,618 44,083 43,144 38,307 34,922
</TABLE>
(continued on following page)
8
<PAGE> 18
UPC SELECTED CONSOLIDATED FINANCIAL DATA -- (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,(1) YEARS ENDED DECEMBER 31,
------------------------- ----------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
PROFITABILITY AND CAPITAL RATIOS
Return on average assets.......... 1.40% 1.33% 1.24% 0.60% 1.03% 0.91% 0.74%
Return on average common equity... 17.35 18.16 15.92 7.61 15.10 13.11 10.95
Net interest income
(taxable-equivalent) to average
earning assets(2)............... 4.61 4.57 4.59 4.36 4.40 4.57 4.48
Loans/deposits.................... 74.47 74.43 74.83 72.64 62.68 58.47 63.42
Common and preferred dividend
payout ratio.................... 36.07 30.44 37.55 62.50 32.64 36.12 34.51
Equity/assets (period end)........ 8.73 7.98 8.57 7.33 7.58 7.14 7.24
Average shareholders'
equity/average total assets..... 8.48 7.84 8.21 7.77 7.29 7.27 6.75
Leverage ratio(4)................. 8.22 7.61 8.09 7.15 7.21 7.07 7.06
Tier 1 capital to risk-weighted
assets(4)....................... 12.89 12.46 12.64 11.88 13.10 12.85 11.66
Total capital to risk-weighted
assets(4)....................... 16.58 14.84 16.35 14.27 15.74 14.83 13.80
ASSET QUALITY RATIOS
Allowance/period end loans........ 1.92 1.99 1.89 1.99 2.37 2.39 2.07
Nonperforming loans/
total loans(5).................. 0.50 0.38 0.48 0.32 0.58 1.22 1.01
Allowance/nonperforming
loans(5)........................ 387 521 391 614 411 196 205
Nonperforming assets/loans and
foreclosed properties(6)........ 0.59 0.48 0.59 0.43 0.78 1.58 1.60
Provision/average loans........... 0.45 0.13 0.32 0.08 0.35 0.72 0.95
Net charge-offs/average loans..... 0.33 0.08 0.36 0.09 0.28 0.55 0.92
</TABLE>
- ---------------
(1) Interim period ratios have been annualized where applicable.
(2) Average balances and calculations do not include the impact of the net
unrealized gain or loss on available for sale securities.
(3) Long-term debt includes subordinated notes and debentures, obligations under
capital leases, mortgage indebtedness, and notes payable with maturities
greater than one year. Subsidiary banks' long-term debt is primarily
Federal Home Loan Bank ("FHLB") advances.
(4) The risk-based capital ratios are based upon capital guidelines prescribed
by Federal bank regulatory authorities. Under those guidelines, the
required minimum Tier 1 and Total capital to risk-weighted assets ratios
are 4% and 8%, respectively. The required minimum leverage ratio of Tier 1
capital to total adjusted assets is 3% to 5% (5% for bank holding companies
effecting acquisitions).
(5) Nonperforming loans include loans on nonaccrual status and restructured
loans.
(6) Nonperforming assets include nonperforming loans and foreclosed properties.
9
<PAGE> 19
LEADER SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,(1) YEARS ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net interest income.................. $ 26,207 $ 20,367 $ 88,510 $ 82,491 $ 64,257 $ 52,154 $ 38,165
Provision for losses on loans........ 1,511 1,206 5,150 4,767 4,710 8,296 8,900
Investment securities gains
(losses)........................... -- -- (67) (2,217) (998) (2,139) 1,067
Other noninterest income............. 6,185 5,844 23,558 25,638 11,999 9,823 19,081
Noninterest expense.................. 13,042 11,123 48,135 46,876 43,239 41,729 42,534
---------- ---------- ---------- ---------- ---------- ---------- ----------
Earnings before income taxes,
extraordinary item, and accounting
changes............................ 17,839 13,882 58,716 54,269 27,309 9,813 6,879
Applicable income taxes.............. 6,379 5,135 21,363 19,707 10,696 3,171 2,186
---------- ---------- ---------- ---------- ---------- ---------- ----------
Earnings before extraordinary item
and accounting changes............. 11,460 8,747 37,353 34,562 16,613 6,642 4,693
Extraordinary item -- early
extinguishment of debt............. -- -- -- -- (1,054) 94 (761)
Accounting changes, net of taxes..... -- -- -- -- (885) 2,952 --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net earnings......................... $ 11,460 $ 8,747 $ 37,353 $ 34,562 $ 14,674 $ 9,688 $ 3,932
========= ========= ========= ========= ========= ========= =========
PER COMMON SHARE DATA
Earnings before extraordinary item
and accounting changes(6).......... $ 1.11 $ 0.87 $ 3.70 $ 3.33 $ 0.57 $ -- $ --
Extraordinary item -- early
extinguishment of debt............. -- -- -- -- (0.06) -- --
Accounting changes, net of taxes..... -- -- -- -- -- -- --
Net earnings(6)...................... 1.11 0.87 3.70 3.33 0.51 -- --
Cash dividends....................... 0.18 0.15 0.60 -- -- -- --
Book value........................... 25.71 21.44 24.95 20.58 17.27 -- --
BALANCE SHEET DATA (AT PERIOD END)
Total assets......................... $3,177,812 $2,529,574 $3,098,577 $2,440,043 $1,946,665 $1,849,302 $1,919,326
Loans, net of unearned income........ 2,067,571 1,799,668 1,964,022 1,715,053 1,318,812 1,174,203 1,163,385
Allowance for losses on loans........ 23,127 21,089 22,901 20,165 16,500 13,848 9,573
Investment securities................ 721,911 466,269 766,826 485,872 410,382 421,188 480,591
Deposits............................. 1,582,691 1,500,614 1,577,230 1,449,404 1,434,020 1,543,115 1,596,062
Short-term borrowings................ 589,120 317,063 597,260 244,828 -- -- --
Long-term debt
Parent company..................... -- -- -- -- -- -- --
Subsidiary banks................... 592,760 372,860 541,318 451,784 250,906 164,384 168,625
Total shareholders' equity........... 255,171 212,293 246,830 203,447 183,886 75,161 65,473
Average assets......................... 3,139,402 2,495,967 2,704,289 2,156,200 1,859,149 1,888,222 2,029,561
Average shareholders' equity........... 251,642 206,789 219,617 192,056 105,352 72,219 64,100
Average shares outstanding (in
thousands)(6)
Primary.............................. 10,323 10,033 10,083 10,391 2,805 -- --
Fully Diluted........................ 10,357 10,039 10,083 10,391 2,805 -- --
PROFITABILITY AND CAPITAL RATIOS
Return on average assets............. 1.47% 1.42% 1.38% 1.60% 0.79% 0.51% 0.19%
Return on average common equity...... 18.32 17.15 16.82 17.64 13.98 13.41 6.13
Net interest income
(taxable-equivalent) to average
earning assets(2).................. 3.60 3.51 3.53 4.11 3.71 3.00 2.08
Loans/deposits....................... 130.64 119.72 124.52 118.33 91.97 76.09 72.89
Common and preferred dividend payout
ratio.............................. 14.95 17.00 16.20 -- -- -- --
Equity/assets (period end)........... 8.03 8.39 7.97 8.34 9.45 4.06 3.41
Average shareholders' equity/average
total assets....................... 8.02 8.28 8.12 8.91 5.67 3.82 3.17
Leverage ratio(3).................... 7.89 8.48 8.77 9.45 9.78 3.18 2.41
Tier 1 capital to risk-weighted
assets(3).......................... 17.68 19.78 17.26 17.77 19.74 6.18 4.48
Total capital to risk-weighted
assets(3).......................... 18.73 20.84 18.37 19.02 20.99 7.96 7.08
ASSET QUALITY RATIOS
Allowance/period end loans........... 1.12 1.17 1.17 1.18 1.25 1.18 0.82
Nonperforming loans/total loans(4)... 0.46 0.37 0.57 0.75 0.79 0.78 1.57
Allowance/nonperforming loans(4)..... 242 313 203 156 158 151 53
Nonperforming assets/loans and
foreclosed properties(5)........... 0.54 0.55 0.65 0.93 1.41 2.42 4.57
Provision/average loans.............. 0.30 0.28 0.28 0.32 0.38 0.70 0.75
Net charge-offs/average loans........ 0.26 0.07 0.13 0.07 0.16 0.34 0.73
</TABLE>
- ---------------
(1) Interim period ratios have been annualized where applicable.
(2) Average balances and calculations do not include the impact of the net
unrealized gain or loss on available for sale securities.
(3) The risk-based capital ratios are based upon capital guidelines prescribed
by Federal bank regulatory authorities. Under those guidelines, the
required minimum Tier 1 and Total capital to risk-weighted assets ratios
are 4% and 8%, respectively. The required minimum leverage ratio of Tier 1
capital to total adjusted assets is 3% to 5%.
(4) Nonperforming loans include loans on nonaccrual status and restructured
loans.
(5) Nonperforming assets include nonperforming loans and foreclosed properties.
(6) The 1993 computation of earnings per common share is based on fourth quarter
income, since the stock conversion occurred on September 30, 1993.
10
<PAGE> 20
EQUIVALENT AND PRO FORMA PER SHARE DATA
The following table presents selected, comparative, unaudited per share
data for: (i) UPC Common Stock and Leader Common Stock on an historical basis;
(ii) UPC Common Stock on a pro forma basis, giving effect only to the Merger;
(iii) UPC Common Stock on a pro forma basis, including the Merger, all Recently
Completed Acquisitions and the Other Pending Acquisitions, except for the
acquisition of Financial Bancshares, Inc. (the "FBI Acquisition") in St. Louis,
Missouri (See "BUSINESS OF UPC -- Recent Developments -- Pending Acquisitions");
(iv) Leader Common Stock on an equivalent pro forma basis; and (v) Leader Common
Stock on an equivalent pro forma basis, including all Recently Completed
Acquisitions and the Other Pending Acquisitions, except for the FBI Acquisition,
for the periods indicated.
The pro forma data for 1995 and the three month period ended March 31, 1996
reflect the assumed acquisition of Leader, all Recently Completed Acquisitions
and all Other Pending Acquisitions, except for the FBI Acquisition, as of
January 1, 1995. The pro forma data for 1994 and 1993 reflect only the assumed
acquisition of Leader because the Other Pending Acquisitions and Recently
Completed Acquisitions are not considered significant to UPC. Reference is made
to UPC's Current Reports on Form 8-K dated March 8, 1996, April 1, 1996, May 21,
1996 and May 22, 1996 for information regarding Leader and the pro forma
financial statements which are incorporated by reference herein. See "DOCUMENTS
INCORPORATED BY REFERENCE."
The pro forma information is not necessarily indicative of the results of
the future operations of either UPC, Leader, the Recently Completed Acquisitions
or the Other Pending Acquisitions or the actual results that would have occurred
had the Merger been consummated on January 1, 1993. The information is derived
from, and should be read in conjunction with, the historical consolidated
financial statements of UPC (including related notes thereto) which are
incorporated by reference, the historical consolidated financial statements of
Leader (including related notes thereto) which are incorporated by reference,
and the pro forma consolidated financial statements (including related notes
thereto) which are incorporated by reference herein. See "DOCUMENTS INCORPORATED
BY REFERENCE," "--Selected Consolidated Financial Data," "-- Selected Pro Forma
Consolidated Financial Data for UPC and Leader," "-- Pro Forma Condensed
Consolidated Financial Information," and "BUSINESS OF UPC -- Recent
Developments."
11
<PAGE> 21
UNION PLANTERS CORPORATION
HISTORICAL AND PRO FORMA COMPARATIVE PER SHARE DATA
<TABLE>
<CAPTION>
YEARS ENDED
THREE MONTHS DECEMBER 31,(1)
ENDED -----------------------
MARCH 31, 1996 1995 1994 1993
------------ ----- ----- -----
<S> <C> <C> <C> <C>
EARNINGS BEFORE EXTRAORDINARY ITEMS AND ACCOUNTING
CHANGES
UPC
Primary............................................. $ 0.82 $2.82 $1.28 $2.24
Fully diluted....................................... 0.78 2.70 1.28 2.18
UPC pro forma (Leader only)
Primary............................................. 0.79 2.72 1.52 2.17
Fully diluted....................................... 0.76 2.64 1.52 2.11
UPC pro forma (all Recently Completed Acquisitions and
Other Pending Acquisitions, including Leader)(2)
Primary............................................. 0.79 2.65 1.52 2.17
Fully diluted....................................... 0.76 2.57 1.52 2.11
Leader................................................. 1.11 3.70 3.33 0.51
Leader equivalent pro forma (Leader only)(1)
Primary............................................. 1.20 4.15 2.32 3.31
Fully diluted....................................... 1.16 4.03 2.32 3.22
Leader equivalent pro forma (all Recently Completed
Acquisitions and Other Pending Acquisitions,
including Leader)(1)
Primary............................................. 1.20 4.04 2.32 3.31
Fully diluted....................................... 1.16 3.92 2.32 3.22
CASH DIVIDENDS PER SHARE
UPC.................................................... 0.27 0.98 0.88 0.72
UPC pro forma (Leader only)............................ 0.27 0.98 0.88 0.72
Leader................................................. 0.18 0.60 -- --
Leader equivalent pro forma(1)......................... 0.41 1.49 1.34 1.10
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
BOOK VALUE PER COMMON SHARE
UPC............................................................ $19.76 $19.24
UPC pro forma (Leader only).................................... 19.05 18.55
UPC pro forma (all Recently Completed Acquisitions and Other
Pending Acquisitions, including Leader)..................... 19.32 18.63
Leader......................................................... 25.71 24.95
Leader equivalent pro forma (Leader only)(1)................... 29.05 28.29
Leader equivalent pro forma (all Recently Completed
Acquisitions and Other Pending Acquisitions, including
Leader)(1).................................................. 29.46 28.41
</TABLE>
- ---------------
(1) The equivalent pro forma per share data for Leader are computed by
multiplying UPC's pro forma information by 1.525, the Exchange Ratio.
(2) See also, "BUSINESS OF UPC -- Recent Developments."
12
<PAGE> 22
SELECTED PRO FORMA CONSOLIDATED FINANCIAL DATA FOR UPC AND LEADER
The following selected pro forma consolidated financial data for the five
year period ended December 31, 1995, and for the three months ended March 31,
1996 and 1995 give effect to the Merger as of the date or at the beginning of
the periods indicated, with the Merger treated as a pooling of interests for
accounting purposes. The selected pro forma consolidated financial data are
presented for informational purposes only and are not necessarily indicative of
the consolidated financial position or results of operations which actually
would have occurred if the Merger had been consummated at the date or at the
beginning of the periods indicated or which may be obtained in the future. The
information should be read in conjunction with the unaudited pro forma
consolidated financial information appearing elsewhere in this Joint Proxy
Statement and included in UPC's Current Report on Form 8-K dated May 22, 1996.
See "-- Pro Forma Condensed Consolidated Financial Information" and "DOCUMENTS
INCORPORATED BY REFERENCE."
UPC SELECTED PRO FORMA CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,(1) YEARS ENDED DECEMBER 31,
------------------------ --------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- ----------- ----------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net interest income.................. $ 141,680 $ 129,206 $ 535,941 $ 505,605 $ 439,290 $ 357,365 $ 294,702
Provision for losses on loans........ 9,492 3,428 27,381 9,661 22,660 37,367 44,860
Investment securities gains (losses). 60 (21) 409 (22,515) 3,508 11,880 3,700
Other noninterest income............. 48,885 44,044 193,640 159,004 154,254 136,162 125,051
Noninterest expense.................. 104,757 103,888 443,205 486,836 408,888 362,028 309,421
----------- ----------- ----------- ----------- ----------- ----------- ----------
Earnings before income taxes,
extraordinary items, and accounting
changes............................ 76,376 65,913 259,404 145,597 165,504 106,012 69,172
Applicable income taxes.............. 25,772 21,509 86,649 45,174 51,864 30,219 16,629
----------- ----------- ----------- ----------- ----------- ----------- ----------
Earnings before extraordinary items
and accounting changes............. 50,604 44,404 172,755 100,423 113,640 75,793 52,543
Extraordinary items.................. -- -- -- -- (4,260) (105) (335)
Accounting changes, net of taxes..... -- -- -- -- 4,897 2,952 --
----------- ----------- ----------- ----------- ----------- ----------- ----------
Net earnings................... $ 50,604 $ 44,404 $ 172,755 $ 100,423 $ 114,277 $ 78,640 $ 52,208
========== ========== ========== ========== ========== ========== =========
PER COMMON SHARE DATA(7)
Primary
Earnings before extraordinary items
and accounting
changes.......................... $ 0.79 $ 0.71 $ 2.72 $ 1.52 $ 2.17 $ 1.75 $ 1.35
Extraordinary items................ -- -- -- -- (0.10) -- --
Accounting changes, net of taxes... -- -- -- -- 0.11 -- --
Net earnings....................... 0.79 0.71 2.72 1.52 2.18 1.75 1.35
Fully diluted
Earnings before extraordinary items
and accounting changes........... 0.76 0.69 2.64 1.52 2.11 1.73 1.35
Extraordinary items................ -- -- -- -- (0.09) -- --
Accounting changes, net of taxes... -- -- -- -- 0.10 -- --
Net earnings....................... 0.76 0.69 2.64 1.52 2.12 1.73 1.35
Cash dividends....................... 0.27 0.23 0.98 0.88 0.72 0.60 0.48
Book value........................... 19.05 16.34 18.55 15.42 14.80 14.08 12.88
</TABLE>
(continued on the following page)
13
<PAGE> 23
UPC SELECTED PRO FORMA CONSOLIDATED FINANCIAL DATA (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,(1) YEARS ENDED DECEMBER 31,
------------------------- ------------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- ----------- ----------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT PERIOD END)
Total assets................... $14,547,501 $13,313,906 $14,377,035 $13,425,063 $11,866,609 $10,180,375 $8,486,299
Loans, net of unearned
income....................... 9,159,308 8,597,031 9,033,875 8,436,650 6,612,662 5,367,352 4,777,330
Allowance for losses on
loans........................ 159,404 156,499 156,388 154,131 141,999 114,130 84,312
Investment securities.......... 3,707,083 3,326,988 3,575,755 3,592,482 3,854,767 3,370,321 2,359,447
Deposits....................... 11,105,567 10,633,690 11,024,966 10,702,569 9,879,780 8,714,306 7,294,124
Short-term borrowings.......... 825,340 539,478 838,283 699,838 300,414 343,452 244,513
Long-term debt(3)
Parent company............... 214,761 114,803 214,758 114,790 114,729 74,292 38,163
Subsidiary banks............. 850,465 693,934 811,818 693,002 463,055 202,847 187,415
Total shareholders' equity..... 1,249,043 1,072,781 1,214,503 1,008,594 935,730 670,267 540,601
Average assets................. 14,415,154 13,349,900 13,659,184 13,105,179 11,565,505 9,475,049 8,584,570
Average shareholders' equity... 1,208,141 1,057,455 1,119,232 1,042,990 813,140 623,869 506,856
Average shares outstanding (in
thousands)
Primary...................... 61,494 59,816 60,384 59,587 43,192 35,463 34,569
Fully Diluted................ 66,258 64,305 64,994 59,929 47,422 38,307 34,922
PROFITABILITY AND CAPITAL RATIOS
Return on average assets....... 1.41% 1.35% 1.26% 0.77% 0.99% 0.83% 0.61%
Return on average common
equity....................... 17.57 17.94 16.16 9.76 14.92 13.15 10.32
Net interest income (taxable-
equivalent) to average
earning assets(2)............ 4.39 4.38 4.38 4.32 4.29 4.26 3.92
Loans/deposits................. 82.47 80.82 81.94 78.83 66.93 61.59 65.50
Common and preferred dividend
payout ratio................. 31.29 30.18 32.71 41.29 28.34 32.95 31.45
Equity/assets (period end)..... 8.59 8.06 8.45 7.51 7.89 6.58 6.37
Average shareholders'
equity/average total
assets....................... 8.38 7.92 8.19 7.96 7.03 6.58 5.90
Leverage ratio(4).............. 8.16 7.77 8.23 7.53 7.62 6.36 5.97
Tier 1 capital to risk-weighted
assets(4).................... 13.69 13.48 13.41 12.75 14.07 11.70 10.12
Total capital to risk-weighted
assets(4).................... 16.94 15.68 16.70 14.97 16.51 13.64 12.36
ASSET QUALITY RATIOS
Allowance/period end loans..... 1.74 1.82 1.73 1.83 2.15 2.13 1.76
Nonperforming loans/total
loans(5)..................... 0.49 0.38 0.50 0.41 0.62 1.12 1.14
Allowance/nonperforming
loans(5)..................... 356 479 344 444 346 189 154
Nonperforming assets/loans and
foreclosed properties(6)..... 0.58 0.49 0.60 0.53 0.91 1.77 2.34
Provision/average loans........ 0.42 0.16 0.31 0.13 0.36 0.72 0.90
Net charge-offs/average
loans........................ 0.31 0.07 0.31 0.09 0.26 0.50 0.87
</TABLE>
- ---------------
(1) Interim period ratios have been annualized where applicable.
(2) Average balances and calculations do not include the impact of the net
unrealized gain or loss on available for sale securities.
(3) Long-term debt includes subordinated notes and debentures, obligations under
capital leases, mortgage indebtedness, and notes payable with maturities
greater than one year. Subsidiary banks' long-term debt is primarily FHLB
advances.
(4) The risk-based capital ratios are based upon capital guidelines prescribed
by Federal bank regulatory authorities. Under those guidelines, the required
minimum Tier 1 and Total capital to risk-weighted assets ratios are 4% and
8%, respectively. The required minimum leverage ratio of Tier 1 capital to
total adjusted assets is 3% to 5% (5% for bank holding companies effecting
acquisitions).
(5) Nonperforming loans include loans on nonaccrual status and restructured
loans.
(6) Nonperforming assets include nonperforming loans and foreclosed properties.
(7) Earnings per share for the years ended December 31, 1992 and 1991 are for
UPC only. Leader was organized on March 18, 1993 in connection with the
conversion of its principal subsidiary, Leader Federal from a federal mutual
savings bank to a federally-chartered capital stock savings bank.
Accordingly, the calculation of pro forma earnings per share for the year
ended December 31, 1993 on a pooled basis is based on Leader's fourth
quarter net income since the stock conversion occurred on September 30,
1993.
14
<PAGE> 24
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following tables contain unaudited pro forma condensed consolidated
financial statements including a balance sheet at March 31, 1996 and statements
of earnings for the three months ended March 31, 1996 and for the years ended
December 31, 1995, 1994 and 1993. These statements present on a pro forma basis
historical results for (i) UPC for all periods, (ii) UPC and Leader for all
periods, and (iii) UPC, Leader, the Recently Completed Acquisitions, and the
Other Pending Acquisitions, except for the FBI Acquisition (see "BUSINESS OF
UPC -- Recent Developments -- Pending Acquisitions") as of March 31, 1996, and
for the three months ended March 31, 1996 and for the twelve months ended
December 31, 1995.
The unaudited pro forma condensed consolidated financial statements also
reflect UPC's Recently Completed Acquisitions: (i) First Bancshares of Eastern
Arkansas, Inc. and its subsidiary, First National Bank of West Memphis,
Arkansas, with total assets of $60 million and (ii) First Bancshares of N.E.
Arkansas, Inc. and its subsidiary, First National Bank of Osceola, Arkansas,
with total assets of $62 million. Both acquisitions were accounted for using the
purchase method of accounting. Additionally, these statements reflect the Merger
and certain of UPC's Other Pending Acquisitions: (i) Valley Federal Savings Bank
("Valley Federal") in Sheffield, Alabama, with total assets of $119 million
which is expected to be accounted for using the pooling of interests method of
accounting; (ii) Eastern National Bank ("ENB"), a $286 million bank located in
Miami, Florida, which is expected to be accounted for using the purchase method
of accounting; (iii) Franklin Financial Group, Inc. ("FFGI"), in Morristown,
Tennessee, a savings and loan holding company and its subsidiary, Franklin
Federal Savings Bank ("Franklin Federal"), with total assets of $137 million
which is expected to be accounted for using the pooling of interests method of
accounting; and (iv) BancAlabama, Inc. ("BancAlabama"), Huntsville, Alabama, a
bank holding company and its subsidiary BankAlabama-Huntsville, with total
assets of $98 million, which is expected to be accounted for using the pooling
of interests method of accounting. As noted above, the FBI Acquisition is not
included.
The operating results for Valley Federal and FFGI included in the unaudited
pro forma statement of earnings have been converted from their respective fiscal
year end (September 30) to UPC's fiscal year end (December 31) by adding their
respective first quarter operating results for the current year and subtracting
first quarter operating results for the previous year.
The Recently Completed Acquisitions and the Other Pending Acquisitions are
not considered significant to UPC from a financial statement presentation
standpoint. Therefore, the financial information for the transactions expected
to be accounted for using the pooling of interests method of accounting will be
restated only for the current period.
The unaudited pro forma condensed consolidated financial statements include
adjustments necessary to record the entities that have been or are expected to
be acquired using the purchase method of accounting. Eliminations have been made
for significant intercompany transactions.
The unaudited pro forma condensed consolidated financial statements should
be read in conjunction with the consolidated historical financial statements of
UPC and Leader which are incorporated by reference herein, and in conjunction
with the information presented in UPC's Current Reports on Form 8-K dated March
8, 1996, April 1, 1996, May 21, 1996 and May 22, 1996, which are incorporated by
reference herein. Pro forma results are not necessarily indicative of future
operating results. Certain nonrecurring charges as discussed in "BUSINESS OF
UPC -- Recent Developments -- Earnings Considerations Related to Pending
Acquisitions" have not been included in the unaudited pro forma condensed
consolidated financial statements. See "DOCUMENTS INCORPORATED BY REFERENCE."
15
<PAGE> 25
UNION PLANTERS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
<TABLE>
<CAPTION>
UPC, LEADER
AND RECENTLY
UPC COMPLETED AND
AND OTHER PENDING
UPC LEADER ACQUISITIONS
----------- ----------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Cash and due from banks................................ $ 475,211 $ 504,180 $ 529,275
Interest-bearing deposits at financial institutions.... 3,820 4,279 4,968
Federal funds sold and securities purchased under
agreements to resell................................. 182,199 275,199 295,593
Trading account assets................................. 134,926 134,926 134,926
Loans held for resale.................................. 91,007 121,146 121,146
Available for sale securities, at fair value........... 2,951,092 3,707,083 3,830,916
Loans.................................................. 7,123,637 9,200,349 9,632,384
Less: Unearned income................................ (31,900) (41,041) (42,617)
Allowance for losses on loans.................. (136,277) (159,404) (163,573)
----------- ----------- --------------
Net loans......................................... 6,955,460 8,999,904 9,426,194
Premises and equipment................................. 229,725 248,999 268,903
Accrued interest receivable............................ 100,811 175,219 179,396
Goodwill and other intangibles......................... 62,141 62,141 70,877
Other assets........................................... 182,290 314,425 320,749
----------- ----------- --------------
Total assets................................. $11,368,682 $14,547,501 $ 15,182,943
========== ========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest-bearing.................................. $ 1,364,399 $ 1,565,921 $ 1,629,387
Certificates of deposit of $100,000 and over......... 784,327 944,410 1,012,358
Other interest-bearing............................... 7,374,150 8,595,236 9,020,196
----------- ----------- --------------
Total deposits............................... 9,522,876 11,105,567 11,661,941
Short-term borrowings.................................. 236,220 825,340 832,433
FHLB advances.......................................... 256,178 836,756 847,610
Long-term debt......................................... 216,288 228,470 242,304
Accrued interest, expenses, and taxes.................. 104,846 142,704 145,987
Other liabilities...................................... 39,409 159,621 162,835
----------- ----------- --------------
Total liabilities............................ 10,375,817 13,298,458 13,893,110
----------- ----------- --------------
Shareholders' equity
Preferred stock
Convertible....................................... 91,810 91,810 98,262
Nonconvertible.................................... -- -- --
Common stock......................................... 228,012 303,682 308,445
Additional paid-in capital........................... 117,044 129,217 149,030
Net unrealized gain on available for sale
securities........................................ 19,145 27,500 27,164
Retained earnings.................................... 536,854 696,834 706,932
Treasury stock....................................... -- -- --
----------- ----------- --------------
Total shareholders' equity................... 992,865 1,249,043 1,289,833
----------- ----------- --------------
Total liabilities and shareholders' equity... $11,368,682 $14,547,501 $ 15,182,943
========== ========== ===========
</TABLE>
16
<PAGE> 26
UNION PLANTERS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
UPC, LEADER
AND RECENTLY
COMPLETED AND
UPC AND OTHER PENDING
UPC LEADER ACQUISITIONS
-------- -------- -------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
Interest income
Interest and fees on loans............................ $164,033 $210,344 $ 220,679
Interest on investment securities
Taxable............................................ 35,735 49,546 51,575
Tax-exempt......................................... 7,550 7,666 7,666
Interest on deposits at financial institutions........ 57 62 91
Interest on federal funds sold and securities
purchased under agreements to resell............... 4,818 6,169 6,328
Interest on trading account assets.................... 2,387 2,387 2,387
Interest on loans held for resale..................... 1,427 1,793 1,793
-------- -------- -------------
Total interest income......................... 216,007 277,967 290,519
-------- -------- -------------
Interest expense
Interest on deposits.................................. 89,994 108,919 114,310
Interest on short-term borrowings..................... 2,934 11,303 11,353
Interest on FHLB advances and long-term debt.......... 7,606 16,065 16,527
-------- -------- -------------
Total interest expense........................ 100,534 136,287 142,190
-------- -------- -------------
Net interest income........................... 115,473 141,680 148,329
Provision for losses on loans........................... 7,981 9,492 9,962
-------- -------- -------------
Net interest income after provision for losses
on loans.................................... 107,492 132,188 138,367
Noninterest income
Service charges on deposit accounts................... 16,641 17,770 18,410
Bank card income...................................... 5,159 5,389 5,389
Mortgage servicing income............................. 2,443 8,043 8,073
Trust service income.................................. 2,290 2,290 2,290
Profits and commissions from trading activities....... 2,207 2,207 2,207
Investment securities gains........................... 60 60 57
Other income.......................................... 11,397 13,186 13,930
-------- -------- -------------
Total noninterest income...................... 40,197 48,945 50,356
-------- -------- -------------
Noninterest expense
Salaries and employee benefits........................ 43,428 50,577 53,286
Net occupancy expense................................. 6,816 7,645 8,465
Equipment expense..................................... 7,260 8,375 8,375
Other expense......................................... 31,648 38,160 40,144
-------- -------- -------------
Total noninterest expense..................... 89,152 104,757 110,270
-------- -------- -------------
Earnings before income taxes.................. 58,537 76,376 78,453
Applicable income taxes................................. 19,393 25,772 26,669
-------- -------- -------------
Net earnings.................................. $ 39,144 $ 50,604 $ 51,784
======== ======== ===========
Earnings per common share
Primary............................................... $ 0.82 $ 0.79 $ 0.79
Fully diluted......................................... 0.78 0.76 0.76
Weighted average shares outstanding (in thousands)
Primary............................................... 45,752 61,494 62,994
Fully diluted......................................... 50,463 66,258 68,081
</TABLE>
17
<PAGE> 27
UNION PLANTERS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
UPC, LEADER
AND RECENTLY
UPC COMPLETED AND
AND OTHER PENDING
UPC LEADER ACQUISITIONS
--------- ---------- -------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
Interest income
Interest and fees on loans.......................... $ 636,769 $ 804,420 $ 853,145
Interest on investment securities
Taxable.......................................... 137,453 177,272 188,736
Tax-exempt....................................... 31,816 32,313 32,576
Interest on deposits at financial institutions...... 1,910 1,936 2,067
Interest on federal funds sold and securities
purchased under agreements to resell............. 12,095 17,041 17,503
Interest on trading account assets.................. 12,774 12,774 12,774
Interest on loans held for resale................... 3,865 5,318 5,318
--------- ---------- -------------
Total interest income....................... 836,682 1,051,074 1,112,119
--------- ---------- -------------
Interest expense
Interest on deposits................................ 347,859 422,360 449,182
Interest on short-term borrowings................... 12,825 33,856 34,076
Interest on FHLB advances and long-term debt........ 28,567 58,917 61,949
--------- ---------- -------------
Total interest expense...................... 389,251 515,133 545,207
--------- ---------- -------------
Net interest income......................... 447,431 535,941 566,912
Provision for losses on loans......................... 22,231 27,381 30,898
--------- ---------- -------------
Net interest income after provision for
losses on loans........................... 425,200 508,560 536,014
Noninterest income
Service charges on deposit accounts................. 71,611 75,694 79,583
Bank card income.................................... 20,103 20,740 20,740
Mortgage servicing income........................... 9,835 36,645 36,645
Trust service income................................ 8,010 8,010 8,010
Profits and commissions from trading activities..... 10,441 10,441 10,441
Investment securities gains......................... 476 409 373
Other income........................................ 37,176 42,110 45,485
--------- ---------- -------------
Total noninterest income.................... 157,652 194,049 201,277
--------- ---------- -------------
Noninterest expense
Salaries and employee benefits...................... 171,325 197,855 212,104
Net occupancy expense............................... 27,192 30,447 34,044
Equipment expense................................... 30,156 34,405 34,405
Other expense....................................... 153,491 180,498 193,512
--------- ---------- -------------
Total noninterest expense................... 382,164 443,205 474,065
--------- ---------- -------------
Earnings before income taxes................ 200,688 259,404 263,226
Applicable income taxes............................... 65,286 86,649 89,467
--------- ---------- -------------
Net earnings................................ $ 135,402 $ 172,755 $ 173,759
========= ========= ===========
Earnings per common share
Primary............................................. $ 2.82 $ 2.72 $ 2.65
Fully diluted....................................... 2.70 2.64 2.57
Weighted average shares outstanding (in thousands)
Primary............................................. 45,008 60,385 61,879
Fully diluted....................................... 49,618 64,995 67,053
</TABLE>
18
<PAGE> 28
UNION PLANTERS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
UPC
AND
UPC LEADER
-------- --------
(DOLLARS IN
THOUSANDS,
EXCEPT PER SHARE
DATA)
<S> <C> <C>
Interest income
Interest and fees on loans........................................... $517,032 $644,690
Interest on investment securities
Taxable........................................................... 162,012 193,276
Tax-exempt........................................................ 32,999 33,415
Interest on deposits at financial institutions....................... 734 748
Interest on federal funds sold and securities purchased under
agreements to resell.............................................. 4,472 6,862
Interest on trading account assets................................... 9,143 9,143
Interest on loans held for resale.................................... 1,573 2,396
-------- --------
Total interest income........................................ 727,965 890,530
-------- --------
Interest expense
Interest on deposits................................................. 262,572 317,721
Interest on short-term borrowings.................................... 21,300 28,277
Interest on FHLB advances and long-term debt......................... 20,979 38,927
-------- --------
Total interest expense....................................... 304,851 384,925
-------- --------
Net interest income.......................................... 423,114 505,605
Provision for losses on loans.......................................... 4,894 9,661
-------- --------
Net interest income after provision for losses on loans...... 418,220 495,944
Noninterest income
Service charges on deposit accounts.................................. 55,551 59,564
Bank card income..................................................... 10,953 11,386
Mortgage servicing income............................................ 9,621 31,060
Trust service income................................................. 7,990 7,990
Profits and commissions from trading activities...................... 6,639 6,639
Investment securities losses......................................... (20,298) (22,515)
Other income......................................................... 30,349 42,365
-------- --------
Total noninterest income..................................... 100,805 136,489
-------- --------
Noninterest expense
Salaries and employee benefits....................................... 175,218 201,532
Net occupancy expense................................................ 28,041 31,638
Equipment expense.................................................... 28,698 32,618
Other expense........................................................ 195,740 221,048
-------- --------
Total noninterest expense.................................... 427,697 486,836
-------- --------
Earnings before income taxes................................. 91,328 145,597
Applicable income taxes................................................ 25,467 45,174
-------- --------
Net earnings................................................. $ 65,861 $100,423
======== ========
Earnings per common share
Primary.............................................................. $ 1.28 $ 1.52
Fully diluted........................................................ 1.28 1.52
Weighted average shares outstanding (in thousands)
Primary.............................................................. 43,741 59,587
Fully diluted........................................................ 44,083 59,929
</TABLE>
19
<PAGE> 29
UNION PLANTERS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
UPC
AND
UPC LEADER
-------- --------
(DOLLARS IN
THOUSANDS,
EXCEPT PER SHARE
DATA)
<S> <C> <C>
Interest income
Interest and fees on loans.................................................... $425,967 $531,417
Interest on investment securities
Taxable.................................................................... 157,403 186,966
Tax-exempt................................................................. 30,507 30,596
Interest on deposits at financial institutions................................ 1,862 1,884
Interest on federal funds sold and securities purchased under agreements to
resell..................................................................... 6,175 8,569
Interest on trading account assets............................................ 6,194 6,194
Interest on loans held for resale............................................. 7,438 8,163
-------- --------
Total interest income................................................. 635,546 773,789
-------- --------
Interest expense
Interest on deposits.......................................................... 238,019 298,312
Interest on short-term borrowings............................................. 8,203 8,203
Interest on FHLB advances and long-term debt.................................. 14,291 27,984
-------- --------
Total interest expense................................................ 260,513 334,499
-------- --------
Net interest income................................................... 375,033 439,290
Provision for losses on loans................................................... 17,950 22,660
-------- --------
Net interest income after provision for losses on loans............... 357,083 416,630
Noninterest income
Service charges on deposit accounts........................................... 49,490 53,723
Bank card income.............................................................. 10,393 10,884
Mortgage servicing income..................................................... 9,595 28,266
Trust service income.......................................................... 7,643 7,643
Profits and commissions from trading activities............................... 13,787 13,787
Investment securities gains................................................... 4,506 3,508
Other income.................................................................. 32,148 39,951
-------- --------
Total noninterest income.............................................. 127,562 157,762
-------- --------
Noninterest expense
Salaries and employee benefits................................................ 163,711 186,703
Net occupancy expense......................................................... 25,393 28,476
Equipment expense............................................................. 25,989 30,345
Other expense................................................................. 131,357 163,364
-------- --------
Total noninterest expense............................................. 346,450 408,888
-------- --------
Earnings before income taxes, extraordinary items, and accounting
changes............................................................... 138,195 165,504
Applicable income taxes......................................................... 41,168 51,864
-------- --------
Earnings before extraordinary items and accounting changes............ $ 97,027 $113,640
======== ========
Earnings per common share before extraordinary items and accounting changes(1)
Primary....................................................................... $ 2.24 $ 2.17
Fully diluted................................................................. 2.18 2.11
Weighted average shares outstanding (in thousands)
Primary....................................................................... 38,914 43,192
Fully diluted................................................................. 43,144 47,422
</TABLE>
- ---------------
(1) Leader was organized on March 18, 1993 in connection with the conversion of
its principal subsidiary, Leader Federal, from a federal mutual savings
bank to a federally-chartered capital stock savings bank. Accordingly, the
calculation of pro forma earnings per share on a pooled basis is based on
Leader's fourth quarter net income since the stock conversion occurred on
September 30, 1993.
20
<PAGE> 30
MEETINGS OF SHAREHOLDERS
DATE, PLACE, TIME, AND PURPOSE
Leader. This Joint Proxy Statement is being furnished to the holders of
Leader Common Stock in connection with the solicitation by the Leader Board of
Directors of proxies for use at the Leader Special Meeting at which Leader
shareholders will be asked to vote upon a proposal to approve the Agreement and
the Plan of Merger. The Leader Special Meeting will be held at the Dixon Gallery
& Gardens, 4339 Park Avenue, Memphis, Tennessee, on Thursday, September 26,
1996, at 10:00 a.m. local time. See "DESCRIPTION OF TRANSACTION."
UPC. This Joint Proxy Statement is being furnished to the holders of UPC
Common Stock in connection with the solicitation by the UPC Board of Directors
of proxies for use at the UPC Special Meeting at which UPC shareholders will be
asked to vote upon a proposal to approve the issuance of shares of UPC Common
Stock pursuant to the Agreement. The UPC Special Meeting will be held at the
Union Planters Administrative Center located at 7130 Goodlett Farms Parkway,
Memphis, Tennessee, on Thursday, September 26, 1996, at 10:00 a.m. local time.
See "DESCRIPTION OF TRANSACTION."
RECORD DATES, VOTING RIGHTS, REQUIRED VOTES, AND REVOCABILITY OF PROXIES
Leader. The close of business on July 26, 1996, has been fixed as the
Leader Record Date for determining holders of outstanding shares of Leader
Common Stock entitled to notice of, and to vote at the Leader Special Meeting.
Only holders of Leader Common Stock of record on the books of Leader at the
close of business on the Leader Record Date are entitled to notice of, and to
vote at the Leader Special Meeting. As of the Leader Record Date, there were
9,962,545 shares of Leader Common Stock issued and outstanding and held by 1,950
holders of record.
Holders of Leader Common Stock are entitled to one vote on each matter
considered and voted upon at the Leader Special Meeting for each share of Leader
Common Stock held of record as of the Leader Record Date. To hold a vote on any
proposal, a quorum must be assembled, which requires that a majority of the
shares of Leader Common Stock issued and outstanding and entitled to vote be
present in person or represented by proxy. In determining whether a quorum
exists at the Leader Special Meeting for purposes of all matters to be voted on,
all votes "for" or "against," as well as all abstentions, with respect to the
proposal receiving the most such votes, will be counted. The vote required for
the approval of the Agreement and the Plan of Merger is a majority of the shares
of Leader Common Stock entitled to be cast at the Leader Special Meeting by
holders of the issued and outstanding shares of Leader Common Stock.
Consequently, with respect to the proposal to approve the Agreement and the Plan
of Merger, abstentions and broker non-votes will be counted as part of the
number of votes to be used in determining if the proposal has received the
requisite number of votes for approval. Thus, an abstention or a broker non-vote
will have the same effect as a vote "against" such proposal.
Shares of Leader Common Stock represented by properly executed proxies, if
such proxies are received in time for exercise and not revoked, will be voted in
accordance with the instructions indicated on the proxies. IF NO INSTRUCTIONS
ARE INDICATED, SUCH PROXIES WILL BE VOTED FOR APPROVAL OF THE AGREEMENT AND THE
PLAN OF MERGER AND, IN THE DISCRETION OF THE PROXY HOLDER, AS TO ANY OTHER
MATTER WHICH MAY COME PROPERLY BEFORE THE LEADER SPECIAL MEETING. IF NECESSARY,
THE PROXY HOLDER MAY VOTE IN FAVOR OF A PROPOSAL TO ADJOURN THE LEADER SPECIAL
MEETING IN ORDER TO PERMIT FURTHER SOLICITATION OF PROXIES IN THE EVENT THERE
SHOULD NOT BE SUFFICIENT VOTES TO APPROVE THE FOREGOING PROPOSAL AT THE TIME OF
THE LEADER SPECIAL MEETING. HOWEVER, NO PROXY HOLDER WILL VOTE ANY PROXIES VOTED
"AGAINST" APPROVAL OF THE AGREEMENT AND THE PLAN OF MERGER "FOR" A PROPOSAL TO
ADJOURN THE LEADER SPECIAL MEETING FOR THAT PURPOSE.
FAILURE TO RETURN THE PROXY CARD OR TO VOTE IN PERSON AT THE LEADER SPECIAL
MEETING WILL HAVE THE EFFECT OF A VOTE CAST AGAINST APPROVAL OF THE AGREEMENT
AND THE PLAN OF MERGER.
A Leader shareholder who has given a proxy may nevertheless revoke it at
any time prior to its exercise at the Leader Special Meeting by (i) giving
written notice of revocation to the Secretary of Leader, (ii) properly
21
<PAGE> 31
submitting to Leader a duly executed proxy bearing a later date, or (iii)
attending the Leader Special Meeting and voting in person. All written notices
of revocation and other communications with respect to revocation of proxies
should be addressed as follows: Leader Financial Corporation, 158 Madison
Avenue, Memphis, Tennessee 38103; Attention: Catherine C. Stallings, Corporate
Secretary.
The directors and executive officers of Leader and their affiliates
beneficially owned, as of the Leader Record Date, 591,369 shares (or
approximately 5.94% of the issued and outstanding shares) of Leader Common
Stock, exclusive of shares which may be acquired pursuant to the exercise of
stock options or other rights or awards. Each director and executive officer of
Leader has indicated such person's intention to vote those Leader shares over
which such person has voting authority (other than in a fiduciary capacity) in
favor of the Agreement and the Plan of Merger. The directors and executive
officers of UPC and their affiliates beneficially owned, as of the Leader Record
Date, 1,600 shares (or approximately .02% of the issued and outstanding shares)
of Leader Common Stock. Each director and executive officer of UPC has indicated
such person's intention to vote those Leader shares over which such person has
voting authority (other than in a fiduciary capacity) in favor of the Agreement
and the Plan of Merger.
In addition, as of the Leader Record Date, Leader Federal, as a fiduciary,
custodian, or agent, had sole or shared voting power over 1,066,103 shares, or
10.70%, of the issued and outstanding shares of Leader Common Stock, under trust
agreements and other instruments and agreements, including shares held as
trustee or agent of various Leader employee benefit and stock purchase plans. It
is the policy of Leader Federal not to vote such shares in the absence of
instructions from other appropriate parties having an interest in such stock,
such as co-fiduciaries and participants in such plans, unless Leader Federal has
sole voting authority with respect to such shares.
UPC. The close of business on July 26, 1996, has been fixed as the UPC
Record Date for determining holders of outstanding shares of UPC Common Stock
entitled to notice of, and to vote at the UPC Special Meeting. Only holders of
UPC Common Stock of record on the books of UPC at the close of business on the
UPC Record Date are entitled to notice of, and to vote at the UPC Special
Meeting. As of the UPC Record Date, there were 46,121,289 shares of UPC Common
Stock issued and outstanding and held by 14,587 holders of record of UPC Common
Stock.
Holders of UPC Common Stock are entitled to one vote on each matter
considered and voted upon at the UPC Special Meeting for each share of UPC
Common Stock held of record as of the UPC Record Date. To hold a vote on any
proposal, a quorum must be assembled, which requires that a majority of the
shares of UPC Common Stock issued and outstanding be present in person or
represented by proxy. In determining whether a quorum exists at the UPC Special
Meeting for purposes of all matters to be voted on, all votes "for" or
"against," as well as all abstentions, with respect to the proposal receiving
the most such votes, will be counted. The vote required for approval of the
issuance of shares of UPC Common Stock pursuant to the Agreement is a majority
of the shares of UPC Common Stock cast at the UPC Special Meeting. Consequently,
with respect to the proposal to approve the issuance of shares of UPC Common
Stock pursuant to the Agreement, abstentions and broker non-votes will not be
counted as part of the number of votes to be used in determining if the proposal
has received the requisite number of votes for approval. Thus, an abstention or
a broker non-vote will have no effect on the vote with respect to the proposal.
Shares of UPC Common Stock represented by properly executed proxies, if
such proxies are received in time for exercise and not revoked, will be voted in
accordance with the instructions indicated on the proxies. IF NO INSTRUCTIONS
ARE INDICATED, SUCH PROXIES WILL BE VOTED FOR APPROVAL OF THE ISSUANCE OF SHARES
OF UPC COMMON STOCK PURSUANT TO THE AGREEMENT AND, IN THE DISCRETION OF THE
PROXY HOLDER, AS TO ANY OTHER MATTER WHICH MAY COME PROPERLY BEFORE THE UPC
SPECIAL MEETING. IF NECESSARY, THE PROXY HOLDER MAY VOTE IN FAVOR OF A PROPOSAL
TO ADJOURN THE UPC SPECIAL MEETING IN ORDER TO PERMIT FURTHER SOLICITATION OF
PROXIES IN THE EVENT THERE SHOULD NOT BE SUFFICIENT VOTES TO APPROVE THE
FOREGOING PROPOSALS AT THE TIME OF THE UPC SPECIAL MEETING. HOWEVER, NO PROXY
HOLDER WILL VOTE ANY PROXIES VOTED "AGAINST" APPROVAL OF THE ISSUANCE OF SHARES
OF UPC COMMON STOCK PURSUANT TO THE AGREEMENT "FOR" A PROPOSAL TO ADJOURN THE
UPC SPECIAL MEETING FOR THAT PURPOSE.
22
<PAGE> 32
A UPC shareholder who has given a proxy may nevertheless revoke it at any
time prior to its exercise at the UPC Special Meeting by (i) giving written
notice of revocation to the Secretary of UPC, (ii) properly submitting to UPC a
duly executed proxy bearing a later date, or (iii) attending the UPC Special
Meeting and voting in person. All written notices of revocation and other
communications with respect to revocation of proxies should be addressed as
follows: Union Planters Corporation, 7130 Goodlett Farms Parkway, Memphis,
Tennessee 38018; Attention: E. James House, Jr., Corporate Secretary.
The directors and executive officers of UPC and their affiliates
beneficially owned, as of the UPC Record Date, 1,410,154 shares (or
approximately 3.06% of the issued and outstanding shares) of UPC Common Stock.
Each director and executive officer of UPC has indicated such person's intention
to vote those UPC shares over which such person has voting authority (other than
in a fiduciary capacity) in favor of the issuance of shares of UPC Common Stock
pursuant to the Agreement. The directors and executive officers of Leader and
their affiliates beneficially owned, as of the UPC Record Date, 18,286 shares
(or approximately .04% of the issued and outstanding shares) of UPC Common
Stock. Each director and executive officer of Leader has indicated such person's
intention to vote those UPC shares over which such person has voting authority
(other than in a fiduciary capacity) in favor of the issuance of shares of UPC
Common Stock pursuant to the Agreement.
In addition, as of the UPC Record Date, various subsidiaries of UPC, as
fiduciaries, custodians, or agents, had sole or shared voting power over 454,629
shares, or .99%, of the issued and outstanding shares of UPC Common Stock, under
trust agreements and other instruments and agreements, including shares held as
trustee or agent of various UPC employee benefit and stock purchase plans. Such
subsidiaries also held 2,200 shares, or .02%, of the issued and outstanding
shares of Leader Common Stock as of the Leader Record Date. It is the policy of
these subsidiaries not to vote such shares in the absence of instructions from
other appropriate parties having an interest in such stock, such as
co-fiduciaries and participants in such plans, unless the subsidiary has sole
voting authority with respect to such shares.
PROXY SOLICITATION
Proxies may be solicited by the directors, officers and employees of UPC
and Leader, respectively, by mail, in person, or by telephone or telegraph. Such
persons will not be specially compensated for such services. In addition, Leader
has engaged Morrow & Company, Inc. ("Morrow") to act as a proxy solicitor in
connection with the Leader Special Meeting. Leader's agreement with Morrow
provides that Leader will pay Morrow a fee of $4,500, plus a fee of $3.50 per
actual direct solicitation made of record and beneficial holders of Leader
Common Stock to cover all related expenses. Each of UPC and Leader will bear its
own respective costs associated with soliciting proxies.
DESCRIPTION OF TRANSACTION
The following information describes the material aspects of the Merger.
This description does not purport to be complete and is qualified in its
entirety by reference to the Appendices hereto, including the Agreement and the
Plan of Merger, which are attached as Appendices I and II, respectively, to this
Joint Proxy Statement and incorporated herein by reference. All shareholders are
urged to read the Appendices in their entirety.
GENERAL
The Agreement provides for the acquisition of Leader by UPC through the
merger of UPC Merger Subsidiary, a newly formed corporation organized under the
laws of the State of Tennessee and a wholly owned subsidiary of UPC, with and
into Leader, which would survive the Merger. At the Effective Time, each share
of Leader Common Stock issued and outstanding immediately prior to the Effective
Time of the Merger (excluding shares held by Leader, UPC, or their respective
subsidiaries, in each case other than shares held in a fiduciary capacity or in
satisfaction of debts previously contracted) would be converted exclusively
into, and exchanged for 1.525 shares of UPC Common Stock (subject to possible
adjustment as described in "-- Possible Adjustment of Exchange Ratio" below).
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No fractional shares of UPC Common Stock will be issued. Rather, cash
(without interest) will be paid in lieu of any fractional share interest
remaining after aggregating all shares and fractional shares to which any Leader
shareholder would be entitled upon consummation of the Merger, in an amount
equal to such fractional part of a share of UPC Common Stock multiplied by the
market value of one share of UPC Common Stock at the Effective Time. The market
value of one share of UPC Common Stock at the Effective Time shall be the
closing price of the UPC Common Stock on the NYSE-Composite Transactions List
(as reported in The Wall Street Journal or, if not reported therein, another
authoritative source as selected by UPC) on the last trading day preceding the
Effective Time.
As of the Leader Record Date, Leader had 9,962,545 shares of Leader Common
Stock issued and outstanding and 909,308 additional shares of Leader Common
Stock had been reserved to satisfy Leader Rights. Taking into the account the
Exchange Ratio of 1.525 shares of UPC Common Stock for each share of Leader
Common Stock, it is anticipated that upon consummation of the Merger UPC would
issue approximately 15,192,881 shares of UPC Common Stock excluding shares
subject to assumed options or other Leader Rights. UPC would then have issued
and outstanding approximately 61,314,170 shares of UPC Common Stock based on the
number of shares of UPC Common Stock issued and outstanding on the UPC Record
Date and without taking into account any additional shares of UPC Common Stock
subject to those Leader Rights assumed by UPC or issuable in connection with
consummating the other acquisitions.
POSSIBLE ADJUSTMENT OF EXCHANGE RATIO
Under certain circumstances, the Exchange Ratio could be adjusted pursuant
to certain provisions of the Agreement; under no circumstances would the
Exchange Ratio be less than 1.525 shares of UPC Common Stock for each share of
Leader Common Stock. An adjustment to the Exchange Ratio could occur only if
Leader's Board of Directors should elect by majority vote to terminate the
Agreement pursuant to the provisions of the Agreement described below, and if
UPC then elects to avoid termination of the Agreement by adjusting the Exchange
Ratio.
Leader is not obligated to consummate the Merger with UPC if both:
(a) the "Average Closing Price," defined in the Agreement as the
average of the daily last sale prices of UPC Common Stock on the NYSE (as
reported in The Wall Street Journal or, if not reported therein, another
authoritative source as selected by UPC) for the 20 consecutive full
trading days on which such shares are traded on the NYSE ending at the
close of trading on the date on which the consent to the Merger of the
Federal Reserve or the OTS (whichever shall be the later to occur) shall
become effective (the "Determination Date"), should be less than $26.39;
and
(b) (i) the quotient obtained by dividing the Average Closing Price by
$29.50 (the "UPC Ratio") should be less than (ii) the quotient obtained by
dividing the weighted average of the closing prices of the common stock
(the "Index Price") of 16 bank holding companies designated in the
Agreement (the "Index Group") on the Determination Date by the Index Price
on March 14, 1996, less 0.15 (the "Index Ratio").
In such case, Leader would have the right to terminate the Agreement during
the ten-day period commencing two days after the Determination Date by giving
UPC prompt notice of that decision. Leader may withdraw its termination notice
at any time during that ten-day period. During the five-day period after receipt
of such notice, UPC has the option to increase the consideration payable to
Leader shareholders by increasing the Exchange Ratio to equal the lesser of (i)
the quotient obtained by dividing (1) the product of $26.39 and the Exchange
Ratio (as then in effect) by (2) the Average Closing Price, and (ii) the
quotient obtained by dividing (1) the product of the Index Ratio and the
Exchange Ratio (as then in effect) by (2) the UPC Ratio. UPC IS UNDER NO
OBLIGATION TO ADJUST THE EXCHANGE RATIO. If UPC should elect to adjust the
Exchange Ratio, it must give Leader prompt notice of that election and of the
adjusted Exchange Ratio, in which case Leader must proceed with the Merger.
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These conditions reflect the parties' agreement that Leader's shareholders
will assume certain risks of decline in the value of UPC Common Stock. If the
value of UPC Common Stock should decline so that the Average Closing Price shall
be less than $26.39, but the Average Closing Price does not reflect a decline in
the price of UPC Common Stock, as measured on March 14, 1996 ($29.50) (the
"Starting Price"), of more than 15% in comparison to the stock prices of the
group of comparable bank holding company stocks (the Index Group referenced
above) as measured from the same date to the Determination Date, then Leader's
shareholders would continue to assume the risk of decline in the value of UPC
Common Stock. Leader has the right to terminate the Agreement only when both the
Average Closing Price of UPC Common Stock is less than $26.39 and the decline
from the value of the Starting Price to such Average Closing Price exceeds by
more than 15% the decline in value for the group of comparable bank holding
companies from March 14, 1996 to the Determination Date.
If the Average Closing Price is less than $26.39 per share and the UPC
Ratio is less than the Index Ratio, the Board of Directors of Leader has the
right to elect to terminate the Agreement so as to require UPC to consider
increasing the Exchange Ratio. UPC would then determine whether to proceed with
the Merger at the higher adjusted Exchange Ratio. In making this determination,
the principal factors UPC would consider include, without limitation, the
projected effect of the Merger on UPC's pro forma earnings and book value per
share and whether UPC's assessment of Leader's earning potential as part of UPC
justifies the issuance of a greater number of UPC's shares. If UPC should
decline to adjust the Exchange Ratio, Leader may elect to withdraw its election
to terminate and to proceed without adjustment, provided it does so within 12
days of the Determination Date. In making such determination, the principal
factors the Board of Directors of Leader would consider include, without
limitation, whether the Merger remains in the best interest of Leader and its
shareholders, despite a decline in the UPC Common Stock price, and whether the
consideration to be received by the holders of Leader Common Stock remains fair
from a financial point of view.
If (i) Leader is entitled to and gives UPC notice of termination and UPC
declines to adjust the Exchange Ratio and (ii) the Board of Directors of Leader
should elect to proceed with the Merger without an adjustment to the Exchange
Ratio, then UPC and Leader intend to review the circumstances prevailing at the
time to determine whether to resolicit the Leader shareholders at such time.
The operation of the adjustment mechanism can be illustrated by three
scenarios. (For purposes of the numerical examples, the Exchange Ratio is 1.525
and the Index Price is, as of March 14, 1996, $100.)
(a) The first scenario would apply if the Average Closing Price of the
UPC Common Stock is not less than $26.39. Under this scenario, regardless
of any comparison between the UPC Ratio and the Index Ratio, there would be
no right on the part of Leader to terminate the Agreement due to a decline
in value of the UPC Common Stock and therefore no potential adjustment to
the Exchange Ratio, even though the value of the consideration to be
received by Leader shareholders would have fallen from a pro forma $44.99
per share (as of March 14, 1996) to as little as $40.24 per share (as of
the Determination Date), assuming that the value at the Determination Date
equals the Average Closing Price.
(b) The second scenario would apply if the Average Closing Price is
less than $26.39, but the UPC Ratio is above the Index Ratio. Under this
scenario, there again would be no right on the part of Leader to terminate
the Agreement due to a decline in value of the UPC Common Stock and
therefore no potential adjustment to the Exchange Ratio, even though the
consideration received by Leader shareholders would have fallen from a pro
forma $44.99 per share (as of March 14, 1996) to something less than $40.24
per share (as of the Determination Date), assuming that the value at the
Determination Date equals the Average Closing Price.
(c) The third scenario arises where both the Average Closing Price is
below $26.39 and the UPC Ratio is below the Index Ratio (i.e., UPC's stock
price has declined by more than 15% relative to the price of shares of the
Index Group). Under this scenario, Leader would have the right to terminate
the Agreement and UPC would have the right, but not the obligation, to
remove such termination right by adjusting the Exchange Ratio. In this
case, the potential adjustment in the Exchange Ratio is designed to ensure
that the Leader shareholders would receive shares of UPC Common Stock
having a value (based
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upon the Average Closing Price) that corresponds to not more than $40.24 or
a 15% decline from the stock performance reflected by the Index Group.
For example, if the Average Closing Price were $20.00, and the Index
Price on the Determination Date were $95, the UPC Ratio would be 0.68 and
would be below the Index Ratio (0.80, or 0.95 - 0.15). In such a case,
Leader could terminate the Agreement unless UPC should elect within five
days to increase the Exchange Ratio to equal 1.794, which represents the
lesser of (a) 2.012 [the result of dividing $40.24 (the product of $26.39
and the 1.525 Exchange Ratio) by the Average Closing Price ($20.00),
rounded to the nearest thousandth] and (b) 1.794 [the result of dividing
the Index Ratio (0.80) times 1.525 by the UPC Ratio (0.68), rounded to the
nearest thousandth]. Based upon the assumed $20.00 Average Closing Price,
the new Exchange Ratio would represent a value to the Leader shareholders
of $35.88 per share.
If the Average Closing Price were $20.00, and the ending Index Price
were $105, the UPC Ratio would be 0.68 and would be below the Index Ratio
(0.90, or 1.05 - 0.15). In such a case, Leader would have the right to
terminate the Agreement unless UPC elected within five days to increase the
Exchange Ratio to equal 2.012, which represents the lesser of (a) 2.012
[the result of dividing $40.24 (the product of $26.39 and the 1.525
Exchange Ratio) by the Average Closing Price ($20.00), rounded to the
nearest thousandth] and (b) 2.018 [the result of dividing the Index Ratio
(0.90) times 1.525 by the UPC Ratio (0.68), rounded to the nearest
thousandth]. Based upon the assumed $20.00 Average Closing Price, the new
Exchange Ratio would represent a value to the Leader shareholders of $40.24
per share.
Leader shareholders should be aware that the actual market value of a share
of UPC Common Stock at the Effective Time and at the time certificates for those
shares are delivered following surrender and exchange of certificates for shares
of Leader Common Stock may be more or less than the Average Closing Price.
Leader shareholders are urged to obtain information on the trading value of UPC
Common Stock that is more recent than that provided in this Joint Proxy
Statement. See "COMPARATIVE MARKET PRICES AND DIVIDENDS."
EFFECT OF THE MERGER ON STOCK RIGHTS
The Agreement contemplates that at the Effective Time, all Leader Rights
granted by Leader under the Leader Stock Plans, as that term is defined in the
Agreement, which are outstanding at the Effective Time, whether or not
exercisable, will be converted into, and become rights with respect to UPC
Common Stock and UPC will assume each Leader Right, in accordance with the terms
of the Leader Stock Plan and stock option or other agreement by which it is
evidenced, except that from and after the Effective Time, (i) UPC and its Salary
and Benefits Committee would be substituted for Leader and the Committee of
Leader's Board of Directors (including, if applicable, the entire Board of
Directors of Leader) administering such Leader Stock Plan; (ii) each Leader
Right assumed by UPC would be exercisable solely for shares of UPC Common Stock
(or for cash in the case of stock appreciation rights); (iii) the number of
shares of UPC Common Stock subject to such Leader Right would be equal to the
number of shares of Leader Common Stock subject to such Leader Right immediately
prior to the Effective Time multiplied by the Exchange Ratio; and (iv) the per
share exercise price (or similar threshold price, in the case of stock awards)
under each such Leader Right would be adjusted by dividing the per share
exercise (or threshold) price under each such Leader Right by the Exchange Ratio
and rounding up to the nearest cent. Notwithstanding the provisions of clause
(iii) of the preceding sentence, UPC will not be obligated to issue any fraction
of a share of UPC Common Stock upon exercise of Leader Rights and any fraction
of a share of UPC Common Stock that otherwise would be subject to a converted
Leader Right will represent the right to receive a cash payment equal to the
product of such fraction and the difference between the market value of one
share of UPC Common Stock and the per share exercise price of such Leader Right.
The market value of one share of UPC Common Stock will be the closing price of
the UPC Common Stock on the NYSE-Composite Transactions List (as reported in The
Wall Street Journal or, if not reported therein, any other authoritative source
selected by UPC) on the last trading day preceding the Effective Time. In
addition, notwithstanding any other term in the Agreement, each Leader Right
which is an "incentive stock option" will be adjusted as required by Section 424
of the Code, and the
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regulations promulgated thereunder, so as not to constitute a modification,
extension, or renewal of the option, within the meaning of Section 424(h) of the
Code.
All contractual restrictions or limitations on transfer with respect to
Leader Common Stock awarded under the Leader Stock Plans or any other plan,
program, or arrangement of any Leader company, to the extent that such
restrictions or limitations shall not have already lapsed, and except as
otherwise expressly provided in such plan, program, or arrangement, would remain
in full force and effect with respect to shares of UPC Common Stock into which
such restricted stock or right is converted pursuant to the Agreement.
BACKGROUND OF AND REASONS FOR THE MERGER
Background of the Merger. Prior to Leader's initial public offering in
September 1993, representatives of Leader had discussions with various parties,
including UPC, regarding Leader's interest in exploring a merger conversion
pursuant to which Leader would convert from mutual to stock form and
simultaneously be acquired. All such discussions were preliminary in nature and
Leader subsequently decided to pursue a stand-alone conversion accompanied by
the formation of a holding company which was consummated in September 1993.
From time to time since late 1994, representatives of Leader have been
approached on an informal basis by various regional financial institution
holding companies regarding a possible business combination. Additionally, in
early 1995, Leader, through a third party, had discussions with a regional bank
holding company regarding its interest in a possible affiliation. All such
discussions were preliminary and no price terms were ever discussed.
On January 15, 1996, at a regularly scheduled meeting of the Leader Board
of Directors, the Board of Directors reviewed Leader's results of operations for
the fiscal year ended December 31, 1995 as part of its ongoing analysis of
Leader's business plan. This analysis recognized that Leader had experienced
continued growth in net income and assets in fiscal year 1995 as compared to the
prior fiscal year 1994. The Board of Directors also reviewed three year
financial projections under three scenarios which had been prepared as the basis
for Leader's 1996-1998 business plan. The Board noted that the projections
indicated that if Leader were able to continue to successfully pursue its
strategy of acquiring delinquent FHA/VA mortgage loans and interest rates did
not increase significantly, Leader was projected to outperform most of its bank
and thrift competitors in terms of return on equity and earnings per share
growth. However, if Leader were to experience increased competition in its
acquisition of delinquent FHA/VA loans or if interest rates were to increase
above projected levels, earnings were projected to flatten. The Board further
noted that Leader was already experiencing some liquidity pressures as a result
of its purchases of FHA/VA delinquent loans and management did not anticipate
being able to significantly increase retail deposits as a source of funding.
While noting that there were no immediate threats to its FHA/VA strategy or to
Leader's ability to continue to produce sufficient returns to its shareholders
by pursuing a strategy of independence, the Board of Directors acknowledged the
risks inherent in Leader's increased reliance on wholesale funding and further
acknowledged the benefits of developing a more diverse revenue stream. Various
strategic alternatives to enhance shareholder value were discussed, including
the possibility of a business combination provided that such a transaction would
provide a substantial capital base for future growth and complement the business
operations of Leader by solving liquidity issues and by providing a more
balanced revenue stream. At this meeting the Board of Directors authorized
management to explore strategic alternatives for enhancing shareholder value,
including a possible business combination.
Following the Leader Board of Directors meeting, Leader management met and
analyzed various business combination candidates and determined that UPC was an
attractive merger candidate based upon the perceived synergy created by an
inmarket merger with an institution that had a complementary balance sheet to
that of Leader and more readily available sources of liquidity.
Soon thereafter, Mr. Edgar H. Bailey, Chairman and Chief Executive Officer
of Leader, and Mr. Benjamin W. Rawlins, Jr., Chairman and Chief Executive
Officer of UPC, had a telephone conversation regarding a possible business
combination. An initial meeting with UPC was held on January 17, 1996 at which
time the parties discussed preliminarily various issues related to a possible
merger of Leader and UPC,
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including the structure of such a merger and various social issues. At that
meeting, the parties also discussed a possible price range for such a
transaction. Mr. Rawlins indicated that a price range of $40-44 was appropriate
while Mr. Bailey stated that a price in excess of $45 was more equitable.
Subsequent to that meeting, Mr. Bailey informed Mr. Rawlins in a telephone
conversation that, after further analysis, a price range of $47-50 per share was
more appropriate. The parties agreed to undertake further discussions.
On January 24, 1996, Mr. Bailey and Ronald W. Stimpson, President of
Leader, met with Mr. Rawlins and Jackson W. Moore, President of UPC, to further
discuss a possible business combination. At that meeting, a preliminary
agreement was reached regarding the number of members of the Board of Directors
of Leader that would be added to the Board of Directors of UPC. The parties
discussed a price range of between $47-50 although a specific price was not
reached. Various other issues also remained unresolved. The parties agreed to
continue their discussions.
On January 31, 1996, a meeting of the members of the Mergers and
Acquisitions Committee of the Leader Board of Directors was held. The members of
the Executive Committee had been appointed on September 19, 1994 to serve as the
Board's Mergers and Acquisitions Committee. The purpose of the meeting was to
update the Committee on the status of management's ongoing discussions with UPC.
The Committee instructed management to continue their discussions with UPC in
order to obtain sufficient information to enable the Committee to determine
whether a possible business combination with UPC was in the shareholders' best
interests and to determine whether to recommend to the full Board of Directors
that Leader enter into more formal negotiations with UPC.
Further discussions between representatives of UPC and Leader were held in
early February 1996. The members of the Mergers and Acquisitions Committee met
again on February 6, 1996 at which time the Committee received an update from
management on the status of these discussions.
On February 19, 1996, the Mergers and Acquisitions Committee met again. At
this meeting management informed the Committee that negotiations with UPC were
proceeding and it appeared that UPC would be willing to pay a significant
premium to Leader's shareholders. Management advised the Committee that it was
necessary to retain a financial advisor and legal counsel to assist in the
structuring and negotiating of a potential business combination. The Committee
authorized management to retain a financial advisor and legal counsel at that
meeting. Legal counsel was engaged and, in late February, Sandler O'Neill was
retained to act as Leader's financial advisor. Subsequent to this meeting, two
members of the Mergers and Acquisitions Committee, Thomas R. Dyer and Spence L.
Wilson, resigned from the committee. Mr. Dyer's law firm served as counsel to
UPC and Mr. Wilson was related to a senior officer of UPC. These directors
believed that these relationships created the appearance of a conflict of
interest. An additional outside director was appointed to replace these
individuals on the Mergers and Acquisition Committee.
On February 26, 1996, members of management of Leader met with
representatives of Sandler O'Neill, Leader's special counsel and other parties,
to discuss various issues related to a possible business combination with UPC,
including the process of negotiating a definitive agreement, due diligence,
impact of the proposed transaction on employees of Leader and various related
issues. Although Leader had previously reviewed publicly available financial
information regarding UPC, Leader still needed to conduct on-site due diligence
of UPC.
Both Leader and UPC conducted on-site due diligence examinations of each
other during the period of March 1-3. On March 1, 1996, the Mergers and
Acquisition Committee met again. Also present at this meeting were
representatives from Leader's special counsel and Sandler O'Neill. The Committee
was updated on the status of negotiations and Leader's legal counsel advised the
members of the Board's fiduciary duties with respect to a possible business
combination. The process of negotiating a definitive agreement was also
described. The representatives from Sandler O'Neill made a detailed presentation
to the Committee which consisted of an analysis of Leader and its strengths and
weaknesses as compared to its peers and an update on the environment for
financial institution mergers. Sandler O'Neill noted that Leader's earnings
outlook was healthy and it was, in most instances, performing at or above highly
valued institutions. However, Sandler O'Neill stated that it may be difficult to
sustain Leader's current growth rate due to retail funding constraints. Sandler
O'Neill also provided a pro forma analysis of a merger between Leader and UPC.
The Committee
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then discussed the operating synergies which could be realized in such a
business combination, as well as the increased dividend yield to Leader's
shareholders. The Sandler O'Neill representatives also analyzed UPC's operating
performance over the past five years as well as its financial condition, in
particular, UPC's lower-than-average loan-to-deposit ratio and high liquidity
levels which would complement Leader's need for additional funding to support
its FHA/VA delinquent loan acquisition strategy. Sandler O'Neill also reviewed
other possible merger candidates, noting that, while some other institutions may
have the capacity to pay a greater price for Leader, those institutions have not
in the past demonstrated a willingness to pay above-market multiples. The
Committee discussed the prospects of a business combination with those other
potential acquirors, including the relative value of the stock of each company,
the ability of each to consummate a business combination with Leader and the pro
forma effect of such a transaction on such companies. Sandler O'Neill advised
that, due to the complementary nature of Leader's and UPC's balance sheets, a
merger with UPC could produce significantly increased value for shareholders of
the combined entity. The Committee instructed management to proceed to resolve
all issues remaining with UPC.
Extensive negotiations occurred over the next several days regarding the
terms of the definitive agreement including the resolution of the final price,
the management of the combined entity and various employee benefit plan and
related social issues.
On March 7, 1996, the full Board of Directors held a special meeting which
was also attended by legal counsel and representatives of Sandler O'Neill and
other parties. Leader reviewed a report on the results of its due diligence
investigation of UPC. The terms of the definitive agreement were discussed in
detail. Legal counsel further reviewed with the Board of Directors its fiduciary
obligations. Sandler O'Neill provided detailed information concerning the
financial terms of the Merger and reviewed other possible merger candidates.
Sandler O'Neill advised the Board of Directors that the proposed Exchange Ratio
was fair to holders of the Leader Common Stock from a financial point of view.
The Board agreed to adjourn its meeting and reconvene the following day so as to
allow sufficient time to review the materials distributed to them. On March 8,
1996, the Board of Directors reconvened its meeting. After discussion and
questions and answers, the Board of Directors approved the Agreement and the
Supplemental Letter, to be attached thereto, and authorized management to
execute the Agreement and the Supplemental Letter on behalf of Leader. Directors
Dyer and Wilson abstained from voting because their relationships (the former's
law firm served as counsel to UPC and the latter was related to a senior officer
of UPC) created the appearance of a conflict of interest. The Agreement and the
Supplemental Letter were executed on March 8, 1996. The Board of Directors also
authorized management to execute and deliver the Option Agreement on the
following day. The Option Agreement was executed as of March 9, 1996.
Leader's Reasons for the Merger. The Leader Board of Directors has
determined that the Agreement, the Plan of Merger and the Merger are in the best
interests of Leader and its shareholders. In evaluating the Agreement, the Plan
of Merger and the Merger, the Leader Board of Directors considered a variety of
factors including:
(a) the value being offered the shareholders of Leader by UPC in
relation to the market value, book value and earnings per share of the
Leader Common Stock;
(b) information concerning the financial condition, results of
operations and prospects of UPC and Leader, including the long term equity
growth potential of Leader as compared to, and in connection with UPC and,
in particular, UPC's dividend yield, earnings per share and stock price
history;
(c) the competitive environment for financial institutions generally
and the increased market share penetration resulting from the Merger;
(d) the compatibility of the respective business management
philosophies of Leader and UPC;
(e) the perceived synergy created by an in-market merger with an
institution that had a complementary balance sheet to that of Leader;
(f) the ability of UPC and its subsidiary banks to provide
comprehensive financial services in relevant markets;
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(g) the financial terms of other recent business combinations in the
local financial services industry;
(h) the fact that the consideration to be received in the Merger by
the shareholders of Leader reflects a premium for the Leader Common Stock
over the values at which it has traded in the market during the last year;
and
(i) the opinion of Sandler O'Neill that the Exchange Ratio to be
received by the shareholders of Leader in the Merger is fair to such
shareholders from a financial point of view.
The foregoing discussion includes all of the material factors considered by
the Leader Board of Directors in determining to recommend that Leader
shareholders approve the Agreement and the Plan of Merger. The Leader Board of
Directors did not quantify or otherwise attempt to assign relative weights to
the factors considered in reaching its determination that the Agreement, the
Plan of Merger and the Merger are in the best interests of Leader shareholders.
Leader's Board of Directors recommends that Leader shareholders vote FOR
approval of the Agreement and the Plan of Merger.
UPC's Reasons for the Merger. In approving the Agreement and the Merger,
the UPC Board considered a number of factors concerning the benefits of the
Merger. The UPC Board of Directors considered the following material factors:
(a) the information presented to the directors by the management of
UPC concerning the business, operations, earnings, asset quality, and
financial condition of Leader, including the composition of the earning
assets portfolio of Leader;
(b) the financial terms of the Merger, including the relationship of
the value of the consideration issuable in the Merger to the market value,
tangible book value, and earnings per share of Leader Common Stock;
(c) the nonfinancial terms of the Merger, including the treatment of
the Merger as a tax-free exchange of Leader Common Stock for UPC Common
Stock for federal income tax purposes;
(d) the likelihood of the Merger being approved by applicable
regulatory authorities without undue conditions or delay;
(e) the opportunity for reducing the noninterest expense of the
operations of Leader and the ability of the operations of Leader after the
Effective Time to contribute to the earnings of UPC;
(f) the attractiveness of the Leader franchise, the market position of
Leader in each of the markets in which it operates, and the compatibility
of the franchise of Leader with the operations of UPC in the State of
Tennessee;
(g) the compatibility of the community bank orientation of the
operations of Leader to that of UPC;
(h) the report of Stifel Nicolaus reviewing a comparison of Leader to
selected peer banks and of premiums paid in other merger transactions; and
(i) the opinion rendered by Stifel Nicolaus as to the fairness, from a
financial point of view, of the Exchange Ratio to the holders of UPC Common
Stock.
The foregoing discussion includes all of the material factors considered by
the UPC Board of Directors in determining to recommend that shareholders approve
the issuance of shares of UPC Common Stock pursuant to the Agreement and the
Plan of Merger. The UPC Board of Directors did not quantify or otherwise attempt
to assign relative or specific weights to the factors considered in reaching its
determination that the Agreement, the Plan of Merger and the Merger are in the
best interests of shareholders.
UPC's Board of Directors recommends that UPC shareholders vote FOR approval
of the issuance of shares of UPC Common Stock pursuant to the Agreement.
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OPINION OF LEADER'S FINANCIAL ADVISOR
Pursuant to a letter agreement dated as of February 26, 1996 (the "Sandler
O'Neill Agreement"), Leader retained Sandler O'Neill as an independent financial
advisor in connection with strategic planning and merger and acquisition
transactions. Sandler O'Neill is a nationally recognized investment banking firm
whose principal business specialty is banks and savings institutions and, in
that connection, is regularly engaged in the valuation of such businesses and
their securities in connection with mergers and acquisitions and other corporate
transactions.
Pursuant to the terms of the Sandler O'Neill Agreement, Sandler O'Neill
acted as financial advisor to Leader in connection with the Merger. In
connection therewith, at the March 8, 1996 meeting at which Leader's Board
approved and adopted the Merger Agreement, Sandler O'Neill delivered a written
opinion to Leader's Board that, as of March 8, 1996, the Exchange Ratio to be
received by the holders of shares of Leader Common Stock pursuant to the
Agreement was fair, from a financial point of view, to such shareholders.
Sandler O'Neill also delivered to Leader's Board a written opinion (the
"Fairness Opinion") dated as of the date of this Joint Proxy Statement which is
substantially identical to the March 8, 1996 opinion. THE FULL TEXT OF SANDLER
O'NEILL'S FAIRNESS OPINION, WHICH SETS FORTH THE PROCEDURES FOLLOWED,
ASSUMPTIONS MADE, MATTERS CONSIDERED AND QUALIFICATIONS AND LIMITATIONS ON THE
REVIEW UNDERTAKEN, IS ATTACHED AS APPENDIX III TO THIS JOINT PROXY STATEMENT AND
IS INCORPORATED HEREIN BY REFERENCE. THE DESCRIPTION OF SANDLER O'NEILL'S
OPINION SET FORTH HEREIN IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO APPENDIX
III. THE OPINION DATED AS OF MARCH 8, 1996 WAS SUBSTANTIALLY IDENTICAL TO THE
FAIRNESS OPINION ATTACHED HERETO. HOLDERS OF LEADER COMMON STOCK ARE URGED TO
READ THE ATTACHED FAIRNESS OPINION IN ITS ENTIRETY IN CONNECTION WITH THEIR
CONSIDERATION OF THE PROPOSED MERGER. SANDLER O'NEILL'S FAIRNESS OPINION SHOULD
NOT BE CONSTRUED BY THE HOLDERS OF SHARES OF LEADER COMMON STOCK AS A
RECOMMENDATION AS TO HOW THEY SHOULD VOTE AT THE SPECIAL MEETING OR AS TO ANY
OTHER MATTER.
In connection with rendering its opinion dated March 8, 1996, Sandler
O'Neill performed a variety of financial analyses. The following is a summary of
such analyses, but does not purport to be a complete description of Sandler
O'Neill's analyses. The preparation of a fairness opinion is a complex process
involving subjective judgments and is not necessarily susceptible to a partial
analysis or summary description. Sandler O'Neill believes that its analyses must
be considered as a whole and that selecting portions of such analyses and the
facts considered therein, without considering all factors and analyses, could
create an incomplete view of the analyses and processes underlying the fairness
opinion. In performing its analyses, Sandler O'Neill made numerous assumptions
with respect to industry performance, business and economic conditions and
various other matters, many of which cannot be predicted and are beyond the
control of Leader, UPC and Sandler O'Neill. Any estimates contained in Sandler
O'Neill's analyses are not necessarily indicative of future results or values,
which may be significantly more or less favorable than such estimates. Estimates
on the values of companies do not purport to be appraisals or necessarily
reflect the prices at which companies or their securities may actually be sold.
Because such estimates are inherently subject to uncertainty, neither Leader nor
Sandler O'Neill assumes responsibility for their accuracy.
The following is a summary of the financial analyses performed by Sandler
O'Neill in connection with its presentation to the Leader Board on March 7, 1996
and its opinion dated March 8, 1996.
Stock Trading History. Sandler O'Neill examined the history of the trading
prices and the volume of the Leader Common Stock and UPC Common Stock, and the
relationship between the movements in the prices of Leader Common Stock and UPC
Common Stock, respectively, to movements in certain stock indices, including the
Standard & Poor's 500 Index, the NASDAQ Banking Index and a composite group of
publicly traded savings institutions (in the case of Leader) and publicly traded
commercial banks (in the case of UPC) in geographic proximity and of similar
asset size.
Analysis of Selected Publicly Traded Companies. In preparing its
presentation, Sandler O'Neill used publicly available information to compare
selected financial and market trading information, including book value,
tangible book value, earnings, asset quality ratios, loan-loss-reserve levels,
profitability and capital adequacy, for Leader and certain other institutions.
The seven publicly-traded regional savings institutions (the "Southeastern
Group") to which Sandler O'Neill compared Leader were: BankAtlantic Bancorp,
Inc.,
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First Financial Holdings, Inc., American Federal Bank, Magna Bancorp, Inc., Home
Financial Corp., First Palm Beach Bancorp, Inc., and Life Bancorp, Inc. Sandler
O'Neill also compared Leader to a group of 14 publicly-traded savings
institutions which were considered to be highly-valued (the "Highly-Valued
Group") by investors because their price to tangible book value was greater than
125%. The Highly-Valued Group was comprised of: Washington Federal, Inc.,
Peoples Heritage Financial Group, Westcorp, MAF Bancorp, Inc., BankAtlantic
Bancorp, Inc., Anchor BanCorp Wisconsin, North Side Savings Bank, First Indiana
Corporation, American Federal Bank, InterWest Bancorp, Inc., Eagle Financial
Corp., Magna Bancorp, Inc., WSFS Financial Corporation, and D&N Financial Corp.
The analysis compared publicly available year-end financial information as of
and for the years ended December 31, 1991 through December 31, 1995. The
following comparisons are based upon the December 31, 1995 financial
information. The data described below with respect to the Southeastern Group and
the Highly-Valued Group consists of the median data for such groups.
The total assets of Leader were approximately $3.1 billion, compared to
approximately $1.3 billion for the Southeastern Group and approximately $1.5
billion for the Highly-Valued Group. The annual growth rate of assets for Leader
was positive 27.27%, compared to a positive growth rate of approximately 12% for
the Southeastern Group and approximately 15% for the Highly-Valued Group. The
total equity of Leader was approximately $247 million, compared to approximately
$120 million for the Southeastern Group and approximately $120 million for the
Highly-Valued Group. The tangible equity to total assets ratio was 7.93% for
Leader, compared to approximately 8.1% for the Southeastern Group and
approximately 7.5% for the Highly-Valued Group. The net loans to assets ratio
for Leader was approximately 63%, compared to approximately 62% for the
Southeastern Group and approximately 64% for the Highly-Valued Group. The cash
and securities to total assets ratio was approximately 29% for Leader, compared
to approximately 33% for the Southeastern Group and approximately 31% for the
Highly-Valued Group. Total deposits were approximately $1.6 billion for Leader,
compared to approximately $950 million for the Southeastern Group and
approximately $1.2 billion for the Highly-Valued Group. Leader had a gross loans
to total deposits ratio of approximately 126%, compared to approximately 86% for
the Southeastern Group and approximately 98% for the Highly-Valued Group. The
total borrowings to total asset ratio for Leader was approximately 37%, compared
to approximately 16% for the Southeastern Group and approximately 18% for the
Highly-Valued Group. The ratio of nonperforming loans to total assets for Leader
was 0.34%, compared to approximately 0.60% for the Southeastern Group and
approximately 0.65% for the Highly-Valued Group. The ratio of nonperforming
assets to total assets for Leader was 0.38%, compared to approximately 0.70% for
the Southeastern Group and approximately 1.20% for the Highly-Valued Group. The
ratio of loan loss reserves to nonperforming loans for Leader was 219.11%,
compared to approximately 120% for the Southeastern Group and approximately 125%
for the Highly-Valued Group. The net interest margin of Leader was 3.48%,
compared to approximately 3.6% for the Southeastern Group and 3.5% for the
Highly-Valued Group. The ratio of noninterest income to average assets for
Leader was 0.85%, compared to approximately 0.75% for the Southeastern Group and
approximately 0.70% for the Highly-Valued Group. The ratio of noninterest
expense to average assets was 1.73% for Leader, compared to approximately 2.30%
for the Southeastern Group and approximately 2.60% for the Highly-Valued Group.
The efficiency ratio of Leader was 42.98%, compared to approximately 60% for the
Southeastern Group and approximately 60% of the Highly-Valued Group. The
overhead ratio of Leader was 27.84%, compared to approximately 46% for the
Southeastern Group and approximately 51% for the Highly-Valued Group. The return
on average assets for Leader was 1.34%, compared to approximately 1.18% for the
Southeastern Group and approximately 1.05% for the Highly-Valued Group. The
return on average equity for Leader was 16.59%, compared to approximately 13%
for the Southeastern Group and approximately 14% for the Highly-Valued Group.
The price to tangible book value for Leader was 158.6%, compared to
approximately 130% for the Southeastern Group and approximately 145% for the
Highly-Valued Group. The price to earnings per share multiple for Leader was
10.00x, which was approximately the same as the ratio for the Southeastern Group
and the Highly-Valued Group. Historical results of Leader were significantly
affected by its strategy of purchasing FHA/VA delinquent loans. This strategy
greatly increased the loan to deposit ratio of Leader and, as the loans were
funded using wholesale sources, its borrowings to asset ratio. The profitability
of this strategy is reflected in Leader's noninterest income to average assets
ratio, its efficiency ratio, its overhead ratio, its return on average assets,
its return on average equity, its price to tangible book value, and its price to
earnings per share multiple.
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Sandler O'Neill also used publicly available information to perform a
similar comparison of selected financial and market trading information for UPC
and certain other institutions. The 17 publicly-traded commercial banks (the
"Southeastern Bank Group") to which Sandler O'Neill compared UPC were:
SouthTrust Corporation, Southern National Corporation, Crestar Financial
Corporation, AmSouth Financial Bancorporation, Regions Financial Corp., First
Tennessee National Corp., Signet Banking Corporation, Central Fidelity Banks,
Inc., Compass Bancshares, Inc., First American Corporation, First Virginia
Banks, Inc., Synovus Financial Corp., First Citizens BancShares, Inc., Deposit
Guaranty Corp., First Commercial Corporation, Centura Banks, Inc., and CCB
Financial Corporation. Sandler O'Neill also compared UPC to a group of 20
publicly-traded commercial banks which were considered to be highly-valued (the
"Highly-Valued Bank Group") by investors because their price to tangible book
value was greater than 150%. The Highly-Valued Bank Group was comprised of:
SouthTrust Corporation, Huntington Bancshares, Inc., Northern Trust Corporation,
Firstar Corporation, Fifth Third Bancorp, Mercantile Bancorporation, Inc.,
Regions Financial Corp., Marshall & Ilsley Corporation, Old Kent Financial
Corporation, First Empire State Corporation, Signet Banking Corporation, First
American Corporation, Star Banc Corporation, Synovus Financial Corp., Provident
Bancorp, Inc., Zions Bancorporation, Wilmington Trust Corporation, First
Commercial Corporation, Centura Banks, Inc., and CCB Financial Corporation. The
analysis compared publicly available year-end financial information as of and
for the years ended December 31, 1991 through December 31, 1995. The following
comparisons are based upon the December 31, 1995 financial information. The data
described below with respect to the Southeastern Bank Group and the
Highly-Valued Bank Group consists of the median data for such groups.
The total assets of UPC were approximately $11.3 billion, compared to $10.5
billion for the Southeastern Bank Group and $11.2 billion for the Highly-Valued
Bank Group. The annual growth rate of assets for UPC was positive 1.66%,
compared to a positive growth rate of approximately 10% for the Southeastern
Bank Group and approximately 10% for the Highly-Valued Bank Group. The total
equity of UPC was approximately $966 million, compared to approximately $850
million for the Southeastern Bank Group and approximately $890 million for the
Highly-Valued Bank Group. The tangible equity to total assets ratio was 8.05%
for UPC, compared to approximately 7.5% for the Southeastern Bank Group and
approximately 7.5% for the Highly-Valued Bank Group. The net loans to total
assets ratio for UPC was approximately 62%, compared to approximately 63% for
the Southeastern Bank Group and approximately 65% for the Highly-Valued Bank
Group. The cash and securities to total assets ratio was approximately 33% for
UPC, compared to approximately 32% for the Southeastern Bank Group and
approximately 33% for the Highly-Valued Bank Group. Total deposits were
approximately $9.4 billion for UPC, compared to approximately $7.6 billion for
the Southeastern Bank Group and approximately $9.4 billion for the Highly-Valued
Bank Group. UPC had a gross loans to total deposits ratio of approximately 75%,
compared to approximately 82% for the Southeastern Bank Group and approximately
87% for the Highly-Valued Bank Group. The total borrowings to total assets ratio
for UPC was approximately 6%, compared to approximately 13% for the Southeastern
Bank Group and approximately 14% for the Highly-Valued Bank Group. The total
nonperforming loans to total assets ratio for UPC was 0.30%, compared to
approximately 0.30% for the Southeastern Bank Group and approximately 0.37% for
the Highly-Valued Bank Group. The nonperforming assets to total assets ratio for
UPC was 0.37%, compared to approximately 0.36% for the Southeastern Bank Group
and approximately 0.41% for the Highly-Valued Bank Group. The ratio of loan loss
reserves to nonperforming loans for UPC was 391%, compared to approximately 325%
for the Southeastern Bank Group and approximately 350% for the Highly-Valued
Bank Group. The ratio of loan loss reserves to nonperforming assets for UPC was
329%, compared to approximately 250% for the Southeastern Bank Group and
approximately 360% for the Highly-Valued Bank Group. The net interest margin of
UPC was 4.59%, compared to approximately 4.30% for the Southeastern Bank Group
and approximately 4.45% for the Highly-Valued Bank Group. The ratio of
noninterest income to average assets for UPC was 1.43%, compared to
approximately 1.28% for the Southeastern Bank Group and approximately 1.55% for
the Highly-Valued Bank Group. The ratio of noninterest expense to average assets
was 3.38% for UPC, compared to approximately 3.40% for the Southeastern Bank
Group and approximately 3.30% for the Highly-Valued Bank Group. The efficiency
ratio of UPC was 57.85%, compared to approximately 61% for the Southeastern Bank
Group and approximately 58% for the Highly-Valued Bank Group. The overhead ratio
of UPC was 43.60%, compared to approximately 45% of the Southeastern Bank Group
and approximately 43%
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for the Highly-Valued Bank Group. The return on average assets for UPC was
1.24%, compared to approximately 1.20% for the Southeastern Bank Group and
approximately 1.25% for the Highly-Valued Bank Group. The return on average
total equity for UPC was 15.05%, compared to approximately 15% for the
Southeastern Bank Group and approximately 16% for the Highly-Valued Bank Group.
The price to tangible book value for UPC was 171.31%, compared to approximately
190% for the Southeastern Bank Group and approximately 210% for the
Highly-Valued Bank Group. The price to earnings per share multiple for UPC was
11.39x, compared to approximately 12.5x for the Southeastern Bank Group and
approximately 13.0x for the Highly-Valued Bank Group.
Analysis of Selected Merger Transactions. Sandler O'Neill reviewed 59
transactions announced from January 1, 1995 to January 26, 1996 involving public
savings institutions nationwide as targets with transaction values over $15
million ("All Transactions"), 21 transactions announced from January 1, 1995 to
January 26, 1996 involving public savings institutions nationwide as targets
with transaction values over $100 million ("All Large Transactions"), 18
transactions announced from January 1, 1995 to January 26, 1996 involving public
savings institutions in Alabama, Arkansas, Georgia, Kentucky, Missouri,
Mississippi, North Carolina, Tennessee, and Virginia as targets with transaction
values over $15 million ("Regional Transactions"), and 27 transactions announced
from January 1, 1994 to January 26, 1996 involving public savings institutions
nationwide as targets with a return on average equity of 14% or greater ("High
ROAE Transactions"). Sandler O'Neill reviewed the ratios of price to earnings,
price to book value, price to tangible book value, price to deposits, price to
assets, and deposit premium paid in each such transaction and computed high,
low, mean, and median ratios and premiums for the respective groups of
transactions. Based on the median multiples for All Transactions, Sandler
O'Neill derived an imputed range of values per share of Leader Common Stock of
$31.02 to $60.02. Based upon the median multiples for All Large Transactions,
Sandler O'Neill derived an imputed range of values per share of Leader Common
Stock of $29.48 to $55.89. Based upon the median range of multiples for Regional
Transactions, Sandler O'Neill derived an imputed range of values per share of
Leader Common Stock of $34.80 to $59.27. Based upon the median multiples for
High ROAE Transactions, Sandler O'Neill derived an imputed range of values per
share of Leader Common Stock of $25.00 to $46.94.
Discounted Dividend Stream and Terminal Value Analysis. Sandler O'Neill
also performed an analysis which estimated the future stream of after-tax
dividend flows of Leader through the year 2000 under various circumstances,
assuming Leader performed in accordance with the earnings forecasts of its
management and certain variations thereof (including variation with respect to
the growth of assets, net interest spread, noninterest income, noninterest
expense and dividend payout ratio). To approximate the terminal value of Leader
Common Stock at the end of the five year period, Sandler O'Neill applied price
to earnings multiples ranging from 8x to 17x and applied multiples of book value
ranging from 140.0% to 230.0%. The dividend income streams and terminal values
were then discounted to present values using different discount rates (ranging
from 9.0% to 14.0%) chosen to reflect different assumptions regarding required
rates of return of holders of prospective buyers of Leader Common Stock. This
analysis, assuming the current dividend payout ratio, indicated an imputed range
of values per share of Leader Common Stock of between $37.55 and $60.36 when
applying the price to earnings multiples, and an imputed range of values per
share of Leader Common Stock of between $45.72 and $58.23 when applying
multiples of book value. In connection with its analysis, Sandler O'Neill
extensively used sensitivity analyses to illustrate the effects changes in the
underlying assumptions would have on the resulting present value and discussed
these changes with Leader's Board of Directors.
In addition, Sandler O'Neill performed an analysis which estimated the
future stream of after-tax dividend flows of UPC on a pro-forma basis, assuming
consummation of the Merger (the "Combined Company") through the year 2001 under
various circumstances, assuming (i) the operations of the Combined Company
attributable to Leader performed in accordance with the earnings forecasts of
Leader's management and certain variations thereof, as described in the previous
paragraph; (ii) the operations of the Combined Company attributable to UPC
performed in accordance with certain publicity available earnings forecasts
prepared by financial analysts and certain variations thereof (including
variation with respect to the growth rate of assets, net interest spread,
noninterest income, noninterest expense and dividend payout ratio); and (iii)
the Combined Company realized cost savings equal to 34.5% of Leader's projected
noninterest expenses
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(other than the expense of deposit insurance). To approximate the terminal value
of the Combined Company's Common Stock at the end of the five year period,
Sandler O'Neill applied price earnings multiples ranging from 8x to 17x and
applied multiples of book value ranging from 140.0% to 230.0%. The dividend
income streams and terminal values were then discounted to present values using
different discount rates (ranging from 9.0% to 14.0%) chosen to reflect
different assumptions regarding required rates of return of holders of
prospective buyers of the Combined Company's Common Stock. This analysis,
assuming the current dividend payout ratio, indicated an imputed range of values
of the shares of UPC Common Stock to be received in the Merger for each share of
Leader Common Stock of between $48.72 and $76.02 when applying the price to
earnings multiples, and an imputed range of values of the shares of UPC Common
Stock of between $56.55 and $70.67 when applying multiples of book value. In
connection with its analysis, Sandler O'Neill extensively used sensitivity
analyses to illustrate the effects changes in the underlying assumptions would
have on the resulting present value, and discussed these changes with Leader's
Board of Directors.
In connection with rendering the Fairness Opinion, Sandler O'Neill
confirmed the appropriateness of its reliance on the analyses used to render its
March 8, 1996 opinion by performing procedures to update certain of such
analyses and by reviewing the assumptions upon which such analyses were based
and the factors considered in connection therewith. Sandler O'Neill also
reviewed, among other things: (i) the Agreement and exhibits thereto; (ii) the
Option Agreement; (iii) this Joint Proxy Statement; (iv) UPC's audited
consolidated financial statements and management's discussion and analysis of
the financial condition and results of operations contained in its annual report
to shareholders for the year ended December 31, 1995; (v) Leader's audited
consolidated financial statements and management's discussion and analysis of
the financial condition and results of operations contained in its annual report
to shareholders for the year ended December 31, 1995; (vi) certain financial
analyses and forecasts of Leader prepared by and reviewed with management of
Leader and the views of senior management of Leader regarding Leader's past and
current business operations, results thereof, financial condition and future
prospects, including: (a) Leader's high level of borrowings/assets and potential
future limitations on growth and (b) Leader's dependence on FHA/VA delinquent
loan purchases and the potential adverse impact of changes in such program on
the future operations and profitability of Leader; (vii) certain financial
analyses and forecasts of UPC prepared by and reviewed with management of UPC
and the views of senior management of UPC regarding UPC's past and current
business operations, results thereof, financial condition and future prospects;
(viii) the pro forma impact of the Merger on UPC; (ix) the historical reported
price and trading activity for UPC Common Stock and Leader Common Stock,
including a comparison of certain financial information for certain other
companies the securities of which are publicly traded; (x) the financial terms
of recent business combinations in the savings institution and banking
industries; (xi) the current market environment generally and the banking
environment in particular; and (xii) such other information, financial studies,
analyses and investigations and financial, economic and market criteria as
Sandler O'Neill considered relevant. Sandler O'Neill was not asked to, and did
not, solicit indications of interest from other third parties.
In performing its review, Sandler O'Neill assumed and relied upon, without
independent verification, the accuracy and completeness of all the financial
information, analyses and other information reviewed by and discussed with it,
and Sandler O'Neill did not make an independent evaluation or appraisal of the
specific assets, the collateral securing assets or the collectibility of any
such assets (relying, where relevant, on the analyses and estimates of UPC and
Leader). With respect to the financial projections reviewed with each company's
management, Sandler O'Neill assumed that they have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
respective managements of the respective future financial performances of UPC
and Leader and that such performances will be achieved. Sandler O'Neill also
assumed that there has been no material change in UPC's or Leader's assets,
financial condition, results of operations, business or prospects since the date
of the last financial statements noted above. Sandler O'Neill assumed that the
Merger will qualify for pooling of interests accounting treatment and further
assumed that UPC will remain as a going concern for all periods relevant to its
analyses and that the conditions precedent in the Agreement are not waived.
Under the Sandler O'Neill Agreement, Leader will pay Sandler O'Neill a
transaction fee in connection with the Merger, a substantial portion of which is
contingent upon the consummation of the Merger. Under
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the terms of the Sandler O'Neill Agreement, Leader will pay Sandler O'Neill a
transaction fee equal to 0.5% of the aggregate purchase price in the
transaction, or approximately $2.4 million (the "Transaction Fee"), of which
100% of amounts not previously paid shall be payable on the day of closing of
the transaction. Leader has paid Sandler O'Neill a fee of $200,000 for rendering
the Fairness Opinion, which amount will be credited against the Transaction Fee
due and payable upon consummation of the Merger. In addition, Leader has agreed
to reimburse Sandler O'Neill for its reasonable out-of-pocket expenses incurred
in connection with its engagement, provided that (i) such expenses shall not
exceed $30,000 in the aggregate if the proposed business combination is not
subject to a definitive agreement and shall not exceed $100,000 in the aggregate
if the Merger is consummated, (ii) such expenses shall be paid at the time it is
determined that the transaction will not be consummated or upon the closing of
the transaction, as applicable, and (iii) any reimbursement of expenses paid by
Leader up to a maximum of $100,000 shall be credited against the Transaction
Fee. Leader has also agreed to indemnify Sandler O'Neill and its affiliates and
their respective partners, directors, officers, employees, agents, and
controlling persons against certain expenses and liabilities, including
liabilities under securities laws.
OPINION OF UPC'S FINANCIAL ADVISOR
UPC has retained Stifel Nicolaus to act as its financial advisor in
connection with rendering a fairness opinion with respect to the Merger. Stifel
Nicolaus is an investment banking and securities firm with membership on all
principal U.S. securities exchanges. As part of its investment banking
activities, Stifel Nicolaus is regularly engaged in the valuation of businesses
and their securities in connection with merger transactions and other types of
businesses and their securities in connection with merger transactions and other
types of acquisitions, negotiated underwritings, secondary distributions of
listed and unlisted securities, private placements and valuations for corporate
and other purposes. Stifel Nicolaus has rendered its opinion that, based upon
and subject to the various considerations set forth therein, as of March 7, 1996
and the date of this Joint Proxy Statement, the Exchange Ratio to be paid for
each share of Leader Common Stock will result in consideration that is fair,
from a financial point of view, to the holders of UPC Common Stock. Stifel
Nicolaus is familiar with UPC, having acted as its financial advisor in
connection with, and having participated in, the negotiations leading to the
Agreement. Representatives of Stifel Nicolaus participated in certain portions
of the meeting of UPC's Board of Directors on March 7, 1996 where the proposed
Merger was considered and certain officers of UPC were authorized to enter into
the Agreement.
THE FULL TEXT OF STIFEL NICOLAUS' OPINION AS OF THE DATE HEREOF, WHICH SETS
FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS OF THE REVIEW
UNDERTAKEN, IS ATTACHED AS APPENDIX IV TO THIS JOINT PROXY STATEMENT AND IS
INCORPORATED HEREIN BY REFERENCE AND SHOULD BE READ IN ITS ENTIRETY IN
CONNECTION WITH THIS JOINT PROXY STATEMENT. THE SUMMARY OF THE OPINION OF STIFEL
NICOLAUS SET FORTH IN THIS JOINT PROXY STATEMENT IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF SUCH OPINION. THE OPINION AS OF MARCH 7, 1996 WAS
SUBSTANTIALLY IDENTICAL TO THE OPINION ATTACHED HERETO. In connection with its
written opinion dated as of the date of this Joint Proxy Statement, Stifel
Nicolaus performed procedures to update certain of its analyses and reviewed the
assumptions on which such analyses were based and the factors considered in
connection therewith. In updating its opinion, Stifel Nicolaus did not utilize
any methods of analysis in addition to those described below.
Stifel Nicolaus' opinion is directed only to the fairness of the Exchange
Ratio from a financial point of view and does not constitute a recommendation to
any holders of UPC Common Stock as to how such holders of UPC Common Stock
should vote at the Special Meeting or as to any other matter.
In connection with its opinions dated as of March 7, 1996 and the date
hereof, Stifel Nicolaus reviewed and analyzed material bearing upon the
financial and operating condition of UPC and Leader and material prepared in
connection with the Merger, including among other things: (a) the Agreement
(excluding the Supplemental Letter) and Plan of Merger and the Option Agreement;
(b) publicly available reports filed with the Commission by UPC and by Leader;
(c) certain other publicly available financial and other information concerning
UPC and Leader and the trading markets for the publicly traded securities of UPC
and Leader; (d) certain other internal information, including projections for
UPC and Leader, relating to UPC and Leader prepared by the managements of UPC
and Leader and furnished to Stifel Nicolaus for purposes of its analysis;
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and (e) publicly available information concerning certain other banks and bank
holding companies, savings banks and savings and loan associations, savings and
loan holding companies, the trading markets for their securities and the nature
and terms of certain other merger and acquisition transactions believed relevant
to its inquiry. Stifel Nicolaus also met with certain officers and
representatives of UPC and Leader to discuss the foregoing as well as other
matters relevant to its inquiry, including the past and current business
operations, results of regulatory examinations, financial condition and future
prospects of UPC and Leader, both separately and on a combined basis. In
addition, Stifel Nicolaus reviewed the reported price and trading activity for
UPC Common Stock and Leader Common Stock, compared certain financial and stock
market information for UPC and Leader with similar information for certain other
companies, the securities of which are publicly traded, reviewed the financial
terms of certain recent business combinations in the commercial banking and
thrift industries, and performed such other studies and analyses as it
considered appropriate. Stifel Nicolaus also took into account its assessment of
general economic, market and financial conditions and its experience in other
transactions, as well as its experience in securities valuations and knowledge
of the commercial banking and thrift industries generally.
In conducting its review and arriving at its opinion, Stifel Nicolaus
relied upon and assumed the accuracy and completeness of the financial and other
information provided to it or publicly available and did not attempt
independently to verify the same. Stifel Nicolaus has relied upon the
managements of UPC and Leader as to the reasonableness and achievability of the
projections (and the assumptions and basis therefor) provided to Stifel
Nicolaus, and assumed that such projections, including, without limitation,
projected cost savings and operating synergies resulting from the Merger,
reflected the best currently available estimates and judgments of such UPC
management and Leader representatives and that such projections would be
realized in the amounts and time periods estimated. Stifel Nicolaus also
assumed, without independent verification, that the aggregate allowances for
loan losses for UPC and Leader were adequate to cover such losses. Stifel
Nicolaus did not conduct physical inspections of any of the properties or assets
of UPC or Leader, and Stifel Nicolaus did not make or obtain, and was not
furnished with, any evaluations or appraisals of any properties, assets or
liabilities of UPC and Leader. Stifel Nicolaus was retained by the UPC Board to
express an opinion as to the fairness, from a financial point of view, to the
holders of UPC Common Stock of the Exchange Ratio to be paid to the holders of
the Leader Common Stock.
In connection with rendering its opinion to the UPC Board, Stifel Nicolaus
performed a variety of financial analyses that are summarized below. The summary
of the presentations by Stifel Nicolaus to the Board of Directors of UPC as set
forth herein does not purport to be a complete description of such
presentations. Stifel Nicolaus believes that its analyses and the summary set
forth herein must be considered as a whole and that selecting portions of such
analyses and the factors considered therein, without considering all factors and
analyses, could create an incomplete view of the analyses and processes
underlying its opinions. The preparation of a fairness opinion is a complex
process involving subjective judgments and is not necessarily susceptible to
partial analysis or summary description. In its analyses, Stifel Nicolaus made
numerous assumptions with respect to industry performance, business and economic
conditions, and other matters, many of which are beyond the control of UPC or
Leader. Any estimates contained in Stifel Nicolaus' analyses are not necessarily
indicative of actual future values or results, which may be significantly more
or less favorable than suggested by such estimates. Estimates of values of
companies do not purport to be appraisals or necessarily reflect the actual
prices at which companies or their securities actually may be sold. No company
or transaction utilized in Stifel Nicolaus' analyses was identical to UPC or
Leader or the Merger. Accordingly, such analyses are not based solely on
arithmetic calculations; rather, they involve complex considerations and
judgments concerning differences in financial and operating characteristics of
the relevant companies, the timing of the relevant transactions, and prospective
buyer interest, as well as other factors that could affect the public trading
values of the company or companies to which they are being compared. None of the
analyses performed by Stifel Nicolaus was assigned a greater significance by
Stifel Nicolaus than any other.
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<PAGE> 47
The following is a summary of the financial analyses performed by Stifel
Nicolaus in connection with providing its opinion to UPC's Board of Directors on
March 7, 1996, which was dated as of March 7, 1996.
Contribution Analysis. Stifel Nicolaus reviewed certain financial
information for the twelve month period ended December 31, 1995 including net
revenues before and after provision for loan losses, net income before preferred
dividends and extraordinary items, total assets, loans, total deposits and total
equity and compared the percentage contribution of Leader to the pro forma
combined figures for UPC and Leader and to the percentage of total outstanding
UPC Common Stock that would be owned by the Leader stockholders as a result of
the Merger. The contribution analysis showed, among other things, that Leader
would contribute 22.3% of combined net revenues before provision for loan
losses, 22.6% of combined net revenues after provision for loan losses, 21.6% of
combined net income before preferred dividends and extraordinary items, 21.6% of
combined total assets, 21.7% of combined loans, 14.3% of combined total
deposits, and 20.3% of combined total equity while receiving 24.8% of the
outstanding shares in the combined institution. Ownership figures are based on
an exchange ratio of 1.525.
Accretion/Dilution Summary. Stifel Nicolaus reviewed certain estimated
future operating and financial information developed by both UPC and Leader for
the pro forma combined entity resulting from the Merger for the projected twelve
month period ended December 31, 1997. Based on this analysis, Stifel Nicolaus
compared UPC's estimated future stand-alone per share earnings with such
projected figures for the pro forma combined entity for this twelve month
period. The Merger is projected to be accretive on a projected pro forma basis
with respect to earnings per share. Stifel Nicolaus also reviewed certain
historical financial information developed by both UPC and Leader for the pro
forma combined entity resulting from the Merger for the period ended December
31, 1995. Based on this analysis, Stifel Nicolaus compared UPC's stand-alone
book value per share and tangible book value with such calculated figures for
the pro forma combined entity at December 31, 1995. The Merger is dilutive on a
pro forma basis with respect to book value per share and tangible book value per
share.
Present Value Analysis. Applying discounted cash flow analysis to the
theoretical future earnings and dividends of UPC and Leader, Stifel Nicolaus
compared the calculated value of a share of UPC Common Stock to the calculated
value of a share of the combined entity. The analysis was based upon a range of
assumed returns on assets, an assumed annual asset growth rate, current dividend
rates, a range of assumed price/earnings ratios, and a 10% discount rate. Stifel
Nicolaus selected the range of terminal price/earnings ratios on the basis of
past and current trading multiples for UPC and other commercial banks. Based on
this analysis, Stifel Nicolaus concluded that the Merger would increase the
calculated value of a share of UPC Common Stock if the combined entity achieves
returns on assets approximately six basis points above the level achieved by UPC
on a stand-alone basis.
Discounted Cash Flow Analysis. Based upon estimates provided by management
of the future earnings and the range of profit improvements for the pro forma
combined entity, Stifel Nicolaus estimated the present value of future dividends
available to be paid to UPC under various scenarios assuming Leader maintains a
capital level of approximately 6.5% of assets. Based upon management's estimated
profitability ranges and a range of discount rates, under UPC's ownership,
Leader could theoretically produce future cash flows to UPC with a present value
ranging from $331 million to $715 million.
Summary Analysis of Thrift Merger Transactions. Stifel Nicolaus analyzed
certain information relating to transactions in the thrift industry, including
median information for 100 acquisitions announced in the U.S. between February
28, 1995 and February 28, 1996, as well as for 31 thrift acquisitions announced
in the Southeast Region of the U.S. during that same time period. Stifel
Nicolaus also analyzed 34 thrift acquisitions announced in the U.S. between
January 1, 1994 and February 28, 1996 involving sellers with total assets in
excess of $1 billion (the "Selected Transactions"). Stifel Nicolaus calculated
the following ratios with respect
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<PAGE> 48
to the Merger (based on the acquisition of 10,881,697 fully diluted common stock
equivalents of Leader at an exchange ratio of 1.525 and a stock price of $31.25
for UPC) and the Selected Transactions:
<TABLE>
<CAPTION>
UPC/ SELECTED TRANSACTIONS
LEADER --------------------------------------
RATIOS MERGER MEAN MEDIAN MINIMUM MAXIMUM
--------------------------------------- ------ ------ ------ ------- -------
<S> <C> <C> <C> <C> <C>
Deal Price per share/Book Value........ 200.57% 141.67% 142.16% 64.99% 218.60%
Deal Price per share/Tangible Book
Value................................ 200.57% 157.24% 150.65% 110.92% 218.60%
Adjusted Deal Price/6.50% Equity....... 229.13% 150.45% 151.17% 69.49% 224.23%
Deal price per share/Last 12 month
earnings per share................... 12.88x 15.56x 13.37x 8.82x 33.33x
Deal Price/Assets...................... 16.74% 11.58% 10.42% 3.68% 21.98%
Premium over Tangible Book
Value/Deposits....................... 16.49% 5.28% 5.29% -1.77% 9.71%
Deal price/Deposits.................... 32.88% 15.79% 14.84% 4.19% 29.57%
</TABLE>
No company or transaction used in the above analyses as a comparison is
identical to Leader, UPC, or the Merger. Accordingly, an analysis of the results
of the foregoing is not mathematical; rather, it involves complex considerations
and judgments concerning differences in financial and operating characteristics
of the companies and other facts that could affect the public trading value of
the companies to which they are being compared.
As described above, Stifel Nicolaus' opinion and presentation to the UPC
Board of Directors were among the many factors taken into consideration by the
UPC Board in making its determination to approve the Merger.
For Stifel Nicolaus' services in connection with the Merger, UPC has agreed
to pay Stifel Nicolaus $500,000 pursuant to the terms of an engagement letter
and has agreed to reimburse Stifel Nicolaus for certain out-of-pocket expenses.
Pursuant to the engagement letter, UPC has agreed to indemnify Stifel Nicolaus,
its affiliates and their respective partners, directors, officers, agents,
consultants, employees and controlling persons against certain liabilities,
including liabilities under the federal securities laws.
In the ordinary course of its business, Stifel Nicolaus actively trades
equity securities of UPC and Leader for its own account and for the accounts of
its customers and, accordingly, may at any time hold a long or short position in
such securities. In addition, Stifel Nicolaus has acted and expects to continue
acting as a market maker in the securities of Leader.
EFFECTIVE TIME OF THE MERGER
Subject to the conditions to the obligations of the parties to effect the
Merger, the Effective Time will occur on the date and at the time that the
Tennessee Articles of Merger relating to the Merger shall become effective after
filing with the Tennessee Secretary of State. Unless otherwise agreed upon by
Leader and UPC, and subject to the conditions to the obligations of the parties
to effect the Merger, the parties will use their reasonable efforts to cause the
Effective Time to occur within thirty days (as designated by UPC) following the
last to occur of (i) the effective date (including the expiration of any
applicable waiting period) of the last consent of any regulatory authority
required for the Merger; (ii) the date on which the shareholders of Leader and
UPC approve the matters relating to the Agreement and the Plan of Merger
required to be approved by such shareholders by applicable law; and (iii) the
date on which all other conditions precedent to each party's obligations under
the Agreement shall have been satisfied or waived (to the extent lawfully
waivable by such party), provided, however, the Effective Time may not occur
prior to October 1, 1996.
Notwithstanding the foregoing, the parties have agreed to cooperate in
selecting the Effective Time to ensure that, with respect to the quarterly
period in which the Effective Time occurs, the holders of Leader Common Stock
will not be entitled to receive both a dividend in respect of their Leader
Common Stock and a dividend in respect of UPC Common Stock or fail to receive
any dividend. See "-- Conduct of Business Pending the Merger."
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<PAGE> 49
No assurance can be provided that the necessary shareholder and regulatory
approvals can be obtained or that other conditions precedent to the Merger can
or will be satisfied. Leader and UPC anticipate that all conditions to
consummation of the Merger will be satisfied so that the Merger can be
consummated during the fourth quarter of 1996. However, delays in the
consummation of the Merger could occur. See "-- Regulatory Approvals."
The Board of Directors of either Leader or UPC generally may terminate the
Agreement if the Merger is not consummated by March 1, 1997, unless the failure
to consummate by that date is the result of a breach of the Agreement by the
party seeking termination. See "-- Conditions to Consummation of the Merger" and
"-- Waiver, Amendment, and Termination."
DISTRIBUTION OF UPC STOCK CERTIFICATES
Promptly after the Effective Time, UPC will cause Union Planters National
Bank, Memphis, Tennessee, acting in its capacity as Exchange Agent, to mail to
the former shareholders of Leader a letter of transmittal, together with
instructions for the exchange of the Certificates previously representing shares
of Leader Common Stock for certificates representing shares of UPC Common Stock.
LEADER SHAREHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY
RECEIVE THE LETTER OF TRANSMITTAL AND INSTRUCTIONS.
Upon surrender to the Exchange Agent of Certificates for Leader Common
Stock, together with a properly completed letter of transmittal, there will be
issued and mailed to each holder of Leader Common Stock surrendering such items
a certificate or certificates representing the whole number of shares of UPC
Common Stock, after aggregation of all shares and fractional shares, to which
such holder is entitled, if any, and a check for the amount to be paid in lieu
of any remaining fractional share (without interest), together with all
undelivered dividends or distributions in respect of such shares (in each case,
without interest thereon). After the Effective Time, to the extent permitted by
law, Leader shareholders of record as of the Effective Time will be entitled to
vote at any meeting of UPC shareholders the number of whole shares of UPC Common
Stock into which their shares of Leader Common Stock have been converted,
regardless of whether such shareholders have surrendered their Leader Common
Stock Certificates. Whenever a dividend or other distribution is declared by UPC
on UPC Common Stock, the record date for which is at or after the Effective
Time, the declaration will include dividends or other distributions on all
shares issuable pursuant to the Agreement, but beginning 30 days after the
Effective Time no dividend or other distribution payable after the Effective
Time with respect to UPC Common Stock will be paid to the holder of any
unsurrendered Leader Common Stock Certificate until the holder duly surrenders
such certificate. Upon surrender of such Leader Common Stock Certificate
however, both the UPC Common Stock certificate, together with all undelivered
dividends or other distributions (in each case, without interest) and any
undelivered cash payments to be paid in lieu of fractional shares (without
interest), will be delivered and paid with respect to each share represented by
such certificate.
After the Effective Time, there will be no transfers of shares of Leader
Common Stock on Leader's stock transfer books. If Certificates representing
shares of Leader Common Stock should be presented for transfer after the
Effective Time, they will be returned to the presenter together with a form of
letter of transmittal and exchange instructions.
CONDITIONS TO CONSUMMATION OF THE MERGER
Consummation of the Merger is subject to various conditions, including (i)
receipt of the approval of the Agreement and the Plan of Merger by the
shareholders of Leader as required by the Tennessee Act and the rules of the
National Association of Securities Dealers, Inc. ("NASD"); (ii) receipt of the
approval of the issuance of shares of UPC Common Stock pursuant to the Agreement
by the shareholders of UPC as required by the Tennessee Act and the rules of the
NYSE; (iii) receipt of certain regulatory approvals required for consummation of
the Merger; (iv) receipt of a favorable opinion of Alston & Bird as to the
tax-free nature (except for cash received in lieu of fractional shares) of the
Merger; (v) receipt of approval of the shares of UPC Common Stock issuable
pursuant to the Merger for listing on the NYSE, subject to official notice of
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issuance; (vi) the Registration Statement being declared effective and all
necessary Commission and state approvals relating to the issuance or trading of
the shares of UPC Common Stock issuable pursuant to the Merger shall have been
received; (vii) the accuracy, as of the date of the Agreement and as of the
Effective Time, of the representations and warranties of Leader and UPC as set
forth in the Agreement; (viii) the performance of all agreements and the
compliance with all covenants of Leader and UPC as set forth in the Agreement;
(ix) receipt of a letter from Price Waterhouse LLP addressed to UPC, dated as of
the Effective Time, to the effect that the Merger will qualify for pooling of
interests accounting treatment; (x) receipt of all consents required for
consummation of the Merger or for the preventing of any default under any
contract or permit which, if not obtained or made, is reasonably likely to have,
individually or in the aggregate, a material adverse effect; (xi) the absence of
any law or order or any action taken by any court, governmental, or regulatory
authority prohibiting, restricting, or making illegal the consummation of the
transaction; and (xii) satisfaction of certain other conditions, including the
receipt of agreements of affiliates of Leader and various certificates from the
officers of Leader and UPC. See "-- Regulatory Approvals" and "-- Waiver,
Amendment, and Termination."
No assurance can be provided as to when or if all of the conditions
precedent to the Merger can or will be satisfied or lawfully waived by the party
permitted to do so. In the event the Merger shall not be effected on or before
March 1, 1997, the Agreement may be terminated and the Merger abandoned by a
vote of a majority of the Board of Directors of either Leader or UPC. See
"--Waiver, Amendment, and Termination."
REPRESENTATIONS AND WARRANTIES
UPC and Leader have made certain representations and warranties to each
other in the Agreement relating to, among other things, their respective
organization, standing and authority; their respective authority to execute and
deliver the Agreement and to consummate the transactions contemplated thereby
and the absence of any breaches as a result thereto; capital stock; filings with
the Commission and financial statements; the absence of any undisclosed
liabilities or certain changes or events; certain tax matters; certain
environmental matters; compliance with laws; legal proceedings; reports; the
truth and accuracy of various statements; and certain accounting, tax and
regulatory matters. Leader has made additional representations and warranties in
the Agreement with respect to its subsidiaries; the adequacy of its allowance
for possible loan losses; its assets; intellectual property; labor relations;
employee benefit plans; material contracts; the applicability of various state
takeover laws; and compliance with provisions of Leader's Charter.
REGULATORY APPROVALS
The Merger may not proceed in the absence of receipt of the requisite
regulatory approvals. Applications for the approvals described below have been
submitted to the appropriate regulatory agencies and approval has been received
from the Federal Reserve. There can be no assurance that such other regulatory
approvals will be obtained or as to the timing of any such approvals. There also
can be no assurance that any such approvals will not impose conditions or be
restricted in a manner (including requirements relating to the raising of
additional capital or the disposition of assets) which in the reasonable
judgment of the Board of Directors of UPC would so materially and adversely
impact the economic or business benefits of the transactions contemplated by the
Agreement that, had such condition or requirement been known, UPC would not, in
its reasonable judgment, have entered into the Agreement. As of the date of this
Joint Proxy Statement, a number of protests to the Merger have been submitted to
the OTS in connection with the applications. The OTS has informed UPC and Leader
that the merits of such protests are being reviewed by the OTS and that such
review may have the effect of delaying the completion of the processing of the
OTS application. Although UPC and Leader believe that such protests are wholly
without merit, it is possible that, as a result of such protests, the OTS could
determine to deny the application filed in connection with the Merger.
Leader and UPC are not aware of any material governmental approvals or
actions that are required for consummation of the Merger, except as described
below. Should any other approval or action be deemed to be required, it
presently is contemplated that such approval or action would be sought.
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The Merger requires the prior approval of the Federal Reserve pursuant to
Section 3 of the BHC Act (which approval has been obtained) and the prior
approval of the OTS pursuant to Section 10(e) of the Home Owners' Loan Act of
1933, as amended ("HOLA"). The Federal Reserve and the OTS apply similar
standards when considering whether or not to approve the Merger.
In evaluating the Merger, both the Federal Reserve and the OTS must
consider, among other factors, the financial and managerial resources and future
prospects of the institutions, the convenience and needs of the communities to
be served, and in the case of the OTS, the risk presented to the SAIF. The
relevant statutes prohibit the Federal Reserve or the OTS from approving the
Merger if (i) it would result in a monopoly or be in furtherance of any
combination or conspiracy to monopolize or attempt to monopolize the business of
banking in any part of the United States or (ii) its effect in any section of
the country may be to substantially lessen competition or to tend to create a
monopoly, or if it would result in a restraint of trade in any other manner,
unless the Federal Reserve or the OTS, as the case may be, should find that any
anticompetitive effects are outweighed clearly by the public interest and the
probable effect of the transaction in meeting the convenience and needs of the
communities to be served. The Merger may not be consummated until the 30th day
(which the Federal Reserve may reduce to 15 days) following the date of the
Federal Reserve approval, during which time the United States Department of
Justice would be afforded the opportunity to challenge the transaction on
antitrust grounds. The commencement of any antitrust action would stay the
effectiveness of the approval of the agencies, unless a court of competent
jurisdiction should specifically order otherwise.
WAIVER, AMENDMENT, AND TERMINATION
To the extent permitted by applicable law, Leader and UPC, with the
approval of their respective Boards of Directors, may amend the Agreement by
written agreement at any time before or after approval of the Agreement by the
Leader and UPC shareholders; provided, however, that after the Special Meetings,
no amendment may alter the manner or basis in which shares of Leader Common
Stock will be exchanged for UPC Common Stock without the requisite approval of
the holders of the issued and outstanding shares of Leader Common Stock and UPC
Common Stock entitled to vote thereon. In addition, prior to or at the Effective
Time, either Leader or UPC, or both, acting through their respective Boards of
Directors or chief executive officers or other authorized officers may waive any
default in the performance of any term of the Agreement by the other party, may
waive or extend the time for the compliance or fulfillment by the other party of
any and all of its obligations under the Agreement, and may waive any of the
conditions precedent to the obligations of such party under the Agreement,
except any condition that, if not satisfied, would result in the violation of
any applicable law or governmental regulation. No such waiver will be effective
unless in writing and unless executed by a duly authorized officer of Leader or
UPC, as the case may be.
The Agreement and the Plan of Merger may be terminated and the Merger
abandoned at any time prior to the Effective Time (i) by the mutual consent of
the Boards of Directors of Leader and UPC; (ii) by the Board of Directors of
Leader or UPC (provided, in the case of (a), (b) and (e) below only, that the
terminating party is not then in breach of any representation or warranty
contained in the Agreement under the applicable standards set forth in the
Agreement or in material breach of any covenant or other agreement contained in
the Agreement) (a) in the event of any inaccuracy of any representation or
warranty of the other party contained in the Agreement which cannot be, or has
not been, cured within 30 days after giving written notice to the breaching
party of such inaccuracy and which inaccuracy would provide the terminating
party the ability to refuse to consummate the Merger under the applicable
standards set forth in the Agreement, (b) in the event of a material breach by
the other party of any covenant or agreement contained in the Agreement which
cannot be, or has not been, cured within 30 days after the giving of written
notice to the breaching party of such breach, (c) if the Merger is not
consummated by March 1, 1997, provided that the failure to consummate is not due
to a breach by the party electing to terminate, (d) if any approval of any
regulatory authority required for consummation of the Merger and the other
transactions contemplated by the Agreement has been denied by final
nonappealable action, or if any action taken by such authority is not appealed
within the time limit for appeal or the shareholders of Leader or UPC fail to
vote their approval of the matters submitted for the approval by such
shareholders at the Special Meetings, or (e) if any of the
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conditions precedent to the obligations of such party to consummate the Merger
shall have not been satisfied, fulfilled, or waived by the appropriate party by
the Effective Time; (iii) by UPC if a Purchase Event (as such term is defined in
the Option Agreement) shall have occurred or by Leader if UPC should exercise
its option or repurchase rights granted under the Option Agreement; or (iv) by
the Board of Directors of Leader pursuant to the provisions of the Agreement
described in "-- Possible Adjustment of Exchange Ratio."
If the Merger should be terminated as described above, the Agreement and
the Plan of Merger will become void and have no effect, except that certain
provisions of the Agreement, including those relating to the obligations to
share certain expenses, maintain the confidentiality of certain information
obtained, and return all documents obtained from the other party under the
Agreement, will survive. In addition, termination of the Agreement will not
relieve any breaching party from liability for any uncured willful breach of a
representation, warranty, covenant, or agreement giving rise to such
termination. Finally, the Option Agreement will be governed by its own terms as
to its termination. See "-- Expenses and Fees" and "-- Option Agreement."
DISSENTERS' RIGHTS
The Tennessee Act denies the holders of Leader Common Stock dissenters'
rights with respect to the Merger. Because the Leader Common Stock is a
"national market system security" as defined in the Exchange Act, the holders of
Leader Common Stock are not entitled to dissent from, and obtain fair value in
cash for their shares in the event of, the Merger though such a transaction
would normally give rise to such rights. In addition, because UPC Common Stock
is listed on the NYSE, a national securities exchange, the holders of UPC Common
Stock do not have dissenters' rights with respect to the issuance of shares of
UPC Common Stock pursuant to the Agreement. See "DESCRIPTION OF UPC COMMON AND
PREFERRED STOCK."
CONDUCT OF BUSINESS PENDING THE MERGER
Pursuant to the Agreement, Leader has agreed that unless the prior written
consent of UPC has been obtained, and except as otherwise expressly contemplated
in the Agreement, Leader will (i) operate its business only in the usual,
regular, and ordinary course; (ii) preserve intact its business organization and
assets and maintain its rights and franchises; and (iii) take no action which
would (a) materially adversely affect the ability of any party to obtain any
consents required for the transactions contemplated by the Agreement without
imposition of a condition or restriction of the type referred to in the
Agreement, including taking any action which would prevent the Merger from
qualifying for pooling of interests accounting treatment or as a reorganization
within the meaning of Section 368(a) of the Code, or (b) materially adversely
affect the ability of any party to perform its covenants and agreements under
the Agreement.
In addition, Leader has agreed that, prior to the earlier of the Effective
Time or termination of the Agreement, Leader will not, except with the prior
written consent of the Chief Executive Officer, President or Chief Financial
Officer of UPC or as expressly contemplated or permitted by the Agreement, agree
or commit to do, any of the following: (i) amend the Charter, Bylaws, or other
governing instruments of any Leader company; (ii) incur any additional debt
obligation or other obligation for borrowed money (other than indebtedness of a
Leader company to another Leader company) in excess of an aggregate of $250,000
(for the Leader companies on a consolidated basis) except in the ordinary course
of business of the Leader subsidiaries consistent with past practices (which
shall include, for Leader subsidiaries that are depository institutions, the
creation of deposit liabilities, purchases of federal funds, obtaining advances
from the Federal Home Loan Bank or the Federal Reserve Bank, and entry into
repurchase agreements fully secured by U.S. government or agency securities), or
impose, or suffer the imposition, on any asset of any Leader company any lien or
permit any such lien to exist (other than in connection with deposits,
repurchase agreements, bankers acceptances, "treasury tax and loan" accounts
established in the ordinary course of business, the satisfaction of legal
requirements in the exercise of trust powers, and liens in effect as of the date
of the Agreement that were previously disclosed to UPC by Leader); (iii)
repurchase, redeem, or otherwise acquire or exchange (other than exchanges in
the ordinary course under employee benefit plans or in their capacity as
transfer agent), directly or indirectly, any shares, or any securities
convertible into any shares, of the capital stock of any
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<PAGE> 53
Leader company, or declare or pay any dividend or make any other distribution in
respect of any Leader capital stock; provided that Leader may (to the extent
legally and contractually permitted to do so), but shall not be obligated to,
declare and pay regular quarterly cash dividends on the shares of Leader Common
Stock at a rate not in excess of $0.18 per share with such increases and usual
and regular record and payment dates in accordance with past practice as
previously disclosed to UPC by Leader and such dates may not be changed without
the prior written consent of UPC, however the parties shall cooperate in
selecting the Effective Time to ensure that, with respect to the quarterly
period in which the Effective Time occurs, the holders of Leader Common Stock
will not become entitled to receive both a dividend in respect of their Leader
Common Stock and a dividend in respect of the UPC Common Stock into which their
Leader Common Stock has been converted or fail to receive any dividend; (iv)
except pursuant to the Agreement, or pursuant to the Option Agreement or
pursuant to the exercise of stock options outstanding as of the date of the
Agreement and pursuant to the terms thereof in existence on the date of the
Agreement, issue, sell, pledge, encumber, authorize the issuance of, enter into
any contract to issue, sell, pledge, encumber, or authorize the issuance of, or
otherwise permit to become outstanding, any additional shares of Leader Common
Stock, or any other capital stock of any Leader company, or any stock
appreciation rights, or any option, warrant, conversion, or other right to
acquire any such stock, or any security convertible into any such stock; (v)
adjust, split, combine, or reclassify any capital stock of any Leader company or
issue or authorize the issuance of any other securities in respect of, or in
substitution for shares of Leader Common Stock or sell, lease, mortgage, or
otherwise dispose of or otherwise encumber any shares of capital stock of any
Leader subsidiary (unless any such shares of stock are sold or otherwise
transferred to another Leader company) or any assets having a book value in
excess of $200,000 other than in the ordinary course of business for reasonable
and adequate consideration; (vi) except for purchases of U.S. Treasury
securities or U.S. Government agency securities, which in either case have
maturities of three years or less, or Federal Home Loan Bank Stock, purchase any
securities or make any material investment, either by purchase of stock or
securities, contributions to capital, asset transfers, or purchase of any
assets, in any person other than a wholly owned Leader subsidiary, or otherwise
acquire direct or indirect control over any person other than in connection with
(a) foreclosures in the ordinary course of business, (b) acquisitions of control
by a depository institution subsidiary in its fiduciary capacity, or (c) the
creation of new wholly owned subsidiaries organized to conduct or continue
activities otherwise permitted by the Agreement; (vii) grant any increase in
compensation or benefits to the employees or officers of any Leader company
except in the ordinary course of business or as previously disclosed to UPC by
Leader or as required by law; pay any bonus except in the ordinary course of
business or pursuant to the provisions of any applicable program or plan adopted
by its Board of Directors prior to the date of the Agreement and as previously
disclosed to UPC by Leader; enter into or amend any severance agreements with
officers of any Leader company; grant any material increase in fees or other
increases in compensation or other benefits to directors of any Leader company
except as previously disclosed to UPC by Leader; or voluntarily accelerate the
vesting of any stock options or other stock-based compensation or employee
benefits (other than the acceleration of vesting which occurs under a benefit
plan upon a change in control of Leader); (viii) enter into or amend any
employment contract between any Leader company and any person (unless such
amendment is required by law) that the Leader company does not have the
unconditional right to terminate without liability (other than liability for
services already rendered), at any time on or after the Effective Time; (ix)
adopt any new employee benefit plan or program of any Leader company or
terminate, withdraw from or make any material change in or to any existing
employee benefit plans or programs of any Leader company other than any such
change that is required by law or that, in the opinion of counsel, is necessary
or advisable to maintain the tax-qualified status of any such plan, or make
distributions from such employee benefit plans, except as required by law, the
terms of such plan or consistent with past practice; (x) make any significant
change in any tax or accounting methods or systems of internal accounting
controls, except as may be necessary to conform to changes in tax laws or
regulatory accounting requirements or generally accepted accounting principles;
(xi) commence any litigation other than in accordance with past practice or
settle any litigation involving any liability of any Leader company for material
money damages or restrictions upon the operations of any Leader company; or
(xii) enter into, modify, amend, or terminate any material contract (excluding
any loan contract) or waive, release, compromise, or assign any material rights
or claims.
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<PAGE> 54
The Agreement also provides that from the date of the Agreement until the
earlier of the Effective Time or the termination of the Agreement, UPC has
agreed that it will (i) continue to conduct its business and the business of its
subsidiaries in a manner designed in its reasonable judgment, to enhance the
long-term value of the UPC Common Stock and the business prospects of the UPC
companies and (ii) take no action which would (a) materially adversely affect
the ability of any party to obtain any consents required for the transactions
contemplated by the Agreement without imposition of a condition or restriction
of the type referred to in the Agreement; (b) materially adversely affect the
ability of any party to perform its covenants and agreements under the
Agreement; or (c) result in UPC's entering into an agreement with respect to an
acquisition proposal with a third party which would result in the Merger not
being consummated; provided, that any UPC company may acquire any other assets
or businesses or discontinue or dispose of any of its assets or business if such
action is, in the judgment of UPC, desirable in the conduct of the business of
UPC and its subsidiaries and would not, in the judgment of UPC, likely delay the
Effective Time after March 1, 1997.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
UPC has agreed that at the Effective Time of the Merger the following
officers of Leader will become officers of UPC, as designated: Edgar H. Bailey,
Vice Chairman of the Board of Directors; Ronald W. Stimpson, Senior Executive
Vice President and Chief Administrative Officer (reporting directly to the
President of UPC); Catherine C. Stallings, Executive Vice President and General
Counsel; and David C. Wadlington, Senior Vice President and Chief Financial
Officer of Specialty Banking Operations. In addition, at the first regularly
scheduled meeting of the UPC Board of Directors after the Effective Time, UPC
shall take all action necessary to elect four individuals who are members of the
Board of Directors of Leader at the Effective Time (two of whom shall be Messrs.
Bailey and Stimpson) to the Board of Directors of UPC. Information concerning
the current management and Board of Directors of UPC is included in the
documents incorporated herein by reference. See "DOCUMENTS INCORPORATED BY
REFERENCE." For additional information regarding the interests of certain
persons in the Merger, see "-- Interests of Certain Persons in the Merger."
Upon consummation of the Merger, Leader and UPC will continue to operate
their businesses and serve the communities and customers of their respective
market areas, although UPC intends to contribute all of the outstanding common
stock of Union Planters National Bank ("UPNB"), the wholly-owned, principal
subsidiary of UPC, to Leader after qualifying Leader as a bank holding company.
At some later date, yet to be determined, Leader Federal is expected to be
merged with and into UPNB (the "Subsidiary Merger"). In addition, certain
branches of Leader and other UPC Banking Subsidiaries may be consolidated with
or reassigned to the appropriate UPC Banking Subsidiary doing business in such
branch's service area.
Until the effective time of the Subsidiary Merger, it is expected that
substantially all of those individuals serving as executive officers of Leader
and Leader Federal will continue in such capacities. UPC has agreed that at the
effective time of the Subsidiary Merger the following officers of Leader will
become officers of UPNB as designated: Mr. Kirk Bailey, President and Chief
Operating Officer; Mr. Stimpson, Vice Chairman; and Brad L. Champlin, Executive
Vice President of Retail Branches. In addition, at the first regularly scheduled
meeting of the UPNB Board of Directors after the effective time of the
Subsidiary Merger, UPNB shall take all action necessary to elect all members of
the Board of Directors of Leader Federal at the Effective Time, who indicate a
willingness to serve, (other than the two non-employee directors elected to the
Board of Directors of UPC) to the Board of Directors of UPNB. For a description
of the provisions of the Agreement affecting the operations of Leader and UPC
prior to the Effective Time, see "--Conduct of Business Pending the Merger."
EFFECT ON CERTAIN EMPLOYEES AND BENEFIT PLANS
Employee Severance. Pursuant to the terms of the Supplemental Letter,
employees of Leader (other than employees whose severance benefits are provided
for in written employment agreements) whose employment is terminated before the
Effective Time shall be entitled to receive severance payments in accordance
with the provisions of Leader's severance pay plan. Leader employees (other than
employees whose severance benefits are provided for in written employment
agreements) whose employment is
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<PAGE> 55
terminated at or after the Effective Time will be entitled to receive severance
payments in accordance with the terms of UPC's involuntary severance pay plan.
Notwithstanding the foregoing, in the event that UPC contracts with a former
employee of Leader to provide services to UPC for a limited period of time after
the Effective Time, upon termination of such employee's employment and except as
otherwise provided in a written agreement with such employee, such employee will
be entitled to the benefits under the severance pay plan of UPC or Leader that
provides the greatest benefit to the employee. In addition, prior to the
Effective Time, Leader is permitted to establish a special termination program
for those employees of Leader whose employment would be terminated as a result
of the Merger. The recipients of the benefits of this program shall be
identified prior to the Effective Time. None of the executive officers of Leader
will participate in this program.
Pension Plan. Leader currently maintains the Leader Pension Plan (the
"Pension Plan"). Pursuant to the terms of the Supplemental Letter, after the
Effective Time there shall be no further accrual of benefits under the Pension
Plan and, on or before the Effective Time, Leader is required to terminate the
Pension Plan. To the extent permitted by law and to the extent that such
amendments do not cause the "benefit liabilities" (as defined in the
Supplemental Letter) to exceed the actual fair market value of the Pension Plan
assets (all determined on the date of the Pension Plan's termination) however,
Leader is permitted to amend the Pension Plan so as to permit participants and
their beneficiaries to elect to receive their accrued benefits in the form of a
lump sum payment rather than an annuity and to adjust the formula and
qualifications for determining benefits in any manner so as to ensure that any
excess funding in the Pension Plan inures solely to the benefit of individuals
who are participants in the Pension Plan at or prior to the Effective Time. Upon
termination of the Pension Plan, employees of Leader who are participants in
such Pension Plan will, to the extent provided under the Pension Plan and
applicable law become fully vested in and eligible to receive benefits under
such Pension Plan. To the extent and in the manner permitted by the Pension Plan
and the applicable law, Leader will distribute all vested and accrued benefits
to plan participants as soon as reasonably practicable following the termination
of the Pension Plan. At the election of any participant in the Pension Plan, any
vested and accrued benefit that constitutes an "eligible rollover distribution"
(as such term is defined in the Internal Revenue Code) may be rolled over to
UPC's 401(k) retirement savings plan.
Employee Stock Ownership Plan. UPC and Leader have agreed that, until such
time as the normal contribution for the 1997 fiscal year has been made to
Leader's existing employee stock ownership plan (the "ESOP") and to the extent
permitted by law, the ESOP will be maintained exclusively for the benefit of
those individuals from Leader participating in the ESOP as of the Effective
Time. The parties have further agreed to make annual contributions to the ESOP
in amounts at least sufficient to repay the principal and interest due annually
on the outstanding ESOP loan; to cause the administrative and other authority
with respect to the ESOP exercised by the Leader Board of Directors prior to the
Effective Time to be administered by a committee consisting of officers of both
UPC and Leader; and to not amend the ESOP except to the extent necessary to
comply with applicable law or to obtain a favorable determination from the
Internal Revenue Service as to the continuing qualified status of the ESOP.
After the full 1997 contribution is made to the ESOP, all contributions to the
ESOP will cease and participants in the ESOP who continue to be employed by UPC
at such time will be entitled to participate in the UPC ESOP to the same extent
as other employees of UPC and the Leader ESOP will be merged into the UPC ESOP.
Until such time as the two ESOPs shall have been merged, no participant in the
Leader ESOP will be entitled to participate in the UPC ESOP.
Other Employee Benefit Plans. The Agreement also provides that, with
certain exceptions, after the Effective Time, UPC will provide to officers and
employees of the Leader companies employee benefits under employee benefit and
welfare plans on terms and conditions which when taken as a whole are
substantially similar to those currently provided by UPC to its similarly
situated officers and employees. For purposes of participation, vesting and
(except in the case of retirement plans) benefit accrual under such employee
benefit plans, the service of the employees of the Leader companies prior to the
Effective Time shall be treated as service with UPC. As discussed above, until
such time as the ESOP is merged with the UPC ESOP, Leader employees will not be
entitled to participate in the UPC ESOP.
Club Dues. Pursuant to the terms of the Supplemental Letter, any employee
of Leader who, as of the date of the Agreement, was entitled to reimbursement of
expenses related to memberships in country clubs or
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<PAGE> 56
luncheon clubs will, subsequent to the Effective Time, only be entitled to
reimbursement in accordance with UPC's policies regarding such expenses. UPC has
agreed that any Leader employee who, prior to the Effective Time, was entitled
to reimbursement of club expenses but is not so entitled under UPC's policies,
will be entitled to have his or her base salary permanently increased at the
Effective Time by an amount equal to the dues paid (as further increased to
reflect the tax expense) for the benefit of the employee for the full fiscal
year immediately preceding the Effective Time.
Automobiles. UPC has agreed that any employee of Leader who, as of the
date of the Agreement, was supplied with an automobile at Leader's expense, will
be entitled to purchase such automobile during the first 30 days following the
Effective Time. In addition, those employees who received an automobile
allowance from Leader but who will not be entitled to receive such an allowance
as a UPC employee, will be entitled to have their base salary permanently
increased at the Effective Time in an amount equal to the reported value (as
increased to reflect the tax expense) of such benefit as reflected on the
employees' respective W-2s for the full fiscal year immediately preceding the
Effective Time.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
General. Certain members of Leader's management and of the Leader Board of
Directors have interests in the Merger that are in addition to any interests
they may have as shareholders of Leader generally. These interests include,
among other things, provisions in the Agreement relating to liquidating
payments, employment agreements, stock options, restricted stock and
indemnification of Leader directors and officers as described below. See
"-- Management and Operations after the Merger" and "-- Effect on Certain
Employees and Benefit Plans."
Employment Agreements. Leader and/or Leader Federal are party to
employment agreements with seven executive officers (the "Employment
Agreements"). Pursuant to the terms of the Employment Agreements, the respective
officer is entitled to receive certain payments in the event of the termination
of his or her Employment Agreement in connection with a change in control of
Leader or Leader Federal. UPC is requiring that such Employment Agreements be
terminated as of the Effective Time, but that such officers become officers of
UPC under new employment agreements consistent with those of other UPC officers.
As a result, such officers will be entitled to receive from UPC a liquidating
payment of the amount such officers are entitled to receive pursuant to the
terms of the Employment Agreements as a result of the change in control and the
termination of the Employment Agreements. Assuming the Merger closes in 1996, it
is currently estimated that Messrs. Edgar Bailey, Stimpson, Kirk Bailey,
Champlin, Wadlington, Larry C. Kershner and Mrs. Stallings will be entitled to
liquidating payments under their respective Employment Agreements in the
approximate amount of $750,000, $682,000, $488,000, $520,000, $372,000, $172,000
and $369,000, respectively. At the request of Mr. Edgar Bailey, the
above-described liquidating payment to be received by him has been reduced by
the aggregate amount of compensation he will receive in connection with his
proposed consulting agreement with UPC and certain other adjustments. Such
liquidating payments would increase significantly in the event the Merger does
not close until 1997. See "-- New Employment and Consulting Agreements."
Leader Federal is also party to severance agreements with four other
executive officers (the "Severance Agreements") which provide for lump sum
severance payments in the event of an officer's termination in connection with a
change in control of Leader Federal. Pursuant to the terms of the Supplemental
Letter, UPC has agreed to assume the Severance Agreements and to cause them to
be honored in accordance with their terms. In the event of their termination in
accordance with the terms of their respective severance agreement, Messrs. Joe
H. Davis Jr., Will E. May, Michael C. Ritz and H. Frederick Romine would be
entitled to receive severance payments in the amounts of $251,000, $206,000,
$165,000 and $160,000, respectively, assuming such termination should occur in
1996.
New Employment and Consulting Agreements. In order to ensure the
participation of various members of the management of Leader in the management
of Leader and Leader Federal and UPC and/or UPNB after the Effective Time, under
the terms of the Supplemental Letter, UPC and/or UPNB intends to enter into new
employment agreements with Messrs. Stimpson, Kirk Bailey, Champlin, Wadlington,
Kershner and
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<PAGE> 57
Mrs. Stallings in connection with their election as officers of UPC and/or UPNB.
The new employment agreement with Mr. Stimpson provides for an initial term of
three years, with one year extensions of the term on each anniversary date of
the effective date of the agreement provided that the Board of Directors of UPC
or UPNB determines in a duly adopted resolution that Mr. Stimpson's performance
has met the Board's requirements and standards and that the employment agreement
should be extended. The new agreement provides for an annual base salary in an
amount not less than $250,000 (Mr. Stimpson's base salary in effect as of the
date of the new agreement) and permits him to participate in an equitable manner
with all other senior management employees of UPC and UPNB in discretionary
bonuses as their respective Boards may award from time to time and to
participate in all employee benefit, retirement and welfare plans that UPC and
UPNB maintain.
The new employment agreement also provides that in the event that Mr.
Stimpson's employment should be terminated without "just cause," he will be
entitled to receive (i) the salary due to him for the remainder of the term of
his employment agreement plus an additional twelve months, but in no event in
excess of three years' salary, and (ii) the cost of obtaining all health, life,
disability and other benefits which he would have been eligible to receive
through the remainder of the term of his agreement. In the event his employment
under the agreement should be terminated without his consent within 12 months
after a change in control of UPC or UPNB, he will be entitled to receive a
payment equal to the excess, if any, of the product of 2.99 times his "base
amount" (as such term is defined in Section 280G(b)(3) of the Internal Revenue
Code) over the sum of any other parachute payments he receives as a result of
the change in control and the liquidating payment he receives in connection with
termination of his Employment Agreement. The agreement permits Mr. Stimpson to
voluntarily terminate his employment within 12 months following a change in
control of UPC or UPNB and be entitled to receive the above-described payment
upon the occurrence of, or within 90 days following any of the following events
(which have not been consented to in writing): (i) the requirement that he move
his personal residence or perform his principal executive functions more than 35
miles from his primary office as of the effective date of the new agreement;
(ii) a reduction in his base compensation as in effect on the effective date of
the new agreement or as may be increased from time to time; (iii) the failure by
UPC or UPNB to continue to provide him with compensation and benefits
substantially similar to those provided to him under any employee benefit plan
in which he becomes a participant, or the taking of any action by UPC or UPNB
which would directly or indirectly reduce any of such benefits or deprive him of
any material fringe benefit enjoyed by him as of the date of the change in
control; (iv) the assignment to him of duties and responsibilities other than
those normally associated with his position; (v) the failure to elect or re-
elect him to the Board of Directors of UPC or UPNB; or (vi) a material
diminution or reduction in his responsibilities or authority.
The new employment agreements to be entered into between UPC and Messrs.
Kirk Bailey, Wadlington, Champlin, Kershner and Mrs. Stallings all provide for a
two year term. The individuals will be entitled to a base salary at least equal
to their respective base salaries as of the date of the new employment
agreements and entitle the officers to participate in all employee and fringe
benefits offered to UPC employees. These agreements provide that an officer's
employment may be terminated for cause by either the employee or UPC or may be
terminated by UPC without cause in which event the officer would be entitled to
receive the greater of his or her base salary as then in effect for the
remaining term of the agreement or six months' base salary as then in effect.
The officers may voluntarily terminate their respective employment provided they
give at least 90 days written notice of the officer's intent to terminate
employment.
In addition, Mr. Edgar Bailey has agreed to enter into a three-year
consulting agreement providing for annual compensation of $150,000. The amount
that Mr. Bailey will be entitled to receive as a result of the termination of
his existing employment agreement has been reduced by the aggregate amount of
the compensation to be received under such consulting agreement.
Stock Options. Leader has granted stock options to certain officers and
directors pursuant to the Leader Financial Corporation 1993 Stock Option and
Incentive Plan (the "Leader Option Plan"). Pursuant to the Agreement, each
option issued under the Leader Option Plan that is outstanding at the Effective
Time will be converted into an option to purchase that number of whole shares of
UPC Common Stock (and cash in lieu of fractional shares as previously described
herein) equal to the number of shares of Leader Common Stock
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subject to such option multiplied by the Exchange Ratio. The per share exercise
price under each such option shall be adjusted by dividing the per share
exercise price under each such option by the Exchange Ratio and rounding up to
the nearest cent. As a result of the change in control of Leader, at the
Effective Time, all participants shall become fully vested in all options
granted to them pursuant to the provisions of the Leader Option Plan.
The following table sets forth with respect to the directors and executive
officers of Leader (i) the number of options held by such persons, (ii) the
number of shares covered by currently exercisable options held by such persons,
(iii) the numbers of shares covered by options held by such persons which will
become exercisable upon consummation of the Merger, (iv) the weighted average
exercise price of all such options held by such persons, and (v) the aggregate
value of all such options based upon the per share value of Leader Common Stock
on the Leader Record Date:
<TABLE>
<CAPTION>
WEIGHTED
OPTIONS AVERAGE
OPTIONS EXERCISABLE EXERCISE AGGREGATE
OPTIONS CURRENTLY UPON MERGER PRICE PER VALUE OF
HELD EXERCISABLE CONSUMMATION OPTION OPTIONS
------- ----------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
DIRECTORS:
Ronald E. Carrier..................... 30,440 30,440 30,440 $ 10.000 $1,057,790
Ludwig M. Clymer(1)................... 27,301 27,301 27,301 10.000 948,710
James H. Daughdrill................... 24,483 24,483 24,483 10.000 850,784
Thomas R. Dyer........................ 23,225 23,225 23,225 10.000 807,069
Arthur F. Fulmer...................... 29,817 29,817 29,817 10.000 1,036,141
James E. Harwood...................... 15,731 15,731 15,731 10.000 546,652
Spence L. Wilson...................... 25,731 25,731 25,731 10.000 894,152
Arthur N. Seessel..................... 5,000 5,000 5,000 27.313 87,188
James E. Witherington................. 5,000 5,000 5,000 27.313 87,188
EXECUTIVE OFFICERS:
Edgar H. Bailey....................... 161,288 107,525 161,288 10.000 5,604,758
Kirk P. Bailey........................ 53,763 35,842 53,763 10.000 1,868,264
Brad L. Champlin...................... 25,000 7,079 25,000 10.000 868,750
Joe H. Davis, Jr...................... 26,881 17,921 26,881 10.000 934,115
Larry C. Kershner..................... 12,500 4,167 12,500 26.906 223,047
Will E. May........................... 26,881 17,921 26,881 10.000 934,115
Michael C. Ritz....................... 13,441 8,961 13,441 10.000 467,075
H. Frederick Romine................... 13,441 8,961 13,441 10.000 467,075
Catherine C. Stallings................ 40,322 26,881 40,322 10.000 1,401,190
Ronald W. Stimpson.................... 96,525 60,683 96,525 10.000 3,354,244
David C. Wadlington................... 39,622 26,181 39,622 10.000 1,376,865
</TABLE>
- ---------------
(1) Director Emeritus
Restricted Stock Awards. Leader has previously granted shares of Leader
Common Stock pursuant to the Leader Financial Corporation Management Recognition
Plan (the "MRP") to various directors and executive officers. The MRP restricts
the transfer of such shares based on vesting requirements in the plan and also
provides for the immediate vesting of such shares upon a change of control of
Leader. As a result of the change in control in Leader, directors and executive
officers shall become immediately vested in the shares awarded to them pursuant
to the MRP.
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The following table sets forth with respect to its directors and executive
officers (i) the number of shares of restricted Leader Common Stock held by such
individuals and (ii) the dollar value of such shares based upon the per share
value of Leader Common Stock on the Leader Record Date.
<TABLE>
<CAPTION>
RESTRICTED AGGREGATE
SHARES HELD VALUE OF AWARD
----------- --------------
<S> <C> <C>
DIRECTORS:
Ronald E. Carrier......................................... 4,408 197,258
Ludwig M. Clymer(1)....................................... 3,700 165,575
James H. Daughdrill....................................... 3,063 137,069
Thomas R. Dyer............................................ 2,780 124,405
Arthur F. Fulmer.......................................... 4,266 190,904
James E. Harwood.......................................... 3,346 149,734
Spence L. Wilson.......................................... 3,346 149,734
Arthur N. Seessel......................................... 1,600 71,600
James E. Witherington..................................... 1,600 71,600
EXECUTIVE OFFICERS:
Edgar H. Bailey........................................... 38,709 1,732,228
Kirk P. Bailey............................................ 25,806 1,154,819
Brad L. Champlin.......................................... 25,806 1,154,819
Joe H. Davis, Jr.......................................... 9,677 433,046
Larry C. Kershner......................................... 8,000 358,000
Will E. May............................................... 9,677 433,046
Michael C. Ritz........................................... 5,806 259,819
H. Frederick Romine....................................... 5,806 259,819
Catherine C. Stallings.................................... 19,355 866,136
Ronald W. Stimpson........................................ 38,709 1,732,228
David C. Wadlington....................................... 19,355 866,136
</TABLE>
- ---------------
(1) Director Emeritus
Bonus Plan. UPC has agreed to permit Leader to continue to accrue for and
pay cash bonuses through December 31, 1996 (or the Effective Time, if later) in
a manner consistent with the requirements of its 1996 bonus plan, provided,
however, that any performance or comparative data about Leader or peer companies
shall be annualized using the best information reasonably available to Leader as
of the Effective Time and without regard for expenses associated with the
Merger.
Indemnification; Insurance. The Agreement provides that UPC will indemnify
the present and former directors, officers, employees and agents of the Leader
companies (each, an "Indemnified Party") against all liabilities (including
reasonable attorneys' fees and amounts paid in settlement) arising out of
actions or omissions occurring at or prior to the Effective Time (including the
transactions contemplated by the Agreement and the Option Agreement) to the full
extent permitted by Tennessee law and by Leader's Charter and Bylaws as in
effect as of the date of the Agreement, including provisions relating to the
advancement of expenses incurred in the defense of any litigation. In any case
in which approval by UPC is required to effectuate any indemnification, at the
election of the Indemnified Party, the determination of any such approval will
be made by independent counsel mutually agreed upon between UPC and the
Indemnified Party.
From and after the Effective Time, UPC has also agreed to use its
reasonable efforts to maintain in effect directors' and officers' liability
insurance coverage containing terms and conditions which are substantially no
less advantageous than the coverage maintained by Leader prior to the Effective
Time (unless Leader otherwise consents prior to the Effective Time) with respect
to claims arising from facts or circumstances which have occurred prior to the
Effective Time and covering persons who were covered by such insurance as of the
date of the Agreement. However, in no event is UPC or Leader obligated to make
premium payments in excess of an aggregate of $100,000 for the entire period in
which such policy or policies are in effect.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material anticipated federal income tax
consequences of the Merger. This summary is based on the federal income tax laws
as now in effect and as currently interpreted; it does not take into account
possible changes in such laws or interpretations, including amendments to
applicable statutes or regulations or changes in judicial or administrative
rulings, some of which may have retroactive effect. This summary does not
purport to address all aspects of the possible federal income tax consequences
of the Merger. In particular, and without limiting the foregoing, this summary
does not address the federal income tax consequences of the Merger to
shareholders in light of their particular circumstances or status (for example,
as foreign persons, tax-exempt entities, dealers in securities, insurance
companies, and corporations, among others). Nor does this summary address any
consequences of the Merger under any state, local, estate, or foreign tax laws.
Shareholders, therefore, are urged to consult their own tax advisors as to the
specific tax consequences to them of the Merger, including tax-return-reporting
requirements, the application and effect of federal, foreign, state, local, and
other tax laws, and the implications of any proposed changes in the tax laws.
A federal income tax ruling with respect to this transaction has not been,
and will not be, requested from the Internal Revenue Service. Instead, Alston &
Bird, counsel to UPC, has rendered an opinion to Leader and UPC concerning
certain federal income tax consequences of the proposed Merger under federal
income tax law. It is such firm's opinion that, based upon the assumptions the
Merger is consummated in accordance with Tennessee law and the Agreement and in
conformity with certain factual representations made by the management of Leader
and UPC, the transaction will have the following federal income tax
consequences:
(a) The Merger will constitute a "reorganization" within the meaning
of Section 368(a) of the Code.
(b) No gain or loss will be recognized to the Leader shareholders upon
the receipt of UPC Common Stock solely in exchange for their shares of
Leader Common Stock.
(c) The basis of the UPC Common Stock to be received by Leader
shareholders will be the same as the basis of the Leader Common Stock
surrendered in the exchange, less the basis allocated to any fractional
share of UPC Common Stock settled by cash payment.
(d) The holding period of the UPC Common Stock to be received by
Leader shareholders will include the holding period of the Leader Common
Stock surrendered in exchange therefor, provided that the Leader Common
Stock was held as a capital asset on the date of the exchange.
(e) The payment of cash to a Leader shareholder in lieu of issuing a
fractional share interest in UPC will be treated for federal income tax
purposes as if the fractional share were distributed as part of the
exchange and then was redeemed by UPC. This cash payment will be treated as
having been received as a distribution in full payment in exchange for the
stock redeemed as provided in Section 302(a) of the Code.
The tax opinion does not address any state, local, or other tax
consequences of the Merger.
ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for as a pooling of
interests. Under the pooling of interests method of accounting, the recorded
amounts of the assets and liabilities of Leader will be carried forward at their
previously recorded amounts.
In order for the Merger to qualify for pooling of interests accounting
treatment, substantially all (90% or more) of the outstanding Leader Common
Stock must be exchanged for UPC Common Stock with substantially similar terms.
There are certain other criteria that must be satisfied in order for the Merger
to qualify for pooling of interests accounting treatment.
For information concerning certain conditions to be imposed on the exchange
of Leader Common Stock for UPC Common Stock in the Merger by persons deemed to
be "affiliates" of Leader and certain restrictions to be imposed on the
transferability of the UPC Common Stock received by those affiliates in the
Merger in
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order, among other things, to ensure the application of pooling of interests
accounting treatment, see "-- Resales of UPC Common Stock."
EXPENSES AND FEES
The Agreement provides, in general, that each of the parties shall bear and
pay its own expenses in connection with the transactions contemplated by the
Agreement, including fees and expenses of its own financial or other
consultants, investment bankers, accountants, and counsel, except that each of
UPC and Leader will bear and pay the filing fees and printing costs incurred in
connection with the Registration Statement and this Joint Proxy Statement based
on the relative asset sizes of the parties at December 31, 1995.
RESALES OF UPC COMMON STOCK
Shares of UPC Common Stock to be issued to shareholders of Leader in
connection with the Merger will be registered under the Securities Act. All
shares of UPC Common Stock received by prior holders of Leader Common Stock, and
all shares of UPC Common Stock issued and outstanding immediately prior to the
Effective Time, upon consummation of the Merger, will be freely transferable by
those shareholders of Leader and UPC who are not deemed to be "Affiliates" of
Leader or UPC. "Affiliates" generally are defined as persons or entities who
control, are controlled by, or are under common control with Leader or UPC
(generally, executive officers and directors).
Rules 144 and 145 promulgated by the Commission under the Securities Act
restrict the sale of UPC Common Stock received in the Merger by Affiliates and
certain of their family members and related interests. Generally speaking,
during the two years following the Effective Time, Affiliates of Leader or UPC
may resell publicly the UPC Common Stock received by them in the Merger within
certain limitations as to the amount of UPC Common Stock sold in any three-month
period and as to the manner of sale. After the two-year period, such Affiliates
of Leader who are not affiliates of UPC may resell their shares without
restriction. The ability of Affiliates to resell shares of UPC Common Stock
received in the Merger under Rules 144 or 145 as summarized herein generally
will be subject to UPC's having satisfied its Exchange Act reporting
requirements for specified periods prior to the time of sale. Affiliates will
receive additional information regarding the effect of Rules 144 and 145 on
their ability to resell UPC Common Stock received in the Merger. Affiliates also
would be permitted to resell UPC Common Stock received in the Merger pursuant to
an effective registration statement under the Securities Act or an available
exemption from the Securities Act registration requirements. This Joint Proxy
Statement does not cover any resales of UPC Common Stock received by persons who
may be deemed to be Affiliates of Leader or UPC.
Leader has agreed to use its reasonable efforts to cause each person who
may be deemed to be an Affiliate of Leader to execute and deliver to UPC not
later than 30 days prior to the Effective Time, an agreement (each, an
"Affiliate Agreement") providing that such Affiliate shall not sell, pledge,
transfer, or otherwise dispose of any UPC Common Stock obtained as a result of
the Merger (i) except in compliance with the Securities Act and the rules and
regulations of the Commission thereunder and (ii) in any case, until after
financial results covering 30 days of post-Merger operations of UPC shall have
been published. Certificates representing shares of Leader Common Stock
surrendered for exchange by any person who is deemed to be an Affiliate of
Leader for purposes of Rule 145(c) under the Securities Act shall not be
exchanged for certificates representing shares of UPC Common Stock until UPC has
received such a written agreement from such person. Prior to publication of such
results, UPC will not transfer on its books any shares of UPC Common Stock
received by an Affiliate pursuant to the Merger. The stock certificates
representing UPC Common Stock issued to Affiliates in the Merger may bear a
legend summarizing the foregoing restrictions. See "-- Conditions to
Consummation of the Merger."
OPTION AGREEMENT
As an inducement and a condition to UPC entering into the Agreement, Leader
and UPC entered into the Option Agreement, pursuant to which Leader granted UPC
an option (the "Option") entitling UPC to
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purchase up to 1,973,600 shares (representing 19.9% of the shares issued and
outstanding before giving effect to the exercise of such Option) of Leader
Common Stock under the circumstances described below, at a cash price per share
equal to $41.50, subject to adjustment in certain circumstances. This
description of the Option Agreement and the Option does not purport to be
complete and is qualified in its entirety by reference to the Option Agreement,
which is filed as a part of Appendix I hereto and is incorporated herein by
reference.
Subject to applicable law and regulatory restrictions, UPC may exercise the
Option, in whole or in part, if, but only if, a "Purchase Event" (as defined
below) should occur prior to the Option's termination; provided that UPC, at the
time, is not in material breach of the Option Agreement or the Agreement. As
defined in the Option Agreement, "Purchase Event" means either of the following
events:
(a) without UPC's prior written consent, Leader shall have authorized,
recommended, publicly proposed or publicly announced an intention to
authorize, recommend, or propose, or entered into an agreement with any
third party to effect (i) a merger, consolidation, or similar transaction
involving Leader or any of its subsidiaries (other than transactions solely
between Leader subsidiaries); (ii) except as permitted by the Agreement,
the disposition, by sale, lease, exchange, or otherwise, of 25% or more of
the consolidated assets of Leader and its subsidiaries; or (iii) the
issuance, sale, or other disposition of (including by way of merger,
consolidation, share exchange, or any similar transaction) securities
representing 25% or more of the voting power of Leader or any of its
subsidiaries; or
(b) any third party's acquiring beneficial ownership, or the right to
acquire beneficial ownership, of 25% or more of the outstanding shares of
Leader Common Stock.
The Option will terminate at or upon the earliest of the following:
(a) the Effective Time;
(b) termination of the Agreement in accordance with the terms thereof
prior to the occurrence of a Purchase Event or a "Preliminary Purchase
Event" (as defined below) (other than a termination of the Agreement by UPC
under certain circumstances involving a willful breach by Leader of a
representation, warranty, covenant or agreement of Leader contained in the
Agreement) (a "Default Termination");
(c) 12 months after termination of the Agreement by UPC pursuant to a
Default Termination; and
(d) 12 months after termination of the Agreement (other than pursuant
to a Default Termination) following the occurrence of a Purchase Event or a
"Preliminary Purchase Event."
As defined in the Option Agreement, "Preliminary Purchase Event" includes
either of the following events:
(a) commencement by any third party of, or filing by any third party
of a registration statement under the Securities Act with respect to, a
tender offer or exchange offer to purchase any shares of Leader Common
Stock such that, upon consummation of such offer, such person would own or
control 15% or more of the then outstanding shares of Leader Common Stock
(a "Tender Offer" or an "Exchange Offer," respectively); or
(b) failure of the shareholders of Leader to approve the Agreement at
the meeting of such shareholders held for the purpose of voting on the
Agreement, the failure to have such meeting prior to termination of the
Agreement, or the withdrawal or modification by Leader's Board of Directors
in a manner adverse to UPC of the recommendation of the Board of Directors
with respect to the Agreement after public announcement that a third party
(i) made, or disclosed an intention to make, a proposal to engage in an
acquisition transaction; (ii) commenced a Tender Offer or filed a
registration statement under the Securities Act with respect to an Exchange
Offer; or (iii) filed an application under certain federal statutes for
approval to engage in an acquisition transaction.
In the event of any change in Leader Common Stock by reason of a stock
dividend, split-up, recapitalization, exchange of shares, or similar
transaction, the type and number of securities subject to the Option, and the
purchase price per share, as the case may be, would be adjusted appropriately.
In the event that any additional shares of Leader Common Stock should be issued
after March 9, 1996 (other than
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pursuant to an event described in the preceding sentence), the number of shares
of Leader Common Stock subject to the Option would be adjusted so that, after
such issuance, it, together with any shares of Leader Common Stock previously
issued pursuant to the Option Agreement, would equal 19.9% of the number of
shares then issued and outstanding, without giving effect to any shares subject
to or issued pursuant to the Option.
Upon the occurrence of a "Repurchase Event" (as defined below) that occurs
prior to the exercise or termination of the Option, at the request of UPC,
delivered within 12 months of the Repurchase Event, Leader will, subject to
regulatory restrictions, be obligated to repurchase the Option and any shares of
Leader Common Stock theretofore purchased pursuant to the Option Agreement at a
specified price.
As defined in the Option Agreement, a "Repurchase Event" would be deemed to
occur if (i) any person (other than UPC or any UPC subsidiary) shall have
acquired beneficial ownership (as such term is defined in Rule 13d-3 promulgated
under the Exchange Act), or the right to acquire beneficial ownership, or any
"group" (as such term is defined under the Exchange Act) shall have been formed
which beneficially owns or has the right to acquire beneficial ownership of 50%
or more of the then-outstanding shares of Leader Common Stock or (ii) any of the
following transactions should be consummated: (a) Leader consolidates with or
merges into any person, other than UPC or one of UPC's subsidiaries, and is not
the continuing or surviving corporation of such consolidation or merger; (b)
Leader permits any person, other than UPC or one of UPC's subsidiaries, to merge
into Leader and Leader shall be the continuing or surviving corporation, but, in
connection with such merger, the then outstanding shares of Leader Common Stock
shall be changed into or exchanged for stock or other securities of Leader or
any other person or cash or any other property or the outstanding shares of
Leader Common Stock immediately prior to such merger shall after such merger
represent less than 50% of the outstanding shares and share equivalents of the
merged company; or (c) Leader sells or otherwise transfers all or substantially
all of its assets to any person, other than UPC or one of UPC's subsidiaries.
In the event that prior to the exercise or termination of the Option,
Leader should enter into an agreement to engage in any of the transactions
described in clause (ii) of the definition of Repurchase Event above, the
agreement governing such transaction must make proper provision so that the
Option will, upon consummation of such transaction, be converted into, or
exchanged for, an option with terms similar to the Option, at the election of
UPC, of either the acquiring person or any person that controls the acquiring
person (or in the case of clause (ii)(b) above, Leader).
After the occurrence of a Purchase Event, UPC may without the consent of
Leader assign the Option Agreement and its rights thereunder in whole or in
part.
Upon the occurrence of certain events, Leader has agreed to file with the
Commission and to cause to become effective certain registration statements
under the Securities Act with respect to dispositions by UPC and its assigns of
all or part of the Option and/or any shares of Leader Common Stock into which
the Option is exercisable.
OTHER RELATED TRANSACTIONS
Subsequent to the execution of the Agreement, Leader and UPC (or UPNB) have
been discussing certain other transactions. Specifically, UPC is currently in
the process of constructing a building to serve as an administrative building
for Leader subsequent to the Merger. In the event the Merger is not consummated,
Leader has agreed to rent the premises from UPC at a rent equivalent to market
rent for similar premises. In addition, UPNB and Leader are exploring the
possibility of UPNB's servicing (or acquiring) an approximately $15 million
portfolio of financing leases owned by a wholly owned subsidiary of Leader
Federal, Leader Leasing, Inc. Such transaction would not be conditioned upon the
consummation of the Merger. The parties are also exploring the transfer of the
servicing of Leader's $38 million credit card receivable portfolio to UPC and
the sale by Leader Federal of a 90% participation interest to UPNB in mortgage
loans having an aggregate principal of approximately $150 million.
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EFFECT OF THE MERGER ON RIGHTS OF SHAREHOLDERS
As a result of the Merger, holders of Leader Common Stock will be
exchanging their shares of a Tennessee corporation governed by the Tennessee Act
and Leader's Charter and Bylaws, for shares of UPC, also a Tennessee corporation
governed by the Tennessee Act and UPC's Charter and Bylaws. Certain significant
differences exist between the rights of Leader shareholders and those of UPC
shareholders. The differences deemed material by Leader and UPC are summarized
below. The following discussion is necessarily general; it is not intended to be
a complete statement of all differences affecting the rights of shareholders and
their respective entities, and it is qualified in its entirety by reference to
the Tennessee Act, UPC's Charter and Bylaws, and Leader's Charter and Bylaws.
ANTITAKEOVER PROVISIONS GENERALLY
The provisions of UPC's Charter and Bylaws described below under the
headings "-- Authorized Capital Stock," "-- Amendment of Charter and Bylaws,"
"-- Classified Board of Directors and Absence of Cumulative Voting,"
"-- Director Removal and Vacancies," the provisions of the Tennessee Act
described under the heading "-- Business Combinations with Certain Persons," and
"-- Mergers, Consolidations, and Sales of Assets Generally" are referred to
herein as the "Protective Provisions." In general, one purpose of the Protective
Provisions is to assist UPC's Board of Directors in playing a role if any group
or person should attempt to acquire control of UPC, so that the Board can
further protect the interests of UPC and its shareholders as appropriate under
the circumstances, including, if the Board determines that a sale of control is
in their best interests, by enhancing the Board's ability to maximize the value
to be received by the shareholders upon such a sale.
Although UPC's management believes the Protective Provisions are beneficial
to UPC's shareholders, the Protective Provisions also may tend to discourage
some takeover bids. As a result, UPC's shareholders may be deprived of
opportunities to sell some or all of their shares at prices that represent a
premium over prevailing market prices. On the other hand, defeating undesirable
acquisition offers can be a very expensive and time-consuming process. To the
extent that the Protective Provisions discourage undesirable proposals, UPC may
be able to avoid those expenditures of time and money.
The Protective Provisions also may discourage open market purchases by a
potential acquiror. Such purchases may increase the market price of UPC Common
Stock temporarily, enabling shareholders to sell their shares at a price higher
than that which otherwise would prevail. In addition, the Protective Provisions
may decrease the market price of UPC Common Stock by making the stock less
attractive to persons who invest in securities in anticipation of price
increases from potential acquisition attempts. The Protective Provisions also
may make it more difficult and time consuming for a potential acquiror to obtain
control of UPC through replacing the Board of Directors and management.
Furthermore, the Protective Provisions may make it more difficult for UPC's
shareholders to replace the Board of Directors or management, even if a majority
of the shareholders should believe such replacement is in the best interests of
UPC. As a result, the Protective Provisions may tend to perpetuate the incumbent
Board of Directors and management.
AUTHORIZED CAPITAL STOCK
UPC. UPC's Charter authorizes the issuance of up to 110,000,000 shares of
stock, including 100,000,000 shares of UPC Common Stock having a par value of
$5.00 per share and 10,000,000 shares of preferred stock having no par value
("UPC Preferred Stock"), of which 46,121,289 shares and 3,489,336 shares,
respectively were issued and outstanding as of July 26, 1996. See "DESCRIPTION
OF UPC COMMON AND PREFERRED STOCK." UPC's Board of Directors may authorize the
issuance of additional authorized shares of UPC Common Stock or UPC Preferred
Stock without further action by UPC's shareholders, unless such action is
required in a particular case by applicable laws or regulations or by any stock
exchange upon which UPC's capital stock may be listed. UPC's shareholders do not
have the preemptive right to purchase or subscribe to any unissued authorized
shares of UPC Common Stock or UPC Preferred Stock or any option or warrant for
the purchase thereof.
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The authority to issue additional shares of UPC Common Stock or UPC
Preferred Stock provides UPC with the flexibility necessary to meet its future
needs without the delay resulting from seeking shareholder approval. The
authorized but unissued shares of UPC Common Stock or UPC Preferred Stock will
be issuable from time to time for any corporate purpose, including, without
limitation, stock splits, stock dividends, employee benefit and compensation
plans, acquisitions, and public or private sales for cash as a means of raising
capital. Such shares could be used to dilute the stock ownership of persons
seeking to obtain control of UPC. In addition, the sale of a substantial number
of shares of UPC Common Stock or UPC Preferred Stock to persons who have an
understanding with UPC concerning the voting of such shares, or the distribution
or declaration of a dividend of shares of UPC Common Stock or UPC Preferred
Stock (or the right to receive UPC Common Stock or UPC Preferred Stock) to UPC
shareholders, may have the effect of discouraging or increasing the cost of
unsolicited attempts to acquire control of UPC.
In addition, in 1989, the UPC Board of Directors adopted a Share Purchase
Rights Plan and distributed a dividend of one Preferred Share Unit Purchase
Right ("Preferred Share Right") for each outstanding share of UPC Common Stock.
Moreover, one Preferred Share Right was required to be, automatically and
without further action by UPC, distributed in respect to each share of UPC
Common Stock issued thereafter. The Preferred Share Rights are generally
designed to deter coercive takeover tactics and to encourage all persons
interested in potentially acquiring control of UPC to treat each shareholder on
a fair and equal basis. Each Preferred Share Right trades in tandem with the
share of UPC Common Stock to which it relates until the occurrence of certain
events indicating a potential change in control of UPC. Upon the occurrence of
such an event, the Preferred Share Rights would separate from UPC Common Stock
and each holder of a Preferred Share Right (other than the potential acquiror)
would be entitled to purchase certain equity securities at prices below their
market value. UPC has authorized 750,000 shares of Series A Preferred Stock for
issuance under the Share Purchase Rights Plan, but no shares have been issued as
of the date of this Joint Proxy Statement. Until a Preferred Share Right is
exercised, the holders thereof, as such, will have no rights as shareholders of
UPC, thus they would have no right to vote or to receive dividends on the Series
A shares.
Leader. Leader's authorized capital stock consists of 50,000,000 shares
including 35,000,000 shares of Leader Common Stock and 15,000,000 shares of
preferred stock, par value of $1.00 per share, ("Leader Preferred Stock"), of
which 9,962,545 shares of Leader Common Stock were issued and outstanding as of
July 26, 1996. No shares of Leader Preferred Stock are issued or outstanding.
Shares of Leader Common Stock can be issued by authorization of the Board of
Directors of Leader without the approval of the shareholders except in certain
instances prescribed by the Tennessee Act. Leader's shareholders do not have the
preemptive right to purchase or subscribe to any unissued authorized shares of
Leader Common Stock or any option or warrant for the purchase thereof.
AMENDMENT OF CHARTER AND BYLAWS
UPC. UPC's Charter requires the affirmative vote of 66 2/3% of the
outstanding shares entitled to vote to amend, alter or repeal certain provisions
of the Charter regarding the election and number of directors, the approval of
certain mergers, consolidations or similar transactions and to amend certain
other provisions; otherwise the affirmative vote of a majority of the votes
eligible to be cast is required. UPC's Charter provisions may make it more
difficult for shareholders of UPC to amend certain provisions of the Charter.
UPC's Bylaws may be amended by a vote of a majority of the entire Board of
Directors, unless otherwise required by the Charter, or by the affirmative vote
of a majority of the outstanding shares eligible to vote.
Leader. Leader's Charter requires the affirmative vote of 80% of the
outstanding shares entitled to vote to repeal, alter, amend or rescind certain
provisions of the Charter regarding the shareholders' meeting and voting,
election, number and removal of directors, directors' liability and
indemnification, and certain antitakeover provisions at a meeting called for
such purpose; except that such amendments may be made by the affirmative vote of
the holders of a majority of the outstanding shares entitled to vote if the same
is first approved by a majority of the "Continuing Directors" (as defined below
in "-- Business Combinations with Certain Persons"). For other amendments, the
affirmative vote of a majority of the votes eligible to be cast is required.
Leader's Charter provisions may make it more difficult for shareholders of
Leader to amend certain provisions of the Charter. Leader's Bylaws may be
repealed, altered, amended or rescinded by an affirmative
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vote of a majority of the Board of Directors at a duly held meeting, or by the
affirmative vote of at least 80% of the outstanding shares eligible to vote cast
at a meeting called for that purpose. However, Leader's Bylaws do not authorize
the Board of Directors to amend the Bylaw provision permitting shareholders to
amend the Bylaws.
CLASSIFIED BOARD OF DIRECTORS AND ABSENCE OF CUMULATIVE VOTING
UPC. UPC's Charter provides that UPC's Board of Directors is divided into
three classes, with each class to be as nearly equal in number as possible. The
directors in each class serve three-year terms of office. The effect of UPC's
having a classified Board of Directors is that only approximately one-third of
the members of the Board are elected each year, which effectively requires two
annual meetings for UPC's shareholders to change a majority of the members of
the Board. The number of UPC directors shall be not less than seven nor more
than 25, the exact number of which is 12 as currently specified in the Bylaws.
To increase the number of directors, 66 2/3% of the directors then in office
must concur.
Pursuant to the Bylaws, each shareholder generally is entitled to one vote
for each share of UPC Common Stock held and is not entitled to cumulative voting
rights in the election of directors. Directors are elected by a plurality of the
total votes cast by all shareholders. Without cumulative voting, the holders of
more than 50% of the shares of UPC Common Stock generally have the ability to
elect 100% of the directors. As a result, the holders of the remaining UPC
Common Stock effectively may not be able to elect any person to the Board of
Directors. The absence of cumulative voting thus could make it more difficult
for a shareholder who acquires less than a majority of the shares of UPC Common
Stock to obtain representation on UPC's Board of Directors.
Leader. Leader's Charter contains similar provisions with respect to a
classified board of directors and the absence of cumulative voting. However, the
number of directors constituting the Leader Board of Directors shall not be less
than five nor more than 15 persons, the exact number of which is 11 as currently
specified in the Bylaws.
DIRECTOR REMOVAL AND VACANCIES
UPC. UPC's Bylaws provide that directors may be removed with or without
cause by the affirmative vote of the holders of 66 2/3% or more of the
outstanding shares entitled to vote generally in the election of directors.
UPC's Bylaws mirror the Tennessee Act and provide that vacancies on the board of
directors may be filled by the board of directors (even if less than a quorum
exists) or shareholders.
Leader. Leader's Charter provides that directors may be removed for cause
only upon the affirmative vote of at least 80% of the outstanding shares
entitled to vote generally in the election of directors cast at a meeting called
for that purpose. In addition, Leader's Charter provides that vacancies, however
caused, and newly created directorships shall be filled only by a vote of at
least two-thirds of the directors then in office, whether or not a quorum
exists.
LIMITATIONS ON DIRECTOR LIABILITY
UPC. UPC's Charter does not contain a provision limiting the liability of
directors.
Leader. Leader's Charter provides that a director of Leader will have no
personal liability to Leader or its shareholders for monetary damages for breach
of a fiduciary duty as a director, except liability for (i) any breach of the
director's duty of loyalty to the corporation or its shareholders, (ii) acts or
omissions that are not in good faith or that involve intentional misconduct or a
knowing violation of law, or (iii) unlawful distributions under the Tennessee
Act.
INDEMNIFICATION
UPC. UPC's Charter and Bylaws provide for the indemnification of its
directors and officers to the fullest extent permitted by Tennessee law.
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Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling UPC pursuant to
the foregoing provision, UPC has been informed that, in the opinion of the
Commission, such indemnification is against public policy as expressed in the
Securities Act.
Leader. Leader's Charter includes all of the statutory provisions of the
Tennessee Act with respect to indemnification of officers and directors of a
for-profit business corporation. In addition, it provides for the
indemnification of its directors and officers to the fullest extent permitted by
Tennessee law, currently in effect or as may be amended.
SPECIAL MEETINGS OF SHAREHOLDERS
UPC. Under UPC's Bylaws, special meetings of the shareholders of UPC may
be called at any time by the Chairman of the Board of Directors, the President,
the Secretary or by the holders of not less than one tenth of the shares
entitled to vote at such meeting.
Leader. Leader's Charter provides that special meetings may be called at
any time, but only by the Board of Directors or a committee of the Board of
Directors that has been duly designated. Leader shareholders do not have the
right to call a special meeting or to require that Leader's Board of Directors
call such a meeting. This provision, combined with other provisions of the
Charter and the restriction on the removal of directors, would prevent a
substantial shareholder from compelling shareholder consideration of any
proposal (such as a proposal for a business combination) over the opposition of
Leader's Board of Directors by calling a special meeting of shareholders at
which such shareholder could replace the entire Board with nominees who were in
favor of such proposal.
BUSINESS COMBINATIONS WITH CERTAIN PERSONS
Tennessee Antitakeover Statutes. The Tennessee Business Combination Act
(the "Tennessee BCA") generally prohibits a "business combination" (generally
defined to include mergers, share exchanges, sales and leases of assets,
issuances of securities, and similar transactions) by a corporation or a
subsidiary with an "Interested Shareholder" (generally defined as any person or
entity which beneficially owns 10% or more of the voting power of any class or
series of the corporation's stock then outstanding) for a period of five years
after the date the person becomes an Interested Shareholder unless, prior to
such date, the board of directors approved either the business combination or
the transaction which resulted in the shareholder becoming an Interested
Shareholder and the business combination satisfies any other applicable
requirements imposed by law or by the corporation's charter or bylaws. The
Tennessee BCA also severely limits the extent to which a corporation or any of
its officers or directors could be held liable for resisting any business
combination.
The Tennessee Control Share Acquisition Act (the "Tennessee CSAA")
generally provides that any person or group of persons that acquires the power
to vote more than specified levels (one-fifth, one-third or a majority) of the
shares of certain domestic corporations will not have the right to vote such
shares unless granted voting rights by the holders of a majority of the votes
entitled to be cast, excluding "interested shares." Interested shares are those
shares held by the acquiring person, officers of the corporation and employees
of the corporation who are also directors of the corporation. If approval of
voting power for the shares is obtained at one of the specified levels,
additional shareholder approval is required when a shareholder seeks to acquire
the power to vote shares at the next level. In the absence of such approval, the
additional shares acquired by the shareholder may not be voted until they are
transferred to another person in a transaction other than a control share
acquisition. The Tennessee CSAA applies only to those Tennessee corporations
whose charters or bylaws contain an express declaration that control share
acquisitions in respect of the shares of such corporations are governed by and
subject to the provisions of such act.
The Tennessee Greenmail Act ("Tennessee GA") prohibits a Tennessee
corporation having a class of voting stock registered or traded on a national
securities exchange or registered with the Commission pursuant to Section 12(g)
of the Exchange Act from purchasing, directly or indirectly, any of its shares
at a price above the market value of such shares (defined as the average of the
highest and lowest closing market price of such shares during the 30 trading
days preceding the purchase or preceding the commencement or announcement of a
tender offer if the seller of such shares has commenced a tender offer or
announced an intention to seek
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control of the corporation) from any person who holds more than 3% of the class
of securities to be purchased if such person has held such shares for less than
two years, unless the purchase has been approved by the affirmative vote of a
majority of the outstanding shares of each class of voting stock issued by such
corporation or the corporation makes an offer, of at least equal value per
share, to all holders of shares of such class.
The Tennessee Act provides that no resident domestic corporation having any
class of voting stock registered or traded on a national securities exchange or
registered with the Commission pursuant to Section 12(g) of the Exchange Act or
any of its officers or directors may be held liable at law or in equity for
either having failed to approve the acquisition of shares by an interested
shareholder on or before the date such shareholder became an interested
shareholder, or for seeking to enforce or implement the provisions of the
Tennessee BCA or the Tennessee CSAA, or for failing to adopt or recommend any
charter or bylaw amendment or provision in respect of any one or more of these
Acts or the Tennessee GA, or for opposing any merger, exchange, tender offer or
significant disposition of the assets of the resident domestic corporation or
any subsidiary of such corporation because of a good faith belief that such
merger, exchange, tender offer or significant disposition of assets would
adversely affect the corporation's employees, customers, suppliers, the
communities in which the corporation or its subsidiaries operate or are located
or any other relevant factor if such factors are permitted to be considered by
the board of directors under the corporation's charter in connection with the
merger, exchange, tender offer or significant disposition of assets.
UPC. UPC is subject to the Tennessee BCA and the Tennessee GA. UPC's
Charter and Bylaws do not contain a declaration adopting the Tennessee CSAA and,
accordingly, the Tennessee CSAA will not apply to shares of UPC unless and until
the Charter or the Bylaws should be amended to so provide. In addition, UPC's
Charter does not include a provision authorizing its Board of Directors to
consider any additional relevant factors in connection with a merger, exchange,
tender offer or significant disposition of assets.
The foregoing provisions to which UPC is subject might be deemed to make
UPC less attractive as a candidate for acquisition by another company than would
otherwise be the case in the absence of such provisions. For example, if another
company should seek to acquire a controlling interest of less than 66 2/3% of
the outstanding shares of UPC Common Stock, the acquiror would not thereby
obtain the ability to replace a majority of the UPC Board until at least the
second annual meeting of shareholders following the acquisition, and furthermore
the acquiror would not obtain the ability immediately to effect a merger,
consolidation or other similar business combination unless the described
conditions were met. As a result, UPC's shareholders may be deprived of
opportunities to sell some or all of their shares at prices that represent a
premium over prevailing market prices in a takeover context. The provisions
described above also may make it more difficult for UPC's shareholders to
promptly replace the UPC Board or management, even if the holders of a majority
of the UPC Common Stock should believe that such replacement is in the interests
of UPC. As a result, such provisions may tend to perpetuate the incumbent UPC
Board and management.
Leader. Leader's Charter specifically sets forth prohibitions on the
acquisition of capital stock similar to the Tennessee BCA and Tennessee CSAA.
Under the Charter, for a period of five years after the completion of the
conversion of Leader Federal from mutual to stock form (September 30, 1993), no
person may directly or indirectly offer to acquire or acquire (which term should
include every type of acquisition, whether effected by purchase, exchange,
operation of law or otherwise) the beneficial ownership of more than 10% of any
class of Leader's equity securities, unless prior to such date, the Continuing
Directors (as defined below) approved such acquisition or offer by a two-thirds
vote. In the event that such acquisition is completed, notwithstanding the
foregoing, the securities beneficially owned in excess of 10% shall not be
counted as shares entitled to vote, shall not be voted by any person or counted
as voting shares in connection with any matter submitted to the shareholders for
a vote, and shall not be counted as outstanding for purposes of determining a
quorum or the affirmative vote necessary to approve any matter submitted for a
shareholders' vote.
If after the five-year period described above, any person should acquire
the beneficial ownership of more than 10% of any class of Leader's equity
securities without the prior approval by a two-thirds vote of the Continuing
Directors, then each vote in excess of 10% of the voting power of the
outstanding shares of Leader's voting stock with respect to the record holders
of such voting stock in the aggregate would be entitled to cast only 1/100 of a
vote, and the aggregate voting power of such record holders, so limited for all
shares of
59
<PAGE> 69
Leader's voting stock beneficially owned by such acquiring person, shall be
allocated proportionately among such record holders.
The foregoing restrictions shall not apply in certain circumstances
involving an underwriting or selling group for a public sale or resale, a proxy
or proxies granted to a Continuing Director, or any employee benefit plans.
"Continuing Director" means any member of the Board of Directors who is
unaffiliated with the "Related Person" (one who beneficially owns in the
aggregate 10% or more of the outstanding Leader Common Stock or its affiliates)
and was a director prior to the time that the Related Person became a Related
Person, and any successor of a Continuing Director who was recommended by a
majority of the Continuing Directors then on the Board of Directors.
In addition, Leader's Charter permits the Board of Directors in determining
the best interests of Leader and its shareholders when evaluating a Business
Combination or tender or exchange offer to consider (in addition to the adequacy
of the consideration) other factors, including social and economic effects,
business and financial condition and earnings prospects of the acquiring person,
and competency, experience and integrity of the acquiring person.
MERGERS, CONSOLIDATIONS, AND SALES OF ASSETS GENERALLY
UPC. UPC's Charter generally requires the affirmative vote of the holders
of at least 66 2/3% of the outstanding voting stock of UPC to effect (i) any
merger or consolidation with or into any other corporation, or (ii) any sale or
lease or other disposition of all or substantially all of the assets of UPC to
any party that beneficially owns 10% or more of the outstanding shares of UPC
voting stock at the time of entering into a binding agreement for such
transaction, unless UPC or a subsidiary owns a majority of the outstanding
shares of all classes of capital stock entitled to vote of the other party to
the transaction. This provision does not apply to the Merger because a wholly
owned subsidiary of UPC is being merged with and into Leader, and Leader is not
being merged with UPC directly.
Leader. Under Leader's Charter, a Business Combination (as defined in the
Charter, but limited to agreements or transactions with Related Persons)
generally requires the affirmative vote of the holders of (i) at least 80% of
the outstanding shares entitled to vote thereon (and, if any class or series of
shares is entitled to vote thereon separately, the affirmative vote of the
holders of at least two-thirds of the outstanding shares of each such class or
series) and (ii) a majority of the outstanding shares entitled to vote thereon
excluding shares deemed beneficially owned by a Related Person. However, only an
affirmative vote of a majority of the outstanding voting shares (or as is
otherwise required by any provision of Tennessee law or any agreement with any
federal regulatory agency or NASDAQ) is required for a Business Combination that
has been approved by at least two-thirds of the Continuing Directors at a
meeting containing a quorum of such Directors (meaning two-thirds of the
Continuing Directors capable of exercising the powers conferred on them). The
Merger has been approved by at least two-thirds of the Continuing Directors. As
a result, such super-majority vote provision is not applicable to the
shareholder vote on the Merger.
60
<PAGE> 70
COMPARATIVE MARKET PRICES AND DIVIDENDS
The UPC Common Stock is traded on the NYSE under the symbol "UPC." The
Leader Common Stock is quoted on the NASDAQ National Market System under the
symbol "LFCT." The following table sets forth, for the indicated periods, the
high and low closing sale prices for the UPC Common Stock and the Leader Common
Stock as reported by the NYSE and NASDAQ National Market System, respectively,
and the cash dividends declared per share of UPC Common Stock and Leader Common
Stock for the indicated periods.
<TABLE>
<CAPTION>
UPC LEADER
------------------------------ --------------------------------
CASH CASH
PRICE RANGE DIVIDENDS PRICE RANGE DIVIDENDS
--------------- DECLARED PER ----------------- DECLARED PER
HIGH LOW SHARE HIGH LOW SHARE
------ ------ ------------ ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
1996
First Quarter....................... $31.75 $29.00 $ 0.27 $44.75 $36.14 $ 0.18
Second Quarter...................... 31.25 29.63 0.27 46.38 43.50 0.18
Third Quarter
Through August 5, 1996........... 30.50 28.63 0.27 45.88 42.63 0.18
------ ------
Total....................... $ 0.81 $ 0.54
========= =========
1995
First Quarter....................... $24.50 $20.88 $ 0.23 $27.38 $20.75 $ 0.15
Second Quarter...................... 28.13 23.13 0.25 28.63 26.19 0.15
Third Quarter....................... 30.75 26.13 0.25 36.25 28.50 0.15
Fourth Quarter...................... 32.25 29.63 0.25 39.50 38.38 0.15
------ ------
Total....................... $ 0.98 $ 0.60
========= =========
1994
First Quarter....................... $26.25 $23.13 $ 0.21 $21.25 $17.25 --
Second Quarter...................... 28.75 24.75 0.21 28.00 18.63 --
Third Quarter....................... 26.00 23.50 0.23 29.63 25.50 --
Fourth Quarter...................... 24.50 19.63 0.23 26.13 19.13 --
------ ------
Total....................... $ 0.88 --
========= =========
</TABLE>
On August 5, 1996, the last sale prices of UPC Common Stock and Leader
Common Stock as reported on the NYSE and NASDAQ National Market System,
respectively, were $30.25 and $45.88 per share, respectively. On March 7, 1996,
the last business day prior to public announcement of the proposed Merger, the
last sale prices of the UPC Common Stock and the Leader Common Stock as reported
by the NYSE and NASDAQ National Market System, respectively, were $31.50 and
$38.00, respectively.
The holders of UPC Common Stock are entitled to receive dividends when, as
and if declared by the Board of Directors out of funds legally available
therefor. Although UPC currently intends to continue to pay quarterly cash
dividends on the UPC Common Stock, there can be no assurance that UPC's dividend
policy will remain unchanged after completion of the Merger. The declaration and
payment of dividends thereafter will depend upon business conditions, operating
results, capital and reserve requirements, and the Board of Directors'
consideration of other relevant factors. For information with respect to
provisions of the Agreement pertaining to Leader's ability to pay dividends on
the Leader Common Stock during the pendency of the Merger, see "DESCRIPTION OF
TRANSACTION -- Conduct of Business Pending the Merger."
UPC is a legal entity separate and distinct from its subsidiaries and its
revenues depend in significant part on the payment of dividends and fees from
its subsidiary depository institutions. UPC's subsidiary depository institutions
are subject to certain legal restrictions on the amount of dividends they are
permitted to pay. See "SUPERVISION AND REGULATION -- Payment of Dividends."
61
<PAGE> 71
BUSINESS OF LEADER
GENERAL
Leader was incorporated under the laws of the State of Tennessee in March
1993 to become a savings and loan holding company with Leader Federal as its
sole first tier subsidiary. Leader acquired all of the capital stock of Leader
Federal issued in connection with Leader Federal's conversion from mutual to
stock form in September 1993. In conjunction with Leader Federal's conversion,
Leader issued 10,752,500 shares of Leader Common Stock at a price of $10.00 per
share. Leader is classified as a unitary savings and loan holding company and is
subject to regulation by the OTS. Its principal business is the business of
Leader Federal and its subsidiaries.
Leader Federal was incorporated as a Tennessee building and loan
association in 1928 and converted to a federal mutual savings and loan
association in 1934 and a federal mutual savings bank in 1989. Leader Federal's
conversion from mutual to stock form was completed on September 30, 1993. Leader
Federal is headquartered in Memphis, Tennessee and operates through 24 retail
branch offices of which 16 are located in and around Memphis, four are located
in the Nashville area and four are located in upper east Tennessee (Johnson
City, Bristol and Kingsport). One branch office in the Memphis area is located
in DeSoto County, Mississippi. Leader Federal also has two operations centers in
Memphis. Leader Mortgage, a wholly owned mortgage banking subsidiary of Leader
Federal, is active in Memphis and Nashville, Tennessee, DeSoto County,
Mississippi and in Orlando and Melbourne, Florida. In addition, Leader Mortgage
also participates in the Birmingham, Alabama market through its investment in a
mortgage banking limited liability company located in Birmingham, Alabama and
plans to invest in a mortgage banking limited liability company headquartered in
Indianapolis, Indiana prior to the Effective Time. Based on total assets at
March 31, 1996, Leader Federal was the largest thrift institution headquartered
in the State of Tennessee and the fifth largest depository institution in
Tennessee.
Leader Federal and its subsidiaries offer a broad range of financial
services and products including retail banking services and products, a variety
of one- to four-family mortgage loans, commercial real estate, executive
banking, warehouse and construction lending products. Through its wholly owned
subsidiary, Leader Services, Leader Federal also offers a range of insurance
products.
As of March 31, 1996, Leader had total consolidated assets of $3.2 billion,
total consolidated deposits of $1.6 billion and total consolidated stockholders'
equity of $255 million. Leader's principal executive office is located at 158
Madison Avenue, Memphis, Tennessee 38103 and its telephone number at such
address is (901) 578-2000. Additional information with respect to Leader and its
subsidiaries is included in documents incorporated by reference in this Joint
Proxy Statement. See "AVAILABLE INFORMATION" and "DOCUMENTS INCORPORATED BY
REFERENCE."
62
<PAGE> 72
RECENT DEVELOPMENTS
Leader's Second Quarter 1996 Operating Results. The following table
presents certain unaudited information for Leader for the three and six month
periods ended June 30, 1996 and 1995.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED SIX MONTHS ENDED
JUNE 30,(1) JUNE 30,(1)
----------------- -----------------------
1996 1995 1996 1995
------- ------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net interest income................................ $28,088 $21,348 $ 54,295 $ 41,715
Provision for losses on loans...................... 1,410 1,356 2,921 2,562
Noninterest income................................. 7,241 5,988 13,426 11,832
Noninterest expense................................ 12,705 11,248 25,747 22,371
Earnings before income taxes....................... 21,214 14,732 39,053 28,614
Applicable income taxes............................ 7,530 5,635 13,909 10,770
Net earnings....................................... 13,684 9,097 25,144 17,844
PER COMMON SHARE DATA
Net earnings
-- primary...................................... $ 1.34 $ 0.90 $ 2.46 $ 1.78
-- fully diluted................................ 1.34 0.90 2.46 1.78
Cash dividends..................................... 0.18 0.15 0.36 0.30
Book value......................................... 26.78 22.26
PROFITABILITY RATIOS
Return on average assets........................... 1.71% 1.39% 1.59% 1.40%
Return on average common equity.................... 20.99 16.85 19.63 16.83
Net interest income as a percentage of average
earning assets (taxable-equivalent basis)(3).... 3.73 3.50 3.63 3.50
ASSET QUALITY DATA
Allowance for losses on loans...................... $ 22,407 $ 21,980
Nonperforming loans................................ 12,293 8,167
Nonperforming assets............................... 14,291 10,651
Allowance for losses on loans to loans............. 1.14% 1.14%
Nonperforming loans to loans....................... 0.62 0.42
Nonperforming assets to loans and foreclosed
properties...................................... 0.72 0.55
Allowance/nonperforming loans...................... 182 269
BALANCE SHEET DATA (AT PERIOD END)
Total assets....................................... $3,211,064 $2,689,897
Loans, net of unearned income...................... 1,972,485 1,926,189
Investment securities
Available for sale (Amortized cost: $707,856
and $67,286).................................. 717,419 69,050
Held to maturity (Fair value: $137,376
and $400,576)................................. 136,922 395,686
Total deposits..................................... 1,569,722 1,524,695
Long-term debt (2)................................. 542,814 365,348
Total stockholders' equity......................... 266,390 219,739
CAPITAL RATIOS
Equity/assets...................................... 8.30% 8.17%
Leverage(3)........................................ 7.95 7.99
</TABLE>
- ---------------
(1) Interim period ratios are annualized.
(2) Primarily FHLB advances to Leader Federal.
(3) Excludes the impact of the fair value adjustment for available for sale
securities.
63
<PAGE> 73
BUSINESS OF UPC
GENERAL
UPC is a multi-state bank holding company and savings and loan holding
company headquartered in Memphis, Tennessee. At March 31, 1996, UPC had total
consolidated assets of approximately $11.4 billion, total consolidated loans of
approximately $7.1 billion, total consolidated deposits of approximately $9.5
billion and total consolidated shareholders' equity of approximately $993
million. As of that date, UPC was the second-largest independent bank holding
company headquartered in Tennessee as measured by total consolidated assets.
UPC conducts its business activities through its principal bank subsidiary,
the $2.2 billion asset Union Planters National Bank, founded in 1869 and
headquartered in Memphis, Tennessee, and 33 other bank subsidiaries and two
savings bank subsidiaries located in Tennessee, Mississippi, Missouri, Arkansas,
Louisiana, Alabama and Kentucky. Through the UPC Banking Subsidiaries, UPC
provides a diversified range of financial services in the communities in which
it operates, including traditional banking services, consumer, commercial and
corporate lending, retail banking and mortgage banking. UPC also is engaged in
mortgage servicing, investment management and trust services, the issuance and
servicing of credit and debit cards, and the origination, packaging and
securitization of the government-guaranteed portions of Small Business
Administration loans.
Through the UPC Banking Subsidiaries, UPC operates approximately 402
banking offices. UPC's assets are allocable by state to its banking offices
(before consolidating adjustments) approximately as follows: $6.0 billion in
Tennessee, $2.4 billion in Mississippi, $1.0 billion in Missouri, $915 million
in Arkansas, $548 million in Louisiana, $249 million in Alabama and $110 million
in Kentucky.
Acquisitions have been, and are expected to continue to be, an important
part of the expansion of UPC's business. UPC completed four acquisitions in
1992, 12 in 1993, 13 in 1994, and three in 1995 adding approximately $1.6
billion in total assets in 1992, $1.3 billion in 1993, $3.8 billion in 1994, and
$1.3 billion in 1995. UPC has completed two acquisitions in 1996, adding
approximately $122 million in assets. Prior to the date hereof, UPC had entered
into definitive agreements to acquire five additional financial institutions
with total assets of $966 million. For additional information regarding these
pending acquisitions, see "-- Recent Developments" below. For a discussion of
UPC's acquisition program and UPC Management's philosophy on that subject, see
the caption "Acquisitions" (on page 6) and Note 2 to UPC's audited consolidated
financial statements for the years ended December 31, 1995, 1994 and 1993 (on
pages 41 through 43) contained in UPC's Annual Report to Shareholders which is
Exhibit 13 to UPC's Annual Report on Form 10-K for the year ended December 31,
1995, which Exhibit 13 is incorporated by reference herein to the extent
indicated herein.
UPC expects to continue to take advantage of the consolidation of the
financial services industry by further developing its franchise through the
acquisition of financial institutions. Future acquisitions may entail the
payment by UPC of consideration in excess of the book value of the underlying
net assets acquired, may result in the issuance of additional shares of UPC
capital stock or the incurring of additional indebtedness by UPC, and could have
a dilutive effect on the earnings or book value per share of UPC Common Stock.
Moreover, significant charges against earnings are sometimes required incidental
to acquisitions. For a description of acquisitions which are currently pending,
see "-- Recent Developments -- Pending Acquisitions" below.
UPC's corporate office is located at 7130 Goodlett Farms Parkway, Memphis,
Tennessee 38018, and its telephone number is (901) 383-6000. Additional
information concerning UPC is included in the documents incorporated by
reference in this Joint Proxy Statement. See "AVAILABLE INFORMATION" and
"DOCUMENTS INCORPORATED BY REFERENCE."
64
<PAGE> 74
RECENT DEVELOPMENTS
Recently Completed Acquisitions. Since December 31, 1995, UPC has
completed the acquisition of the following institutions (collectively, the
"Recently Completed Acquisitions").
<TABLE>
<CAPTION>
CONSIDERATION
---------------------
APPROXIMATE
INSTITUTION ASSET SIZE VALUE TYPE
- ----------------------------------------------------------------- ---------- ------------- -----
(IN MILLIONS)
<S> <C> <C> <C>
First Bancshares of Eastern Arkansas, Inc., West Memphis,
Arkansas, and its subsidiary, First National Bank of West
Memphis, Arkansas.............................................. $ 60 $10.9 Cash
First Bancshares of N.E. Arkansas, Inc., Osceola, Arkansas, and
its subsidiary, First National Bank of Osceola, Arkansas....... 62 9.2 Cash
---------- ------
Total.................................................. $122 $20.1
======= ==========
</TABLE>
Pending Acquisitions. UPC has entered into definitive agreements to
acquire the following five financial institutions in addition to Leader, which
UPC's management considers probable of consummation and which are expected to
close in 1996 or the first quarter of 1997 (collectively, the "Other Pending
Acquisitions").
<TABLE>
<CAPTION>
INSTITUTION TYPE OF CONSIDERATION
- ----------------------------------------------- ASSET SIZE ------------------------------
----------------
(IN MILLIONS)(1)
<S> <C> <C>
Eastern National Bank, Miami, Florida(2)....... $286 Cash, Notes and UPC Series E
Preferred Stock(3)
Valley Federal Savings Bank in Sheffield,
Alabama...................................... 119 Approximately 435,000 shares
of UPC Common Stock
Franklin Financial Group, Inc., Morristown,
Tennessee, and its subsidiary, Franklin
Federal Savings Bank......................... 137 Approximately 738,000 shares
of UPC Common Stock
BancAlabama, Inc. in Huntsville, Alabama and
its subsidiary BankAlabama -- Huntsville..... 98 Approximately 415,000 shares
of UPC Common Stock
Financial Bancshares, Inc., St. Louis, Missouri
and its subsidiaries, First Financial Bank of
St. Louis, Missouri; Citizens First Financial
Bank in Dexter, Missouri; First Financial
Bank of Southeast Missouri in Sikeston,
Missouri; First Financial Bank of Mississippi
County in East Prairie, Missouri; and First
Financial Bank of Ste. Genevieve, Missouri
("FBI")(4)................................... 326 Approximately 1,220,000 shares
of UPC Common Stock
------
$966
============
</TABLE>
- ---------------
(1) At March 31, 1996.
(2) UPC's management expects to complete the acquisition of Eastern National
Bank ("ENB") on or before December 31, 1996, provided that disputes between
ENB's Shareholders and agencies of the Republic of Venezuela and others in
the United States District Court for the Southern District of Florida shall
have been resolved to the satisfaction of UPC by that date.
(3) Cash in the amount of $4.5 million, UPC Promissory Notes in the aggregate
original principal amount of $14.5 million, and up to 317,458 shares of
Series E Preferred Stock of UPC.
(4) The FBI Acquisition is not included in the "Equivalent and Pro Forma Per
Share Data" or the "Pro Forma Condensed Consolidated Financial Information"
and was not included in UPC's pro forma financial statements in UPC's
Current Report on Form 8-K dated May 22, 1996. The definitive agreement was
executed June 27, 1996 and was subject to a 30-day due diligence period
ending July 27, 1996. Since this definitive agreement was executed after
the pro forma financial statements were filed and this acquisition is not
considered significant to the overall pro forma financial information of
UPC, the pro formas were not amended to include FBI.
Earnings Considerations Related to Pending Acquisitions. It is expected
that either UPC or the institutions to be acquired in connection with the Merger
and the Other Pending Acquisitions will incur charges arising from such
acquisitions and to the assimilation of those institutions into the UPC
organization.
65
<PAGE> 75
Anticipated charges would normally arise from matters such as, but not limited
to, legal and accounting fees, financial advisory fees, consulting fees, payment
of contractual benefits triggered by a change of control, early retirement and
involuntary separation and related benefits, costs associated with elimination
of duplicate facilities and branch closures, data processing charges,
cancellation of vendor contracts, the potential for additional provisions for
loan losses and similar costs which normally arise from the consolidation of
operational activities.
Aggregate charges expected to arise with respect to the acquisition of
Leader and the Other Pending Acquisitions have been preliminarily estimated to
be in the range of $17 million to $22 million after taxes, which does not
include a potential after-tax charge of approximately $6 million for the
recapture of Leader Federal's thrift bad debt reserve, which, under existing
law, would be triggered by the merger of Leader Federal into UPC's principal
subsidiary, UPNB, and certain other banking subsidiaries. Legislation passed by
both the House and Senate on August 2, 1996 and awaiting signature by the
President of the United States as of August 5, 1996 would substantially decrease
the federal income taxes associated with a recapture of a thrift institution's
bad debt reserve. There is no assurance that such pending legislation will be
signed into law by the President. Should the President veto the bad debt reserve
legislation, UPC may still merge Leader Federal into UPNB, thereby triggering a
recapture of Leader Federal's bad debt reserve and incurring expense of
approximately $6 million, should it be determined that the cost savings
associated with the consolidation of Leader Federal's and UPNB's banking
operations would exceed the tax expense. UPC is unable to predict if or when
such bad debt reserve recapture legislation will be signed into law. In
addition, the range of estimated potential charges set forth above does not take
into account any potential assessment for recapitalization of the Savings
Association Insurance Fund discussed below under the heading " -- Earnings
Considerations Relating to Potential Special Regulatory Assessment." To the
extent that UPC's recognition of these acquisition-related charges is contingent
upon consummation of a particular transaction, those charges would be recognized
in the period in which such transaction closes. This range of potential charges
is based on currently available information as well as preliminary estimates and
is subject to change. The range is provided as a preliminary estimate of the
significant charges which may in the aggregate be required and should be viewed
accordingly. These charges are not reflected in the pro forma consolidated
financial statements.
Earnings Considerations Relating to Potential Special Regulatory
Assessment. There are several proposals currently under consideration by the
U.S. Congress, the purpose of which is to provide additional financing for the
Savings Association Insurance Fund ("SAIF") and to provide for interest payments
on the Financing Corporation ("FICO") bonds issued in connection with earlier
Congressional efforts to support the then failing thrift industry. A common
feature of these proposals is a one-time special assessment of from 70 to 85
basis points on all deposits insured by the SAIF ($0.70 to $0.85 per $100 of
covered deposits) ("SAIF-Insured Deposits"). All SAIF-Insured Deposits may not
be subject to an assessment at the 70 to 85 basis point level. Those
SAIF-Insured Deposits which have been acquired by banks in so-called Oakar
transactions ("Oakar Deposits") may be assessed at a lower rate, (one proposal
suggests 20% lower.) In addition to the special assessment on SAIF-Insured
Deposits, the proposals also contemplate annual assessments on deposits which
are insured by the Bank Insurance Fund ("BIF") ("BIF Deposits"). The assessment
on BIF Deposits would be for the purpose of providing financial support to pay
approximately $600 million annually in interest on the FICO bonds until they
mature in 2017. It is unknown at this time what the assessment level will be on
BIF Deposits, but it has been suggested that the assessment will be
approximately 2.4 basis points ($0.024 per $100 of covered deposits). The
proposals generally provide that such assessments will reduce the paying
institution's taxable income. At March 31, 1996, UPC's Banking Subsidiaries held
approximately $1.4 billion in SAIF-Insured Deposits, approximately $1.0 billion
of which are Oakar Deposits. At March 31, 1996, Leader held approximately $1.6
billion in SAIF-Insured Deposits and the Other Pending Acquisitions held
approximately $217 million in SAIF-Insured Deposits. If the Leader Merger, all
Recently Completed and Other Pending Acquisitions had been consummated by March
31, 1996, then UPC's subsidiaries would have held approximately $3.2 billion in
SAIF-Insured Deposits, approximately $1.0 billion of which would have been Oakar
Deposits, assuming the savings associations to be acquired (Leader, Valley
Federal and Franklin Federal) had not been merged into other UPC Banking
Subsidiaries. Should the proposed legislation be adopted at levels indicated,
both UPC and Leader, as well as all other financial institutions with insured
deposits, would be required to take significant charges in relation to these
special assessments. These proposals
66
<PAGE> 76
to recapitalize the SAIF have not passed and are under strong criticism by the
banking industry. It is questionable whether any such legislation will actually
pass in 1996, however UPC does expect some form of legislation to be passed in
the near future relative to the recapitalization of the SAIF and that such
legislation will provide for special assessments at or above the levels
discussed above against both SAIF-Insured Deposits and BIF Deposits.
A number of other related proposals are also under consideration relating
to the elimination of the thrift charter and the conversion of all
federally-chartered thrifts to state-chartered banks or national banks and the
merger of the OTS into the Office of the Comptroller of the Currency ("OCC"). It
is not expected that any such proposals would have a material adverse impact on
UPC, either before or after considering the pending acquisitions, except to the
extent such proposals are tied to the recapitalization of the SAIF as discussed
above. However, none of these proposals are currently in a definitive form, are
subject to amendment, and UPC is unable to predict with any accuracy the impact
any such proposals will have on UPC and its subsidiaries when and if actually
passed. See "CERTAIN REGULATORY CONSIDERATIONS."
67
<PAGE> 77
UPC's Second Quarter 1996 Operating Results. The following table presents
certain unaudited information for UPC for the three and six month periods ended
June 30, 1996 and 1995. Reference is made to UPC's press release dated July 18,
1996, which is included in UPC's Current Report on Form 8-K dated July 18, 1996.
See "DOCUMENTS INCORPORATED BY REFERENCE."
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30,(1) JUNE 30,(1)
-------------------- --------------------------
1996 1995 1996 1995
-------- -------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net interest income......................... $116,843 $110,725 $ 232,316 $ 219,564
Provision for losses on loans............... 7,870 2,316 15,851 4,538
Investment securities gains (losses)........ 6 18 66 (3)
Other noninterest income.................... 41,267 39,607 81,404 75,707
Noninterest expense......................... 89,210 93,706 178,362 184,371
Earnings before income taxes................ 61,036 54,328 119,573 106,359
Applicable income taxes..................... 20,393 17,877 39,786 34,251
Net earnings................................ 40,643 36,451 79,787 72,108
PER COMMON SHARE DATA
Net earnings
-- primary............................... $ 0.84 $ 0.77 $ 1.66 $ 1.52
-- fully diluted......................... 0.80 0.73 1.58 1.45
Cash dividends.............................. 0.27 0.25 0.54 0.48
Book value.................................. 19.96 17.87
PROFITABILITY RATIOS
Return on average assets.................... 1.45% 1.35% 1.42% 1.34%
Return on average common equity............. 17.44 17.88 17.40 18.01
Net interest income as a percentage of
average earning assets
(taxable-equivalent basis)(3)............ 4.65 4.60 4.63 4.58
ASSET QUALITY DATA
Allowance for losses on loans............... $ 136,255 $ 132,884
Nonperforming loans......................... 38,346 32,896
Nonperforming assets........................ 45,264 39,947
Allowance for losses on loans to loans...... 1.90% 1.91%
Nonperforming loans to loans................ 0.53 0.47
Nonperforming assets to loans and foreclosed
properties............................... 0.63 0.57
Allowance/nonperforming loans............... 355 404
BALANCE SHEET DATA (AT PERIOD END)
Total assets................................ $11,367,625 $10,921,482
Loans, net of unearned income............... 7,169,872 6,960,602
Investment securities
Available for sale (Amortized cost:
$3,049,657 and $1,531,222)............. 3,053,759 1,532,593
Held to maturity (Fair value: $1,130,005
at June 30, 1995)...................... -- 1,106,952
Total deposits.............................. 9,343,893 9,291,329
Long-term debt(2)........................... 473,144 440,814
Total shareholders' equity.................. 1,007,608 897,066
CAPITAL RATIOS
Equity/assets............................... 8.86% 8.21%
Leverage(3)................................. 8.49 7.88
</TABLE>
- ---------------
(1) Interim period ratios are annualized.
(2) Includes subsidiary banks' long-term debt (primarily FHLB advances) of
$259.7 million and $325.4 million at June 30, 1996 and 1995, respectively.
(3) Excludes the impact of the fair value adjustment for available for sale
securities.
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CERTAIN REGULATORY CONSIDERATIONS
The following discussion sets forth certain of the material elements of the
regulatory framework applicable to banks and bank holding companies and provides
certain specific information related to UPC and Leader. For additional
information regarding community reinvestment, transactions with affiliates,
brokered deposits, safety and soundness standards, and depositor preference, see
Part I, Item 1 of UPC's Annual Report on Form 10-K for the year ended December
31, 1995, under the caption GOVERNMENTAL SUPERVISION AND REGULATION OF FINANCIAL
INSTITUTIONS which information is hereby incorporated by reference in this Joint
Proxy Statement.
GENERAL
UPC is a bank holding company registered with the Federal Reserve under the
BHC Act. As such, UPC and its non-bank subsidiaries are subject to the
supervision, examination, and reporting requirements of the BHC Act and the
regulations of the Federal Reserve. In addition, as savings and loan holding
companies, both UPC and Leader are registered with the OTS under the HOLA and
are subject to regulation, supervision, examination, and reporting requirements
of the OTS (Leader is not a bank holding company).
The BHC Act requires every bank holding company to obtain the prior
approval of the Federal Reserve before: (i) it may acquire direct or indirect
ownership or control of any voting shares of any bank if, after such
acquisition, the bank holding company will directly or indirectly own or control
more than 5.0% of the voting shares of the bank; (ii) it or any of its
subsidiaries, other than a bank, may acquire all or substantially all of the
assets of any bank; or (iii) it may merge or consolidate with any other bank
holding company. Similar federal statutes require savings and loan holding
companies and other companies to obtain the prior approval of the OTS before
acquiring direct or indirect ownership or control of a savings association.
The BHC Act further provides that the Federal Reserve may not approve any
transaction that would result in a monopoly or would be in furtherance of any
combination or conspiracy to monopolize or attempt to monopolize the business of
banking in any section of the United States, or the effect of which may be
substantially to lessen competition or to tend to create a monopoly in any
section of the country, or that in any other manner would be in restraint of
trade, unless the anticompetitive effects of the proposed transaction are
clearly outweighed by the public interest in meeting the convenience and needs
of the community to be served. The Federal Reserve is also required to consider
the financial and managerial resources and future prospects of the bank holding
companies and banks concerned and the convenience and needs of the community to
be served. Consideration of financial resources generally focuses on capital
adequacy, and consideration of convenience and needs issues includes the
parties' performance under the Community Reinvestment Act of 1977, as amended
(the "CRA"), discussed below and in Part I, Item 1 of UPC's Annual Report on
Form 10-K.
The BHC Act, as amended by the interstate banking provisions of the
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 ("Interstate
Banking Act"), which became effective on September 29, 1995, repealed the prior
statutory restrictions on interstate acquisitions of banks by bank holding
companies, such that UPC and any other bank holding company located in Tennessee
may now acquire a bank located in any other state, and any bank holding company
located outside of Tennessee may lawfully acquire any Tennessee-based bank,
regardless of state law to the contrary, in either case subject to certain
deposit-percentage, aging requirements, and other restrictions. The Interstate
Banking Act also generally provides that, after June 1, 1997, national and
state-chartered banks may branch interstate through acquisitions of banks in
other states. By adopting legislation prior to that date, a state has the
ability either to "opt in" and accelerate the date after which interstate
branching is permissible or "opt out" and prohibit interstate branching
altogether. As of the date of this Joint Proxy Statement, Tennessee has not
"opted in" nor "opted out." Assuming no state action prior to June 1, 1997, UPC
would be able to consolidate all of its bank subsidiaries into a single bank
with interstate branches following that date, however its present intention is
to maintain separately chartered regional banks to serve each of UPC's
significant geographical service areas.
The BHC Act generally prohibits UPC from engaging in activities other than
banking or managing or controlling banks or other permissible subsidiaries and
from acquiring or retaining direct or indirect control of
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any company engaged in any activities other than those activities determined by
the Federal Reserve to be so closely related to banking or managing or
controlling banks as to be a proper incident thereto. In determining whether a
particular activity is permissible, the Federal Reserve must consider whether
the performance of such an activity reasonably can be expected to produce
benefits to the public, such as greater convenience, increased competition, or
gains in efficiency, that outweigh possible adverse effects, such as undue
concentration of resources, decreased or unfair competition, conflicts of
interest, or unsound banking practices. For example, factoring accounts
receivable, acquiring or servicing loans, leasing personal property, conducting
discount securities brokerage activities, performing certain data processing
services, acting as agent or broker in selling credit life insurance and certain
other types of insurance in connection with credit transactions, and performing
certain insurance underwriting activities all have been determined by the
Federal Reserve to be permissible activities of bank holding companies. The BHC
Act does not place territorial limitations on permissible non-banking activities
of bank holding companies. Despite prior approval, the Federal Reserve has the
power to order a holding company or its subsidiaries to terminate any activity
or to terminate its ownership or control of any subsidiary when it has
reasonable cause to believe that continuation of such activity or such ownership
or control constitutes a serious risk to the financial safety, soundness, or
stability of any bank subsidiary of that bank holding company.
Each of the banking and thrift subsidiaries of UPC and Leader is a member
of the Federal Deposit Insurance Corporation (the "FDIC"), and as such, its
deposits are insured by the FDIC to the maximum extent provided by law. Each
such subsidiary is also subject to numerous state and federal statutes and
regulations that affect its business, activities, and operations, and each is
supervised and examined by one or more state or federal bank regulatory
agencies.
All of UPC's Banking Subsidiaries that are state-chartered banks which are
not members of the Federal Reserve System, are subject to regulation,
supervision, and examination by the FDIC and the state banking authorities of
the states in which they are located. The banking subsidiaries of UPC that are
national banking associations are subject to regulation, supervision, and
examination by the OCC and the FDIC. The thrift subsidiaries of UPC and Leader
are subject to regulation, supervision, and examination by the OTS and the FDIC.
The federal banking regulator for each of the banking and thrift subsidiaries of
UPC and Leader, as well as the appropriate state banking authorities in the case
of those depository institution subsidiaries that are state-chartered, regularly
examine the operations of each of the banking and thrift subsidiaries of UPC and
Leader and are given authority to approve or disapprove mergers, consolidations,
the establishment of branches, and similar corporate actions. The federal and
state banking regulators also have the power to prevent the continuance or
development of unsafe or unsound banking practices or other violations of law.
PAYMENT OF DIVIDENDS
UPC and Leader are legal entities separate and distinct from their banking,
thrift, and other subsidiaries. The principal sources of cash flow of both UPC
and Leader, including the cash flow required to pay dividends to their
respective shareholders, are dividends and management fees received from their
banking and thrift subsidiaries. There are statutory and regulatory limitations
on the payment of dividends by these depository-institution subsidiaries to UPC
and Leader, as well as by UPC and Leader to their shareholders.
All of UPC's Banking Subsidiaries are subject to the respective laws and
regulations of the states in which they are chartered as to the payment of
dividends. Each national banking association subsidiary of UPC is required by
federal law to obtain the prior approval of the OCC for the payment of dividends
if the total of all dividends declared by the bank in any year would exceed the
total of (i) such bank's net profits (as defined and interpreted by regulation)
for that year, plus (ii) the retained net profits (as defined and interpreted by
regulation) for the preceding two years, less any required transfers to surplus.
In addition, national banks may lawfully pay only dividends to the extent that
their retained net profits (including the portion transferred to surplus) exceed
statutory bad debts (as defined by regulation).
If, in the opinion of its federal banking regulator, a bank or thrift under
its jurisdiction is engaged in or is about to engage in an unsafe or unsound
practice (which, depending on the financial condition of the depository
institution, could include the payment of dividends), such authority may
require, after notice and
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hearing, that such institution cease and desist from such practice. The federal
banking agencies have indicated that paying dividends that deplete a depository
institution's capital base to an inadequate level would be an unsafe and unsound
banking practice. Under the Federal Deposit Insurance Corporation Improvement
Act of 1991 ("FDICIA"), a depository institution may not pay any dividend if
payment would cause it to become undercapitalized or if it already is
undercapitalized. See "-- Prompt Corrective Action." Moreover, the federal
agencies have issued policy statements that provide that bank holding companies
and insured banks should generally only pay dividends out of current operating
earnings.
At March 31, 1996, under dividend restrictions imposed under federal and
state laws, the banking and thrift subsidiaries of UPC and Leader, without
obtaining governmental approvals, could have lawfully declared aggregate
dividends to UPC and Leader of approximately $30.9 million and $53.4 million,
respectively.
The payment of dividends by UPC and Leader and their banking and thrift
subsidiaries may also be affected or limited by other factors, such as the
requirement to maintain adequate capital above regulatory guidelines.
CAPITAL ADEQUACY
UPC, Leader, and their respective banking and thrift subsidiaries are
required to comply with the capital adequacy standards established by the
Federal Reserve and OTS in the case of UPC and Leader, respectively, and by the
appropriate federal banking regulator in the case of each of their banking and
thrift subsidiaries. There are two basic measures of capital adequacy for bank
holding companies that have been promulgated by the Federal Reserve: a
risk-based measure and a leverage measure. All applicable capital standards must
be satisfied for a bank holding company to be considered to be
"well-capitalized."
The risk-based capital standards are designed to make regulatory capital
requirements more sensitive to differences in risk profile among banks and bank
holding companies, to account for off-balance-sheet exposure, and to minimize
disincentives for holding liquid assets. Assets and off-balance-sheet items are
assigned to broad risk categories, each with appropriate weighting. The
resulting capital ratios represent capital as a percentage of total
risk-weighted assets and off-balance-sheet items.
The minimum guideline for the ratio ("Risk-Based Capital Ratio") of total
capital ("Total Capital") to risk-weighted assets (including certain
off-balance-sheet items, such as standby letters of credit) is 8.0%. At least
one-half of Total Capital must consist of common stock, minority interests in
the equity accounts of consolidated subsidiaries, noncumulative perpetual
preferred stock, and a limited amount of cumulative perpetual preferred stock,
less goodwill and certain other intangible assets ("Tier 1 Capital"). The
remainder may consist of subordinated debt, other preferred stock, and a limited
amount of loan loss reserves ("Tier 2 Capital"). At March 31, 1996, UPC's
consolidated Risk-Based Capital Ratio and its Tier 1 Risk-Based Capital Ratio
(i.e., the ratio of Tier 1 Capital to risk-weighted assets) were 16.58% and
12.89%, respectively, and Leader's consolidated Risk-Based Capital and Tier 1
Risk-Based Capital Ratios were 18.73% and 17.68% respectively.
In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
ratio (the "Leverage Ratio") of Tier 1 Capital to average assets, less goodwill
and certain other intangible assets, of 3.0% for bank holding companies that
meet certain specified criteria, including having the highest regulatory rating.
All other bank holding companies generally are required to maintain a Leverage
Ratio of at least 3.0%, plus an additional cushion of 100 to 200 basis points.
UPC's and Leader's respective Leverage Ratios at March 31, 1996, were 8.22% and
7.89%. The guidelines also provide that bank holding companies experiencing
internal growth or making acquisitions will be expected to maintain strong
capital positions substantially above the minimum supervisory levels without
significant reliance on intangible assets. Furthermore, the Federal Reserve has
indicated that it will consider a "tangible Tier 1 Capital Leverage Ratio"
(deducting all intangibles) and other indicia of capital strength in evaluating
proposals for expansion or new activities.
Each of UPC's and Leader's banking and thrift subsidiaries is subject to
risk-based and leverage capital requirements adopted by its federal banking
regulator, which are substantially similar to those adopted by the
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Federal Reserve for bank holding companies. Each of the banking and thrift
subsidiaries was deemed to be "well-capitalized" under applicable capital
guidelines as of March 31, 1996. Neither UPC, Leader, nor any of their banking
and thrift subsidiaries has been advised by any federal banking agency of any
specific minimum capital ratio requirement applicable to it.
Failure to meet capital guidelines could subject a bank (or thrift) to a
variety of enforcement remedies, including issuance of a capital directive, the
termination of deposit insurance by the FDIC, a prohibition on the taking of
brokered deposits, and certain other restrictions on its business. As described
below, substantial additional restrictions can be imposed upon FDIC-insured
depository institutions that fail to meet applicable capital requirements. See
"-- Prompt Corrective Action."
The federal bank regulators continue to indicate their desire to raise
capital requirements applicable to banking organizations beyond their current
levels. In this regard, the Federal Reserve, the OCC, and the FDIC have,
pursuant to FDICIA, proposed an amendment to the risk-based capital standards
that would calculate the change in an institution's net economic value
attributable to increases and decreases in market interest rates and would
require banks with excessive interest rate risk exposure to hold additional
amounts of capital against such exposures. The OTS has already included an
interest-rate risk component in its risk-based capital guidelines for savings
associations that it regulates.
SUPPORT OF SUBSIDIARY BANKS
Under Federal Reserve policy, UPC is expected to act as a source of
financial strength for, and to commit resources to support, each of its banking
subsidiaries. This support may be required at times when, absent such Federal
Reserve policy, UPC may not be inclined to provide it. In addition, any capital
loans by a bank holding company to any of its banking subsidiaries are
subordinate in right of payment to deposits and to certain other indebtedness of
such banks. In the event of a bank holding company's bankruptcy, any commitment
by the bank holding company to a federal bank regulatory agency to maintain the
capital of a banking subsidiary would be assumed by the bankruptcy trustee and
entitled to priority of payment.
Under the Federal Deposit Insurance Act ("FDIA"), a depository institution
insured by the FDIC can be held liable for any loss incurred by, or reasonably
expected to be incurred by, the FDIC after August 9, 1989, in connection with
(i) the default of a commonly controlled FDIC-insured depository institution or
(ii) any assistance provided by the FDIC to any commonly controlled FDIC-insured
depository institution "in danger of default." "Default" is defined generally as
the appointment of a conservator or receiver, and "in danger of default" is
defined generally as the existence of certain conditions indicating that a
default is likely to occur in the absence of regulatory assistance. The FDIC's
claim for damages is superior to claims of shareholders of the insured
depository institution or its holding company, but is subordinate to claims of
depositors, secured creditors, and holders of subordinated debt (other than
affiliates) of the commonly controlled insured depository institution. The
banking and thrift subsidiaries of UPC and Leader are subject to these
cross-guarantee provisions. As a result, any loss suffered by the FDIC in
respect of any of these subsidiaries would likely result in assertion of the
cross-guarantee provisions, the assessment of such estimated losses against the
banks' or the thrifts' depository institution affiliates, and a potential loss
of UPC's investments in such other banking and thrift subsidiaries.
PROMPT CORRECTIVE ACTION
FDICIA establishes a system of "prompt corrective action" to resolve the
problems of undercapitalized institutions. Under this system, which became
effective in December 1992, the federal banking regulators are required to
establish five capital categories (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, and critically
undercapitalized) and to take certain mandatory supervisory actions, and are
authorized to take other discretionary actions, with respect to institutions in
the three undercapitalized categories, the severity of which will depend upon
the capital category in which the institution is placed. Generally, subject to a
narrow exception, FDICIA requires the appropriate banking regulator to appoint a
receiver or conservator for an institution that is critically undercapitalized.
The federal banking agencies have specified by regulation the relevant capital
level for each category.
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Under the final agency rules implementing the prompt corrective action
provisions, an institution that (i) has a Risk-Based Capital Ratio of 10% or
greater, a Tier 1 Risk-Based Capital Ratio of 6.0% or greater, and a Leverage
Ratio of 5.0% or greater and (ii) is not subject to any written agreement,
order, capital directive, or prompt corrective action directive issued by the
appropriate federal banking agency is deemed to be "well capitalized." An
institution with a Risk-Based Capital Ratio of 8.0% or greater, a Tier 1
Risk-Based Capital Ratio of 4.0% or greater, and a Leverage Ratio of 4.0% or
greater is considered to be "adequately capitalized." A depository institution
that has a Risk-Based Capital Ratio of less than 8.0%, a Tier 1 Risk-Based
Capital Ratio of less than 4.0%, or a Leverage Ratio of less than 4.0% is
considered to be "undercapitalized." A depository institution that has a
Risk-Based Capital Ratio of less than 6.0%, a Tier 1 Risk-Based Capital Ratio of
less than 3.0%, or a Leverage Ratio of less than 3.0% is considered to be
"significantly undercapitalized," and an institution that has a tangible equity
capital to assets ratio equal to or less than 2.0% is deemed to be "critically
undercapitalized." For purposes of the regulation, the term "tangible equity"
includes core capital elements counted as Tier 1 Capital for purposes of the
risk-based capital standards, plus the amount of outstanding cumulative
perpetual preferred stock (including related surplus), minus all intangible
assets with certain exceptions. A depository institution may be deemed to be in
a capitalization category that is lower than is indicated by its actual capital
position if it receives an unsatisfactory examination rating.
An institution that is categorized as undercapitalized, significantly
undercapitalized, or critically undercapitalized is required to submit an
acceptable capital restoration plan to its appropriate federal banking agency.
Under FDICIA, a bank holding company must guarantee that a subsidiary depository
institution will meet its capital restoration plan, subject to certain
limitations. The obligation of a controlling bank holding company under FDICIA
to fund a capital restoration plan is limited to the lesser of 5.0% of an
undercapitalized subsidiary's assets or the amount required to meet regulatory
capital requirements. An undercapitalized institution is also generally
prohibited from increasing its average total assets, making acquisitions,
establishing any branches, or engaging in any new line of business, except in
accordance with an accepted capital restoration plan or with the approval of the
FDIC. In addition, the appropriate federal banking agency is given authority
with respect to any undercapitalized depository institution to take any of the
actions it is required to, or may take with respect to a significantly
undercapitalized institution as described below if it determines "that those
actions are necessary to carry out the purpose" of FDICIA.
For those institutions that are significantly undercapitalized or
undercapitalized and either fail to submit an acceptable capital restoration
plan or fail to implement an approved capital restoration plan, the appropriate
federal banking agency must require the institution to take one or more of the
following actions: (i) sell enough shares, including voting shares, to become
adequately capitalized; (ii) merge with (or be sold to) another institution (or
holding company), but only if grounds exist for appointing a conservator or
receiver; (iii) restrict certain transactions with banking affiliates as if the
"sister bank" exception to the requirements of Section 23A of the Federal
Reserve Act did not exist; (iv) otherwise restrict transactions with bank or
non-bank affiliates; (v) restrict interest rates that the institution pays on
deposits to "prevailing rates" in the institution's "region"; (vi) restrict
asset growth or reduce total assets; (vii) alter, reduce, or terminate
activities; (viii) hold a new election of directors; (ix) dismiss any director
or senior executive officer who held office for more than 180 days immediately
before the institution became undercapitalized, provided that in requiring
dismissal of a director or senior officer, the agency must comply with certain
procedural requirements, including the opportunity for an appeal in which the
director or officer will have the burden of proving his or her value to the
institution; (x) employ "qualified" senior executive officers; (xi) cease
accepting deposits from correspondent depository institutions; (xii) divest
certain nondepository affiliates which pose a danger to the institution; or
(xiii) be divested by a parent holding company. In addition, without the prior
approval of the appropriate federal banking agency, a significantly
undercapitalized institution may not pay any bonus to any senior executive
officer or increase the rate of compensation for such an officer.
At March 31, 1996, all of the banking and thrift subsidiaries of both UPC
and Leader had the requisite capital levels to qualify as "well capitalized."
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FDIC INSURANCE ASSESSMENTS
In July 1993, the FDIC adopted a new risk-based assessment system for
insured depository institutions that takes into account the risks attributable
to different categories and concentrations of assets and liabilities. The new
system, which went into effect on January 1, 1994, and replaced a transitional
system that the FDIC had utilized for the 1993 calendar year, assigns an
institution to one of three capital categories: (i) well capitalized; (ii)
adequately capitalized; and (iii) undercapitalized. These three categories are
substantially similar to the categories described above under "Prompt Corrective
Action," with the undercapitalized category including institutions that are
undercapitalized, significantly undercapitalized, and critically
undercapitalized for prompt corrective action purposes. An institution is also
assigned by the FDIC to one of three supervisory subgroups within each capital
group. The supervisory subgroup to which an institution is assigned is based on
a supervisory evaluation provided to the FDIC by the institution's primary
federal regulator and information which the FDIC determines to be relevant to
the institution's financial condition and the risk posed to the deposit
insurance funds (which may include, if applicable, information provided by the
institution's state supervisor). An institution's insurance assessment rate is
then determined based on the capital category and supervisory category to which
it is assigned. Under the final risk-based assessment system, as well as the
prior transitional system, there are nine assessment risk classifications (i.e.,
combinations of capital groups and supervisory subgroups) to which different
assessment rates are applied. Assessment rates for members of both the BIF and
the SAIF for the first half of 1995, as they had been during 1994, ranged from
23 basis points (0.23% of deposits) for an institution in the highest category
(i.e., "well capitalized" and "healthy") to 31 basis points (0.31% of deposits)
for an institution in the lowest category (i.e., "undercapitalized" and
"substantial supervisory concern"). These rates were established for both funds
to achieve a designated ratio of reserves to insured deposits (i.e., 1.25%)
within a specified period of time.
Once the designated ratio for the BIF was reached, which appears to have
occurred some time during May 1995, the FDIC was authorized to reduce the
minimum assessment rate below 23 basis points and to set future assessment rates
at such levels that would maintain a fund's reserve ratio at the designated
level. More recently, on November 14, 1995, the FDIC announced that, beginning
in 1996, it would reduce the deposit insurance premiums for BIF members in the
highest capital and supervisory categories to $2,000 per year, regardless of
deposit size. The FDIC has also elected to retain the existing assessment rate
of 23 to 31 basis points for SAIF members for the foreseeable future given the
undercapitalized status of that insurance fund.
Several proposed bills have been introduced into the United States
legislature, the main purpose of which is to provide additional capitalization
of the SAIF and to provide funds to pay interest and/or principal on bonds
issued to finance governmental costs associated with the savings and loan
industry. A common feature of the proposed legislation is a one-time payment to
the SAIF and BIF by both savings associations and banks. The consideration of
these proposed bills is ongoing, and at this time it is impossible to state with
accuracy the amounts, if any, Leader and UPC, or any of their subsidiaries, will
be required to pay in connection with any such legislation should it be passed,
or the effect such payments, if any, will have on the financial condition of
Leader or UPC. See "BUSINESS OF UPC -- Recent Developments -- Earnings
Considerations Relating to Potential Special Regulatory Assessment".
Under the FDIA, insurance of deposits may be terminated by the FDIC upon a
finding that the institution has engaged in unsafe and unsound practices, is in
an unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, rule, order, or condition imposed by the FDIC.
PROPOSED LEGISLATION
Because of concerns relating to the competitiveness and the safety and
soundness of the industry, the Congress continues to consider a number of
wide-ranging proposals for altering the structure, regulation, and competitive
relationships of the nation's financial institutions. Among such bills are
proposals to combine banks and thrifts into a unified charter, to alter the
statutory separation of commercial and investment banking, and to further expand
the powers of depository institutions, bank holding companies, and competitors
of depository institutions. It cannot be predicted whether or in what form any
of these proposals will be adopted or the extent to which the business of UPC or
Leader may be affected thereby.
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DESCRIPTION OF UPC COMMON AND PREFERRED STOCK
UPC's Charter currently authorizes the issuance of 100,000,000 shares of
UPC Common Stock and 10,000,000 shares of UPC Preferred Stock. As of July 26,
1996, 46,121,289 shares of UPC Common Stock were issued and outstanding and
approximately 1,115,000 shares were subject to issuance through the exercise of
options granted pursuant to UPC's 1992 and 1983 Stock Option Plans and other
employee, officer and director benefit plans; approximately 502,000 shares were
authorized for issuance pursuant to said plans but not yet subject to option
grants or otherwise issued; and approximately 4,758,492 shares were authorized
for issuance and reserved for conversion of certain outstanding shares of UPC
Preferred Stock. In addition, as of July 26, 1996, 3,489,336 shares of UPC's 8%
Cumulative, Convertible Preferred Stock, Series E (the "Series E Preferred
Stock") were issued and outstanding. As of July 26, 1996, none of UPC's
authorized shares of Series A Preferred Stock were issued and outstanding nor is
management aware of the existence of circumstances from which it may be inferred
that such issuance is imminent. THE CAPITAL STOCK OF UPC DOES NOT REPRESENT OR
CONSTITUTE A DEPOSIT ACCOUNT AND IS NOT INSURED BY THE FDIC, THE BANK INSURANCE
FUND, THE SAVINGS ASSOCIATION INSURANCE FUND OR ANY GOVERNMENTAL AGENCY.
UPC COMMON STOCK
General. Shares of UPC Common Stock may be issued at such time, or times
and for such consideration (not less than the par value thereof) as the UPC
Board may deem advisable, subject to such limitations as may be set forth in the
laws of the State of Tennessee, UPC's Charter or Bylaws or the rules of the
NYSE. Union Planters National Bank, a wholly-owned subsidiary of UPC, is the
Registrar, Transfer Agent and Dividend Disbursing Agent for shares of UPC Common
Stock. Its street address is Union Planters National Bank, Corporate Trust
Department, 6200 Poplar Avenue, Third Floor, Memphis, Tennessee 38119. Its
mailing address is P.O. Box 387, Memphis, Tennessee 38147.
Dividends. Subject to the preferential dividend rights applicable to
outstanding shares of the UPC Preferred Stock and subject to applicable
requirements, if any, with respect to the setting aside of sums for purchase,
retirement or sinking funds, if any, for all outstanding UPC Preferred Stock,
the holders of the UPC Common Stock are entitled to receive, to the extent
permitted by law, only such dividends as may be declared from time to time by
the UPC Board.
UPC has the right to, and may from time to time, enter into borrowing
arrangements or issue other debt instruments, the provisions of which may
contain restrictions on payment of dividends and other distributions on UPC
Common Stock and UPC Preferred Stock; however, UPC has no such arrangements in
effect at the date hereof.
Liquidation Rights. In the event of the voluntary or involuntary
liquidation, dissolution, distribution of assets or winding-up of UPC, after
distribution in full of the preferential amounts required to be distributed to
the holders of UPC Preferred Stock, holders of UPC Common Stock will be entitled
to receive all of the remaining assets of UPC, of whatever kind, available for
distribution to shareholders ratably in proportion to the number of shares of
UPC Common Stock held. The UPC Board may distribute in kind to the holders of
UPC Common Stock such remaining assets of UPC or may sell, transfer or otherwise
dispose of all or any part of such remaining assets to any other person or
entity and receive payment therefor in cash, stock or obligations of such other
person or entity, and may sell all or any part of the consideration so received
and distribute any balance thereof in kind to holders of UPC Common Stock.
Neither the merger or consolidation of UPC into or with any other corporation,
nor the merger of any other corporation into UPC, nor any purchase or redemption
of shares of stock of UPC of any class, shall be deemed to be a dissolution,
liquidation or winding-up of UPC for purposes of this paragraph.
Because UPC is a holding company, its right and the rights of its creditors
and shareholders, including the holders of UPC Preferred Stock and UPC Common
Stock, to participate in the distribution of assets of a subsidiary on its
liquidation or recapitalization may be subject to prior claims of such
subsidiary's creditors except to the extent that UPC itself may be a creditor
having recognized claims against such subsidiary.
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For a further description of UPC Common Stock, see "EFFECT OF THE MERGER ON
RIGHTS OF SHAREHOLDERS."
UPC PREFERRED STOCK
Series A Preferred Stock. UPC's Charter was amended on July 18, 1996 to
increase the number of shares of Series A Preferred Stock authorized and
currently provides for the issuance of up to 750,000 shares (subject to
adjustment by action of the UPC Board) of Series A Preferred Stock under certain
circumstances involving a potential change in control of UPC. None of such
shares are outstanding and management is aware of no facts suggesting that
issuance of such shares may be imminent. The Series A Preferred Stock is
described in more detail in UPC's Registration Statement on Form 8-A dated
January 19, 1989, and filed February 1, 1989 (Commission File No. 0-6919) which
is incorporated by reference herein. On July 18, 1996 the UPC Board of Directors
authorized the amendment of UPC's Charter to designate an additional 500,000
shares of Series A Preferred Stock. The amendment will become effective upon
filing with the Tennessee Secretary of State.
Series B Preferred Stock. All 44,000 outstanding shares of Series B
Preferred Stock were converted by the holder into 339,765 shares of UPC Common
Stock on April 30, 1996, such that no Series B Preferred Stock remains
outstanding at the date hereof.
Series E Preferred Stock. 3,489,336 shares of Series E Preferred Stock
were outstanding as of July 26, 1996. Up to 317,458 shares of Series E Preferred
Stock are expected to be issued upon consummation of UPC's pending acquisition
of ENB, if and when adverse claims to ENB's stock shall have been resolved to
UPC's satisfaction in pending court proceedings. See "BUSINESS OF UPC -- Recent
Developments -- Other Pending Acquisitions." All shares of Series E Preferred
Stock have a stated value of $25.00 per share. Dividends are payable at the rate
of $0.50 per share per quarter and are cumulative. The Series E Preferred Stock
is convertible at the election of the holder at the rate of 1.25 shares of UPC
Common Stock for each share of Series E Preferred Stock. The Series E Preferred
Stock is not subject to any sinking fund provisions and has no preemptive
rights. Such shares have a liquidation preference of $25.00 per share plus
unpaid dividends accrued thereon and, at UPC's option and with the prior
approval of the Federal Reserve, are subject to redemption by UPC at any time or
from time to time after March 31, 1997 at a redemption price of $25.00 per share
plus any unpaid dividend. Holders of Series E Preferred Stock have no voting
rights except as required by law and in certain other limited circumstances.
SHAREHOLDER PROPOSALS
UPC expects to hold its next annual meeting of shareholders after the
Merger during April 1997. Under Commission rules proposals of UPC shareholders
intended to be presented at that meeting must be received by UPC at its
principal executive offices no later than the date specified in UPC's 1996
annual meeting proxy statement. It is not currently anticipated that Leader will
hold its 1997 annual meeting unless the Merger should not be consummated. In the
event the Merger is not consummated, proposals of Leader shareholders intended
to be presented at that meeting must be received by Leader at its principal
executive offices no later than November 24, 1996.
EXPERTS
The consolidated financial statements of Union Planters Corporation
incorporated in this Joint Proxy Statement by reference to the Annual Report on
Form 10-K of Union Planters Corporation for the year ended December 31, 1995,
have been so incorporated in reliance on the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The consolidated statements of financial position of Leader and its
subsidiary as of December 31, 1995 and 1994, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
years in the three-year period ended December 31, 1995, incorporated in this
Joint Proxy Statement by reference to the Annual Report on Form 10-K of Leader
Financial Corporation for the year ended
76
<PAGE> 86
December 31, 1995 and UPC's Current Report on Form 8-K, dated April 1, 1996,
have been audited by KPMG Peat Marwick LLP, independent certified public
accountants, as stated in their report which is incorporated herein by reference
and in reliance on the report of such firm given upon their authority as experts
in accounting and auditing.
The report of KPMG Peat Marwick LLP refers to changes in the accounting
principles related to the adoption in 1994 of the provisions of the American
Institute of Certified Public Accountants' Statement of Position 93-6,
Employer's Accounting for Employee Stock Ownership Plans, and in 1993 of the
provisions of Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 106, Employers' Accounting for Postretirement Benefits
Other than Pensions, and No. 115, Accounting for Certain Investments in Debt and
Equity Securities.
OPINIONS
The validity of the shares of the UPC Common Stock offered hereby will be
passed upon by E. James House, Jr., Secretary and Manager of the Legal
Department of UPC. E. James House, Jr. is an officer of, and receives
compensation from UPC.
Certain tax consequences of the transaction have been passed upon by Alston
& Bird, Atlanta, Georgia.
77
<PAGE> 87
INDEX TO APPENDICES
<TABLE>
<CAPTION>
APPENDIX
- --------
<C> <C> <S>
I -- Agreement and Plan of Merger between Union Planters Corporation and Leader
Financial Corporation, dated as of March 8, 1996, together with the
Supplemental Letter dated March 8, 1996 and Stock Option Agreement dated March
9, 1996
II -- Form of Plan of Merger of UPC Merger Subsidiary, Inc. with and into Leader
Financial Corporation
III -- Fairness Opinion of Sandler O'Neill & Partners, L.P.
IV -- Fairness Opinion of Stifel, Nicolaus & Company, Incorporated
</TABLE>
78
<PAGE> 88
APPENDIX I
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
LEADER FINANCIAL CORPORATION
AND
UNION PLANTERS CORPORATION
DATED AS OF MARCH 8, 1996
<PAGE> 89
APPENDIX I -- AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Parties.................................................................................. 1
Preamble................................................................................. 1
ARTICLE 1 -- TRANSACTIONS AND TERMS OF MERGER............................................ 1
1.1 Merger....................................................................... 1
1.2 Time and Place of Closing.................................................... 1
1.3 Effective Time............................................................... 1
1.4 Execution of Stock Option Agreement.......................................... 2
ARTICLE 2 -- TERMS OF MERGER............................................................. 2
2.1 Charter...................................................................... 2
2.2 By-laws...................................................................... 2
2.3 Directors and Officers....................................................... 2
ARTICLE 3 -- MANNER OF CONVERTING SHARES................................................. 2
3.1 Conversion of Shares......................................................... 2
3.2 Anti-Dilution Provisions..................................................... 2
3.3 Shares Held by Leader or UPC................................................. 3
3.4 Fractional Shares............................................................ 3
3.5 Conversion of Stock Options; Restricted Stock................................ 3
ARTICLE 4 -- EXCHANGE OF SHARES.......................................................... 4
4.1 Exchange Procedures.......................................................... 4
4.2 Rights of Former Leader Shareholders......................................... 4
ARTICLE 5 -- REPRESENTATIONS AND WARRANTIES OF LEADER.................................... 5
5.1 Organization, Standing, and Power............................................ 5
5.2 Authority; No Breach By Agreement............................................ 5
5.3 Capital Stock................................................................ 6
5.4 Leader Subsidiaries.......................................................... 6
5.5 SEC Filings; Financial Statements............................................ 7
5.6 Absence of Undisclosed Liabilities........................................... 7
5.7 Absence of Certain Changes or Events......................................... 7
5.8 Tax Matters.................................................................. 7
5.9 Allowance for Possible Loan Losses........................................... 8
5.10 Assets....................................................................... 8
5.11 Intellectual Property........................................................ 9
5.12 Environmental Matters........................................................ 9
5.13 Compliance With Laws......................................................... 9
5.14 Labor Relations.............................................................. 10
5.15 Employee Benefit Plans....................................................... 10
5.16 Material Contracts........................................................... 11
5.17 Legal Proceedings............................................................ 12
5.18 Reports...................................................................... 12
5.19 Statements True and Correct.................................................. 12
5.20 Accounting, Tax, and Regulatory Matters...................................... 13
5.21 State Takeover Laws.......................................................... 13
5.22 Charter Provisions........................................................... 13
ARTICLE 6 -- REPRESENTATIONS AND WARRANTIES OF UPC....................................... 13
6.1 Organization, Standing, and Power............................................ 13
6.2 Authority; No Breach By Agreement............................................ 13
6.3 Capital Stock................................................................ 14
6.4 SEC Filings; Financial Statements............................................ 14
</TABLE>
i
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APPENDIX I -- AGREEMENT AND PLAN OF MERGER
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
6.5 Absence of Undisclosed Liabilities........................................... 14
6.6 Absence of Certain Changes or Events......................................... 15
6.7 Tax Matters.................................................................. 15
6.8 Environmental Matters........................................................ 15
6.9 Compliance With Laws......................................................... 15
6.10 Legal Proceedings............................................................ 16
6.11 Reports...................................................................... 16
6.12 Statements True and Correct.................................................. 16
6.13 Accounting, Tax, and Regulatory Matters...................................... 17
ARTICLE 7 -- CONDUCT OF BUSINESS PENDING CONSUMMATION.................................... 17
7.1 Affirmative Covenants of Leader.............................................. 17
7.2 Negative Covenants of Leader................................................. 17
7.3 Covenants of UPC............................................................. 19
7.4 Adverse Changes in Condition................................................. 19
7.5 Reports...................................................................... 19
ARTICLE 8 -- ADDITIONAL AGREEMENTS....................................................... 19
8.1 Registration Statement; Joint Proxy Statement; Shareholder Approvals......... 19
8.2 Exchange Listing............................................................. 20
8.3 Applications................................................................. 20
8.4 Filings with State Offices................................................... 20
8.5 Agreement as to Efforts to Consummate........................................ 20
8.6 Investigation and Confidentiality............................................ 20
8.7 Press Releases............................................................... 21
8.8 Certain Actions.............................................................. 21
8.9 Accounting and Tax Treatment................................................. 21
8.10 State Takeover Laws.......................................................... 21
8.11 Charter Provisions........................................................... 21
8.12 Agreements of Affiliates..................................................... 21
8.13 Employee Benefits and Contracts.............................................. 22
8.14 Indemnification.............................................................. 22
8.15 UPC Merger Subsidiary Organization........................................... 23
ARTICLE 9 -- CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE........................... 23
9.1 Conditions to Obligations of Each Party...................................... 23
9.2 Conditions to Obligations of UPC............................................. 24
9.3 Conditions to Obligations of Leader.......................................... 25
ARTICLE 10 -- TERMINATION................................................................ 26
10.1 Termination.................................................................. 26
10.2 Effect of Termination........................................................ 28
10.3 Non-Survival of Representations and Covenants................................ 28
ARTICLE 11 -- MISCELLANEOUS.............................................................. 29
11.1 Definitions.................................................................. 29
11.2 Expenses..................................................................... 35
11.3 Brokers and Finders.......................................................... 35
11.4 Entire Agreement............................................................. 35
11.5 Amendments................................................................... 35
11.6 Waivers...................................................................... 35
11.7 Assignment................................................................... 36
11.8 Notices...................................................................... 36
11.9 Governing Law................................................................ 36
</TABLE>
ii
<PAGE> 91
APPENDIX I -- AGREEMENT AND PLAN OF MERGER
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
11.10 Counterparts................................................................. 37
11.11 Captions..................................................................... 37
11.12 Interpretations.............................................................. 37
11.13 Enforcement of Agreement..................................................... 37
11.14 Severability................................................................. 37
Signatures............................................................................... 37
</TABLE>
iii
<PAGE> 92
APPENDIX I -- AGREEMENT AND PLAN OF MERGER
LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ------------------------------------------------------------------------------------
<S> <C>
1. -- Plan of Merger. (Section 1.1).
2. -- Form of Stock Option Agreement. (Sections 1.4, 11.1).
3. -- Form of Supplemental Letter. (Sections 7.2, 11.1).
4. -- Form of agreement of affiliates of Leader. (Sections 8.12, 9.2(d)).
</TABLE>
iv
<PAGE> 93
APPENDIX I -- AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of March 8, 1996, by and between LEADER FINANCIAL CORPORATION
("Leader"), a Tennessee corporation having its principal office located in
Memphis, Tennessee; and UNION PLANTERS CORPORATION ("UPC"), a Tennessee
corporation having its principal office located in Memphis, Tennessee.
PREAMBLE
The Boards of Directors of Leader and UPC are of the opinion that the
transactions described herein are in the best interests of the parties and their
respective shareholders. This Agreement provides for the acquisition of Leader
by UPC pursuant to the merger of a wholly owned subsidiary of UPC to be
organized under the Laws of the State of Tennessee ("UPC Merger Subsidiary")
with and into Leader. At the effective time of such merger, the outstanding
shares of the common stock of Leader shall be converted into the right to
receive shares of the common stock of UPC (except as provided in Sections 3.3
and 3.4 of this Agreement). As a result, shareholders of Leader shall become
shareholders of UPC and Leader shall continue to conduct its business and
operations as a wholly owned subsidiary of UPC. The transactions described in
this Agreement are subject to the approvals of the shareholders of UPC and
Leader, the Board of Governors of the Federal Reserve System, the Office of
Thrift Supervision, and other applicable federal and state regulatory
authorities, and the satisfaction of certain other conditions described in this
Agreement. It is the intention of the parties to this Agreement that the Merger
for federal income tax purposes shall qualify as a "reorganization" within the
meaning of Section 368(a) of the Internal Revenue Code, and for accounting
purposes shall qualify for treatment as a pooling of interests.
Immediately after the execution and delivery of this Agreement, as a
condition and inducement to UPC's willingness to enter into this Agreement,
Leader and UPC are entering into a stock option agreement pursuant to which
Leader is granting to UPC an option to purchase shares of Leader Common Stock.
Certain terms used in this Agreement are defined in Section 11.1 of this
Agreement.
NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants, and agreements set forth herein, the parties agree
as follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
1.1 Merger. Subject to the terms and conditions of this Agreement, at the
Effective Time, UPC Merger Subsidiary shall be merged with and into Leader in
accordance with the provisions of Section 48-21-102 of the TBCA and with the
effect provided in Section 48-21-108 of the TBCA (the "Merger"). Leader shall be
the Surviving Corporation resulting from the Merger and shall continue to be
governed by the Laws of the State of Tennessee. The Merger shall be consummated
pursuant to the terms of this Agreement, which has been approved and adopted by
the respective Boards of Directors of Leader and UPC and the Plan of Merger, in
substantially the form of Exhibit 1, which has been approved and adopted by the
Board of Directors of Leader and will be approved and adopted by the Board of
Directors of UPC Merger Subsidiary and UPC (in its capacity as sole shareholder
of UPC Merger Subsidiary) upon the organization of UPC Merger Subsidiary.
1.2 Time and Place of Closing. The Closing will take place at 9:00 A.M. on
the date that the Effective Time occurs (or the immediately preceding day if the
Effective Time is earlier than 9:00 A.M.), or at such other time as the Parties,
acting through their chief executive officers or chief financial officers, may
mutually agree. The Closing shall be held at such place as may be mutually
agreed upon by the Parties.
1.3 Effective Time. The Merger and other transactions contemplated by this
Agreement shall become effective on the date and at the time the Articles of
Merger reflecting the Merger shall become effective with the Secretary of State
of the State of Tennessee (the "Effective Time"). Subject to the terms and
conditions hereof, unless otherwise mutually agreed upon in writing by the chief
executive officers or chief financial
<PAGE> 94
APPENDIX I -- AGREEMENT AND PLAN OF MERGER
officers of each Party, the Parties shall use their reasonable efforts to cause
the Effective Time to occur on such date as may be designated by UPC within 30
days following the last to occur of (i) the effective date (including expiration
of any applicable waiting period) of the last required Consent of any Regulatory
Authority having authority over and approving or exempting the Merger, (ii) the
date on which the shareholders of UPC and Leader approve this Agreement and the
Plan of Merger to the extent such approval is required by applicable Law, and
(iii) the date on which all other conditions precedent to each Party's
obligations hereunder shall have been satisfied or waived (to the extent
waivable by such Party), provided the Effective Time may not occur prior to
October 1, 1996.
1.4 Execution of Stock Option Agreement. Simultaneously with the execution
of this Agreement by the Parties and as a condition thereto, Leader is executing
and delivering to UPC a stock option agreement (the "Stock Option Agreement"),
in substantially the form of Exhibit 2, pursuant to which Leader is granting to
UPC an option to purchase shares of Leader Common Stock.
ARTICLE 2
TERMS OF MERGER
2.1 Charter. The Charter of Leader in effect immediately prior to the
Effective Time shall be the Charter of the Surviving Corporation until otherwise
amended or repealed.
2.2 By-Laws. The By-laws of Leader in effect immediately prior to the
Effective Time shall be the By-laws of the Surviving Corporation until otherwise
amended or repealed.
2.3 Directors and Officers. The directors of Leader in office immediately
prior to the Effective Time, together with such additional persons as may
thereafter be elected, shall serve as the directors of the Surviving Corporation
from and after the Effective Time in accordance with the By-laws of the
Surviving Corporation. The officers of Leader in office immediately prior to the
Effective Time, together with such additional persons as may thereafter be
elected, shall serve as the officers of the Surviving Corporation from and after
the Effective Time in accordance with the By-laws of the Surviving Corporation.
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 Conversion of Shares. Subject to the provisions of this Article 3, at
the Effective Time, by virtue of the Merger and without any action on the part
of UPC, UPC Merger Subsidiary, Leader, or the shareholders of either of the
foregoing, the shares of the constituent corporations shall be converted as
follows:
(a) Each share of UPC Capital Stock, including any associated UPC
Rights, issued and outstanding immediately prior to the Effective Time
shall remain issued and outstanding from and after the Effective Time.
(b) Each share of UPC Merger Subsidiary Common Stock issued and
outstanding immediately prior to the Effective Time shall cease to be
outstanding and shall be converted into and exchanged for one share of
Leader Common Stock.
(c) Each share of Leader Common Stock (excluding shares held by any
Leader Company or any UPC Company, in each case other than in a fiduciary
capacity or as a result of debts previously contracted) issued and
outstanding at the Effective Time shall cease to be outstanding and shall
be converted into and exchanged for the right to receive 1.525 of a share
of UPC Common Stock (as subject to possible adjustment as set forth in
Section 10.1(i) of this Agreement, the "Exchange Ratio"). Pursuant to the
UPC Rights Agreement, each share of UPC Common Stock issued in connection
with the Merger upon conversion of Leader Common Stock shall be accompanied
by a UPC Right.
3.2 Anti-Dilution Provisions. In the event UPC changes the number of
shares of UPC Common Stock issued and outstanding prior to the Effective Time as
a result of a stock split, stock dividend, or similar
2
<PAGE> 95
APPENDIX I -- AGREEMENT AND PLAN OF MERGER
recapitalization with respect to such stock and the record date therefor (in the
case of a stock dividend) or the effective date thereof (in the case of a stock
split or similar recapitalization for which a record date is not established)
shall be prior to the Effective Time, the Exchange Ratio shall be
proportionately adjusted.
3.3 Shares Held by Leader or UPC. Each of the shares of Leader Common
Stock held by any Leader Company or by any UPC Company, in each case other than
in a fiduciary capacity or as a result of debts previously contracted, shall be
canceled and retired at the Effective Time and no consideration shall be issued
in exchange therefor.
3.4 Fractional Shares. Notwithstanding any other provision of this
Agreement, each holder of shares of Leader Common Stock exchanged pursuant to
the Merger who would otherwise have been entitled to receive a fraction of a
share of UPC Common Stock (after taking into account all certificates delivered
by such holder) shall receive, in lieu thereof, cash (without interest) in an
amount equal to such fractional part of a share of UPC Common Stock multiplied
by the market value of one share of UPC Common Stock at the Effective Time. The
market value of one share of UPC Common Stock at the Effective Time shall be the
closing price of such common stock on the NYSE-Composite Transactions List (as
reported by The Wall Street Journal or, if not reported thereby, any other
authoritative source selected by UPC) on the last trading day preceding the
Effective Time. No such holder will be entitled to dividends, voting rights, or
any other rights as a shareholder in respect of any fractional shares.
3.5 Conversion of Stock Options; Restricted Stock. (a) At the Effective
Time, each option to purchase or other right with respect to shares of Leader
Common Stock pursuant to stock options, stock appreciation rights or other
rights, including stock awards ("Leader Options") granted by Leader under the
Leader Stock Plans, which are outstanding at the Effective Time, whether or not
exercisable, shall be converted into and become rights with respect to UPC
Common Stock, and UPC shall assume each Leader Option, in accordance with the
terms of the Leader Stock Plan and stock option or other agreement by which it
is evidenced, except that from and after the Effective Time, (i) UPC and its
Salary and Benefits Committee shall be substituted for Leader and the Committee
of Leader's Board of Directors (including, if applicable, the entire Board of
Directors of Leader) administering such Leader Stock Plan, (ii) each Leader
Option assumed by UPC may be exercised solely for shares of UPC Common Stock (or
cash in the case of stock appreciation rights), (iii) the number of shares of
UPC Common Stock subject to such Leader Option shall be equal to the number of
shares of Leader Common Stock subject to such Leader Option immediately prior to
the Effective Time multiplied by the Exchange Ratio, and (iv) the per share
exercise price under each such Leader Option shall be adjusted by dividing the
per share exercise price under each such Leader Option by the Exchange Ratio and
rounding up to the nearest cent. Notwithstanding the provisions of clause (iii)
of the preceding sentence, UPC shall not be obligated to issue any fraction of a
share of UPC Common Stock upon exercise of Leader Options and any fraction of a
share of UPC Common Stock that otherwise would be subject to a converted Leader
Option shall represent the right to receive a cash payment upon exercise of such
converted Leader Option equal to the product of such fraction and the difference
between the market value of one share of UPC Common Stock at the time of
exercise of such Option and the per share exercise price of such Option. The
market value of one share of UPC Common Stock at the time of exercise of an
Option shall be the closing price of such common stock on the NYSE-Composite
Transactions List (as reported by The Wall Street Journal or, if not reported
thereby, any other authoritative source selected by UPC) on the last trading day
preceding the date of exercise. In addition, notwithstanding the clauses (iii)
and (iv) of the first sentence of this Section 3.5, each Leader Option which is
an "incentive stock option" shall be adjusted as required by Section 424 of the
Internal Revenue Code, and the regulations promulgated thereunder, so as not to
constitute a modification, extension or renewal of the option, within the
meaning of Section 424(h) of the Internal Revenue Code. UPC and Leader agree to
take all necessary steps to effectuate the foregoing provisions of this Section
3.5.
(b) As soon as practicable after the Effective Time, UPC shall deliver to
the participants in each Leader Stock Plan an appropriate notice setting forth
such participant's rights pursuant thereto and the grants subject to such Leader
Stock Plan shall continue in effect on the same terms and conditions (subject to
the adjustments required by Section 3.5(a) after giving effect to the Merger),
and UPC shall comply with the terms of each Leader Stock Plan to ensure, to the
extent required by, and subject to the provisions of, such
3
<PAGE> 96
APPENDIX I -- AGREEMENT AND PLAN OF MERGER
Leader Stock Plan, that Leader Options which qualified as incentive stock
options prior to the Effective Time continue to qualify as incentive stock
options after the Effective Time. Within 30 days after the Effective Time, UPC
shall file a registration statement on Form S-3 or Form S-8, as the case may be
(or any successor or other appropriate forms), with respect to the shares of UPC
Common Stock subject to such options and shall use its reasonable efforts to
maintain the effectiveness of such registration statements (and maintain the
current status of the prospectus or prospectuses contained therein) for so long
as such options remain outstanding.
(c) All contractual restrictions or limitations on transfer with respect to
Leader Common Stock awarded under the Leader Stock Plans or any other plan,
program, or Contract of any Leader Company, to the extent that such restrictions
or limitations shall not have already lapsed (whether as a result of the Merger
or otherwise), and except as otherwise expressly provided in such plan, program,
or Contract, shall remain in full force and effect with respect to shares of UPC
Common Stock into which such restricted stock is converted pursuant to Section
3.1 of this Agreement.
(d) In approving this Agreement, Leader and the Stock Option Committee
appointed by the Board of Directors of Leader in accordance with paragraph 5(a)
of the Leader Financial Corporation 1993 Stock Option and Incentive Plan agree
not to permit the holders of options outstanding under such plan to receive cash
upon the "Change in Control" of Leader in an amount equal to the excess of the
"Market Value" of the Leader Common Stock subject to such option over the
"Exercise Price" of the shares subject to such option in accordance with Section
12 of the Leader Financial Corporation 1993 Stock Option and Incentive Plan.
ARTICLE 4
EXCHANGE OF SHARES
4.1 Exchange Procedures. Promptly after the Effective Time, UPC and Leader
shall cause the exchange agent selected by UPC (the "Exchange Agent") to mail to
the former shareholders of Leader appropriate transmittal materials (which shall
specify that delivery shall be effected, and risk of loss and title to the
certificates theretofore representing shares of Leader Common Stock shall pass,
only upon proper delivery of such certificates to the Exchange Agent). The
Exchange Agent may establish reasonable and customary rules and procedures in
connection with its duties. After the Effective Time, each holder of shares of
Leader Common Stock (other than shares to be canceled pursuant to Section 3.3 of
this Agreement) issued and outstanding at the Effective Time shall surrender the
certificate or certificates representing such shares to the Exchange Agent and
shall promptly upon surrender thereof receive in exchange therefor the
consideration provided in Section 3.1 of this Agreement, together with all
undelivered dividends or distributions in respect of such shares (without
interest thereon) pursuant to Section 4.2 of this Agreement. To the extent
required by Section 3.4 of this Agreement, each holder of shares of Leader
Common Stock issued and outstanding at the Effective Time also shall receive,
upon surrender of the certificate or certificates representing such shares, cash
in lieu of any fractional share of UPC Common Stock to which such holder may be
otherwise entitled (without interest). UPC shall not be obligated to deliver the
consideration to which any former holder of Leader Common Stock is entitled as a
result of the Merger until such holder surrenders such holder's certificate or
certificates representing the shares of Leader Common Stock for exchange as
provided in this Section 4.1. The certificate or certificates of Leader Common
Stock so surrendered shall be duly endorsed as the Exchange Agent may require.
Any other provision of this Agreement notwithstanding, neither UPC nor the
Exchange Agent shall be liable to a holder of Leader Common Stock for any
amounts paid or property delivered in good faith to a public official pursuant
to any applicable abandoned property Law. Adoption of this Agreement by the
shareholders of Leader shall constitute ratification of the appointment of the
Exchange Agent.
4.2 Rights of Former Leader Shareholders. At the Effective Time, the stock
transfer books of Leader shall be closed as to holders of Leader Common Stock
immediately prior to the Effective Time and no transfer of Leader Common Stock
by any such holder shall thereafter be made or recognized. Until surrendered for
exchange in accordance with the provisions of Section 4.1 of this Agreement,
each certificate theretofore representing shares of Leader Common Stock (other
than shares to be canceled pursuant to Section 3.3 of this
4
<PAGE> 97
APPENDIX I -- AGREEMENT AND PLAN OF MERGER
Agreement) shall from and after the Effective Time represent for all purposes
only the right to receive the consideration provided in Sections 3.1 and 3.4 of
this Agreement in exchange therefor, subject, however, to the Surviving
Corporation's obligation to pay any dividends or make any other distributions
with a record date prior to the Effective Time which have been declared or made
by Leader in respect of such shares of Leader Common Stock in accordance with
the terms of this Agreement and which remain unpaid at the Effective Time.
Whenever a dividend or other distribution is declared by UPC on the UPC Common
Stock, the record date for which is at or after the Effective Time, the
declaration shall include dividends or other distributions on all shares of UPC
Common Stock issuable pursuant to this Agreement, but beginning 30 days after
the Effective Time no dividend or other distribution payable to the holders of
record of UPC Common Stock as of any time subsequent to the Effective Time shall
be delivered to the holder of any certificate representing shares of Leader
Common Stock issued and outstanding at the Effective Time until such holder
surrenders such certificate for exchange as provided in Section 4.1 of this
Agreement. However, upon surrender of such Leader Common Stock certificate, both
the UPC Common Stock certificate (together with all such undelivered dividends
or other distributions without interest) and any undelivered dividends and cash
payments payable hereunder (without interest) shall be delivered and paid with
respect to each share represented by such certificate.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF LEADER
Leader hereby represents and warrants to UPC as follows:
5.1 Organization, Standing, and Power. Leader is a corporation duly
organized, validly existing, and in good standing under the Laws of the State of
Tennessee, and has the corporate power and authority to carry on its business as
now conducted and to own, lease, and operate its Assets. Leader is duly
qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for such jurisdictions in which the failure
to be so qualified or licensed is not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Leader.
5.2 Authority; No Breach by Agreement. (a) Leader has the corporate power
and authority necessary to execute, deliver, and perform its obligations under
this Agreement and the Plan of Merger and to consummate the transactions
contemplated hereby and thereby. The execution, delivery, and performance of
this Agreement and the Plan of Merger, as appropriate, and the consummation of
the transactions contemplated herein and therein, including the Merger, have
been duly and validly authorized by all necessary corporate action in respect
thereof on the part of Leader, subject to the approval of this Agreement and the
Plan of Merger by the holders of a majority of the outstanding shares of Leader
Common Stock, which is the only shareholder vote required for approval of this
Agreement and the Plan of Merger and consummation of the Merger by Leader.
Subject to such requisite shareholder approval, this Agreement and the Plan of
Merger (which for purposes of this sentence shall not include the Stock Option
Agreement) represent legal, valid, and binding obligations of Leader,
enforceable against Leader in accordance with their respective terms (except in
all cases as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, receivership, conservatorship, moratorium, or
similar Laws affecting the enforcement of creditors' rights generally and except
that the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceeding may be brought).
(b) Neither the execution and delivery of this Agreement or the Plan of
Merger, as appropriate, by Leader, nor the consummation by Leader of the
transactions contemplated hereby or thereby, nor compliance by Leader with any
of the provisions hereof or thereof, will (i) conflict with or result in a
breach of any provision of Leader's Charter or By-laws, or (ii) except as
disclosed in Section 5.2 of the Leader Disclosure Memorandum, constitute or
result in a Default under, or require any Consent pursuant to, or result in the
creation of any Lien on any material Asset of any Leader Company under, any
Contract or Permit of any Leader Company, or, (iii) subject to receipt of the
requisite Consents referred to in Section 9.1(b) of this
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Agreement, violate any Law or Order applicable to any Leader Company or any of
their respective material Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules of
the NASD, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit plans,
or under the HSR Act, and other than Consents, filings, or notifications which,
if not obtained or made, are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Leader, no notice to, filing with,
or Consent of, any public body or authority is necessary for the consummation by
Leader of the Merger and the other transactions contemplated in this Agreement
and the Plan of Merger.
5.3 Capital Stock. (a) The authorized capital stock of Leader consists of
(i) 35,000,000 shares of Leader Common Stock, of which 9,917,916 shares are
issued and outstanding as of the date of this Agreement (exclusive of treasury
shares) and not more than 10,879,697 shares will be issued and outstanding at
the Effective Time, and (ii) 15,000,000 shares of preferred stock, $1.00 par
value, of which no shares are, or will be, issued and outstanding as of the date
of this Agreement or at the Effective Time, respectively. All of the issued and
outstanding shares of capital stock of Leader are duly and validly issued and
outstanding and are fully paid and nonassessable under the TBCA. None of the
outstanding shares of capital stock of Leader has been issued in violation of
any preemptive rights of the current or past shareholders of Leader. Leader has
reserved 1,075,250 shares of Leader Common Stock for issuance under the Leader
Stock Plans, pursuant to which options to purchase not more than 961,781 shares
of Leader Common Stock are outstanding.
(b) Except as set forth in Section 5.3(a) of this Agreement, or as provided
in the Stock Option Agreement there are no shares of capital stock or other
equity securities of Leader outstanding and no outstanding Rights relating to
the capital stock of Leader.
5.4 Leader Subsidiaries. Leader has disclosed in Section 5.4 of the Leader
Disclosure Memorandum all of the Leader Subsidiaries that are corporations
(identifying its jurisdiction of incorporation, each jurisdiction in which
character of its Assets or the nature or conduct of its business requires it to
be qualified and/or licensed to transact business, and the number of shares
owned and percentage ownership interest represented by such share ownership) and
all of the Leader Subsidiaries that are general or limited partnerships or other
non-corporate entities (identifying the Law under which such entity is
organized, each jurisdiction in which character of its Assets or the nature or
conduct of its business requires it to be qualified and/or licensed to transact
business, and the amount and nature of the ownership interest therein of all
Leader Companies). Leader or one of its wholly owned Subsidiaries owns all of
the issued and outstanding shares of capital stock (or other equity interests)
of each Leader Subsidiary. No capital stock (or other equity interest) of any
Leader Subsidiary are or may become required to be issued (other than to another
Leader Company) by reason of any Rights, and there are no Contracts by which any
Leader Subsidiary is bound to issue (other than to another Leader Company)
additional shares of its capital stock (or other equity interests) or Rights or
by which any Leader Company is or may be bound to transfer any shares of the
capital stock (or other equity interests) of any Leader Subsidiary (other than
to another Leader Company). There are no Contracts relating to the rights of any
Leader Company to vote or to dispose of any shares of the capital stock (or
other equity interests) of any Leader Subsidiary. All of the shares of capital
stock (or other equity interests) of each Leader Subsidiary held by a Leader
Company are fully paid and nonassessable under the applicable corporation or
similar Law of the jurisdiction in which such Subsidiary is incorporated or
organized and are owned by the Leader Company free and clear of any Lien. Each
Leader Subsidiary is either a bank, a savings association, partnership, limited
liability corporation, or a corporation, and each such Subsidiary is duly
organized, validly existing, and (as to corporations) in good standing under the
Laws of the jurisdiction in which it is incorporated or organized, and has the
corporate power and authority necessary for it to own, lease, and operate its
Assets and to carry on its business as now conducted. Each Leader Subsidiary is
duly qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for such jurisdictions in which the failure
to be so qualified or licensed is not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Leader. The only
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APPENDIX I -- AGREEMENT AND PLAN OF MERGER
Leader Subsidiary that is a depository institution is Leader Federal. Leader
Federal is an "insured institution" as defined in the Federal Deposit Insurance
Act and applicable regulations thereunder, and the deposits in which are insured
by the Savings Association Insurance Fund. The minute book and other
organizational documents for each Leader Subsidiary have been made available to
UPC for its review, and are true and complete as in effect as of the date of
this Agreement and accurately reflect all amendments thereto and all proceedings
of the Board of Directors and shareholders thereof.
5.5 SEC Filings; Financial Statements. (a) Leader has filed and made
available to UPC all SEC Documents required to be filed by Leader since December
31, 1992 (the "Leader SEC Reports"). The Leader SEC Reports (i) at the time
filed, complied in all material respects with the applicable requirements of the
Securities Laws and (ii) did not, at the time they were filed (or, if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated in such Leader SEC Reports or necessary in
order to make the statements in such Leader SEC Reports, in light of the
circumstances under which they were made, not misleading. None of Leader's
Subsidiaries is required to file any SEC Documents.
(b) Each of the Leader Financial Statements (including, in each case, any
related notes) contained in the Leader SEC Reports, including any Leader SEC
Reports filed after the date of this Agreement until the Effective Time,
complied as to form in all material respects with the applicable published rules
and regulations of the SEC with respect thereto, was prepared in accordance with
GAAP applied on a consistent basis throughout the periods involved (except as
may be indicated in the notes to such financial statements or, in the case of
unaudited interim statements, as permitted by Form 10-Q of the SEC), and fairly
presented in all material respects the consolidated financial position of Leader
and its Subsidiaries as at the respective dates and the consolidated results of
its operations and cash flows for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be material
in amount or effect.
5.6 Absence of Undisclosed Liabilities. No Leader Company has any
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Leader, except Liabilities which are
accrued or reserved against in the consolidated balance sheets of Leader as of
December 31, 1994 and September 30, 1995, included in the Leader Financial
Statements made available prior to the date of this Agreement or reflected in
the notes thereto. No Leader Company has incurred or paid any Liability since
September 30, 1995, except for such Liabilities incurred or paid (i) in the
ordinary course of business consistent with past business practice and which are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Leader or (ii) in connection with the transactions
contemplated by this Agreement.
5.7 Absence of Certain Changes or Events. Since December 31, 1994, except
as disclosed in the Leader Financial Statements made available prior to the date
of this Agreement, (i) there have been no events, changes, or occurrences which
have had, or are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Leader, and (ii) the Leader Companies have not taken
any action, or failed to take any action, prior to the date of this Agreement,
which action or failure, if taken after the date of this Agreement, would
represent or result in a material breach or violation of any of the covenants
and agreements of Leader contained in this Agreement.
5.8 Tax Matters. (a) All Tax Returns required to be filed by or on behalf
of any of the Leader Companies have been timely filed or requests for extensions
have been timely filed, granted, and have not expired for periods ended on or
before December 31, 1994, and on or before the date of the most recent fiscal
year end immediately preceding the Effective Time, and all Tax Returns filed are
complete and accurate. All Taxes shown on filed Tax Returns have been paid.
There is no audit examination, deficiency, or refund Litigation with respect to
any Taxes, except as reserved against in the Leader Financial Statements made
available prior to the date of this Agreement. All Taxes and other Liabilities
due with respect to completed and settled examinations or concluded Litigation
have been paid. There are no Liens with respect to Taxes upon any of the Assets
of the Leader Companies.
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APPENDIX I -- AGREEMENT AND PLAN OF MERGER
(b) None of the Leader Companies has executed an extension or waiver of any
statute of limitations on the assessment or collection of any Tax due (excluding
such statutes that relate to years currently under examination by the Internal
Revenue Service or other applicable taxing authorities) that is currently in
effect.
(c) Adequate provision for any Taxes due or to become due for any of the
Leader Companies for the period or periods through and including the date of the
respective Leader Financial Statements has been made and is reflected on such
Leader Financial Statements.
(d) Deferred Taxes of the Leader Companies have been provided for in
accordance with GAAP.
(e) Each of the Leader Companies is in compliance with, and its records
contain all information and documents (including properly completed IRS Forms
W-9) necessary to comply with, all applicable information reporting and Tax
withholding requirements under federal, state, and local Tax Laws, and such
records identify with specificity all accounts subject to backup withholding
under Section 3406 of the Internal Revenue Code.
(f) Except as set forth in Section 5.8 of the Leader Disclosure Memorandum,
none of the Leader Companies has made any payments, is obligated to make any
payments, or is a party to any Contract that could obligate it to make any
payments that would be disallowed as a deduction under Section 280G or 162(m) of
the Internal Revenue Code.
(g) There has not been an ownership change, as defined in Internal Revenue
Code Section 382(g), of the Leader Companies that occurred during or after any
Taxable Period in which the Companies incurred a net operating loss that carries
over to any Taxable Period ending after December 31, 1994.
(h) Except as set forth in Section 5.8 of the Leader Disclosure Memorandum,
none of the Leader Companies is a party to any tax allocation or sharing
agreement and none of the Leader Companies has been a member of an affiliated
group filing a consolidated federal income tax return (other than a group the
common parent of which was Leader) has any Liability for taxes of any Person
(other than Leader and its Subsidiaries) under Treasury Regulation Section
1.1502-6 (or any similar provision of state, local, or foreign law) as a
transferee or successor or by Contract or otherwise.
5.9 Allowance for Possible Loan Losses. The allowance for possible loan or
credit losses (the "Allowance") shown on the consolidated balance sheets of
Leader included in the most recent Leader Financial Statements dated prior to
the date of this Agreement was, and the Allowance shown on the consolidated
balance sheets of Leader included in the Leader Financial Statements as of dates
subsequent to the execution of this Agreement will be, as of the dates thereof,
in the reasonable opinion of management of Leader adequate (within the meaning
of GAAP and applicable regulatory requirements or guidelines) to provide for all
known and reasonably anticipated losses relating to or inherent in the loan and
lease portfolios (including accrued interest receivables) of the Leader
Companies and other extensions of credit (including letters of credit and
commitments to make loans or extend credit) by the Leader Companies as of the
dates thereof.
5.10 Assets. Except as disclosed or reserved against in the Leader
Financial Statements made available prior to the date of this Agreement, the
Leader Companies have good and marketable title, free and clear of all Liens, to
all of their respective Assets. All tangible properties used in the businesses
of the Leader Companies are in good condition, reasonable wear and tear
excepted, and are usable in the ordinary course of business consistent with
Leader's past practices. All Assets which are material to Leader's business on a
consolidated basis, held under leases or subleases by any of the Leader
Companies, are held under valid Contracts enforceable in accordance with their
respective terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or other Laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceedings may be brought), and
each such Contract is in full force and effect. The Leader Companies currently
maintain insurance similar in amounts, scope, and coverage to that maintained by
other peer banking organizations. None of the Leader Companies has received
notice from any insurance carrier that (i) such insurance will be canceled or
that coverage thereunder will be reduced or eliminated, or (ii) premium costs
with respect to such policies of
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APPENDIX I -- AGREEMENT AND PLAN OF MERGER
insurance will be substantially increased. Except as set forth in Section 5.10
of the Leader Disclosure Memorandum, there are presently no claims pending under
any such policies of insurance and no notices have been given by any Leader
Company under such policies.
5.11 Intellectual Property. All of the Intellectual Property rights of the
Leader Companies are in full force and effect and constitute legal, valid, and
binding obligations of the respective parties thereto, and there have not been,
and, to the Knowledge of Leader, there currently are not, any Defaults
thereunder by Leader. A Leader Company owns or is the valid licensee of all such
Intellectual Property rights free and clear of all Liens or claims of
infringement. None of the Leader Companies or, to the Knowledge of Leader, their
respective predecessors has misused the Intellectual Property rights of others
and none of the Intellectual Property rights as used in the business conducted
by any such Leader Company infringes upon or otherwise violates the rights of
any Person, nor has any Person asserted a claim of such infringement. Except as
disclosed in Section 5.11 of the Leader Disclosure Memorandum, no Leader Company
is obligated to pay any royalties to any Person with respect to any such
Intellectual Property. Each Leader Company owns or has the valid right to use
all of the Intellectual Property rights which it is presently using, or in
connection with performance of any material Contract to which it is a party. No
officer, director, or employee of any Leader Company is party to any Contract
which requires such officer, director or employee to assign any interest in any
Intellectual Property or keep confidential any trade secrets, proprietary data,
customer information, or other business information or except as disclosed in
Section 5.11 of the Leader Disclosure Memorandum, which restricts or prohibits
such officer, director, or employee from engaging in activities competitive with
any Person, including any Leader Company.
5.12 Environmental Matters. Except as set forth in Section 5.12 of the
Leader Disclosure Memorandum:
(a) To the Knowledge of Leader, each Leader Company, its Participation
Facilities, and its Operating Properties are, and have been, in compliance
with all Environmental Laws, except for violations which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect
on Leader.
(b) To the Knowledge of Leader, there is no Litigation pending or
threatened before any court, governmental agency, or authority or other
forum in which any Leader Company or any of its Operating Properties or
Participation Facilities (or Leader in respect of such Operating Property
or Participation Facility) has been or, with respect to threatened
Litigation, may be named as a defendant (i) for alleged noncompliance
(including by any predecessor) with any Environmental Law or (ii) relating
to the release into the environment of any Hazardous Material, whether or
not occurring at, on, under, adjacent to, or affecting (or potentially
affecting) a site owned, leased, or operated by any Leader Company or any
of its Operating Properties or Participation Facilities, except for such
Litigation pending or threatened that is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Leader, nor
is there any reasonable basis for any Litigation of a type described in
this sentence.
(c) During the period of (i) any Leader Company's ownership or
operation of any of their respective current properties, (ii) any Leader
Company's participation in the management of any Participation Facility, or
(iii) any Leader Company's holding of a security interest in a Operating
Property, to the Knowledge of Leader, there have been no releases of
Hazardous Material in, on, under, adjacent to, or affecting (or potentially
affecting) such properties, except such as are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on
Leader. Prior to the period of (i) any Leader Company's ownership or
operation of any of their respective current properties, (ii) any Leader
Company's participation in the management of any Participation Facility, or
(iii) any Leader Company's holding of a security interest in a Operating
Property, to the Knowledge of Leader, there were no releases of Hazardous
Material in, on, under, or affecting any such property, Participation
Facility or Operating Property, except such as are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on
Leader.
5.13 Compliance With Laws. Leader is duly registered as a savings and loan
holding company under the HOLA. Each Leader Company has in effect all Permits
necessary for it to own, lease, or operate its
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APPENDIX I -- AGREEMENT AND PLAN OF MERGER
material Assets and to carry on its business as now conducted, and there has
occurred no Default under any such Permit. Except as set forth in Section 5.13
of the Leader Disclosure Memorandum, none of the Leader Companies:
(a) is in violation of any Laws, Orders, or Permits applicable to its
business or employees conducting its business; and
(b) has received any notification or communication from any agency or
department of federal, state, or local government or any Regulatory
Authority or the staff thereof (i) asserting that any Leader Company is not
in compliance with any of the Laws or Orders which such governmental
authority or Regulatory Authority enforces, (ii) threatening to revoke any
Permits, or (iii) requiring any Leader Company to enter into or consent to
the issuance of a cease and desist order, formal agreement, directive,
commitment, or memorandum of understanding, or to adopt any Board
resolution or similar undertaking, which restricts materially the conduct
of its business, or in any manner relates to its capital adequacy, its
credit or reserve policies, its management, or the payment of dividends.
5.14 Labor Relations. No Leader Company is the subject of any Litigation
asserting that it or any other Leader Company has committed an unfair labor
practice (within the meaning of the National Labor Relations Act or comparable
state law) or seeking to compel it or any other Leader Company to bargain with
any labor organization as to wages or conditions of employment, nor is there any
strike or other labor dispute involving any Leader Company, pending or
threatened, or to the Knowledge of Leader, is there any activity involving any
Leader Company's employees seeking to certify a collective bargaining unit or
engaging in any other organization activity.
5.15 Employee Benefit Plans. (a) Leader has disclosed in Section 5.15 of
the Leader Disclosure Memorandum, and has delivered or made available to UPC
prior to the execution of this Agreement copies in each case of, all pension,
retirement, profit-sharing, deferred compensation, stock option, employee stock
ownership, severance pay, vacation, bonus, or other incentive plan, all other
written employee programs, arrangements, or agreements, all medical, vision,
dental, or other health plans, all life insurance plans, and all other employee
benefit plans or fringe benefit plans, including "employee benefit plans" as
that term is defined in Section 3(3) of ERISA, currently adopted, maintained by,
sponsored in whole or in part by, or contributed to by any Leader Company or
ERISA Affiliate thereof for the benefit of employees, retirees, dependents,
spouses, directors, independent contractors, or other beneficiaries and under
which employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries are eligible to participate (collectively,
the "Leader Benefit Plans"). Any of the Leader Benefit Plans which is an
"employee pension benefit plan," as that term is defined in Section 3(2) of
ERISA, is referred to herein as a "Leader ERISA Plan." Each Leader ERISA Plan
which is also a "defined benefit plan" (as defined in Section 414(j) of the
Internal Revenue Code) is referred to herein as a "Leader Pension Plan." No
Leader Pension Plan is or has been a multiemployer plan within the meaning of
Section 3(37) of ERISA.
(b) All Leader Benefit Plans are in compliance with the applicable terms of
ERISA, the Internal Revenue Code, and any other applicable Laws the breach or
violation of which are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Leader. Each Leader ERISA Plan which is
intended to be qualified under Section 401(a) of the Internal Revenue Code has
received a favorable determination letter from the Internal Revenue Service, and
Leader is not aware of any circumstances likely to result in revocation of any
such favorable determination letter. No Leader Company has engaged in a
transaction with respect to any Leader Benefit Plan that, assuming the taxable
period of such transaction expired as of the date hereof, would subject any
Leader Company to a Tax imposed by either Section 4975 of the Internal Revenue
Code or Section 502(i) of ERISA.
(c) No Leader Pension Plan has any "unfunded current liability," as that
term is defined in Section 302(d)(8)(A) of ERISA, and the fair market value of
the assets of any such plan exceeds the plan's "benefit liabilities," as that
term is defined in Section 4001(a)(16) of ERISA, when determined under actuarial
factors that would apply if the plan terminated in accordance with all
applicable legal requirements. Since the date of the most recent actuarial
valuation, there has been (i) no material change in the financial position of
any Leader Pension Plan, (ii) no change in the actuarial assumptions with
respect to any Leader
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APPENDIX I -- AGREEMENT AND PLAN OF MERGER
Pension Plan, and (iii) no increase in benefits under any Leader Pension Plan as
a result of plan amendments or changes in applicable Law which is reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Leader or materially adversely affect the funding status of any such plan.
Neither any Leader Pension Plan nor any "single-employer plan," within the
meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by any
Leader Company, or the single-employer plan of any entity which is considered
one employer with Leader under Section 4001 of ERISA or Section 414 of the
Internal Revenue Code or Section 302 of ERISA (whether or not waived) (an "ERISA
Affiliate") has an "accumulated funding deficiency" within the meaning of
Section 412 of the Internal Revenue Code or Section 302 of ERISA. No Leader
Company has provided, or is required to provide, security to a Leader Pension
Plan or to any single-employer plan of an ERISA Affiliate pursuant to Section
401(a)(29) of the Internal Revenue Code.
(d) Within the six-year period preceding the Effective Time, no Liability
under Subtitle C or D of Title IV of ERISA has been or is expected to be
incurred by any Leader Company with respect to any ongoing, frozen, or
terminated single-employer plan or the single-employer plan of any ERISA
Affiliate. No Leader Company has incurred any withdrawal Liability with respect
to a multiemployer plan under Subtitle B of Title IV of ERISA (regardless of
whether based on contributions of an ERISA Affiliate). No notice of a
"reportable event," within the meaning of Section 4043 of ERISA for which the
30-day reporting requirement has not been waived, has been required to be filed
for any Leader Pension Plan or by any ERISA Affiliate within the 12-month period
ending on the date hereof.
(e) Except as disclosed in Section 5.15 of the Leader Disclosure
Memorandum, no Leader Company has any Liability for retiree health and life
benefits under any of the Leader Benefit Plans and there are no restrictions on
the rights of such Leader Company to amend or terminate any such retiree health
or benefit Plan without incurring Liability thereunder.
(f) Except as disclosed in Section 5.15 of the Leader Disclosure
Memorandum, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, or
otherwise) becoming due to any director or any employee of any Leader Company
from any Leader Company under any Leader Benefit Plan or otherwise, (ii)
increase any benefits otherwise payable under any Leader Benefit Plan, or (iii)
result in any acceleration of the time of payment or vesting of any such
benefit.
(g) The actuarial present values of all accrued deferred compensation
entitlements (including entitlements under any executive compensation,
supplemental retirement, or employment agreement) of employees and former
employees of any Leader Company and their respective beneficiaries, other than
entitlements accrued pursuant to funded retirement plans subject to the
provisions of Section 412 of the Internal Revenue Code or Section 302 of ERISA,
have been fully reflected on the Leader Financial Statements to the extent
required by and in accordance with GAAP.
5.16 Material Contracts. Except as disclosed in the Leader SEC Reports or
as disclosed in Section 5.16 of the Leader Disclosure Memorandum, none of the
Leader Companies, nor any of their respective Assets, businesses, or operations,
is a party to, or is bound or affected by, or receives benefits under, (i) any
employment, severance, termination, consulting, or retirement Contract providing
for aggregate payments to any Person in any calendar year in excess of $100,000,
(ii) any Contract relating to the borrowing of money by any Leader Company or
the guarantee by any Leader Company of any such obligation (other than Contracts
evidencing deposit liabilities, purchases of federal funds, fully-secured
repurchase agreements, and Federal Home Loan Bank advances of depository
institution Subsidiaries, trade payables, and Contracts relating to borrowings
or guarantees made in the ordinary course of business), (iii) any Contracts
which prohibit or restrict any Leader Company from engaging in any business
activities in any geographic area, line of business, or otherwise in competition
with any other Person, (iv) any Contracts between or among Leader Companies, (v)
any exchange-traded or over-the-counter swap, forward, future, option, cap,
floor, or collar financial Contract, or any other interest rate or foreign
currency protection Contract (not disclosed in the Leader Financial Statements
delivered prior to the date of this Agreement) which is a financial derivative
Contract (including various combinations thereof), and (vi) any other Contract
or amendment thereto that would be
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APPENDIX I -- AGREEMENT AND PLAN OF MERGER
required to be filed as an exhibit to a Leader SEC Report filed by Leader with
the SEC prior to the date of this Agreement that has not been filed as an
exhibit to a Leader SEC Report (together with all Contracts referred to in
Sections 5.10 and 5.15(a) of this Agreement, the "Leader Contracts"). With
respect to each Leader Contract: (i) the Contract is in full force and effect;
(ii) no Leader Company is in Default thereunder; (iii) no Leader Company has
repudiated or waived any material provision of any such Contract; and (iv) no
other party to any such Contract is, to the Knowledge of Leader, in Default in
any respect or has repudiated or waived any material provision thereunder.
Except as set forth in Section 5.16 of the Leader Disclosure Memorandum, all of
the indebtedness of any Leader Company for money borrowed is prepayable at any
time by such Leader Company without penalty or premium.
5.17 Legal Proceedings. There is no Litigation instituted or pending, or,
to the Knowledge of Leader, threatened (or unasserted but considered probable of
assertion and which if asserted would have at least a reasonable probability of
an unfavorable outcome) against any Leader Company, or against any Asset,
employee benefit plan, interest, or right of any of them, that is reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Leader, nor are there any Orders of any Regulatory Authorities, other
governmental authorities, or arbitrators outstanding against any Leader Company.
Section 5.17 of the Leader Disclosure Memorandum includes a summary report of
all material Litigation as of the date of this Agreement to which any Leader
Company is a party and which names a Leader Company as a defendant or cross-
defendant.
5.18 Reports. Since January 1, 1992, or the date of organization if later,
each Leader Company has timely filed all reports and statements, together with
any amendments required to be made with respect thereto, that it was required to
file with (i) the SEC, including, but not limited to, Forms 10-K, Forms 10-Q,
Forms 8-K, and proxy statements, (ii) other Regulatory Authorities, and (iii)
any applicable state securities or banking authorities (except, in the case of
state securities authorities, failures to file which are not reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on Leader).
As of their respective dates, each of such reports and documents, including the
financial statements, exhibits, and schedules thereto, complied in all material
respects with all applicable Laws. As of its respective date, each such report
and document did not, in all material respects, contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
5.19 Statements True and Correct. No statement, certificate, instrument,
or other writing furnished or to be furnished by any Leader Company or any
Affiliate thereof to UPC pursuant to this Agreement or any other document,
agreement, or instrument referred to herein contains or will contain any untrue
statement of material fact or will omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. None of the information supplied or to be supplied by any
Leader Company or any Affiliate thereof for inclusion in the Registration
Statement to be filed by UPC with the SEC will, when the Registration Statement
becomes effective, be false or misleading with respect to any material fact, or
omit to state any material fact necessary to make the statements therein not
misleading. None of the information supplied or to be supplied by any Leader
Company or any Affiliate thereof for inclusion in the Joint Proxy Statement to
be mailed to UPC's and Leader's shareholders in connection with the
Shareholders' Meetings, and any other documents to be filed by a Leader Company
or any Affiliate thereof with the SEC or any other Regulatory Authority in
connection with the transactions contemplated hereby, will, at the respective
time such documents are filed, and with respect to the Joint Proxy Statement,
when first mailed to the shareholders of UPC and Leader, be false or misleading
with respect to any material fact, or omit to state any material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading, or, in the case of the Joint Proxy Statement or any
amendment thereof or supplement thereto, at the time of the Shareholders'
Meetings, be false or misleading with respect to any material fact, or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of any proxy for the
Shareholders' Meetings. All documents that any Leader Company or any Affiliate
thereof is responsible for filing with any Regulatory Authority in connection
with the transactions contemplated hereby will comply as to form in all material
respects with the provisions of applicable Law.
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5.20 Accounting, Tax, and Regulatory Matters. No Leader Company or any
Affiliate thereof has taken any action or has any Knowledge of any fact or
circumstance relating to Leader that is reasonably likely to (i) prevent the
transactions contemplated hereby, including the Merger, from qualifying for
pooling-of-interests accounting treatment or as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code, or (ii) materially
impede or delay receipt of any Consents of Regulatory Authorities referred to in
Section 9.1(b) of this Agreement or result in the imposition of a condition or
restriction of the type referred to in the last sentence of such section.
5.21 State Takeover Laws. Each Leader Company has taken all necessary
action to exempt the transactions contemplated by this Agreement and the Plan of
Merger from, or if necessary challenge the validity or applicability of, any
applicable "moratorium," "fair price," "business combination," "control share,"
or other anti-takeover Laws (collectively, "Takeover Laws"), including Section
48-35-101 through 48-35-406 of the TBCA.
5.22 Charter Provisions. Each Leader Company has taken all action so that
the entering into of this Agreement and the Plan of Merger and the consummation
of the Merger and the other transactions contemplated by this Agreement and the
Plan of Merger do not and will not result in the grant of any rights to any
Person under the Charter, By-laws or other governing instruments of any Leader
Company or restrict or impair the ability of UPC or any of its Subsidiaries to
vote, or otherwise to exercise the rights of a shareholder with respect to,
shares of any Leader Company that may be directly or indirectly acquired or
controlled by it.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF UPC
Except as disclosed in the UPC Disclosure Memorandum, UPC hereby represents
and warrants to Leader as follows:
6.1 Organization, Standing, and Power. UPC is a corporation duly
organized, validly existing, and in good standing under the Laws of the State of
Tennessee, and has the corporate power and authority to carry on its business as
now conducted and to own, lease and operate its material Assets. UPC is duly
qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for such jurisdictions in which the failure
to be so qualified or licensed is not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on UPC.
6.2 Authority; No Breach by Agreement. (a) UPC has the corporate power and
authority necessary to execute, deliver and perform its obligations under this
Agreement and to consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated herein, including the Merger, have been duly and
validly authorized by all necessary corporate action in respect thereof on the
part of UPC. Subject to such requisite shareholder approval, this Agreement
(which for purposes of this sentence shall not include the Stock Option
Agreement) represents a legal, valid, and binding obligation of UPC, enforceable
against UPC in accordance with its terms (except in all cases as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by UPC, nor the
consummation by UPC of the transactions contemplated hereby, nor compliance by
UPC with any of the provisions hereof, will (i) conflict with or result in a
breach of any provision of UPC's Restated Charter of Incorporation or By-laws,
or (ii) constitute or result in a Default under, or require any Consent pursuant
to, or result in the creation of any Lien on any Asset of any UPC Company under,
any Contract or Permit of any UPC Company, or (iii) subject to receipt of the
requisite approvals referred to in Section 9.1(b) of this Agreement, violate any
Law or Order applicable to any UPC Company or any of their respective material
Assets.
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APPENDIX I -- AGREEMENT AND PLAN OF MERGER
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules of
the NYSE, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit plans,
or under the HSR Act, and other than Consents, filings, or notifications which,
if not obtained or made, are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on UPC, no notice to, filing with, or
Consent of, any public body or authority is necessary for the consummation by
UPC of the Merger and the other transactions contemplated in this Agreement.
6.3 Capital Stock. The authorized capital stock of UPC consists of (i)
100,000,000 shares of UPC Common Stock, of which 45,565,914 shares are issued
and outstanding as of February 29, 1996, and (ii) 10,000,000 shares of UPC
Preferred Stock, of which no shares of UPC Series A Preferred Stock, 44,000
shares of UPC Series B Preferred Stock, and 3,496,419 shares of UPC Series E
Preferred Stock are issued and outstanding. All of the issued and outstanding
shares of UPC Capital Stock are, and all of the shares of UPC Common Stock to be
issued in exchange for shares of Leader Common Stock upon consummation of the
Merger, when issued in accordance with the terms of this Agreement, will be,
duly and validly issued and outstanding and fully paid and nonassessable under
the TBCA. None of the outstanding shares of UPC Capital Stock has been, and none
of the shares of UPC Common Stock to be issued in exchange for shares of Leader
Common Stock upon consummation of the Merger will be, issued in violation of any
preemptive rights of the current or past shareholders of UPC. UPC has reserved
for issuance a sufficient number of shares of UPC Common Stock for the purpose
of issuing shares of UPC Common Stock in accordance with the provisions of
Sections 3.1 and 3.5 of this Agreement.
6.4 SEC Filings; Financial Statements. (a) UPC has filed and made
available to Leader all SEC Documents required to be filed by UPC since December
31, 1992 (the "UPC SEC Reports"). The UPC SEC Reports (i) at the time filed,
complied in all material respects with the applicable requirements of the
Securities Laws and (ii) did not, at the time they were filed (or, if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated in such UPC SEC Reports or necessary in
order to make the statements in such UPC SEC Reports, in light of the
circumstances under which they were made, not misleading. Except for UPC
Subsidiaries that are registered as a broker, dealer, or investment advisor,
none of UPC's Subsidiaries is required to file any SEC Documents.
(b) Each of the UPC Financial Statements (including, in each case, any
related notes) contained in the UPC SEC Reports, including any UPC SEC Reports
filed after the date of this Agreement until the Effective Time, complied as to
form in all material respects with the applicable published rules and
regulations of the SEC with respect thereto, was prepared in accordance with
GAAP applied on a consistent basis throughout the periods involved (except as
may be indicated in the notes to such financial statements or, in the case of
unaudited interim statements, as permitted by Form 10-Q of the SEC), and fairly
presented in all material respects the consolidated financial position of UPC
and its Subsidiaries as at the respective dates and the consolidated results of
its operations and cash flows for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be material
in amount or effect.
6.5 Absence of Undisclosed Liabilities. No UPC Company has any Liabilities
that are reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on UPC, except Liabilities which are accrued or reserved against
in the consolidated balance sheets of UPC as of December 31, 1994 and September
30, 1995, included in the UPC Financial Statements made available prior to the
date of this Agreement or reflected in the notes thereto. No UPC Company has
incurred or paid any Liability since September 30, 1995, except for such
Liabilities incurred or paid (i) in the ordinary course of business consistent
with past business practice and which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on UPC or (ii) in
connection with the transactions contemplated by this Agreement.
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APPENDIX I -- AGREEMENT AND PLAN OF MERGER
6.6 Absence of Certain Changes or Events. Since December 31, 1994, except
as disclosed in the UPC Financial Statements delivered prior to the date of this
Agreement or contemplated by pending federal legislation applicable to financial
institutions generally, (i) there have been no events, changes, or occurrences
which have had, or are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on UPC, and (ii) the UPC Companies have not
taken any action, or failed to take any action, prior to the date of this
Agreement, which action or failure, if taken after the date of this Agreement,
would represent or result in a material breach or violation of any of the
covenants and agreements of UPC provided in Article 7 of this Agreement.
6.7 Tax Matters. (a) All Tax Returns required to be filed by or on behalf
of any of the UPC Companies have been timely filed or requests for extensions
have been timely filed, granted, and have not expired for periods ended on or
before December 31, 1994, and on or before the date of the most recent fiscal
year end immediately preceding the Effective Time, and all Tax Returns filed are
complete and accurate. All Taxes shown on filed Tax Returns have been paid.
There is no audit examination, deficiency, or refund Litigation with respect to
any Taxes, except as reserved against in the UPC Financial Statements delivered
prior to the date of this Agreement. All Taxes and other Liabilities due with
respect to completed and settled examinations or concluded Litigation have been
paid. There are no Liens with respect to Taxes upon any of the Assets of the UPC
Companies.
(b) Adequate provision for any Taxes due or to become due for any of the
UPC Companies for the period or periods through and including the date of the
respective UPC Financial Statements has been made and is reflected on such UPC
Financial Statements.
(c) Deferred Taxes of the UPC Companies have been provided for in
accordance with GAAP.
6.8 Environmental Matters. (a) To the Knowledge of UPC, each UPC Company,
its Participation Facilities, and its Operating Properties are, and have been,
in compliance with all Environmental Laws, except for violations which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on UPC.
(b) To the Knowledge of UPC, there is no Litigation pending or threatened
before any court, governmental agency, or authority or other forum in which any
UPC Company or any of its Operating Properties or Participation Facilities (or
UPC in respect of such Operating Property or Participation Facility) has been
or, with respect to threatened Litigation, may be named as a defendant (i) for
alleged noncompliance (including by any predecessor) with any Environmental Law
or (ii) relating to the release into the environment of any Hazardous Material,
whether or not occurring at, on, under, adjacent to, or affecting (or
potentially affecting) a site owned, leased, or operated by any UPC Company or
any of its Operating Properties or Participation Facilities, except for such
Litigation pending or threatened that is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on UPC, nor is there
any reasonable basis for any Litigation of a type described in this sentence.
(c) During the period of (i) any UPC Company's ownership or operation of
any of their respective current properties, (ii) any UPC Company's participation
in the management of any Participation Facility, or (iii) any UPC Company's
holding of a security interest in a Operating Property, to the Knowledge of UPC,
there have been no releases of Hazardous Material in, on, under, adjacent to, or
affecting (or potentially affecting) such properties, except such as are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on UPC. Prior to the period of (i) any UPC Company's ownership or
operation of any of their respective current properties, (ii) any UPC Company's
participation in the management of any Participation Facility, or (iii) any UPC
Company's holding of a security interest in a Operating Property, to the
Knowledge of UPC, there were no releases of Hazardous Material in, on, under, or
affecting any such property, Participation Facility or Operating Property,
except such as are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on UPC.
6.9 Compliance With Laws. UPC is duly registered as a bank holding company
under the BHC Act and as a savings and loan holding company under the HOLA. Each
UPC Company has in effect all Permits
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APPENDIX I -- AGREEMENT AND PLAN OF MERGER
necessary for it to own, lease, or operate its material Assets and to carry on
its business as now conducted, and there has occurred no Default under any such
Permit. No UPC Company:
(a) is in violation of any Laws, Orders, or Permits applicable to its
business or employees conducting its business; and
(b) has received any notification or communication from any agency or
department of federal, state, or local government or any Regulatory
Authority or the staff thereof (i) asserting that any UPC Company is not in
compliance with any of the Laws or Orders which such governmental authority
or Regulatory Authority enforces, (ii) threatening to revoke any Permits,
or (iii) requiring any UPC Company to enter into or consent to the issuance
of a cease and desist order, formal agreement, directive, commitment or
memorandum of understanding, or to adopt any Board resolution or similar
undertaking, which restricts materially the conduct of its business, or in
any manner relates to its capital adequacy, its credit or reserve policies,
its management, or the payment of dividends.
6.10 Legal Proceedings. There is no Litigation instituted or pending, or,
to the Knowledge of UPC, threatened (or unasserted but considered probable of
assertion and which if asserted would have at least a reasonable probability of
an unfavorable outcome) against any UPC Company, or against any Asset, interest,
or right of any of them, that is reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on UPC, nor are there any Orders of any
Regulatory Authorities, other governmental authorities, or arbitrators
outstanding against any UPC Company.
6.11 Reports. Since January 1, 1992, or the date of organization if later,
each UPC Company has filed all reports and statements, together with any
amendments required to be made with respect thereto, that it was required to
file with (i) the SEC, including, but not limited to, Forms 10-K, Forms 10-Q,
Forms 8-K, and proxy statements, (ii) other Regulatory Authorities, and (iii)
any applicable state securities or banking authorities (except, in the case of
state securities authorities, failures to file which are not reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on UPC). As
of their respective dates, each of such reports and documents, including the
financial statements, exhibits, and schedules thereto, complied in all material
respects with all applicable Laws. As of its respective date, each such report
and document did not, in all material respects, contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
6.12 Statements True and Correct. No statement, certificate, instrument or
other writing furnished or to be furnished by any UPC Company or any Affiliate
thereof to Leader pursuant to this Agreement or any other document, agreement,
or instrument referred to herein contains or will contain any untrue statement
of material fact or will omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. None of the information supplied or to be supplied by any UPC
Company or any Affiliate thereof for inclusion in the Registration Statement to
be filed by UPC with the SEC, will, when the Registration Statement becomes
effective, be false or misleading with respect to any material fact, or omit to
state any material fact necessary to make the statements therein not misleading.
None of the information supplied or to be supplied by any UPC Company or any
Affiliate thereof for inclusion in the Joint Proxy Statement to be mailed to
UPC's and Leader's shareholders in connection with the Shareholders' Meetings,
and any other documents to be filed by any UPC Company or any Affiliate thereof
with the SEC or any other Regulatory Authority in connection with the
transactions contemplated hereby, will, at the respective time such documents
are filed, and with respect to the Joint Proxy Statement, when first mailed to
the shareholders of UPC and Leader, be false or misleading with respect to any
material fact, or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or, in the case of the Joint Proxy Statement or any amendment
thereof or supplement thereto, at the time of the Shareholders' Meetings, be
false or misleading with respect to any material fact, or omit to state any
material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of any proxy for the Shareholders' Meetings.
All documents that any UPC Company or any Affiliate thereof is responsible for
filing with any Regulatory Authority in
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APPENDIX I -- AGREEMENT AND PLAN OF MERGER
connection with the transactions contemplated hereby will comply as to form in
all material respects with the provisions of applicable Law.
6.13 Accounting, Tax, and Regulatory Matters. No UPC Company or any
Affiliate thereof has taken any action or has any Knowledge of any fact or
circumstance relating to UPC that is reasonably likely to (i) prevent the
transactions contemplated hereby, including the Merger, from qualifying for
pooling-of-interests accounting treatment or as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code, or (ii) materially
impede or delay receipt of any Consents of Regulatory Authorities referred to in
Section 9.1(b) of this Agreement or result in the imposition of a condition or
restriction of the type referred to in the last sentence of such Section.
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 Affirmative Covenants of Leader. Unless the prior written consent of
UPC shall have been obtained, and except as otherwise expressly contemplated
herein, Leader shall and shall cause each of its Subsidiaries to (i) operate its
business only in the usual, regular, and ordinary course (which shall include
matters of the type set forth in Section 7.1 of the Leader Disclosure
Memorandum), (ii) preserve intact its business organization and Assets and
maintain its rights and franchises, and (iii) take no action which would (a)
materially adversely affect the ability of any Party to obtain any Consents
required for the transactions contemplated hereby without imposition of a
condition or restriction of the type referred to in the last sentence of Section
9.1(b) of this Agreement or prevent the transactions contemplated hereby,
including the Merger, from qualifying for pooling-of-interests accounting
treatment or as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code, or (b) materially adversely affect the ability of any
Party to perform its covenants and agreements under this Agreement.
7.2 Negative Covenants of Leader. Except as specifically permitted by this
Agreement or the Supplemental Letter, from the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, Leader
covenants and agrees that it will not do or agree or commit to do, or permit any
of its Subsidiaries to do or agree or commit to do, any of the following without
the prior written consent of the chief executive officer, president, or chief
financial officer of UPC, which consent shall not be unreasonably withheld:
(a) amend the Charter, By-laws, or other governing instruments of any
Leader Company, or
(b) incur any additional debt obligation or other obligation for
borrowed money (other than indebtedness of a Leader Company to another
Leader Company) in excess of an aggregate of $250,000 (for the Leader
Companies on a consolidated basis) except in the ordinary course of the
business of Leader Subsidiaries consistent with past practices (which shall
include, for Leader Subsidiaries that are depository institutions, creation
of deposit liabilities, purchases of federal funds, advances from the
Federal Reserve Bank or Federal Home Loan Bank, and entry into repurchase
agreements fully secured by U.S. government or agency securities), or
impose, or suffer the imposition, on any Asset of any Leader Company of any
Lien or permit any such Lien to exist (other than in connection with
deposits, repurchase agreements, bankers acceptances, "treasury tax and
loan" accounts established in the ordinary course of business, the
satisfaction of legal requirements in the exercise of trust powers, and
Liens in effect as of the date hereof that are disclosed in the Leader
Disclosure Memorandum); or
(c) repurchase, redeem, or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans), directly or
indirectly, any shares, or any securities convertible into any shares, of
the capital stock of any Leader Company, or declare or pay any dividend or
make any other distribution in respect of Leader's capital stock, provided
that Leader may (to the extent legally and contractually permitted to do
so), but shall not be obligated to, declare and pay regular quarterly cash
dividends on the shares of Leader Common Stock at a rate not in excess of
$.18 per share with usual and regular record and payment dates in
accordance with past practice disclosed in Section 7.2(c) of the Leader
Disclosure Memorandum and such dates may not be changed without the prior
written consent of
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APPENDIX I -- AGREEMENT AND PLAN OF MERGER
UPC, provided, that, notwithstanding the provisions of Section 1.3, the
Parties shall cooperate in selecting the Effective Time to ensure that,
with respect to the quarterly period in which the Effective Time occurs,
the holders of Leader Common Stock do not become entitled to receive both a
dividend in respect of their Leader Common Stock and a dividend in respect
of UPC Common Stock or fail to be entitled to receive any dividend; or
(d) except for this Agreement, or pursuant to the exercise of stock
options outstanding as of the date hereof and pursuant to the terms thereof
in existence on the date hereof, or pursuant to the Stock Option Agreement,
issue, sell, pledge, encumber, authorize the issuance of, enter into any
Contract to issue, sell, pledge, encumber, or authorize the issuance of, or
otherwise permit to become outstanding, any additional shares of Leader
Common Stock or any other capital stock of any Leader Company, or any stock
appreciation rights, or any option, warrant, conversion, or other right to
acquire any such stock, or any security convertible into any such stock; or
(e) adjust, split, combine or reclassify any capital stock of any
Leader Company or issue or authorize the issuance of any other securities
in respect of or in substitution for shares of Leader Common Stock, or
sell, lease, mortgage or otherwise dispose of or otherwise encumber any
shares of capital stock of any Leader Subsidiary (unless any such shares of
stock are sold or otherwise transferred to another Leader Company) or any
Asset having a book value in excess of $200,000 other than in the ordinary
course of business for reasonable and adequate consideration; or
(f) except for purchases of U.S. Treasury securities or U.S.
Government agency securities, which in either case have maturities of three
years or less or Federal Home Loan Bank Stock, purchase any securities or
make any material investment, either by purchase of stock of securities,
contributions to capital, Asset transfers, or purchase of any Assets, in
any Person other than a wholly owned Leader Subsidiary, or otherwise
acquire direct or indirect control over any Person, other than in
connection with (i) foreclosures in the ordinary course of business, (ii)
acquisitions of control by a depository institution Subsidiary in its
fiduciary capacity, or (iii) the creation of new wholly owned Subsidiaries
organized to conduct or continue activities otherwise permitted by this
Agreement; or
(g) grant any increase in compensation or benefits to the employees or
officers of any Leader Company, except in accordance with past practice
disclosed in Section 7.2(g) of the Leader Disclosure Memorandum or as
required by Law; pay any severance or termination pay or any bonus other
than pursuant to written policies or written Contracts in effect on the
date of this Agreement and disclosed in Section 7.2(g) of the Leader
Disclosure Memorandum; and enter into or amend any severance agreements
with officers of any Leader Company; grant any material increase in fees or
other increases in compensation or other benefits to directors of any
Leader Company except in accordance with past practice disclosed in Section
7.2(g) of the Leader Disclosure Memorandum; or voluntarily accelerate the
vesting of any stock options or other stock-based compensation or employee
benefits (other than the acceleration of vesting which occurs under a
benefit plan upon a change of control of Leader); or
(h) enter into or amend any employment Contract between any Leader
Company and any Person (unless such amendment is required by Law) that the
Leader Company does not have the unconditional right to terminate without
Liability (other than Liability for services already rendered), at any time
on or after the Effective Time; or
(i) adopt any new employee benefit plan of any Leader Company or
terminate or withdraw from, or make any material change in or to, any
existing employee benefit plans of any Leader Company other than any such
change that is required by Law or that, in the opinion of counsel, is
necessary or advisable to maintain the tax qualified status of any such
plan, or make any distributions from such employee benefit plans, except as
required by Law, the terms of such plans or consistent with past practice;
or
(j) make any significant change in any Tax or accounting methods or
systems of internal accounting controls, except as may be appropriate to
conform to changes in Tax Laws or regulatory accounting requirements or
GAAP; or
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APPENDIX I -- AGREEMENT AND PLAN OF MERGER
(k) commence any Litigation other than in accordance with past
practice, settle any Litigation involving any Liability of any Leader
Company for material money damages or restrictions upon the operations of
any Leader Company; or
(l) enter into, modify, amend, or terminate any material Contract
(excluding any loan Contract) or waive, release, compromise, or assign any
material rights or claims.
7.3 Covenants of UPC. From the date of this Agreement until the earlier of
the Effective Time or the termination of this Agreement, UPC covenants and
agrees that it shall (i) continue to conduct its business and the business of
its Subsidiaries in a manner designed in its reasonable judgment, to enhance the
long-term value of the UPC Common Stock and the business prospects of the UPC
Companies, and (ii) take no action which would (a) materially adversely affect
the ability of any Party to obtain any Consents required for the transactions
contemplated hereby without imposition of a condition or restriction of the type
referred to in the last sentence of Section 9.1(b) of this Agreement or prevent
the transactions contemplated hereby, including the Merger, from qualifying for
pooling-of-interests accounting treatment or as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code, (b) materially adversely
affect the ability of any Party to perform its covenants and agreements under
this Agreement, or (c) result in UPC entering into an agreement with respect to
an Acquisition Proposal with a third party which would result in the Merger not
being consummated; provided, that the foregoing shall not prevent any UPC
Company from acquiring any other Assets or businesses or from discontinuing or
disposing of any of its Assets or business if such action is, in the judgment of
UPC, desirable in the conduct of the business of UPC and its Subsidiaries and
would not, in the judgment of UPC, likely delay the Effective Time to a date
subsequent to the date set forth in Section 10.1(e) of this Agreement.
7.4 Adverse Changes in Condition. Each Party agrees to give written notice
promptly to the other Party upon becoming aware of the occurrence or impending
occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on it or (ii) would cause or constitute a
material breach of any of its representations, warranties, or covenants
contained herein, and to use its reasonable efforts to prevent or promptly to
remedy the same.
7.5 Reports. Each Party and its Subsidiaries shall file all reports
required to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time and shall deliver to the other Party copies of
all such reports promptly after the same are filed. If financial statements are
contained in any such reports filed with the SEC, such financial statements will
fairly present the consolidated financial position of the entity filing such
statements as of the dates indicated and the consolidated results of operations,
changes in shareholders' equity, and cash flows for the periods then ended in
accordance with GAAP (subject in the case of interim financial statements to
normal recurring year-end adjustments that are not material). As of their
respective dates, such reports filed with the SEC will comply in all material
respects with the Securities Laws and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Any financial statements contained
in any other reports to another Regulatory Authority shall be prepared in
accordance with Laws applicable to such reports.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 Registration Statement; Joint Proxy Statement; Shareholder
Approvals. UPC shall file the Registration Statement with the SEC, and shall
use its reasonable efforts to cause the Registration Statement to become
effective under the 1933 Act and take any action required to be taken under the
applicable state Blue Sky or securities Laws in connection with the issuance of
the shares of UPC Common Stock upon consummation of the Merger. Leader shall
furnish all information concerning it and the holders of its capital stock as
UPC may reasonably request in connection with such action. Leader shall call a
Shareholders' Meeting, to be held as soon as reasonably practicable after the
Registration Statement is declared effective by
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the SEC, for the purpose of voting upon approval of this Agreement and the Plan
of Merger and such other related matters as it deems appropriate. UPC shall call
a Shareholders' Meeting, to be held as soon as reasonably practicable after the
Registration Statement is declared effective by the SEC, for the purpose of
voting upon the issuance of shares of UPC Common Stock pursuant to the Merger
and such other related matters as it deems appropriate. In connection with the
Shareholders' Meetings, (i) UPC and Leader shall prepare and file with the SEC a
Joint Proxy Statement and mail such Joint Proxy Statement to their respective
shareholders, (ii) the Parties shall furnish to each other all information
concerning them that they may reasonably request in connection with such Joint
Proxy Statement, (iii) the Boards of Directors of UPC and Leader shall recommend
(subject to compliance with their fiduciary duties as advised by counsel) to
their respective shareholders the approval of the matters submitted for
approval, and (iv) the Boards of Directors and officers of UPC and Leader shall
(subject to compliance with their fiduciary duties as advised by counsel) use
their reasonable efforts to obtain such shareholders' approvals.
8.2 Exchange Listing. UPC shall use its reasonable efforts to list, prior
to the Effective Time, on the NYSE, subject to official notice of issuance, the
shares of UPC Common Stock to be issued to the holders of Leader Common Stock or
Leader Options pursuant to the Merger, and UPC shall give all notices and make
all filings with the NYSE required in connection with the transactions
contemplated herein.
8.3 Applications. UPC shall prepare and file, and Leader shall cooperate
in the preparation and, where appropriate, filing of, applications with all
Regulatory Authorities having jurisdiction over the transactions contemplated by
this Agreement seeking the requisite Consents necessary to consummate the
transactions contemplated by this Agreement. At least three business days prior
to filing, UPC shall provide Leader and its counsel with copies of such
applications. The Parties shall deliver to each other copies of all filings,
correspondence and orders to and from all Regulatory Authorities in connection
with the transactions contemplated hereby as soon as practicable upon their
becoming available.
8.4 Filings With State Offices. Upon the terms and subject to the
conditions of this Agreement, UPC and Leader shall execute and file the Articles
of Merger with the Secretary of State of the State of Tennessee in connection
with the Closing.
8.5 Agreement as to Efforts to Consummate. Subject to the terms and
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper, or
advisable under applicable Laws to consummate and make effective, as soon as
practicable after the date of this Agreement, the transactions contemplated by
this Agreement, including using its reasonable efforts to lift or rescind any
Order adversely affecting its ability to consummate the transactions
contemplated herein and to cause to be satisfied the conditions referred to in
Article 9 of this Agreement; provided, that nothing herein shall preclude either
Party from exercising its rights under this Agreement or the Stock Option
Agreement. Each Party shall use, and shall cause each of its Subsidiaries to
use, its reasonable efforts to obtain all Consents necessary or desirable for
the consummation of the transactions contemplated by this Agreement.
8.6 Investigation and Confidentiality. (a) Prior to the Effective Time,
each Party shall keep the other Party advised of all material developments
relevant to its business and to consummation of the Merger and shall permit the
other Party to make or cause to be made such investigation of the business and
properties of it and its Subsidiaries and of their respective financial and
legal conditions as the other Party reasonably requests, provided that such
investigation shall be reasonably related to the transactions contemplated
hereby and shall not interfere unnecessarily with normal operations. No
investigation by a Party shall affect the representations and warranties of the
other Party.
(b) Each Party shall, and shall cause its advisers and agents to, maintain
the confidentiality of all confidential information furnished to it by the other
Party concerning its and its Subsidiaries' businesses, operations, and financial
positions and shall not use such information for any purpose except in
furtherance of the transactions contemplated by this Agreement. If this
Agreement is terminated prior to the Effective Time, each Party shall promptly
return or certify the destruction of all documents and copies thereof, and all
work papers containing confidential information received from the other Party.
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APPENDIX I -- AGREEMENT AND PLAN OF MERGER
(c) Leader shall use its reasonable efforts to exercise its rights under
confidentiality agreements entered into with Persons which were considering an
Acquisition Transaction with Leader to preserve the confidentiality of the
information relating to Leader provided to such Persons and their Affiliates and
Representatives.
8.7 Press Releases. Prior to the Effective Time, Leader and UPC shall
consult with each other as to the form and substance of any press release or
other public disclosure materially related to this Agreement or any other
transaction contemplated hereby; provided, that nothing in this Section 8.7
shall be deemed to prohibit any Party from making any disclosure which its
counsel deems necessary or advisable in order to satisfy such Party's disclosure
obligations imposed by Law.
8.8 Certain Actions. Except with respect to this Agreement and the Plan of
Merger and the transactions contemplated hereby and thereby, after the date of
this Agreement, no Leader Company nor any Affiliate thereof nor any
Representatives thereof retained by any Leader Company shall directly or
indirectly solicit any Acquisition Proposal by any Person. Except to the extent
necessary to comply with the fiduciary duties of Leader's Board of Directors as
advised by counsel, no Leader Company or any Affiliate or Representative thereof
shall furnish any non-public information that it is not legally obligated to
furnish, negotiate with respect to, or enter into any Contract with respect to,
any Acquisition Proposal, but Leader may communicate information about such an
Acquisition Proposal to its shareholders if and to the extent that it is
required to do so in order to comply with its legal obligations as advised by
counsel. Leader shall promptly notify UPC orally and in writing in the event
that it receives any inquiry or proposal relating to any such transaction.
Leader shall (i) immediately cease and cause to be terminated any existing
activities, discussions, or negotiations with any Persons conducted heretofore
with respect to any of the foregoing, and (ii) direct and use its reasonable
efforts to cause all of its Representatives not to engage in any of the
foregoing.
8.9 Accounting and Tax Treatment. Each of the Parties undertakes and
agrees to use its reasonable efforts to cause the Merger, and to take no action
which would cause the Merger not, to qualify for pooling-of-interests accounting
treatment and treatment as a "reorganization" within the meaning of Section
368(a) of the Internal Revenue Code for federal income tax purposes.
8.10 State Takeover Laws. Each Leader Company shall take all necessary
steps to exempt the transactions contemplated by this Agreement from, or if
necessary challenge the validity or applicability of, any applicable Takeover
Law.
8.11 Charter Provisions. Each Leader Company shall take all necessary
action to ensure that the entering into of this Agreement and the Plan of Merger
and the consummation of the Merger and the other transactions contemplated
hereby and thereby do not and will not result in the grant of any rights to any
Person under the Charter, By-laws, or other governing instruments of any Leader
Company or restrict or impair the ability of UPC or any of its Subsidiaries to
vote, or otherwise to exercise the rights of a shareholder with respect to,
shares of any Leader Company that may be directly or indirectly acquired or
controlled by it.
8.12 Agreement of Affiliates. Leader has disclosed in Section 8.12 of the
Leader Disclosure Memorandum all Persons whom it reasonably believes is an
"affiliate" of Leader for purposes of Rule 145 under the 1933 Act. Leader shall
use its reasonable efforts to cause each such Person to deliver to UPC not later
than 30 days prior to the Effective Time, a written agreement, substantially in
the form of Exhibit 4, providing that such Person will not sell, pledge,
transfer, or otherwise dispose of the shares of Leader Common Stock held by such
Person except as contemplated by such agreement or by this Agreement and will
not sell, pledge, transfer, or otherwise dispose of the shares of UPC Common
Stock to be received by such Person upon consummation of the Merger except in
compliance with applicable provisions of the 1933 Act and the rules and
regulations thereunder and until such time as financial results covering at
least 30 days of combined operations of UPC and Leader have been published
within the meaning of Section 201.01 of the SEC's Codification of Financial
Reporting Policies. If the Merger will qualify for pooling-of-interests
accounting treatment, shares of UPC Common Stock issued to such affiliates of
Leader in exchange for shares of Leader Common Stock shall not be transferable
until such time as financial results covering at least 30 days of combined
operations of UPC and Leader have been published within the meaning of Section
201.01 of the SEC's Codification of Financial Reporting Policies, regardless of
whether each such affiliate has provided the written agreement referred to in
this Section 8.12 (and UPC shall be entitled to place restrictive legends upon
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certificates for shares of UPC Common Stock issued to affiliates of Leader
pursuant to this Agreement to enforce the provisions of this Section 8.12). UPC
shall not be required to maintain the effectiveness of the Registration
Statement under the 1933 Act for the purposes of resale of UPC Common Stock by
such affiliates.
8.13 Employee Benefits and Contracts. Subject to the terms of the
Supplemental Letter following the Effective Time, UPC shall provide to officers
and employees of the Leader Companies employee benefits under employee benefit
and welfare plans, on terms and conditions which when taken as a whole are
substantially similar to those currently provided by the UPC Companies to their
similarly situated officers and employees. For purposes of participation,
vesting, and (except in the case of retirement plans) benefit accrual under such
employee benefit plans, the service of the employees of the Leader Companies
prior to the Effective Time shall be treated as service with a UPC Company
participating in such employee benefit plans.
8.14 Indemnification. (a) After the Effective Time, UPC shall indemnify,
defend and hold harmless the present and former directors, officers, employees,
and agents of the Leader Companies (each, an "Indemnified Party") (including any
person who becomes a director, officer, employee, or agent prior to the
Effective Time) against all Liabilities (including reasonable attorneys' fees
and amounts paid in settlement) arising out of actions or omissions occurring at
or prior to the Effective Time (including the transactions contemplated by this
Agreement and the Stock Option Agreement) to the full extent permitted under
Tennessee Law and by Leader's Charter and By-laws as in effect on the date
hereof, including provisions relating to advances of expenses incurred in the
defense of any Litigation. Without limiting the foregoing, in any case in which
approval by UPC is required to effectuate any indemnification, UPC shall direct,
at the election of the Indemnified Party, that the determination of any such
approval shall be made by independent counsel mutually agreed upon between UPC
and the Indemnified Party.
(b) UPC shall use its reasonable efforts (and Leader shall cooperate prior
to the Effective Time in these efforts) to maintain in effect Leader's existing
directors' and officers' liability insurance policy (provided that UPC may
substitute therefor (i) policies of at least the same coverage and amounts
containing terms and conditions which are substantially no less advantageous or
(ii) with the Consent of Leader given prior to the Effective Time, any other
policy) with respect to claims arising from facts or circumstances which occur
prior to the Effective Time and covering persons who are currently covered by
such insurance; provided that neither UPC nor Leader shall be obligated to make
premium payments in excess of an aggregate of $100,000 for the entire period in
which such policy or policies are in effect.
(c) Any Indemnified Party wishing to claim indemnification under paragraph
(a) of this Section 8.14, upon learning of any such Liability or Litigation,
shall promptly notify UPC thereof, provided that the failure so to notify shall
not affect the obligations of UPC under this Section 8.14 unless and to the
extent such failure materially increases UPC's liability under this Section
8.14. In the event of any such Litigation (whether arising before or after the
Effective Time), (i) UPC or the Surviving Corporation shall have the right to
assume the defense thereof and UPC shall not be liable to such Indemnified
Parties for any legal expenses of other counsel or any other expenses
subsequently incurred by such Indemnified Parties in connection with the defense
thereof, except that if UPC or the Surviving Corporation elects not to assume
such defense or counsel for the Indemnified Parties advises that there are
substantive issues which raise conflicts of interest between UPC or the
Surviving Corporation and the Indemnified Parties, the Indemnified Parties may
retain counsel satisfactory to them, and UPC or the Surviving Corporation shall
pay all reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received; provided, that UPC shall be
obligated pursuant to this paragraph (c) to pay for only one firm of counsel for
all Indemnified Parties in any jurisdiction, (ii) the Indemnified Parties will
cooperate in the defense of any such Litigation, and (iii) UPC shall not be
liable for any settlement effected without its prior written consent; and
provided further that the Surviving Corporation shall not have any obligation
hereunder to any Indemnified Party when and if a court of competent jurisdiction
shall determine, and such determination shall have become final, that the
indemnification of such Indemnified Party in the manner contemplated hereby is
prohibited by applicable law.
(d) The Surviving Corporation shall not be liable for any settlement
effected without its prior written consent which shall not be unreasonably
withheld. The Surviving Corporation shall not have any obligation
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APPENDIX I -- AGREEMENT AND PLAN OF MERGER
hereunder to any Indemnified Party when and if a court of competent jurisdiction
shall determine, and such determination shall have become final, that the
indemnification of such Indemnified Party in the manner contemplated hereby is
prohibited by applicable Law.
(e) If the Surviving Corporation or any of its successors or assigns shall
consolidate with or merge into any other Person and shall not be the continuing
or surviving Person of such consolidation or merger or shall transfer all or
substantially all of its assets to any Person, then and in each case, proper
provision shall be made so that the successors and assigns of the Surviving
Corporation shall assume the obligations set forth in this Section 8.14.
(f) UPC shall pay all reasonable costs, including attorneys' fees, that may
be incurred by any Indemnified Party in enforcing the indemnity and other
obligations provided for in this Section 8.14. The rights of each Indemnified
Party hereunder shall be in addition to any other rights such Indemnified Party
may have under applicable Law.
8.15 UPC Merger Subsidiary Organization. UPC shall organize UPC Merger
Subsidiary under the Laws of the State of Tennessee. Prior to the Effective
Time, the outstanding capital stock of UPC Merger Subsidiary shall consist of
1,000 shares of UPC Merger Subsidiary Common Stock, all of which shares shall be
owned by UPC. Prior to the Effective Time, UPC Merger Subsidiary shall not (i)
conduct any business operations whatsoever or (ii) enter into any Contract or
agreement of any kind, acquire any assets or incur any Liability, except as may
be specifically contemplated by this Agreement or the Plan of Merger or as the
Parties may otherwise agree. UPC, as the sole stockholder of UPC Merger
Subsidiary, shall vote prior to the Effective Time the shares of UPC Merger
Subsidiary Common Stock in favor of the Plan of Merger.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
9.1 Conditions to Obligations of Each Party. The respective obligations of
each Party to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by both Parties pursuant to Section 11.6 of
this Agreement:
(a) Shareholder Approvals. The shareholders of Leader shall have
approved this Agreement and the Plan of Merger, and the consummation of the
transactions contemplated hereby and thereby, including the Merger, as and
to the extent required by Law, by the provisions of any governing
instruments, or by the rules of the NASD. The shareholders of UPC shall
have approved the issuance of shares of UPC Common Stock pursuant to the
Merger as and to the extent required by Law, by the provisions of any
governing instruments, or by the rules of the NYSE or the NASD.
(b) Regulatory Approvals. All Consents of, filings and registrations
with, and notifications to, all Regulatory Authorities required for
consummation of the Merger shall have been obtained or made and shall be in
full force and effect and all waiting periods required by Law shall have
expired. No Consent obtained from any Regulatory Authority which is
necessary to consummate the transactions contemplated hereby shall be
conditioned or restricted in a manner (other than matters relating to the
raising of additional capital or the disposition of Assets or deposit
Liabilities) which in the reasonable judgment of the Board of Directors of
UPC would so materially adversely impact the financial or economic benefits
of the transactions contemplated by this Agreement that, had such condition
or requirement been known, UPC would not, in its reasonable judgment, have
entered into this Agreement.
(c) Consents and Approvals. Each Party shall have obtained any and
all Consents required for consummation of the Merger (other than those
referred to in Section 9.1(b) of this Agreement) or for the preventing of
any Default under any Contract or Permit of such Party which, if not
obtained or made, is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on such Party.
(d) Legal Proceedings. No court or governmental or regulatory
authority of competent jurisdiction shall have enacted, issued,
promulgated, enforced, or entered any Law or Order (whether temporary,
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APPENDIX I -- AGREEMENT AND PLAN OF MERGER
preliminary, or permanent) or taken any other action which prohibits,
restricts, or makes illegal consummation of the transactions contemplated
by this Agreement and the Plan of Merger.
(e) Registration Statement. The Registration Statement shall be
effective under the 1933 Act, no stop orders suspending the effectiveness
of the Registration Statement shall have been issued, no action, suit,
proceeding, or investigation by the SEC to suspend the effectiveness
thereof shall have been initiated and be continuing, and all necessary
approvals under state securities Laws or the 1933 Act or 1934 Act relating
to the issuance or trading of the shares of UPC Common Stock issuable
pursuant to the Merger shall have been received.
(f) Exchange Listing. The shares of UPC Common Stock issuable
pursuant to the Merger shall have been approved for listing on the NYSE,
subject to official notice of issuance.
(g) Pooling Letters. Each of the Parties shall have received copies
of the letters, dated as of the date of filing of the Registration
Statement with the SEC and as of the Effective Time, addressed to UPC, from
Price Waterhouse LLP to the effect that the Merger will qualify for
pooling-of-interests accounting treatment.
(h) Tax Matters. Each Party shall have received a written opinion of
counsel from Alston & Bird, in form reasonably satisfactory to such Parties
(the "Tax Opinion"), to the effect that (i) the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, (ii) the exchange in the Merger of Leader Common Stock for UPC Common
Stock will not give rise to gain or loss to the shareholders of Leader with
respect to such exchange (except to the extent of any cash received), and
(iii) none of Leader or UPC will recognize gain or loss as a consequence of
the Merger (except for the inclusion in income of the amount of the
bad-debt reserve maintained by Leader and any other amounts resulting from
any required change in accounting methods and any income and deferred gain
recognized pursuant to Treasury regulations issued under Section 1502 of
the Internal Revenue Code). In rendering such Tax Opinion, such counsel
shall be entitled to rely upon representations of officers of Leader and
UPC reasonably satisfactory in form and substance to such counsel.
9.2 Conditions to Obligations of UPC. The obligations of UPC to perform
this Agreement and consummate the Merger and the other transactions contemplated
hereby are subject to the satisfaction of the following conditions, unless
waived by UPC pursuant to Section 11.6(a) of this Agreement:
(a) Representations and Warranties. For purposes of this Section
9.2(a), the accuracy of the representations and warranties of Leader set
forth in this Agreement shall be assessed as of the date of this Agreement
and as of the Effective Time with the same effect as though all such
representations and warranties had been made on and as of the Effective
Time (provided that representations and warranties which are confined to a
specified date shall speak only as of such date). The representations and
warranties of Leader set forth in Section 5.3 of this Agreement shall be
true and correct (except for inaccuracies which are de minimus in amount).
The representations and warranties of Leader set forth in Sections 5.20,
5.21, and 5.22 of this Agreement shall be true and correct in all material
respects. There shall not exist inaccuracies in the representations and
warranties of Leader set forth in this Agreement (including the
representations and warranties set forth in Sections 5.3, 5.20, 5.21, and
5.22) such that the aggregate effect of such inaccuracies has, or is
reasonably likely to have, a Material Adverse Effect on Leader; provided
that, for purposes of this sentence only, those representations and
warranties which are qualified by references to "material" or "Material
Adverse Effect" shall be deemed not to include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of Leader to be performed and complied with
pursuant to this Agreement and the other agreements contemplated hereby
prior to the Effective Time shall have been duly performed and complied
with in all material respects.
(c) Certificates. Leader shall have delivered to UPC (i) a
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer and its chief financial officer, to the effect that
the conditions of its obligations set forth in Section 9.2(a) and 9.2(b) of
this Agreement have been
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APPENDIX I -- AGREEMENT AND PLAN OF MERGER
satisfied, and (ii) certified copies of resolutions duly adopted by
Leader's Board of Directors and shareholders evidencing the taking of all
corporate action necessary to authorize the execution, delivery, and
performance of this Agreement and the Plan of Merger, and the consummation
of the transactions contemplated hereby and thereby, all in such reasonable
detail as UPC and its counsel shall request.
(d) Affiliates Agreements. UPC shall have received from each
affiliate of Leader the affiliates letter referred to in Section 8.12 of
this Agreement, to the extent necessary to assure in the reasonable
judgment of UPC that the transactions contemplated hereby will qualify for
pooling-of-interests accounting treatment.
9.3 Conditions to Obligations of Leader. The obligations of Leader to
perform this Agreement and the Plan of Merger and consummate the Merger and the
other transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by Leader pursuant to Section 11.6(b) of
this Agreement:
(a) Representations and Warranties. For purposes of this Section
9.3(a), the accuracy of the representations and warranties of UPC set forth
in this Agreement shall be assessed as of the date of this Agreement and as
of the Effective Time with the same effect as though all such
representations and warranties had been made on and as of the Effective
Time (provided that representations and warranties which are confined to a
specified date shall speak only as of such date). The representations and
warranties of UPC set forth in Section 6.3 of this Agreement shall be true
and correct (except for inaccuracies which are de minimus in amount). The
representations and warranties of UPC set forth in Section 6.13 of this
Agreement shall be true and correct in all material respects. There shall
not exist inaccuracies in the representations and warranties of UPC set
forth in this Agreement (including the representations and warranties set
forth in Sections 6.3 and 6.13) such that the aggregate effect of such
inaccuracies has, or is reasonably likely to have, a Material Adverse
Effect on UPC; provided that, for purposes of this sentence only, those
representations and warranties which are qualified by references to
"material" or "Material Adverse Effect" shall be deemed not to include such
qualifications.
(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of UPC to be performed and complied with pursuant
to this Agreement and the other agreements contemplated hereby prior to the
Effective Time shall have been duly performed and complied with in all
material respects.
(c) Certificates. UPC shall have delivered to Leader (i) a
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer and its chief financial officer, to the effect that
the conditions of its obligations set forth in Section 9.3(a) and 9.3(b) of
this Agreement have been satisfied, and (ii) certified copies of
resolutions duly adopted by UPC's Board of Directors evidencing the taking
of all corporate action necessary to authorize the execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, all in such reasonable detail as Leader and its
counsel shall request.
(d) Exchange Agent Certification. The Exchange Agent shall have
delivered to Leader a certificate, dated as of the Effective Time, to the
effect that the Exchange Agent has received from UPC appropriate
instructions and authorization for the Exchange Agent to issue a sufficient
number of shares of UPC Common Stock in exchange for all outstanding shares
of Leader Common Stock and has deposited with the Exchange Agent sufficient
funds to pay a reasonable estimate of the cash payments necessary to make
all fractional share payments as required by Section 3.4 of this Agreement.
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APPENDIX I -- AGREEMENT AND PLAN OF MERGER
ARTICLE 10
TERMINATION
10.1 Termination. Notwithstanding any other provision of this Agreement,
and notwithstanding the approval of this Agreement by the shareholders of UPC or
Leader, this Agreement and the Plan of Merger may be terminated and the Merger
abandoned at any time prior to the Effective Time:
(a) By mutual consent of the Board of Directors of UPC and the Board
of Directors of Leader; or
(b) By the Board of Directors of either Party (provided that the
terminating Party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in
Section 9.2(a) of this Agreement in the case of Leader and Section 9.3(a)
in the case of UPC or in material breach of any covenant or other agreement
contained in this Agreement) in the event of an inaccuracy of any
representation or warranty of the other Party contained in this Agreement
which cannot be or has not been cured within 30 days after the giving of
written notice to the breaching Party of such inaccuracy and which
inaccuracy would provide the terminating Party the ability to refuse to
consummate the Merger under the applicable standard set forth in Section
9.2(a) of this Agreement in the case of Leader and Section 9.3(a) of this
Agreement in the case of UPC; or
(c) By the Board of Directors of either Party (provided that the
terminating Party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in
Section 9.2(a) of this Agreement in the case of Leader and Section 9.3(a)
in the case of UPC or in material breach of any covenant or other agreement
contained in this Agreement) in the event of a material breach by the other
Party of any covenant or agreement contained in this Agreement which cannot
be or has not been cured within 30 days after the giving of written notice
to the breaching Party of such breach; or
(d) By the Board of Directors of either Party in the event (i) any
Consent of any Regulatory Authority required for consummation of the Merger
and the other transactions contemplated hereby shall have been denied by
final nonappealable action of such authority or if any action taken by such
authority is not appealed within the time limit for appeal, or (ii) the
shareholders of UPC or Leader fail to vote their approval of this Agreement
and the transactions contemplated hereby as required by the TBCA and the
rules of the NYSE or NASD at the Shareholders' Meetings where the
transactions were presented to such shareholders for approval and voted
upon; or
(e) By the Board of Directors of either Party in the event that the
Merger shall not have been consummated by March 1, 1997, if the failure to
consummate the transactions contemplated hereby on or before such date is
not caused by any willful breach of this Agreement by the Party electing to
terminate pursuant to this Section 10.1(e); or
(f) By the Board of Directors of either Party (provided that the
terminating Party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in
Section 9.2(a) of this Agreement in the case of Leader and Section 9.3(a)
in the case of UPC or in material breach of any covenant or other agreement
contained in this Agreement) in the event that any of the conditions
precedent to the obligations of such Party to consummate the Merger cannot
be satisfied or fulfilled by the date specified in Section 10.1(e) of this
Agreement; or
(g) By UPC, if a "Purchase Event" as such term is defined in the Stock
Option Agreement, shall have occurred or by Leader, if UPC (or its
assignee) exercises the Stock Option Agreement pursuant to Section 3
thereof or exercises its repurchase rights pursuant to Section 8 thereof;
or
(h) By UPC, if, prior to 8:00 a.m. on March 9, 1996, Leader does not
execute and deliver to UPC the Stock Option Agreement; or
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APPENDIX I -- AGREEMENT AND PLAN OF MERGER
(i) By the Board of Directors of Leader, if it determines by a vote of
a majority of the members of its entire Board, at any time during the
ten-day period commencing two days after the Determination Date, if both of
the following conditions are satisfied:
(1) the Average Closing Price shall be less than $26.39; and
(2) (i) the quotient obtained by dividing the Average Closing Price
by the Starting Price (such number being referred to herein as the "UPC
Ratio") shall be less than (ii) the quotient obtained by dividing the
Index Price on the Determination Date by the Index Price on the Starting
Date and subtracting 0.15 from the quotient in this clause (2)(ii) (such
number being referred to herein as the "Index Ratio");
subject, however, to the following three sentences. If Leader refuses to
consummate the Merger pursuant to this Section 10.1(i), it shall give prompt
written notice thereof to UPC; provided, that such notice of election to
terminate may be withdrawn at any time within the aforementioned ten-day period.
During the five-day period commencing with its receipt of such notice, UPC shall
have the option to elect to increase the Exchange Ratio to equal the lesser of
(i) the quotient obtained by dividing (1) the product of $26.39 and the Exchange
Ratio (as then in effect) by (2) the Average Closing Price, and (ii) the
quotient obtained by dividing (1) the product of the Index Ratio and the
Exchange Ratio (as then in effect) by (2) the UPC Ratio. If UPC makes an
election contemplated by the preceding sentence, within such five-day period, it
shall give prompt written notice to Leader of such election and the revised
Exchange Ratio, whereupon no termination shall have occurred pursuant to this
Section 10.1(i) and this Agreement shall remain in effect in accordance with its
terms (except as the Exchange Ratio shall have been so modified), and any
references in this Agreement to "Exchange Ratio" shall thereafter be deemed to
refer to the Exchange Ratio as adjusted pursuant to this Section 10.1(i).
For purposes of this Section 10.1(i), the following terms shall have the
meanings indicated:
"Average Closing Price" shall mean the average of the daily last sales
prices of UPC Common Stock as reported on the NYSE (as reported by The Wall
Street Journal or, if not reported thereby, another authoritative source as
chosen by UPC) for the 20 consecutive full trading days in which such
shares are traded on the NYSE ending at the close of trading on the
Determination Date.
"Determination Date" shall mean the date on which the last Consent of
the Board of Governors of the Federal Reserve System or the Office of
Thrift Supervision shall be received.
"Index Group" shall mean the 16 bank holding companies listed below,
the common stocks of all of which shall be publicly traded and as to which
there shall not have been, since the Starting Date and before the
Determination Date, any public announcement of a proposal for such company
to be acquired or for such company to acquire another company or companies
in transactions with a value exceeding 25% of the acquiror's market
capitalization. In the event that any such company or companies are removed
from the Index Group, the weights (which shall be determined based upon the
number of
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APPENDIX I -- AGREEMENT AND PLAN OF MERGER
outstanding shares of common stock) shall be redistributed proportionately
for purposes of determining the Index Price. The 16 bank holding companies
and the weights attributed to them are as follows:
<TABLE>
<CAPTION>
BANK HOLDING COMPANIES WEIGHTING
--------------------------------------------------------------------------- ---------
<S> <C>
AmSouth Bancorporation..................................................... 7.66%
Central Fidelity Banks, Inc................................................ 5.25
Compass Bancshares, Inc.................................................... 4.99
Crestar Financial Corporation.............................................. 4.93
Deposit Guaranty Corporation............................................... 2.56
Fifth Third Bancorp........................................................ 13.14
First American Corporation................................................. 3.65
First Commerce Corporation................................................. 4.95
First Tennessee National Corporation....................................... 4.53
First Virginia Banks, Inc.................................................. 4.44
Mercantile Bancorporation, Inc............................................. 7.24
Mercantile Bancshares Corporation.......................................... 6.14
National Commerce Bancorp.................................................. 3.24
Regions Financial Corporation.............................................. 6.03
Signet Banking Corporation................................................. 7.73
Southern National Corporation.............................................. 13.52
---------
Total............................................................ 100.00%
=======
</TABLE>
"Index Price" on a given date shall mean the weighted average
(weighted in accordance with the factors listed above) of the closing
prices of the companies composing the Index Group.
"Starting Date" shall mean the fourth full trading day after the
announcement by press release of the Merger.
"Starting Price" shall mean the closing price per share of UPC Common
Stock as reported on the NYSE (as reported by The Wall Street Journal or,
if not reported thereby, another authoritative source as chosen by UPC) on
the Starting Date.
If any company belonging to the Index Group or UPC declares or effects a
stock dividend, reclassification, recapitalization, split-up, combination,
exchange of shares, or similar transaction between the date of this Agreement
and the Determination Date, the prices for the common stock of such company or
UPC shall be appropriately adjusted for the purposes of applying this Section
10.1(i).
10.2 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 10.1 of this Agreement, this
Agreement, the Plan of Merger, and the Supplemental Letter shall become void and
have no effect, except that (i) the provisions of this Section 10.2 and Article
11 and Section 8.6(b) of this Agreement shall survive any such termination and
abandonment, and (ii) a termination pursuant to Sections 10.1(b), 10.1(c) or
10.1(f) of this Agreement shall not relieve the breaching Party from Liability
for an uncured willful breach of a representation, warranty, covenant, or
agreement giving rise to such termination. The Stock Option Agreement shall be
governed by its own terms as to its termination.
10.3 Non-Survival of Representations and Covenants. The respective
representations, warranties, obligations, covenants, and agreements of the
Parties shall not survive the Effective Time except this Section 10.3 and
Articles 2, 3, 4 and 11 and Sections 8.12, 8.13, and 8.14 of this Agreement and
the provisions of the Supplemental Letter.
28
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APPENDIX I -- AGREEMENT AND PLAN OF MERGER
ARTICLE 11
MISCELLANEOUS
11.1 Definitions. (a) Except as otherwise provided herein, the capitalized
terms set forth below shall have the following meanings:
"Acquisition Proposal" with respect to a Party shall mean any tender
offer or exchange offer or any proposal for a merger, acquisition of all of
the stock or assets of, or other business combination involving such Party
or any of its Subsidiaries or the acquisition of a substantial equity
interest in, or a substantial portion of the assets of, such Party or any
of its Subsidiaries.
"Affiliate" of a Person shall mean: (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by,
or under common control with such Person; (ii) any officer, director,
partner, employer, or direct or indirect beneficial owner of any 10% or
greater equity or voting interest of such Person; or (iii) any other Person
for which a Person described in clause (ii) acts in any such capacity.
"Agreement" shall mean this Agreement and Plan of Merger, including
the Stock Option Agreement and the Exhibits delivered pursuant hereto and
incorporated herein by reference.
"Assets" of a Person shall mean all of the assets, properties,
businesses, and rights of such Person of every kind, nature, character and
description, whether real, personal or mixed, tangible or intangible,
accrued or contingent, or otherwise relating to or utilized in such
Person's business, directly or indirectly, in whole or in part, whether or
not carried on the books and records of such Person, and whether or not
owned in the name of such Person or any Affiliate of such Person and
wherever located.
"BHC Act" shall mean the federal Bank Holding Company Act of 1956, as
amended.
"Articles of Merger" shall mean the Articles of Merger to be executed
by Leader and filed with the Secretary of State of the State of Tennessee
relating to the Merger as contemplated by Section 1.1 of this Agreement.
"Closing Date" shall mean the date on which the Closing occurs.
"Consent" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
"Contract" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease,
obligation, plan, practice, restriction, understanding, or undertaking of
any kind or character, or other document to which any Person is a party or
that is binding on any Person or its capital stock, Assets, or business.
"Default" shall mean (i) any breach or violation of or default under
any Contract, Order, or Permit, (ii) any occurrence of any event that with
the passage of time or the giving of notice or both would constitute a
breach or violation of or default under any Contract, Order, or Permit, or
(iii) any occurrence of any event that with or without the passage of time
or the giving of notice would give rise to a right to terminate or revoke,
change the current terms of, or renegotiate, or to accelerate, increase, or
impose any Liability under, any Contract, Order or Permit.
"Environmental Laws" shall mean all Laws relating to pollution or
protection of human health or the environment (including ambient air,
surface water, ground water, land surface or subsurface strata) and which
are administered, interpreted or enforced by the United States
Environmental Protection Agency and state and local agencies with
jurisdiction over, and including common law in respect of, pollution or
protection of the environment, including the Comprehensive Environmental
Response Compensation and Liability Act, as amended, 42 U.S.C. 9601 et seq.
("CERCLA"), the Resource Conservation and Recovery Act, as amended, 42
U.S.C. 6901 et seq. ("RCRA"), and other Laws relating to emissions,
discharges, releases, or threatened releases of any Hazardous Material, or
otherwise
29
<PAGE> 122
APPENDIX I -- AGREEMENT AND PLAN OF MERGER
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling of any Hazardous Material.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Exhibits" 1 through 4, inclusive, shall mean the Exhibits so marked,
copies of which are attached to this Agreement. Such Exhibits are hereby
incorporated by reference herein and made a part hereof, and may be
referred to in this Agreement and any other related instrument or document
without being attached hereto.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"Hazardous Material" shall mean (i) any hazardous substance, hazardous
material, hazardous waste, regulated substance, or toxic substance (as
those terms are defined by any applicable Environmental Laws) and (ii) any
chemicals, pollutants, contaminants, petroleum, petroleum products, or oil
(and specifically shall include asbestos requiring abatement, removal, or
encapsulation pursuant to the requirements of governmental authorities and
any polychlorinated biphenyls).
"HOLA" shall mean the Home Owners' Loan Act of 1933, as amended.
"HSR Act" shall mean Section 7A of the Clayton Act, as added by Title
II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
and the rules and regulations promulgated thereunder.
"Intellectual Property" shall mean copyrights, patents, trademarks,
service marks, service names, trade names, applications therefor,
technology rights and licenses, computer software (including any source or
object codes therefor or documentation relating thereto), trade secrets,
franchises, know-how, inventions, and other intellectual property rights.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder.
"Joint Proxy Statement" shall mean the joint proxy statement used by
UPC and Leader to solicit the approval of their respective shareholders of
the transactions contemplated by this Agreement and the Plan of Merger,
which shall include the prospectus of UPC relating to the issuance of the
UPC Common Stock to holders of Leader Common Stock.
"Knowledge" as used with respect to a Person (including references to
such Person being aware of a particular matter) shall mean those facts that
are known by the Chairman, President, Chief Financial Officer, Chief
Accounting Officer, Chief Credit Officer, or General Counsel of such
Person.
"Law" shall mean any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or statute applicable to a Person or its
Assets, Liabilities or business, including those promulgated, interpreted,
or enforced by any Regulatory Authority.
"Leader Common Stock" shall mean the $1.00 par value common stock of
Leader.
"Leader Companies" shall mean, collectively, Leader and all Leader
Subsidiaries.
"Leader Disclosure Memorandum" shall mean the written information
entitled "Leader Financial Corporation Disclosure Memorandum" delivered
prior to the date of this Agreement to UPC describing in reasonable detail
the matters contained therein and, with respect to each disclosure made
therein, specifically referencing each Section of this Agreement under
which such disclosure is being made. Information disclosed with respect to
one Section shall not be deemed to be disclosed for purposes of any other
Section not specifically referenced with respect thereto.
"Leader Federal" shall mean Leader Federal Bank for Savings, a federal
stock savings bank and a Leader Subsidiary.
30
<PAGE> 123
APPENDIX I -- AGREEMENT AND PLAN OF MERGER
"Leader Financial Statements" shall mean (i) the consolidated
statements of financial position (including related notes and schedules, if
any) of Leader as of September 30, 1995, and as of December 31, 1994 and
1993, and the related statements of operations, stockholders' equity, and
cash flows (including related notes and schedules, if any) for the nine
months ended September 30, 1995, and for each of the three fiscal years
ended December 31, 1994, 1993 and 1992, as filed by Leader in SEC
Documents, (ii) the consolidated statements of financial position of Leader
(including related notes and schedules, if any) and related statements of
operations, stockholders' equity, and cash flows (including related notes
and schedules, if any) included in SEC Documents filed with respect to
periods ended subsequent to September 30, 1995, and (iii) the consolidated
statements of financial position (including related notes) of Leader as of
December 31, 1995 and 1994, and the related statements of operations,
stockholders' equity, and cash flows (including related notes) for each of
the three fiscal years ended December 31, 1995, 1994 and 1993 included in
the Leader Disclosure Memorandum.
"Leader Stock Plans" shall mean the existing stock option and other
stock-based compensation plans of Leader designated as follows: (i) Leader
Financial Corporation 1993 Stock Option and Incentive Plan and (ii) Leader
Financial Corporation Management Recognition Plans "A" through "Q".
"Leader Subsidiaries" shall mean the Subsidiaries of Leader, which
shall include the Leader Subsidiaries described in Section 5.4 of this
Agreement and any corporation, bank, savings association, or other
organization acquired as a Subsidiary of Leader in the future and owned by
Leader at the Effective Time.
"Liability" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost, or expense (including
costs of investigation, collection, and defense), claim, deficiency,
guaranty, or endorsement of or by any Person (other than endorsements of
notes, bills, checks, and drafts presented for collection or deposit in the
ordinary course of business) of any type, whether accrued, absolute or
contingent, liquidated or unliquidated, matured or unmatured, or otherwise.
"Lien" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title
retention, or other security arrangement, or any adverse right or interest,
charge, or claim of any nature whatsoever of, on, or with respect to any
property or property interest, other than (i) Liens for current property
Taxes not yet due and payable, and (ii) for depository institution
Subsidiaries of a Party, pledges to secure deposits and other Liens
incurred in the ordinary course of the banking business.
"Litigation" shall mean any action, arbitration, cause of action,
claim, complaint, criminal prosecution, demand letter, governmental or
other examination or investigation, hearing, inquiry, administrative or
other proceeding, or notice (written or oral) by any Person alleging
potential Liability or requesting information relating to or affecting a
Party, its business, its Assets (including Contracts related to it), or the
transactions contemplated by this Agreement, but shall not include regular,
periodic examinations of depository institutions and their Affiliates by
Regulatory Authorities.
"material" for purposes of this Agreement shall be determined in light
of the facts and circumstances of the matter in question; provided that any
specific monetary amount stated in this Agreement shall determine
materiality in that instance.
"Material Adverse Effect" on a Party shall mean an event, change, or
occurrence which, individually or together with any other event, change, or
occurrence, has a material adverse impact on (i) the financial position,
business, or results of operations of such Party and its Subsidiaries,
taken as a whole, or (ii) the ability of such Party to perform its
obligations under this Agreement or to consummate the Merger or the other
transactions contemplated by this Agreement, provided that "Material
Adverse Effect" and "material adverse impact" shall not be deemed to
include the impact of (a) changes in banking and similar Laws of general
applicability or interpretations thereof by courts or governmental
authorities (including changes in insurance deposit assessment rates and
changes requiring the recapture of bad debt reserves but excluding changes
in Federal Housing Authority/Veterans Association regulations or policies
that have a material adverse impact on the results of operations of a
Party), (b) changes in
31
<PAGE> 124
APPENDIX I -- AGREEMENT AND PLAN OF MERGER
GAAP or regulatory accounting principles generally applicable to banks,
savings associations, and their holding companies, (c) actions and
omissions of a Party (or any of its Subsidiaries) taken with the prior
informed written consent of the other Party in contemplation of the
transaction contemplated hereby, (d) changes in economic conditions
generally affecting Southeastern financial institutions, and (e) the direct
effects of compliance with this Agreement (including the expense associated
with the vesting of benefits under the various employee benefit plans of
Leader as a result of the Merger constituting a change of control) on the
operating performance of the Parties, including expenses incurred by the
Parties in consummating the transactions contemplated by the Agreement.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Nasdaq National Market" shall mean the National Market System of the
National Association of Securities Dealers Automated Quotations System.
"NYSE" shall mean the New York Stock Exchange, Inc.
"1933 Act" shall mean the Securities Act of 1933, as amended.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
"Operating Property" shall mean any property owned by the Party in
question or by any of its Subsidiaries or in which such Party or Subsidiary
holds a security interest, and, where required by the context, includes the
owner or operator of such property, but only with respect to such property.
"Order" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or
writ of any federal, state, local, or foreign or other court, arbitrator,
mediator, tribunal, administrative agency, or Regulatory Authority.
"Participation Facility" shall mean any facility or property in which
the Party in question or any of its Subsidiaries participates in the
management and, where required by the context, said term means the owner or
operator of such facility or property, but only with respect to such
facility or property.
"Party" shall mean either Leader or UPC, and "Parties" shall mean both
Leader and UPC.
"Permit" shall mean any federal, state, local, and foreign
governmental approval, authorization, certificate, easement, filing,
franchise, license, notice, permit, or right to which any Person is a party
or that is or may be binding upon or inure to the benefit of any Person or
its securities, Assets or business.
"Plan of Merger" shall mean the plan of merger providing for the
Merger, in substantially the form of Exhibit 1.
"Person" shall mean a natural person or any legal, commercial, or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting
in a representative capacity.
"Registration Statement" shall mean the Registration Statement on Form
S-4, or other appropriate form, including any pre-effective or
post-effective amendments or supplements thereto, filed with the SEC by UPC
under the 1933 Act with respect to the shares of UPC Common Stock to be
issued to the shareholders of Leader in connection with the transactions
contemplated by this Agreement.
"Regulatory Authorities" shall mean, collectively, the Federal Trade
Commission, the United States Department of Justice, the Board of the
Governors of the Federal Reserve System, the Office of Thrift Supervision
(including its predecessor, the Federal Home Loan Bank Board), the Office
of the Comptroller of the Currency, the Federal Deposit Insurance
Corporation, all state regulatory agencies having jurisdiction over the
Parties and their respective Subsidiaries, the NYSE, the NASD, and the SEC.
"Representative" shall mean any investment banker, financial advisor,
attorney, accountant, consultant, or other representative of a Person.
32
<PAGE> 125
APPENDIX I -- AGREEMENT AND PLAN OF MERGER
"Rights" shall mean all arrangements, calls, commitments, Contracts,
options, rights to subscribe to, scrip, understandings, warrants, or other
binding obligations of any character whatsoever relating to, or securities
or rights convertible into or exchangeable for, shares of the capital stock
of a Person or by which a Person is or may be bound to issue additional
shares of its capital stock or other Rights.
"SEC Documents" shall mean all forms, proxy statements, registration
statements, reports, schedules, and other documents filed, or required to
be filed, by a Party or any of its Subsidiaries with any Regulatory
Authority pursuant to the Securities Laws.
"Securities Laws" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940, as amended, the Investment Advisors Act of
1940, as amended, the Trust Indenture Act of 1939, as amended, and the
rules and regulations of any Regulatory Authority promulgated thereunder.
"Shareholders' Meetings" shall mean the respective meetings of the
shareholders of UPC and Leader to be held pursuant to Section 8.1 of this
Agreement, including any adjournment or adjournments thereof.
"Stock Option Agreement" shall mean the Stock Option Agreement of even
date herewith issued to UPC by Leader, substantially in the form of Exhibit
1.
"Subsidiaries" shall mean all those corporations, banks, associations,
or other entities of which the entity in question owns or controls 10% or
more of the outstanding equity securities either directly or through an
unbroken chain of entities as to each of which 10% or more of the
outstanding equity securities is owned directly or indirectly by its
parent; provided, there shall not be included any such entity acquired
through foreclosure or any such entity the equity securities of which are
owned or controlled in a fiduciary capacity.
"Supplemental Letter" shall mean the supplemental letter of even date
herewith relating to certain understandings and agreements in addition to
those included in this Agreement, substantially in the form of Exhibit 3.
"Surviving Corporation" shall mean Leader as the surviving corporation
resulting from the Merger.
"Tax" or "Taxes" shall mean any federal, state, county, local, or
foreign income, profits, franchise, gross receipts, payroll, sales,
employment, use, property, withholding, excise, occupancy, and other taxes,
assessments, charges, fares, or impositions, including interest, penalties,
and additions imposed thereon or with respect thereto.
"TBCA" shall mean the Tennessee Business Corporation Act.
"UPC Capital Stock" shall mean, collectively, the UPC Common Stock,
the UPC Preferred Stock and any other class or series of capital stock of
UPC.
"UPC Common Stock" shall mean the $5.00 par value common stock of UPC.
"UPC Companies" shall mean, collectively, UPC and all UPC
Subsidiaries.
"UPC Disclosure Memorandum" shall mean the written information
entitled "Union Planters Corporation Disclosure Memorandum" delivered prior
to the date of this Agreement to Leader describing in reasonable detail the
matters contained therein and, with respect to each disclosure made
therein, specifically referencing each Section of this Agreement under
which such disclosure is being made. Information disclosed with respect to
one Section shall be deemed to be disclosed for purposes of any other
Section not specifically referenced with respect thereto.
"UPC Financial Statements" shall mean (i) the consolidated balance
sheets (including related notes and schedules, if any) of UPC as of
September 30, 1995, and as of December 31, 1994 and 1993, and the related
statements of earnings, changes in shareholders' equity, and cash flows
(including related notes and schedules, if any) for the nine months ended
September 30, 1995, and for each of the three years ended December 31,
1994, 1993 and 1992, as filed by UPC in SEC Documents, (ii) the
consolidated balance sheets of UPC (including related notes and schedules,
if any) and related statements of earnings,
33
<PAGE> 126
APPENDIX I -- AGREEMENT AND PLAN OF MERGER
changes in shareholders' equity, and cash flows (including related notes
and schedules, if any) included in SEC Documents filed with respect to
periods ended subsequent to September 30, 1995, and (iii) the consolidated
balance sheets (including related notes) of UPC as of December 31, 1995 and
1994, and the related statements of earnings, changes in shareholders'
equity, and cash flows (including related notes) for each of the three
fiscal years ended December 31, 1995, 1994 and 1993 included in the UPC
Disclosure Memorandum.
"UPC Merger Subsidiary" shall mean the wholly owned subsidiary of UPC
to be organized to effect the Merger under the Laws of the State of
Tennessee and with the name of UPC Merger Subsidiary, Inc.
"UPC Merger Subsidiary Common Stock" shall mean the $1.00 par value
common stock of UPC Merger Subsidiary.
"UPC Preferred Stock" shall mean the no par value preferred stock of
UPC and shall include the (i) Series A Preferred Stock, (ii) Series B,
$8.00 Nonredeemable, Cumulative, Convertible Preferred Stock ("UPC Series B
Preferred Stock"), and (iii) Series E, 8% Cumulative, Convertible Preferred
Stock, of UPC ("UPC Series E Preferred Stock").
"UPC Rights" shall mean the preferred stock purchase rights issued
pursuant to the UPC Rights Agreement.
"UPC Rights Agreement" shall mean that certain Rights Agreement, dated
January 19, 1989, between UPC and UPNB, as Rights Agent.
"UPC Subsidiaries" shall mean the Subsidiaries of UPC.
(b) The terms set forth below shall have the meanings ascribed thereto in
the referenced sections:
<TABLE>
<S> <C>
Allowance........................................................... Section 5.9
Average Closing Price............................................... Section 10.1(i)
Bank Merger......................................................... Section 1.5
Closing............................................................. Section 1.2
Determination Date.................................................. Section 10.1(i)
Effective Time...................................................... Section 1.3
ERISA Affiliate..................................................... Section 5.15(c)
Exchange Agent...................................................... Section 4.1
Exchange Ratio...................................................... Section 3.1(c)
Indemnified Party................................................... Section 8.14(a)
Index Group......................................................... Section 10.1(i)
Index Price......................................................... Section 10.1(i)
Index Ratio......................................................... Section 10.1(i)
Leader Benefit Plans................................................ Section 5.15(a)
Leader Contracts.................................................... Section 5.16
Leader ERISA Plan................................................... Section 5.15(a)
Leader Options...................................................... Section 3.5(a)
Leader Pension Plan................................................. Section 5.15(a)
Leader SEC Reports.................................................. Section 5.5(a)
Merger.............................................................. Section 1.1
Starting Date....................................................... Section 10.1(i)
Starting Price...................................................... Section 10.1(i)
Takeover Laws....................................................... Section 5.21
Tax Opinion......................................................... Section 9.1(h)
UPC Ratio........................................................... Section 10.1(i)
UPC SEC Reports..................................................... Section 6.4(a)
</TABLE>
34
<PAGE> 127
APPENDIX I -- AGREEMENT AND PLAN OF MERGER
(c) Any singular term in this Agreement shall be deemed to include the
plural, and any plural term the singular. Whenever the words "include,"
"includes," or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation."
11.2 Expenses. (a) Except as otherwise provided in this Section 11.2, each
of the Parties shall bear and pay all direct costs and expenses incurred by it
or on its behalf in connection with the transactions contemplated hereunder,
including filing, registration and application fees, printing fees, and fees and
expenses of its own financial or other consultants, investment bankers,
accountants, and counsel, except that each of the Parties shall bear and pay the
filing fees payable in connection with the Registration Statement and the Proxy
Statement and printing costs incurred in connection with the printing of the
Registration Statement and the Proxy Statement based on the relative Asset sizes
of the Parties at December 31, 1995.
(b) Nothing contained in this Section 11.2 shall constitute or shall be
deemed to constitute liquidated damages for the willful breach by a Party of the
terms of this Agreement or otherwise limit the rights of the nonbreaching Party.
11.3 Brokers and Finders. Except for Sandler O'Neill & Partners, L.P. as
to Leader and except for Stifel, Nicolaus & Company, Incorporated as to UPC,
each of the Parties represents and warrants that neither it nor any of its
officers, directors, employees, or Affiliates has employed any broker or finder
or incurred any Liability for any financial advisory fees, investment bankers'
fees, brokerage fees, commissions, or finders' fees in connection with this
Agreement or the transactions contemplated hereby. In the event of a claim by
any broker or finder based upon his or its representing or being retained by or
allegedly representing or being retained by Leader or UPC, each of Leader and
UPC, as the case may be, agrees to indemnify and hold the other Party harmless
of and from any Liability in respect of any such claim.
11.4 Entire Agreement. Except as otherwise expressly provided herein, this
Agreement and the Supplemental Letter (including the other documents and
instruments referred to herein) constitutes the entire agreement between the
Parties with respect to the transactions contemplated hereunder and supersedes
all prior arrangements or understandings with respect thereto, written or oral.
Nothing in this Agreement expressed or implied, is intended to confer upon any
Person, other than the Parties or their respective successors, any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
other than as provided in Sections 8.14 of this Agreement.
11.5 Amendments. To the extent permitted by Law, this Agreement may be
amended by a subsequent writing signed by each of the Parties upon the approval
of the Boards of Directors of each of the Parties, whether before or after
shareholder approval of this Agreement and the Plan of Merger has been obtained;
provided, that after any such approval by the holders of UPC Common Stock or
Leader Common Stock, there shall be made no amendment that modifies in any
material respect the consideration to be received by the holders of Leader
Common Stock without the further approval of such shareholders.
11.6 Waivers. (a) Prior to or at the Effective Time, UPC, acting through
its Board of Directors, chief executive officer, or other authorized officer,
shall have the right to waive any Default in the performance of any term of this
Agreement by Leader, to waive or extend the time for the compliance or
fulfillment by Leader of any and all of its obligations under this Agreement,
and to waive any or all of the conditions precedent to the obligations of UPC
under this Agreement, except any condition which, if not satisfied, would result
in the violation of any Law. No such waiver shall be effective unless in writing
signed by a duly authorized officer of UPC.
(b) Prior to or at the Effective Time, Leader, acting through its Board of
Directors, chief executive officer, or other authorized officer, shall have the
right to waive any Default in the performance of any term of this Agreement by
UPC, to waive or extend the time for the compliance or fulfillment by UPC of any
and all of its obligations under this Agreement, and to waive any or all of the
conditions precedent to the obligations of Leader under this Agreement, except
any condition which, if not satisfied, would result in the violation of any Law.
No such waiver shall be effective unless in writing signed by a duly authorized
officer of Leader.
(c) The failure of any Party at any time or times to require performance of
any provision hereof shall in no manner affect the right of such Party at a
later time to enforce the same or any other provision of this
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APPENDIX I -- AGREEMENT AND PLAN OF MERGER
Agreement. No waiver of any condition or of the breach of any term contained in
this Agreement in one or more instances shall be deemed to be or construed as a
further or continuing waiver of such condition or breach or a waiver of any
other condition or of the breach of any other term of this Agreement.
11.7 Assignment. Except as expressly contemplated hereby, neither this
Agreement nor any of the rights, interests, or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise) without
the prior written consent of the other Party. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the Parties and their respective successors and assigns.
11.8 Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, by registered or certified mail, postage pre-paid, or by
courier or overnight carrier, to the persons at the addresses set forth below
(or at such other address as may be provided hereunder), and shall be deemed to
have been delivered as of the date so delivered:
Leader: Leader Financial Corporation
158 Madison Avenue
Memphis, Tennessee 38103
Telecopy Number: (901) 578-2049
Attention: Edgar H. Bailey
Chairman of the Board and
Chief Executive Officer
Copy to Counsel: Leader Financial Corporation
158 Madison Avenue
Memphis, Tennessee 38103
Telecopy Number: (901) 578-2049
Attention: Catherine C. Stallings
General Counsel
Housley Kantarian & Bronstein
1220 19th Street, N.W., Suite 700
Washington, D.C. 20036
Telecopy Number: (202) 822-0140
Attention: Harry K. Kantarian
UPC: Union Planters Corporation
7130 Goodlett Farms Parkway
Memphis, Tennessee 38018
Telecopy Number: (901) 383-2877
Attention: Jackson W. Moore
President
Copy to Counsel: Alston & Bird
601 Pennsylvania Avenue
North Building, Suite 250
Washington, D.C. 20004
Telecopy Number: (202) 508-3333
Attention: Frank M. Conner III
11.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the Laws of the State of Tennessee, without regard to any
applicable conflicts of Laws.
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APPENDIX I -- AGREEMENT AND PLAN OF MERGER
11.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
11.11 Captions. The captions contained in this Agreement are for reference
purposes only and are not part of this Agreement.
11.12 Interpretations. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against any party, whether under
any rule of construction or otherwise. No party to this Agreement shall be
considered the draftsman. The Parties acknowledge and agree that this Agreement
has been reviewed, negotiated, and accepted by all Parties and their attorneys
and shall be construed and interpreted according to the ordinary meaning of the
words used so as fairly to accomplish the purposes and intentions of all parties
hereto.
11.13 Enforcement of Agreement. The Parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that the Parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.
11.14 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf and its corporate seal to be hereunto affixed and
attested by officers thereunto as of the day and year first above written.
<TABLE>
<S> <C>
ATTEST: LEADER FINANCIAL CORPORATION
By: /s/ CATHERINE C. STALLINGS By: /s/ EDGAR H. BAILEY
----------------------------------------- -----------------------------------------
Catherine C. Stallings Edgar H. Bailey
Secretary Chairman of the Board and
Chief Executive Officer
[CORPORATE SEAL]
ATTEST: UNION PLANTERS CORPORATION
By: /s/ E.J. HOUSE, Jr. By: /s/ JACKSON W. MOORE
----------------------------------------- -----------------------------------------
E.J. House, Jr. Jackson W. Moore
Secretary President
[CORPORATE SEAL]
</TABLE>
37
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APPENDIX I -- SUPPLEMENTAL LETTER
Leader Financial Corporation March 8, 1996
158 Madison Avenue
Memphis, Tennessee 38103
Ladies and Gentlemen:
We have, today, entered into an Agreement and Plan of Merger (the
"Agreement") between Union Planters Corporation ("UPC") and Leader Financial
Corporation ("Leader"). This Supplemental Letter is intended to set forth
certain additional agreements and understandings of UPC and Leader. Each of such
parties agrees that this letter is an integral part of the Agreement and is
being entered into separately, solely as an accommodation to UPC. All terms used
herein without definition shall have the same meaning as ascribed to such terms
in the Agreement.
Accordingly, in consideration of the Parties having entered into the
Agreement and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, it is further agreed that:
A. Representation on Boards of Directors
1. UPC Board of Directors. Not later than the first regularly
scheduled meeting of the Board of Directors of UPC following the Effective
Time, UPC shall take all action necessary to elect four individuals who are
members of the Board of Directors of Leader at the Effective Time (two of
whom shall include Edgar H. Bailey and Ronald W. Stimpson) to the Board of
Directors of UPC. Such individuals will serve as members of the Board of
Directors of UPC in accordance with the practice and policies (including
applicable age limitations) applicable to all other directors of UPC, will
serve for the full term for which such director is initially elected, and
will be renominated for election as directors and receive director fees in
accordance with such policies and practices. In the case of Edgar H.
Bailey, Mr. Bailey shall be elected for a term expiring at the 1998 annual
meeting of shareholders of UPC, notwithstanding the application of UPC's
mandatory retirement policy.
2. UPC Board Committees. The four individuals who are elected to the
Board of Directors of UPC as described above shall serve on committees of
the Board of Directors (currently consisting of the Audit Committee, the
Executive Committee (which shall include Edgar H. Bailey and Ronald W.
Stimpson), and the Salary and Benefits Committee, only two of which, the
Audit Committee and the Salary and Benefits Committee, meet regularly) as
determined by the Board in accordance with the practice and policies
(including applicable age limitations) applicable to all other directors of
UPC, subject to applicable legal limitations.
3. UPNB Board of Directors. Not later than the first regularly
scheduled meeting of the Board of Directors of Union Planters National Bank
("UPNB"), UPNB shall take all action necessary to elect all members of the
Board of Directors of Leader Federal at the Effective Time (other than the
two non-employee directors elected to the Board of Directors of UPC as
described above) to serve on the Board of Directors of UPNB. Such
individuals will serve as members of the Board of Directors of UPNB in
accordance with the practice and policies (including applicable age
limitations) applicable to all other directors of UPNB and will be
renominated for election as directors and receive director fees in
accordance with such policies and practices.
B. Officer Positions
1. UPC. At the Effective Time, the following officers of Leader shall
be appointed to the designated officer positions in UPC:
Edgar H. Bailey -- Vice Chairman of the Board of Directors
Ronald W. Stimpson -- Senior Executive Vice President and Chief
Administrative Officer (reporting directly to the President of UPC)
Catherine C. Stallings -- Executive Vice President and General
Counsel
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APPENDIX I -- SUPPLEMENTAL LETTER
David C. Wadlington -- Senior Vice President and Chief Financial
Officer of Specialty Banking Operations
2. UPNB. At the Effective Time, the following officers of Leader
shall be appointed to the designated officer positions in UPNB:
Kirk P. Bailey -- President and Chief Operating Officer (reporting
directly to the Chairman of UPNB)
Ronald W. Stimpson -- Vice Chairman with functional responsibility
for Specialty Banking Operations (reporting directly to the Chief
Executive Officer of UPNB)
Brad L. Champlin -- Executive Vice President of Retail Branches
In addition, at the Effective Time, Kenneth W. Plunk shall be
appointed to the position of Chairman of UPNB and Benjamin W. Rawlins, Jr.
shall be appointed to the position of Vice Chairman and remain Chief
Executive Officer of UPNB.
C. Consolidation Coordination Committee. As soon as reasonably practicable
after execution of the Agreement, UPC and Leader shall establish a consolidation
committee that will be composed of Benjamin W. Rawlins, Jr., Jackson W. Moore,
Kenneth W. Plunk, Edgar H. Bailey, Ronald W. Stimpson, and Kirk P. Bailey. Such
committee will have general oversight responsibility for all matters relating to
the consolidation of Leader Federal with UPC. Such committee shall also have
responsibility for structuring and awarding any necessary incentive compensation
to the employees of UPC and Leader to encourage the continued employment of key
operational employees through the Effective Time.
D. Benefit Plans
1. ESOP. To the extent not prohibited by applicable Law, after the
Effective Time and until such time as the normal contribution for the 1997
fiscal year to Leader's Employee Stock Ownership Plan (the "ESOP") shall be
made, UPC shall (i) maintain the ESOP for the exclusive benefit of
individuals who have become participants in the ESOP prior to the Effective
Time, (ii) make annual contributions to the ESOP in amounts at least
sufficient to repay the principal and interest due annually on the
outstanding ESOP loan, (iii) cause the administrative and other authority
previously exercised by Leader's Board of Directors with respect to the
ESOP to be exercised by the Coordination Consolidation Committee, which
authority shall include the authority to appoint the ESOP's trustees, and
(iv) not amend the ESOP except to the extent necessary to comply with
applicable Law or to obtain a favorable determination from the Internal
Revenue Service as to the continuing qualified status of the ESOP.
Notwithstanding the foregoing, UPC agrees that, to the extent not
prohibited by applicable Law, until the full normal 1997 contribution is
made to the ESOP, the ESOP shall not, under any circumstances whatsoever,
be merged into any other tax-qualified retirement plan or be amended to
permit participation by anyone who had not become a participant in the ESOP
prior to the Effective Time. After the full normal 1997 contribution is
made to the ESOP, all contributions under the ESOP shall cease and
participants in the ESOP who at that time continue to be employed by UPC
shall be entitled to participate in UPC's ESOP to the same extent as other
employees of UPC, and UPC shall take such steps as are necessary to merge
Leader's ESOP with and into UPC's ESOP and shall obtain such regulatory
determinations regarding the merger of the Leader ESOP into the UPC ESOP as
may be appropriate to ensure the qualified status of such plans and related
trust under the Internal Revenue Code. Until the merger of the Leader ESOP
into the UPC ESOP, no participant in the Leader ESOP shall be entitled to
participate in the UPC ESOP. At the Effective Time, Leader shall reserve
all costs reasonably anticipated for the separate operation of the Leader
ESOP until such time as the Leader ESOP may be merged into the UPC ESOP as
provided herein.
2. Pension Plan. After the Effective Time there shall be no further
accrual of benefits under Leader's Pension Plan as in effect on the date of
the Agreement (the "Pension Plan") and Leader shall take such steps as are
necessary or practicable to terminate the Pension Plan on or before the
Effective Time. Leader represents that the actual fair market value of
Pension Plan assets exceeds the Pension
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APPENDIX I -- SUPPLEMENTAL LETTER
Plan's "benefit liabilities" (as defined in ERISA Section 4001(a)(16))
assuming the Pension Plan had terminated. Only to the extent permitted by
applicable Law and only to the extent that any of the following amendments
do not cause the benefit liabilities (as defined in the preceding sentence)
to exceed the actual fair market value of Pension Plan assets (all
determined as of the date of the Pension Plan's termination), Leader may at
any time before the Effective Time take the necessary steps with respect to
the Pension Plan to permit participants and their beneficiaries to elect to
receive their accrued benefits in the form of a lump sum payment rather
than an annuity, and to adjust the formula and qualifications for
determining benefits under the Pension Plan in any manner associated with
assuring that any excess funding in such plan inures solely to the benefit
of individuals who have become participants in the Pension Plan at or prior
to the Effective Time. Prior to the Effective Time, Leader shall take such
steps as are appropriate or necessary to determine the cost of terminating
the Pension Plan, including, but not limited to, the amount needed to
satisfy all "benefit liabilities" (as defined in ERISA Section 4001(a)(16))
under the Pension Plan in the event of the anticipated termination and any
penalties or termination fees associated therewith or in connection with
the assets held therein ("Costs of Termination"). Leader shall coordinate
with the Human Resources Department of UPC to ascertain, as close as
reasonably practicable, the Costs of Termination and prior to the Effective
Time, Leader shall fully reserve all such Costs of Termination. Upon
termination of the Leader Pension Plan, employees of Leader who are
participants in such Pension Plan will, to the extent provided under such
Pension Plan and by applicable Law, become fully vested in and eligible to
receive benefits under such Pension Plan to the extent required therein and
by applicable Law. To the extent permitted by the Pension Plan and
applicable Law, Leader shall distribute all vested accrued benefits to plan
participants as soon as reasonably practicable following the termination of
the Pension Plan in the manner required by applicable Law. Leader shall
obtain such regulatory determinations regarding the termination of the
Pension Plan as may be appropriate to ensure the qualified status of such
plan and related trust under the Internal Revenue Code. Upon the election
of any participant, any vested accrued benefit under the Pension Plan that
constitutes an "eligible rollover distribution" (as defined in Internal
Revenue Code Section 402(f)(2)(A) may be rolled over to UPC's 401(k)
retirement savings plan.
3. 401(k) Plan. Notwithstanding anything to the contrary in the
Agreement, after the Effective Time, all contributions under Leader's
401(k) Plan as in effect on the date of the Agreement (the "401(k) Plan")
shall cease and employees of Leader who continue their employment with
Leader after the Effective Time shall be entitled to participate in UPC's
401(k) Plan to the same extent as other employees of UPC as of immediately
after the Effective Time. Leader, in coordination with UPC's Human
Resources Department, shall take such steps as are necessary to merge
Leader's 401(k) Plan with and into UPC's 401(k) Plan as of the Effective
Time or as soon as reasonably practicable after the Effective Time, but any
delay in effectuating such merger shall not delay Leader's employees' right
to participate in UPC's 401(k) Plan as of the Effective Time. Prior to the
Effective Time, Leader shall fully reserve for all anticipated costs and
expenses related to its 401(k) Plan and the merger thereof into UPC's
401(k) Plan. Leader, in coordination with UPC's Human Resources Department,
shall obtain such regulatory determinations regarding the merger of its
401(k) Plan into the UPC 401(k) Plan as may be appropriate to ensure the
qualified status of such plans and related trusts under the Internal
Revenue Code.
E. Other Benefit Matters
1. Employment/Severance Agreements. Due to the inconsistency of the
terms and benefits of the respective employment agreements between Leader
and each of Ronald W. Stimpson, Kirk P. Bailey, Brad L. Champlin, Catherine
C. Stallings, David C. Wadlington, and Larry Kirschner with the corporate
policies and practices of UPC, UPC has requested that each of such
employment agreements be terminated at the Effective Time. Such individuals
who are parties to the employment agreements with Leader have agreed to the
termination of such contracts, and accordingly at the Effective Time, each
of such contracts shall terminate and be of no further force and effect in
consideration of a cash payment respecting a change of control to each
party to the respective agreements in an amount calculated in accordance
with such party's employment agreement. As such individuals are critical to
the successful
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<PAGE> 133
APPENDIX I -- SUPPLEMENTAL LETTER
assimilation of Leader and UPC and will be elected to senior management
positions in UPC and UPNB, UPC is further requesting that such individuals
enter into employment arrangements at the Effective Time appropriate for
their respective positions in UPC and UPNB.
At the Effective Time, the employment agreement between Leader and
Edgar H. Bailey shall terminate and be of no further force and effect. UPC
acknowledges and agrees that consummation of the Merger would constitute a
change of control under Mr. Bailey's employment contract and, therefore,
Mr. Bailey would be entitled to the payment determined pursuant to the
terms of such contract upon consummation of the Merger and termination of
his employment contract. Prior to the Effective Time, Leader shall fully
accrue all payments due or which may be due to Mr. Bailey under such
employment contract upon consummation of the Merger, including, but not
limited to, such payments due Mr. Bailey upon the change of control, change
in conditions, and termination of his employment contract. In lieu of
receiving a lump sum payment for the full amount due under the employment
agreement between Leader and Edgar H. Bailey, Mr. Bailey and UPC agree to
enter into a three-year consulting agreement mutually agreed upon by such
parties and reduce the amount otherwise payable to Mr. Bailey under the
terms of his employment agreement with Leader as a result of the Merger
constituting a change in control by the amounts payable under such
consulting agreement.
All other severance agreements disclosed in Section 5.15 of the Leader
Disclosure Memorandum shall be assumed by UPC in accordance with their
terms and UPC shall, and shall cause Leader to, abide by such agreements in
accordance with the terms.
2. Leader Severance Benefits. Prior to the Effective Time, Leader
will provide severance payments to employees of Leader (other than
employees whose severance benefits are provided for in written employment
agreements) whose employment is terminated as a result of situations
covered under the current Leader severance pay plan disclosed in the Leader
Disclosure Memorandum. Such payment shall be consistent with the terms and
conditions of the Leader severance pay plan. At and subsequent to the
Effective Time, UPC will provide severance payments to employees of Leader
(other than employees whose severance benefits are provided for in written
employment agreements) whose employment is terminated as a result of
situations covered under the current UPC involuntary severance pay plan.
Such payments shall be consistent with the terms and conditions of the UPC
involuntary severance pay plan. Notwithstanding the foregoing, in the event
that UPC contracts with a former employee of Leader to provide services to
UPC for a limited period of time after the Effective Time, upon termination
of such employee's employment and except as otherwise provided in a written
agreement with such employee, such employee shall be entitled to the
benefits under the severance pay plan of UPC or Leader that provides the
greater benefit to such employee. Prior to the Effective Time, Leader shall
fully reserve for all anticipated severance benefits to be paid at or
subsequent to the Effective Time.
3. Leader Termination Program. Prior to the Effective Time, Leader
shall establish a special termination program for those employees of Leader
whose employment is terminated as a result of the Merger. The recipients of
the benefits of the termination program shall be identified prior to the
Effective Time and shall receive cash payments not to exceed in aggregate
$4 million on a pre-tax basis. Prior to the Effective Time, Leader shall
fully reserve for all anticipated costs and expenses related to the special
termination program. Leader shall have full responsibility for structuring
and implementing the special termination program.
4. 1996 Bonus Plan. UPC acknowledges that Leader has disclosed in
Section 7.2 of the Leader Disclosure Memorandum, the 1996 bonus plan of
Leader. Through December 31, 1996 (or the Effective Time, if later), Leader
may continue to accrue for and pay cash bonuses in a manner consistent with
the methodology heretofore established for 1996; provided that any
performance or comparative data about Leader or peer companies shall be
annualized using the best information reasonably available to Leader as of
the Effective Time and without regard for expenses associated with the
Merger (including without limitation the costs allocated with respect to
the resolution of any Leader benefit plan or arrangement as is contemplated
herein); and provided further that such cash bonuses shall be paid on the
Effective Time and be calculated on a 12-month basis.
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APPENDIX I -- SUPPLEMENTAL LETTER
5. Automobiles. Any employee of Leader who, as of the date of the
Agreement, is supplied an automobile at Leader's expense, shall be entitled
to purchase such automobile during the first 30 days following the
Effective Time at a price equal to the book value of such automobile at the
Effective Time. For those employees of Leader who receive an automobile
allowance from Leader and who become employees of UPC but are not provided
an automobile allowance under UPC's policies, such employees will have at
the Effective Time their base salary permanently increased on a one-time
basis by an amount equal to the reported value (as further increased to
reflect the tax expense) of such benefit on the employee's W-2 for the full
fiscal year immediately preceding the Effective Time.
6. Club Dues. Reimbursement of expenses related to memberships in
country clubs or luncheon clubs incurred by employees of Leader who become
employees of UPC after the Effective Time shall, after the Effective Time,
be effected in accordance with the policies of UPC with respect to such
matter for similarly positioned officers and employees. For those employees
of Leader who receive club dues allowance from Leader and who become
employees of UPC but are not provided a club dues allowance under UPC's
policies, such employees will have at the Effective Time their base salary
permanently increased on a one-time basis by an amount equal to the dues
paid (as further increased to reflect the tax expense) for the benefit of
the employee for the full fiscal year immediately preceding the Effective
Time.
7. SERA. On or before the Effective Time, Leader may amend its
supplemental executive retirement agreement ("SERA") with Edgar H. Bailey
in order to permit him to defer the commencement of benefit payments
thereunder until on or after January 1, 1997. UPC agrees to honor the SERA,
Leader's supplemental retirement obligation to Mr. Grady Marlow and
Leader's split-dollar life insurance arrangements, in accordance with their
terms as in effect at the Effective Time.
8. VEBA. Except as provided in the following sentence, on or before
the Effective Time, Leader shall be permitted to contribute, to the trust
associated with the voluntary employees' beneficiary association ("VEBA")
established by Leader pursuant to Internal Revenue Code Section 501(c)(9),
an amount of funds sufficient to permit the trust to meet its pre-Effective
Time obligations under the VEBA, including but not limited to its
obligations that will arise from the retirement of Edgar H. Bailey from his
full-time employment with Leader. However, such contribution will not
exceed the amount that may be deductible under Internal Revenue Code
Sections 419 and 419A or under any other applicable limitation of Law. On
and after the Effective Time, UPC shall maintain the trust associated with
Leader's VEBA for the exclusive benefit of Leader's employees who had
become trust beneficiaries on or before the Effective Time.
9. MRP. UPC agrees to honor Leader's Management Recognition Plan, the
trust associated therewith, and any deferred compensation agreements made
pursuant to the plan, according to their respective terms as in effect at
the Effective Time.
10. Rabbi Trust. Except as provided in the following sentence, on or
before the Effective Time, Leader may take the necessary steps in order to
provide the trustee with specific directions as to (i) the circumstances
under which the assets of the trust (the "Rabbi Trustee") established by
its trust agreement may be paid to Trust beneficiaries, and (ii) the timing
and amount of said payments; provided that the benefits that Leader may
provide through said Trust shall be limited to any severance benefits that
may become payable pursuant to this Supplemental Letter and pursuant to
Leader's deferred compensation plans (pursuant to which participants may
defer compensation prior to the Effective Time). UPC agrees to honor said
trust agreement and deferred compensation plans in accordance with their
terms as in effect at the Effective Time, and to change the Trustee only to
an independent fiduciary with institutional trustee powers. In no event may
the rabbi trust deviate from the IRS model trust described in Revenue
Procedure 92-64.
11. Other Rules Applicable to Paragraphs 7 -- 10 of Section E. The
following restrictions apply in addition to any limitations or conditions
contained in paragraphs 7 through 10 of this Section E.
(a) Unless specifically provided otherwise in this Supplemental
Letter, neither Leader nor its Affiliates may amend any of the benefit
arrangements referred to in paragraphs 7 through 10 above.
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APPENDIX I -- SUPPLEMENTAL LETTER
(b) UPC and its Affiliates are not bound by any of the conditions
and terms of paragraphs 7 through 10 of this Section E to the extent
Leader, UPC, or any of their Affiliates would be required to violate any
requirement of Law.
(c) Unless specifically provided otherwise in this Supplemental
Letter, neither Leader nor its Affiliates may additionally fund any of
the benefit arrangements referred to in paragraphs 7 through 10 above.
F. General Concerns. Notwithstanding anything in this Supplemental Letter
to the contrary, the rights granted by UPC to Leader employees in connection
with the Merger shall not in and of themselves be construed in any way to be an
employment contract with, or right to employment by, Leader, UPC, or any other
subsidiary of UPC after the Effective Time.
G. Timing. Notwithstanding anything in this Supplemental Letter or in the
Agreement to the contrary, Leader may take such actions on or before the
Effective Time as are necessary or appropriate to effectuate the purposes of
this Supplemental Letter, including, but not limited to (i) the adoption and
execution of agreements and amendments relating to the plans, programs, and
agreements referenced herein, and (ii) the adoption and execution of any
amendment required by applicable Law.
IN WITNESS WHEREOF, the Parties intending to be legally bound have caused
this Supplemental Letter to be executed.
UNION PLANTERS CORPORATION
By: /s/ JACKSON W. MOORE
-----------------------------------
Jackson W. Moore
President
LEADER FINANCIAL CORPORATION
By: /s/ EDGAR H. BAILEY
-----------------------------------
Edgar H. Bailey
Chairman of the Board and Chief
Executive Officer
6
<PAGE> 136
APPENDIX I -- STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of March 9, 1996 (the "Agreement"), by and
between Leader Financial Corporation, a Tennessee corporation ("Issuer"), and
Union Planters Corporation, a Tennessee corporation ("Grantee").
WHEREAS, Grantee and Issuer have entered into that certain Agreement and
Plan of Merger, dated as of March 8, 1996 (the "Merger Agreement"), providing
for, among other things, the merger of Issuer with a wholly-owned subsidiary of
Grantee, with Issuer as the surviving entity; and
WHEREAS, as a condition and inducement to Grantee's execution of the Merger
Agreement, Grantee has required that Issuer agree, and Issuer has agreed, to
grant Grantee the Option (as defined below);
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants and agreements set forth herein and in the Merger
Agreement, and intending to be legally bound hereby, Issuer and Grantee agree as
follows:
1. Defined Terms. Capitalized terms which are used but not defined herein
shall have the meanings ascribed to such terms in the Merger Agreement.
2. Grant of Option. Subject to the terms and conditions set forth herein,
Issuer hereby grants to Grantee an irrevocable option (the "Option") to purchase
up to 1,973,600 shares (as adjusted as set forth herein) (the "Option Shares,"
which shall include the Option Shares before and after any transfer of such
Option Shares) of Common Stock, par value $1.00 per share ("Issuer Common
Stock"), of Issuer at a purchase price per Option Share (the "Purchase Price")
equal to $41.50.
3. Exercise of Option. (a) Provided that (i) Grantee shall not be in
material breach of the agreements or covenants contained in this Agreement or
the Merger Agreement, and (ii) no preliminary or permanent injunction or other
order against the delivery of shares covered by the Option issued by any court
of competent jurisdiction in the United States shall be in effect, Grantee may
exercise the Option, in whole or in part, at any time and from time to time
following the occurrence of a Purchase Event; provided that the Option shall
terminate and be of no further force and effect upon the earliest to occur of
(A) the Effective Time, (B) termination of the Merger Agreement in accordance
with the terms thereof prior to the occurrence of a Purchase Event or a
Preliminary Purchase Event (other than a termination of the Merger Agreement by
Grantee pursuant to Section 10.1(b) (but only if such termination was a result
of a willful breach by Issuer) or Section 10.1(c) thereof or by Grantee and
Issuer pursuant to Section 10.1(a) thereof if Grantee shall at that time have
been entitled to terminate the Merger Agreement pursuant to Section 10.1(b) (but
only if such termination was a result of a willful breach by Issuer) or Section
10.1(c) thereof (each a "Default Termination"), (C) 12 months after the
termination of the Merger Agreement by Grantee pursuant to a Default
Termination, and (D) 12 months after termination of the Merger Agreement (other
than pursuant to a Default Termination) following the occurrence of a Purchase
Event or a Preliminary Purchase Event; and provided, further, that any purchase
of shares upon exercise of the Option shall be subject to compliance with
applicable law, including, without limitation, the Bank Holding Company Act of
1956, as amended (the "BHC Act"), and the Home Owners' Loan Act of 1933, as
amended (the "HOLA"). The rights set forth in Section 8 shall terminate when the
right to exercise the Option terminates (other than as a result of a complete
exercise of the Option) as set forth herein.
(b) As used herein, a "Purchase Event" means any of the following events
subsequent to the date of this Agreement:
(i) without Grantee's prior written consent, Issuer shall have
authorized, recommended, publicly proposed or publicly announced an
intention to authorize, recommend or propose, or entered into an agreement
with any person (other than Grantee or any subsidiary of Grantee) to effect
an Acquisition Transaction (as defined below). As used herein, the term
Acquisition Transaction shall mean (A) a merger, consolidation or similar
transaction involving Issuer or any of its subsidiaries (other than
transactions solely between Issuer's subsidiaries), (B) except as permitted
pursuant to Section 7.1 of the Merger Agreement, the disposition, by sale,
lease, exchange or otherwise, of assets of Issuer or any of its
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subsidiaries representing in either case 25% or more of the consolidated
assets of Issuer and its subsidiaries, or (C) the issuance, sale or other
disposition of (including by way of merger, consolidation, share exchange
or any similar transaction) securities representing 25% or more of the
voting power of Issuer or any of its subsidiaries (any of the foregoing an
"Acquisition Transaction"); or
(ii) any person (other than Grantee or any subsidiary of Grantee)
shall have acquired beneficial ownership (as such term is defined in Rule
13d-3 promulgated under the Exchange Act) of or the right to acquire
beneficial ownership of, or any "group" (as such term is defined under the
Exchange Act) shall have been formed which beneficially owns or has the
right to acquire beneficial ownership of, 25% or more of the then-
outstanding shares of Issuer Common Stock.
(c) As used herein, a "Preliminary Purchase Event" means any of the
following events:
(i) any person (other than Grantee or any subsidiary of Grantee) shall
have commenced (as such term is defined in Rule 14d-2 under the Exchange
Act), or shall have filed a registration statement under the Securities Act
with respect to, a tender offer or exchange offer to purchase any shares of
Issuer Common Stock such that, upon consummation of such offer, such person
would own or control 15% or more of the then- outstanding shares of Issuer
Common Stock (such an offer being referred to herein as a "Tender Offer" or
an "Exchange Offer," respectively); or
(ii) the holders of Issuer Common Stock shall not have approved the
Merger Agreement at the meeting of such shareholders held for the purpose
of voting on the Merger Agreement, such meeting shall not have been held or
shall have been canceled prior to termination of the Merger Agreement, or
Issuer's Board of Directors shall have withdrawn or modified in a manner
adverse to Grantee the recommendation of Issuer's Board of Directors with
respect to the Merger Agreement, in each case after it shall have been
publicly announced that any person (other than Grantee or any subsidiary of
Grantee) shall have (A) made, or disclosed an intention to make, a proposal
to engage in an Acquisition Transaction, (B) commenced a Tender Offer or
filed a registration statement under the Securities Act with respect to an
Exchange Offer, or (C) filed an application (or given a notice), whether in
draft or final form, under the BHC Act, the HOLA, the Bank Merger Act, or
the Change in Bank Control Act of 1978, for approval to engage in an
Acquisition Transaction.
As used in this Agreement, "person" shall have the meaning specified in Sections
3(a)(9) and 13(d)(3) of the Exchange Act.
(d) In the event Grantee wishes to exercise the Option, it shall send to
Issuer a written notice (the date of which being herein referred to as the
"Notice Date") specifying (i) the total number of Option Shares it intends to
purchase pursuant to such exercise and (ii) a place and date not earlier than
three business days nor later than 15 business days from the Notice Date for the
closing (the "Closing") of such purchase (the "Closing Date"). If prior
notification to or approval of the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board"), the Office of Thrift Supervision (the
"OTS") or any other regulatory authority is required in connection with such
purchase, Issuer shall cooperate with Grantee in the filing of the required
notice or application for approval and the obtaining of such approval and the
Closing shall occur immediately following such regulatory approvals (and any
mandatory waiting periods).
(e) Notwithstanding any other provision of this Agreement to the contrary,
in no event shall Grantee (together with any other holders of the Option)
purchase under the terms of this Agreement that number of Option Shares which
have a "Spread Value" in excess of $20,737,000. For purposes of this Agreement,
"Spread Value" shall mean the difference between (i) the product of (1) the sum
of the total number of Option Shares Grantee (x) intends to purchase at the
Closing Date pursuant to the exercise of the Option and (y) previously purchased
pursuant to the prior exercise of the Option, and (2) the closing price of
Issuer Common Stock as quoted on the Nasdaq National Market on the last trading
day immediately preceding the Closing Date, and (ii) the product of (1) the
total number of Option Shares Grantee (x) intends to purchase at the Closing
Date pursuant to the exercise of the Option and (y) previously purchased
pursuant to the prior exercise of the Option and (2) the applicable Purchase
Price of such Option Shares. In the event the Spread Value exceeds $20,737,000
the number of Option Shares which Grantee (together with any other holders of
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APPENDIX I -- STOCK OPTION AGREEMENT
the Option) is entitled to purchase at the Closing Date shall be reduced to that
number of shares necessary such that the Spread Value equals or is less than
$20,737,000.
4. Payment and Delivery of Certificates. (a) On each Closing Date, Grantee
shall (i) pay to Issuer, in immediately available funds by wire transfer to a
bank account designated by Issuer, an amount equal to the Purchase Price
multiplied by the number of Option Shares to be purchased on such Closing Date,
and (ii) present and surrender this Agreement to the Issuer at the address of
the Issuer specified in Section 12(f) hereof.
(b) At each Closing, simultaneously with the delivery of immediately
available funds and surrender of this Agreement as provided in Section 4(a), (i)
Issuer shall deliver to Grantee (A) a certificate or certificates representing
the Option Shares to be purchased at such Closing, which Option Shares shall be
free and clear of all liens, claims, charges and encumbrances of any kind
whatsoever and subject to no pre-emptive rights, and (B) if the Option is
exercised in part only, an executed new agreement with the same terms as this
Agreement evidencing the right to purchase the balance of the shares of Issuer
Common Stock purchasable hereunder, and (ii) Grantee shall deliver to Issuer a
letter agreeing that Grantee shall not offer to sell or otherwise dispose of
such Option Shares in violation of applicable federal and state law or of the
provisions of this Agreement.
(c) In addition to any other legend that is required by applicable law,
certificates for the Option Shares delivered at each Closing shall be endorsed
with a restrictive legend which shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT
TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF MARCH 9,
1996. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF
WITHOUT CHARGE UPON RECEIPT BY THE ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificate(s) without such legend if Grantee shall have delivered
to Issuer a copy of a letter from the staff of the SEC, or an opinion of counsel
in form and substance reasonably satisfactory to Issuer and its counsel, to the
effect that such legend is not required for purposes of the Securities Act.
5. Representations and Warranties of Issuer. Issuer hereby represents and
warrants to Grantee as follows:
(a) Issuer has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals referred to herein, to
consummate the transactions contemplated hereby. The execution and delivery
of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the
part of Issuer. This Agreement has been duly executed and delivered by
Issuer. The execution and delivery of this Agreement, the consummation of
the transactions contemplated hereby and compliance by Issuer with any of
the provisions hereof will not (i) conflict with or result in a breach of
any provision of its Articles of Incorporation or By-laws or a default (or
give rise to any right of termination, cancellation or acceleration) under
any of the terms, condition or provisions of any material note, bond,
debenture, mortgage, indenture, license, material agreement or other
material instrument or obligation to which Issuer is bound, or (ii) violate
any order, writ, injunction, decree, statute, rule or regulation applicable
to Issuer or any of its properties or assets. No consent or approval by any
governmental authority, other than compliance with applicable federal and
state securities and banking laws, and regulations of the Federal Reserve
Board and the OTS, is required of Issuer in connection with the execution
and delivery by Issuer of this Agreement or the consummation by Issuer of
the transactions contemplated hereby.
(b) Issuer has taken all necessary corporate and other action to
authorize and reserve and to permit it to issue, and, at all times from the
date hereof until the obligation to deliver Issuer Common Stock upon the
exercise of the Option terminates, will have reserved for issuance, upon
exercise of the Option, the number of shares of Issuer Common Stock
necessary for Grantee to exercise the Option, and Issuer
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will take all necessary corporate action to authorize and reserve for
issuance all additional shares of Issuer Common Stock or other securities
which may be issued pursuant to Section 7 upon exercise of the Option. The
shares of Issuer Common Stock to be issued upon due exercise of the Option,
including all additional shares of Issuer Common Stock or other securities
which may be issuable pursuant to Section 7, upon issuance pursuant hereto,
shall be duly and validly issued, fully paid, and nonassessable, and shall
be delivered free and clear of all liens, claims, charges, and encumbrances
of any kind or nature whatsoever, including any preemptive rights of any
stockholder of Issuer.
6. Representations and Warrants of Grantee. Grantee hereby represents and
warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals or consents referred to
herein, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of Grantee. This Agreement has been duly executed and
delivered by Grantee.
(b) This Option is not being, and any Option Shares or other
securities acquired by Grantee upon exercise of the Option will not be,
acquired with a view to the public distribution thereof and will not be
transferred or otherwise disposed of except in a transaction registered or
exempt from registration under the Securities Laws.
7. Adjustment Upon Changes in Capitalization, Etc. (a) In the event of any
change in Issuer Common Stock by reason of a stock dividend, stock split,
split-up, recapitalization, combination, exchange of shares or similar
transaction, the type and number of shares or securities subject to the Option,
and the Purchase Price therefor, shall be adjusted appropriately, and proper
provision shall be made in the agreements governing such transaction so that
Grantee shall receive, upon exercise of the Option, the number and class of
shares or other securities or property that Grantee would have received in
respect of Issuer Common Stock if the Option had been exercised immediately
prior to such event, or the record date therefor, as applicable. If any
additional shares of Issuer Common Stock are issued after the date of this
Agreement (other than pursuant to an event described in the first sentence of
this Section 7(a)), the number of shares of Issuer Common Stock subject to the
Option shall be adjusted so that, after such issuance, it, together with any
shares of Issuer Common Stock previously issued pursuant hereto, equals 19.9% of
the number of shares of Issuer Common Stock then issued and outstanding, without
giving effect to any shares subject to or issued pursuant to the Option.
(b) In the event that Issuer shall enter in an agreement: (i) to
consolidate with or merge into any person, other than Grantee or one of its
Subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger; (ii) to permit any person, other than Grantee or one of
its Subsidiaries, to merge into Issuer and Issuer shall be the continuing or
surviving corporation, but, in connection with such merger, the then outstanding
shares of Issuer Common Stock shall be changed into or exchanged for stock or
other securities of Issuer or any other person or cash or any other property or
the outstanding shares of Issuer Common Stock immediately prior to such merger
shall after such merger represent less than 50% of the outstanding shares and
share equivalents of the merged company; or (iii) to sell or otherwise transfer
all or substantially all of its Assets to any person, other than Grantee or one
of its Subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provisions so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of Grantee, of either (x) the Acquiring Corporation
(as defined below), (y) any person that controls the Acquiring Corporation, or
(z) in the case of a merger described in clause (ii), the Issuer (in each case,
such person being referred to as the "Substitute Option Issuer").
(c) The Substitute Option shall have the same terms as the Option, provided
that, if the terms of the Substitute Option cannot, for legal reasons, be the
same as the Option, such terms shall be as similar as possible and in no event
less advantageous to Grantee. The Substitute Option Issuer shall also enter into
an agreement with the then-holder or holders of the Substitute Option in
substantially the same form as this Agreement, which shall be applicable to the
Substitute Option.
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APPENDIX I -- STOCK OPTION AGREEMENT
(d) The Substitute Option shall be exercisable for such number of shares of
the Substitute Common Stock (as hereinafter defined) as is equal to the Assigned
Value (as hereinafter defined) multiplied by the number of shares of the Issuer
Common Stock for which the Option was theretofore exercisable, divided by the
Average Price (as hereinafter defined). The exercise price of the Substitute
Option per share of the Substitute Common Stock (the "Substitute Purchase
Price") shall then be equal to the Purchase Price multiplied by a fraction in
which the numerator is the number of shares of the Issuer Common Stock for which
the Option was theretofore exercisable and the denominator is the number of
shares for which the Substitute Option is exercisable.
(e) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (x) the continuing or surviving
corporation of a consolidation or merger with Issuer (if other than
Issuer), (y) Issuer in a merger in which Issuer is the continuing or
surviving person, and (z) the transferee of all or any substantial part of
the Issuer's assets (or the assets of its Subsidiaries).
(ii) "Substitute Common Stock" shall mean the common stock issued by
the Substitute Option Issuer upon exercise of the Substitute Option.
(iii) "Assigned Value" shall mean the highest of (x) the price per
share of the Issuer Common Stock at which a Tender Offer or Exchange Offer
therefor has been made by any person (other than Grantee), (y) the price
per share of the Issuer Common Stock to be paid by any person (other than
the Grantee) pursuant to an agreement with Issuer, and (z) the highest
closing sales price per share of Issuer Common Stock quoted on the Nasdaq
National Market (or if Issuer Common Stock is not quoted on the Nasdaq
National Market, the highest bid price per share on any day as quoted on
the principal trading market or securities exchange on which such shares
are traded as reported by a recognized source chosen by Grantee) within the
six-month period immediately preceding the agreement; provided, that in the
event of a sale of less than all of Issuer's assets, the Assigned Value
shall be the sum of the price paid in such sale for such assets and the
current market value of the remaining assets of Issuer as determined by a
nationally recognized investment banking firm selected by Grantee (or by a
majority in interest of the Grantees if there shall be more than one
Grantee (a "Grantee Majority")), divided by the number of shares of the
Issuer Common Stock outstanding at the time of such sale. In the event that
an exchange offer is made for the Issuer Common Stock or an agreement is
entered into for a merger or consolidation involving consideration other
than cash, the value of the securities or other property issuable or
deliverable in exchange for the Issuer Common Stock shall be determined by
a nationally recognized investment banking firm mutually selected by
Grantee and Issuer (or if applicable, Acquiring Corporation), provided that
if a mutual selection cannot be made as to such investment banking firm, it
shall be selected by Grantee. (If there shall be more than one Grantee, any
such selection shall be made by a Grantee Majority.)
(iv) "Average Price" shall mean the average closing price of a share
of the Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of the Substitute Common Stock on the day
preceding such consolidation, merger or sale; provided that if Issuer is
the issuer of the Substitute Option, the Average Price shall be computed
with respect to a share of common stock issued by Issuer, the person
merging into Issuer or by any company which controls or is controlled by
such merger person, as Grantee may elect.
(f) In no event pursuant to any of the foregoing paragraphs shall the
Substitute Option be exercisable for more than 19.9% of the aggregate of the
shares of the Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than 19.9% of the aggregate of the shares of Substitute Common Stock
but for this clause (f), the Substitute Option Issuer shall make a cash payment
to Grantee equal to the excess of (i) the value of the Substitute Option without
giving effect to the limitation in this clause (f) over (ii) the value of the
Substitute Option after giving effect to the limitation in this clause (f). This
difference in value shall be determined by a nationally recognized investment
banking firm selected by Grantee (or a Grantee Majority).
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APPENDIX I -- STOCK OPTION AGREEMENT
(g) Issuer shall not enter into any transaction described in subsection (b)
of this Section 7 unless the Acquiring Corporation and any person that controls
the Acquiring Corporation assume in writing all the obligations of Issuer
hereunder and take all other actions that may be necessary so that the
provisions of this Section 7 are given full force and effect (including, without
limitation, any action that may be necessary so that the shares of Substitute
Common Stock are in no way distinguishable from or have lesser economic value
than other shares of common stock issued by the Substitute Option Issuer).
(h) The provisions of Sections 8, 9, and 10 shall apply, with appropriate
adjustments, to any securities for which the Option becomes exercisable pursuant
to this Section 7 and, as applicable, references in such sections to "Issuer,"
"Option," "Purchase Price" and "Issuer Common Stock" shall be deemed to be
references to "Substitute Option Issuer," "Substitute Option," "Substitute
Purchase Price" and "Substitute Common Stock," respectively.
8. Repurchase at the Option of Grantee. (a) Subject to the last sentence
of Section 3(a), at the request of Grantee at any time commencing upon the first
occurrence of a Repurchase Event (as defined in Section 8(d)) and ending 12
months immediately thereafter, Issuer shall repurchase from Grantee the Option
and all shares of Issuer Common Stock purchased by Grantee pursuant hereto with
respect to which Grantee then has beneficial ownership. The date on which
Grantee exercises its rights under this Section 8 is referred to as the "Request
Date." Such repurchase shall be at an aggregate price (the "Section 8 Repurchase
Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by Grantee for any shares of
Issuer Common Stock acquired pursuant to the Option with respect to which
Grantee then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as defined
below) for each share of Issuer Common Stock over (y) the Purchase Price
(subject to adjustment pursuant to Section 7), multiplied by the number of
shares of Issuer Common Stock with respect to which the Option has not been
exercised; and
(iii) the excess, if any, of the Applicable Price over the Purchase
Price (subject to adjustment pursuant to Section 7) paid (or, in the case
of Option Shares with respect to which the Option has been exercised but
the Closing Date has not occurred, payable) by Grantee for each share of
Issuer Common Stock with respect to which the Option has been exercised and
with respect to which Grantee then has beneficial ownership, multiplied by
the number of such shares; provided, that the amount calculated pursuant to
clause (ii) and (iii) of this Section 8(a) shall not exceed $20,737,000.
(b) If Grantee exercises its rights under this Section 8, Issuer shall,
within ten business days after the Request Date, pay the Section 8 Repurchase
Consideration to Grantee in immediately available funds, and contemporaneously
with such payment Grantee shall surrender to Issuer the Option and the
certificates evidencing the shares of Issuer Common Stock purchased thereunder
with respect to which Grantee then has beneficial ownership, and Grantee shall
warrant that it has sole record and beneficial ownership of such shares and that
the same are then free and clear of all liens, claims, charges and encumbrances
of any kind whatsoever. Notwithstanding the foregoing, to the extent that prior
notification to or approval of the Federal Reserve Board, the OTS or other
regulatory authority is required in connection with the payment of all or any
portion of the Section 8 Repurchase Consideration, Grantee shall have the
ongoing option to revoke its request for repurchase pursuant to Section 8, in
whole or in part, or to require that Issuer deliver from time to time that
portion of the Section 8 Repurchase Consideration that it is not then so
prohibited from paying and promptly file the required notice or application for
approval and expeditiously process the same (and each party shall cooperate with
the other in the filing of any such notice or application and the obtaining of
any such approval). If the Federal Reserve Board, the OTS or any other
regulatory authority disapproves of any part of Issuer's proposed repurchase
pursuant to this Section 8, Issuer shall promptly give notice of such fact to
Grantee. If the Federal Reserve Board, the OTS or other agency prohibits the
repurchase in part but not in whole, then Grantee shall have the right (i) to
revoke the repurchase request or (ii) to the extent permitted by the Federal
Reserve Board, the OTS or other agency, determine whether the repurchase should
apply to the Option and/or Option Shares and to what extent to each, and Grantee
shall thereupon have the right to exercise the Option as to the number of Option
Shares for which the Option was exercisable at the Request
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APPENDIX I -- STOCK OPTION AGREEMENT
Date less the sum of the number of shares covered by the Option in respect of
which payment has been made pursuant to Section 8(a)(ii) and the number of
shares covered by the portion of the Option (if any) that has been repurchased.
Grantee shall notify Issuer of its determination under the preceding sentence
within five business days of receipt of notice of disapproval of the repurchase.
Notwithstanding anything herein to the contrary, all of Grantee's rights
under this Section 8 shall terminate on the date of termination of this Option
pursuant to Section 3(a).
(c) For purposes of this Agreement, the "Applicable Price" means the
highest of (i) the highest price per share of Issuer Common Stock paid for any
such share by the person or groups described in Section 8(d)(i), (ii) the price
per share of Issuer Common Stock received by holders of Issuer Common Stock in
connection with any merger or other business combination transaction described
in Section 7(b)(i), 7(b)(ii) or 7(b)(iii), or (iii) the highest closing sales
price per share of Issuer Common Stock quoted on the Nasdaq National Market (or
if Issuer Common Stock is not quoted on the Nasdaq National Market, the highest
bid price per share as quoted on the principal trading market or securities
exchange on which such shares are traded as reported by a recognized source
chosen by Grantee) during the 60 business days preceding the Request Date;
provided, however, that in the event of a sale of less than all of Issuer's
assets, the Applicable Price shall be the sum of the price paid in such sale for
such assets and the current market value of the remaining assets of Issuer as
determined by an independent nationally recognized investment banking firm
selected by Grantee and reasonably acceptable to Issuer (which determination
shall be conclusive for all purposes of this Agreement), divided by the number
of shares of the Issuer Common Stock outstanding at the time of such sale. If
the consideration to be offered, paid or received pursuant to either of the
foregoing clauses (i) or (ii) shall be other than in cash, the value of such
consideration shall be determined in good faith by an independent nationally
recognized investment banking firm selected by Grantee and reasonably acceptable
to Issuer, which determination shall be conclusive for all purposes of this
Agreement.
(d) As used herein, "Repurchase Event" shall occur if (i) any person (other
than Grantee or any subsidiary of Grantee) shall have acquired beneficial
ownership (as such term is defined in Rule 13d-3 promulgated under the Exchange
Act), or the right to acquire beneficial ownership, or any "group" (as such term
is defined under the Exchange Act) shall have been formed which beneficially
owns or has the right to acquire beneficial ownership, of 50% or more of the
then-outstanding shares of Issuer Common Stock, or (ii) any of the transactions
described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii) shall be consummated.
9. Registration Rights.
(a) Issuer shall, subject to the conditions of subparagraph (c) below, if
requested by Grantee (or if applicable, a Grantee Majority), as expeditiously as
possible prepare and file a registration statement under the Securities Laws if
necessary in order to permit the sale or other disposition of any or all shares
of Issuer Common Stock or other securities that have been acquired by or are
issuable to Grantee upon exercise of the Option in accordance with the intended
method of sale or other disposition stated by Grantee in such request,
including, without limitation, a "shelf" registration statement under Rule 415
under the Securities Act or any successor provision, and Issuer shall use its
best efforts to qualify such shares or other securities for sale under any
applicable state securities laws.
(b) If Issuer at any time after the exercise of the Option proposes to
register any shares of Issuer Common Stock under the Securities Laws in
connection with an underwritten public offering of such Issuer Common Stock,
Issuer will promptly give written notice to Grantee (and any permitted
transferee) of its intention to do so and, upon the written request of Grantee
(or any such permitted transferee of Grantee) given within 30 days after receipt
of any such notice (which request shall specify the number of shares of Issuer
Common Stock intended to be included in such underwritten public offering by
Grantee (or such permitted transferee)), Issuer will cause all such shares, the
holders of which shall have requested participation in such registration, to be
so registered and included in such underwritten public offering; provided, that
Issuer may elect to not cause any such shares to be so registered (i) if the
underwriters in good faith object for valid business reasons, or (ii) in the
case of a registration solely to implement a dividend reinvestment or similar
plan, an employee benefit plan or a registration filed on Form S-4; provided,
further, that such election pursuant to clause (i) may only be made one time. If
some but not all the shares of Issuer
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APPENDIX I -- STOCK OPTION AGREEMENT
Common Stock, with respect to which Issuer shall have received requests for
registration pursuant to this subparagraph (b), shall be excluded from such
registration, Issuer shall make appropriate allocation of shares to be
registered among Grantee (and any such permitted transferee desiring to register
their shares) and any other person (other than Issuer) who or which is permitted
to register their shares of Issuer Common Stock in connection with such
registration pro rata in the proportion that the number of shares requested to
be registered by each such holder bears to the total number of shares requested
to be registered by all such holders then desiring to have Issuer Common Stock
registered for sale.
(c) Issuer shall use all reasonable efforts to cause each registration
statement referred to in subparagraph (a) above to become effective and to
obtain all consents or waivers of other parties which are required therefor and
to keep such registration statement effective, provided, that Issuer may delay
any registration of Option Shares required pursuant to subparagraph (a) above
for a period not exceeding 90 days provided Issuer shall in good faith determine
that any such registration would adversely affect an offering or contemplated
offering of other securities by Issuer, and Issuer shall not be required to
register Option Shares under the Securities Laws pursuant to subparagraph (a)
above:
(i) prior to the earliest of (a) termination of the Merger Agreement
pursuant to Section 10.1 thereof, (b) failure to obtain the requisite
stockholder approval pursuant to Section 9.1(a) of the Merger Agreement,
and (c) a Purchase Event or a Preliminary Purchase Event;
(ii) on more than two occasions;
(iii) more than once during any calendar year;
(iv) within 90 days after the effective date of a registration
referred to in subparagraph (b) above pursuant to which the holder or
holders of the Option Shares concerned were afforded the opportunity to
register such shares under the Securities Laws and such shares were
registered as requested; and
(v) unless a request therefor is made to Issuer by the holder or
holders of at least 25% or more of the aggregate number of Option Shares
then outstanding.
In addition to the foregoing, Issuer shall not be required to maintain the
effectiveness of any registration statement after the expiration of nine months
from the effective date of such registration statement. Issuer shall use all
reasonable efforts to make any filings, and take all steps, under all applicable
state securities laws to the extent necessary to permit the sale or other
disposition of the Option Shares so registered in accordance with the intended
method of distribution for such shares, provided, that Issuer shall not be
required to consent to general jurisdiction or qualify to do business in any
state where it is not otherwise required to so consent to such jurisdiction or
to so qualify to do business.
(d) Except where applicable state law prohibits such payments, Issuer will
pay all expenses (including without limitation registration fees, qualification
fees, blue sky fees and expenses (including the fees and expenses of counsel),
accounting expenses, legal expenses including the reasonable fees and expenses
of one counsel to the holders whose Option Shares are being registered, printing
expenses, expenses of underwriters, excluding discounts and commissions but
including liability insurance if Issuer so desires or the underwriters so
require, and the reasonable fees and expenses of any necessary special experts)
in connection with each registration pursuant to subparagraph (a) or (b) above
(including the related offerings and sales by holders of Option Shares) and all
other qualifications, notifications or exemptions pursuant to subparagraph (a)
or (b) above. Underwriting discounts and commissions relating to Option Shares,
fees and disbursements of counsel to the holders of Option Shares being
registered and any other expenses incurred by such holders in connection with
any such registration shall be borne by such holders.
(e) In connection with any registration under subparagraph (a) or (b) above
Issuer hereby indemnifies the holder of the Option Shares, and each underwriter
thereof, including each person, if any, who controls such holder or underwriter
within the meaning of Section 15 of the Securities Act, against all expenses,
losses, claims, damages and liabilities caused by any untrue, or alleged untrue,
statement of a material fact contained in any registration statement or
prospectus or notification or offering circular (including any amendments or
supplements thereto) or any preliminary prospectus, or caused by any omission,
or alleged omission, to state
8
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APPENDIX I -- STOCK OPTION AGREEMENT
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such expenses, losses,
claims, damages or liabilities of such indemnified party are caused by any
untrue statement or alleged untrue statement that was included by Issuer in any
such registration statement or prospectus or notification or offering circular
(including any amendments or supplements thereto) in reliance upon and in
conformity with, information furnished in writing to Issuer by such indemnified
party expressly for use therein, and Issuer and each officer, director and
controlling person of Issuer shall be indemnified by such holder of the Option
Shares, or by such underwriter, as the case may be, for all such expenses,
losses, claims, damages and liabilities caused by any untrue, or alleged untrue,
statement, that was included by Issuer in any such registration statement or
prospectus or notification or offering circular (including any amendments or
supplements thereto) in reliance upon, and in conformity with, information
furnished in writing to Issuer by such holder or such underwriter, as the case
may be, expressly for such use.
Promptly upon receipt by a party indemnified under this subparagraph (e) of
notice of the commencement of any action against such indemnified party in
respect of which indemnity or reimbursement may be sought against any
indemnifying party under this subparagraph (e), such indemnified party shall
notify the indemnifying party in writing of the commencement of such action, but
the failure so to notify the indemnifying party shall not relieve it of any
liability which it may otherwise have to any indemnified party under this
subparagraph (e). In case notice of commencement of any such action shall be
given to the indemnifying party as above provided, the indemnifying party shall
be entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and reasonably satisfactory
to such indemnified party. The indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel (other than reasonable costs of
investigation) shall be paid by the indemnified party unless (i) the
indemnifying party either agrees to pay the same, (ii) the indemnifying party
fails to assume the defense of such action with counsel satisfactory to the
indemnified party, or (iii) the indemnified party has been advised by counsel
that one or more legal defenses may be available to the indemnifying party that
may be contrary to the interest of the indemnified party, in which case the
indemnifying party shall be entitled to assume the defense of such action
notwithstanding its obligation to bear fees and expenses of such counsel. No
indemnifying party shall be liable for any settlement entered into without its
consent, which consent may not be unreasonably withheld.
If the indemnification provided for in this subparagraph (e) is unavailable
to a party otherwise entitled to be indemnified in respect of any expenses,
losses, claims, damages or liabilities referred to herein, then the indemnifying
party, in lieu of indemnifying such party otherwise entitled to be indemnified,
shall contribute to the amount paid or payable by such party to be indemnified
as a result of such expenses, losses, claims, damages or liabilities in such
proportion as is appropriate to reflect the relative benefits received by
Issuer, the selling shareholders and the underwriters from the offering of the
securities and also the relative fault of Issuer, the selling shareholders and
the underwriters in connection with the statements or omissions which resulted
in such expenses, losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The amount paid or payable by a party as a
result of the expenses, losses, claims, damages and liabilities referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action
or claim; provided, that in no case shall the holders of the Option Shares be
responsible, in the aggregate, for any amount in excess of the net offering
proceeds attributable to its Option Shares included in the offering. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. Any obligation by any holder to
indemnify shall be several and not joint with other holders.
In connection with any registration pursuant to subparagraph (a) or (b)
above, Issuer and each holder of any Option Shares (other than Grantee) shall
enter into an agreement containing the indemnification provisions of this
subparagraph (e).
(f) Issuer shall comply with all reporting requirements and will do all
such other things as may be necessary to permit the expeditious sale at any time
of any Option Shares by the holder thereof in accordance
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APPENDIX I -- STOCK OPTION AGREEMENT
with and to the extent permitted by any rule or regulation promulgated by the
SEC from time to time, including, without limitation, Rules 144 and 144A. Issuer
shall at its expense provide the holder of any Option Shares with any
information necessary in connection with the completion and filing of any
reports or forms required to be filed by them under the Securities Laws, or
required pursuant to any state securities laws or the rules of any stock
exchange.
(g) Issuer will pay all stamp taxes in connection with the issuance and the
sale of the Option Shares and in connection with the exercise of the Option, and
will save Grantee harmless, without limitation as to time, against any and all
liabilities, with respect to all such taxes.
10. Quotation; Listing. If Issuer Common Stock or any other securities to
be acquired upon exercise of the Option are then authorized for quotation or
trading or listing on the Nasdaq National Market or any securities exchange,
Issuer, upon the request of Grantee, will promptly file an application, if
required, to authorize for quotation or trading or listing the shares of Issuer
Common Stock or other securities to be acquired upon exercise of the Option on
the Nasdaq National Market or any securities exchange and will use its best
efforts to obtain approval, if required, of such quotation or listing as soon as
practicable.
11. Division of Option. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of Grantee, upon presentation and
surrender of this Agreement at the principal office of Issuer for other
Agreements providing for Options of different denominations entitling the holder
thereof to purchase in the aggregate the same number of shares of Issuer Common
Stock purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any other Agreements and related Options for which this Agreement (and
the Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
12. Miscellaneous.
(a) Expenses. Except as otherwise provided in Section 10, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or
on its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
(b) Waiver and Amendment. Any provision of this Agreement may be
waived at any time by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a written agreement
executed by the parties hereto.
(c) Entire Agreement; No Third-Party Beneficiary; Severability. This
Agreement, together with the Merger Agreement and the other documents and
instruments referred to herein and therein, between Grantee and Issuer (a)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to
the subject matter hereof and (b) is not intended to confer upon any person
other than the parties hereto (other than any transferees of the Option
Shares or any permitted transferee of this Agreement pursuant to Section
13(h)) any rights or remedies hereunder. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent
jurisdiction or a federal or state regulatory agency to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and
shall in no way be affected, impaired or invalidated. If for any reason
such court or regulatory agency determines that the Option does not permit
Grantee to acquire, or does not require Issuer to repurchase, the full
number of shares of Issuer Common Stock as provided in Sections 3 and 8 (as
adjusted pursuant to Section 7), it is the express intention of Issuer to
allow Grantee to acquire or to
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APPENDIX I -- STOCK OPTION AGREEMENT
require Issuer to repurchase such lesser number of shares as may be
permissible without any amendment or modification hereof.
(d) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Tennessee without regard to any
applicable conflicts of law rules.
(e) Descriptive Headings. The descriptive headings contained herein
are for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
(f) Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, telecopied
(with confirmation) or mailed by registered or certified mail (return
receipt requested) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
<TABLE>
<S> <C> <C>
If to Issuer to: Leader Financial Corporation
158 Madison Avenue
Memphis, Tennessee 38103
Telecopy Number (901) 578-2049
Attention: Edgar H. Bailey
Chairman and Chief Executive Officer
with a copy to: Leader Financial Corporation
158 Madison Avenue
Memphis, Tennessee 38103
Telecopy Number (901) 578-2049
Attention: Catherine C. Stallings
General Counsel
Housley, Kantarian & Bronstein
1220 19th Street, N.W.
Suite 700
Washington, D.C. 20036
Telecopy Number: (202) 822-0140
Attention: Harry K. Kantarian
If to Grantee to: Union Planters Corporation
7130 Goodlett Farms Parkway
Memphis, Tennessee 38108
Telecopy Number: (901) 383-2877
Attention: Jackson W. Moore
President
with a copy to: Alston & Bird
601 Pennsylvania Avenue, N.W.
North Building, Suite 250
Washington, D.C. 20004-2601
Telecopy Number: (202) 508-3333
Attention: Frank M. Conner III
</TABLE>
(g) Counterparts. This Agreement and any amendments hereto may be executed
in two counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have been signed, it
being understood that both parties need not sign the same counterpart.
(h) Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder or under the Option shall be assigned by any of the
parties hereto (whether by operation of law or otherwise)
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APPENDIX I -- STOCK OPTION AGREEMENT
without the prior written consent of the other party, except that Grantee may
assign this Agreement to a wholly owned subsidiary of Grantee and Grantee may
assign its rights hereunder in whole or in part after the occurrence of a
Purchase Event. Subject to the preceding sentence, this Agreement shall be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
(i) Further Assurances. In the event of any exercise of the Option by
Grantee, Issuer and Grantee shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
(j) Specific Performance. The parties hereto agree that this Agreement may
be enforced by either party through specific performance, injunctive relief and
other equitable relief. Both parties further agree to waive any requirement for
the securing or posting of any bond in connection with the obtaining of any such
equitable relief and that this provision is without prejudice to any other
rights that the parties hereto may have for any failure to perform this
Agreement.
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
<TABLE>
<S> <C>
ATTEST: LEADER FINANCIAL CORPORATION
By: /s/ CATHERINE C. STALLINGS By: /s/ EDGAR H. BAILEY
----------------------------------------- -----------------------------------------
Catherine C. Stallings Edgar H. Bailey
Secretary Chairman of the Board and
Chief Executive Officer
[CORPORATE SEAL]
ATTEST: UNION PLANTERS CORPORATION
By: /s/ E.J. HOUSE, Jr. By: /s/ JACKSON W. MOORE
----------------------------------------- -----------------------------------------
E.J. House, Jr. Jackson W. Moore
Secretary President
[CORPORATE SEAL]
</TABLE>
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<PAGE> 148
APPENDIX II
PLAN OF MERGER
OF
UPC MERGER SUBSIDIARY, INC.
INTO AND WITH
LEADER FINANCIAL CORPORATION
Pursuant to this Plan of Merger ("Plan of Merger"), UPC MERGER SUBSIDIARY,
INC. ("Merger Sub"), a corporation organized and existing under the laws of the
State of Tennessee and a wholly owned subsidiary of UNION PLANTERS CORPORATION,
a corporation organized and existing under the laws of the State of Tennessee
("UPC"), shall be merged into and with LEADER FINANCIAL CORPORATION, a
corporation organized and existing under the laws of the State of Tennessee
("Leader").
ARTICLE 1
DEFINITIONS
Except as otherwise provided herein, the capitalized terms set forth below
shall have the following meanings:
1.1 "Articles of Merger" shall mean the Articles of Merger to be executed
by Leader and Merger Sub and filed with the Secretary of State of the State of
Tennessee relating to the merger of Merger Sub into and with Leader as
contemplated by Section 2.1 of this Plan of Merger.
1.2 "Effective Time" shall mean the date and time on which the Merger
becomes effective pursuant to the Laws of the State of Tennessee as defined in
Section 2.2 of this Plan of Merger.
1.3 "Exchange Agent" shall mean the exchange agent selected by UPC.
1.4 "Internal Revenue Code" shall mean the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder.
1.5 "Law" shall mean any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or statute applicable to a person or its assets,
liabilities, or business, including those promulgated, interpreted, or enforced
by any federal or state regulatory agencies having jurisdiction over a person or
its Subsidiaries.
1.6 "Leader Common Stock" shall mean the $1.00 par value common stock of
Leader.
1.7 "Leader Companies" shall mean, collectively, Leader and all Leader
Subsidiaries.
1.8 "Leader Stock Plans" shall have the meaning set forth in the Merger
Agreement.
1.9 "Merger" shall mean the merger of Merger Sub into and with Leader as
provided in Section 2.1 of this Plan of Merger.
1.10 "Merger Agreement" shall mean the Agreement and Plan of Merger, dated
as of March 8, 1996, by and between UPC and Leader.
1.11 "Merger Sub Common Stock" shall mean the $1.00 par value common stock
of Merger Sub.
1.12 "Subsidiaries" shall mean all those corporations, banks, associations,
or other entities of which the entity in question owns or controls 50% or more
of the outstanding equity securities either directly or through an unbroken
chain of entities as to each of which 50% or more of the outstanding equity
securities is owned directly or indirectly by its parent; provided, there shall
not be included any such entity acquired through foreclosure or any such entity
the equity securities of which are owned or controlled in a fiduciary capacity.
1.13 "Surviving Corporation" shall refer to Leader as the surviving
corporation resulting from the Merger.
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APPENDIX II -- FORM OF PLAN OF MERGER
1.14 "TBCA" shall mean the Tennessee Business Corporation Act, as in effect
at the Effective Time.
1.15 "UPC Common Stock" shall mean the $5.00 par value common stock of UPC.
1.16 "UPC Companies" shall mean, collectively, UPC and all UPC
Subsidiaries.
1.17 "UPC Capital Stock" shall mean, collectively, the UPC Common Stock,
the UPC Preferred Stock, and any other class or series of capital stock of UPC.
1.18 "UPC Preferred Stock" shall mean the no par value preferred stock of
UPC and shall include the (i) Series A Preferred Stock, (ii) Series B, $8.00
Nonredeemable, Cumulative, Convertible Preferred Stock, and (iii) Series E, 8%
Cumulative, Convertible Preferred Stock, of UPC.
1.19 "UPC Rights" shall mean the preferred stock purchase rights issued
pursuant to the UPC Rights Agreement.
1.20 "UPC Rights Agreement" shall mean that certain Rights Agreement, dated
January 19, 1989, between UPC and UPNB, as Rights Agent.
ARTICLE 2
TERMS OF MERGER
2.1 Merger. Subject to the terms and conditions set forth in this Plan of
Merger, at the Effective Time, Merger Sub shall be merged into and with Leader
in accordance with the provisions of Section 48-21-102 of the TBCA and with the
effect specified in Section 48-21-108 of the TBCA. Leader shall be the Surviving
Corporation of the Merger and shall continue to be governed by the Laws of the
State of Tennessee.
2.2 Effective Time. The Merger shall become effective on the date and at
the time specified in the Articles of Merger to be filed with the Secretary of
State of the State of Tennessee as provided in Section 48-21-107 of the TBCA.
2.3 Charter. The Charter of Leader, as in effect immediately prior to the
Effective Time, shall remain in full force and effect following the Effective
Time as the Charter of the Surviving Corporation until otherwise amended or
repealed as provided by Law or by such Charter.
2.4 Bylaws. The Bylaws of Leader, as in effect immediately prior to the
Effective Time, shall continue in full force and effect as the Bylaws of the
Surviving Corporation until otherwise amended or repealed as provided by Law or
by such Bylaws.
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 Conversion of Shares. Subject to the provisions of this Article 3, at
the Effective Time, by virtue of the Merger and without any action on the part
of UPC, Merger Sub, Leader, or the shareholders of either of the foregoing, the
shares of the constituent corporations shall be converted as follows:
(a) Each share of UPC Capital Stock, including any associated UPC
Rights, issued and outstanding immediately prior to the Effective Time
shall remain issued and outstanding from and after the Effective Time.
(b) Each share of Merger Sub Common Stock issued and outstanding at
the Effective Time shall cease to be outstanding and shall be converted
into one share of Leader Common Stock.
(c) Each share of Leader Common Stock (excluding shares held by any
Leader Company or any UPC Company, in each case other than in a fiduciary
capacity or as a result of debts previously contracted) issued and
outstanding at the Effective Time shall cease to be outstanding and shall
be
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APPENDIX II -- FORM OF PLAN OF MERGER
converted into and exchanged for the right to receive 1.525 of a share of
UPC Common Stock (as subject to possible adjustment as set forth in Section
10.1(i) of the Merger Agreement, the "Exchange Ratio"). Pursuant to the UPC
Rights Agreement, each share of UPC Common Stock issued in connection with
the Merger upon conversion of Leader Common Stock shall be accompanied by a
UPC Right.
3.2 Anti-Dilution Provisions. In the event UPC changes the number of
shares of UPC Common Stock issued and outstanding prior to the Effective Time as
a result of a stock split, stock dividend, or similar recapitalization with
respect to such stock and the record date therefor (in the case of a stock
dividend) or the effective date thereof (in the case of a stock split or similar
recapitalization for which a record date is not established) shall be prior to
the Effective Time, the Exchange Ratio shall be proportionately adjusted.
3.3 Shares Held by Leader or UPC. Each of the shares of Leader Common
Stock held by any Leader Company or by any UPC Company, in each case other than
in a fiduciary capacity or as a result of debts previously contracted, shall be
canceled and retired at the Effective Time and no consideration shall be issued
in exchange therefor.
3.4 Fractional Shares. Notwithstanding any other provision of this
Agreement, each holder of shares of Leader Common Stock exchanged pursuant to
the Merger who would otherwise have been entitled to receive a fraction of a
share of UPC Common Stock (after taking into account all certificates delivered
by such holder) shall receive, in lieu thereof, cash (without interest) in an
amount equal to such fractional part of a share of UPC Common Stock multiplied
by the market value of one share of UPC Common Stock at the Effective Time. The
market value of one share of UPC Common Stock at the Effective Time shall be the
closing price of such common stock on the NYSE-Composite Transactions List (as
reported by The Wall Street Journal or, if not reported thereby, any other
authoritative source selected by UPC) on the last trading day preceding the
Effective Time. No such holder will be entitled to dividends, voting rights, or
any other rights as a shareholder in respect of any fractional shares.
3.5 Conversion of Stock Options; Restricted Stock. (a) At the Effective
Time, each option to purchase or other right with respect to shares of Leader
Common Stock pursuant to stock options, stock appreciation rights or other
rights, including stock awards ("Leader Options") granted by Leader under the
Leader Stock Plans, which are outstanding at the Effective Time, whether or not
exercisable, shall be converted into and become rights with respect to UPC
Common Stock, and UPC shall assume each Leader Option, in accordance with the
terms of the Leader Stock Plan and stock option or other agreement by which it
is evidenced, except that from and after the Effective Time, (i) UPC and its
Salary and Benefits Committee shall be substituted for Leader and the Committee
of Leader's Board of Directors (including, if applicable, the entire Board of
Directors of Leader) administering such Leader Stock Plan, (ii) each Leader
Option assumed by UPC may be exercised solely for shares of UPC Common Stock (or
cash in the case of stock appreciation rights), (iii) the number of shares of
UPC Common Stock subject to such Leader Option shall be equal to the number of
shares of Leader Common Stock subject to such Leader Option immediately prior to
the Effective Time multiplied by the Exchange Ratio, and (iv) the per share
exercise price under each such Leader Option shall be adjusted by dividing the
per share exercise price under each such Leader Option by the Exchange Ratio and
rounding up to the nearest cent. Notwithstanding the provisions of clause (iii)
of the preceding sentence, UPC shall not be obligated to issue any fraction of a
share of UPC Common Stock upon exercise of Leader Options and any fraction of a
share of UPC Common Stock that otherwise would be subject to a converted Leader
Option shall represent the right to receive a cash payment upon exercise of such
converted Leader Option equal to the product of such fraction and the difference
between the market value of one share of UPC Common Stock at the time of
exercise of such Option and the per share exercise price of such Option. The
market value of one share of UPC Common Stock at the time of exercise of an
Option shall be the closing price of such common stock on the NYSE-Composite
Transactions List (as reported by The Wall Street Journal or, if not reported
thereby, any other authoritative source selected by UPC) on the last trading day
preceding the date of exercise. In addition, notwithstanding the clauses (iii)
and (iv) of the first sentence of this Section 3.5, each Leader Option which is
an "incentive stock option" shall be adjusted as required by Section 424 of the
Internal Revenue Code, and the regulations promulgated thereunder, so as not to
constitute
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APPENDIX II -- FORM OF PLAN OF MERGER
a modification, extension or renewal of the option, within the meaning of
Section 424(h) of the Internal Revenue Code. UPC and Leader agree to take all
necessary steps to effectuate the foregoing provisions of this Section 3.5.
(b) As soon as practicable after the Effective Time, UPC shall deliver to
the participants in each Leader Stock Plan an appropriate notice setting forth
such participant's rights pursuant thereto and the grants subject to such Leader
Stock Plan shall continue in effect on the same terms and conditions (subject to
the adjustments required by Section 3.5(a) after giving effect to the Merger),
and UPC shall comply with the terms of each Leader Stock Plan to ensure, to the
extent required by, and subject to the provisions of, such Leader Stock Plan,
that Leader Options which qualified as incentive stock options prior to the
Effective Time continue to qualify as incentive stock options after the
Effective Time. Within 30 days after the Effective Time, UPC shall file a
registration statement on Form S-3 or Form S-8, as the case may be (or any
successor or other appropriate forms), with respect to the shares of UPC Common
Stock subject to such options and shall use its reasonable efforts to maintain
the effectiveness of such registration statements (and maintain the current
status of the prospectus or prospectuses contained therein) for so long as such
options remain outstanding.
(c) All contractual restrictions or limitations on transfer with respect to
Leader Common Stock awarded under the Leader Stock Plans or any other plan,
program, or Contract of any Leader Company, to the extent that such restrictions
or limitations shall not have already lapsed, and except as otherwise expressly
provided in such plan, program, or Contract, shall remain in full force and
effect with respect to shares of UPC Common Stock into which such restricted
stock is converted pursuant to Section 3.1 of this Plan of Merger.
(d) In approving this Plan of Merger, Leader and the Stock Option Committee
appointed by the Board of Directors of Leader in accordance with paragraph 5(a)
of the Leader Financial Corporation 1993 Stock Option and Incentive Plan agree
not to permit the holders of options outstanding under such plan to receive cash
upon the "Change in Control" of Leader in an amount equal to the excess of the
"Market Value" of the Leader Common Stock subject to such option over the
"Exercise Price" of the shares subject to such option in accordance with Section
12 of the Leader Financial Corporation 1993 Stock Option and Incentive Plan.
ARTICLE 4
DELIVERY OF CONSIDERATION
4.1 Exchange Procedures. Promptly after the Effective Time, UPC and Leader
shall cause the Exchange Agent to mail to the former shareholders of Leader
appropriate transmittal materials (which shall specify that delivery shall be
effected, and risk of loss and title to the certificates theretofore
representing shares of Leader Common Stock shall pass, only upon proper delivery
of such certificates to the Exchange Agent). After the Effective Time, each
holder of shares of Leader Common Stock (other than shares to be canceled
pursuant to Section 3.3 of this Plan of Merger) issued and outstanding at the
Effective Time shall surrender the certificate or certificates representing such
shares to the Exchange Agent and shall promptly upon surrender thereof receive
in exchange therefor the consideration provided in Section 3.1 of this Plan of
Merger, together with all undelivered dividends or distributions in respect of
such shares (without interest thereon) pursuant to Section 4.2 of this Plan of
Merger. To the extent required by Section 3.4 of this Plan of Merger, each
holder of shares of Leader Common Stock issued and outstanding at the Effective
Time also shall receive, upon surrender of the certificate or certificates
representing such shares, cash in lieu of any fractional share of UPC Common
Stock to which such holder may be otherwise entitled (without interest). UPC
shall not be obligated to deliver the consideration to which any former holder
of Leader Common Stock is entitled as a result of the Merger until such holder
surrenders such holder's certificate or certificates representing the shares of
Leader Common Stock for exchange as provided in this Section 4.1. The
certificate or certificates of Leader Common Stock so surrendered shall be duly
endorsed as the Exchange Agent may require. Any other provision of this Plan of
Merger notwithstanding, neither the Surviving Corporation nor the
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APPENDIX II -- FORM OF PLAN OF MERGER
Exchange Agent shall be liable to a holder of Leader Common Stock for any
amounts paid or property delivered in good faith to a public official pursuant
to any applicable abandoned property Law.
4.2 Rights of Former Leader Shareholders. At the Effective Time, the stock
transfer books of Leader shall be closed as to holders of Leader Common Stock
immediately prior to the Effective Time and no transfer of Leader Common Stock
by any such holder shall thereafter be made or recognized. Until surrendered for
exchange in accordance with the provisions of Section 4.1 of this Plan of
Merger, each certificate theretofore representing shares of Leader Common Stock
(other than shares to be canceled pursuant to Section 3.3 of this Plan of
Merger) shall from and after the Effective Time represent for all purposes only
the right to receive the consideration provided in Sections 3.1 and 3.4 of this
Plan of Merger in exchange therefor, subject, however, to the Surviving
Corporation's obligation to pay any dividends or make any other distributions
with a record date prior to the Effective Time which have been declared or made
by Leader in respect of such shares of Leader Common Stock in accordance with
the terms of this Plan of Merger and which remain unpaid at the Effective Time.
To the extent permitted by Law, former shareholders of record of Leader shall be
entitled to vote after the Effective Time at any meeting of UPC shareholders the
number of whole shares of UPC Common Stock into which their respective shares of
Leader Common Stock are converted, regardless of whether such holders have
exchanged their certificates representing Leader Common Stock for certificates
representing UPC Common Stock in accordance with the provisions of this Plan of
Merger. Whenever a dividend or other distribution is declared by UPC on the UPC
Common Stock, the record date for which is at or after the Effective Time, the
declaration shall include dividends or other distributions on all shares
issuable pursuant to this Plan of Merger, but beginning 30 days after the
Effective Time no dividend or other distribution payable to the holders of
record of UPC Common Stock as of any time subsequent to the Effective Time shall
be delivered to the holder of any certificate representing shares of Leader
Common Stock issued and outstanding at the Effective Time until such holder
surrenders such certificate for exchange as provided in Section 4.1 of this Plan
of Merger. However, upon surrender of such Leader Common Stock certificate, both
the UPC Common Stock certificate (together with all such undelivered dividends
or other distributions without interest) and any undelivered dividends and cash
payments to be paid for fractional share interests (without interest) shall be
delivered and paid with respect to each share represented by such certificate.
ARTICLE 5
MISCELLANEOUS
5.1 Conditions Precedent. Consummation of the Merger by Merger Sub shall
be conditioned on the satisfaction of, or waiver by UPC of, of the conditions
precedent to the Merger set forth in Sections 9.1 and 9.2 of the Merger
Agreement. Consummation of the Merger by Leader shall be conditioned on the
satisfaction of, or waiver by Leader of, of the conditions precedent to the
Merger set forth in Sections 9.1 and 9.3 of the Merger Agreement.
5.2 Termination. This Plan of Merger may be terminated at any time prior
to the Effective Time by the parties hereto as provided in Article 10 of the
Merger Agreement.
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APPENDIX III
[SANDLER O'NEILL LETTERHEAD]
August 8, 1996
Board of Directors
Leader Financial Corporation
158 Madison Avenue
Memphis, TN 38103
Ladies and Gentlemen:
Leader Financial Corporation ("Leader") and Union Planters Corporation
("Union Planters") have entered into an Agreement and Plan of Merger dated as of
March 8, 1996 (the "Agreement") pursuant to which a wholly-owned subsidiary of
Union Planters will be merged with and into Leader (the "Merger") and, upon
consummation of the Merger, each outstanding share of Leader common stock, par
value $1.00 per share (the "Leader Shares"), will be converted into the right to
receive 1.525 shares (the "Exchange Ratio") of common stock, par value $5.00 per
share, of Union Planters (the "Union Planters Shares"), subject to possible
adjustment as set forth in the Agreement. The terms and conditions of the Merger
are more fully set forth in the Agreement. You have requested our opinion as to
the fairness, from a financial point of view, of the Exchange Ratio to the
holders of Leader Shares.
Sandler O'Neill Corporate Strategies, a division of Sandler O'Neill &
Partners, L.P., as part of its investment banking business is regularly engaged
in the valuation of financial institutions and their securities in connection
with mergers and acquisitions and other corporate transactions.
In connection with this opinion we have reviewed, among other things: (i)
the Agreement and exhibits thereto; (ii) the Stock Option Agreement dated as of
March 9, 1996 by and between Union Planters and Leader; (iii) Union Planters'
audited consolidated financial statements and management's discussion and
analysis of the financial condition and results of operations contained in its
annual report to shareholders for the year ended December 31, 1995; (iv)
Leader's audited consolidated financial statements and management's discussion
and analysis of the financial condition and results of operations contained in
its annual report to shareholders for the year ended December 31, 1995; (v)
certain financial analyses and forecasts of Leader prepared by and reviewed with
management of Leader and the views of senior management of Leader regarding
Leader's past and current business operations, results thereof, financial
condition and future prospects, including: (a) Leader's high level of
borrowings/assets and potential future limitations on growth and (b) Leader's
dependence on FHA/VA delinquent loan purchases and the adverse potential impact
of changes in such program on the future operations and profitability of Leader;
(vi) certain financial analyses and forecasts of Union Planters prepared by and
reviewed with management of Union Planters' and the views of senior management
of Union Planters regarding Union Planters' past and current business
operations, results thereof, financial condition and future prospects; (vii) the
pro forma impact of the Merger on Union Planters; (viii) the historical reported
price and trading activity for Union Planters' and Leader's common stock,
including a comparison of certain financial and stock market information for
Union Planters and Leader with similar information for certain other companies
the securities of which are publicly traded; (ix) the financial terms of recent
business combinations in the savings institution and banking industries; (x) the
current market environment generally and the banking environment in particular;
and (xi) such other information, financial studies, analyses and investigations
and financial, economic and market criteria as we considered relevant. We were
not asked to, and did not, solicit indications of interest from other third
parties.
In performing our review, we have assumed and relied upon, without
independent verification, the accuracy and completeness of all the financial
information, analyses and other information reviewed by and discussed with us,
and we did not make an independent evaluation or appraisal of the specific
assets, the collateral securing assets or the liabilities of Union Planters or
Leader or any of their subsidiaries, or the
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APPENDIX III -- FAIRNESS OPINION OF SANDLER O'NEILL
& PARTNERS, L.P.
collectibility of any such assets (relying, where relevant, on the analyses and
estimates of Union Planters and Leader). With respect to the financial
projections reviewed with management, we have assumed that they have been
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the respective managements of the respective future financial
performances of Union Planters and Leader and that such performances will be
achieved. We have also assumed that there has been no material change in Union
Planters' or Leader's assets, financial condition, results of operations,
business or prospects since the date of the last financial statements noted
above. We have assumed that the Merger will qualify for pooling of interests
accounting treatment and have further assumed that Union Planters will remain as
a going concern for all periods relevant to our analyses and that the conditions
precedent in the Agreement are not waived.
Our opinion is necessarily based on economic, market and other conditions
as in effect on, and the information made available to us as of, the date
hereof. Events occurring after the date hereof could materially affect the
assumptions used in preparing this opinion. We have not undertaken to reaffirm
or revise this opinion or otherwise comment upon events occurring after the date
hereof.
We have acted as Leader's financial advisor in connection with the Merger
and will receive a fee for our services, a significant portion of which is
contingent upon consummation of the Merger. We will also receive a fee for
rendering this opinion.
In the ordinary course of our business, we may actively trade the equity
securities of Union Planters and Leader for our own account and for the accounts
of our customers and, accordingly, may at any time hold a long or short position
in such securities.
Our opinion is directed to the Board of Directors of Leader and does not
constitute a recommendation to any stockholder of Leader as to how such
stockholder should vote at the special meeting of stockholders to consider and
vote upon the Merger. Our opinion is not to be quoted or referred to, in whole
or in part, in a registration statement, prospectus, proxy statement or in any
other document, nor shall this opinion be used for any other purposes, without
Sandler O'Neill's prior written consent.
Based upon and subject to the foregoing, it is our opinion that the
Exchange Ratio is fair, from a financial point of view, to the holders of Leader
Shares.
Very truly yours,
/s/ Sandler O'Neill & Partners, L.P.
Sandler O'Neill & Partners, L.P.
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APPENDIX IV
[STIFEL, NICOLAUS & COMPANY, INCORPORATED LETTERHEAD]
August 8, 1996
Board of Directors
Union Planters Corporation
7130 Goodlett Farms Parkway
Memphis, TN 38018
Members of the Board:
You have requested our opinion as to the fairness from a financial point of
view to the shareholders of Union Planters Corporation ("Union Planters") of the
consideration to be paid to the shareholders of Leader Financial Corporation
("Leader Financial") by Union Planters pursuant to the terms of the Agreement
and Plan of Merger by and between Leader Financial and Union Planters dated as
of March 8, 1996 (the "Agreement"). Pursuant to the Agreement, the holder of
each share of common stock of Leader Financial would be entitled to receive
1.525 shares of common stock of Union Planters. For the purposes of our opinion,
we have assumed that the transaction will constitute a tax-free reorganization
as contemplated by the Agreement and the Merger will qualify as a pooling of
interests for accounting purposes. We have also assumed that no securities will
be issued under the option agreement being entered into between Union Planters
and Leader Financial.
Stifel, Nicolaus & Company, Incorporated ("Stifel"), as part of its
investment banking services, is regularly engaged in the independent valuation
of businesses and securities in connection with mergers, acquisitions,
underwritings, sales and distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and other purposes. In
addition, Stifel has and expects to continue acting as a market maker in the
securities of Leader Financial. We are familiar with Union Planters and Leader
Financial and have completed our financial analysis of this transaction.
In rendering our opinion, we have reviewed the Agreement as well as
financial and other information that was publicly available or furnished to us
by Union Planters and Leader Financial including information provided during
Stifel's discussions with their respective management. We have conducted
conversations with Union Planters' senior management regarding recent
developments and management's financial projections for Union Planters and
Leader Financial. In addition, we have spoken to members of Union Planters'
management and Leader Financial's management regarding factors which affect each
entity's business. We have also compared certain financial and securities data
(as appropriate) of Union Planters and Leader Financial with various other
companies whose securities are traded in public markets, reviewed the historical
stock prices and trading volumes of the common stock of Union Planters and
Leader Financial, reviewed prices and premiums paid in other business
combinations and conducted such other financial studies, analyses and
investigations as we deemed appropriate for purposes of this opinion.
In rendering our opinion, we have relied upon and assumed, without
independent verification, the accuracy and completeness of all of the financial
and other information that was provided to us or that was otherwise reviewed by
us. With respect to the financial projections supplied to us, we have assumed
that they were reasonably prepared on the basis reflecting the best currently
available estimates and judgments of the management of Union Planters and Leader
Financial as to the future operating and financial performance of Union Planters
and Leader Financial and that they provided a reasonable basis upon which we
could form our opinion. We also assumed that there were no material changes in
the assets, liabilities, financial condition, results of operations, business or
prospects of either Union Planters or Leader Financial since the date of the
last financial statements made available to us. We did not make or obtain any
independent evaluation, appraisal or physical inspection of Union Planters' or
Leader Financial's assets or liabilities nor did we review loan files of Union
Planters or Leader Financial. We relied on advice of counsel to Union Planters
as to all
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APPENDIX IV -- FAIRNESS OPINION OF STIFEL, NICOLAUS
& COMPANY, INCORPORATED
legal matters with respect to Union Planters, the Agreement and the transactions
and other matters contained or contemplated therein.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. Our opinion is directed to the Board of Directors of
Union Planters and does not constitute a recommendation to any shareholder as to
how such shareholder should vote on the proposed transaction, nor have we
expressed any opinion as to the prices at which any securities of Union Planters
or Leader Financial might trade in the future. Except as required by applicable
law, including without limitation federal securities laws, our opinion may not
be published or otherwise used or referred to, nor shall any public reference to
Stifel be made, without our prior consent.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion, as of the date hereof, that the consideration to be paid to the
shareholders of Leader Financial pursuant to the Agreement is fair to the
shareholders of Union Planters from a financial point of view.
Very truly yours,
/s/ Stifel, Nicolaus & Company, Incorporated
STIFEL, NICOLAUS & COMPANY, INCORPORATED
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