<PAGE> 1
As filed with the Securities and Exchange Commission on October 9, 1997
Registration No. 333-36403
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
Pre-Effective Amendment No. 1 to
FORM S-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
--------------
UNION PLANTERS CORPORATION
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
TENNESSEE 6712 62-0859007
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
Incorporation or Organization) Classification Code Number)
</TABLE>
7130 GOODLETT FARMS PARKWAY
MEMPHIS, TENNESSEE 38018
(901) 580-6000
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
E. JAMES HOUSE, JR.
SECRETARY AND MANAGER OF THE LEGAL DEPARTMENT
UNION PLANTERS CORPORATION
7130 GOODLETT FARMS PARKWAY
MEMPHIS, TENNESSEE 38018
(901) 580-6596
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
WITH COPIES TO:
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<S> <C> <C>
WILLIAM S. RUBENSTEIN TIMOTHY E. KISH FRANK M. CONNER III
SKADDEN, ARPS, SLATE, SENIOR VICE PRESIDENT, GENERAL ALSTON & BIRD LLP
MEAGHER & FLOM LLP COUNSEL AND CORPORATE SECRETARY 601 PENNSYLVANIA AVENUE, N.W.
919 THIRD AVENUE CAPITAL BANCORP NORTH BUILDING, SUITE 250
NEW YORK, NEW YORK 10022 1221 BRICKELL AVENUE WASHINGTON, D.C. 20004
(212) 735-2642 MIAMI, FLORIDA 33131 (202) 508-3303
(305) 536-1574
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE PUBLIC:
As soon as practicable after the merger (the "Merger") described in
this Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE TIME UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a),
SHALL DETERMINE.
================================================================================
<PAGE> 2
CAPITAL BANCORP
1221 BRICKELL AVENUE
MIAMI, FLORIDA 33131
October 9, 1997
TO THE SHAREHOLDERS OF
CAPITAL BANCORP:
You are cordially invited to attend a special meeting of the
shareholders (the "Special Meeting") of Capital Bancorp ("Capital") to be held
at The Grand Bay Hotel located at 2669 South Bayshore Drive, Miami, Florida
33133 at 10:00 a.m., local time, on November 24, 1997, notice of which is
enclosed.
At the Special Meeting, you will be asked to consider and vote on a
proposal to approve the Amended and Restated Agreement and Plan of Merger (the
"Agreement"), by and between Capital and Union Planters Corporation, a
Tennessee corporation ("UPC"), and a related Plan of Merger (the "Plan of
Merger") pursuant to which Capital will merge (the "Merger") with and into
Union Planters Florida Holding Corporation, a corporation to be organized under
the laws of the State of Tennessee, which will exist as a wholly-owned
subsidiary of UPC ("UPC Merger Subsidiary"), with the effect that UPC Merger
Subsidiary will be the surviving corporation resulting from the Merger. Upon
consummation of the Merger, each share of Capital common stock issued and
outstanding (excluding certain shares held by Capital or UPC, or their
respective subsidiaries, in each case other than shares held in a fiduciary
capacity or as a result of debts previously contracted) will be converted into
and exchanged for the right to receive .8525 shares of UPC common stock and
the associated "Preferred Share Rights" (as defined in the accompanying Proxy
Statement/Prospectus), subject to possible adjustment as described in the
accompanying Proxy Statement/Prospectus, with cash being paid in lieu of
issuing fractional shares.
Enclosed are the (i) Notice of Special Meeting, (ii) Proxy
Statement/Prospectus, (iii) proxy card for the Special Meeting and (iv)
pre-addressed return envelope for the proxy card. The Proxy
Statement/Prospectus describes in more detail the Agreement, the Plan of
Merger, and the proposed Merger, including a description of the conditions to
consummation of the Merger and the effects of the Merger on the rights of
Capital shareholders. Please read these materials carefully and consider
thoughtfully the information set forth in them.
Sandler O'Neill & Partners, LP, Capital's financial advisor, has
issued its opinion to your Board of Directors regarding the fairness, from a
financial point of view, of the consideration to be paid by UPC pursuant to the
Agreement. A copy of the opinion is attached as Appendix C to the Proxy
Statement/Prospectus.
THE BOARD OF DIRECTORS OF CAPITAL HAS UNANIMOUSLY (WITH ONE DIRECTOR
ABSENT) APPROVED AND ADOPTED THE AGREEMENT AND THE PLAN OF MERGER AND
CONSUMMATION OF THE MERGER CONTEMPLATED THEREBY, AND RECOMMENDS THAT YOU VOTE
FOR APPROVAL OF THE AGREEMENT AND THE PLAN OF MERGER.
Pursuant to Capital's Articles of Incorporation, approval of the
Agreement and the Plan of Merger will require the affirmative vote of the
holders of at least two-thirds of the issued and outstanding shares of Capital
Common Stock entitled to be voted at the Special Meeting. Pursuant to the
Agreement, shares which are voted pursuant to certain irrevocable proxies, the
validity of which has been contested by the underlying owner, will not be
counted, unless (i) the underlying owner has given written instructions with
respect to the voting of such shares in connection with the Agreement or (ii)
the parties to the Agreement have waived this requirement. 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 even if you previously returned your
proxy card. The proposed Merger with UPC is a significant step for Capital and
your vote on this matter is of great importance.
ON BEHALF OF THE BOARD OF DIRECTORS, WE URGE YOU TO VOTE FOR ADOPTION
OF THE AGREEMENT AND THE PLAN OF MERGER BY MARKING THE ENCLOSED PROXY CARD
"FOR" ITEM ONE.
We look forward to seeing you at the Special Meeting.
Sincerely,
/s/ DANIEL M. HOLTZ /s/ GERALD. M. STERN
DANIEL M. HOLTZ GERALD. M. STERN
Chairman of the Board, President and Director and Chairman, Strategic
Chief Executive Officer Planning and Corporate Finance
Committee
<PAGE> 3
CAPITAL BANCORP
1221 BRICKELL AVENUE
MIAMI, FLORIDA 33131
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD AT 10:00 A.M. ON NOVEMBER 24, 1997
NOTICE IS HEREBY GIVEN that a special meeting of the shareholders (the
"Special Meeting") of Capital Bancorp ("Capital") will be held at
The Grand Bay Hotel located at 2669 South Bayshore Drive, Miami, Florida 33133
on November 24, 1997, at 10:00 a.m., local time, for the following purposes:
1. MERGER. To consider and vote upon a proposal to approve the
Amended and Restated Agreement and Plan of Merger, dated as of August 12, 1997
(the "Agreement"), by and between Capital and Union Planters Corporation, a
Tennessee corporation ("UPC"), and the related Plan of Merger (the "Plan of
Merger"), by and between Capital and Union Planters Florida Holding
Corporation, a corporation to be organized under the laws of the State of
Tennessee, which will exist as a wholly-owned subsidiary of UPC ("UPC Merger
Subsidiary"), pursuant to which (i) Capital will merge (the "Merger") with and
into UPC Merger Subsidiary, with the effect that UPC Merger Subsidiary will be
the surviving corporation resulting from the Merger, (ii) each share of the
$1.00 par value common stock of Capital ("Capital Common Stock") issued and
outstanding at the effective time of the Merger (excluding certain shares held
by Capital or UPC, or their respective subsidiaries, in each case other than
shares held in a fiduciary capacity or as a result of debts previously
contracted) will be converted into and exchanged for the right to receive .8525
shares of the $5.00 par value common stock of UPC, and the associated
"Preferred Share Rights" (as defined in the accompanying Proxy
Statement/Prospectus), subject to possible adjustment, and cash in lieu of
issuing any fractional share, and (iii) UPC will assume the obligations of
Capital under various stock plans and adopt substitute plans where appropriate,
all as more fully described in the accompanying Proxy Statement/Prospectus. A
copy of each of the Agreement and the Plan of Merger is set forth as Appendix A
and Appendix B, respectively, to the accompanying Proxy Statement/Prospectus
and is incorporated by reference herein.
2. OTHER BUSINESS. To transact such other business as may come
properly before the Special Meeting or any adjournments or postponements of the
Special Meeting.
Only shareholders of record at the close of business on
October 6, 1997 will be entitled to receive notice of and to vote at the
Special Meeting or any adjournment or postponement thereof. PURSUANT TO
CAPITAL'S ARTICLES OF INCORPORATION, APPROVAL OF THE AGREEMENT AND THE PLAN OF
MERGER REQUIRES THE AFFIRMATIVE VOTE OF THE HOLDERS OF AT LEAST TWO-THIRDS OF
THE ISSUED AND OUTSTANDING SHARES OF CAPITAL COMMON STOCK ENTITLED TO BE VOTED
AT THE SPECIAL MEETING. PURSUANT TO THE AGREEMENT, SHARES WHICH ARE VOTED
PURSUANT TO CERTAIN IRREVOCABLE PROXIES, THE VALIDITY OF WHICH HAS BEEN
CONTESTED BY THE UNDERLYING OWNER, WILL NOT BE COUNTED, UNLESS (i) THE
UNDERLYING OWNER, HAS GIVEN WRITTEN INSTRUCTIONS WITH RESPECT TO THE VOTING OF
SUCH SHARES IN CONNECTION WITH THE AGREEMENT OR (ii) THE PARTIES TO THE
AGREEMENT HAVE WAIVED THIS REQUIREMENT.
THE BOARD OF DIRECTORS OF CAPITAL UNANIMOUSLY RECOMMENDS (ACTING WITH
ONE DIRECTOR ABSENT) THAT SHAREHOLDERS VOTE FOR APPROVAL OF THE AGREEMENT AND
THE PLAN OF MERGER.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ TIMOTHY E. KISH
TIMOTHY E. KISH
Senior Vice President, General Counsel,
and Corporate Secretary
Miami, Florida
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> 4
PROSPECTUS
COMMON STOCK, $5.00 PAR VALUE
UNION PLANTERS CORPORATION
PROXY STATEMENT
FOR SPECIAL MEETING OF SHAREHOLDERS OF
CAPITAL BANCORP
This Prospectus of Union Planters Corporation, a bank holding company
organized and existing under the laws of the State of Tennessee ("UPC"),
relates to up to 7,576,369 shares of common stock, $5.00 par value, of UPC
(together with associated "Preferred Share Rights" (as defined herein), "UPC
Common Stock"), including shares to be subject to assumed options and rights,
which are issuable to the shareholders of Capital Bancorp, a corporation
organized and existing under the laws of the State of Florida ("Capital"), upon
consummation of the proposed merger (the "Merger") of Capital with and into
Union Planters Florida Holding Corporation, a corporation to be organized under
the laws of the State of Tennessee, which will exist as a wholly-owned
subsidiary of UPC ("UPC Merger Subsidiary"), with the effect that UPC Merger
Subsidiary will be the surviving corporation of the Merger. The Merger will be
consummated pursuant to the terms of the Amended and Restated Agreement and
Plan of Merger, dated as of August 12, 1997 (the "Agreement"), by and between
UPC and Capital, and the related Plan of Merger (the "Plan of Merger"), by and
between UPC Merger Subsidiary and Capital.
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 Capital ("Capital Common Stock") will be converted into
and exchanged for the right to receive .8525 shares of UPC Common Stock,
subject to certain possible adjustments described herein (the "Exchange
Ratio"). Cash (without interest) will be paid in lieu of the issuance of any
fractional shares of UPC Common Stock.
If (i) the Average Closing Price (as defined herein) of UPC Common
Stock is less than $39.90 and (ii) the relative performance of UPC Common Stock
(as measured by comparing the Average Closing Price to $49.875, which was the
closing price of UPC Common Stock on the fourth trading day after the public
announcement of the Merger) is more than 15% lower than the relative performance
of the common stocks of a specified group (the "Index Group") of bank holding
companies (as measured by comparing the Index Price on the Determination Date
(as such terms are defined herein) to the Index Price on the fourth trading day
after the public announcement of the Merger), then Capital may elect to
terminate the Agreement (the "Stock Price Termination Right") unless UPC
increases the Exchange Ratio such that the shares of UPC Common Stock issued in
exchange for each share of Capital Common Stock have a value (based on the
Average Closing Price) equal to the lesser of (i) $34.01 and (ii) the value
(based on the Average Closing Price) of the shares of UPC Common Stock that
would have been exchanged for each share of Capital Common Stock if the relative
performance of UPC Common Stock as determined above was 15% lower than the
relative performance of the Index Group. If the Merger is approved by the
Capital shareholders, the Board of Directors of Capital (the "Capital Board")
may elect not to terminate the Agreement and to consummate the Merger without
resoliciting the Capital shareholders even if Capital's Stock Price Termination
Right is triggered and as a result of the Exchange Ratio, the value of the
shares of UPC Common Stock (valued at the Average Closing Price) issued in
exchange for each share of Capital Common Stock would be less than the lesser of
(i) $34.01 and (ii) the value (based on the Average Closing Price) of the shares
of UPC Common Stock that would have been exchanged for each share of Capital
Common Stock if the relative performance of UPC Common Stock as determined above
was 15% lower than the relative performance of the Index Group.
In making its determination of whether to terminate the Agreement, the
Capital Board will take into account, consistent with its fiduciary duties, all
relevant facts and circumstances that exist at such time, including, without
limitation, information concerning the business, financial condition, results
of operations, and prospects of UPC (including the recent performance of UPC
Common Stock, the historical financial data of UPC, customary statistical
measurements of UPC's financial performance, and the future prospects for UPC
Common Stock following the Merger), and the advice of its financial advisor and
legal counsel. If the Capital Board elects to terminate the Agreement, UPC
would then determine whether to proceed with the Merger at the higher Exchange
Ratio. In making this determination, the principal factors UPC will consider
include the projected effect of the Merger on UPC's pro forma earnings per
share and whether UPC's assessment of Capital's earning potential as part
<PAGE> 5
of UPC justifies the issuance of an increased number of UPC's shares. See
"DESCRIPTION OF TRANSACTION -- Possible Adjustment of Exchange Ratio."
This Prospectus also serves as the Proxy Statement of Capital, and is
being furnished to the shareholders of Capital in connection with the
solicitation of proxies by the Capital Board for use at its special meeting of
shareholders (including any adjournment or postponement thereof, the "Special
Meeting"), to be held on November 24, 1997, to consider and vote upon the
Agreement and the Plan of Merger and the transactions contemplated therein.
This Proxy Statement/Prospectus ("Proxy Statement") and related materials
enclosed herewith are being mailed to shareholders of Capital on or about
October 14, 1997.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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.
--------------
The date of this Proxy Statement is October 9, 1997.
<PAGE> 6
AVAILABLE INFORMATION
Each of UPC and Capital is subject to the reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, is required to file reports, proxy and information
statements, and other information with the Securities and Exchange Commission
(the "SEC"). Copies of such reports, proxy and information statements, and
other information can be obtained, at prescribed rates, from the SEC by
addressing written requests for such copies to the Public Reference Section at
the SEC at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. In
addition, such reports, proxy and information statements, and other information
can be inspected at the public reference facilities referred to above and at
the regional offices of the SEC at 7 World Trade Center, 13th Floor, New York,
New York 10048 and Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. The SEC also maintains a site on the World Wide
Web at http://www.sec.gov that contains reports, proxy and information
statements, and other information regarding registrants that file
electronically with the SEC. The shares of UPC Common Stock are listed and
traded on the New York Stock Exchange (the "NYSE") under the symbol "UPC," and
reports, proxy and information statements, and other information concerning UPC
also may be inspected at the offices of the NYSE, 20 Broad Street, New York,
New York 10005. The shares of Capital Common Stock are traded on the Nasdaq
National Market System (the "Nasdaq National Market") under the symbol "CBCP,"
and reports, proxy and information statements, and other information concerning
Capital also may be inspected at the offices of the National Association of
Securities Dealers, Inc. (the "NASD"), 1735 K Street, N.W., Washington, D.C.
20006. For information concerning the potential delisting of Capital Common
Stock from the Nasdaq National Market, see "COMPARATIVE MARKET PRICES AND
DIVIDENDS."
This Proxy Statement constitutes part of the Registration Statement on
Form S-4 of UPC (including any exhibits and amendments thereto, the
"Registration Statement") filed with the SEC under the Securities Act of 1933,
as amended (the "Securities Act"), relating to the securities offered hereby.
This Proxy Statement does not include all of the information in the
Registration Statement, certain portions of which have been omitted pursuant to
the rules and regulations of the SEC. 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 SEC's public reference facilities at the addresses set forth above.
All information contained in this Proxy Statement or incorporated
herein by reference with respect to UPC was supplied by UPC, and all
information contained in this Proxy Statement or incorporated herein by
reference with respect to Capital was supplied by Capital.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROXY STATEMENT DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, THE
SECURITIES OFFERED BY THIS 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 PROXY STATEMENT NOR ANY
DISTRIBUTION OF THE SECURITIES BEING OFFERED PURSUANT TO THIS PROXY STATEMENT
SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF UPC OR CAPITAL OR THE INFORMATION SET FORTH OR
INCORPORATED BY REFERENCE HEREIN SINCE THE DATE OF THIS PROXY STATEMENT.
THIS PROXY STATEMENT CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WITH
RESPECT TO THE FINANCIAL CONDITION, RESULTS OF OPERATIONS, AND BUSINESS OF UPC
FOLLOWING THE CONSUMMATION OF THE MERGER AND THE OTHER PENDING ACQUISITIONS (AS
DEFINED UNDER "BUSINESS OF UPC -- RECENT DEVELOPMENTS"), INCLUDING STATEMENTS
RELATING TO THE COST SAVINGS AND REVENUE ENHANCEMENTS THAT ARE EXPECTED TO BE
REALIZED FROM THE MERGER AND THE OTHER PENDING ACQUISITIONS AND THE EXPECTED
IMPACT OF THE MERGER AND THE OTHER PENDING ACQUISITIONS ON UPC'S FINANCIAL
PERFORMANCE. THESE FORWARD-LOOKING STATEMENTS INVOLVE CERTAIN RISKS AND
UNCERTAINTIES. FACTORS THAT MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
THOSE CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS INCLUDE, AMONG OTHER
THINGS, THE FOLLOWING POSSIBILITIES: (i) EXPECTED COST SAVINGS FROM THE MERGER
AND THE OTHER PENDING ACQUISITIONS CANNOT BE FULLY REALIZED; (ii) DEPOSIT
ATTRITION, CUSTOMER LOSS, OR REVENUE LOSS FOLLOWING THE MERGER AND THE OTHER
PENDING ACQUISITIONS IS GREATER THAN EXPECTED; (iii) COMPETITIVE PRESSURE IN
THE BANKING INDUSTRY INCREASES SIGNIFICANTLY; (iv) COSTS OR DIFFICULTIES
RELATED TO THE INTEGRATION OF THE BUSINESSES OF UPC AND THE INSTITUTIONS TO BE
ACQUIRED ARE GREATER THAN EXPECTED;
- i -
<PAGE> 7
(v) CHANGES IN THE INTEREST RATE ENVIRONMENT REDUCE MARGINS; (vi) GENERAL
ECONOMIC CONDITIONS, EITHER NATIONALLY OR REGIONALLY, ARE LESS FAVORABLE THAN
EXPECTED, RESULTING IN, AMONG OTHER THINGS, A DETERIORATION IN CREDIT QUALITY;
(vii) CHANGES OCCUR IN THE REGULATORY ENVIRONMENT; (viii) CHANGES OCCUR IN
BUSINESS CONDITIONS AND INFLATION; AND (ix) CHANGES OCCUR IN THE SECURITIES
MARKETS. THE FORWARD-LOOKING EARNINGS ESTIMATES INCLUDED IN THIS PROXY
STATEMENT HAVE NOT BEEN EXAMINED OR COMPILED BY THE INDEPENDENT PUBLIC
ACCOUNTANTS OF UPC AND CAPITAL, NOR HAVE SUCH ACCOUNTANTS APPLIED ANY
PROCEDURES THERETO. ACCORDINGLY, SUCH ACCOUNTANTS DO NOT EXPRESS AN OPINION OR
ANY OTHER FORM OF ASSURANCE ON THEM. FURTHER INFORMATION ON OTHER FACTORS THAT
COULD AFFECT THE FINANCIAL RESULTS OF UPC AFTER THE MERGER AND THE OTHER
PENDING ACQUISITIONS IS INCLUDED IN THE SEC FILINGS INCORPORATED BY REFERENCE
HEREIN.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents previously filed with the SEC by UPC pursuant
to the Exchange Act are hereby incorporated by reference herein (SEC File No.
1-10160):
(a) UPC's Annual Report on Form 10-K for the year ended December
31, 1996 (provided that any information included or
incorporated by reference in response to Items 402(a)(8), (i),
(k), or (1) of Regulation S-K of the SEC shall not be deemed
to be incorporated herein and is not part of the Registration
Statement);
(b) UPC's Quarterly Reports on Form 10-Q for the quarters ended
March 31 and June 30, 1997;
(c) UPC's Current Reports on Form 8-K dated January 16, April 17,
July 17, and August 12, 1997;
(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 on April 17, 1997;
(e) UPC's Registration Statement on Form 8-A dated January 19,
1989, filed on February 1, 1989; (SEC File No. 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.
The following documents previously filed with the SEC by Capital
pursuant to the Exchange Act are hereby incorporated by reference herein (SEC
File No. 0-26080):
(a) Capital's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 (provided that any information included or
incorporated by reference in response to Items 402(a)(8), (i),
(k), or (1) of Regulation S-K of the SEC shall not be deemed
to be incorporated herein and is not part of the Registration
Statement);
(b) Capital's Quarterly Reports on Form 10-Q for the quarters
ended March 31 and June 30, 1997; and
(c) Capital's Current Reports on Form 8-K dated May 16, June 16,
July 31, August 12, and September 26, 1997.
All documents filed by UPC and/or Capital pursuant to Sections 13(a),
13(c), 14, or 15(d) of the Exchange Act after the date of this Proxy Statement
and prior to final adjournment of the Special Meeting shall be deemed to be
incorporated by reference in this 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
- ii -
<PAGE> 8
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.
UPC will provide without charge, upon the written or oral request of
any person, including any beneficial owner, to whom this Proxy Statement is
delivered, a copy of any and all information (excluding certain exhibits)
relating to UPC that has been incorporated by reference in the Registration
Statement. Such requests should be directed to E. James House, Jr., Secretary
and Manager of the Legal Department, Union Planters Corporation, 7130 Goodlett
Farms Parkway, Memphis, Tennessee 38018 (telephone (901) 580-6584). Capital
will provide without charge, upon the written or oral request of any person,
including any beneficial owner, to whom this Proxy Statement is delivered, a
copy of any and all information (excluding certain exhibits) relating to
Capital that has been incorporated by reference in the Registration Statement
of which this Proxy Statement is a part. Such requests should be directed to
Timothy E. Kish, Senior Vice President, General Counsel, and Corporate
Secretary, Capital Bancorp, 1221 Brickell Avenue, Miami, Florida 33131
(telephone (305) 536-1574). In order to ensure timely delivery of the
documents, any request should be made by November 17, 1997.
- iii -
<PAGE> 9
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Meeting of Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Comparative Market Prices of Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Equivalent and Pro Forma Per Share Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SPECIAL MEETING OF CAPITAL SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Date, Place, Time, and Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Record Date, Voting Rights, Required Vote, and Revocability of Proxies . . . . . . . . . . . . . 15
Irrevocable Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Solicitation of Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
DESCRIPTION OF TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Possible Adjustment of Exchange Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Effect of the Merger on Capital Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Background of and Reasons for the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Opinion of Capital's Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Effective Time of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Distribution of UPC Stock Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Conditions to Consummation of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Regulatory Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Waiver, Amendment, and Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Conduct of Business Pending the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Management and Operations After the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Interests of Certain Persons in the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Certain Federal Income Tax Consequences of the Merger . . . . . . . . . . . . . . . . . . . . . 36
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Expenses and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Resales of UPC Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Option Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Support Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
EFFECT OF THE MERGER ON RIGHTS OF SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Anti-takeover Provisions Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Authorized Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Amendment of Charter and Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Classified Board of Directors and Absence of Cumulative Voting . . . . . . . . . . . . . . . . . 44
Director Removal and Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Limitations on Director Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Special Meeting of Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Actions by Shareholders Without a Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Shareholder Nominations and Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Business Combinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Limitations on Ability to Vote Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Dissenters' Rights of Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Shareholders' Rights to Examine Books and Records . . . . . . . . . . . . . . . . . . . . . . . 50
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
</TABLE>
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<TABLE>
<CAPTION>
PAGE
----
<S> <C>
COMPARATIVE MARKET PRICES AND DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
BUSINESS OF CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Beneficial Ownership of Capital Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Administrative Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
BUSINESS OF UPC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
CERTAIN REGULATORY CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Payment of Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Support of Subsidiary Institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Prompt Corrective Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
DESCRIPTION OF UPC CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
UPC Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
UPC Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SHAREHOLDER PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
OPINIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
</TABLE>
APPENDICES:
Appendix A -- Amended and Restated Agreement and Plan of Merger, dated
as of August 12, 1997, by and between Capital Bancorp
and Union Planters Corporation
Appendix B -- Plan of Merger of Capital Bancorp into and with Union
Planters Florida Holding Corporation
Appendix C -- Opinion of Sandler O'Neill & Partners, LP
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<PAGE> 11
SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED IN THIS
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 PROXY STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION APPEARING ELSEWHERE OR INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT. SHAREHOLDERS ARE URGED TO READ CAREFULLY THE ENTIRE PROXY
STATEMENT, INCLUDING THE APPENDICES. AS USED IN THIS PROXY STATEMENT, THE
TERMS "UPC" AND "CAPITAL" REFER TO UNION PLANTERS CORPORATION AND CAPITAL
BANCORP, RESPECTIVELY, AND, WHERE THE CONTEXT REQUIRES, TO THOSE ENTITIES AND
THEIR RESPECTIVE SUBSIDIARIES.
THE PARTIES
CAPITAL. Capital, a Florida corporation, is a bank holding company
registered with the Board of Governors of the Federal Reserve System (the
"Federal Reserve") under the Bank Holding Company Act of 1956, as amended (the
"BHC Act"). As of June 30, 1997, Capital had total consolidated assets of
approximately $1.9 billion, total consolidated loans of approximately $851.6
million, total consolidated deposits of approximately $1.2 billion, and total
consolidated shareholders' equity of approximately $146.3 million.
Capital conducts its business activities through its wholly-owned bank
subsidiary, Capital Bank, which was organized in 1974 as a commercial bank
chartered under the laws of the State of Florida. Capital Bank operates from
its main office in Miami, Florida and at 28 branch offices located in the
Florida Counties of Dade, Broward, and Palm Beach. In addition, Capital Bank
owns approximately 81% of the common stock of Capital Factors Holding, Inc., a
Florida corporation ("Factors"). Factors is a specialized financial services
company principally engaged in providing receivables-based commercial financing
and related fee-based credit, collection and management information services.
Factors is based in Boca Raton, Florida and operates through regional offices
located in New York, New York; Los Angeles, California; and Charlotte, North
Carolina, and through a limited service office in Atlanta, Georgia.
The principal executive offices of Capital are located at 1221
Brickell Avenue, Miami, Florida 33131 and its telephone number at such address
is (305) 536-1500. Additional information with respect to Capital and its
subsidiaries is included elsewhere herein and in documents incorporated by
reference in this Proxy Statement. See "AVAILABLE INFORMATION," "DOCUMENTS
INCORPORATED BY REFERENCE," and "BUSINESS OF CAPITAL."
UPC. UPC, a Tennessee corporation, is a bank holding company
registered with the Federal Reserve under the BHC Act. As of June 30, 1997,
UPC had total consolidated assets of approximately $14.8 billion, total
consolidated loans of approximately $10.4 billion, total consolidated deposits
of approximately $11.2 billion, and total consolidated shareholders' equity of
approximately $1.4 billion.
UPC conducts its business activities through its principal bank
subsidiary, the $5.5 billion asset Union Planters National Bank, founded in
1869 and headquartered in Memphis, Tennessee, and 32 other bank subsidiaries
and one savings bank subsidiary 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
and maintains approximately 432 banking offices and 564 automated teller
machines ("ATMs"). UPC's total assets at June 30, 1997 are allocable by state
(before consolidating adjustments) approximately as follows: $9.7 billion in
Tennessee; $2.3 billion in Mississippi; $1.2 billion in Missouri; $800 million
in Arkansas; $609 million in Louisiana; $440 million in Alabama; and $113
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 12
acquisitions in 1993, 13 in 1994, three in 1995, and seven in 1996, adding
approximately $1.7 billion in total assets in 1993, $3.8 billion in 1994, $1.3
billion in 1995, and $4.2 billion in 1996. Thus far in 1997, UPC has entered
into definitive agreements to acquire six financial institutions not including
Capital, which had aggregate total assets of approximately $2.1 billion at June
30, 1997 (collectively referred to
<PAGE> 12
as the "Other Pending Acquisitions"). For additional information, see
"BUSINESS OF UPC -- Recent Developments." For a discussion of UPC's
acquisition program, see the caption "Acquisitions" (on page 6) in UPC's Annual
Report to Shareholders and Note 2 to UPC's audited consolidated financial
statements for the years ended December 31, 1996, 1995, and 1994 (on pages 45
and 46) contained in such Annual Report to Shareholders. UPC's Annual Report
to Shareholders is included as Exhibit 13 to UPC's Annual Report on Form 10-K
for the year ended December 31, 1996 and 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 the acquisitions in addition
to the Merger which are currently pending, see "BUSINESS OF UPC -- Recent
Developments."
The principal executive offices of UPC are located at 7130 Goodlett
Farms Parkway, Memphis, Tennessee 38018, and its telephone number at such
address is (901) 580-6000. Additional information with respect to UPC and its
subsidiaries is included elsewhere herein and in documents incorporated by
reference in this Proxy Statement. See "AVAILABLE INFORMATION," "DOCUMENTS
INCORPORATED BY REFERENCE," and "BUSINESS OF UPC."
MEETING OF SHAREHOLDERS
This Proxy Statement is being furnished to the holders of Capital
Common Stock in connection with the solicitation by the Capital Board of
proxies for use at the Special Meeting at which Capital shareholders will be
asked to vote upon (i) a proposal to approve the Agreement and the Plan of
Merger and (ii) such other business as may properly come before the meeting.
The Special Meeting will be held at The Grand Bay Hotel located at 2669 South
Bayshore Drive, Miami, Florida 33133, at 10:00 a.m., local time, on November
24, 1997. See "SPECIAL MEETING OF CAPITAL SHAREHOLDERS -- Date, Place, Time,
and Purpose."
The Capital Board has fixed the close of business on October 6, 1997,
as the record date (the "Capital Record Date") for determination of the
shareholders entitled to notice of and to vote at the Special Meeting. Only
holders of record of shares of Capital Common Stock on the Capital Record Date
will be entitled to notice of and to vote at the Special Meeting. Each share
of Capital Common Stock is entitled to one vote. Shareholders who execute
proxies solicited by the Capital Board retain the right to revoke them at any
time prior to the proxies being voted at the Special Meeting. On the Capital
Record Date, there were 7,623,671 shares of Capital Common Stock outstanding.
See "SPECIAL MEETING OF CAPITAL SHAREHOLDERS -- Record Date, Voting Rights,
Required Vote, and Revocability of Proxies."
Pursuant to Capital's Articles of Incorporation, approval of the
Agreement and the Plan of Merger and the transactions contemplated thereby
requires the affirmative vote of the holders of at least two-thirds of the
issued and outstanding shares of Capital Common Stock entitled to be voted at
the Special Meeting. Pursuant to the Agreement, shares which are voted
pursuant to certain irrevocable proxies, the validity of which have been
contested by the underlying owner, will not be counted, unless (i) the
underlying owner has given written instructions with respect to the voting of
such shares in connection with the Agreement or (ii) the parties to the
Agreement have waived this requirement.
The directors and executive officers of Capital (including immediate
family members and affiliated entities) owned, as of the Capital Record Date,
2,912,871 shares (excluding shares underlying Capital Options (as defined
herein)), or approximately 38.2% of the outstanding shares of Capital Common
Stock. A director and an executive officer of Capital also control, as of the
Capital Record Date, irrevocable proxies covering an additional 1,202,898
shares of Capital Common Stock, or approximately 15.8% of the outstanding
shares of Capital Common Stock, and which provide the proxyholder the power to
vote such shares of Capital Common Stock. The validity of certain of these
irrevocable proxies is currently the subject of litigation (the "Disputed
Irrevocable Proxies"). Pursuant to the Agreement, any
- 2 -
<PAGE> 13
shares subject to Disputed Irrevocable Proxies will not be counted in the vote
to approve the Agreement unless (i) the underlying owner has given written
instructions with respect to the voting of such shares in connection with the
Agreement and the Plan of Merger or (ii) the parties to the Agreement have
waived this requirement. See "SPECIAL MEETING OF CAPITAL SHAREHOLDERS --
Irrevocable Proxies" and "BUSINESS OF CAPITAL -- Legal Proceedings."
As an inducement and a condition to UPC entering into the Agreement,
the directors of Capital each individually entered into an agreement (each a
"Support Agreement") with UPC, pursuant to which such persons agreed, among
other things, to vote all shares of Capital Common Stock which they are
entitled to vote (not including shares over which such director has voting
authority in a fiduciary capacity) in favor of the Agreement. See "DESCRIPTION
OF TRANSACTION -- Support Agreements."
The directors and executive officers of UPC owned, as of the Capital
Record Date, no shares of Capital Common Stock. As of the Capital Record Date,
UPC held no shares of Capital Common Stock in a fiduciary capacity for others,
or as a result of debts previously contracted, and Capital held 1,500 shares
of Capital Common Stock in a fiduciary capacity for others. See "SPECIAL
MEETING OF CAPITAL SHAREHOLDERS -- Record Date, Voting Rights, Required Vote,
and Revocability of Proxies."
For information with respect to beneficial owners of 5.0% or more of
the outstanding shares of Capital Common Stock, see "BUSINESS OF CAPITAL --
Beneficial Ownership of Capital Common Stock."
THE MERGER
GENERAL. The Agreement provides for the acquisition of Capital by UPC
pursuant to the merger of Capital with and into UPC Merger Subsidiary, a
corporation to be organized under the laws of the State of Tennessee, which will
exist as a wholly-owned subsidiary of UPC, with the effect that UPC Merger
Subsidiary will be the surviving corporation resulting from the Merger. At the
Effective Time, each share of Capital Common Stock then issued and outstanding
(excluding shares held by Capital, UPC, or their respective subsidiaries, in
each case other than shares held in a fiduciary capacity or as a result of
debts previously contracted) will be converted into and exchanged for the right
to receive .8525 shares of UPC Common Stock, subject to possible adjustment as
described below (the "Exchange Ratio").
If (i) the Average Closing Price (as described below) of UPC Common
Stock is less than $39.90 and (ii) the relative performance of UPC Common Stock
(as measured by comparing the Average Closing Price to $49.875, which was the
closing price of UPC Common Stock on the fourth trading day after the public
announcement of the Merger) is more than 15% lower than the relative
performance of the common stocks of a specified group (the "Index Group") of
bank holding companies (as measured by comparing the Index Price on the
Determination Date (as such terms are defined below) to the Index Price on the
fourth trading day after the public announcement of the Merger), then Capital
may elect to terminate the Agreement (the "Stock Price Termination Right")
unless UPC increases the Exchange Ratio such that the shares of UPC Common
Stock issued in exchange for each share of Capital Common Stock have a value
(based on the Average Closing Price) equal to the lesser of (i) $34.01 and (ii)
the value (based on the Average Closing Price) of the shares of UPC Common
Stock that would have been exchanged for each share of Capital Common Stock if
the relative performance of UPC Common Stock as determined above was 15% lower
than the relative performance of the Index Group. If the Merger is approved by
the Capital shareholders, the Capital Board may elect not to terminate the
Agreement and to consummate the Merger without resoliciting the Capital
shareholders even if Capital's Stock Price Termination Right is triggered and as
a result of the Exchange Ratio, the value of the shares of UPC Common Stock
(valued at the Average Closing Price) issued in exchange for each share of
Capital Common Stock would be less than the lesser of (i) $34.01 and (ii) the
value (based on the Average Closing Price) of the shares of UPC Common Stock
that would have been exchanged for each share of Capital Common Stock if the
relative performance of UPC Common Stock as determined above was 15% lower than
the relative performance of the Index Group.
Under no circumstances would the Exchange Ratio be less than .8525
shares of UPC Common Stock for each share of Capital Common Stock. See
"DESCRIPTION OF TRANSACTION -- Possible Adjustment of Exchange Ratio."
The Average Closing Price is 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
- 3 -
<PAGE> 14
chosen by UPC) for 20 consecutive full trading days in which such shares are
traded on the NYSE ending at the close of trading on the Determination Date.
The Determination Date is the later of the date of the Special Meeting and the
date on which consent of the Federal Reserve of the Merger shall be received
(without regard to any requisite waiting period thereof).
No fractional shares of UPC Common Stock will be issued. Rather, cash
(without interest) will be paid in lieu of any fractional share interest to
which any Capital shareholder would otherwise 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 closing price of one share of UPC Common Stock on the
NYSE (as reported by The Wall Street Journal or, if not reported thereby,
another authoritative source as selected by UPC) on the last trading day
preceding the Effective Time. See "DESCRIPTION OF TRANSACTION -- General."
EFFECT OF THE MERGER ON CAPITAL OPTIONS. At the Effective Time, each
option to purchase, or other right with respect to shares of Capital Common
Stock, pursuant to stock options, stock appreciation rights, or other rights
("Capital Options") granted by Capital under the Capital Stock Plans, as
defined in the Agreement, that is outstanding at the Effective Time, whether
or not exercisable, shall be assumed by UPC and will be converted into and
become an option with respect to UPC Common Stock on a basis adjusted to
reflect the Exchange Ratio. In lieu of having the Capital Options assumed by
UPC, each holder of a Capital Option that is not an "incentive stock option,"
whether or not then vested, will have the right to elect to convert, at the
Effective Time, all or a portion of his or her Capital Options that are not
"incentive stock options" and that have not expired prior to the Effective Time
into the right to receive a number of shares of UPC Common Stock equal to the
fair value of the options. See "DESCRIPTION OF TRANSACTION -- Effect of the
Merger on Capital Options."
As of the Capital Record Date, Capital had 7,623,671 shares of
Capital Common Stock issued and outstanding and 1,260,974 additional shares of
Capital Common Stock subject to Capital Options. Based upon an Exchange Ratio
of .8525, upon consummation of the Merger, UPC would issue up to approximately
6,499,179 shares of UPC Common Stock, excluding shares subject to assumed
Capital Options. Accordingly, UPC would then have outstanding up to
approximately 73,710,821 shares of UPC Common Stock based on the number of
shares of UPC Common Stock outstanding on September 30, 1997 (and excluding
shares to be issued pursuant to Other Pending Acquisitions and shares to be
issued pursuant to the exercise of stock options and for other purposes).
REASONS FOR THE MERGER, RECOMMENDATIONS OF THE BOARD OF DIRECTORS OF
CAPITAL. The Capital Board believes that the Agreement and the Merger are in
the best interests of Capital and its shareholders. THE CAPITAL BOARD (ACTING
WITH ONE DIRECTOR ABSENT) UNANIMOUSLY RECOMMENDS THAT CAPITAL SHAREHOLDERS VOTE
FOR APPROVAL OF THE AGREEMENT AND THE PLAN OF MERGER. The Capital Board
believes that the Merger will result in a company with expanded opportunities
for profitable growth and that the combined resources and capital of Capital
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 unanimously approving (with one director absent) the Agreement and
the Plan of Merger, Capital's directors considered, among other things,
Capital's and UPC's financial condition, the financial terms and income tax
consequences of the Merger, the likelihood of the Merger being approved by
regulatory authorities without undue conditions or delay and the opinion of
Sandler O'Neill & Partners, LP ("Sandler O'Neill") as to the fairness of the
Exchange Ratio, from a financial point of view, to the shareholders of Capital.
See "DESCRIPTION OF TRANSACTION -- Background of and Reasons for the Merger."
OPINION OF FINANCIAL ADVISOR. Sandler O'Neill has rendered an opinion
to the Capital Board 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 Capital. The opinion of
Sandler O'Neill dated as of the date of this Proxy Statement is attached as
- 4 -
<PAGE> 15
Appendix C to this Proxy Statement. Capital 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 Capital's Financial Advisor."
EFFECTIVE TIME. 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 Florida Articles of Merger become effective with the
Secretary of State of the State of Florida and the Tennessee Articles of Merger
become effective with the Secretary of State of the State of Tennessee.
Subject to the terms and conditions of the Agreement, unless otherwise agreed
upon by Capital and UPC, the parties will 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 of the last consent
of any regulatory authority having authority over and approving or exempting
the Merger (without regard to any requisite waiting period in respect thereof),
(ii) the date on which the shareholders of Capital approve the Agreement, and
(iii) the date on which all other conditions precedent (other than those
conditions which relate to actions to be taken at the Closing) to each party's
obligations under the Agreement have been satisfied or waived (to the extent
waivable by such party). See "DESCRIPTION OF TRANSACTION -- Effective Time of
the Merger," "-- Conditions to Consummation of the Merger," and "-- Waiver,
Amendment, and Termination."
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. CAPITAL AND UPC ANTICIPATE THAT ALL
CONDITIONS TO THE CONSUMMATION OF THE MERGER WILL BE SATISFIED SO THAT THE
MERGER CAN BE CONSUMMATED ON OR BEFORE DECEMBER 31, 1997. 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 Capital 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 Capital Common Stock in lieu of
issuing 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 issued to such holder, and in no event will Capital, UPC, or the Exchange
Agent be liable to any holder of Capital 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 APPROVAL AND OTHER CONDITIONS. The Merger is subject to the
prior approval of the Federal Reserve and of the Department of Banking and
Finance of the State of Florida (the "Florida Department"). An application has
been filed with each of these regulatory authorities for the requisite
approvals. By letter dated October 8, 1997, the Federal Reserve advised UPC
that the Merger had been approved. THERE CAN BE NO ASSURANCE THAT ADDITIONAL
REGULATORY APPROVALS WILL BE OBTAINED OR AS TO THE TIMING OF ANY SUCH
APPROVALS.
Consummation of the Merger is subject to various other conditions,
including receipt of the required approval of Capital shareholders, receipt of
an opinion of counsel as to the tax-free nature of certain aspects of the
Merger, and certain other conditions. See "DESCRIPTION OF TRANSACTION --
Regulatory Approval" and "-- 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
consent of the Capital Board and the Board of Directors of UPC (the "UPC
Board"), or by the action of the Board of either company under certain
circumstances, including, but not limited to, (i) if the Merger is not
consummated by April 30, 1998, unless the failure to consummate by such date is
due to a willful breach of the Agreement by the party seeking to terminate, and
(ii) by the Capital Board, in certain circumstances, if an adjustment is not
made to the Exchange Ratio. To the extent permitted by law, the Agreement may
be amended upon the written agreement of UPC and Capital without the approval
of shareholders, whether before or after approval of the Agreement and the Plan
of Merger by Capital shareholders; provided, that after such
- 5 -
<PAGE> 16
approval, there shall be made no amendment that has any of the effects set
forth in Section 607.1103 of the Florida Business Corporation Act ("FBCA"),
without the approval of holders of Capital Common Stock. See "DESCRIPTION OF
TRANSACTION -- Possible Adjustment of Exchange Ratio" and "-- Waiver,
Amendment, and Termination."
DISSENTERS' RIGHTS. Pursuant to the FBCA Section 607.1302, because
the Capital Common Stock was listed on the Nasdaq National Market as of the
Capital Record Date, the holders of Capital Common Stock will not have
dissenters' rights with respect to the Merger. See "DESCRIPTION
OF TRANSACTION -- Dissenters' Rights."
INTERESTS OF CERTAIN PERSONS IN THE MERGER. Certain members of
Capital's management and the Capital Board have interests in the Merger in
addition to their interests as shareholders of Capital generally. These
interests relate to: (i) the receipt, under certain circumstances, by the
Executive Officers (as defined herein) of certain economic benefits pursuant to
the terms of their respective employment agreements; (ii) the assumption by UPC
of the Capital Options on a basis that reflects the Exchange Ratio, including
Capital Options held by the "Executive Officer Group" (as defined herein) and
the "Non-Executive Officer Director Group" (as defined herein) entitling them,
as of the Capital Record Date, to purchase in the aggregate 708,760 shares of
Capital Common Stock having an aggregate value of approximately $21,532,673
(based upon the $48.25 closing price of Capital Common Stock on the Nasdaq
National Market on October 6, 1997) (or, at the election of each holder of a
Capital Option that is not an incentive stock option, the right to elect to
convert all or a portion of his or her Capital Options into the right to receive
a number of shares of UPC Common Stock equal to the fair value of the options;
and (iii) the continued indemnification by UPC of the former directors,
officers, employees, and agents of Capital and its subsidiaries following
consummation of the Merger. 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, for federal income tax purposes, no gain or loss will be
recognized by a Capital shareholder upon the exchange of all of such
shareholder's shares of Capital Common Stock solely for shares of UPC Common
Stock (except with respect to cash received in lieu of a fractional share of
UPC Common Stock). Consummation of the Merger is conditioned upon receipt by
UPC of an opinion of Alston & Bird LLP ("Alston & Bird") and upon receipt by
Capital of an opinion of Skadden, Arps, Slate, Meagher & Flom LLP ("Skadden,
Arps") substantially to this effect. TAX CONSEQUENCES OF THE MERGER FOR
INDIVIDUAL TAXPAYERS CAN VARY, HOWEVER, AND ALL CAPITAL 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 of the Merger."
ACCOUNTING TREATMENT. It is intended that the Merger will be
accounted for as a pooling of interests transaction for accounting and
financial reporting purposes. See "DESCRIPTION OF TRANSACTION -- Accounting
Treatment."
CERTAIN DIFFERENCES IN SHAREHOLDERS' RIGHTS. At the Effective Time,
Capital shareholders, whose rights are governed by Capital's Articles of
Incorporation, as amended (the "Articles"), and Amended and Restated Bylaws
(the "Bylaws") and by the FBCA, will automatically become UPC shareholders, and
their rights as UPC shareholders will be governed by UPC's Restated Charter
(the "Charter") and Bylaws and the Tennessee Business Corporation Act (the
"TBCA"). The rights of UPC shareholders differ from the rights of Capital
shareholders in certain important respects, including with respect to certain
anti-takeover provisions provided for in UPC's Restated Charter and Bylaws.
See "EFFECT OF THE MERGER ON RIGHTS OF SHAREHOLDERS."
OPTION AGREEMENT. Capital, as issuer, and UPC, as grantee, entered
into a stock option agreement (the "Option Agreement"), which became effective
at the end of the due diligence period on September 11, 1997, pursuant to which
Capital granted UPC an option to purchase, under certain circumstances and
subject to certain possible adjustments and limitations, up to 1,510,500 shares
of Capital Common Stock at a price of $40.50 per
- 6 -
<PAGE> 17
share. Notwithstanding anything to the contrary contained in the Option
Agreement, in no event may the Total Profit or the Notional Total Profit (each
as defined in the Option Agreement) of UPC exceed $18.0 million. The Option
Agreement is exercisable upon the occurrence of certain events that create the
potential for another party to acquire control of Capital. To the knowledge of
Capital, no such event which would permit exercise of the Option Agreement has
occurred as of the date of this Proxy Statement. The Option Agreement was
granted by Capital 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 Capital. See "DESCRIPTION OF TRANSACTION -- Option
Agreement."
CONDUCT OF BUSINESS PENDING THE MERGER. Each party has agreed in the
Agreement to, among other things, operate its business and to take no action
that would materially adversely affect the ability of any party to perform its
covenants and agreements under the Agreement. In addition, Capital has agreed
not to take certain actions relating to the operation of Capital pending
consummation of the Merger without the prior written consent of UPC, except as
otherwise permitted by the Agreement, including, among other things: (i)
becoming responsible for any obligation for borrowed money in excess of an
aggregate of $500,000, except in the ordinary course of business consistent
with past practices; (ii) paying any dividends, except in accordance with past
practices, or, subject to certain exceptions, exchanging any shares of its
capital stock, issuing any additional shares of its capital stock, or giving
any person the right to acquire any such shares; (iii) acquiring control over
any other entity; (iv) subject to certain exceptions, granting any increase in
compensation or benefits, or paying any bonus, to any of its directors,
officers, or employees; or (v) except as previously disclosed to UPC, modifying
or adopting any employee benefit plans, including any employment contract. See
"DESCRIPTION OF TRANSACTION -- Conduct of Business Pending the Merger."
COMPARATIVE MARKET PRICES OF COMMON STOCK
Shares of UPC Common Stock are traded on the NYSE under the symbol
"UPC." Shares of Capital Common Stock are traded in the over-the-counter
market and quoted on the Nasdaq National Market under the symbol "CBCP." The
following table sets forth the reported closing sale prices per share for
Capital Common Stock and UPC Common Stock and the equivalent per share prices
giving effect to the Merger (as explained below) for Capital Common Stock on
(i) August 12, 1997, the last trading day preceding the public announcement of
the execution of the Agreement, and (ii) October 8, 1997, the last practicable
date prior to the mailing of this Proxy Statement.
<TABLE>
<CAPTION>
Capital UPC Equivalent Price
Common Stock Common Stock Per Capital Share(1)
------------------- ------------------ ------------------------
<S> <C> <C> <C>
August 12, 1997 $46.00 $50.44 $43.00
October 8, 1997 50.00 60.38 51.47
</TABLE>
- ------------------------------
(1) The equivalent price per share of Capital Common Stock at each
specified date represents the closing sale price of a share of
UPC Common Stock on such date multiplied by an Exchange Ratio
of .8525. 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.
EQUIVALENT AND PRO FORMA PER SHARE DATA
The following table sets forth certain comparative per share data
relating to earnings before extraordinary items and accounting changes, cash
dividends, and book value on: (i) a historical basis for UPC and Capital; (ii) a
pro forma combined basis per share of UPC Common Stock, giving effect to the
Merger only; (iii) a pro forma combined basis per share of UPC Common Stock,
giving effect to the Merger and the Other Pending Acquisitions
- 7 -
<PAGE> 18
(as defined under "BUSINESS OF UPC -- Recent Developments"); (iv) an equivalent
pro forma basis per share of Capital Common Stock, giving effect to the Merger
only; and (v) an equivalent pro forma basis per share of Capital Common Stock,
giving effect to the Merger and the Other Pending Acquisitions. The UPC pro
forma combined information and the Capital equivalent pro forma information
give effect to the Merger and the Other Pending Acquisitions and reflect an
Exchange Ratio of .8525. The Merger and the Other Pending Acquisitions, except
for the acquisition of Sho-Me Financial Corp., are expected to be accounted for
using the pooling-of-interests method of accounting and the acquisition of
Sho-Me Financial Corp. is expected to be accounted for using the purchase
method of accounting. The pro forma information for 1996 and the six months
ended June 30, 1997 reflect the acquisition of Capital and the Other Pending
Acquisitions as of January 1, 1996. The pro forma information for 1995 and
1994 reflect only the acquisition of Capital and Magna Bancorp, Inc. because
the Other Pending Acquisitions (excluding Magna Bancorp, Inc.) are not
considered significant to UPC from a financial statement presentation
standpoint. The pro forma data are presented for information purposes only and
are not necessarily indicative of the results of operations or combined
financial position that would have resulted had the Merger or the Other
Acquisitions (as defined under "BUSINESS OF UPC -- Recent Developments") been
consummated at the dates or during the periods indicated, nor are they
necessarily indicative of future results of operations or combined financial
position. The pro forma data does not reflect preliminary estimates by UPC of
acquisition-related charges to be incurred in connection with consummation of
the Merger and the Other Pending Acquisitions. For additional information with
respect to these estimated charges, see "BUSINESS OF UPC -- Recent
Developments.
The information shown below should be read in conjunction with, and is
qualified in its entirety by, the historical consolidated financial statements
of UPC and Capital, including the respective notes thereto. See "DOCUMENTS
INCORPORATED BY REFERENCE," "-- Selected Financial Data," and "BUSINESS OF UPC
- -- Recent Developments."
- 8 -
<PAGE> 19
UNION PLANTERS CORPORATION
AND CAPITAL BANCORP
HISTORICAL AND PRO FORMA COMPARATIVE PER SHARE DATA
<TABLE>
<CAPTION>
Six Months
Ended Years Ended December 31, (1)
June 30, --------------------------------------------
1997 1996 1995 1994
---------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
EARNINGS BEFORE EXTRAORDINARY ITEMS
AND ACCOUNTING CHANGES
UPC
Primary . . . . . . . . . . . . . . . . . . . . . . . $1.73 $1.95 $2.72 $1.52
Fully Diluted . . . . . . . . . . . . . . . . . . . . 1.68 1.92 2.64 1.52
UPC pro forma (Capital Only)
Primary . . . . . . . . . . . . . . . . . . . . . . . 1.72 2.04 2.71 1.58
Fully diluted . . . . . . . . . . . . . . . . . . . . 1.67 2.01 2.63 1.57
UPC pro forma (all Other Pending Acquisitions
and Capital)
Primary . . . . . . . . . . . . . . . . . . . . . . . 1.71 2.29 2.73 1.63
Fully diluted . . . . . . . . . . . . . . . . . . . . 1.66 2.25 2.66 1.63
Capital
Primary . . . . . . . . . . . . . . . . . . . . . . . 1.40 2.50 2.25 1.83
Fully Diluted . . . . . . . . . . . . . . . . . . . . 1.38 2.50 2.20 1.80
Capital equivalent pro forma (Capital only)(1)
Primary . . . . . . . . . . . . . . . . . . . . . . . 1.47 1.74 2.31 1.35
Fully diluted . . . . . . . . . . . . . . . . . . . . 1.42 1.71 2.24 1.34
Capital equivalent pro forma (all Other Pending
Acquisitions and Capital)(1)
Primary . . . . . . . . . . . . . . . . . . . . . . . 1.46 1.95 2.33 1.39
Fully diluted . . . . . . . . . . . . . . . . . . . . 1.42 1.92 2.27 1.39
CASH DIVIDENDS PER SHARE
UPC . . . . . . . . . . . . . . . . . . . . . . . . . . .695 1.08 .98 .88
Capital . . . . . . . . . . . . . . . . . . . . . . . . .167 .33 .33 .33
Capital equivalent pro forma (1) . . . . . . . . . . . . .59 .92 .84 .75
June 30, December 31,
1997 1996
-------- ------------
BOOK VALUE PER COMMON SHARE
UPC . . . . . . . . . . . . . . . . . . . . . . . . . . $20.69 $19.55
UPC pro forma (Capital only) . . . . . . . . . . . . . . 20.86 19.69
UPC pro forma (all Other Pending
Acquisitions and Capital) . . . . . . . . . . . . . . 20.87 19.71
Capital . . . . . . . . . . . . . . . . . . . . . . . . 19.29 18.02
Capital equivalent pro forma (Capital only)(1) . . . . . 17.78 16.79
Capital equivalent pro forma (all Other
Pending Acquisitions and Capital) (1) . . . . . . . . 17.79 16.80
</TABLE>
- ---------------------------------------
(1) The equivalent pro forma per share data for Capital is
computed by multiplying UPC's pro forma information by an
Exchange Ratio of .8525.
- 9 -
<PAGE> 20
SELECTED FINANCIAL DATA
The following tables present selected consolidated financial data for
UPC for the five-year period ended December 31, 1996, and for the six-month
periods ended June 30, 1997 and 1996, and selected consolidated financial data
for Capital for the five-year period ended December 31, 1996, and for the
six-month periods ended June 30, 1997 and 1996. The information for UPC has
been derived from the consolidated financial statements of UPC, including the
audited consolidated financial statements of UPC incorporated in this Proxy
Statement by reference to UPC's 1996 Annual Report on Form 10-K for the year
ended December 31, 1996 and UPC's Quarterly Report on Form 10-Q for the quarter
and six months ended June 30, 1997, and should be read in conjunction therewith
and with the notes thereto. See "DOCUMENTS INCORPORATED BY REFERENCE." The
information for Capital has been derived from the consolidated financial
statements of Capital incorporated in this Proxy Statement by reference to
Capital's Annual Report on Form 10-K for the year ended December 31, 1996 and
Capital's Quarterly Report on Form 10-Q for the quarter and six months ended
June 30, 1997, 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 opinion of the respective managements of UPC and Capital, all adjustments
(which include normal recurring adjustments and those related to the adoption
of new accounting principles) necessary to arrive at a fair statement of
interim results of operations of UPC and Capital, respectively, have been
included. With respect to UPC and Capital, results for the six months ended
June 30, 1997 are not necessarily indicative of results which may be expected
for any other interim period or for the year as a whole. See "BUSINESS OF UPC
- -- Recent Developments" for information concerning UPC's Other Acquisitions as
defined therein.
- 10 -
<PAGE> 21
UNION PLANTERS CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Six Months Ended
June 30, (1) Years Ended December 31, (1)
----------------------------------- ---------------------------------
1997 1996 1996 1995
---------------- ---------------- ---------------- --------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net interest income . . . . . . . . . . . . . $ 312,950 $ 299,542 $ 605,962 $ 535,997
Provision for losses on loans . . . . . . . . 25,001 25,669 57,395 27,381
Investment securities gains (losses) . . . . . 9 32 4,081 409
Other noninterest income . . . . . . . . . . . 111,982 109,285 222,250 203,014
Noninterest expense . . . . . . . . . . . . . 219,302 238,245 570,634 452,635
---------------- ---------------- ---------------- --------------
Earnings before income taxes,
extraordinary item, and accounting
changes . . . . . . . . . . . . . . . . . 180,638 144,945 204,264 259,404
Applicable income taxes . . . . . . . . . . . 61,593 49,169 70,526 86,648
---------------- ---------------- ---------------- --------------
Earnings before extraordinary item and
accounting changes . . . . . . . . . . . . 119,045 95,776 133,738 172,756
Extraordinary item and accounting
changes, net of taxes . . . . . . . . . . . -- -- -- --
---------------- ---------------- ---------------- --------------
Net earnings . . . . . . . . . . . . . . . . . $ 119,045 $ 95,776 $ 133,738 $ 172,756
================ ================ ================ ==============
PER COMMON SHARE DATA (2), (5)
Primary
Earnings before extraordinary item
and accounting changes . . . . . . . . . $ 1.73 $ 1.42 $ 1.95 $ 2.72
Net earnings . . . . . . . . . . . . . . . 1.73 1.42 1.95 2.72
Fully diluted
Earnings before extraordinary item
and accounting changes . . . . . . . . . 1.68 1.38 1.92 2.64
Net earnings . . . . . . . . . . . . . . . 1.68 1.38 1.92 2.64
Cash dividends . . . . . . . . . . . . . . . . .695 .54 1.08 .98
Book value . . . . . . . . . . . . . . . . . . 20.69 19.19 19.55 18.52
BALANCE SHEET DATA (AT PERIOD END)
Total assets . . . . . . . . . . . . . . . . $14,770,346 $15,273,145 $15,222,563 $14,383,222
Loans, net of unearned income . . . . . . . 10,402,408 9,607,778 10,434,070 9,041,059
Allowance for losses on loans . . . . . . . 161,159 167,987 166,853 156,388
Investment securities . . . . . . . . . . . 2,832,726 4,111,207 2,956,234 3,573,054
Deposits . . . . . . . . . . . . . . . . . . 11,238,399 11,593,444 11,490,262 11,074,722
Short-term borrowings . . . . . . . . . . . 534,068 1,076,781 714,146 838,283
Long-term debt (3)
Parent company . . . . . . . . . . . . . 373,478 213,453 373,459 214,758
Subsidiary banks . . . . . . . . . . . . 943,582 869,525 1,035,257 811,819
Total shareholders' equity . . . . . . . . . 1,444,929 1,316,114 1,352,874 1,213,162
Average assets . . . . . . . . . . . . . . . 14,877,498 15,138,068 15,274,782 13,661,748
Average shareholders' equity . . . . . . . . 1,368,627 1,254,354 1,283,575 1,119,232
Average shares outstanding (in thousands)
Primary . . . . . . . . . . . . . . . . . 67,249 64,300 64,987 60,385
Fully diluted . . . . . . . . . . . . . . 71,028 68,919 69,518 64,995
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31, (1)
----------------------------------------------------
1994 1993 1992
--------------- -------------- ---------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C>
INCOME STATEMENT DATA
Net interest income . . . . . . . . . . . . . $ 504,500 $ 439,290 $ 357,365
Provision for losses on loans . . . . . . . . 9,661 22,660 37,367
Investment securities gains (losses) . . . . . (22,515) 3,508 11,880
Other noninterest income . . . . . . . . . . . 160,109 154,254 136,162
Noninterest expense . . . . . . . . . . . . . 486,836 408,888 362,028
--------------- -------------- ---------------
Earnings before income taxes,
extraordinary item, and accounting
changes . . . . . . . . . . . . . . . . . 145,597 165,504 106,012
Applicable income taxes . . . . . . . . . . . 45,174 51,864 30,219
--------------- -------------- ---------------
Earnings before extraordinary item and
accounting changes . . . . . . . . . . . . 100,423 113,640 75,793
Extraordinary item and accounting
changes, net of taxes . . . . . . . . . . . -- 637 2,847
--------------- -------------- ---------------
Net earnings . . . . . . . . . . . . . . . . . $ 100,423 $ 114,277 $ 78,640
=============== ============== ===============
PER COMMON SHARE DATA (2), (5)
Primary
Earnings before extraordinary item
and accounting changes . . . . . . . . . $ 1.52 $ 2.19 $ 1.75
Net earnings . . . . . . . . . . . . . . . 1.52 2.20 1.75
Fully diluted
Earnings before extraordinary item
and accounting changes . . . . . . . . . 1.52 2.14 1.73
Net earnings . . . . . . . . . . . . . . . 1.52 2.15 1.73
Cash dividends . . . . . . . . . . . . . . . . .88 .72 .60
Book value . . . . . . . . . . . . . . . . . . 15.42 14.80 14.08
BALANCE SHEET DATA (AT PERIOD END)
Total assets . . . . . . . . . . . . . . . . $13,425,063 $11,866,609 $10,180,375
Loans, net of unearned income . . . . . . . 8,436,650 6,615,884 5,364,377
Allowance for losses on loans . . . . . . . 154,131 141,999 114,130
Investment securities . . . . . . . . . . . 3,592,482 3,854,767 3,370,321
Deposits . . . . . . . . . . . . . . . . . . 10,702,569 9,879,780 8,714,306
Short-term borrowings . . . . . . . . . . . 699,838 300,414 343,452
Long-term debt (3)
Parent company . . . . . . . . . . . . . 114,790 114,729 74,292
Subsidiary banks . . . . . . . . . . . . 693,002 463,055 202,847
Total shareholders' equity . . . . . . . . . 1,008,594 935,730 670,267
Average assets . . . . . . . . . . . . . . . 13,105,179 11,565,505 9,475,049
Average shareholders' equity . . . . . . . . 1,042,990 813,140 623,869
Average shares outstanding (in thousands)
Primary . . . . . . . . . . . . . . . . . 59,587 43,192 35,463
Fully diluted . . . . . . . . . . . . . . 59,929 47,422 38,307
</TABLE>
- 11 -
<PAGE> 22
<TABLE>
<CAPTION>
Six Months Ended
June 30, (1) Years Ended December 31, (1)
--------------------------------------------------------
1997 1996 1996 1995
------------- --------- ---------- --------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
PROFITABILITY AND CAPITAL RATIOS
Return on average assets . . . . . . . . . . 1.61% 1.27% .88% 1.26%
Return on average common equity . . . . . . 18.12 15.93 10.61 16.16
Net interest income (taxable-equivalent)/
average earning assets (4) . . . . . . . 4.73 4.42 4.41 4.38
Loans/deposits . . . . . . . . . . . . . . . 92.56 82.87 90.81 81.64
Common and preferred dividend
payout ratio . . . . . . . . . . . . . . 40.75 33.53 50.64 32.74
Equity/assets (period end) . . . . . . . . . 9.78 8.62 8.89 8.43
Average shareholders' equity/
average total assets . . . . . . . . . . 9.20 8.29 8.40 8.19
Leverage ratio . . . . . . . . . . . . . . . 10.64 8.34 9.61 8.08
Tier 1 capital/risk-weighted assets . . . . 16.76 13.93 15.29 13.39
Total capital/risk-weighted assets . . . . . 19.86 17.09 18.32 16.68
ASSET QUALITY RATIOS (6)
Allowance/period-end loans . . . . . . . . . 1.80% 1.98% 1.86% 1.92%
Nonperforming loans/total loans . . . . . . .61 .74 .74 .56
Allowance/nonperforming loans . . . . . . . 295 268 253 344
Nonperforming assets/loans and
foreclosed properties . . . . . . . . . . .80 .87 .92 .67
Provision/average loans . . . . . . . . . . .56 .60 .66 .34
Net charge-offs/average loans . . . . . . . .69 .48 .60 .34
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31, (1)
--------------------------------------
1994 1993 1992
----------- ---------- ---------
(Dollars in thousands, except per share data)
<S> <C> <C> <C>
PROFITABILITY AND CAPITAL RATIOS
Return on average assets . . . . . . . . . . .77% .99% .83%
Return on average common equity . . . . . . 9.76 14.92 13.15
Net interest income (taxable-equivalent)/
average earning assets (4) . . . . . . . 4.31 4.29 4.26
Loans/deposits . . . . . . . . . . . . . . . 78.83 66.96 61.56
Common and preferred dividend
payout ratio . . . . . . . . . . . . . . 40.99 28.34 32.95
Equity/assets (period end) . . . . . . . . . 7.51 7.89 6.58
Average shareholders' equity/
average total assets . . . . . . . . . . 7.96 7.03 6.58
Leverage ratio . . . . . . . . . . . . . . . 7.53 7.62 6.36
Tier 1 capital/risk-weighted assets . . . . 12.75 14.07 11.70
Total capital/risk-weighted assets . . . . . 14.97 16.51 13.64
ASSET QUALITY RATIOS (6)
Allowance/period-end loans . . . . . . . . . 1.98% 2.27% 2.20%
Nonperforming loans/total loans . . . . . . .44 .65 1.16
Allowance/nonperforming loans . . . . . . . 444 346 189
Nonperforming assets/loans and
foreclosed properties . . . . . . . . . . .58 .96 1.83
Provision/average loans . . . . . . . . . . .14 .37 .74
Net charge-offs/average loans . . . . . . . .09 .27 .52
</TABLE>
- ------------------------------
(1) Reference is made to "Basis of Presentation" in Note 1 to
UPC's audited consolidated financial statements contained in
the 1996 Annual Report to Shareholders, which is incorporated
by reference. See "DOCUMENTS INCORPORATED BY REFERENCE."
(2) Share and per share amounts have been retroactively restated
for significant acquisitions accounted for as pooling of
interests.
(3) Long-term debt includes Medium-Term Bank Notes, Federal Home
Loan Bank ("FHLB") advances, subordinated notes and
debentures, obligations under capital leases, mortgage
indebtedness, Trust Preferred Securities, and notes payable
with maturities greater than one year.
(4) Average balances and calculations do not include the impact of
the net unrealized gain or loss on available for sale
securities.
(5) Leader Financial Corporation ("Leader") was organized as a
holding company on March 18, 1993 in connection with the
conversion of its principal subsidiary, Leader Federal Bank
for Savings, from a federal mutual savings bank to a
federally-chartered capital stock savings bank. (See Note 2
to UPC's consolidated financial statements contained in the
1996 Annual Report to Shareholders). Accordingly, earnings
per share for the year ended December 31, 1992 is calculated
using only UPC's historical net earnings and the calculation
of earnings per share for the year ended December 31, 1993 is
based on UPC's historical net earnings for 1993 plus Leader's
fourth quarter net earnings, since the stock conversion
occurred on September 30, 1993.
(6) FHA/VA government-insured/guaranteed loans have been excluded,
since they represent minimal credit risk to UPC.
- 12 -
<PAGE> 23
CAPITAL BANCORP AND SUBSIDIARIES
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Six Months Ended
June 30, Years Ended December 31,
-----------------------------------------------------------
1997 1996 1996 1995
------------ ------------ ------------- ------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net interest income . . . . . . . . . . . . . . . $ 38,436 $ 33,984 $ 70,303 $ 67,579
Provision for losses on loans
and doubtful accounts . . . . . . . . . . . . . 5,900 4,400 9,025 5,835
Investment securities gains (losses) . . . . . . . 57 -- 18 12
Other noninterest income . . . . . . . . . . . . . 29,107 25,231 53,140 46,094
Noninterest expense (1) . . . . . . . . . . . . . 43,388 39,132 80,568 80,288
------------ ------------ ------------- ------------
Earnings before income taxes,
extraordinary items, and accounting
changes . . . . . . . . . . . . . . . . . . . . 18,312 15,683 33,868 27,562
Applicable income taxes . . . . . . . . . . . . . 6,884 6,116 13,664 10,461
------------ ------------ ------------- ------------
Earnings before extraordinary items
and accounting changes . . . . . . . . . . . . 11,428 9,567 20,204 17,101
Accounting changes, net of taxes . . . . . . . . . -- -- -- --
------------ ------------ ------------- ------------
Net earnings . . . . . . . . . . . . . . . . . . . $ 11,428 $ 9,567 $ 20,204 $ 17,101
============ ============ ============= ============
PER COMMON SHARE DATA
Primary
Earnings before accounting
changes . . . . . . . . . . . . . . . . . . . $1.40 $1.18 $2.50 $2.25
Net earnings . . . . . . . . . . . . . . . . . 1.40 1.18 2.50 2.25
Fully diluted
Earnings before accounting
changes . . . . . . . . . . . . . . . . . . . 1.38 1.18 2.50 2.20
Net earnings . . . . . . . . . . . . . . . . . 1.38 1.18 2.50 2.20
Cash dividends . . . . . . . . . . . . . . . . . . .1666 .1666 .33 .33
Book value . . . . . . . . . . . . . . . . . . . . 19.29 16.12 18.02 15.26
BALANCE SHEET DATA (AT PERIOD END)
Total assets . . . . . . . . . . . . . . . . . . . $1,910,330 $1,634,524 $1,762,898 $1,589,715
Loans, net of unearned income . . . . . . . . . . 848,272 745,975 827,366 725,280
Allowance for losses on loans . . . . . . . . . . 10,807 8,949 9,333 11,789
Investment securities . . . . . . . . . . . . . . 221,146 232,043 218,486 240,504
Deposits . . . . . . . . . . . . . . . . . . . . . 1,197,578 1,034,231 1,096,825 1,038,755
Short-term borrowings . . . . . . . . . . . . . . 81,805 87,110 79,905 86,133
Long-term debt
Subsidiary bank (2) . . . . . . . . . . . . . . 256,085 204,300 200,900 175,000
Total shareholders' equity . . . . . . . . . . . . 146,341 120,408 135,742 113,725
Average assets . . . . . . . . . . . . . . . . . . 1,798,183 1,575,462 1,651,399 1,424,549
Average shareholders' equity . . . . . . . . . . . 140,684 116,973 123,620 102,318
Average shares outstanding (in thousands)
Primary . . . . . . . . . . . . . . . . . . . . 8,187 8,118 8,096 7,610
Fully diluted . . . . . . . . . . . . . . . . . 8,288 8,118 8,096 7,770
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------
1994 1993 1992
------------- ------------ ------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C>
INCOME STATEMENT DATA
Net interest income . . . . . . . . . . . . . . . $ 59,449 $ 56,796 $ 48,694
Provision for losses on loans
and doubtful accounts . . . . . . . . . . . . . 5,760 12,145 12,050
Investment securities gains (losses) . . . . . . . 1,213 632 106
Other noninterest income . . . . . . . . . . . . . 40,735 39,567 35,005
Noninterest expense (1) . . . . . . . . . . . . . 74,459 67,713 60,934
------------- ------------ ------------
Earnings before income taxes,
extraordinary items, and accounting
changes . . . . . . . . . . . . . . . . . . . . 21,178 17,137 10,821
Applicable income taxes . . . . . . . . . . . . . 7,974 5,368 2,631
------------- ------------ ------------
Earnings before extraordinary items
and accounting changes . . . . . . . . . . . . 13,204 11,769 8,190
Accounting changes, net of taxes . . . . . . . . . -- -- --
------------- ------------ ------------
Net earnings . . . . . . . . . . . . . . . . . . . $ 13,204 $ 11,769 $ 8,190
============= ============ ============
PER COMMON SHARE DATA
Primary
Earnings before accounting
changes . . . . . . . . . . . . . . . . . . . $1.83 $1.64 $1.20
Net earnings . . . . . . . . . . . . . . . . . 1.83 1.64 1.20
Fully diluted
Earnings before accounting
changes . . . . . . . . . . . . . . . . . . . 1.80 1.61 1.16
Net earnings . . . . . . . . . . . . . . . . . 1.80 1.61 1.16
Cash dividends . . . . . . . . . . . . . . . . . . .33 .33 .27
Book value . . . . . . . . . . . . . . . . . . . . 12.85 12.25 10.63
BALANCE SHEET DATA (AT PERIOD END)
Total assets . . . . . . . . . . . . . . . . . . . $1,317,081 $1,204,467 $1,271,015
Loans, net of unearned income . . . . . . . . . . 645,421 565,046 567,316
Allowance for losses on loans . . . . . . . . . . 9,210 18,423 15,243
Investment securities . . . . . . . . . . . . . . 221,049 179,813 176,286
Deposits . . . . . . . . . . . . . . . . . . . . . 876,793 915,848 934,356
Short-term borrowings . . . . . . . . . . . . . . 87,236 59,566 116,595
Long-term debt
Subsidiary bank (2) . . . . . . . . . . . . . . 125,000 -- --
Total shareholders' equity . . . . . . . . . . . . 91,363 84,673 74,549
Average assets . . . . . . . . . . . . . . . . . . 1,273,079 1,230,817 1,186,707
Average shareholders' equity . . . . . . . . . . . 87,433 80,082 70,757
Average shares outstanding (in thousands)
Primary . . . . . . . . . . . . . . . . . . . . 7,210 7,190 6,820
Fully diluted . . . . . . . . . . . . . . . . . 7,347 7,298 7,048
</TABLE>
- 13-
<PAGE> 24
<TABLE>
<CAPTION>
Six Months Ended
June 30, Years Ended December 31,
-------------------------------------------------
1997 1996 1996 1995
--------- ---------- --------- ------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
PROFITABILITY AND CAPITAL RATIOS
Return on average assets (3) . . . . . . 1.28% 1.22% 1.22% 1.20%
Return on average common
equity (3) . . . . . . . . . . . . . . 16.38 16.45 16.34 16.71
Net interest income/average earning
assets, taxable equivalent (3) . . . 5.40 5.34 5.45 5.84
Loans/deposits . . . . . . . . . . . . . 69.93 71.26 74.58 68.69
Common and preferred dividend
payout ratio . . . . . . . . . . . . 11.05 13.00 12.35 15.00
Equity/assets (period end) . . . . . . . 7.66 7.37 7.70 7.15
Average shareholders' equity/
average total assets . . . . . . . . 7.82 7.42 7.49 7.18
Capital ratio . . . . . . . . . . . . . 8.57 7.50 8.38 7.25
Tier 1 capital/risk-weighted assets . . 10.71 9.89 10.84 9.99
Total capital/risk-weighted assets . . . 11.66 10.85 11.75 11.24
ASSET QUALITY RATIOS
Allowance/period-end loans (4) . . . . . 1.27% 1.20% 1.13% 1.63%
Nonperforming loans/total loans(5) . . . 1.89 .69 .68 .97
Allowance/nonperforming loans . . . . . 67.26 174.99 164.86 168.01
Nonperforming assets/loans and
foreclosed properties . . . . . . . . 2.22 1.32 1.12 1.89
Provision/average loans (3) . . . . . . .88 .63 .70 .53
Net charge-offs/average loans(3) . . . . .53 1.41 1.02 .15
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------
1994 1993 1992
---------- --------- --------
(Dollars in thousands, except per share data)
<S> <C> <C> <C>
PROFITABILITY AND CAPITAL RATIOS
Return on average assets (3) . . . . . . 1.04% .96% .69%
Return on average common
equity (3) . . . . . . . . . . . . . . 15.10 14.70 11.57
Net interest income/average earning
assets, taxable equivalent (3) . . . 5.91 6.03 5.52
Loans/deposits . . . . . . . . . . . . . 72.56 59.68 59.09
Common and preferred dividend
payout ratio . . . . . . . . . . . . 18.52 20.66 22.99
Equity/assets (period end) . . . . . . . 6.94 7.03 5.87
Average shareholders' equity/
average total assets . . . . . . . . 6.87 6.51 5.96
Capital ratio . . . . . . . . . . . . . 7.58 7.30 6.18
Tier 1 capital/risk-weighted assets . . 9.68 9.23 8.21
Total capital/risk-weighted assets . . . 10.82 10.48 9.46
ASSET QUALITY RATIOS
Allowance/period-end loans (4) . . . . . 1.43% 3.26% 2.69%
Nonperforming loans/total loans(5) . . . 1.20 2.18 4.98
Allowance/nonperforming loans . . . . . 119.07 149.65 53.97
Nonperforming assets/loans and
foreclosed properties . . . . . . . . 3.40 5.23 9.81
Provision/average loans (3) . . . . . . .60 1.63 1.56
Net charge-offs/average loans(3) . . . . 2.15 1.08 1.91
</TABLE>
- ------------------------------
(1) Includes minority interests in net income of consolidated
subsidiary of $1.0 million and $1.1 million for the six months
ended June 30, 1997 and the year ended December 31, 1996,
respectively.
(2) Represents long-term debt of Factors and subsidiaries.
(3) Annualized for the six months ended June 30, 1997 and 1996.
(4) Allowance divided by loans, net of unearned income.
(5) Nonperforming loans divided by loans, net of unearned income.
- 14-
<PAGE> 25
SPECIAL MEETING OF CAPITAL SHAREHOLDERS
DATE, PLACE, TIME, AND PURPOSE
This Proxy Statement is being furnished to the holders of Capital
Common Stock in connection with the solicitation by the Capital Board of
proxies for use at the Special Meeting and at any adjournments or postponements
thereof at which Capital shareholders will be asked to vote upon a proposal to
approve the Agreement and the Plan of Merger. The Special Meeting will be held
at The Grand Bay Hotel located at 2669 South Bayshore Drive, Miami, Florida
33133, at 10:00 a.m., local time, on November 24, 1997. See "DESCRIPTION OF
TRANSACTION."
RECORD DATE, VOTING RIGHTS, REQUIRED VOTE, AND REVOCABILITY OF PROXIES
The close of business on October 6, 1997, has been fixed as the
Capital Record Date for determining holders of outstanding shares of Capital
Common Stock entitled to notice of and to vote at the Special Meeting. Only
holders of Capital Common Stock of record on the books of Capital at the close
of business on the Capital Record Date are entitled to notice of and to vote at
the Special Meeting. As of the Capital Record Date, there were 7,623,671
shares of Capital Common Stock issued and outstanding held by approximately 489
holders of record.
Each holder of record of shares of Capital Common Stock on the Capital
Record Date is entitled to cast one vote per share on the proposal to approve
the Agreement and the Plan of Merger, and on any other matter properly
submitted for the vote of the Capital shareholders at the Special Meeting. The
presence, either in person or by properly executed proxy, of the holders of a
majority of the outstanding shares of Capital Common Stock entitled to vote at
the Special Meeting is necessary to constitute a quorum at the Special Meeting.
Capital intends to count shares of Capital Common Stock present in
person at the Special Meeting but not voting, and shares of Capital Common Stock
for which it has received proxies but with respect to which holders of shares
have abstained on any matter, as present at the Special Meeting for purposes of
determining the presence or absence of a quorum for the transaction of business.
Pursuant to Capital's Articles, approval of the Agreement and Plan of Merger
requires the affirmative vote of at least two-thirds of the issued and
outstanding shares of Capital Common Stock entitled to vote at the Special
Meeting. Pursuant to the Agreement, shares which are voted pursuant to Disputed
Irrevocable Proxies will not be counted, unless (i) the underlying owner has
given written instructions with respect to the voting of such shares in
connection with the Agreement or (ii) the parties to the Agreement have waived
this requirement. See "-- Irrevocable Proxies"). In addition, brokers who hold
shares in street name for customers who are the beneficial owners of such shares
are prohibited from giving a proxy to vote shares held for such customers on the
approval of the Agreement and the Plan of Merger without specific instructions
from such customers. Given that the approval of the Agreement and the Plan of
Merger requires the affirmative vote of the holders of at least two-thirds of
the outstanding shares of Capital Common Stock entitled to vote thereon, any
abstention, non-voting share or "broker non-vote" with respect to such shares of
Capital Common Stock will have the same effect as a vote AGAINST the approval of
the Agreement and the Plan of Merger.
Shares of Capital Common Stock represented by properly executed
proxies, if such proxies are received prior to or at the Special Meeting 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 THE
PROPOSAL TO APPROVE THE AGREEMENT AND THE PLAN OF MERGER AND IN THE DISCRETION
OF THE PROXYHOLDER AS TO ANY OTHER MATTER WHICH MAY COME PROPERLY BEFORE THE
SPECIAL MEETING. IF NECESSARY, THE PROXYHOLDER MAY VOTE IN FAVOR OF A PROPOSAL
TO ADJOURN THE SPECIAL MEETING IN ORDER TO PERMIT FURTHER SOLICITATION OF
PROXIES IN THE EVENT THERE ARE NOT SUFFICIENT VOTES TO APPROVE THE FOREGOING
PROPOSAL AT THE TIME OF THE SPECIAL MEETING. HOWEVER, NO PROXYHOLDER WILL VOTE
ANY
- 15-
<PAGE> 26
PROXIES VOTED AGAINST APPROVAL OF THE AGREEMENT AND THE PLAN OF MERGER FOR
A PROPOSAL TO ADJOURN THE SPECIAL MEETING.
A Capital shareholder who has given a proxy solicited by the Capital
Board may revoke it at any time prior to its exercise at the Special Meeting
by (i) giving written notice of revocation to the Secretary of Capital,
(ii) properly submitting to Capital a duly executed proxy bearing a later date,
or (iii) attending the 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: Capital Bancorp, 1221 Brickell Avenue,
Miami, Florida 33131; Attention: Timothy E. Kish, Senior Vice President,
General Counsel, and Corporate Secretary.
The directors and executive officers of Capital (including immediate
family members and affiliated entities) owned, as of the Capital Record Date,
2,912,871 shares (excluding shares underlying Capital Options), or approximately
38.2% of the outstanding shares of Capital Common Stock. A director and an
executive officer of Capital also control, as of the Capital Record Date,
irrevocable proxies covering an additional 1,202,898 shares of Capital Common
Stock, or approximately 15.8% of the outstanding shares of Capital Common Stock,
and which provide the proxyholder the power to vote such shares of Capital
Common Stock. The validity of certain of these irrevocable proxies is currently
the subject of litigation. Pursuant to the Agreement, any shares subject to
Disputed Irrevocable Proxies will not be counted in the vote to approve the
Agreement, unless (i) the underlying owner has given written instructions with
respect to the voting of such shares in connection with the Agreement or (ii)
the parties to the Agreement have waived this requirement. See "-- Irrevocable
Proxies" and "BUSINESS OF CAPITAL -- Legal Proceedings."
As an inducement and a condition to UPC entering into the Agreement,
the directors of Capital each individually entered into a Support Agreement
with UPC, pursuant to which such persons agreed, among other things, to vote
all shares of Capital Common Stock which they are entitled to vote (not
including shares over which such director has voting authority in a fiduciary
capacity) in favor of the Agreement. See "DESCRIPTION OF TRANSACTION --
Support Agreements."
The directors and executive officers of UPC owned, as of the Capital
Record Date, no shares of Capital Common Stock. As of the Capital Record Date,
UPC held no shares of Capital Common Stock in a fiduciary capacity for others,
or as a result of debts previously contracted, and Capital held 1,500 shares of
Capital Common Stock in a fiduciary capacity for others.
For information with respect to beneficial owners of 5.0% or more of
the outstanding shares of Capital Common Stock, see "BUSINESS OF CAPITAL --
Beneficial Ownership of Capital Common Stock."
IRREVOCABLE PROXIES
Irrevocable proxies have been granted with respect to 1,202,898 shares
of Capital Common Stock, or approximately 15.8% of the shares of Capital Common
Stock outstanding on the Capital Record Date, including certain Disputed
Irrevocable Proxies, the validity of which is currently the subject of
litigation as described under "BUSINESS OF CAPITAL -- Legal Proceedings."
Irrevocable proxies covering 1,202,477 shares of Capital Common Stock are held
by Fana Holtz, Vice Chairman of the Board of Capital, and irrevocable proxies
covering 421 shares of Capital Common Stock are held by Javier J. Holtz, Senior
Vice President of Capital. Pursuant to the Agreement, any shares subject to
Disputed Irrevocable Proxies voted by the proxyholder without the written
agreement of the underlying owner will not be counted in the vote to approve
the Agreement (except as provided below). Therefore, absent such written
agreement, any shares subject to the Disputed Irrevocable Proxies which are
voted to approve the Agreement by the holders of such proxies will not be
voted, which has the same effect as a vote against the approval of the
Agreement. As of the date of this Proxy Statement, 168,973 shares of Capital
Common Stock, or approximately 2.2% of the shares of Capital Common Stock
outstanding on the Capital Record Date, were subject to Disputed Irrevocable
Proxies.
Alex Halberstein ("Halberstein") and members of his family
(collectively, the "Halberstein Group") are collectively the owners of
approximately 11% of the outstanding shares of Capital Common Stock, which are
subject to irrevocable proxies held by Fana Holtz. Halberstein, on behalf
of himself and other members of the Halberstein Group, has entered into an
agreement, dated as of October 8, 1997 ("the Halberstein Agreement"), with Fana
Holtz, Daniel M. Holtz (the successor proxyholder in the event of Fana Holtz's
death), Capital Bank, and Capital Bancorp whereby each member of the
Halberstein Group consents and instructs Fana Holtz to vote all of such
member's shares subject to irrevocable proxies in favor of the Agreement and
the Merger and to vote against any other proposal or transaction that would in
any manner impede, frustrate, prevent, or nullify the Merger, the Agreement or
any of the other transactions contemplated thereby.
The Halberstein Agreement also provides for the termination of the
irrevocable proxies over shares held by the Halberstein Group upon consummation
of the Merger, subject to certain terms and conditions set forth in the
Halberstein Agreement.
UPC and Capital reserve the right to waive the provision in the
Agreement providing that any vote with respect to shares that are subject to
Disputed Irrevocable Proxies will be disregarded absent written instructions by
- 16-
<PAGE> 27
the underlying owner of the shares. Any such decision to waive this provision
will be based on the facts and circumstances existing at the time of the
Special Meeting, including, without limitation, the status of the pending
litigation described under "BUSINESS OF CAPITAL -- Legal Proceedings."
SOLICITATION OF PROXIES
Proxies may be solicited by the directors, officers, and employees of
Capital by mail, in person, or by telephone or telegraph. Such persons will
receive no additional compensation for such services. Capital may make
arrangements with brokerage firms and other custodians, nominees, and
fiduciaries, if any, for the forwarding of solicitation materials to the
beneficial owners of Capital Common Stock held of record by such persons. Any
such brokers, custodians, nominees, and fiduciaries will be reimbursed for the
reasonable out-of-pocket expenses incurred by them for such services. All
expenses associated with the solicitation of proxies, other expenses associated
with the Special Meeting, and expenses related to the printing and mailing of
this Proxy Statement, will be shared by UPC and Capital as provided in the
Agreement. Capital is using the services of a proxy soliciting firm in
connection with the solicitation of proxies for the Special Meeting. See
"DESCRIPTION OF TRANSACTION -- Expenses and Fees."
RECOMMENDATION
THE CAPITAL BOARD (WITH ONE DIRECTOR ABSENT) HAS UNANIMOUSLY APPROVED
THE AGREEMENT, THE PLAN OF MERGER, AND THE MERGER CONTEMPLATED THEREBY,
BELIEVES THAT THE PROPOSAL TO APPROVE THE AGREEMENT AND THE PLAN OF MERGER IS
IN THE BEST INTERESTS OF CAPITAL AND ITS SHAREHOLDERS, AND RECOMMENDS THAT THE
CAPITAL SHAREHOLDERS VOTE FOR APPROVAL OF THE AGREEMENT AND THE PLAN OF MERGER.
DESCRIPTION OF TRANSACTION
The following information describes 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 A and B, respectively, to this
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 Capital by UPC pursuant
to the merger of Capital with and into UPC Merger Subsidiary, a corporation to
be organized under the laws of the State of Tennessee, which will exist as a
wholly-owned subsidiary of UPC, with the effect that UPC Merger Subsidiary will
be the surviving corporation resulting from the Merger. At the Effective Time,
each share of Capital Common Stock then issued and outstanding (excluding shares
held by Capital, UPC, or their respective subsidiaries, in each case other than
shares held in a fiduciary capacity or as a result of debts previously
contracted) will be converted into and exchanged for the right to receive .8525
shares of UPC Common Stock, subject to possible adjustment as described below
(the "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 to which
any Capital 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 closing price of such common stock on the NYSE
(as reported by The Wall Street Journal or, if not reported thereby, another
authoritative source as selected by UPC) on the last trading day preceding the
Effective Time.
As of the Capital Record Date, Capital had 7,623,671 shares of Capital
Common Stock issued and outstanding and 1,260,974 additional shares of Capital
Common Stock subject to Capital Options. Based upon an Exchange Ratio of .8525,
upon consummation of the Merger, UPC would issue approximately 6,499,179 shares
of UPC Common Stock, excluding shares subject to assumed Capital Options.
Accordingly, UPC would then have outstanding approximately 73,710,821 shares of
UPC Common Stock based on the number of shares
- 17-
<PAGE> 28
of UPC Common Stock outstanding on September 30, 1997 (and excluding shares to
be issued pursuant to Other Pending Acquisitions and shares to be issued
pursuant to the exercise of stock options and for other purposes).
POSSIBLE ADJUSTMENT OF EXCHANGE RATIO
Under certain circumstances described below, the Exchange Ratio could
be adjusted pursuant to certain provisions of the Agreement. UNDER NO
CIRCUMSTANCES WOULD THE EXCHANGE RATIO BE LESS THAN .8525 SHARES OF UPC COMMON
STOCK FOR EACH SHARE OF CAPITAL COMMON STOCK. An adjustment could occur only if
the Capital Board elects by a 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.
If:
(i) the Average Closing Price (as defined below)
is less than $39.90; and
(ii) (a) the number obtained by dividing the Average
Closing Price by $49.875 is less than (b) the number obtained by
dividing the weighted average of the closing prices of the common
stock of the bank holding companies defined as the "Index Group" in
the Agreement (the "Index Price") on the Determination Date by the
Index Price on August 18, 1997, less 15%
Capital may elect to terminate the Agreement (the "Stock Price Termination
Right") unless UPC increases the Exchange Ratio such that the shares of UPC
Common Stock issued in exchange for each share of Capital Common Stock have a
value (based on the Average Closing Price) equal to the lesser of (i) $34.01 and
(ii) the value (based on the Average Closing Price) of the shares of UPC Common
Stock that would have been exchanged for each share of Capital Common Stock if
the relative performance of UPC Common Stock as determined above was 15% lower
than the relative performance of the Index Group. If the Merger is approved by
the Capital shareholders, the Capital Board may elect not to terminate the
Agreement and to consummate the Merger without resoliciting the Capital
shareholders even if Capital's Stock Price Termination Right is triggered and as
a result of the Exchange Ratio, the value of the shares of UPC Common Stock
(valued at the Average Closing Price) issued in exchange for each share of
Capital Common Stock would be less than the lesser of (i) $34.01 and (ii) the
value (based on the Average Closing Price) of the shares of UPC Common Stock
that would have been exchanged for each share of Capital Common Stock if the
relative performance of UPC Common Stock as determined above was 15% lower than
the relative performance of the Index Group.
The Average Closing Price is 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 20 consecutive full trading days in which such shares are traded on
the NYSE ending at the close of trading on the Determination Date.
The Determination Date is the later of the date of the Special Meeting
and the date on which consent of the Federal Reserve shall be received (without
regard to any requisite waiting period thereof).
These conditions reflect the parties' agreement that Capital's
shareholders will assume the risk of declines in the value of UPC Common Stock
to $39.90. Any adjustment of the Exchange Ratio below a decline in the price
of UPC Common Stock to $39.90 would be dependent on whether the Average Closing
Price of UPC Common Stock lags behind a market basket of comparable bank
holding company common stocks (the Index Group referenced above) by more than
15%.
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In making its determination of whether to terminate the Agreement, the
Capital Board will take into account, consistent with its fiduciary duties, all
relevant facts and circumstances that exist at such time, including, without
limitation, information concerning the business, financial condition, results
of operations, and prospects of UPC (including the recent performance of UPC
Common Stock, the historical financial data of UPC, customary statistical
measurements of UPC's financial performance, and the future prospects for UPC
Common Stock following the Merger), and the advice of its financial advisor and
legal counsel. If the Capital Board elects to terminate the Agreement, UPC
would then determine whether to proceed with the Merger at the higher Exchange
Ratio. In making this determination, the principal factors UPC will consider
include the projected effect of the Merger on UPC's pro forma earnings per
share and whether UPC's assessment of Capital's earning potential as part of
UPC justifies the issuance of an increased number of UPC's shares. If UPC
declines to adjust the Exchange Ratio, Capital may elect to proceed without the
adjustment, provided it does so within 12 days of the Determination Date. UPC
IS UNDER NO OBLIGATION TO ADJUST THE EXCHANGE RATIO.
The operation of the adjustment mechanism can be illustrated by three
scenarios. (For purposes of the scenarios, it has been assumed that the
initial Exchange Ratio is .8525, the Starting Price of UPC Common Stock is
$49.875, and the Index Price, as of the Starting Date, is $100.)
(1) The first scenario occurs if the Average Closing Price is not less
than $39.90. Under this scenario, regardless of any comparison
between the UPC Ratio and the Index Ratio, there would be no possible
adjustment to the Exchange Ratio, even though the value of the
consideration to be received by Capital shareholders could have fallen
from a pro forma $42.52 per share, as of the Starting Date, to $34.01
per share, as of the Determination Date.
(2) The second scenario occurs if the Average Closing Price is less than
$39.90, but does not represent a decline from the Starting Price of
more than 15% than the decline of the common stock prices of the Index
Group. Under this scenario, there also would be no possible
adjustment to the Exchange Ratio, even though the value of the
consideration to be received by Capital shareholders would have fallen
from a pro forma $42.52 per share, as of the Starting Date, to an
amount based on the then lower Average Closing Price of UPC Common
Stock, as of the Determination Date.
(3) The third scenario occurs if the Average Closing Price declines below
$39.90 and the UPC Ratio is below the Index Ratio. Under this
scenario, the adjustment in the Exchange Ratio is designed to ensure
that the Capital shareholders receive shares of UPC Common Stock
having a value (based upon the Average Closing Price) that corresponds
to at least $34.01 or a 15% decline from the stock price performance
reflected by the Index Group, whichever is less.
For example, if the Average Closing Price were $39.00, and the ending
Index Price, as of the Determination Date, were $95, the UPC Ratio
(.7820) would be below the Index Ratio (.80, or .95 minus .15),
Capital could terminate the Agreement unless UPC elected within five
days to increase the Exchange Ratio to equal .8721, which represents
the lesser of (a) .8721 [the result of dividing $34.01 (the product of
$39.90 and the .8525 Exchange Ratio) by the Average Closing Price
($39.00), rounded to the nearest thousandth] and (b) .8722 [the result
of dividing the Index Ratio (.80) times .8525 by the UPC Ratio
(.7820), rounded to the nearest thousandth]. Based upon the assumed
$39.00 Average Closing Price, the new Exchange Ratio would represent a
value to the Capital shareholders of $34.01 per share.
If the Average Closing Price were $39.00, and the ending Index Price,
as of the Determination Date, were $100, the UPC Ratio (.7820) would
be below the Index Ratio (.85, or 1.00 minus .15), Capital could
terminate the Agreement unless UPC elected within five days to
increase the Exchange Ratio to equal .8721, which represents the
lesser of (a) .8721 [the result of dividing $34.01 (the product of
$39.50 and the .8525 Exchange Ratio) by the Average Closing Price
($39.00), rounded to the nearest thousandth] and (b) .9266 [the result
of dividing the Index Ratio (.85) times .8525 by the UPC Ratio
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<PAGE> 30
(.7820), rounded to the nearest thousandth]. Based upon the assumed
$39.00 Average Closing Price, the new Exchange Ratio would represent a
value to the Capital shareholders of $34.01 per share.
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 Capital Common
Stock may be more or less than the Average Closing Price. Capital shareholders
are urged to obtain current market quotations for UPC Common Stock. See
"COMPARATIVE MARKET PRICES AND DIVIDENDS."
EFFECT OF THE MERGER ON CAPITAL OPTIONS
At the Effective Time, each Capital Option granted by Capital under
the Capital Stock Plans, as defined in the Agreement, that is outstanding at
the Effective Time, whether or not exercisable, will be converted into and
become an option with respect to UPC Common Stock, and UPC will assume each
Capital Option, in accordance with the terms of the Capital 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 will be
substituted for Capital and the Committee of the Capital Board (including, if
applicable, the entire Capital Board) administering such Capital Stock Plan,
(ii) each Capital Option assumed by UPC may be exercised solely for or
converted into 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 Capital Option will be equal to the number of shares of Capital Common
Stock subject to such Capital Option immediately prior to the Effective Time
multiplied by the Exchange Ratio and rounding down to the nearest whole share,
and (iv) the per share exercise price under each such Capital Option will be
adjusted by dividing the per share exercise price under each such Capital
Option by the Exchange Ratio and rounding up to the nearest cent.
In lieu of having the Capital Options assumed by UPC, each holder of a
Capital Option that is not an "incentive stock option" (as such term is defined
in Section 422 of the Code), whether or not then vested, will have the right to
elect to convert, at the Effective Time, all or a portion of his or her Capital
Options that are not "incentive stock options" and that have not expired prior
to the Effective Time into the right to receive such number of shares (rounded
to the nearest whole share) of UPC Common Stock as are equal in value
(determined by valuing each share of UPC Common Stock at the Average Closing
Price) to the excess of (i) the product of the number of shares of Capital
Common Stock subject to such option times the Exchange Ratio times the Average
Closing Price of the UPC Common Stock over (ii) the product of (A) the exercise
price per share of Capital Common Stock subject to such option and (B) the
number of shares of Capital Common Stock subject to such option. To make this
election, a holder of such Capital Options must deliver to UPC written notice of
election (specifying the number of Capital Options covered by such election) not
later than two business days prior to the Effective Time.
For information with respect to Capital Options held by the Capital
Board and management, see "-- Interests of Certain Persons in the Merger."
BACKGROUND OF AND REASONS FOR THE MERGER
BACKGROUND OF THE MERGER. In November 1996, the Capital Board
established the Strategic Planning and Corporate Finance Committee (the
"Committee") for the purpose of working with management of Capital and an
investment banking firm to be retained by Capital in evaluating the strategic
alternatives available to Capital. In forming the Committee, the Capital Board
was mindful of the increasing competition and rapid consolidation taking place
in the banking industry and deemed it advisable for the Committee to review
such consolidation and consider its potential implications for Capital. The
Committee initially consisted of directors Daniel M. Holtz, the Chairman
of the Board, and Jeffrey H. Porter, Leon J. Simkins, and Gerald M. Stern.
In March 1997, the Committee retained Sandler O'Neill to act as
financial advisor to Capital in connection with the evaluation of strategic
alternatives available to Capital and any transaction arising as a result of
such review. At a meeting of the Committee held that month, Sandler O'Neill
made a financial presentation of the strategic alternatives available to
Capital, including remaining independent and affiliating with a larger banking
organization. Following this presentation, the Committee authorized Sandler
O'Neill to contact third par-
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<PAGE> 31
ties for the purpose of ascertaining levels of interest by any of such third
parties in pursuing a business combination with Capital.
Over the course of the next few months, Sandler O'Neill contacted 28
financial institutions to solicit indications of interest. Capital entered
into confidentiality agreements with those institutions that expressed interest
in receiving confidential information concerning Capital. While certain of
these institutions expressed interest in acquiring only Capital's factoring
operations or Capital's banking operations, two institutions, UPC and
BankAtlantic Bancorp, Inc. ("BA"), were interested in pursuing a merger with
Capital whereby such parties would acquire Capital in its entirety.
During this process, the Committee, with the assistance of Sandler
O'Neill and Skadden, Arps ("Skadden, Arps"), special counsel to Capital, also
analyzed the possible spin-off of Capital's factoring operations
in connection with the sale of Capital Bank. However, in April 1997, the Joint
Committee's Report of Revenue Provisions in President Clinton's 1998 Budget
Proposal described proposed legislation (which legislation was subsequently
enacted by Congress and signed by President Clinton in July 1997) which called
for the elimination of the tax-free nature of transactions structured in the
manner of the transaction then being considered by the Committee. Consequently,
the Committee chose not to pursue this transaction structure.
On June 16, 1997, the Comptroller of the State of Florida (the "Florida
Comptroller") issued an order (the "Order") denying the application filed by
Fana Holtz, the Vice Chairman of the Board of Capital, Daniel M. Holtz, the
Chairman, President and Chief Executive Officer of Capital, and Javier J. Holtz,
a Senior Vice President of Capital (collectively, the "Applicants"),
individually and as a group, to acquire and/or maintain a controlling interest
in Capital Bank. The Order, among other things, required that the Applicants
submit a plan for divestiture of all "indicia of control" of Capital. Shortly
following the issuance of the Order, Daniel M. Holtz resigned from the Committee
although he, along with certain other directors of Capital who were not members
of the Committee, participated in certain subsequent meetings of the Committee.
See "BUSINESS OF CAPITAL -- Administrative Proceedings."
Throughout the course of the process of contacting third parties,
Sandler O'Neill regularly reported to the Committee the status of all
indications of interest received from third parties and the potential values
that such indications could yield to Capital's shareholders. After reporting
such preliminary indications in May 1997, including UPC's preliminary offer of
approximately $40 per share, the Committee instructed Sandler O'Neill to
continue its dialogue with all interested parties. In early July 1997, UPC
engaged in a limited on-site due diligence examination of Capital.
On July 21, 1997, the Committee held a telephonic meeting. During the
meeting, Sandler O'Neill described the separate bids that had been received for
either Factors or Capital Bank and the potential value that could be achieved
by pairing the highest bidder for Factors with the highest bidder for Capital
Bank (a "Joint Bid"). Sandler O'Neill reported that, based on the values that
such parties indicated they would be willing to pay, a Joint Bid did not
indicate a greater value to the Capital shareholders than the bids for Capital
in its entirety. Sandler O'Neill believed that the lower potential value was
principally attributable to the fact that the initial buyer of Capital would
incur a substantial tax liability upon the subsequent sale of Capital Bank or
Factors, as applicable, to the other bidder in the Joint Bid. Sandler O'Neill
and Skadden, Arps also explained that, because a Joint Bid would involve two
buyers, such bids would necessarily involve additional contingencies to
closing.
Sandler O'Neill also reported that UPC had increased its indication of
interest such that it would be willing to pursue a merger with Capital where
each Capital shareholder would receive UPC Common Stock with an indicated value
in the range of $43 to $44 per share. Sandler O'Neill further reported that BA
had indicated that it would be willing to pay in the range of $45 to $46 per
share of Capital Common Stock, which would be payable in the form of 55%
non-voting common stock and 45% cash. The initial offer of BA contemplated
that, in order to provide the necessary capital to consummate the merger, BA
would undertake an exchange offer of BA common stock for its outstanding
convertible debt. At this meeting, the Committee authorized Skadden, Arps to
deliver a draft merger
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<PAGE> 32
agreement to Alston & Bird, UPC's legal advisors, and to continue discussions
with all interested parties including, in particular, UPC and BA. Later that
week, Skadden, Arps delivered a draft merger agreement to UPC and its legal
advisors.
During the week of July 28, 1997, Alston & Bird and Skadden, Arps
discussed the preliminary issues raised by the draft merger agreement,
including, in particular, UPC's request for the Option Agreement, Support
Agreements (see "-- Option Agreement" and "-- Support Agreements"), and a due
diligence termination right. On July 31, in response to a press report
speculating on the status of merger negotiations involving Capital, Capital
issued a press release confirming that it was in discussions with several
parties concerning a possible merger transaction.
On August 1, 1997, the Committee and directors Russell Galbut and
Craig Platt met at the offices of Sandler O'Neill for an update and for a
financial presentation by Sandler O'Neill relating to the competing proposals.
Sandler O'Neill indicated that there had been no change in the status of the
Joint Bids or in the UPC proposal. The Committee was informed that BA had
reiterated its proposal but had revised the form of the merger consideration to
75% non-voting common stock and 25% cash. As part of the revised BA proposal,
BA indicated that it would no longer undertake an exchange offer for its
outstanding debt but rather would propose that Capital Bank sell a portion of
its investment in Factors representing approximately 32% of the outstanding
Factors stock to an unrelated third party where the proceeds of such sale, when
combined with a proposed write-up to fair market value of the remaining
ownership interest in Factors, would provide necessary capital to effectuate
the merger.
Following the Sandler O'Neill presentation, the Committee and the
additional directors discussed the relative merits of the UPC and BA proposals.
While the Committee concurred that both proposals provided Capital's
shareholders with significant value and long-term growth opportunities, the
Committee determined that the UPC proposal had certain advantages relative to
the BA proposal including the expectation that: the UPC transaction would be
entirely tax-free as opposed to the BA proposal which would have been taxable
to Capital shareholders with respect to the cash portion of that proposed
transaction; the UPC Common Stock is a more liquid investment than the
non-voting common stock of BA; UPC offered Capital shareholders voting common
stock, whereas under the BA proposal Capital shareholders would have received
non-voting common stock, which effectively would have maintained substantial
voting control in the resulting entity in the hands of BA's current chairman;
UPC would provide a higher pro forma dividend for the Capital shareholders than
BA; and the UPC proposal appeared to have a higher certainty of consummation.
Following these discussions, the Committee authorized Mr. Stern, the Chairman
of the Committee, to propose a fixed exchange ratio of .8525 shares of UPC
Common Stock for each share of Capital Common Stock (which, based on the
closing price of UPC Common Stock on the preceding day, represented an
indicated value of $45.07). The Committee also instructed Sandler O'Neill to
continue its discussions with other interested parties, including BA. That
afternoon, Mr. Stern informed Benjamin W. Rawlins, Jr., the Chairman and
Chief Executive Officer of UPC, that, subject to the resolution of other
outstanding issues, the Committee would be prepared to recommend that the
Capital Board approve a merger with UPC at a fixed exchange ratio of .8525
shares of UPC Common Stock for each share of Capital Common Stock. Mr. Rawlins
indicated that, subject to the resolution of such issues, UPC would be willing
to pay the proposed exchange ratio.
Over the course of the next few days, Skadden, Arps and Alston & Bird
continued to negotiate the draft merger agreements. On August 6, 1997, the
Capital Board met at the offices of Sandler O'Neill. At such meeting, Sandler
O'Neill described the process undertaken by it over the previous months at the
direction of the Committee and explained that the process had yielded the Joint
Bids and the BA and the UPC proposals, which were all described in detail to
the Capital Board. Sandler O'Neill explained that BA was unwilling to revise
its proposal to issue voting common stock rather than nonvoting common stock as
merger consideration. Skadden, Arps described the draft agreements and the
status of negotiations with respect thereto. Based on the factors described
in the previous paragraph, the opinion of Sandler O'Neill described below as to
the fairness of the Exchange Ratio as well as those factors set forth below in
" -- Recommendation of the Capital Board; Reasons for the Merger," the Capital
Board (with one director absent) unanimously authorized and approved the
execution of the Agreement with UPC, subject to the satisfactory resolution of
any remaining issues relating to the Agreement, including issues relating to
the scope of UPC's due diligence termination right.
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On August 12, 1997, after resolution of the remaining issues, the
Capital Board held a telephonic meeting at which the Capital Board ratified its
earlier approval of the Agreement. On the evening of August 12, 1997, the
Agreement and the Option Agreement were executed by the parties and the
directors of Capital entered into the Support Agreements. See "-- Option
Agreement" and "-- Support Agreements."
RECOMMENDATION OF THE CAPITAL BOARD; REASONS FOR THE MERGER. The
Capital Board believes that the Merger is fair to, and in the best interests
of, Capital and its shareholders. ACCORDINGLY, THE CAPITAL BOARD HAS
UNANIMOUSLY APPROVED (WITH ONE DIRECTOR ABSENT) THE AGREEMENT AND RECOMMENDS
THAT THE HOLDERS OF CAPITAL COMMON STOCK VOTE FOR THE APPROVAL OF THE AGREEMENT
AND THE PLAN OF MERGER AND THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED
THEREBY. See "-- Background of and Reasons for the Merger -- Background of
the Merger" and "-- Opinion of Capital's Financial Advisor" below.
The terms of the Merger, including the Exchange Ratio, are the result
of arm's-length negotiations between representatives of Capital and UPC. In
reaching its decision to approve the Agreement, the Capital Board consulted
with its legal advisors regarding the terms of the transaction, with its
financial advisor regarding the financial aspects of the proposed transaction
and the fairness of the Exchange Ratio, and with management of Capital, and,
without assigning any relative or specific weights, considered a number of
factors, both from a short-term and long-term perspective, including, without
limitation, those set forth in "-- Background of and Reasons for the Merger --
Background of the Merger," and the following:
(a) the Capital Board's familiarity with and review of
Capital's business, financial condition, results of operations, and
prospects, including, without limitation, its potential growth and
profitability and the business risks associated therewith;
(b) the current and prospective environment in which
Capital operates, including national and local economic conditions,
the competitive environment for commercial banks and other financial
institutions generally and the increasing consolidation in the
financial services industry and the competitive effects of such
increased consolidation on smaller financial institutions such as
Capital;
(c) information concerning the business, financial
condition, results of operations, and prospects of UPC, including the
recent performance of UPC Common Stock, the historical financial data
of UPC, customary statistical measurements of UPC financial
performance, and the future prospects for UPC Common Stock following
the Merger;
(d) the value to be received by holders of Capital Common
Stock pursuant to the Agreement in relation to the historical trading
prices of Capital Common Stock;
(e) the information presented by Sandler O'Neill to the
Capital Board with respect to the Merger and the opinion of Sandler
O'Neill that, as of the date of such opinion, the Exchange Ratio was
fair to the holders of Capital Common Stock from a financial point of
view (see "-- Opinion of Capital's Financial Advisor");
(f) the financial and other significant terms of the
proposed Merger with UPC, and the review by Capital with its legal and
financial advisors of the provisions of the Agreement and the Option
Agreement;
(g) the Capital Board's belief that the receipt of UPC
Common Stock in the Merger generally will permit holders of Capital
Common Stock to defer any federal income tax liability associated with
the increase in the value of their stock as a result of the Merger
(see "-- Certain Federal Income Tax Consequences of the Merger") and
to become shareholders of UPC, an institution with strong operations,
earnings performance, dividend payments, and share liquidity; and
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(h) the alternative strategic courses available to
Capital, including remaining independent and exploring other potential
business combination transactions, including, in particular, the Joint
Bids and the proposal by BA, and the potential values that could be
derived therefrom (see "-- Background of and Reasons for the Merger--
Background of the Merger").
UPC'S REASONS FOR THE MERGER. In adopting the Agreement, the Plan of
Merger, and the Merger, the UPC Board considered a number of additional factors
concerning the benefits of the Merger. Without assigning any relative or
specific weights to the factors, the UPC Board considered the following
additional material factors:
(a) a review, based in part on a presentation by UPC's
management, of (i) the business, operations, earnings, and financial condition,
including the capital levels and asset quality, of Capital on historical,
prospective, and pro forma basis and in comparison to other financial
institutions in the area, (ii) the demographic, economic, and financial
characteristics of the markets in which Capital operates, including existing
competition, history of the market areas with respect to financial institutions,
and average demand for credit, on historical and prospective basis, (iii) the
status of the litigation then pending as described under "BUSINESS OF CAPITAL--
Legal Proceedings," including the merits and value of the claims, and (iv)
the results of UPC's due diligence review of Capital; and
(b) a variety of factors affecting and relating to the
overall strategic focus of UPC, including UPC's desire to expand into markets
in the Southeast and the business lines pursued by Capital.
The UPC Board determined that the Merger was in the best interests of
UPC and its shareholders and unanimously approved the proposed Merger on July
22, 1997.
OPINION OF CAPITAL'S FINANCIAL ADVISOR
Capital retained Sandler O'Neill to, among other things, assist the
Committee and the Capital Board in an analysis of the various strategic
alternatives available to Capital and, ultimately, to act as independent
financial advisor to Capital in connection with the Merger. 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.
In connection with Sandler O'Neill's engagement as independent
financial advisor to Capital, at the August 6, 1997 meeting at which the
Capital Board approved and adopted the Agreement, Sandler O'Neill delivered an
oral opinion to the Capital Board that, as of August 6, 1997, the Exchange
Ratio was fair, from a financial point of view, to such shareholders. Sandler
O'Neill also delivered to the Capital Board a written opinion (the "Sandler
O'Neill Fairness Opinion"), dated the date of this Proxy Statement, which
states that the Exchange Ratio is fair, from a financial point of view, to such
shareholders. THE FULL TEXT OF THE SANDLER O'NEILL FAIRNESS OPINION, WHICH
SETS FORTH THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED, AND
QUALIFICATIONS AND LIMITATIONS ON THE REVIEW UNDERTAKEN, IS ATTACHED AS
APPENDIX C TO THIS PROXY STATEMENT AND IS INCORPORATED HEREIN BY REFERENCE.
THE DESCRIPTION OF SUCH OPINION SET FORTH HEREIN IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO APPENDIX C. HOLDERS OF CAPITAL COMMON STOCK ARE URGED TO READ
THE SANDLER O'NEILL FAIRNESS OPINION IN ITS ENTIRETY IN CONNECTION WITH THEIR
CONSIDERATION OF THE PROPOSED MERGER. THE SANDLER O'NEILL FAIRNESS OPINION
SHOULD NOT BE CONSTRUED BY THE HOLDERS OF THE SHARES OF CAPITAL COMMON STOCK AS
A RECOMMENDATION AS TO HOW THEY SHOULD VOTE AT THE SPECIAL MEETING.
In connection with rendering its oral opinion on August 6, 1997,
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 factors considered therein, without considering all factors
and analyses, could create an incomplete view of the analyses
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and processes underlying the Sandler O'Neill 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
Capital, 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, none of Capital, UPC, or Sandler O'Neill assumes responsibility
for their accuracy.
STOCK TRADING HISTORY. Sandler O'Neill examined the history of the
trading prices and the volume of Capital Common Stock, the common stock of
Factors, and UPC Common Stock, and the relationship between the movements in
the prices of Capital, Factors, and UPC Common Stock, respectively, to
movements in certain stock indices, including the Standard & Poor's 500 Index,
the Nasdaq Banking Index and, in the case of Capital and UPC, composite groups
of publicly traded commercial banks 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 efficiency ratios, of Capital and two different groups of
selected institutions. The first group consisted of the following 14
publicly-traded regional commercial banks (the "Regional Commercial Group") of
comparable size: Trustmark Corp.; National Commerce Bancorp.; One Valley
Bancorp Inc.; BancorpSouth Inc.; Hancock Holding Co.; F & M National Corp.;
United Bankshares Inc.; WesBanco Inc.; Carolina First Corp.; First United
Bancshares Inc.; MainStreet BankGroup Inc.; City Holding Co.; Triangle Bancorp
Inc.; and Capital City Bank Group Inc. Sandler O'Neill also compared Capital
to a group of ten publicly-traded commercial banks of comparable size which
were considered to be highly valued (the "Highly-Valued Group") by investors.
The Highly-Valued Group was comprised of: TrustCo Bank Corp. NY; Silicon
Valley Bancshares; Corus Bankshares Inc.; Mid Am Inc.; Chittenden Corp.; Park
National Corp.; Santa Barbara Bancorp; National Penn Bancshares Inc.; Texas
Regional Bancshares Inc.; and Independent Bank Corp. The analysis compared
publicly available financial information as of and for the periods ended
December 31, 1992 through June 30, 1997 (although in some cases, the
information was as of or for the period ended March 31, 1997).
Sandler O'Neill also used publicly available information to perform a
similar comparison of selected financial and market trading information for UPC
and two different groups of selected institutions. The first group consisted
of the following ten publicly-traded commercial banks (the "Regional Bank
Group"): SouthTrust Corp; BB&T Corp.; Crestar Financial Corp.; Regions
Financial Corporation; AmSouth Bancorp.; First Tennessee National Corp.;
Compass Bancshares Inc.; First American Corp.; First Virginia Banks Inc.; and
Synovus Financial Corp. Sandler O'Neill also compared UPC to a group of 12
publicly-traded commercial banks of comparable size which were considered to be
highly-valued (the "Highly-Valued Bank Group") by investors. The Highly-Valued
Bank Group was comprised of: BB&T Corp.; First of America Bank Corp.; Fifth
Third Bancorp; Firstar Corp.; First Security Corp.; Marshall & Ilsley Corp.;
Old Kent Financial Corp.; Star Banc Corp.; First American Corp.; Synovus
Financial Corp.; Zions Bancorp.; and TCF Financial Corp. The analysis compared
publicly available financial information as of and for the periods ended
December 31, 1992 through June 30, 1997.
ANALYSIS OF SELECTED MERGER TRANSACTIONS. Sandler O'Neill reviewed
212 transactions announced from January 1, 1996 to July 31, 1997 (the "Analysis
Period") involving public commercial banking institutions nationwide as
acquired institutions with transaction values over $15 million ("All
Transactions"), 59 transactions announced during the Analysis Period involving
public commercial banking institutions in the Southeast ("Regional
Transactions"), and 17 transactions announced during the Analysis Period
involving public commercial banking institutions in Florida ("Florida
Transactions"). Sandler O'Neill also reviewed transactions with transaction
values greater than $15 million where the acquired bank's return on average
equity was greater than 15%: 64 transactions announced during the Analysis
Period involving public commercial banking institutions nationwide as targets
("Nationwide High Performing Transactions"), 18 transactions announced during
the Analysis Period involving public commercial banking institutions in the
Southeast ("Regional High Performing Transactions"), and four transactions
announced during the Analysis Period involving public commercial banking
institutions in
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Florida ("Florida High Performing Transactions"). In addition, Sandler O'Neill
reviewed 43 transactions announced during the Analysis Period involving public
commercial banking institutions nationwide as acquired institutions with
transaction values over $100 million ("Nationwide Large Transactions") and nine
transactions announced during the Analysis Period with transaction values over
$100 million involving public commercial banking institutions in the Southeast
("Regional Large Transactions").
Sandler O'Neill reviewed the ratios of price to net income, price to
tangible book value, price to book value, tangible book premium to core
deposits, price to total assets, and price to total deposits in each
transaction and computed high, low, mean, and median ratios and premiums for
the respective groups of transactions. Based upon the median multiples for All
Transactions, Sandler O'Neill derived an imputed range of values per share of
Capital Common Stock of $36.80 to $50.72. Based upon the median multiples for
Regional Transactions, Sandler O'Neill derived an imputed range of values per
share of Capital Common Stock of $39.81 to $54.95. Based upon the median
multiples for Florida Transactions, Sandler O'Neill derived an imputed range of
values per share of Capital Common Stock of $34.40 to $57.37. Based upon the
median multiples for Nationwide High Performing Transactions, Sandler O'Neill
derived an imputed range of values per share of Capital Common Stock of $34.84
to $50.01. Based upon the median multiples for Regional High Performing
Transactions, Sandler O'Neill derived an imputed range of values per share of
Capital Common Stock of $34.83 to $49.99. Based upon the median multiples for
Florida High Performing Transactions, Sandler O'Neill derived an imputed range
of values per share of Capital Common Stock of $38.01 to $54.42. Based upon
the median multiples for Nationwide Large Transactions, Sandler O'Neill derived
an imputed range of values per share of Capital Common Stock of $42.01 to
$56.56. Based upon the median multiples for Regional Large Transactions,
Sandler O'Neill derived an imputed range of values per share of Capital Common
Stock of $45.36 to $57.32.
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 Capital through 2001 under various circumstances,
assuming that Capital performed in accordance with the earnings forecasts of
its management and certain variations thereof and assuming that Capital grew at
a rate more consistent with the growth rate of the banking industry (the
"Moderate Growth Scenario"). To approximate the terminal value of Capital
Common Stock at the end of the five-year period, Sandler O'Neill applied price
to earnings multiples ranging from 12x to 24x and applied multiples of tangible
book value ranging from 150% to 300%. The dividend income streams and terminal
values were then discounted to present values using different discount rates
(ranging from 10% to 18%) chosen to reflect different assumptions regarding
required rates of return of holders of prospective buyers of Capital Common
Stock. This analysis, assuming the current dividend payout ratio, indicated an
imputed range of values per share of Capital Common Stock of between $29.84 and
$79.89 based on management's projections and $21.04 to $55.99 based on the
Moderate Growth Scenario when applying the price to earnings multiples, and an
imputed range of values per share of Capital Common Stock between $25.01 and
$66.64 based on management's projections and $22.30 and $59.44 based on the
Moderate Growth Scenario when applying multiples of tangible book value. In
connection with its analysis, Sandler O'Neill extensively used sensitivity
analyses to illustrate the effects changes in the underlying assumptions
(including variations with respect to the growth rate of assets, net interest
spread, non-interest income, non-interest expense, and dividend payout ratio)
would have on the resulting present value, and discussed these changes with the
Capital Board.
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PRO FORMA MERGER ANALYSIS. Sandler O'Neill performed pro forma merger
analyses that combined UPC's and Capital's current and projected income
statements and balance sheets based on projections provided by management of
UPC and management of Capital. Assumptions and analyses of the economic
environment, accounting treatment, acquisition adjustments, operating
efficiencies, balance sheet enhancements, and other adjustments were used to
arrive at a base case pro forma analysis to determine the pro forma effect of
the Merger on UPC. Sandler O'Neill used an exchange ratio of .8525 shares of
UPC Common Stock for each share of Capital Common Stock in analyzing the
projections of UPC's earnings per share and tangible book value per share.
This analysis indicated that the Merger could be accretive to UPC's earnings
per share and tangible book value per share in each of the years 1998 through
2002. This analysis was based on estimates of expected cost savings and other
consolidation efficiencies to be achieved following the Merger, and numerous
other assumptions, including assumptions with respect to the anticipated
expenses and non-recurring charges to be incurred by UPC in connection with the
Merger. The actual results achieved by the combined company will vary from the
projected results and the variations may be material.
In connection with rendering its oral opinion on August 6, 1997,
Sandler O'Neill reviewed, among other things: (i) the Agreement and exhibits
thereto; (ii) the Option Agreement; (iii) 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, 1996; (iv) Capital'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 fiscal year ended December 31, 1996; (v) UPC's unaudited consolidated
financial statements and management's discussion and analysis of the financial
condition and results of operations contained in its Quarterly Report on Form
10-Q for the quarter ended March 31, 1997; (vi) Capital's unaudited
consolidated financial statements and management's discussion and analysis of
the financial condition and results of operations contained in its Quarterly
Report on Form 10-Q for the quarter ended March 31, 1997; (vii) preliminary
financial information prepared by the senior management of Capital concerning
Capital's financial condition and results of operations for the quarter ended
June 30, 1997; (viii) a draft of UPC's unaudited consolidated financial
statements and management's discussion and analysis of the financial condition
and results of operations contained in its draft Quarterly Report on Form 10-Q
for the quarter ended June 30, 1997; (ix) certain financial analyses and
forecasts of Capital prepared by and reviewed with management of Capital and
the views of senior management of Capital regarding Capital's past and current
business operations, results thereof, financial condition, and future
prospects; (x) 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; (xi) the pro forma impact of the
Merger on UPC; (xii) the historical reported price and trading activity for UPC
Common Stock, Capital Common Stock, and the Factors common stock, including a
comparison of certain financial and stock market information for UPC and Capital
with similar information for certain other companies the securities of which are
publicly traded; (xiii) the financial terms of recent business combinations in
the banking industry; (xiv) the current market environment generally and the
banking environment in particular; and (xv) such other information, financial
studies, analyses and investigations, and financial, economic, and market
criteria as Sandler O'Neill considered relevant.
In connection with rendering the Sandler O'Neill Fairness Opinion,
Sandler O'Neill confirmed the appropriateness of its reliance on the analyses
used to render its August 6, 1997 oral 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.
In performing its reviews, 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
liabilities of Capital or UPC or any of their subsidiaries, or the
collectibility of any such assets (relying, where relevant, on the analyses and
estimates of Capital and UPC). With respect to the financial projections
reviewed with each company's management, Sandler O'Neill assumed that they had
been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the respective managements of the respective future
financial performances of Capital and UPC and that such performances will be
achieved. Sandler O'Neill also assumed that there has been no material change
in Capital's and UPC's assets,
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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
has 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 letter agreement between Capital and Sandler O'Neill, dated
as of August 6, 1997, (the "Letter Agreement") Capital 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 the terms of the
Letter Agreement, Capital will pay Sandler O'Neill a transaction fee equal to a
percentage of the aggregate purchase price paid in the transaction. The
percentage to be paid ranges from 0.40% to 0.75% of the aggregate transaction
value and is dependent on the per share transaction value. As of October 9,
1997 (the date of this Proxy Statement), Capital would pay Sandler O'Neill a
transaction fee equal to 0.55% of the aggregate purchase price paid in
the transaction, or approximately $2.2 million, of which approximately 25% will
be paid prior to the Effective Time and 75% will be paid if the Merger is
consummated. Capital will also have paid Sandler O'Neill a fee of $200,000 for
rendering the Sandler O'Neill Fairness Opinion, all of which amount will be
credited towards the fee payable to Sandler O'Neill upon consummation of the
Merger. Capital has also agreed to reimburse Sandler O'Neill for its reasonable
out-of-pocket expenses incurred in connection with its engagement and 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.
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
Florida Articles of Merger reflecting the Merger become effective with the
Secretary of State of the State of Florida and the Tennessee Articles of Merger
reflecting the Merger become effective with the Secretary of State of the State
of Tennessee. Subject to the terms and conditions of the Agreement, unless
otherwise agreed upon in writing by UPC and Capital, the parties will 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 of the last consent of any regulatory authority having authority
over and approving or exempting the Merger (without regard to any requisite
waiting period in respect thereof), (ii) the date on which the shareholders of
Capital approve the matters relating to the Agreement to the extent such
shareholder approval is required by applicable law or the Agreement, and (iii)
the date on which all other conditions precedent (other than those conditions
which relate to actions to be taken at the Closing) to each party's obligations
under the Agreement have been satisfied or waived (to the extent waivable by
such party).
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. Capital and UPC anticipate that all
conditions to consummation of the Merger will be satisfied so that the Merger
can be consummated on or before December 31, 1997. However, delays in the
consummation of the Merger could occur.
The Board of Directors of either Capital or UPC generally may
terminate the Agreement and the Plan of Merger if the Merger is not consummated
by April 30, 1998, unless the failure to consummate the transactions
contemplated by the Agreement on or before such date is caused by any willful
breach of the Agreement by the party seeking termination. See "-- Conditions
to Consummation of the Merger" and "-- Waiver, Amendment, and Termination."
DISSENTERS' RIGHTS
Pursuant to FBCA Section 607.1302, because the Capital Common Stock was
listed on the Nasdaq National Market as of the Capital Record Date, the holders
of Capital Common Stock do not have dissenters' rights with respect to the
Merger.
DISTRIBUTION OF UPC STOCK CERTIFICATES
Promptly after the Effective Time, UPC and Capital will cause Union
Planters National Bank, Memphis, Tennessee, acting in its capacity as Exchange
Agent, to mail to the former shareholders of Capital a letter of
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transmittal, together with instructions for the exchange of the Certificates
representing shares of Capital Common Stock for certificates representing
shares of UPC Common Stock.
CAPITAL 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 Capital
Common Stock, together with a properly completed letter of transmittal, there
will be issued and mailed to each holder of Capital Common Stock surrendering
such items a certificate or certificates representing the number of shares of
UPC Common Stock to which such holder is entitled and a check for the amount to
be paid in lieu of any fractional share (without interest), if any, together
with all undelivered dividends or distributions in respect of such shares
(without interest thereon), if any. UPC will not be obligated to deliver the
consideration to which any former holder of Capital Common Stock is entitled as
a result of the Merger until the holder surrenders such holder's Certificates
representing the shares of Capital Common Stock. 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 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 Capital Common
Stock Certificate until the holder duly surrenders such Certificate. Upon
surrender of such Capital Common Stock Certificate, however, both the UPC
Common Stock certificate, together with all undelivered dividends or other
distributions (without interest) and any undelivered cash payment to be paid in
lieu of a fractional share (without interest), will be delivered and paid with
respect to the shares represented by such Certificate. In the event any
Capital Common Stock Certificate has been lost, stolen, or destroyed, upon the
making of an affidavit of that fact by the person claiming the Certificate to
be lost, stolen, or destroyed and, if required by UPC, the posting by such
person of a bond in such amount as UPC may reasonably direct as indemnity
against any claim that may be made against it with respect to such Certificate,
the Exchange Agent will issue in exchange for such lost, stolen, or destroyed
Certificate the shares of UPC Common Stock and cash in lieu of fractional
shares deliverable in respect thereof pursuant to the Agreement.
At the Effective Time, the stock transfer books of Capital will be closed
to holders of Capital Common Stock and no transfer of shares of Capital Common
Stock by any such holder will thereafter be made or recognized. If Certificates
representing shares of Capital Common Stock are presented for transfer after the
Effective Time, they will be canceled and exchanged for shares of UPC Common
Stock and a check for the amount due in lieu of fractional shares and
undelivered dividends, if any, deliverable in respect thereof.
CONDITIONS TO CONSUMMATION OF THE MERGER
Consummation of the Merger is subject to various conditions, including (i)
receipt of the approval of the shareholders of Capital of the Agreement and the
Plan of Merger, and the consummation of the transactions contemplated thereby,
including the Merger, as and to the extent required by the law or by the
provisions of any governing instrument (without regard to any shares voted
pursuant to Disputed Irrevocable Proxies, unless (a) the underlying owner has
given written instructions with respect to the voting of such shares in
connection with the Agreement, or (b) the parties to the Agreement have waived
this requirement), (ii) receipt of certain regulatory approvals required for
consummation of the Merger, (iii) receipt by UPC of a written opinion of counsel
from Alston & Bird and by Capital of a written opinion of counsel from Skadden,
Arps as to the tax-free nature of the Merger (except to the extent of cash
received), (iv) 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
issuance, (v) the Registration Statement being declared effective under the
Securities Act, (vi) the accuracy, as of the date of the Agreement and as of the
Effective Time, of the representations and warranties of Capital and UPC as set
forth in the Agreement, (vii) the performance of all agreements and the
compliance with all covenants of Capital and UPC as set forth in the Agreement,
(viii) 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 on Capital or UPC, (ix) receipt by UPC and
Capital of a letter from Price Waterhouse LLP to the effect that the Merger will
qualify for pooling-of-interests accounting treatment, (x) the absence of any
law or order
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or any action taken by any court, governmental, or regulatory authority of
competent jurisdiction prohibiting, restricting, or making illegal the
consummation of the transactions contemplated by the Agreement (xi) receipt by
UPC of agreements from each affiliate of Capital, and (xii) satisfaction of
certain other conditions, including the receipt of certain legal opinions and
various certificates from the officers of Capital and UPC. See "-- Regulatory
Approval" 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 waived by the party
permitted to do so. In the event the Merger is not effected on or before April
30, 1998, the Agreement may be terminated and the Merger abandoned by a vote of
a majority of the Board of Directors of either Capital or UPC. See "-- Waiver,
Amendment, and Termination."
REGULATORY APPROVAL
THE MERGER MAY NOT PROCEED IN THE ABSENCE OF RECEIPT OF THE REQUISITE
REGULATORY APPROVAL. THERE CAN BE NO ASSURANCE THAT SUCH REGULATORY APPROVAL
WILL BE OBTAINED OR AS TO THE TIMING OF SUCH APPROVAL. APPLICATIONS FOR THE
APPROVAL DESCRIBED BELOW HAVE BEEN SUBMITTED TO THE APPROPRIATE REGULATORY
AUTHORITIES.
It is a condition to the consummation of the Merger that UPC and Capital
shall have received all applicable regulatory approvals to consummate the
transactions contemplated by the Agreement, without the imposition of any
condition which in the reasonable judgment of the UPC Board would so materially
adversely impact the financial or economic benefits of the transactions
contemplated by the Agreement and the Plan of Merger that, had such condition or
requirement been known, UPC would not, in its reasonable judgment, have entered
into the Agreement. There can be no assurance that such approvals will not
contain terms, conditions or requirements which cause such approvals to fail to
satisfy such condition to the consummation of the Merger.
Capital 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 required, it presently
is contemplated that such approval or action would be sought.
The Merger is subject to the prior approval of the Federal Reserve,
pursuant to Section 3 of the BHC Act. In evaluating the Merger, the Federal
Reserve must consider, among other factors, the financial and managerial
resources and future prospects of the institutions and the convenience and
needs of the communities to be served. The relevant statutes prohibit the
Federal Reserve 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 could 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 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. By letter dated October 8,
1997, the Federal Reserve advised UPC that the Merger had been approved.
The Merger also is subject to the approval of the Florida Department .
In its evaluation, this regulatory authority will take into account
considerations similar to those applied by the Federal Reserve.
WAIVER, AMENDMENT, AND TERMINATION
To the extent permitted by law, the 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 the Agreement and the Plan of Merger has been obtained; provided
however, that after any such approval by the holders of Capital Common Stock,
except as contemplated by the Agreement, there shall be made no amendment that
has any of the effects set forth in
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Section 607.1103 of the FBCA without the further approval of the holders of
Capital Common Stock. In addition, prior to or at the Effective Time, either
Capital or UPC, or both, acting through their respective Boards of Directors,
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 written and unless executed by a duly authorized officer of
Capital 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 Capital and UPC; (ii) by the Capital Board or the
UPC Board (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 (provided 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), (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 (provided 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), (c) if (1) any consent 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 (2) the
shareholders of Capital fail to vote their approval of the Agreement and the
transactions contemplated thereby as required by the FBCA and the Agreement at
the Special Meeting, or (d) if the Merger is not consummated by April 30, 1998,
provided that the failure to consummate is not caused by any willful breach of
the Agreement by the party electing to terminate; or (iii) by the Capital Board
pursuant to the relevant provisions of the Agreement described in " -- Possible
Adjustment of Exchange Ratio."
If the Merger is 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. The Option Agreement will be governed by its own terms as to its
termination. See "-- Expenses and Fees" and "-- Option Agreement."
CONDUCT OF BUSINESS PENDING THE MERGER
Pursuant to the Agreement, Capital has agreed that unless the prior
written consent of UPC has been obtained, and except as otherwise expressly
contemplated in the Agreement, each of Capital and its subsidiaries will (i)
operate its business only in the usual, regular, and ordinary course, (ii) use
reasonable efforts to 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 or prevent the
transactions contemplated by the Agreement, including the Merger, from
qualifying for pooling-of-interests accounting treatment or as a reorganization
within the meaning of Section 368(a) of the Code (see "-- Certain Federal
Income Tax Consequences of the Merger"), or (b) materially adversely affect the
ability of any party to perform its covenants and agreements under the
Agreement.
In addition, Capital has agreed that, except as specifically
permitted by the Agreement or other documents or instruments executed in
connection with the Agreement, prior to the earlier of the Effective Time or
termination of the Agreement, Capital will not, except with the prior written
consent of the chief executive officer, president, or chief financial officer
of UPC (which consent shall not be unreasonably withheld), agree or commit to
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do, or permit any of its subsidiaries to agree or commit to do, any of the
following: (i) amend the Articles of Incorporation, Bylaws, or other governing
instruments of Capital or any Capital subsidiary (each a "Capital company" and
together, the "Capital companies"); (ii) incur any additional debt obligation or
other obligation for borrowed money (other than indebtedness of a Capital
company to another Capital company) in excess of an aggregate of $500,000 (for
the Capital companies on a consolidated basis) except in the ordinary course of
business of the Capital subsidiaries consistent with past practices (which shall
include, for Capital subsidiaries that are depository institutions, the creation
of deposit liabilities, purchases of federal funds, advances from the Federal
Reserve Bank or the 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 material asset of any Capital 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 of the Agreement
that were previously disclosed to UPC by Capital); (iii) 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 Capital company, or
declare or pay any dividend or make any other distribution in respect of any
Capital capital stock, provided that Capital 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 Capital Common Stock at a
rate not in excess of $.08 per share with usual and regular record and payment
dates in accordance with past practice, provided, that, notwithstanding the
provisions of the Agreement, 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 Capital Common Stock do not become
entitled to receive both a dividend in respect of their Capital Common Stock and
a dividend in respect of UPC Common Stock or fail to be entitled to receive any
dividend; (iv) except (A) for the Agreement, or (B) 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 under the Capital Stock
Plans or (C) pursuant to the exercise of stock options granted by Factors, or
(D) pursuant to the 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 Capital Common Stock, or any other capital stock, 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 Capital company
or issue or authorize the issuance of any other securities in respect of or in
substitution for shares of Capital Common Stock, or sell, lease, mortgage, or
otherwise dispose of or otherwise encumber any shares of capital stock of any
Capital subsidiary (unless any such shares of stock are sold or otherwise
transferred to another Capital company) or any assets having a book value in
excess of $250,000 other than in the ordinary course of business for reasonable
and adequate consideration; (vi) except for purchases of investment securities
acquired in the ordinary course of business consistent with past practices,
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 Capital subsidiary, or
otherwise acquire direct or indirect control over any person, with certain
exceptions; (vii) grant any increase in compensation or benefits to the
employees or officers of any Capital company, except in the ordinary course of
business consistent with past practices as previously disclosed to UPC by
Capital 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 the Agreement and previously disclosed to UPC by Capital; enter into or
amend any severance agreements with officers of any Capital company; grant any
material increase in fees or other increases in compensation or other benefits
to directors of any Capital company 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 Capital); (viii) enter into or amend any employment contract
between any Capital company and any person (unless such amendment is required by
law) that the Capital 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 of
any Capital company or terminate or withdraw from, or make any material change
in or to, any existing employee benefit plans of any Capital 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 distribution from such employee benefit plans, except as required by
law, the terms of the plans, or
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consistent with past practices; (x) make any material 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 generally accepted accounting principles; (xi) commence any
litigation other than in accordance with past practice or settle any litigation
involving any liability of any Capital company for material money damages or
restrictions upon the operations of any Capital company; or (xii) except in the
ordinary course consistent with past practice, enter into, modify, amend, or
terminate any material contract (excluding any loan contract) or waive,
release, compromise, or assign any material rights or claims.
Capital has also agreed that, except with respect to the Agreement,
the Plan of Merger, and the transactions contemplated thereby, no Capital
company or any representative thereof shall directly or indirectly solicit any
acquisition proposal or, except to the extent necessary to comply with the
fiduciary duties of the Capital Board as advised by counsel, 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 Capital 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.
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
covenants and agrees 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 UPC or its subsidiaries 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 or prevent the
transactions contemplated by the Agreement, including the Merger, from
qualifying for pooling-of-interests accounting treatment or as a reorganization
within the meaning of Section 368(a) of the Code (see "-- Certain Federal
Income Tax Consequences of the Merger"), (b) materially adversely affect the
ability of any party to perform its covenants and agreements under the
Agreement, or (c) result in UPC entering into an agreement with respect to an
Acquisition Proposal, as defined in the Agreement, with a third party which
could be reasonably expected to result in the Merger not being consummated;
provided, that the foregoing shall not prevent UPC or any UPC subsidiary 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 reasonable judgment of
UPC, desirable in the conduct of the business of UPC and the UPC subsidiaries
and would not, in the reasonable judgment of UPC, likely delay the Effective
Time to a date subsequent to April 30, 1998.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
Consummation of the Merger will not alter the present management team
of UPC or the UPC Board. Information concerning the management of UPC is
included in the documents incorporated herein by reference. See "DOCUMENTS
INCORPORATED BY REFERENCE." In connection with consummating the Merger, Fana
Holtz, the Vice Chairman of the Board of Capital, and Daniel M. Holtz, the
Chairman, President, and Chief Executive Officer of Capital, will resign or be
terminated from all management positions with Capital and will have no
continuing role in the management of UPC or Capital. For additional
information regarding the interests of certain persons in the Merger, see
"-- Interests of Certain Persons in the Merger."
UPC and Capital have agreed that to the extent UPC determines to
appoint a director to the UPC Board to represent the interest of Capital
shareholders, Capital will have the right to propose a nominee for such
directorship. UPC may, but will have no obligation to, cause the UPC Board to
be expanded by one member and appoint such person as a nominee to fill the
vacancy on the UPC Board created by such increase as of the Effective Time. As
of the date of this Proxy Statement, no decision has been made by UPC to
appoint a director to the UPC Board.
UPC Merger Subsidiary will be the surviving corporation resulting from
the Merger and shall continue to be governed by the laws of the State of
Tennessee and operate in accordance with its Charter and Bylaws.
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INTERESTS OF CERTAIN PERSONS IN THE MERGER
GENERAL. Certain members of Capital's management and the Capital
Board may be deemed to have certain interests in the Merger that are in
addition to their interests as shareholders of Capital generally. The Capital
Board was aware of these interests and considered them, among other matters, in
approving the Agreement and the transactions contemplated thereby.
EMPLOYMENT AGREEMENTS. Capital Bank has entered into employment
agreements with Daniel M. Holtz, Javier J. Holtz, Thomas J. Flood, Timothy E.
Kish, Charles R. Boyce, Lucious T. Harris, and David Konfino. The employment
agreements are for the period from January 1, 1996 to May 31, 1998 and provide
for annual base salaries, subject to adjustment in the discretion of the
Capital Board. Upon the execution of the employment agreements, each such
officer, except Daniel M. Holtz, received a $50,000 loan from Capital payable
in five equal annual installments of principal plus all accrued interest
through the date of payment, which must be repaid if the executive officer
terminates his employment prior to the end of the loan period. Such officers
(other than Daniel M. Holtz) receive bonuses on June 1 of each year
during the term of the employment agreements in an amount equal to the amount
of principal and interest then due under their loan (a "Loan Bonus"). The
employment agreements also provide for annual incentive compensation pursuant
to an incentive compensation plan adopted annually by the Board of Directors of
Capital Bank (the "Capital Bank Board"). The bonus amounts payable pursuant to
such plan are based on the achievement of (i) a specific earnings goal by
Capital Bank (excluding the earnings of Factors) set by the Capital Bank Board,
and (ii) certain other individual goals related to such executive officer's job
responsibilities. Daniel M. Holtz's incentive-related compensation also
includes a specific Capital Bank consolidated earnings goal, which includes the
operations of Capital Bank and Factors. Upon the termination of an executive
officer's employment without cause, such officer will be entitled to receive,
among other things, (i) his base salary and incentive compensation through the
date of termination of the employment agreement and (ii) a bonus equal to the
amount necessary to repay in full the outstanding principal and accrued
interest on the $50,000 signing loan (other than Daniel M. Holtz).
In the event of a change in control (which will occur upon consummation of
the Merger), if, within one year after the change in control, the executive
officer, other than Daniel M. Holtz, terminates his employment because of
certain specified changes in his employment situation or if he is terminated by
Capital Bank (or any successor) without cause, he shall be entitled to receive
(in addition to salary and incentive compensation earned prior to termination) a
single lump sum payment in an amount equal to (i) his annual base salary,
incentive compensation, and value of the annual fringe benefits for the year
immediately preceding the year in which his employment terminates, plus (ii) the
value of the portion of his benefits under any savings, pension, profit sharing,
or deferred compensation plans that are forfeited under those plans by reason of
the termination of employment. If Daniel M. Holtz were to terminate his
employment in the manner described, he would have been entitled to receive in a
single lump sum payment an amount equal to (i) two times his annual base salary,
incentive compensation, and value of the annual fringe benefits for the year
immediately preceding the year in which his employment terminates plus (ii) the
value of the portion of his benefits under any savings, pension, profit sharing,
or deferred compensation plans that are forfeited under those plans by reason of
the termination of employment. Such officers (including Daniel M. Holtz and
Javier J. Holtz) would also receive a gross-up payment for any excise tax
payable under Section 4999 of the Code. As described below, Daniel M. Holtz and
Javier J. Holtz have each agreed to waive the severance benefits that would be
triggered by a change in control, as described above.
Certain provisions of the Order call for the repudiation by Daniel M.
Holtz and Javier J. Holtz of their severance arrangements described above that
would be triggered by a change in control of Capital (see "BUSINESS OF CAPITAL
- -- Administrative Proceedings"). As part of submitting the Second Revised
Compliance Plan (as defined herein), Daniel M. Holtz and Javier J. Holtz
unconditionally waived any right to receive payments of any amounts under their
respective employment agreements that would be triggered by a change in control
of Capital. Accordingly, Daniel M. Holtz and Javier J. Holtz will not receive
any payment as described above under their
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<PAGE> 45
respective employment agreements that would be triggered by a change in control
of Capital which will occur upon consummation of the Merger.
Factors has entered into an employment agreement with John W. Kiefer,
a Senior Vice President of Capital and the President and Chief Executive Officer
of Factors. The employment agreement, which has a term of five years expires in
December 2000 and provides for an annual base salary, subject to a limited
adjustment in the discretion of Factors' Board of Directors (the "Factors
Board") or Compensation Committee. Upon execution of his agreement, Mr. Kiefer
received a $250,000 bonus and a $100,000 loan from Factors payable in five equal
annual installments of principal, plus all accrued interest through the date of
payment, which loan must be repaid if Mr. Kiefer terminates his employment prior
to the end of the loan period. Mr. Kiefer receives a Loan Bonus on December 31
of each year during the term of the employment agreement.
The employment agreement provides for an annual bonus based on
specific earnings goals of Factors set by the Factors Board or Compensation
Committee. Mr. Kiefer's employment agreement also provides for Mr. Kiefer to
receive certain deferred compensation equal to 67% of his salary for each year
that Factors achieves certain earnings goals set forth in the employment
agreement. This deferred compensation vests at the rate of 50% after three
years, and at 25% after each of the fourth and fifth years.
Upon Factors' termination of Mr. Kiefer's employment without cause,
Mr. Kiefer shall be entitled to receive, among other things, (i) his base
salary through the date of such termination, (ii) all previous bonuses and a
pro rata portion of the bonus payable, if any, for the year in which termination
occurs, (iii) an acceleration of the vesting of all deferred compensation, and
(iv) subject to mitigation if he obtains subsequent employment, his base salary
through the expiration date of the employment agreement. In the event of a
change in control (which would occur upon the consummation of the Merger), Mr.
Kiefer shall receive the same compensation as if terminated without cause
except that in lieu of the compensation payable in (iv) above, Mr. Kiefer shall
be entitled to receive a lump sum payment equal to two times the sum of his
base salary and prior year's bonus if he terminates his employment because
of changes in his employment situation and an additional amount equal
to two times his prior year's deferred compensation, if any, if he is
terminated by Factors without cause within one year after a change in control.
Upon termination for "cause" or upon voluntary resignation, Mr. Kiefer shall be
entitled to receive his base salary through the date of such termination.
All of the executive officers' employment agreements also provide for
the usual benefits afforded to employees of Capital Bank or Factors, such as
medical, disability, and life insurance benefits. Each of the executive
officers is also entitled to the use of an automobile, along with reimbursement
of the operating expenses thereof, and stock options under the Capital or
Factors stock option plan, in amounts and under the terms as determined by the
applicable Board Committee.
Although the Agreement does not provide for the termination of
employment of the executive officers, the Merger will constitute a change in
control under the terms of the employment agreements. Therefore, assuming that
an executive officer is terminated without cause or experiences certain
specified changes in his employment situation, such executive officer would be
entitled to a lump sum severance payment pursuant to his employment agreement.
The estimated lump sum severance amounts payable under the terms of the
employment agreements (based on a termination date of December 31, 1997 and
based on the achievement of incentive compensation goals for certain officers)
would be as follows: Charles R. Boyce ($259,438); Thomas J. Flood ($362,377);
Lucious T. Harris ($284,567); John W. Kiefer ($2,277,750 if he is terminated
without cause or $1,842,750 if he terminates his employment because of changes
in his employment situation); Timothy E. Kish ($301,252); and David Konfino
($297,927); (collectively, with Daniel M. Holtz and Javier J. Holtz, the
"Executive Officers"). Absent the waiver described above, Daniel M. Holtz and
Javier J. Holtz would have received approximately $1,106,985 and $318,758,
respectively. Because the severance payments are based on elements which vary
from year to year, if termination occurs after December 31, 1997, such payments
could be more or less than the estimated lump sum payments set forth above.
STOCK OPTIONS. Capital has granted Capital Options to executive
officers and directors under the Capital Stock Plans. Such options, whether or
not vested prior to the Effective Time, will become fully vested at the
Effective Time, as the Merger will constitute a change-of-control for purposes
of such plan. Further, Capital's repurchase rights with respect to shares of
Capital Common Stock previously acquired by such employees upon exercise of
options will terminate at the Effective Time, as the Merger will constitute a
change-of-control for purposes of such plan. The Agreement provides that UPC
will assume any outstanding Capital Options, that are outstanding at the
Effective Time, whether or not then vested, on a basis adjusted to reflect the
Exchange Ratio. In lieu of having the Capital Options assumed by UPC, each
holder of a Capital Option that is not an "incentive stock option," whether or
not then vested, will have a right to elect to convert, at the Effective Time,
all or a portion of his or her Capital Options that are not "incentive stock
options" and that have not expired prior to the Effective Time, into the right
to receive a number of shares of UPC Common Stock equal to the fair value of the
option. See "DESCRIPTION OF TRANSACTION -- Effect of the Merger on Capital
Options."
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<PAGE> 46
The following table sets forth, with respect to (i) each Executive
Officer, (ii) a group consisting of all the Executive Officers (the "Executive
Officer Group"), and (iii) the Capital Board as a group (the "Non-Executive
Officer Director Group"), the number of shares of Capital Common Stock covered
by outstanding Capital Options held by such persons as of the Capital Record
Date:
<TABLE>
<CAPTION>
Options Currently Weighted Average Aggregate Value of
Options Held Exerciseable Exercise Per Option Option(1)
------------ ----------------- ------------------- ------------------
<S> <C> <C> <C> <C>
Daniel M. Holtz . . . . . . . 174,751 156,751 $16.45 $ 5,557,082
Javier J. Holtz . . . . . . . 90,751 84,751 15.03 3,014,748
Thomas J. Flood . . . . . . . 79,502 73,502 15.09 2,636,286
Timothy E. Kish . . . . . . . 32,501 27,501 19.35 939,279
Charles R. Boyce . . . . . . 25,001 20,001 21.55 667,527
Lucious T. Harris . . . . . . 55,002 50,002 16.70 1,735,313
David Konfino . . . . . . . . 42,001 36,001 19.11 1,223,909
John W. Kiefer . . . . . . . 59,501 54,501 18.90 1,746,354
Executive Officer Group
(eight persons) . . . . . 559,010 503,010 16.91 $17,519,373
===========
Non-Executive Officer
Director Group (seven
persons) . . . . . . . . 149,750 149,750 21.45 $ 4,013,300
</TABLE>
- -----------------------
(1) Based on the closing price of Capital Common Stock of $48.25 as quoted
on the Nasdaq National Market on the Capital Record Date.
INDEMNIFICATION; DIRECTORS AND OFFICERS INSURANCE. The Agreement
provides that UPC will, subject to the conditions set forth therein, indemnify
the present and former directors, officers, employees, and agents of Capital
and its subsidiaries against all Liabilities (as defined in the Agreement)
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 and the legal proceedings described under "BUSINESS OF CAPITAL --
Legal Proceedings" to the full extent permitted under any of Florida law,
Capital's Articles and Bylaws, and any indemnity agreements previously entered
into by Capital or any of its subsidiaries and any director, officer, employee,
or agent of Capital or any of its subsidiaries. This provision of the
Agreement is consistently included in UPC's standard form merger agreement and
is not intended to broaden in any manner the scope of indemnification to which
the present and former directors, officers, employees, and agents of Capital
and its subsidiaries are entitled, but serves to ratify the legal obligations
of Capital and its subsidiaries (to be assumed by UPC Merger Subsidiary upon
consummation of the Merger) to provide indemnification in accordance with
Florida law, Capital's Articles and Bylaws, and any indemnification agreements
to which Capital or its subsidiaries is a party with an indemnified person.
The indemnification provided under the provisions of such instruments will be
subject to the same standards that are currently applicable for determining
whether indemnified parties are entitled to indemnification under such
instruments.
In connection with the Merger, each of Abel Holtz, Fana Holtz, Daniel
M. Holtz, and Javier J. Holtz have agreed not to seek indemnification to which
they otherwise may have been entitled pursuant to Florida law, the Agreement,
certain indemnification agreements, or the Articles and Bylaws of Capital,
Capital Bank and their subsidiaries in connection with certain litigation
matters referred to under "BUSINESS OF CAPITAL -- Legal Proceedings,"
except to the extent of the portion, if any, of the aggregate liability, cost,
and expense associated with such litigation matters incurred by all of such
persons after the date of the Agreement exceeds $4.0 million, provided such
liability, cost, or expense is otherwise indemnifiable under Florida law or any
of such instruments.
The Agreement further provides that UPC will, subject to the
conditions set forth in the Agreement, use its reasonable efforts to cause the
persons serving as officers and directors of Capital immediately prior to the
Merger to be covered for a period of three years following the Effective Time
by Capital's directors and officers liability insurance policy (or any
equivalent substitute therefor), provided that UPC will not be required to
expend on an annual basis more than 150% of the current annual amount expended
by Capital to procure such insurance.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
THE FOLLOWING IS A SUMMARY OF THE MATERIAL ANTICIPATED FEDERAL INCOME
TAX CONSEQUENCES OF THE MERGER TO CAPITAL SHAREHOLDERS WHO HOLD THEIR CAPITAL
COMMON STOCK AS A CAPITAL ASSET (GENERALLY, PROPERTY HELD FOR INVESTMENT).
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
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<PAGE> 47
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 AND IS NOT INTENDED AS TAX ADVICE TO ANY PERSON.
IN PARTICULAR, AND WITHOUT LIMITING THE FOREGOING, THIS SUMMARY DOES NOT
ADDRESS THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO CAPITAL
SHAREHOLDERS IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES OR STATUS (INCLUDING,
FOR EXAMPLE, FOREIGN PERSONS, TAX-EXEMPT ENTITIES, DEALERS IN SECURITIES,
INSURANCE COMPANIES, CORPORATIONS, HOLDERS WHO ACQUIRED CAPITAL COMMON STOCK
PURSUANT TO THE EXERCISE OF AN EMPLOYEE STOCK OPTION OR RIGHT OR OTHERWISE AS
COMPENSATION, AND HOLDERS WHO HOLD CAPITAL COMMON STOCK AS PART OF A HEDGE,
STRADDLE, OR CONVERSION TRANSACTION). NOR DOES THIS SUMMARY ADDRESS ANY
CONSEQUENCES OF THE MERGER UNDER ANY STATE, LOCAL, ESTATE, OR FOREIGN TAX LAWS.
CAPITAL 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.
Each party's obligation to consummate the Merger is conditioned upon
the receipt by UPC of the opinion of Alston & Bird, counsel to UPC, and upon
the receipt by Capital of the opinion of Skadden, Arps, counsel to Capital
(collectively, the "Tax Opinions"), each dated the Effective Time, in form and
substance reasonably satisfactory to its client, on the basis of facts,
representations and assumptions set forth or referred to in such opinions which
are consistent with the state of facts existing at the Effective Time,
substantially to the effect that the Merger will be treated for federal income
tax purposes as a reorganization within the meaning of Section 368(a) of the
Code, and accordingly, for federal income tax purposes:
(a) No gain or loss will be recognized by the Capital
shareholders who exchange all of their Capital Common Stock solely for UPC
Common Stock pursuant to the Merger (except with respect to cash received in
lieu of a fractional share interest in UPC Common Stock).
(b) The aggregate tax basis of the UPC Common Stock
received by Capital shareholders who exchange all of their Capital Common Stock
solely for UPC Common Stock pursuant to the Merger will be the same as the
aggregate tax basis of the Capital Common Stock surrendered in exchange
therefor (reduced by any amount allocable to the fractional share interest in
UPC Common Stock for which cash is received).
(c) The holding period of UPC Common Stock received by
Capital shareholders in the Merger will include the period during which the
shares of Capital Common Stock surrendered in exchange therefor were held.
(d) Neither Capital nor UPC will recognize gain or loss
as a consequence of the Merger.
In rendering the Tax Opinions, such counsel shall require and be
entitled to rely upon representations and covenants contained in certificates of
officers of Capital, UPC, and others. The Tax Opinions do not address any
state, local, or other tax consequences of the Merger. In addition, the Tax
Opinions do not bind the Internal Revenue Service (the "IRS") nor preclude the
IRS from adopting a contrary position.
Based upon the current ruling position of the IRS, cash received by a
holder of Capital Common Stock in lieu of a fractional share interest in UPC
Common Stock will be treated as received in exchange for such fractional share
interest, and gain or loss will be recognized for federal income tax purposes
measured by the difference between the amount of cash received and the portion
of the basis of the share of Capital Common Stock allocable to such fractional
share interest. Such gain or loss should be long-term capital gain or loss if
the holding period for such share of Capital Common Stock is greater than one
year at the Effective Time. In certain circumstances, holders of Capital
Common Stock that are individuals may be entitled to preferential treatment for
net long-term
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<PAGE> 48
capital gains, including, as a result of recently enacted legislation, in the
case of a capital asset held for more than 18 months at the time of the
disposition.
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 Capital will be carried
forward at their previously recorded amounts, and current and prior period
financial statements will be restated for all periods as though Capital and UPC
had been combined at the beginning of the earliest period presented.
In order for the Merger to qualify for pooling-of-interests accounting
treatment, substantially all (90% or more) of the outstanding Capital 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 as a pooling of interests, some of which criteria cannot be
satisfied until after the Effective Time. In addition, it is a condition to
closing that Price Waterhouse LLP deliver a letter to the parties to the effect
the Merger will qualify for pooling-of-interests accounting treatment.
For information concerning certain conditions to be imposed on the
exchange of Capital Common Stock for UPC Common Stock in the Merger by
affiliates of Capital and certain restrictions to be imposed on the
transferability of the UPC Common Stock received by those affiliates in the
Merger in order, among other things, to ensure the availability of
pooling-of-interests accounting treatment, see "--Resales of UPC Common Stock."
EXPENSES AND FEES
The Agreement provides that each of the parties will 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
Capital will bear and pay the filing fees payable in connection with the
Registration Statement and this Proxy Statement and the printing costs and
certain other third-party costs in connection with the Registration Statement
and this Proxy Statement based on the relative asset sizes of the parties at
December 31, 1996.
RESALES OF UPC COMMON STOCK
UPC Common Stock to be issued to shareholders of Capital in connection
with the Merger will be registered under the Securities Act. All shares of UPC
Common Stock received by holders of Capital Common Stock and all shares of UPC
Common Stock issued and outstanding immediately prior to the Effective Time,
will be freely transferable upon consummation of the Merger by those
shareholders of Capital not deemed to be "Affiliates" of Capital or UPC.
"Affiliates" generally are defined as persons or entities who control, are
controlled by, or are under common control with Capital or UPC at the time of
the Special Meeting (generally, executive officers, directors, and 10%
shareholders).
Rule 145 promulgated under the Securities Act restricts the sale of
UPC Common Stock received in the Merger by Affiliates and certain of their
family members and related interests. Under the rule, during the one year
following the Effective Time, Affiliates of Capital 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 one-year period, such Affiliates of Capital 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 Rule 145 will be subject to UPC 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 Rule 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
Proxy Statement does not cover any resales of UPC Common Stock received by
persons who may be deemed to be Affiliates of Capital or UPC.
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<PAGE> 49
Capital has agreed to use its reasonable efforts to cause each person
who may be deemed to be an Affiliate of Capital to execute and deliver to UPC
not later than 40 days prior to the Effective Time, an agreement (each, an
"Affiliate Agreement") providing that such Affiliate will not sell, pledge,
transfer, or otherwise dispose of any Capital Common Stock held by such
Affiliate except as contemplated by the Agreement or the Affiliate Agreement,
and will not sell, pledge, transfer or otherwise dispose of any UPC Common
Stock received by such Affiliate upon consummation of the Merger (i) except in
compliance with the Securities Act and the rules and regulations thereunder and
(ii) until such time as financial results covering 30 days of combined
operations of UPC and Capital have been published. If the Merger will qualify
for pooling-of-interests accounting treatment, shares of UPC Common Stock
issued to such Affiliates of Capital in exchange for shares of Capital Common
Stock shall not be transferable until such time as financial results covering
at least 30 days of combined operations of UPC and Capital have been published,
regardless of whether each such Affiliate has provided an Affiliate Agreement
(and UPC shall be entitled to place restrictive legends upon certificates for
shares of UPC Common Stock issued to Affiliates of Capital). Certificates
representing shares of Capital Common Stock surrendered for exchange by any
person who is an Affiliate of Capital 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,
Capital and UPC entered into the Option Agreement which became effective at the
end of the due diligence period on September 11, 1997, pursuant to which
Capital granted UPC an option (the "Option") entitling it to purchase up to
1,510,500 shares (representing approximately 19.9% of the shares issued and
outstanding before giving effect to the issuance of additional shares of Capital
Common Stock pursuant to the exercise of such option) of Capital Common Stock
under the circumstances described below, at a cash price per share equal
to $40.50, subject to possible adjustment in certain circumstances (the
"Purchase Price"). 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 an exhibit to the Registration
Statement and incorporated herein by reference.
Notwithstanding anything to the contrary contained in the Option
Agreement, in no event may the Total Profit (as defined below) of UPC exceed
$18.0 million and, if it otherwise would exceed such amount, UPC, at its sole
election, shall either (a) reduce the number of shares of Capital Common Stock
subject to the Option, (b) deliver to Capital for cancellation, without
consideration, the shares of Capital Common Stock previously purchased pursuant
to the Option, (c) pay cash to Capital or (d) any combination thereof, so that
UPC will not actually realize Total Profit (together with the Total Profit
realized by all other holders) in excess of $18.0 million after taking into
account the foregoing actions. In addition, the Option may not be exercised
for a number of shares of Capital Common Stock as would, as of the date of
exercise, result in UPC's (taking into account all other holders)
Notional Total Profit (as defined below) exceeding $18.0 million; provided,
however, that this limitation will not restrict any exercise of the Option
permitted by the Option Agreement on any subsequent date.
"Total Profit" means the aggregate sum (prior to payment of taxes) of
the following: (a) the amount received by UPC pursuant to Capital's repurchase
of the Option (or any portion thereof); (b)(i) the amount received by UPC
pursuant to Capital's repurchase of shares of Capital Common Stock purchased
pursuant to the Option Agreement, less (ii) UPC's purchase price for such
shares; (c)(i) the net cash amounts received by UPC pursuant to the sale of
Capital Common Stock purchased pursuant to the Option (or any other securities
into which such shares may be converted or exchanged) to any unaffiliated
party, less (ii) UPC's purchase price of such shares; and (d) any amounts
received by UPC on the transfer of the Option (or any portion thereof) to any
unaffiliated party.
"Notional Total Profit" means the Total Profit determined as of the
date of such proposed exercise, assuming that the Option were exercised on such
date for such number of shares and assuming that such shares,
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together with all other Capital Common Stock purchased pursuant to the Option
held by UPC and its affiliates as of such date, were sold for cash at the
closing sale price per share of Capital Common Stock as quoted on the Nasdaq
National Market (or, if Capital Common Stock is not then 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 selected by UPC) as of the close of business
on the preceding trading day (less customary brokerage commissions).
Provided no preliminary or permanent injunction or other order against
the delivery of the shares of Capital Common Stock covered by the Option issued
by any court of competent jurisdiction shall be in effect, UPC may exercise the
Option, in whole or in part, at any time, from time to time, if, but only if,
a Purchase Event (as defined below) occurs 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, Capital
authorizing, recommending, publicly proposing, or publicly announcing an
intention to authorize, recommend, or propose or entering into an agreement
with any third party to effect (i) a merger, consolidation, or similar
transaction involving Capital or any of its subsidiaries (other than
transactions solely between Capital's subsidiaries and transactions involving
Capital or any of Capital's subsidiaries in which the voting securities
outstanding immediately prior thereto continue to represent (by either
remaining outstanding or being converted into securities of the surviving
entity or the parent thereof) at least 60% of the combined voting power of the
voting securities of Capital or the surviving entity or the parent thereof
outstanding immediately after the consummation of the transaction)), (ii)
except as permitted by the Agreement, the disposition, by sale, lease,
exchange, or otherwise, of 25% or more of the consolidated assets of Capital
and its subsidiaries or (iii) the issuance, sale, or other disposition
(including by way of merger, consolidation, share exchange, or any similar
transaction) of securities representing 25% or more of the voting power of
Capital or any of its subsidiaries; or
(b) any person (other than UPC, any UPC subsidiary, or
the group consisting of Abel Holtz, Fana Holtz, Daniel M. Holtz, and Javier J.
Holtz (the "Holtz Family")), provided that no member of the Holtz Family
increases his or her beneficial ownership of outstanding Capital Common
Stock (other than as a result of exercise of options outstanding as of the date
of the Agreement) such that the aggregate beneficial ownership of the Holtz
Family as of the date of the Agreement increases by more than 1.0%) acquiring
beneficial ownership (as such term is defined in Rule 13d-3 promulgated under
the Exchange Act), or the right to acquire beneficial ownership of, or the
formation of any "group" (as defined under the Exchange Act), other than a
group of which UPC or any UPC subsidiary is a member, that beneficially owns or
has the right to acquire beneficial ownership of, 25% or more of the
outstanding shares of Capital Common Stock.
The Option will terminate 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
under certain circumstances involving generally a willful breach by Capital of
a representation or warranty contained in the Agreement or a breach by Capital
of a covenant 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
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 or filing of a registration statement
under the Securities Act by any third party of a tender offer or exchange offer
to purchase any shares of Capital Common Stock such that, upon consummation of
such offer, such person would own or control 25% or more of the
then-outstanding shares of Capital Common Stock (a "Tender Offer" or an
"Exchange Offer," respectively); or
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(b) failure of the shareholders of Capital Common Stock
to approve the Agreement and the Plan of Merger at the Special Meeting,
the failure to have the Special Meeting or another such meeting held for the
purpose of voting on the Agreement or the cancellation of such meeting prior to
termination of the Agreement, or the withdrawal or modification by the Capital
Board in a manner adverse to UPC of the recommendation of the Capital Board
with respect to the Agreement, in each case, after public announcement that a
third party (i) made 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 or given a
notice under any federal or state statutes or regulations for approval or
consent to engage in an acquisition transaction.
In the event of any change in Capital 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 securities subject to
the Option, and the purchase price therefor shall be adjusted appropriately.
In the event that any additional shares of Capital Common Stock are issued
after August 12, 1997 (other than pursuant to an event described in the
preceding sentence), the number of shares of Capital Common Stock subject to
the Option will be adjusted so that, after such issuance, it, together with any
shares of Capital Common Stock previously issued pursuant to the Option
Agreement, equals 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, Capital will, subject
to regulatory restrictions, be obligated to repurchase the Option and any
shares of Capital Common Stock therefor purchased pursuant to the Option
Agreement at a specified price.
As defined in the Option Agreement, "Repurchase Event" shall 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 Capital Common Stock, or (ii) any of the
following transactions is consummated: (a) Capital 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)
Capital permits any person, other than UPC or one of UPC's subsidiaries, to
merge into Capital and Capital shall be the continuing or surviving
corporation, but, in connection with such merger, the then-outstanding shares
of Capital Common Stock shall be changed into or exchanged for stock or other
securities of Capital or any other person or cash or any other property or the
outstanding shares of Capital 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) Capital 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,
Capital enters 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 UPC will receive
for each share of Capital Common Stock subject to the option an amount of
consideration that would be received by a holder of Capital Common Stock in
such transaction less the Purchase Price.
After the occurrence of a Purchase Event, UPC may assign the Option
Agreement and its rights thereunder in whole or in part.
Upon the occurrence of certain events, Capital has agreed to file with
the SEC 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 Capital Common Stock into which the
Option is exercisable.
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SUPPORT AGREEMENTS
As an inducement and a condition to UPC entering into the Agreement,
directors of Capital each individually entered into a Support Agreement with
UPC pursuant to which such persons agreed, among other things, to vote all
shares of Capital Common Stock which they are entitled to vote (not including
shares over which such director has voting authority in a fiduciary capacity)
(i) in favor of approval of the Agreement and the Merger and (ii) against
approval of (a) any other agreement which provides for a merger, consolidation,
combination, sale of substantial assets, recapitalization, dissolution,
liquidation, or winding up of or by Capital or (b) any other action which would
frustrate consummation of the Merger subject to requirements of law. The total
number of shares of Capital Common Stock owned by the directors which are
subject to the Support Agreements is 2,400,906, or approximately 31.5% of the
outstanding shares of Capital Common Stock as of the Capital Record Date. The
directors also held, in the aggregate, Capital Options to acquire 327,501
shares of Capital Common Stock. Any such shares acquired upon the exercise of
such option would also become subject to the voting provisions described above.
In addition, certain irrevocable proxies are held by Fana Holtz, Vice
Chairman of the Board of Capital, and Javier J. Holtz, Senior Vice President
of Capital, covering approximately 1,202,898 shares of Capital Common Stock, or
approximately 15.8% of the outstanding shares of Capital Common Stock as of the
Capital Record Date. The holders of such irrevocable proxies intend to vote
such shares in favor of the Agreement and the Merger. Of the 1,202,898 shares
of Capital Common Stock subject to such irrevocable proxies, 168,973 shares, or
approximately 2.2% of the outstanding shares of Capital Common Stock as of the
Capital Record Date, are Disputed Irrevocable Proxies and in accordance with
the Agreement will not be counted unless (i) the underlying owner has given
written instructions with respect to the voting of such shares in connection
with the Agreement or (ii) the parties to the Agreement have waived the
requirement.
EFFECT OF THE MERGER ON RIGHTS OF SHAREHOLDERS
As a result of the Merger, holders of Capital Common Stock will be
exchanging their shares of a Florida corporation governed by the FBCA and
Capital's Articles and Bylaws, for shares of UPC, a Tennessee corporation
governed by the TBCA and UPC's Charter and Bylaws. Certain significant
differences exist between the rights of Capital shareholders and those of UPC
shareholders. In particular, UPC's Charter and Bylaws contain several
provisions that may be deemed to have an anti-takeover effect in that they
could impede or prevent an acquisition of UPC unless the potential acquirer has
obtained the approval of the UPC Board. 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 FBCA and the TBCA as
well as to UPC's Charter and Bylaws and Capital's Articles and Bylaws.
ANTI-TAKEOVER 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," "-- Limitations on Director Liability," "--
Indemnification," "-- Special Meeting of Shareholders," "-- Actions by
Shareholders Without a Meeting," "-- Shareholder Nominations and Proposals" and
"-- Business Combinations" are referred to herein as the "Protective
Provisions." In general, one purpose of the Protective Provisions is to assist
the UPC Board in playing a role if any group or person attempts to acquire
control of UPC, so that the UPC Board can further protect the interests of UPC
and its shareholders as appropriate under the circumstances, including, if the
UPC Board determines that a sale of control is in their best interests, by
enhancing the UPC 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,
therefore, 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.
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The Protective Provisions also may discourage open market purchases by
a potential acquirer. 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 acquirer 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 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 (i) 100,000,000
shares of UPC Common Stock, of which 67,211,642 shares were issued and
outstanding as of September 30, 1997, and (ii) 10,000,000 shares of no par value
preferred stock ("UPC Preferred Stock"), of which no shares of UPC Series A
Preferred Stock, and 2,289,594 shares of UPC Series E Preferred Stock were
issued and outstanding as of September 30, 1997. The UPC Board may authorize
the issuance of additional shares of UPC Common 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.
Similarly, with certain exceptions, the UPC Board may issue, without
any further action by the shareholders, shares of UPC Preferred Stock, in one
or more classes or series, with such voting, conversion, dividend, and
liquidation rights as specified in UPC's Charter. In providing for the
issuance of such shares, the UPC Board may determine, among other things, the
distinctive designation and number of shares comprising a series of preferred
stock, the dividend rate or rates on the shares of such series and the relation
of such dividends to the dividends payable on other classes of stock, whether
the shares of such series shall be convertible into or exchangeable for shares
of any other class or series of UPC capital stock, the voting powers if any of
such series, and any other preferences, privileges, and powers of such series.
In the event of the voluntary or involuntary liquidation, dissolution,
distribution of assets, or winding up of UPC, the holders of any series of UPC
Preferred Stock will have priority over holders of UPC Common Stock.
The authority to issue additional shares of UPC Common Stock or
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 and 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 voting 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 voting stock (or the right to receive UPC voting
stock) to UPC shareholders, may have the effect of discouraging or increasing
the cost of unsolicited attempts to acquire control of UPC.
In 1989, the UPC Board adopted a Share Purchase Rights Plan
("Preferred Share Rights Plan") and distributed a dividend of one Preferred
Share Unit Purchase Right ("Preferred Share Right") for each outstanding share
of UPC Common Stock. In addition, under the Preferred Share Rights Plan, one
Preferred Share Right is to be automatically, and without further action by
UPC, distributed in respect to each share of UPC Common Stock issued after
adoption of the Preferred Share Rights Plan. 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
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Common Stock and each holder of a Preferred Share Right (other than the
potential acquiror) would be entitled to purchase certain equity securities of
UPC at prices below their market value. UPC has authorized 750,000 shares of
Series A Preferred Stock for issuance under the Preferred Share Rights Plan and
no shares have been issued as of the date of this Proxy Statement. Until a
Preferred Share Right is exercised, the holder thereof, as such, has no rights
of a shareholder of UPC, including the right to vote or receive dividends.
CAPITAL. Capital's Articles authorize the issuance of up to
20,000,000 shares of Capital Common Stock, of which 7,623,671 shares were
issued and outstanding as of the Capital Record Date. The Capital Board
generally may authorize the issuance of additional authorized shares of Capital
Common Stock without further action by Capital's shareholders upon receipt of
valid consideration in exchange for such shares.
AMENDMENT OF CHARTER AND BYLAWS
UPC. The Charter of UPC provides that amendments thereto may be
adopted in any manner permitted by the TBCA. The TBCA provides that a
corporation's charter may be amended by a majority of votes entitled to be cast
on the amendment, subject to any condition the Board of Directors may place on
its submission of the amendment to the shareholders. The Charter requires a
vote of two-thirds or more of the shares of capital stock entitled to vote in
an election of directors to amend the articles of the Charter governing
directors and to remove a director from office whether with or without cause.
A two-thirds vote is also required to amend, alter, or repeal the article of
the Charter relating to business combinations.
The UPC Board may adopt, amend, or repeal the Bylaws by a majority
vote of the entire Board of Directors. The Bylaws may also be amended or
repealed by action of UPC's shareholders.
UPC's Charter provides that all corporate powers of UPC shall be
exercised by the Board of Directors except as otherwise provided by law. The
Board of Directors may designate an executive committee consisting of five or
more directors and may authorize such committee to exercise all of the
authority of the Board of Directors, including the authority to adopt, amend
and repeal the Bylaws, to submit any action to the shareholders, to fill
vacancies on the Board of Directors or any committee, to declare dividends or
other corporate distributions, and to issue or reissue any capital stock or any
warrant, right or option to acquire capital stock of the corporation.
CAPITAL. Capital's Articles provide that any amendment, repeal,
exchange, or alteration of any of the provisions of the Articles requires the
affirmative vote of not less than two-thirds of the outstanding Capital Common
Stock.
The power to amend, alter, or repeal the Capital Bylaws, and to adopt
new Bylaws is vested in the Capital Board or the shareholders. The Bylaws
generally may be amended by resolution of a majority of the Board or a vote of
a majority of the shareholders.
CLASSIFIED BOARD OF DIRECTORS AND ABSENCE OF CUMULATIVE VOTING
UPC. The Charter of UPC provides that the UPC Board 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 purpose of dividing the UPC Board into classes is to
facilitate continuity and stability of leadership of UPC by ensuring that
experienced personnel familiar with UPC will be represented on the UPC Board at
all times, and to permit UPC's management to plan for the future for a
reasonable amount of time. However, by potentially delaying the time within
which an acquirer could obtain working control of the Board, this provision may
discourage some potential mergers, tender offers, or takeover attempts.
Pursuant to the Charter of UPC, each shareholder 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. With cumulative voting, a
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shareholder has the right to cast a number of votes equal to the total number
of such holder's shares multiplied by the number of directors to be elected.
The shareholder has the right to distribute all of his votes in any manner
among any number of candidates or to accumulate such shares in favor of one
candidate. Directors are elected by a plurality of the total votes cast by all
shareholders. With cumulative voting, it may be possible for minority
shareholders to obtain representation on the Board of Directors. 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 the UPC
Board.
CAPITAL. Capital's Bylaws provide for an unclassified Board of
Directors with between one to 11 members. Each holder of Capital Common Stock
is entitled to one vote for each share held and is not entitled to cumulative
voting in the election of directors.
DIRECTOR REMOVAL AND VACANCIES
UPC. UPC's Charter provides that a director may be removed by the
shareholders only upon the affirmative vote of the holders of at least
two-thirds of the voting power of all shares of capital stock entitled to vote
generally in the election of directors. The purpose of this provision is to
prevent a majority shareholder from circumventing the classified board system
by removing directors and filling the vacancies with new individuals selected
by that shareholder. Accordingly, the provision may have the effect of
impeding efforts to gain control of the Board of Directors by anyone who
obtains a controlling interest in UPC Common Stock. Vacancies on the Board of
Directors may be filled by the Board of Directors or shareholders, as provided
under the UPC Bylaws and the TBCA. The term of a director appointed to fill a
vacancy expires at the next meeting of shareholders at which directors are
elected.
CAPITAL. Capital's Articles provide that the affirmative vote of not
less than two-thirds of the holders of the outstanding Capital Common Stock is
required to remove a director or the entire board with or without cause.
Vacancies on the Capital Board may be filled by the Capital Board or
shareholders, as provided under the Capital Bylaws and the FBCA. The term of a
director appointed to fill a vacancy expires at the next meeting of
shareholders at which directors are elected.
LIMITATIONS ON DIRECTOR LIABILITY
UPC. UPC's Charter does not address the issue of director liability
to the corporation.
CAPITAL. Capital's Articles also do not address the issue of director
liability.
INDEMNIFICATION
UPC. Under the TBCA, subject to certain exceptions, a corporation may
indemnify an individual made a party to a proceeding, because he or she is or
was a director, against liability incurred in the proceeding if (i) he or she
conducted himself or herself in good faith; (ii) he or she reasonably believed
(a) in the case of conduct in his or her official capacity with the
corporation, that his or her conduct was in the best interests of the
corporation, and (b) in all other cases, that his or her conduct was at least
not opposed to the corporation's best interests; and (iii) in the case of any
criminal proceeding, he or she had no reasonable cause to believe his or her
conduct was unlawful (the "Standard of Conduct"). Moreover, unless limited by
its articles of incorporation, a corporation must indemnify a director who was
wholly successful, on the merits or otherwise, in the defense of any proceeding
to which he or she was a party because he or she is or was a director of the
corporation against reasonable expenses incurred by him or her in connection
with the proceeding. Expenses incurred by a director in defending a proceeding
may be paid by the corporation in advance of the final disposition of such
proceeding upon receipt of a written affirmation by the director of his or her
good faith belief that he or she has met the Standard of Conduct, a written
undertaking by or on behalf of a director to repay such amount if it shall
ultimately be determined that he or she is entitled to be indemnified by the
corporation against such expenses and a determination is made that the facts
known to those making the determination would preclude indemnification. Before
any such indemnification is made, it must be determined that such
indemnification would not be precluded by the TBCA.
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A director may also apply for court-ordered indemnification under
certain circumstances. Unless a corporation's articles of incorporation
provide otherwise, (i) an officer of a corporation is entitled to mandatory
indemnification and is entitled to apply for court-ordered indemnification to
the same extent as a director; (ii) the corporation may indemnify and advance
expenses to an officer, employee, or agent of the corporation to the same
extent as to a director; and (iii) a corporation may also indemnify and advance
expenses to an officer, employee, or agent who is not a director to the extent,
consistent with public policy, that may be provided by its articles of
incorporation, bylaws, general or specific action of its board of directors, or
contract.
UPC's Charter and Bylaws provide for the indemnification of its
directors and officers, to the fullest extent permitted by Tennessee law.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, or persons controlling
UPC pursuant to the foregoing provisions, UPC has been informed that, in the
opinion of the SEC, such indemnification is against public policy as expressed
in the Securities Act and is therefore unenforceable.
CAPITAL. Under the FBCA, generally, a corporation shall have the
power to indemnify any person who was or is a party to any proceeding (a
"Proceeding") (other than an action by, or in the right of, the corporation),
by reason of the fact that he or she is or was a director, officer, employee,
or agent of the corporation or is or was serving at the request of the
corporation as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise (an "Indemnified
Person") against liability incurred in connection with such Proceeding,
including any appeal thereof, if he or she acted in good faith and in a manner
he or she reasonably believed to be in, or not opposed to, the best interests
of the corporation and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his or her conduct was unlawful. The
termination of any Proceeding by judgment, order, settlement, or conviction or
upon a plea of nolo contendere or its equivalent shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
or she reasonably believed to be in, or not opposed to, the best interests of
the corporation or, with respect to any criminal action or proceeding, had
reasonable cause to believe that his or her conduct was unlawful. A
corporation shall have the power to indemnify an Indemnified Person who is or
was a party to any proceeding by or in the right of the corporation against
expenses and amounts paid in settlement not exceeding, in the judgment of the
board of directors, the estimated expense of litigating the proceeding to
conclusion, actually and reasonably incurred in connection with the defense or
settlement of such proceeding, including the appeal thereof. Such
indemnification shall be authorized if such Indemnified Person acted in good
faith and in a manner he or she reasonably believed to be in, or not opposed
to, the best interests of the corporation, except that no indemnification shall
be made in respect of any claim, issue or matter as to which such Indemnified
Person shall have been adjudged liable unless, and only to the extent that, the
court in which such proceeding was brought, or any other court of competent
jurisdiction, shall determine upon application that, despite the adjudication
of liability but in view of all circumstances of the case, such person is
fairly and reasonably entitled to indemnify for such expense which such court
shall deem proper.
To the extent that a director, officer, employee, or agent of a
corporation has been successful on the merits or otherwise in defense of any
Proceeding, or in defense of any claim, issue, or matter therein, he or she
shall be indemnified against expenses actually and reasonably incurred by him
or her in connection therewith.
Unless the corporation's articles of incorporation provide otherwise,
notwithstanding the failure of a corporation to provide indemnification, and
despite any contrary determination of the board or of the shareholders in the
specific case, a director, officer, employee, or agent of the corporation who
is or was a party to a Proceeding may apply for indemnification or advancement
of expenses, or both, to the court conducting the Proceeding, to the circuit
court, or to another court of competent jurisdiction. On receipt of an
application, the court, after giving any notice that it considers necessary,
may order indemnification and advancement of expenses, including expenses
incurred in seeking court-ordered indemnification or advancement of expenses,
if it determines that (i) the director, officer, employee, or agent is entitled
to mandatory indemnification to the extent that he or she has been successful
on the merits or otherwise in defense of any Proceeding, or in defense of any
claim, issue, or matter therein, in which case the court shall also order the
corporation to pay the reasonable expenses incurred in obtaining court-
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ordered indemnification or advancement of expenses; (ii) the director, officer,
employee, or agent is entitled to indemnification or advancement of expenses,
or both, pursuant to the corporation's bylaws, an agreement, a vote of
shareholders or disinterested directors, or otherwise; or (iii) the director,
officer, employee or agent is fairly and reasonably entitled to indemnification
or advancement of expenses, or both, in view of all the relevant circumstances,
regardless of whether such person met the standards of conduct set forth in the
applicable law. Capital's Bylaws provide for indemnification of directors,
officers, and other employees to the extent permitted by applicable law. In
addition, all of Capital's, Capital Bank's and Factors' executive officers and
directors have entered into indemnification agreements with Capital, Capital
Bank, and Factors which provide such persons with broader rights of
indemnification and advancement of expenses than the statutory standard. See
"DESCRIPTION OF TRANSACTION -- Interests of Certain Persons in the Merger
- -- Indemnification; Directors and Officers Insurance."
SPECIAL MEETING OF SHAREHOLDERS
UPC. UPC's Bylaws provide that special meetings of shareholders may
be called, unless otherwise prescribed by law, for any purpose or purposes
whatever at any time by the Chairman of the Board, the President, the
Secretary, or the holders of not less than one-tenth of the shares entitled to
vote at such meeting.
CAPITAL. Capital's Bylaws provide that special meetings of
shareholders may be called for any purpose at any time by a vote of the
majority of Board of Directors of Capital then in office, the Chairman of the
Board, the President, or by the written request of shareholders having the
right to vote, in the aggregate, not less than one-tenth of Capital Common
Stock.
ACTIONS BY SHAREHOLDERS WITHOUT A MEETING
UPC. UPC's Charter and Bylaws provide that any action required or
permitted to be taken by UPC shareholders at a duly called meeting of
shareholders may be effected by the unanimous written consent of the
shareholders entitled to vote on such action.
CAPITAL. Capital's Bylaws state that any action required or
permitted to be taken by the shareholders may be taken without a meeting,
without prior notice, and without a vote, if a written consent to such action
is signed by a number of holders of the outstanding Capital Common Stock having
not less than the minimum number of votes that would be necessary to authorize
the action at a meeting of the shareholders at which all shares entitled to
vote were present and voted.
SHAREHOLDER NOMINATIONS AND PROPOSALS
UPC. UPC's Charter and Bylaws do not address whether a shareholder
may nominate members of the Board of Directors.
CAPITAL. Capital's Bylaws generally provide that any shareholder of
the corporation entitled to vote for the election of directors may nominate
persons for election to the Board of Directors. The shareholder must provide
written notice of such nomination to the Corporate Secretary of Capital not
less than 60 days but not more than 90 days prior to the date of the meeting at
which the election of directors is to be held. The shareholder's notice must
set forth all information relating to the person whom the shareholder proposes
to nominate that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, under the Exchange Act.
BUSINESS COMBINATIONS
UPC. UPC's Charter requires the affirmative vote of the holders of
two-thirds or more of the outstanding UPC Common Stock for approval of a
merger, consolidation, or a sale or lease of all or substantially all of the
assets of UPC if the other party to the transaction is a beneficial owner of
10% or more of the outstanding shares of UPC. A two-thirds vote is not
required for any merger or consolidation of UPC with or into any corporation or
entity of which a majority of the outstanding shares of all classes of capital
stock entitled to vote in the election of directors is owned by UPC or any UPC
company.
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<PAGE> 58
The requirement of a supermajority vote of shareholders to approve
certain business transactions, as described above, may discourage a change in
control of UPC by allowing a minority of UPC's shareholders to prevent a
transaction favored by the majority of the shareholders. Also, in some
circumstances, the Board of Directors could cause a two-thirds vote to be
required to approve a transaction thereby enabling management to retain control
over the affairs of UPC and their positions with UPC. The primary purpose of
the supermajority vote requirement, however, is to encourage negotiations with
UPC's management by groups or corporations interested in acquiring control of
UPC and to reduce the danger of a forced merger or sale of assets.
As a Tennessee corporation, UPC is or could be subject to various
legislative acts set forth in Chapter 35 of Title 48 of the Tennessee Code,
which impose certain restrictions on business combinations, including, but not
limited to, combinations with interested shareholders similar to those
described above.
The TBCA generally prohibits a "business combination" (generally
defined to include mergers, share exchanges, sales and leases of assets,
issuances of securities, and similar transactions) by UPC 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
UPC's stock then outstanding) within five years after the person or entity
becomes an interested shareholder, unless the business combination or the
transaction pursuant to which the interested shareholder became such was
approved by the UPC Board before the interested shareholder became such, and
the business combination satisfies any other applicable requirements imposed by
law or by UPC's Charter or Bylaws. The TBCA also severely limits the extent to
which UPC 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 Tennessee 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. UPC's Charter and
Bylaws do not currently contain such an express declaration.
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 SEC 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 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 TBCA provides that no Tennessee corporation having any class of
voting stock registered or traded on a national securities exchange or
registered with the SEC 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 interested shareholder's share acquisition date, or
for seeking to enforce or implement the provisions of the TBCA 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
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<PAGE> 59
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.
The acts described above along with the provisions of UPC's Charter
regarding business combinations 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 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.
CAPITAL. Capital's Articles require the affirmative vote of the
holders of not less than two-thirds of the outstanding Capital Common Stock
for approval of a merger or consolidation of Capital with or into any other
corporation, or a sale, lease, exchange, or other disposition of a substantial
part of the assets of Capital.
As a Florida corporation, Capital is or could be subject to various
legislative acts set forth in the FBCA, which impose certain restrictions on
business combinations. The FBCA 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 Florida 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 FBCA control
share acquisition provision applies to every "issuing public corporation"
unless the corporation's articles of incorporation or bylaws expressly provide
that the provision does not apply. Capital's Articles and Bylaws do not
currently contain such an express declaration. An "issuing public corporation"
is defined as a corporation that has (i) 100 or more shareholders, (ii) has its
principal place of business, its principal office, or substantial assets within
the State of Florida, and (iii) either (a) more than 10% of its shareholders
are residents of the State of Florida, (b) more than 10% of its shares are owned
by residents of the State of Florida, or (c) 1,000 shareholders reside in the
State of Florida.
The FBCA generally prohibits an "affiliated transaction" (generally
defined to mean any merger, consolidation, sales and leases of assets,
issuances or transfers of securities, and similar transactions) by a
corporation or its subsidiary with an "interested shareholder" (generally
defined as any person which beneficially owns 10% or more of the outstanding
voting shares of the corporation) within five years after the person becomes an
interested shareholder, unless the affiliated transaction pursuant to which the
interested shareholder became such was approved by the corporation's Board of
Directors, or unless: (i) the affiliated transaction has been approved by a
majority of the disinterested directors (as defined by the FBCA); (ii) the
corporation has not had more than 300 shareholders of record at any time during
the three years preceding the announcement date; (iii) the interested
shareholder has been the beneficial owner of at least 80% of the corporation's
outstanding voting shares for at least five years preceding the announcement
date; (iv) the interested shareholder is the beneficial owner of at least 90%
of the outstanding voting shares of the corporation, exclusive of shares
acquired directly from the corporation in a transaction not approved by a
majority of the disinterested directors; (v) the corporation is an investment
company; or, (vi) in the affiliated transaction, consideration shall be paid to
the holders of each class or series of voting shares and additional conditions
regarding the transaction have been met.
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<PAGE> 60
LIMITATIONS ON ABILITY TO VOTE STOCK
UPC. UPC's Charter and Bylaws do not contain any provision
restricting a shareholder's ability to vote shares of UPC voting stock.
CAPITAL. Capital's Articles and Bylaws also do not contain any
provision restricting a shareholder's ability to vote shares of Capital Common
Stock.
DISSENTERS' RIGHTS OF APPRAISAL
UPC. Under the TBCA, a shareholder is generally entitled to dissent
from a corporate action, and obtain payment of the fair value of his shares in
the event of: (i) consummation of a plan of merger to which the corporation is
a party, unless shareholder approval is not required by the TBCA; (ii)
consummation of a plan of share exchange to which the corporation is a party as
the corporation whose shares will be acquired if the shareholder is entitled to
vote on the plan; (iii) consummation of a sale or exchange of substantially all
of the corporation's property other than in the usual and regular course of
business, if the shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution, but not including a sale pursuant to court
order or to a plan by which substantially all of the net proceeds of the sale
will be distributed in cash to the shareholders within one year after the date
of sale; (iv) an amendment of the charter that materially and adversely affects
rights in respect of a dissenter's shares because it (a) alters or abolishes a
preferential right of the shares, (b) creates, alters, or abolishes a right in
respect of redemption of the shares, including a provision respecting a sinking
fund for the redemption or repurchase of the shares, (c) alters or abolishes a
preemptive right of the holder of the shares to acquire shares or other
securities, (d) excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution through
issuance of shares or other securities with similar voting rights, or (e)
reduces the number of shares owned by the shareholder to a fraction of a share
if the fractional share so created is to be acquired for cash under the TBCA;
or (v) any corporate action taken pursuant to a shareholder vote, to the extent
the charter, bylaws, or a resolution of the board of directors provide that
voting or nonvoting shareholders are entitled to dissent and obtain payment for
their shares. UPC's Charter and Bylaws do not provide for any such additional
dissenters' rights.
CAPITAL. The rights of appraisal of dissenting shareholders of Capital
are governed by the FBCA. Under the FBCA, a shareholder is generally entitled
to dissent from a corporate action, and obtain payment of the fair value of his
or her shares in the event of (i) consummation of a plan of merger to which the
corporation is a party, unless shareholder approval is not required by the FBCA;
(ii) consummation of a sale or exchange of all, or substantially all, of the
property of the corporation, unless shareholder approval is not required by the
FBCA; (iii) the approval of a control-share acquisition; (iv) consummation of a
plan of share exchange to which the corporation is the party whose shares are
being acquired; (v) an amendment of the articles of incorporation that adversely
affects such shareholder because it (a) alters or abolishes any preemptive
rights attached to any of his or her shares, (b) alters or abolishes the voting
rights pertaining to any of his or her shares, (c) effects an exchange,
cancellation, or reclassification of any of his or her shares which would alter
or abolish his or her voting rights, or alter his or her percentage of equity in
the corporation, or effects a reduction or cancellation of accrued dividends or
other arrearages in respect to such shares, (d) reduces the stated redemption
price of any of his or her redeemable shares, alters or abolishes any provision
relating to any sinking fund for the redemption or purchase of his or her
shares, or makes any of his or her shares subject to redemption when they are
not otherwise redeemable, (e) makes noncumulative, in whole or in part,
dividends of any of his or her preferred shares which had theretofore been
cumulative, (f) reduces the stated dividend preference of any of his or her
preferred shares, or (g) reduces any stated preferential amount payable on any
of his or her preferred shares upon liquidation of the corporation; or (vi) any
corporate action taken, to the extent that articles of incorporation provide
that a voting or non-voting shareholder is entitled to dissent and obtain
payment for his or her shares. The FBCA further provides that no appraisal
rights are available, however, for the shares of any class or series of stock
that is, as of the record date of the meeting of the shareholders at which a
proposal to approve a plan of merger is to be considered, either listed on a
national securities exchange, quoted on the Nasdaq National Market, or held of
record by more than 2,000 shareholders. Capital's Articles and Bylaws do not
provide for any additional dissenters' rights.
SHAREHOLDERS' RIGHTS TO EXAMINE BOOKS AND RECORDS
UPC. The TBCA provides that a shareholder may inspect and copy books
and records during regular business hours, if he or she gives the corporation
written notice of his or her demand at least five business days before the date
of the inspection. In order to inspect certain records, written demand must
also be made in good faith and for a proper purpose and must describe with
reasonable particularity the purpose of the request and the records the
shareholder desires to inspect.
CAPITAL. The FBCA similarly provides that a shareholder may inspect
certain books and records if he or she gives the corporation written demand
stating the purpose of the inspection at least five business days before the
date he or she wishes to inspect the books and records. Under certain
instances, the demand must be made in good faith and for a proper purpose and
the records he or she desires to inspect must be reasonably related to the
stated purpose of such holder's inspection.
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<PAGE> 61
DIVIDENDS
UPC. UPC's ability to pay dividends on UPC Common Stock is governed
by Tennessee corporate law. Under Tennessee corporate law, dividends may be
paid so long as the corporation would be able to pay its debts as they become
due in the ordinary course of business and the corporation's total assets would
not be less than the sum of its total liabilities plus the amount that would be
needed, if the corporation were to be dissolved at the time of the
distribution, to satisfy the preferential rights upon dissolution to
shareholders whose preferential rights are superior to those receiving the
distribution.
There are various statutory limitations on the ability of the UPC
Banking Subsidiaries to pay dividends to UPC. See "CERTAIN REGULATORY
CONSIDERATIONS -- Payment of Dividends."
CAPITAL. The FBCA provides that, subject to any restrictions in the
corporation's articles of incorporation, and other customary restrictions
similar to those contained in the TBCA, a Florida corporation may make
distributions to its shareholders. Substantially all of the funds available
for the payment of dividends by Capital are derived from its subsidiary
depository institution. There are various statutory limitations on the ability
of Capital's subsidiary depository institution to pay dividends to Capital.
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<PAGE> 62
COMPARATIVE MARKET PRICES AND DIVIDENDS
UPC Common Stock is traded on the NYSE under the symbol "UPC."
Capital Common Stock is quoted on the Nasdaq National Market under the symbol
"CBCP." The following table sets forth, for the indicated periods, the high
and low closing sale prices for the UPC Common Stock and Capital Common Stock
as reported by the NYSE and Nasdaq National Market, respectively, and the cash
dividends declared per share of UPC Common Stock and Capital Common Stock for
the indicated periods. The stock prices and dividend amounts have been
restated to give effect to stock splits and stock dividends. The stock prices
do not include retail mark-ups, mark-downs or commissions.
<TABLE>
<CAPTION>
UPC CAPITAL
---------------------------------- ----------------------------------------
Cash Cash
Dividends Dividends
Price Range Declared Price Range Declared
------------------ Per ------------------- Per
High Low Share High Low Share
------ ------ ----------- ------ ------ ------------
<S> <C> <C> <C> <C> <C> <C>
1997
- ---------------------------------
First Quarter............ $47.75 $38.38 $0.320 $35.00 $27.13 $.0833
Second Quarter........... 52.13 41.25 .375 40.75 33.25 .0833
Third Quarter............ 56.50 49.25 .400 46.00 39.50 .0833
Fourth Quarter (through
October 8, 1997)...... 60.38 57.00 -- 50.00 46.00 --
----------- ------------
Total................. $1.095 $.2499
=========== ============
1996
- ---------------------------------
First Quarter............ $31.75 $29.00 $0.27 $34.50 $28.75 $.0833
Second Quarter........... 31.25 29.63 0.27 31.75 28.25 .0833
Third Quarter............ 36.25 28.63 0.27 29.50 24.50 .0833
Fourth Quarter........... 41.38 34.63 0.27 28.88 27.00 .0833
----------- ------------
Total................. $1.08 $.3333
=========== ============
1995
- ---------------------------------
First Quarter............ $24.50 $20.88 $0.23 N/A N/A $.0833(1)
Second Quarter........... 28.13 23.13 0.25 N/A N/A .0833(1)
Third Quarter............ 30.75 26.13 0.25 28.00 24.25 .0833
Fourth Quarter........... 32.25 29.63 0.25 36.00 25.75 .0833
----------- ------------
Total................. $0.98 $.3333
=========== ============
</TABLE>
- ------------------------------
(1) These amounts have been adjusted to reflect the 3-for-2 stock split in
the form of a 50% stock dividend which was paid on Capital Common Stock
effective on June 22, 1995.
On October 8, 1997, the last sale prices of UPC Common Stock and
Capital Common Stock as reported on the NYSE and Nasdaq National Market,
respectively, were $60.38 and $50.00 per share, respectively. On August 12,
1997, the last business day prior to public announcement of the proposed
Merger, the last sale prices of the UPC Common Stock and Capital Common Stock
as reported by the NYSE and Nasdaq National Market, respectively, were $50.44
and $46.00, respectively.
By letter dated September 25, 1997, Nasdaq advised Capital that Nasdaq
is seeking to delist the Capital Common Stock from the Nasdaq National Market.
Nasdaq cited Capital's failure to hold an annual meeting as the basis for the
proposed delisting. On October 2, 1997, Capital requested a hearing before
Nasdaq with respect to the proposed delisting, which automatically stayed the
effectiveness of the delisting, which was otherwise scheduled to occur on
October 6, 1997. Capital intends to vigorously contest the proposed delisting.
The holders of UPC Common Stock are entitled to receive dividends when
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. The Agreement provides
that Capital may not declare and pay cash dividends, other than regular
quarterly cash dividends, on the shares of Capital Common Stock.
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<PAGE> 63
UPC and Capital are each legal entities separate and distinct from
their subsidiaries and their revenues depend in significant part on the payment
of dividends from their subsidiary depository institutions. UPC's and
Capital's subsidiary depository institutions are subject to certain legal
restrictions on the amount of dividends they are permitted to pay. See
"CERTAIN REGULATORY CONSIDERATIONS -- Payment of Dividends."
BUSINESS OF CAPITAL
GENERAL
Capital, a Florida corporation, is a bank holding company registered
with the Federal Reserve under the BHC Act. As of June 30, 1997, Capital had
total consolidated assets of approximately $1.9 billion, total consolidated
loans of approximately $837.5 million, total consolidated deposits of
approximately $1.2 billion, and total consolidated shareholders' equity of
approximately $146.3 million.
Capital conducts its business activities through its wholly-owned bank
subsidiary, Capital Bank, which was organized in 1974 as a commercial bank
chartered under the laws of the State of Florida. Capital Bank operates from
its main office in Miami, Florida and at 28 branch offices located in the
Florida counties of Dade, Broward, and Palm Beach. Generally, the commercial
banking activities include both domestic and foreign activities. The domestic
lending activities primarily involve small- and middle-market commercial
borrowers, builders of residential real estate, owners of commercial or
income-producing real estate and consumers. Capital Bank does not generally
provide long-term financing for owner-occupied residential real estate. The
international division is engaged primarily in financing the exportation of
goods to, and the importation of goods from, countries in Latin America and the
refinancing of trade-related credits for foreign banks. The international
division also lends funds primarily to banks and other financial institutions
located in foreign countries.
In addition, Capital Bank owns approximately 81% of the common stock
of Factors. Factors is a specialized financial services company principally
engaged in providing receivables-based commercial financing and related
fee-based credit, collection and management information services. Factors is
based in Boca Raton, Florida and operates through regional offices located in
New York, New York; Los Angeles, California; and Charlotte, North Carolina and
through a limited service office in Atlanta, Georgia. Factors generally
provides financing to its clients through the purchase of accounts receivable
owed to Factors' clients by the clients' customers, usually on a non-recourse
basis, as well as by guaranteeing amounts due under letters of credit issued to
Factors' clients, which are collateralized by such accounts receivable and
other assets. The purchase of accounts receivable is known as "factoring" and
results in the payment by the client of a factoring fee, generally equal to
0.5% to 2.0% of the factored sales volume. Factors' clients are primarily
small- to medium-sized companies in various industries, including textile,
apparel and furniture manufacturing and recently, entities involved in the
healthcare industry.
The principal executive offices of Capital are located at 1221
Brickell Avenue, Miami, Florida and its telephone number at such address is
(305) 536-1500. Additional information with respect to Capital and its
subsidiaries is included elsewhere herein and in documents incorporated by
reference in this Proxy Statement. See "AVAILABLE INFORMATION" and "DOCUMENTS
INCORPORATED BY REFERENCE."
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<PAGE> 64
BENEFICIAL OWNERSHIP OF CAPITAL COMMON STOCK
The following table lists, as of September 15, 1997, each holder of
record of Capital Common Stock who had filed with Capital a copy of a Schedule
13D or a Schedule 13G, indicating that the filers individually, or with a group,
is, or may be deemed to be, a beneficial owner of 5.0% or more of the
outstanding shares of Capital Common Stock.
<TABLE>
<CAPTION>
Amount and Nature of
Percentage of
Name and Address Beneficial Ownership Percentage of Class(1)
-------------------------------- -------------------- ----------------------
<S> <C> <C>
Fana Holtz 2,758,042(2) 36.0%
1221 Brickell Avenue, 12th Floor
Miami, Florida 33131
Alex Halberstein 734,692(3) 9.6
1221 Brickell Avenue, Suite 1050
Miami, Florida 33131
Leon J. Simkins 717,399(4) 9.4
1221 Brickell Avenue, 12th Floor
Miami, Florida 33131
Abel Holtz 677,077(5) 8.9
169 East Flagler Street
Suite 1627
Miami, Florida 33131
Lawrence A. Gordich 677,077(6) 8.9
Barnett Tower, Suite 1900
701 Brickell Avenue
Miami, Florida 33131
Daniel M. Holtz 479,500(7) 6.2
1221 Brickell Avenue, 12th Floor
Miami, Florida 33131
Javier J. Holtz 285,778(8) 3.7
1221 Brickell Avenue, 12th Floor
Miami, Florida 33131
</TABLE>
- ----------------------
(1) The calculation of percentage of class beneficially owned is based on
the shares of Capital Common Stock outstanding on September 30, 1997.
(2) Includes 1,527,565 shares held individually (41,250 of which Ms.
Holtz transferred voting rights to an unaffiliated third party
pursuant to an irrevocable proxy), 28,000 shares that she has the
right to acquire pursuant to options, and 1,202,477 shares over which
Ms. Holtz claims voting power pursuant to irrevocable proxies.
Certain of these irrevocable proxies are Disputed Irrevocable Proxies.
For additional information, see "SPECIAL MEETING OF CAPITAL
SHAREHOLDERS -- Irrevocable Proxies." Does not include 677,077 shares
held by her husband, Abel Holtz, as to which shares Ms. Holtz
disclaims beneficial ownership and voting power. Ms. Holtz is the
mother of Daniel M. Holtz and Javier J. Holtz.
(3) This information was obtained from a Schedule 13G filed with the SEC
on February 5, 1997.
(4) Includes 519,277 shares held individually, 13 shares held as custodian
for Mr. Simkins' son under the Florida Gifts to Minors Act, 170,109
shares held by a trust for the benefit of Mr. Simkins' children and
28,000 shares he has the right to acquire pursuant to currently
exercisable options.
(5) Abel Holtz, at the request of the FDIC, has advised Capital that he has
entered into an irrevocable proxy with respect to such shares which
grants the sole right and power to vote such shares to Lawrence A.
Gordich.
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<PAGE> 65
For more information regarding the irrevocable proxy, see note (6)
below. In addition, Abel Holtz disclaims beneficial ownership as
to any shares held by his wife, Fana Holtz, or his sons, Daniel M.
Holtz and Javier J. Holtz.
(6) Pursuant to an irrevocable proxy dated December 24, 1996, Mr. Gordich
was granted the sole right and power to vote all shares of Capital
Common Stock beneficially owned by Abel Holtz. Pursuant to such
proxy, Mr. Gordich is required to vote such shares proportionately
with all other outstanding shares of Capital Common Stock entitled to
vote on any matter brought before Capital's shareholders. However,
the FDIC has orally advised Abel Holtz that all of the shares subject
to the proxy may be voted in favor of the Merger. See
" -- Administrative Proceedings."
(7) Includes 322,749 shares held individually (22,500 of which Mr. Holtz
has transferred voting rights to an unaffiliated third party pursuant
to an irrevocable proxy) and 156,751 shares that he has the right to
acquire pursuant to options that are currently exercisable. Does not
include 18,000 shares subject to options that are not currently
exerciseable. Daniel M. Holtz is the brother of Javier J. Holtz and
the son of Abel Holtz and Fana Holtz.
(8) Includes 162,919 shares held individually, 15,187 shares held jointly
with his wife, 22,500 shares held by his wife individually (the voting
rights to which have been transferred to an unaffiliated third party
pursuant to an irrevocable proxy) and 421 shares over which he claims
voting power pursuant to an irrevocable proxy. Also includes 84,751
shares that Mr. Holtz has the right to acquire pursuant to options
that are currently exercisable. Does not include 6,000 shares subject
to options that are not currently exercisable. Javier J. Holtz is the
brother of Daniel M. Holtz and the son of Abel Holtz and Fana Holtz.
LEGAL PROCEEDINGS
Beginning in approximately August 1992, the Audit Committee of Capital
Bank began to investigate certain allegations made by Alex Halberstein, a
then-officer and director of Capital Bank (who is currently the beneficial
owner of approximately 10% of Capital Common Stock), against Abel Holtz,
Capital Bank, and possibly relatives of Abel Holtz. At the time, Abel Holtz was
the Chairman of the Board, Chief Executive Officer, and President of Capital
and Capital Bank. He currently owns slightly less than 9.0% of Capital's
outstanding shares. See " -- Beneficial Ownership of Capital Common Stock."
The allegations related primarily to alleged wrongful conduct by Abel Holtz
with respect to (i) the settlement of two sexual harassment claims brought
against Capital Bank and Abel Holtz, (ii) the reimbursement of certain travel
and entertainment expenses by Capital Bank, and (iii) certain charitable
donations made by Capital Bank.
In connection with this investigation, the Audit Committee filed a
Report of Apparent Crime with certain governmental authorities. Thereafter,
members of the Audit Committee, together with three other directors of Capital
Bank, attempted to call a special meeting of the Capital Bank Board to, among
other things, remove Abel Holtz as the Chief Executive Officer and as Chairman
of the Capital Bank Board. Prior to such meeting, however, the holders
of a majority of the outstanding shares of Capital Common Stock, either in
person or by proxy, took certain actions by written consent in lieu of a
meeting pursuant to which the Capital Board was expanded from seven to ten
directors, three new directors were elected, and certain sections of Capital's
Bylaws were amended. A majority of the outstanding shares of Capital Common
Stock was voted in favor of the foregoing, including certain shares of Capital
that were subject to irrevocable proxies in favor of Abel Holtz, certain of
which were owned by Alex Halberstein and certain other shareholders, including
Stanley Worton and Leonard Wein. See "Special Meeting of Capital Shareholders
- -- irrevocable proxies." Holders of certain of the shares covered by the
irrevocable proxies notified Abel Holtz that, in their view, the irrevocable
proxies previously given to Abel Holtz were invalid and purported to revoke
them. Abel Holtz advised Capital that he believed that the irrevocable proxies
continued to be valid. Subsequent to the Capital meeting, Capital, as the sole
shareholder of Capital Bank, by written consent removed four directors of
Capital Bank, including Stanley Worton, one of the three members of the Audit
Committee. This corporate action occurred prior to the special meeting called
by certain directors of Capital Bank, including those directors removed by such
action.
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Thereafter, the Audit Committee (including Dr. Worton, a director who
was removed) instituted Case No. 92-2520-Civ-Graham in the United States
District Court, Southern District of Florida against Abel Holtz, Capital Bank,
Capital and certain directors of Capital (the "Audit Committee Action"). The
Audit Committee Action sought, among other things, (i) to obtain declaratory
and injunctive relief, to prevent alleged interference with the Audit Committee
and to invalidate the corporate actions undertaken by the shareholders of
Capital and Capital Bank on October 19, 1992; (ii) to declare that Abel Holtz
and Daniel M. Holtz had unlawfully interfered with the investigative work of
the Audit Committee and that Abel Holtz was unlawfully in de facto control of
Capital Bank, its assets and its business; and (iii) to declare invalid the
actions allegedly taken in the self interest of Abel Holtz.
The Audit Committee Action was voluntarily dismissed by the Audit
Committee on November 24, 1992. The independent accounting firm of Arthur
Andersen & Co. was engaged to conduct certain agreed-upon procedures in
connection with the matters investigated by the Audit Committee. On January
28, 1993, after conducting an investigation and reviewing the report from
Arthur Andersen & Co., both the Audit Committee and the Capital Bank Board
adopted resolutions which ratified the settlement of the sexual harassment
claims, determined that there was no basis for requiring Abel Holtz to
contribute to such settlement and concluded that certain travel and
entertainment expenses and charitable contributions reviewed by the Audit
Committee were ordinary business expenses of Capital Bank.
In approximately April 1994, Abel Holtz, pursuant to the terms of the
irrevocable proxies, designated Fana Holtz, his wife, as successor proxyholder
with respect to most of the irrevocable proxies within his control and
transferred the remainder of such proxies in January 1995. Fana Holtz has
designated her son, Daniel M. Holtz, the current Chairman of the Board,
President, and Chief Executive Officer of Capital and Capital Bank, as her
successor proxyholder in the event of her death. On October 7, 1994, Abel
Holtz resigned from all positions with Capital and its subsidiaries.
Certain of the governmental authorities having regulatory oversight
for Capital Bank and Capital, as well as a federal grand jury, investigated
these matters among others. Capital was advised that neither it nor Capital
Bank were targets of the federal grand jury investigation, although Capital
ultimately learned that Abel Holtz was a target. On October 25, 1994, Abel
Holtz entered a guilty plea to one count of giving misleading testimony in 1991
to a federal grand jury with respect to the purpose of certain payments made by
Capital Bank, Capital, and certain related parties to a public official.
Capital was advised that this plea resolved all pending criminal inquiries with
respect to Mr. Holtz that were being conducted or supervised by the United
States Attorney's Office for the Southern District of Florida and that no
charges would be filed against either Capital or Capital Bank with respect to
the matters that were the subject of the grand jury investigation. On January
20, 1995, Abel Holtz was sentenced to a term of confinement of 45 days, to be
followed by two years of supervised release, including 4 1/2 months of house
confinement, to be followed by community service during the supervised release.
Abel Holtz was also fined $20,000 and assessed certain costs.
On February 8, 1995, certain shareholders, including Stanley Worton
and Nathan Esformes, who was then a director of Capital, commenced a derivative
action against Daniel M. Holtz, the Chairman of the Board, President, and Chief
Executive Officer of Capital, Fana Holtz, the Vice Chairman of the Board,
Javier J. Holtz, a Senior Vice President of Capital, Abel Holtz, Capital, and
Capital Bank (the "Derivative Action"). The Derivative Action, as subsequently
amended, is entitled Nathan J. Esformes, Stanley 1. Worton, M.D., and Leonard
Wien, each as individual shareholders of Capital Bancorp and on behalf of all
other similarly situated shareholders v. Abel Holtz, Fana Holtz, Daniel M.
Holtz, Javier J. Holtz, Capital Bank, Capital Bancorp, Russell W. Galbut, Hugh
F. Culverhouse, Jr., Craig L. Platt, Jeffrey H. Porter, Leon J. Simkins and
Alex Halberstein, Circuit Court for the 11th Judicial District in and for Dade
County, Florida, Case No. 95-02515. The amended complaint in the Derivative
Action alleges that certain defendants engaged in a series of illegal
activities causing harm to Capital and Capital Bank, including, among others,
(i) the settlement of the sexual harassment claims, (ii) the payment of
excessive compensation and separation payments, (iii) the appointment of
unqualified family members as officers, (iv) the withholding of information, and
(v) the misappropriation of Capital Bank funds for personal uses. The amended
complaint also alleges, among other things, that such individuals engaged in a
series of activities designed to improperly increase or maintain their interest
in, and control of, Capital, including (i) the unlawful use
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<PAGE> 67
of the irrevocable proxies, (ii) the prevention of investigations and
shareholder meetings, (iii) the unlawful alteration of the composition of the
Capital Board, and (iv) the failure to obtain approval for a change in control.
The plaintiffs in the Derivative Action are seeking, on behalf of
Capital, unspecified monetary damages, including treble damages, reasonable
costs and attorneys' fees, and injunctive relief (i) precluding Fana Holtz from
voting shares subject to the irrevocable proxies, (ii) setting aside the
February 27, 1995 annual shareholders' meeting, (iii) precluding the current
Board from taking any action, and (iv) returning certain shares to Capital. No
motions seeking such relief have been filed. No monetary relief is sought from
Capital and no count specifically seeks relief from Capital.
The Capital Board established an independent committee (the
"Independent Committee") to investigate the allegations contained in the
Derivative Action. The members of the Independent Committee were Russell
Galbut, who serves as Chairman of the Independent Committee, and Hugh
Culverhouse, Jr., both of whom are outside directors of Capital. The
Independent Committee issued a report dated May 29, 1996, concluding, based on
its investigation and the investigation of its counsel and accounting firm,
that "the derivative litigation is not in the best interests of Capital Bancorp
or Capital Bank and, as such, should be dismissed."
In January 1997, Capital filed a motion to dismiss the Derivative
Action based on the Independent Committee's report; however, such motion was
denied by the Court in September 1997. Promptly thereafter, the defendants
moved to dismiss the Derivative Action or, in the alternative, to disqualify
the named plaintiffs on the ground that the named plaintiffs were not
adequate representatives of the shareholders and/or had a conflict of
interest because, in their capacities as former directors of Capital, they had
voted for many of the actions challenged as improper in the lawsuit. On
October 9, 1997, the court denied this motion without prejudice. In addition,
answers, third-party complaints, and affirmative defenses have been filed by
all defendants other than Capital.
In early October 1997, Robert Paterno, a current shareholder of
Capital, filed a motion to intervene in the Derivative Action in order to
object to the standing and qualifications of the named plaintiffs. Such motion
alleges that Stanley Worton, Nathan Esformes, and Leonard Wein cannot
impartially represent the Capital shareholders because certain of the wrongs
alleged in the Derivative Action were approved by the plaintiffs, as former
members of the Capital Board and Capital Bank Board. In addition, Mr. Paterno
alleges that the Derivative Action and the actions of the plaintiffs have
adversely impacted upon the Capital shareholders "resulting in a diminution of
the negotiating position of [Capital] in the merger and a material dilution of
the value of the merger to the Capital shareholders." The Court has not yet
ruled on this motion.
Also on February 8, 1995, Stanley Worton and Nathan Esformes commenced
an individual action against Capital, Daniel M. Holtz, Fana Holtz, Javier J.
Holtz, and Abel Holtz (the "Individual Action"). The complaint in this action,
as subsequently amended, alleges that the defendants, other than Capital,
breached fiduciary duties owed to the plaintiff by, among other things,
improperly using proxies to vote shares of Capital owned by the plaintiff and
another shareholder to engage in improper activity and to promote their
personal interest to the detriment of the plaintiff. The Individual Action is
entitled Stanley 1. Worton, M.D. and Nathan Esformes v. Abel Holtz, Fana Holtz,
Daniel Holtz, Javier Holtz, Capital Bancorp, Russell W. Galbut, Hugh F.
Culverhouse, Craig L. Platt, Jeffrey H. Porter and Leon J. Simkins, Circuit
Court for the 11th Judicial District in and for Dade County, Florida, Case No.
95-02520-CA-09. The amended complaint contains many of the same allegations
contained in the Derivative Action. In addition, among other things, the
plaintiffs allege that certain of the defendants unlawfully solicited proxies
for the February 27, 1995 annual shareholders' meeting and that the actions
taken at this meeting, including the reduction in the size of the Board, were
invalid. The amended complaint also sought an order directing Capital to hold
a shareholders' meeting on or before May 28, 1995 to elect a board of directors
(although the plaintiffs never formally moved for such relief).
The plaintiffs in the Individual Action seek unspecified monetary
damages and costs and, in addition to the injunctive relief requested in the
Derivative Action, seek relief regarding, among other things, (i) the voting
and/or termination of certain proxies, (ii) the establishment of a constructive
trust for certain shares and options, (iii) the holding of a shareholders
meeting, (iv) the return to one of the plaintiffs of his percentage of any
shares obtained by members of the Holtz Family because of the control group
created by the irrevocable proxies, (v) the reinstatement of one of the
plaintiffs to the Board of Directors and (vi) invalidation of the actions of
the current Board. Plaintiffs also seek declaratory relief invalidating the
proxies and former actions with respect to which the proxies were voted. The
plaintiffs have not indicated that they are seeking any monetary relief from
Capital other than costs. Capital has filed a motion to dismiss the two counts
of the complaint in the Individual Action in which it is named and has moved to
stay certain other counts of the complaint on the grounds that those claims are
derivative. The other defendants also filed motions to dismiss. These motions
are still pending. In August 1997, the plaintiffs filed a motion for partial
summary judgment in the Individual Action, which is set for a hearing on
October 14, 1997.
In late September 1997, the Halberstein Group filed a motion to
intervene in the Individual Action (the "Halberstein Action"). Pursuant to the
Halberstein Agreement, the Halberstein Group agrees to dismiss without
prejudice its motion to intervene or, if such motion has been granted, to
dismiss without prejudice its action in the Individual Action. Effective upon
consummation of the Merger and the termination of the irrevocable proxies over
shares held by the Halberstein Group, the Halberstein Group releases and
discharges all defendants named in the Halberstein Action from any claims,
counterclaims or causes of action that were raised in the Halberstein Action
and from any other claims, counterclaims, or causes of action related to the
irrevocable proxies.
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On August 14, 1997, a purported class action captioned Rywell v.
Capital Bancorp, et al., Civ. No. 97-18383-CA-23, was commenced in the Circuit
Court of the Eleventh Judicial District in and for Dade County, Florida against
Capital, certain of the officers and directors of Capital and Capital Bank and
UPC. The action purports to be brought on behalf of a class consisting of all
holders of Capital securities or their successors in interest, and alleges that
(i) Capital's merger with UPC is unfair, (ii) the merger consideration is
inadequate and (iii) the individual defendants, aided and abetted by UPC, have
breached their fiduciary duties to Capital and its public shareholders and
failed to maximize shareholder value in connection with the Merger. The
complaint seeks injunctive relief preliminarily and permanently enjoining the
Merger or, alternatively, rescission and damages, together with costs and
reasonable attorneys and expert fees. The defendants have not yet answered the
complaint, but intend to deny all material allegations of wrongdoing and to
contest the action vigorously.
Capital does not believe that the outcome of the foregoing litigation
matters will have a material adverse effect on its financial condition, results
of operation, or liquidity. Capital is currently advancing the legal expenses
of the outside directors who were named as defendants. Such defendants have
agreed to repay Capital for all or any portion of such advances which they are
ultimately found not to be entitled to pursuant to applicable law. Based on
the information currently available to Capital, management does not believe
that the indemnification in the above litigation matters will have a material
adverse effect on Capital's financial condition, results of operations, or
liquidity. However, the actual effects of such indemnification on Capital
cannot be finally determined until the amount of such indemnification, if any,
is fixed.
ADMINISTRATIVE PROCEEDINGS
As a result of discussions with the Florida Department, Daniel M.
Holtz, Chairman of the Board, President, and Chief Executive Officer of
Capital, Fana Holtz, the Vice Chairman of the Board, and Javier J. Holtz,
a Senior Vice President of Capital (collectively, the "Applicants"), both
individually and as a group, voluntarily filed an application (the
"Application") to acquire and/or maintain a controlling interest in Capital,
although they do not believe such an application is legally required. The
Applicants also have had discussions with the Federal Reserve as to whether a
change of control notice is required under federal law. As of the Capital
Record Date, Daniel M. Holtz, Fana Holtz, and Javier J. Holtz owned and/or had
the power to vote, approximately 6.2%, 36.0% and 3.7% (45.9% in the aggregate),
respectively, of Capital Common Stock (including shares of Capital Common Stock
subject to options exercisable by such individuals within 60 days).
The plaintiffs in the Derivative Action, along with another
shareholder (collectively the "Petitioners"), filed a Notice of Intent
to Appear and Petition for a Formal Administrative Hearing with the Florida
Department in connection with the disposition of the Application opposing the
change in control and raising many of the same issues raised in the Derivative
and Individual Actions. A hearing commenced in August 1996 and ended in
November 1996. On June 16, 1997, the Florida Comptroller issued the Order
denying the Application filed by the Applicants and requiring Applicants to
divest their control of Capital Bank within 90 days. The Florida Comptroller
also required that the Applicants "take into appropriate consideration of the
ownership interest of Abel Holtz" in determining their aggregate control
position. On July, 1997 the Applicants filed with the Florida Comptroller an
initial report of compliance with the Order. On the same date, the
Applicants filed an appeal of the Order with Florida's First District Court of
Appeals. On July 10, 1997, the Petitioners filed a cross-appeal of the Order
to the extent that the Order could be construed as permitting Applicants to
remain in control of Capital or Capital Bank.
Following a review of the initial report of compliance, the Florida
Comptroller allowed the Applicants until August 21, 1997 in which to submit a
revised compliance package. On August 21, 1997, a revised compliance proposal
was submitted, which was subsequently amended on September 11, 1997 (the
"Second Revised Compliance Plan"). The Second Revised Compliance Plan relies
on consummation of the Merger to satisfy the condition set forth in the Order
requiring "cessation of control" of Capital by the Applicants (taking into
account the ownership interest of Abel Holtz). In addition, the Second Revised
Compliance Plan included, consistent with the Order, an unconditional
repudiation by Daniel M. Holtz and Javier J. Holtz of severance benefits under
any executive employment agreements entered into between such individuals and
Capital that would be triggered by a change in control of Capital (see
"DESCRIPTION OF TRANSACTION -- Interests of Certain Persons in the Merger").
UPC also notified the Florida Comptroller that upon consummation of the Merger,
Fana Holtz and Daniel M. Holtz would resign or be terminated from all
management positions with Capital, and would have no continuing role in the
management of UPC or Capital. Finally, the Applicants agreed in the Second
Revised
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Compliance Plan to join the Florida Department, upon consummation of the
Merger, in filing a motion to dismiss as moot the pending appeal of the Order.
On September 5, 1997, the Applicants and the Florida Comptroller filed
a joint motion with the First District Court of Appeals requesting a 60-day
extension of time for the filing of briefs in the Applicants' appeal of the
Order. On September 9, 1997, the Petitioners opposed this joint motion and
requested an expedited briefing schedule. On October 3, 1997, the Court
granted Applicants' and Comptroller's joint motion for extension of time in
part and granted Petitioners' motion for an expedited briefing schedule.
Pursuant to this Order, Applicants must file their initial brief by October 20,
1997; opposition briefs must be filed within 15 days of service of the initial
brief; reply briefs must be filed within 10 days of service of the opposition
briefs; and cross-reply briefs must be filed within 5 days of the service of
the reply briefs.
On September 18, 1997, the Florida Comptroller approved the Second
Revised Compliance Plan permitting the Applicants to remain in their respective
management positions with Capital until the Effective Time and to vote the
shares of Capital Common Stock that they own or control in favor of the Merger.
In granting such approval, the Florida Comptroller stated that "the approval is
of limited significance, and suggests that what is not approved here remains of
vital significance to the ultimate resolution of the underlying issues. First,
this Order in no way constitutes [the Florida Department]'s approval or
endorsement of the proposed merger between UPC and Capital Bank and Bancorp.
It is up to the shareholders of Bancorp to determine whether to approve the
merger at the expected stockholders' meeting. If no stockholders' meeting
occurs, or if the merger is voted on but is rejected, of course, then the
[Florida Department] must immediately revisit the control status of the
institution on an emergency basis. Second, this order does not approve the
change-of-control application filed with the [Florida Department] by UPC on
September 8, 1997. UPC's application is separately docketed by the [Florida
Department] and is being considered separately from this matter. Third,
nothing in this order, or in the prior order, or in the record of proceedings
in this matter, should be interpreted as the [Florida Department]'s passing of
legal judgment on the validity of actions previously taken by Capital Bank or
Bancorp in a corporate capacity. However, in entering these orders, it was not
(and is not) the [Florida Department]'s intention to declare ultra vires any
actions taken either by the [Applicants] or the boards of Capital Bank and
Bancorp during the pendency of the change-of-control application." On
September 26, 1997, the Petitioners filed an appeal of this Order with
Florida's First District Court of Appeals.
In addition, Abel Holtz is subject to the restrictions of Section 19
of the Federal Deposit Insurance Act as a result of his guilty plea to one
count of giving misleading testimony in 1991 to a federal grand jury. As a
result, he is precluded from owning or controlling, or otherwise participating
in, the affairs of Capital and Capital Bank without regulatory approval. In
December 1996, the Federal Deposit Insurance Corporation (the "FDIC") issued a
cease and desist order, which prohibits Abel Holtz from, among other things,
(i) assisting, participating, or engaging in the solicitation of proxies for
Capital shareholders, (ii) influencing or attempting to influence the voting or
disposition of any shares of Capital Common Stock, excepting only the
disposition of those shares owned directly by him, (iii) requesting or
receiving performance reports or other internal data relating to the
activities, operations, or financial condition of Capital, or (iv)
communicating with any officer, director, or employee of Capital on matters
regarding the conduct of the operations or affairs of Capital. The cease and
desist order also required, among other things, that Abel Holtz, who as of the
Capital Record Date owned approximately 8.9% of Capital Common Stock, enter
into an irrevocable proxy with respect to such shares. Capital has been advised
that on December 24, 1996, Abel Holtz entered into such irrevocable proxy which
transferred the sole right and power to vote the shares of Capital he currently
owns (and any shares that he may acquire in the future) to Lawrence A. Gordich.
Pursuant to the irrevocable proxy, such third party is required to vote the
shares proportionately with all other outstanding shares of Capital on any
matter brought before the shareholders of Capital for a vote. In connection
with the Merger, Abel Holtz requested of the FDIC that he be permitted to vote
all shares of Capital Common Stock otherwise subject to the proxy in favor of
the Merger. The FDIC has orally advised Abel Holtz that all of the shares
subject to the proxy may be voted in favor of the Merger.
Capital also was advised that, in a January 1997 letter, the FDIC
informed the Applicants that the FDIC did not anticipate recommending any
enforcement action against any of such individuals as a result of the FDIC's
investigation. The FDIC's decision was based on information known to the FDIC
at such time, and the FDIC reserved the right to change its position in the
event that additional facts and circumstances warrant reconsideration.
BUSINESS OF UPC
GENERAL
UPC, a Tennessee corporation, is a bank holding company registered
with the Federal Reserve under the BHC Act. As of June 30, 1997, UPC had total
consolidated assets of approximately $14.8 billion, total consolidated loans of
approximately $10.4 billion, total consolidated deposits of approximately $11.2
billion, and total consolidated shareholders' equity of approximately $1.4
billion.
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UPC conducts its business activities through its principal bank
subsidiary, the $5.5 billion asset Union Planters National Bank, founded in
1869 and headquartered in Memphis, Tennessee, 32 other bank subsidiaries and
one savings bank subsidiary 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 and maintains approximately 432 banking
offices and 564 ATMs. UPC's total assets at June 30, 1997 are allocable by
state to its banking offices (before consolidating adjustments) approximately
as follows: $9.7 billion in Tennessee; $2.3 billion in Mississippi; $1.2
billion in Missouri; $800 million in Arkansas; $609 million in Louisiana; $440
million in Alabama; and $113 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 12
acquisitions in 1993, 13 in 1994, three in 1995, and seven in 1996, adding
approximately $1.7 billion in total assets in 1993, $3.8 billion in 1994, $1.3
billion in 1995, and $4.2 billion in 1996. Thus far in 1997, UPC has entered
into definitive agreements to acquire six financial institutions, in addition
to Capital which had aggregate total assets of approximately $2.1 billion at
June 30, 1997. For information with respect to these acquisitions see "--
Recent Developments." For a discussion of UPC's acquisition program, see the
caption "Acquisitions" (on page 6) in UPC's Annual Report to Shareholders and
Note 2 to UPC's audited consolidated financial statements for the years ended
December 31, 1996, 1995, and 1994 (on pages 45 and 46) contained in such Annual
Report to Shareholders. UPC's Annual Report to Shareholders is included as
Exhibit 13 to UPC's Annual Report on Form 10-K for the year ended December 31,
1996 and 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 the acquisitions in addition
to the Merger which are currently pending, see "-- Recent Developments."
The principal executive offices of UPC are located at 7130 Goodlett
Farms Parkway, Memphis, Tennessee 38018, and its telephone number at such
address is (901) 580-6000. Additional information with respect to UPC and its
subsidiary is included in documents incorporated by reference in this Proxy
Statement. See "AVAILABLE INFORMATION" and "DOCUMENTS INCORPORATED BY
REFERENCE."
RECENT DEVELOPMENTS
RECENTLY COMPLETED ACQUISITION. Since December 31, 1996, UPC has
completed the acquisition of one institution (the "Recently Completed
Acquisition").
<TABLE>
<CAPTION>
Asset Size
Institution (In Millions) Type of Consideration
----------------- ------------- ---------------------
<S> <C> <C>
PFIC Corporation $4.1 59,992 shares of
UPC Common Stock
</TABLE>
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<PAGE> 71
OTHER PENDING ACQUISITIONS. UPC has entered into definitive
agreements to acquire the following financial institutions in addition to
Capital (collectively, the Other Pending Acquisitions and, together with the
Recently Completed Acquisition, the "Other Acquisitions") which UPC's
management considers probable of consummation and which are expected to close
in 1997.
<TABLE>
<CAPTION>
Asset Size
Institution (In Millions)(1) Type of Consideration
--------------------------------------------- ---------------- -------------------------------
<S> <C> <C>
SBT Bancshares, Inc., Selmer, Tennessee, $ 102 Approximately 612,000 shares
and its subsidiary, Selmer Bank & Trust of UPC Common Stock
Co.
Citizens of Hardeman County Financial 65 Approximately 211,000 shares
Services, Inc., Whiteville, Tennessee, of UPC Common Stock
and its subsidiary, The Whiteville Bank
Magna Bancorp, Inc., and its subsidiary, 1,353 Approximately 7,100,000 shares
Magnolia Federal Bank for Savings of UPC Common Stock
Sho-Me Financial Corp, Mt. Vernon, 329 Approximately 1,048,000 shares
Missouri, and its subsidiary, of UPC Common Stock
1st Savings Bank, f.s.b.
First Acadian Bancshares, Inc., 83 Approximately 335,000 shares
Thibodaux, Louisiana, and its subsidiary, of UPC Common Stock
Acadian Bank
Security Bancshares, Inc., Des Arc, 162 Approximately 488,000 shares
Arkansas, and its subsidiaries of UPC Common Stock
----------------
TOTALS $2,094
================
</TABLE>
- ------------------------------
(1) Approximate total assets at June 30, 1997.
EARNINGS CONSIDERATIONS RELATED TO THE MERGER AND THE OTHER 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 from the assimilation of those
institutions into the UPC organization. Most of the charges are expected to
relate to the Merger and the Magna Bancorp, Inc. acquisition. 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 consolidations, data processing charges,
cancellation of vendor contracts, and the potential for additional provisions
for loan losses and other contingencies and similar costs which normally arise
from the consolidation of operational activities.
With the exception of the acquisition of Sho-Me Financial Corp., each
of the Merger and the Other Pending Acquisitions is expected to be accounted
for as a pooling of interests. UPC currently estimates incurring aggregate
charges in the range of $25 million to $35 million after taxes in connection
with the consummation of the Merger and the Other Pending Acquisitions. 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.
The range of anticipated charges to be incurred in connection with
consummating the Merger and the Other Pending Acquisitions is 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 data included in this Proxy Statement. Moreover, this range
has been based on the due diligence that has been performed to date in
connection with the various acquisitions and the range may be subject to change
and the
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actual charges incurred may be higher or lower than what is currently
contemplated, once the acquired institutions are assimilated from an
operational perspective and various contingencies are either satisfied or
eliminated.
CONSOLIDATION OF SUBSIDIARY BANK CHARTERS. UPC management has
announced plans to consolidate all of its separate banking subsidiaries, with
the exception of a small savings and loan subsidiary and Capital Bank, into
UPC's principal subsidiary, Union Planters National Bank.
Implementation of this plan will likely result in UPC incurring
charges in the fourth quarter of 1997. Management is developing the plan to
consolidate the subsidiaries and is seeking required regulatory approvals.
The exact charges and future savings cannot be quantified at this time.
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. A more complete
discussion is included in UPC's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996. Information relating to Capital is included in the
Capital Annual Report on Form 10-K for the fiscal year ended December 31, 1996.
See "AVAILABLE INFORMATION" and "DOCUMENTS INCORPORATED BY REFERENCE."
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.
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.
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 which is discussed below, and consideration of convenience
and needs issues includes the parties' performance under the Community
Reinvestment Act of 1977.
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 in September 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 Tennessee may lawfully acquire any
Tennessee-based bank, regardless of state law to the contrary, in either case
subject to certain deposit-percentage limitations, 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. None of the states in which the banking
subsidiaries of UPC or Capital are located has either moved up the date after
which interstate branching will be permissible or "opted out." Accordingly,
UPC is able to consolidate all of its bank subsidiaries into a single bank with
interstate branches.
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 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
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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 nonbanking 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 UPC Banking Subsidiaries is a member of the FDIC, and as
such, its deposits are insured by the FDIC to the extent provided by law. Each
such subsidiary is also subject to numerous state and federal statutes and
regulations that affect is business, activities, and operations, and each is
supervised and examined by one or more state or federal bank regulatory
agencies.
The regulatory agencies having supervisory jurisdiction over the
respective subsidiary institutions of UPC and Capital (the FDIC and the
applicable state authority in the case of state-chartered nonmember banks, the
Office of Thrift Supervision ("OTS") in the case of federally chartered thrift
institutions, the Federal Reserve in the case of state-chartered member banks,
and the Office of the Comptroller of the Currency ("OCC") in the case of
national banks) regularly examine the operations of such institutions and have
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 is a legal entity separate and distinct from its banking, thrift,
and other subsidiaries. The principal sources of cash flow of UPC, including
cash flow to pay dividends to its shareholders, are dividends from its
subsidiary depository institutions. There are statutory and regulatory
limitations on the payment of dividends by these subsidiary depository
institutions to UPC, as well as by UPC and Capital to their shareholders.
As to the payment of dividends, each of UPC's state-chartered banking
subsidiaries is subject to the respective laws and regulations of the state in
which such bank is located, and to the regulations of the bank's primary
federal regulator. UPC's subsidiaries that are thrift institutions are subject
to the OTS' capital distributions regulation, and those that are national banks
are subject to the regulations of the OCC.
If, in the opinion of the federal banking regulator, a depository
institution under its jurisdiction is engaged in or is about to engage in an
unsafe or unsound practice (which, depending on the financial condition of the
depository institution, could include the payment of dividends), such agency
may require, after notice and hearing, that such institution cease and desist
from such practice. The federal banking agencies have indicated that paying
dividends that deplete a depository institution's capital base to an inadequate
level would be an unsafe and unsound banking practice. Under the Federal
Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"), a depository
institution may not pay any dividend if payment would cause it to become
undercapitalized or if it already is undercapitalized. See "-- Prompt
Corrective Action." Moreover, the federal agencies have issued policy
statements that provide that bank holding companies and insured banks should
generally only pay dividends out of current operating earnings.
At June 30, 1997, under dividend restrictions imposed under federal
and state laws, the UPC Banking Subsidiaries, without obtaining governmental
approvals, could declare aggregate dividends to UPC of approximately $142.4
million.
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The payment of dividends by UPC and the UPC Banking Subsidiaries may
also be affected or limited by other factors, such as the requirement to
maintain adequate capital above regulatory guidelines.
CAPITAL ADEQUACY
UPC and the UPC Banking Subsidiaries are required to comply with the
capital adequacy standards established by the Federal Reserve in the case of
UPC, and the appropriate federal banking regulator in the case of each of the
UPC Banking Subsidiary. There are two basic measures of capital adequacy for
bank holding companies and their subsidiary depository institutions that have
been promulgated by the Federal Reserve and each of the federal bank regulatory
agencies: a risk-based measure and a leverage measure. All applicable capital
standards must be satisfied for a bank holding company to be considered in
compliance.
The risk-based capital standards are designed to make regulatory
capital requirements more sensitive to differences in risk profile among
depository institutions 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 weights. 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 ("Total 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
half of Total Capital must be composed of common equity, undivided profits,
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 June 30, 1997, UPC's consolidated Total Capital Ratio and its Tier 1 Capital
Ratio (i.e., the ratio of Tier 1 Capital to risk-weighted assets) were 19.86%
and 16.76%, 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 Leverage Ratio at June 30, 1997, was 10.64%. 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 the UPC Banking Subsidiaries is subject to risk-based and
leverage capital requirements adopted by its federal banking regulatory, which
are substantially similar to those adopted by the Federal Reserve for bank
holding companies. Each of the UPC Banking Subsidiaries was in compliance with
applicable minimum capital requirements as of June 30, 1997. Neither UPC nor
any of the UPC Banking 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 FDIC, and the OCC have,
pursuant to FDICIA, proposed an amendment to the risk-based capital standards
that would calculate the change in an institution's net economic value
attributable to increases and decreases in market interest rates and
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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 INSTITUTIONS
Under Federal Reserve policy, UPC is expected to act as a source of
financial strength for, and to commit resources to support, each of the UPC
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 will be
assumed by the bankruptcy trustee and entitled to a priority of payment.
Under the Federal Deposit Insurance Act (the "FDIA"), a depository
institution insured by the FDIC can be held liable for any loss incurred by, or
reasonably expected to be incurred by, the FDIC after August 9, 1989, in
connection with (i) the default of a commonly controlled FDIC-insured
depository institution or (ii) any assistance provided by the FDIC to any
commonly controlled FDIC-insured depository institution "in danger of default."
"Default" is defined generally as the appointment of a conservator or receiver,
and "in danger of default" is defined generally as the existence of certain
conditions indicating that a default is likely to occur in the absence of
regulatory assistance. The FDIC's claim for damages is superior to claims of
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 UPC Banking Subsidiaries are subject to these
cross-guarantee provisions. As a result, any loss suffered by the FDIC in
respect of any of these subsidiaries would likely result in assertion of the
cross-guarantee provisions, the assessment of such estimated losses against the
depository institution's banking or thrift affiliates, and a potential loss of
UPC's respective investments in such other subsidiary depository institutions.
PROMPT CORRECTIVE ACTION
FDICIA establishes a system of prompt corrective action to resolve the
problems of undercapitalized institutions. Under this system, which became
effective in December 1992, the federal banking regulators are required to
establish five capital categories (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, and critically
undercapitalized) and to 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 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.
Under the final agency rules implementing the prompt corrective action
provisions, an institution that (i) has a Total Capital Ratio of 10% or
greater, a Tier 1 Capital Ratio of 6.0% or greater, and a Leverage Ratio of
5.0% or greater and (ii) is not subject to any written agreement, order,
capital directive, or prompt corrective action directive issued by the
appropriate federal banking agency is deemed to be well capitalized. An
institution with a Total Capital Ratio of 8.0% or greater, a Tier 1 Capital
Ratio of 4.0% or greater, and a Leverage Ratio of 4.0% or greater is considered
to be adequately capitalized. A depository institution that has a Total
Capital Ratio of less than 8.0%, a Tier 1 Capital Ratio of less than 4.0%, or a
Leverage Ratio of less than 4.0% is considered to be undercapitalized. A
depository institution that has a Total Capital Ratio of less than 6.0%, a Tier
1 Capital Ratio of less than 3.0%, or a Leverage Ratio of less than 3.0% is
considered to be significantly undercapitalized, and an institution that has a
tangible equity capital to assets ratio equal to or less than 2.0% is deemed to
be critically undercapitalized. For purposes of the regulation, the term
"tangible equity" includes core capital elements counted as Tier 1 Capital for
purposes of the risk-based capital standards, plus the amount of outstanding
cumulative perpetual preferred stock (including related surplus), minus all
intangible assets with certain exceptions. A
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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 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 June 30, 1997, all of the UPC Banking Subsidiaries had the
requisite capital levels to qualify as well capitalized.
DESCRIPTION OF UPC CAPITAL 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
September 30, 1997, 67,211,642 shares of UPC Common Stock were outstanding and
approximately 2,883,000 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 3,236,000 shares
were authorized for issuance pursuant to said plans but not yet subject to
option grants or otherwise issued; and approximately 2,861,993 shares were
authorized for issuance and reserved for conversion of certain outstanding
shares of UPC Preferred Stock. In addition, as of September 30, 1997, 2,289,594
shares of UPC's 8% Cumulative, Convertible Preferred Stock, Series E (the
"Series E Preferred Stock") were outstanding. As of September 30, 1997, none
of UPC's 750,000 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.
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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, first-tier subsidiary
of UPC, is the Registrar, Transfer Agent and Dividend Disbursing Agent for
shares of UPC Common Stock. Its 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.
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 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 (SEC
File No. 0-6919) which is incorporated by reference herein.
SERIES E PREFERRED STOCK. 2,289,594 shares of Series E Preferred
Stock were outstanding as of September 30, 1997. 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 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
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Federal Reserve, are subject to redemption by UPC at any time at a redemption
price of $25.00 per share plus any unpaid dividends. Holders of Series E
Preferred Stock have no voting rights except as required by law and in certain
other limited circumstances. See "CERTAIN REGULATORY CONSIDERATIONS -- Payment
of Dividends."
OTHER MATTERS
As of the date of this Proxy Statement, the Capital Board knows of no
matters that will be presented for consideration at the Special Meeting other
than as described in this Proxy Statement. However, if any other matters shall
properly come before the Special Meeting or any adjournment or postponement
thereof and be voted upon, the enclosed proxy shall be deemed to confer
discretionary authority to the individuals named as proxies therein to vote the
shares represented by such proxy as to any such matters.
SHAREHOLDER PROPOSALS
UPC expects to hold its next annual meeting of shareholders after the
Merger on April 16, 1998. Under SEC 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 1998
annual meeting proxy statement. It is not currently anticipated that Capital
will hold its annual meeting unless the Merger should not be consummated.
In the event the Merger is not consummated, proposals of Capital shareholders
intended to be presented at that meeting must have been received by Capital at
its principal executive offices no later than December 15, 1997.
EXPERTS
The consolidated financial statements of UPC and subsidiaries
incorporated in this Proxy Statement by reference to UPC's Annual Report on
Form 10-K for the year ended December 31, 1996, 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 financial statements incorporated in this Proxy
Statement by reference to Capital's Annual Report on Form 10-K for the year
ended December 31, 1996, have been audited by Deloitte & Touche LLP,
independent auditors, as stated in its report, which is incorporated herein by
reference, and have been so incorporated in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
OPINIONS
The legality of the shares of UPC Common Stock to be issued in the
Merger 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 LLP, Atlanta, Georgia for UPC.
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APPENDIX A
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
UNION PLANTERS CORPORATION
AND
CAPITAL BANCORP
DATED AS OF AUGUST 12, 1997
A-1
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
PREAMBLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-5
ARTICLE 1 TRANSACTIONS AND TERMS OF MERGER . . . . . . . . . . . . . . . . A-5
1.1 Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-5
1.2 Time and Place of Closing . . . . . . . . . . . . . . . . . . . . A-5
1.3 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . A-6
1.4 Execution of Agreements . . . . . . . . . . . . . . . . . . . . . A-6
1.5 Restructure of Transaction . . . . . . . . . . . . . . . . . . . A-6
ARTICLE 2 TERMS OF MERGER . . . . . . . . . . . . . . . . . . . . . . . . . A-6
2.1 Charter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-6
2.2 By-Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-6
2.3 Directors and Officers . . . . . . . . . . . . . . . . . . . . . A-7
ARTICLE 3 MANNER OF CONVERTING SHARES . . . . . . . . . . . . . . . . . . . A-7
3.1 Conversion of Shares . . . . . . . . . . . . . . . . . . . . . . A-7
3.2 Anti-Dilution Provisions . . . . . . . . . . . . . . . . . . . . A-7
3.3 Shares Held by Subject Company or Parent . . . . . . . . . . . . A-7
3.4 Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . A-7
3.5 Conversion of Stock Options . . . . . . . . . . . . . . . . . . . A-7
ARTICLE 4 EXCHANGE OF SHARES . . . . . . . . . . . . . . . . . . . . . . . A-9
4.1 Exchange Procedures . . . . . . . . . . . . . . . . . . . . . . . A-9
4.2 Rights of Former Subject Company Shareholders . . . . . . . . . . A-9
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF SUBJECT COMPANY . . . . . . . . A-10
5.1 Organization, Standing, and Power . . . . . . . . . . . . . . . . A-10
5.2 Authority; No Breach by Agreement . . . . . . . . . . . . . . . . A-10
5.3 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . A-11
5.4 Subject Company Subsidiaries . . . . . . . . . . . . . . . . . . A-11
5.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . A-12
5.6 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . A-12
5.7 Absence of Certain Changes or Events . . . . . . . . . . . . . . A-12
5.8 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . A-12
5.9 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-13
5.10 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . A-14
5.11 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . A-14
5.12 Compliance With Laws . . . . . . . . . . . . . . . . . . . . . . A-15
5.13 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . A-15
5.14 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . A-15
5.15 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . A-17
5.16 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . A-17
5.17 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-17
5.18 Statements True and Correct . . . . . . . . . . . . . . . . . . . A-17
5.19 Accounting, Tax, and Regulatory Matters . . . . . . . . . . . . . A-18
5.20 State Takeover Laws . . . . . . . . . . . . . . . . . . . . . . . A-18
5.21 Article Provisions . . . . . . . . . . . . . . . . . . . . . . . A-18
</TABLE>
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<TABLE>
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ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF PARENT . . . . . . . . . . . . A-18
6.1 Organization, Standing and Power . . . . . . . . . . . . . . . . A-18
6.2 Authority; No Breach by Agreement . . . . . . . . . . . . . . . . A-18
6.3 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . A-19
6.4 Parent Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . A-19
6.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . A-20
6.6 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . A-20
6.7 Absence of Certain Changes or Events . . . . . . . . . . . . . . A-20
6.8 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . A-20
6.9 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . A-21
6.10 Compliance With Laws . . . . . . . . . . . . . . . . . . . . . . A-21
6.11 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . A-21
6.12 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-22
6.13 Statements True and Correct . . . . . . . . . . . . . . . . . . . A-22
6.14 Accounting, Tax, and Regulatory Matters . . . . . . . . . . . . . A-22
ARTICLE 7 CONDUCT OF BUSINESS PENDING CONSUMMATION . . . . . . . . . . . . A-22
7.1 Affirmative Covenants of Subject Company . . . . . . . . . . . . A-22
7.2 Negative Covenants of Subject Company . . . . . . . . . . . . . . A-23
7.3 Covenants of Parent . . . . . . . . . . . . . . . . . . . . . . . A-24
7.4 Adverse Changes in Condition . . . . . . . . . . . . . . . . . . A-25
7.5 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-25
ARTICLE 8 ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . A-25
8.1 Registration Statement; Proxy Statement; Shareholder Approval . . A-25
8.2 Exchange Listing . . . . . . . . . . . . . . . . . . . . . . . . A-25
8.3 Applications . . . . . . . . . . . . . . . . . . . . . . . . . . A-25
8.4 Filings With State Offices . . . . . . . . . . . . . . . . . . . A-26
8.5 Agreement as to Efforts to Consummate . . . . . . . . . . . . . . A-26
8.6 Investigation and Confidentiality . . . . . . . . . . . . . . . . A-26
8.7 Press Releases . . . . . . . . . . . . . . . . . . . . . . . . . A-26
8.8 Certain Actions . . . . . . . . . . . . . . . . . . . . . . . . . A-26
8.9 Accounting and Tax Treatment . . . . . . . . . . . . . . . . . . A-27
8.10 Agreement of Affiliates . . . . . . . . . . . . . . . . . . . . . A-27
8.11 Employee Benefits and Contracts . . . . . . . . . . . . . . . . . A-27
8.12 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . A-27
8.13 Merger Subsidiary Organization . . . . . . . . . . . . . . . . . A-29
8.14 State Takeover Laws . . . . . . . . . . . . . . . . . . . . . . . A-29
ARTICLE 9 CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE . . . . . . . . A-29
9.1 Conditions to Obligations of Each Party . . . . . . . . . . . . . A-29
9.2 Conditions to Obligations of Parent . . . . . . . . . . . . . . . A-30
9.3 Conditions to Obligations of Subject Company . . . . . . . . . . A-31
ARTICLE 10 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . A-32
10.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . A-32
10.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . A-34
10.3 Non-Survival of Representations and Covenants . . . . . . . . . . A-35
ARTICLE 11 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . A-35
11.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . A-35
11.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-41
11.3 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . A-41
</TABLE>
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<TABLE>
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11.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . A-41
11.5 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . A-42
11.6 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-42
11.7 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . A-42
11.8 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-42
11.9 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . A-43
11.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . A-43
11.11 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-43
11.12 Interpretations . . . . . . . . . . . . . . . . . . . . . . . . . A-43
11.13 Enforcement of Agreement . . . . . . . . . . . . . . . . . . . . A-43
11.14 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . A-44
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-44
</TABLE>
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AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (this
"Agreement") is made and entered into as of August 12, 1997, by and between
Capital Bancorp, a Florida corporation having its principal office located in
Miami, Florida ("Subject Company"), and Union Planters Corporation, a Tennessee
corporation having its principal office located in Memphis, Tennessee
("Parent").
PREAMBLE
The Boards of Directors of Subject Company and Parent 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 Subject Company by Parent pursuant to the merger of Subject
Company with and into a wholly owned subsidiary of Parent to be organized under
the Laws of the State of Tennessee ("Merger Subsidiary"). At the effective
time of such merger, the outstanding shares of the common stock of Subject
Company shall be converted into the right to receive shares of the common stock
of Parent (except as provided in Sections 3.3 and 3.4 of this Agreement). As a
result, shareholders of Subject Company shall become shareholders of Parent and
Subject Company shall continue to conduct its business and operations as a
wholly owned subsidiary of Parent. The transactions described in this
Agreement are subject to the approvals of the shareholders of Subject Company,
the Board of Governors of the Federal Reserve System, the Department of Banking
and Finance of the State of Florida, 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 (i) for federal income tax purposes this Agreement shall
constitute a plan of merger and the Merger shall qualify as a "reorganization"
within the meaning of Section 368(a) of the Internal Revenue Code and (ii) for
accounting purposes the Merger shall qualify for treatment as a pooling of
interests.
Immediately after the execution and delivery of this
Agreement, as a condition and inducement to Parent's willingness to enter into
this Agreement, (i) Subject Company and Parent are entering into a stock option
agreement pursuant to which Subject Company is granting to Parent an option to
purchase shares of Subject Company Common Stock and (ii) each of the directors
of Subject Company are entering into a support agreement with Parent.
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, Merger Subsidiary shall be merged with
Subject Company in accordance with the provisions of Section 607.1107 of
the FBCA and Section 48-21-109 of the TBCA and with the effect provided in
Section 607.1106 of the FBCA and Section 48-21-108 of the TBCA (the "Merger").
Merger Subsidiary 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 Subject
Company and Parent and will be approved and adopted by the Board of Directors
of Merger Subsidiary upon its organization.
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
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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 Florida Articles of Merger reflecting the Merger shall become
effective with the Secretary of State of the State of Florida and the Tennessee
Articles of Merger become effective with the Secretary of 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 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 Parent within 30 days following the last to occur of (i) the effective date
of the last required Consent of any Regulatory Authority having authority over
and approving or exempting the Merger (without regard to any requisite waiting
period in respect thereof), (ii) the date on which the shareholders of Subject
Company approve this Agreement, and (iii) the date on which all other
conditions precedent (other than those conditions which relate to actions to be
taken at the Closing) to each Party's obligations hereunder shall have been
satisfied or waived (to the extent waivable by such Party).
1.4 Execution of Agreements. Immediately after the
execution of this Agreement by the Parties and as a condition thereto, (i)
Subject Company is executing and delivering to Parent a stock option agreement
(the "Stock Option Agreement"), in substantially the form of Exhibit 1,
pursuant to which Subject Company is granting to Parent an option to purchase
shares of Subject Company Common Stock and (ii) each of the directors of
Subject Company is executing and delivering to Parent a support agreement (the
"Support Agreement") in substantially the form of Exhibit 2.
1.5 Restructure of Transaction. Parent shall, in its
reasonable discretion, have the unilateral right to revise the structure of the
Merger contemplated by this Agreement in order to achieve tax benefits or for
any other reason which Parent may deem advisable; provided, however, that
Parent shall not have the right, without the approval of the Board of Directors
of Subject Company and, if required by Section 607.1103 of the FBCA, the
holders of the Subject Company Common Stock, to make any revision to the
structure of the Merger which: (i) changes the amount of the consideration
which the holders of shares of Subject Company Common Stock are entitled to
receive (determined in the manner provided in Section 3.1 of this Agreement);
(ii) changes the intended tax-free effects of the Merger to Parent, Subject
Company or the holders of shares of Subject Company Common Stock or changes the
intended pooling of interests accounting treatment; (iii) would permit Parent
to pay the consideration other than by delivery of Parent Common Stock
registered with the SEC (in the manner described in Section 4.1 of this
Agreement); (iv) would be materially adverse to the interests of Subject
Company or adverse to the holders of shares of Subject Company Common Stock;
(v) would materially impede or delay consummation of the Merger; or (vi) would
require a vote of Parent's shareholders under relevant state Law. Parent may
exercise this right of revision by giving written notice to Subject Company in
the manner provided in Section 11.8 of this Agreement which notice shall be in
the form of an amendment to this Agreement or in the form of an Amended and
Restated Agreement and Plan of Merger.
ARTICLE 2
TERMS OF MERGER
2.1 Charter. The Charter (the "Charter") of Merger
Subsidiary in effect immediately prior to the Effective Time shall be the
Articles of the Surviving Corporation until otherwise amended or repealed.
2.2 By-Laws. The Amended and Restated By-laws of Merger
Subsidiary (the "By-Laws") in effect immediately prior to the Effective Time
shall be the By-laws of the Surviving Corporation until otherwise amended or
repealed.
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2.3 Directors and Officers. The directors of Merger
Subsidiary 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
Merger Subsidiary 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 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 Parent, Merger Subsidiary, Subject Company, or the
shareholders of any of the foregoing, the shares of the constituent
corporations shall be converted as follows:
(a) Each share of Parent Capital Stock, including any
associated Parent 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 Subsidiary Common Stock issued
and outstanding immediately prior to the Effective Time shall remain issued and
outstanding after the Effective Time.
(c) Each share of Subject Company Common Stock (excluding
shares held by Subject Company, any Subject Company Subsidiary, Parent or any
Parent Subsidiary, 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 .8525 shares of Parent Common Stock (as subject to
possible adjustment as set forth in Section 10.1(g) of this Agreement, the
"Exchange Ratio"). Pursuant to the Parent Rights Agreement, each share of
Parent Common Stock issued in connection with the Merger upon conversion of
Subject Company Common Stock shall be accompanied by a Parent Right.
3.2 Anti-Dilution Provisions. In the event Parent
changes the number of shares of Parent 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 Subject Company or Parent. Each of
the shares of Subject Company Common Stock held by Subject Company, any Subject
Company Subsidiary, Parent or any Parent Subsidiary, in each case other than in
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 Subject Company Common
Stock exchanged pursuant to the Merger who would otherwise have been entitled
to receive a fractional share of Parent 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 share of Parent Common
Stock multiplied by 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 Parent) 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. (a) At the Effective
Time, each option to purchase or other right with respect to shares of Subject
Company Common Stock pursuant to stock options, stock appreciation
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<PAGE> 86
rights or other rights, including stock awards ("Subject Company Options")
granted by Subject Company under the Subject Company Stock Plans, which are
outstanding at the Effective Time, whether or not exercisable, shall be
converted into and become options with respect to Parent Common Stock, and
Parent shall assume each Subject Company Option, in accordance with the terms
of the applicable Subject Company Stock Plan and stock option or other
agreement by which it is evidenced, except that from and after the Effective
Time, (i) Parent and its Salary and Benefits Committee shall be substituted for
Subject Company and the committee of Subject Company's Board of Directors
(including, if applicable, the entire Board of Directors of Subject Company)
administering such Subject Company Stock Plan, (ii) each Subject Company Option
assumed by Parent may be exercised solely for shares of Parent Common Stock (or
cash in the case of stock appreciation rights), (iii) the number of shares of
Parent Common Stock subject to such Subject Company Option shall be equal to
the number of shares of Subject Company Common Stock subject to such Subject
Company Option immediately prior to the Effective Time multiplied by the
Exchange Ratio and rounding down to the nearest whole share, and (iv) the per
share exercise price under each such Subject Company Option shall be adjusted
by dividing the per share exercise price under each such Subject Company Option
by the Exchange Ratio and rounding up to the nearest cent. Notwithstanding
clauses (iii) and (iv) of the first sentence of this Section 3.5, each Subject
Company Option that 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. Parent and Subject Company 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,
Parent shall deliver to the participants in each Subject Company Stock Plan an
appropriate notice setting forth such participant's rights pursuant thereto and
the grants subject to such Subject Company 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 Parent shall comply with
the terms of each Subject Company Stock Plan to ensure, to the extent required
by, and subject to the provisions of, such Subject Company Stock Plan, that
Subject Company Options that 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, Parent shall file a
registration statement on Form S-8 with respect to the shares of Parent 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) Without limiting the foregoing, and provided that the
right contained in this paragraph (c) is not inconsistent with any of the
conditions contained in Article 9 hereof, each holder of a Subject Company
Option that is not an "incentive stock option", whether or not then vested,
shall have the right to elect to convert, at the Effective Time, all or a
portion of his or her Subject Company Options which are not "incentive stock
options" and which have not expired prior to the Effective Time into the right
to receive such number of shares (rounded to the nearest whole share) of Parent
Common Stock as are equal in value (determined by valuing each share of Parent
Common Stock at the Average Closing Price (as defined in Section 10.1)) to the
excess of (i) the product of the number of shares of Subject Company Common
Stock subject to such option times the Exchange Ratio times the Average Closing
Price of the Parent Common Stock over (ii) the product of (A) the exercise
price per share of Subject Company Common Stock subject to such option and (B)
the number of shares of Subject Company Common Stock subject to such option.
The foregoing right shall be exercised by delivery to Parent of written notice
of election (specifying the number of Subject Company Options covered by such
election) by the holder of such Subject Company Option not later than two
business days prior to the Effective Time.
(d) All contractual restrictions or limitations on
transfer with respect to Subject Company Common Stock awarded under the Subject
Company Stock Plans or any other plan, program, or Contract of Subject Company
or any of the Subject Company Subsidiaries, 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 Parent Common Stock into which such restricted stock is converted
pursuant to Section 3.1 of this Agreement.
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ARTICLE 4
EXCHANGE OF SHARES
4.1 Exchange Procedures. Promptly after the Effective
Time, Parent and Subject Company shall cause the exchange agent selected by
Parent (the "Exchange Agent") to mail to the former shareholders of Subject
Company appropriate transmittal materials (which shall specify that delivery
shall be effected, and risk of loss and title to the certificates theretofore
representing shares of Subject Company Common Stock shall pass, only upon
proper delivery of such certificates to the Exchange Agent). Subject Company
shall have the right to review the transmittal materials. 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 Subject Company
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 Subject
Company 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 Parent Common Stock to which
such holder may be otherwise entitled (without interest). Parent shall not be
obligated to deliver the consideration to which any former holder of Subject
Company Common Stock is entitled as a result of the merger until such holder
surrenders such holder's certificate or certificates representing the shares of
Subject Company Common Stock for exchange as provided in this Section 4.1. The
certificate or certificates of Subject Company Common Stock so surrendered
shall be duly endorsed as the Exchange Agent may require. Any other provision
of this Agreement notwithstanding, neither Parent nor the Exchange Agent shall
be liable to a holder of Subject Company 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 Subject Company Shareholders. At
the Effective Time, the stock transfer books of Subject Company shall be closed
as to holders of Subject Company Common Stock immediately prior to the
Effective Time and no transfer of Subject Company 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 Subject Company Common Stock
(other than shares to be canceled pursuant to Section 3.3 of this 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 Subject Company in respect of such shares of Subject Company 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
Parent on the Parent 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 Parent 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 Parent Common Stock as of any time
subsequent to the Effective Time shall be delivered to the holder of any
certificate representing shares of Subject Company 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 Subject Company Common Stock certificate, both a Parent
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. In the event any Subject
Company Common Stock certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
certificate to be lost, stolen or destroyed and, if required by Parent, the
posting by such person of a bond in such amount as Parent may reasonably direct
as indemnity against any claim that may be made against it with respect to such
certificate, the Exchange Agent shall issue in exchange for such lost, stolen
or destroyed certificate the shares of Parent Common Stock and cash in lieu of
fractional shares deliverable in respect thereof pursuant to this Agreement.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF SUBJECT COMPANY
Subject Company hereby represents and warrants to Parent as
follows:
5.1 Organization, Standing, and Power. Subject Company
is a corporation duly organized, validly existing, and in good standing under
the Laws of the State of Florida, and has the corporate power and authority to
carry on its business as now conducted and to own, lease, and operate its
Assets. Subject Company 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 Subject Company.
5.2 Authority; No Breach by Agreement. (a) Subject
Company 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 (including valid authorization and adoption of this Agreement
by Subject Company's duly constituted Board of Directors) in respect thereof on
the part of Subject Company, subject to the approval of this Agreement by the
holders of the outstanding shares of Subject Company Common Stock, which is the
only shareholder vote required for approval of this Agreement and consummation
of the Merger by Subject Company. Subject to such requisite shareholder
approval and assuming due authorization, execution and delivery of this
Agreement by each of Parent and Merger Subsidiary, this Agreement (which, for
purposes of this sentence, shall not include the Stock Option Agreement)
represents a legal, valid, and binding obligation of Subject Company,
enforceable against Subject Company in accordance with its 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
(which, for purposes of clause (iii) of this sentence, shall not include the
Stock Option Agreement) by Subject Company, nor the consummation by Subject
Company of the transactions contemplated hereby, nor compliance by Subject
Company with any of the provisions hereof, will (i) conflict with or result in
a breach of any provision of the Articles or the By-laws, or (ii) except as
disclosed in Section 5.2 of the Subject Company Disclosure Memorandum,
constitute or result in a Default under, or require any Consent (excluding
Consents required by Law or Order) pursuant to, or result in the creation of
any Lien on any material Asset of Subject Company or any Subject Company
Subsidiary under, any Contract or Permit of Subject Company or any Subject
Company Subsidiary, except for such Defaults, Liens and Consents, which, if not
obtained or made, are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Subject Company, or (iii) subject to
receipt of the requisite Consents referred to in Section 9.1(b) of this
Agreement, violate any Law or Order applicable to Subject Company, its
Subsidiaries 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 Subject
Company, no notice to, filing with, or Consent of, any public body or authority
is necessary for the consummation by Subject Company of the Merger and the
other transactions contemplated in this Agreement.
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5.3 Capital Stock. (a) The authorized capital stock of
Subject Company consists of 20,000,000 shares of Subject Company Common Stock,
of which 7,590,925 shares are issued and outstanding as of July 31, 1997
(exclusive of treasury shares) and not more than 8,887,237 shares will be
issued and outstanding at the Effective Time (exclusive of shares issued or
issuable pursuant to the Stock Option Agreement). All of the issued and
outstanding shares of capital stock of Subject Company are duly and validly
issued and outstanding and are fully paid and nonassessable under the FBCA.
None of the outstanding shares of capital stock of Subject Company has been
issued in violation of any preemptive rights of the current or past
shareholders of Subject Company. As of the date of this Agreement, Subject
Company has 739,192 shares of Subject Company Common Stock available for grant
under the Subject Company Stock Plans, and there are options to purchase not
more than 1,296,312 shares of Subject Company Common Stock 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 Subject Company outstanding and no
outstanding Rights relating to the capital stock of Subject Company.
5.4 Subject Company Subsidiaries. Subject Company has
disclosed in Section 5.4 of the Subject Company Disclosure Memorandum all of
the Subject Company Subsidiaries that are corporations (identifying its
jurisdiction of incorporation) and all of the Subject Company Subsidiaries that
are general or limited partnerships or other non-corporate entities
(identifying the Law under which such entity is organized, and the amount and
nature of the ownership interest therein of Subject Company Subsidiaries).
Except as set forth in Section 5.4 of the Subject Company Disclosure
Memorandum, Subject Company or one of its wholly owned Subsidiaries owns all of
the issued and outstanding shares of capital stock (or other equity interests)
of each of the Subject Company Subsidiaries. Except as set forth in Section
5.4 of the Subject Company Disclosure Memorandum and except for the Stock
Option Agreement and options outstanding under the Subject Company Stock Plans,
no capital stock (or other equity interest) of any Subject Company Subsidiary
is or may become required to be issued (other than to another Subject Company
Subsidiary) by reason of any rights, and there are no Contracts by which
Subject Company or any of the Subject Company Subsidiaries is bound to issue
(other than to Subject Company or another of the Subject Company Subsidiaries)
additional shares of its capital stock (or other equity interests) or Rights or
by which Subject Company or any of the Subject Company Subsidiaries is or may
be bound to transfer any shares of the capital stock (or other equity
interests) of any of Subject Company or any of the Subject Company Subsidiaries
(other than to Subject Company or any of the Subject Company Subsidiaries).
Except as set forth in Section 5.4 of the Subject Company Disclosure
Memorandum, there are no Contracts relating to the rights of Subject Company or
any Subject Company Subsidiary to vote or to dispose of any shares of the
capital stock (or other equity interests) of Subject Company or any Subject
Company Subsidiary. All of the shares of capital stock (or other equity
interests) of each Subject Company Subsidiary held by Subject Company or any
Subject Company Subsidiary are fully paid and nonassessable (except pursuant to
applicable state law, in the case of the Bank) under the applicable corporation
or similar Law of the jurisdiction in which such Subsidiary is incorporated or
organized and are owned by Subject Company or a Subject Company Subsidiary free
and clear of any Liens. Each Subject Company Subsidiary is either a bank,
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 Subject Company 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 Subject Company. The only Subject Company
Subsidiary that is a depository institution is the Bank. The Bank 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
Bank Insurance Fund. The minute book and other organizational documents (and
all amendments thereto) for Subject Company and each Subject Company Subsidiary
that is a "Significant Subsidiary" (as such term is defined in Regulation S-X
promulgated under the 1934 Act) have been or will be made available to Parent
for its review, and are true and complete as in effect as of the date of this
Agreement.
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5.5 Financial Statements. (a) Each of the Subject
Company Financial Statements (including, in each case, any related notes)
contained in the Subject Company SEC Reports, including any Subject Company SEC
Reports filed after the date of this Agreement until the Effective Time,
complied, or will comply, as to form in all material respects with the
applicable published rules and regulations of the SEC with respect thereto, was
prepared, or will be 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, or will fairly
present, in all material respects the consolidated financial position of
Subject Company and the Subject Company Subsidiaries as of 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.
(b) Each of the Holding Financial Statements (including, in
each case, any related notes) complied, or will comply, as to form in all
material respects with the applicable published rules and regulations of the
SEC with respect thereto, was prepared, or will be 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, or will fairly present, in all material respects the consolidated
financial position of Holding and its Subsidiaries as of 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. Neither Subject
Company nor any of the Subject Company Subsidiaries has any Liabilities that
are reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Subject Company, except Liabilities which are accrued or
reserved against in the consolidated balance sheets of Subject Company as of
March 31, 1997, included in the Subject Company Financial Statements made
available prior to the date of this Agreement or reflected in the notes
thereto. Neither Subject Company nor any of the Subject Company Subsidiaries
has incurred or paid any Liability since March 31, 1997, except for such
Liabilities incurred or paid (i) in the ordinary course of business consistent
with past business practice or which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Subject Company
or (ii) in connection with the transactions contemplated by this Agreement.
5.7 Absence of Certain Changes or Events. Since December
31, 1996, except as disclosed in the Subject Company SEC Reports made available
prior to the date of this Agreement or in Section 5.7 of the Subject Company
Disclosure Memorandum, 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 Subject Company.
5.8 Tax Matters. Except as set forth in Section 5.8 of
the Subject Company Disclosure Memorandum:
(a) All material Tax Returns required to be filed by or
on behalf of Subject Company or any of the Subject Company Subsidiaries 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, 1996, and on
or before the date of the most recent fiscal year end immediately preceding the
Effective Time, and all such Tax Returns filed are complete and accurate in all
material respects. All Taxes shown on filed Tax Returns have been paid. There
is no audit examination or refund Litigation with respect to any material
Taxes, except as reserved against in the Subject Company Financial Statements
made available prior to the date of this Agreement. All material Taxes and
other material Liabilities due with respect to completed and settled
examinations or concluded Litigation have been paid. There are no material
Liens with respect to Taxes upon any of the Assets of Subject Company or any of
the Subject Company Subsidiaries.
(b) Neither Subject Company nor any of the Subject
Company Subsidiaries has executed an extension or waiver of any statute of
limitations on the assessment or collection of any Tax due (excluding such
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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 material Taxes due or to
become due for Subject Company or the Subject Company Subsidiaries for the
period or periods through and including the date of the respective Subject
Company Financial Statements has been made and is reflected on such Subject
Company Financial Statements.
(d) Material deferred Taxes of Subject Company and the
Subject Company Subsidiaries have been provided for in accordance with GAAP.
(e) Subject Company and the Subject Company Subsidiaries
are in material compliance with, and its records contain all information and
documents (including properly completed IRS Forms W-9) necessary to comply in
all material respects 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) Neither Subject Company nor any of the Subject
Company Subsidiaries 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 Subject Company or any of the Subject
Company Subsidiaries that occurred during or after any Taxable Period in which
Subject Company or any of the Subject Company Subsidiaries incurred a net
operating loss that carries over to any Taxable Period ending after December
31, 1996, except in connection with the transactions contemplated pursuant to
this Agreement.
(h) Neither Subject Company nor any of the Subject
Company Subsidiaries is a party to any tax allocation or sharing agreement and
neither Subject Company nor any of the Subject Company Subsidiaries 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 Subject Company) or has any
material Liability for taxes of any Person (other than Subject Company and the
Subject Company 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 Assets. Except as disclosed or reserved against in
the Subject Company Financial Statements made available prior to the date of
this Agreement, Subject Company and the Subject Company Subsidiaries 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 Subject Company and
its Subsidiaries are in good condition, reasonable wear and tear excepted, and
are usable in the ordinary course of business of Subject Company and its
Subsidiaries. All Assets which are material to Subject Company's business on a
consolidated basis, held under leases or subleases by the Subject Company or
any of the Subject Company Subsidiaries, 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. Subject Company and the Subject Company Subsidiaries
currently maintain insurance in amounts, scope, and coverage which, in the
reasonable opinion of management of Subject Company, are adequate for the
operations of Subject Company and the Subject Company Subsidiaries. Neither
Subject Company nor any of the Subject Company Subsidiaries 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 insurance will be substantially increased. Except
as set forth in Section 5.9 of the Subject Company Disclosure Memorandum, there
are presently no claims pending under any such policies of insurance and no
notices have been given by Subject Company or any of the Subject Company
Subsidiaries under such policies.
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5.10 Intellectual Property. All of the Intellectual
Property rights of Subject Company and the Subject Company Subsidiaries are in
full force and effect and, if applicable, constitute legal, valid, and binding
obligations of the respective parties thereto, and there have not been, and, to
the Knowledge of Subject Company, there currently are not, any Defaults
thereunder by Subject Company or a Subject Company Subsidiary. Subject Company
or a Subject Company Subsidiary owns or is the valid licensee of all such
Intellectual Property rights free and clear of all Liens or claims of
infringement. Neither Subject Company nor any of the Subject Company
Subsidiaries nor, to the Knowledge of Subject Company, their respective
predecessors has infringed the Intellectual Property rights of others and, to
the Knowledge of Subject Company, none of the Intellectual Property rights as
used in the business conducted by Subject Company or the Subject Company
Subsidiaries 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 5.10 of the Subject Company Disclosure Memorandum, neither Subject
Company nor the Subject Company Subsidiaries is obligated to pay any royalties
to any Person with respect to any such Intellectual Property. Subject Company
or a Subject Company Subsidiary 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 Subject Company or the Subject Company Subsidiaries 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 5.10 of the Subject Company Disclosure
Memorandum, which restricts or prohibits such officer, director, or employee
from engaging in activities competitive with any Person, including Subject
Company or any of the Subject Company Subsidiaries.
5.11 Environmental Matters. Except as set forth in
Section 5.11 of the Subject Company Disclosure Memorandum:
(a) To the Knowledge of Subject Company, each of Subject
Company and the Subject Company Subsidiaries, 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 Subject
Company.
(b) To the Knowledge of Subject Company, there is no
Litigation pending or threatened before any court, governmental agency, or
authority or other forum in which Subject Company, any of the Subject Company
Subsidiaries or any of their respective Operating Properties or Participation
Facilities (or Subject Company 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 Subject Company or any of the Subject Company
Subsidiaries or any of their respective 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 Subject Company, nor, to the knowledge of Subject Company, is there
any reasonable basis for any Litigation of a type described in this sentence.
(c) During the period of (i) Subject Company's or any of
the Subject Company Subsidiaries' ownership or operation of any of their
respective current properties, (ii) Subject Company's or any of the Subject
Company Subsidiaries' participation in the management of any Participation
Facility, or (iii) Subject Company's or any of the Subject Company
Subsidiaries' holding of a security interest in an Operating Property, to the
Knowledge of Subject Company, 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 Subject Company. Prior to the
period of (i) Subject Company's or any of the Subject Company Subsidiaries'
ownership or operation of any of their respective current properties, (ii)
Subject Company's or any of the Subject Company Subsidiaries' participation in
the management of any Participation Facility, or (iii) Subject Company's or any
of the Subject Company Subsidiaries' holding of a security interest in an
Operating Property, to the Knowledge of Subject Company, 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
Subject Company.
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5.12 Compliance With Laws. Subject Company is duly
registered as a bank holding company under the BHC Act. Each of Subject
Company and the Subject Company Subsidiaries has in effect all Permits
necessary for it to own, lease, or operate its material Assets and to carry on
its business as now conducted, except where the failure to hold such Permits
would not be reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Subject Company. Except as set forth in Section
5.12 of the Subject Company Disclosure Memorandum, neither Subject Company nor
any of the Subject Company Subsidiaries:
(a) is in violation of any Laws, Orders, or Permits
applicable to its business or employees conducting its business, except for
such violations which would not be reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Subject Company; or
(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 Subject Company or
any of the Subject Company Subsidiaries 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 Subject
Company or any of the Subject Company Subsidiaries 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.
5.13 Labor Relations. Neither Subject Company nor any of
the Subject Company Subsidiaries is the subject of any Litigation asserting
that Subject Company or any of the Subject Company Subsidiaries has committed
an unfair labor practice (within the meaning of the National Labor Relations
Act or comparable state law) or seeking to compel Subject Company or any of the
Subject Company Subsidiaries to bargain with any labor organization as to wages
or conditions of employment, nor is there any strike or other labor dispute
involving Subject Company or any of the Subject Company Subsidiaries, pending
or threatened, or to the Knowledge of Subject Company, is there any activity
involving Subject Company's or any of the Subject Company Subsidiaries'
employees seeking to certify a collective bargaining unit or engaging in any
other organization activity.
5.14 Employee Benefit Plans. (a) Subject Company has
disclosed in Section 5.14 of the Subject Company Disclosure Memorandum, and has
delivered or made available to Parent 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 Subject Company or the Subject Company
Subsidiaries or ERISA Affiliate thereof for the benefit of employees, retirees,
dependents, spouses, directors, independent contractors, or other beneficiaries
of Subject Company or any Subject Company Subsidiary and under which employees,
retirees, dependents, spouses, directors, independent contractors, or other
beneficiaries of Subject Company or any Subject Company Subsidiary are eligible
to participate (collectively, the "Subject Company Benefit Plans"). Any of the
Subject Company 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
"Subject Company ERISA Plan." Each Subject Company 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 "Subject Company Pension Plan." No Subject
Company Pension Plan is or has been a multiemployer plan within the meaning of
Section 3(37) of ERISA.
(b) All Subject Company 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 Subject Company.
Each Subject Company ERISA Plan that is intended to be qualified under Section
401(a) of the Internal Revenue Code has either received a favorable
determination letter from the Internal Revenue Service (and Subject Company is
not aware of any circumstances likely to result in revocation of any such
favorable determination letter) or timely application
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has been made therefor. To the knowledge of Subject Company, neither Subject
Company nor any of the Subject Company Subsidiaries has engaged in a
transaction with respect to any Subject Company Benefit Plan that, assuming the
taxable period of such transaction expired as of the date hereof, would subject
any Subject Company to a material Tax imposed by either Section 4975 of the
Internal Revenue Code or Section 502(i) of ERISA.
(c) Except as disclosed in Section 5.14 of the Subject
Company Disclosure Memorandum, no Subject Company Pension Plan has any
"underfunded 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 Subject Company Pension Plan, (ii) no
change in the actuarial assumptions with respect to any Subject Company Pension
Plan, and (iii) no increase in benefits under any Subject Company 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
Subject Company or materially adversely affect the funding status of any such
plan. Neither any Subject Company Pension Plan nor any "single-employer plan,"
within the meaning of Section 4001(a)(15) of ERISA, currently or formerly
maintained by Subject Company or any of the Subject Company Subsidiaries, or
the single-employer plan of any entity which is considered one employer with
Subject Company 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. Neither
Subject Company nor any of the Subject Company Subsidiaries has provided, or,
to Subject Company's knowledge, is required to provide, security to a Subject
Company 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 material Liability under Subtitle C or D of Title IV of ERISA has been
incurred by Subject Company or any of the Subject Company Subsidiaries with
respect to any current, frozen, or terminated single-employer plan or the
single-employer plan of any ERISA Affiliate. Neither Subject Company nor any
of the Subject Company Subsidiaries has incurred any material withdrawal
Liability with respect to a multiemployer plan under Subtitle E 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 Subject Company Pension Plan or by any ERISA
Affiliate within the 12-month period ending on the date hereof.
(e) Except as disclosed in Section 5.14 of the Subject
Company Disclosure Memorandum, neither Subject Company nor any of the Subject
Company Subsidiaries has any material Liability for retiree health and life
benefits under any of the Subject Company Benefit Plans.
(f) Except as disclosed in Section 5.14 of the Subject
Company 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 or golden
parachute) becoming due to any director or any employee of Subject Company or
any of the Subject Company Subsidiaries from Subject Company or any of the
Subject Company Subsidiaries under any Subject Company Benefit Plan, (ii)
materially increase any benefits otherwise payable under any Subject Company
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 Subject Company Subsidiary 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 Subject Company
Financial Statements to the extent required by and in accordance with GAAP.
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5.15 Material Contracts. Except as disclosed in the
Subject Company SEC Reports, in the SEC Documents filed by Holding or as
disclosed in Section 5.15 of the Subject Company Disclosure Memorandum, neither
Subject Company, the Subject Company Subsidiaries, 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 Subject Company or any of the Subject Company
Subsidiaries or the guarantee by Subject Company or any of the Subject Company
Subsidiaries of any such obligation (other than Contracts evidencing deposit
liabilities, purchases of federal funds, fully-secured repurchase agreements,
trade payables, and Contracts relating to borrowings or guarantees made in the
ordinary course of business), (iii) any Contracts which prohibit or restrict
Subject Company or any of the Subject Company Subsidiaries 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 Subject
Company and the Subject Company Subsidiaries, (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 Subject Company 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 required to be filed as an exhibit to a Subject Company SEC
Report filed by Subject Company with the SEC prior to the date of this
Agreement that has not been filed as an exhibit to a Subject Company SEC Report
(together with all Contracts referred to in Sections 5.9 and 5.14(a) of this
Agreement, the "Subject Company Contracts"). With respect to each Subject
Company Contract: (i) the Contract is in full force and effect; (ii) neither
Subject Company nor any Subject Company Subsidiary is in Default thereunder;
(iii) neither Subject Company nor its Subsidiaries 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 Subject Company, in Default in any respect or
has repudiated or waived any material provision thereunder.
5.16 Legal Proceedings. There is no Litigation instituted
or pending, or, to the Knowledge of Subject Company, threatened (or unasserted
but considered probable of assertion and which if asserted would have at least
a reasonable probability of an unfavorable outcome) against Subject Company or
any of the Subject Company Subsidiaries, 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 Subject Company,
nor are there any Orders of any Regulatory Authorities, other governmental
authorities, or arbitrators outstanding against Subject Company or any of the
Subject Company Subsidiaries. Section 5.16 of the Subject Company Disclosure
Memorandum includes a summary report of all material Litigation as of the date
of this Agreement to which Subject Company or any Subject Company Subsidiary is
a party and which names Subject Company or a Subject Company Subsidiary as a
defendant or cross-defendant.
5.17 Reports. Except as disclosed in Section 5.17 of the
Subject Company Disclosure Memorandum, since January 1, 1994, or the applicable
date of organization if later, Subject Company and each Subject Company
Subsidiary 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 (the "Subject Company SEC Reports"), (ii) other
Regulatory Authorities, and (iii) any applicable state securities or banking
authorities, except failures to file which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Subject Company.
As of its respective date (or, if amended or superseded by a filing prior to
the date of this Agreement, then on the date of such filing), 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 (or, if amended or superseded by a filing prior to
the date of this Agreement, then on the date of such filing), each Subject
Company SEC Report did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances under which
they were made, not misleading. Except for Holding or as disclosed in Section
5.17 of the Subject Company Disclosure Schedule, none of the Subject Company
Subsidiaries is required to file any SEC Documents.
5.18 Statements True and Correct. None of the information
supplied or to be supplied by Subject Company for inclusion in the Registration
Statement to be filed by Parent with the SEC will, when the
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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 Subject Company for inclusion in the Proxy Statement to be mailed
to Subject Company's shareholders in connection with the Shareholders' Meeting,
and any other documents to be filed by Subject Company 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 Proxy Statement, when first mailed to the shareholders of Subject
Company, 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 Proxy Statement or any amendment thereof or supplement thereto, at the
time of the Shareholders' Meeting, 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' Meeting. All documents that Subject Company or the
Subject Company Subsidiaries are 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.
5.19 Accounting, Tax, and Regulatory Matters. Neither
Subject Company nor any of the Subject Company Subsidiaries has taken any
action or has any Knowledge of any fact or circumstance relating to Subject
Company 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.
5.20 State Takeover Laws. Except as disclosed in Section
5.20 of the Subject Company Disclosure Memorandum, Subject Company has taken
all necessary action to exempt the transactions contemplated by this Agreement
from any applicable "moratorium," "fair price," "business combination,"
"control share," or other anti-takeover laws (collectively, "Takeover Laws"),
including Sections 607.0901 and 607.0902 of the FBCA.
5.21 Article Provisions. Except as disclosed in Section
5.21 of the Subject Company Disclosure Memorandum, Subject Company has taken
all action so that the entering into of this Agreement and the consummation of
the Merger and the other transactions contemplated by this Agreement do not and
will not result in the grant of any rights to any Person under the Articles,
By-laws or other governing instruments of Subject Company or any Subject
Company Subsidiary or restrict or impair the ability of Parent or any of the
Parent Subsidiaries to vote, or otherwise to exercise the rights of a
shareholder with respect to, shares of Subject Company or any Subject Company
Subsidiary.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent hereby represents and warrants to Subject Company as
follows:
6.1 Organization, Standing and Power. Parent 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. Parent 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 Parent.
6.2 Authority; No Breach by Agreement. (a) Parent 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
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corporate action (including valid authorization and adoption of this Agreement
by Parent's duly constituted Board of Directors) in respect thereof on the part
of Parent. Assuming due authorization, execution and delivery of this
Agreement by Subject Company, this Agreement (which, for purposes of this
sentence, shall not include the Stock Option Agreement) represents a legal,
valid, and binding obligation of Parent, enforceable against Parent 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
(which, for purposes of clause (iii) of this sentence, shall not include the
Stock Option Agreement) by Parent, nor the compliance by Parent with any of the
provisions hereof, will (i) conflict with or result in a breach of any
provision of Parent's Restated Charter of Incorporation or By-laws, or (ii)
constitute or result in a Default under, or require any Consent (excluding
Consents required by Law or Order) pursuant to, or result in the creation of
any Lien on any material Asset of Parent or any Parent Subsidiary under, any
Contract or Permit of Parent or any Parent Subsidiary, except for such
Defaults, Liens and Consents, which, if not obtained or made, are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Parent, 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 Parent or any Parent Subsidiary 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 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 Parent, no
notice to, filing with, or Consent of, any public body or authority is
necessary for the consummation by Parent of the Merger and the other
transactions contemplated in this Agreement.
6.3 Capital Stock. The authorized capital stock of
Parent consists of (i) 100,000,000 shares of Parent Common Stock, of which
66,790,144 shares are issued and outstanding as of June 30, 1997, and (ii)
10,000,000 shares of Parent Preferred Stock, of which 2,533,236 shares of
Parent Series E Preferred Stock are issued and outstanding. All of the issued
and outstanding shares of Parent Capital Stock are, and all of the shares of
Parent Common Stock to be issued in exchange for shares of Subject Company
Common Stock upon consummation of the Merger, when issued in exchange for
shares of Subject Company 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 Parent Capital Stock has been, and none of
the shares of Parent Common Stock to be issued in exchange for shares of
Subject Company Common Stock upon consummation of the Merger will be, issued in
violation of any preemptive rights of the current or past shareholders of
Parent. Parent has reserved for issuance a sufficient number of shares of
Parent Common Stock for the purpose of issuing shares of Parent Common Stock in
accordance with the provisions of Sections 3.1 and 3.5 of this Agreement.
6.4 Parent Subsidiaries. Except as set forth in Section
6.4 of the Parent Disclosure Memorandum, Parent or one of its wholly owned
Subsidiaries owns all of the issued and outstanding shares of capital stock (or
other equity interests) of each of the Parent Subsidiaries. No capital stock
(or other equity interest) of any Parent Subsidiary is or may become required
to be issued (other than to another Parent Subsidiary) by reason of any rights,
and there are no Contracts by which the Parent or any of the Parent
Subsidiaries are bound to issue (other than to Parent or any of the Parent
Subsidiaries) additional shares of its capital stock (or other equity
interests) or Rights or by which Parent or any of the Parent Subsidiaries are
or may be bound to transfer any shares of the capital stock (or other equity
interests) of any of Parent or any of the Parent Subsidiaries (other than to
Parent or any of the Parent Subsidiaries). There are no Contracts relating to
the rights of Parent or any Parent Subsidiary to vote or to dispose of any
shares of the capital stock (or other equity interests) of Parent or any of the
Parent Subsidiaries. All of the shares of capital stock (or other equity
interests) of each Parent Subsidiary held by
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Parent or any Parent Subsidiary are fully paid and nonassessable (except
pursuant to 12 U.S.C. Section 55 in the case of national banks and comparable,
applicable state Law, if any, in the case of state depository institutions)
under the applicable corporation or similar Law of the jurisdiction in which
such Subsidiary is incorporated or organized and are owned by Parent or a
Parent Subsidiary free and clear of any Liens. Each Parent 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 Parent 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 Parent.
The minute book and other organizational documents (and all amendments thereto)
for each of Parent and each Parent Subsidiary that is a Significant Subsidiary
have been made available to Subject Company for its review, and are true and
complete as in effect as of the date of this Agreement.
6.5 Financial Statements. Each of the Parent Financial
Statements (including, in each case, any related notes) contained in the Parent
SEC Reports, including any Parent SEC Reports filed after the date of this
Agreement until the Effective Time, complied, or will comply, as to form in all
material respects with the applicable published rules and regulations of the
SEC with respect thereto, was prepared, or will be 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, or will fairly present, in all material respects the consolidated
financial position of Parent and the Parent 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.
6.6 Absence of Undisclosed Liabilities. Neither Parent
nor any of the Parent Subsidiaries has any Liabilities that are reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Parent, except Liabilities which are accrued or reserved against in the
consolidated balance sheets of Parent as of March 31, 1997, included in the
Parent Financial Statements made available prior to the date of this Agreement
or reflected in the notes thereto. Neither Parent nor any of the Parent
Subsidiaries has incurred or paid any Liability since March 31, 1997, except
for such Liabilities incurred or paid (i) in the ordinary course of business
consistent with past business practice or which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on Parent or
(ii) in connection with the transaction contemplated by this Agreement.
6.7 Absence of Certain Changes or Events. Since December
31, 1996, except as disclosed in the Parent SEC Reports made available prior to
the date of this Agreement or in Section 6.7 of the Parent Disclosure
Memorandum, 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 Parent.
6.8 Tax Matters. (a) All material Tax Returns required
to be filed by or on behalf of Parent or any of the Parent Subsidiaries 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, 1996, and on
or before the date of the most recent fiscal year end immediately preceding the
Effective Time, and all such Tax Returns filed are complete and accurate in all
material respects. All Taxes shown on filed Tax Returns have been paid. There
is no audit examination, or refund Litigation with respect to any material
Taxes, except as reserved against the Parent Financial Statements delivered
prior to the date of this Agreement. All material Taxes and other material
Liabilities due with respect to completed and settled examinations or concluded
Litigation have been paid. There are no material Liens with respect to Taxes
upon any of the Assets of Parent or any of the Parent Subsidiaries.
(b) Adequate provision for any material Taxes due or to
become due for Parent or any of the Parent Subsidiaries for the period or
periods through and including the date of the respective Parent Financial
Statements has been made and is reflected on such Parent Financial Statements.
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(c) Material deferred Taxes of Parent and the Parent
Subsidiaries have been provided for in accordance with GAAP.
6.9 Environmental Matters. (a) To the Knowledge of
Parent, each of Parent and the Parent Subsidiaries, 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 Parent.
(b) To the Knowledge of Parent, there is no Litigation
pending or threatened before any court, governmental agency, or authority or
other forum in which Parent or any of the Parent Subsidiaries or any of their
respective Operating Properties or Participation Facilities (or Parent 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 Parent or any of the Parent
Subsidiaries or any of their respective 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 Parent, nor, to the knowledge of Parent, is there any reasonable
basis for any Litigation of a type described in this sentence.
(c) During the period of (i) Parent's or any of the
Parent Subsidiaries' ownership or operation of any of their respective current
properties, (ii) any Parent's or any of the Parent Subsidiaries' participation
in the management of any Participation Facility, or (iii) Parent's or any of
the Parent Subsidiaries' holding of a security interest in an Operating
Property, to the Knowledge of Parent, 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 Parent. Prior to the period
of (i) Parent's or any of Parent Subsidiaries' ownership or operation of any of
their respective current properties, (ii) Parent's or any of Parent
Subsidiaries' participation in the management of any Participation Facility,
or (iii) Parent or any of Parent Subsidiaries' holding of a security interest
in an Operating Property, to the Knowledge of Parent, 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 Parent.
6.10 Compliance With Laws. Parent is duly registered as a
bank holding company under the BHC Act. Each of Parent and the Parent
Subsidiaries has in effect all Permits necessary for it to own, lease, or
operate its material Assets and to carry on its business as now conducted,
except where the failure to hold such permits would not be reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on Parent.
Neither Parent nor any of the Parent Subsidiaries:
(a) is in violation of any Laws, Orders, or Permits
applicable to its business or employees conducting its business, except for
such violations which would not be reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Parent; or
(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 Parent or any
Parent Subsidiary 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 Parent or any Parent Subsidiary 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.
6.11 Legal Proceedings. There is no Litigation instituted
or pending, or, to the Knowledge of Parent, threatened (or unasserted but
considered probable of assertion and which if asserted would have at least a
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reasonable probability of an unfavorable outcome) against Parent or any Parent
Subsidiary, 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 Parent, nor are there any Orders of any Regulatory Authorities, other
governmental authorities, or arbitrators outstanding against Parent or any
Parent Subsidiary.
6.12 Reports. Since January 1, 1994, or the applicable
date of organization if later, Parent and each Parent Subsidiary 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 (the
"Parent SEC Reports"), (ii) other Regulatory Authorities, and (iii) any
applicable state securities or banking authorities, except failures to file
which are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Parent. As of its respective date (or, if amended
or superseded by a filing prior to the date of this Agreement, then on the date
of such filing), 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 Parent SEC Report
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they were made, not
misleading. Except for Parent Subsidiaries that are registered as a broker,
dealer, or investment advisor, no Parent Subsidiary is required to file any
SEC Documents.
6.13 Statements True and Correct. None of the information
supplied or to be supplied by Parent for inclusion in the Registration
Statement to be filed by Parent 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 Parent for inclusion in the Proxy Statement to be mailed to Subject
Company's shareholders in connection with the Shareholders' Meeting, and any
other documents to be filed by Parent or any Parent Subsidiary 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 Proxy Statement, when first mailed to the shareholders of Subject
Company, 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 Proxy Statement or any amendment thereof or supplement thereto, at the
time of the Shareholders' Meeting, 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' Meeting. All documents that Parent or any Parent
Subsidiary 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.
6.14 Accounting, Tax, and Regulatory Matters. Neither
Parent nor any Parent Subsidiary has taken any action or has any Knowledge of
any fact or circumstance relating to Parent 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.
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 Affirmative Covenants of Subject Company. Unless the
prior written consent of Parent shall have been obtained, and except as
otherwise expressly contemplated herein, Subject Company shall and shall cause
each of the Subject Company Subsidiaries to (i) operate its business only in
the usual, regular, and ordinary course, (ii) use reasonable efforts to
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 or prevent the transactions contemplated
hereby,
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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 Subject Company. Except as
specifically permitted by this Agreement, from the date of this Agreement until
the earlier of the Effective Time or the termination of this Agreement, Subject
Company covenants and agrees that it will not do or agree or commit to do, or
permit any of the Subject Company 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 Parent, which consent shall
not be unreasonably withheld:
(a) amend the Articles, By-laws, or other governing
instruments of Subject Company or any Subject Company Subsidiary; or
(b) incur any additional debt obligation for borrowed
money (other than indebtedness of Subject Company or the Subject Company
Subsidiaries to each other) in excess of an aggregate of $500,000 (for Subject
Company and the Subject Company Subsidiaries on a consolidated basis) except in
the ordinary course of the business of the Subject Company Subsidiaries
consistent with past practices (which shall include, for the Subject Company
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
material Asset of Subject Company or any of the Subject Company Subsidiaries 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 Subject Company 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 Subject Company or any of the Subject Company
Subsidiaries, or declare or pay any dividend or make any other distribution in
respect of Subject Company's capital stock, provided that Subject Company 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
Subject Company Common Stock at a rate not in excess of $.08 per share with
usual and regular record and payment dates in accordance with past practice,
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 Subject
Company Common Stock do not become entitled to receive both a dividend in
respect of their Subject Company Common Stock and a dividend in respect of
Parent Common Stock or fail to be entitled to receive any dividend; or
(d) except (I) for this Agreement, (II) 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 under the Subject Company Stock
Plans or (III) pursuant to the exercise of stock options granted by Holding, or
(IV) 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 its common stock or any other capital
stock, 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 Subject Company or any of the Subject Company Subsidiaries or issue or
authorize the issuance of any other securities in respect of or in substitution
for shares of Subject Company Common Stock, or sell, lease, mortgage or
otherwise dispose of or otherwise encumber any shares of capital stock of any
Subject Company Subsidiary (unless any such shares of stock are sold or
otherwise transferred to another Subject Company Subsidiary) or any Asset
having a book value in excess of $250,000 other than in the ordinary course of
business for reasonable and adequate consideration; or
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(f) except for purchases of investment securities
acquired in the ordinary course of business consistent with past practice,
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 Subsidiary of Subject
Company, 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 Subject Company or the Subject Company Subsidiaries,
except in the ordinary course of business consistent with past practice and
disclosed in Section 7.2(g) of the Subject Company 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 Subject Company Disclosure
Memorandum; enter into or amend any severance agreements with officers of
Subject Company or the Subject Company Subsidiaries; grant any material
increase in fees or other increases in compensation or other benefits to
directors of Subject Company or the Subject Company Subsidiaries; 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 Subject Company); or
(h) enter into or amend any employment Contract between
Subject Company or the Subject Company Subsidiaries and any Person (unless such
amendment is required by Law) that Subject 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 Subject
Company or the Subject Company Subsidiaries or terminate or withdraw from, or
make any material change in or to, any existing employee benefit plans of
Subject Company or the Subject Company Subsidiaries 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 practices; or
(j) make any material 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
(k) commence any Litigation other than in accordance with
past practice, settle any Litigation involving any Liability of Subject Company
or the Subject Company Subsidiaries for material money damages or restrictions
upon the operations of Subject Company or the Subject Company Subsidiaries; or
(l) except in the ordinary course consistent with past
practice, 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 Parent. From the date of this Agreement
until the earlier of the Effective Time or the termination of this Agreement,
Parent covenants and agrees that it shall (i) continue to conduct its business
and the business of the Parent Subsidiaries in a manner designed in its
reasonable judgment to enhance the long-term value of the Parent Common Stock
and the business prospects of Parent and the Parent Subsidiaries, 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 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 Parent entering into an
agreement with respect to an Acquisition Proposal with a third party which
could be reasonably expected to result in the Merger not being consummated;
provided, that the foregoing shall not prevent Parent or any Parent Subsidiary
from acquiring any
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other Assets or businesses or from discontinuing or disposing of any of its
Assets or business if such action is, in the reasonable judgment of Parent,
desirable in the conduct of the business of Parent and the Parent Subsidiaries
and would not, in the reasonable judgment of Parent, 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, to the extent permitted by
Law, 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; Proxy Statement; Shareholder
Approval. Each of Parent and Subject Company shall prepare and file the
Registration Statement, of which the Proxy Statement shall form a part, with
the SEC, and shall use its reasonable efforts to cause the Registration
Statement to become effective under the 1933 Act and Parent shall 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 Parent Common Stock upon
consummation of the Merger. Each of Parent and Subject Company shall furnish
all information concerning it and the holders of its capital stock as the other
Party may reasonably request in connection with such action. Subject Company
shall call a Shareholders' Meeting, to be held as soon as practicable after the
Registration Statement is declared effective by the SEC, for the purpose of
voting upon approval of this Agreement and such other related matters as it
deems appropriate. In connection with the Shareholders' Meeting, (i) the Board
of Directors of Subject Company shall recommend (subject to compliance with its
fiduciary duties as advised by counsel) to its shareholders the approval of the
Merger, and (ii) the Board of Directors (subject to compliance with its
fiduciary duties as advised by counsel) and officers of Subject Company shall
use their reasonable efforts to obtain shareholder approval.
8.2 Exchange Listing. Parent shall use its reasonable
efforts to list, prior to the Effective Time, on the NYSE, subject to official
notice of issuance, the shares of Parent Common Stock to be issued to the
holders of Subject Company Common Stock or Subject Company Options pursuant to
the Merger, and Parent shall give all notices and make all filings with the
NYSE required in connection with the transactions contemplated herein.
8.3 Applications. Parent shall prepare and file, and
Subject Company 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; provided, however, that no party shall be required to seek any
Consents for the exercise of any rights or performance of any obligations under
the Stock Option Agreement except
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as set forth in such agreement. At least five business days prior to each
filing, Parent shall provide Subject Company 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, Parent and Subject Company shall
execute and file the Articles of Merger with the Secretary of State of the
State of Florida 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, however, that no party
shall be required to seek any Consents or take any other actions for the
exercise of any rights or performance of any obligations under the Stock Option
Agreement except as set forth in such 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; provided, however, that no party shall be
required to seek any Consents or take any other actions for the exercise of any
rights or performance of any obligations under the Stock Option Agreement
except as set forth in such 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. Neither Party shall be required to provide access to or to
disclose information where such access or disclosure would violate or prejudice
the rights of such Party's customers, jeopardize any attorney-client privilege
or contravene any Law, rule, regulation, order, judgment, decree, fiduciary
duty or binding agreement entered into prior to the date of this Agreement.
The Parties will make appropriate substitute disclosure arrangements under
circumstances in which the restrictions of the preceding sentence apply. No
investigation by a Party shall affect the representations and warranties of the
other Party.
(b) Each Party will hold all information gathered
pursuant to this Agreement in confidence to the extent required by, and in
accordance with, the provisions of the Confidentiality Agreement, dated April
23, 1997, between Parent and Subject Company.
8.7 Press Releases. Prior to the Effective Time, Subject
Company and Parent 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 transactions contemplated hereby, after the date of this
Agreement, neither Subject Company, the Subject Company Subsidiaries nor any
Representatives thereof retained by Subject Company or the Subject Company
Subsidiaries shall directly or indirectly solicit any Acquisition Proposal by
any Person. Except to the extent necessary to comply with the fiduciary duties
of Subject Company's Board of Directors as advised by counsel, Subject Company,
the Subject Company Subsidiaries, or Representatives thereof shall not 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 Subject Company 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
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by counsel. Subject Company shall promptly notify Parent orally and in writing
in the event that it receives any Acquisition Proposal or inquiry related
thereto. Subject Company 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 Agreement of Affiliates. Subject Company has
disclosed in Section 8.10 of the Subject Company Disclosure Memorandum each
Person whom it reasonably believes is an "affiliate" of Subject Company as of
the date of this Agreement for purposes of Rule 145 under the 1933 Act.
Subject Company shall use its reasonable efforts to cause each such Person to
deliver to Parent not later than 40 days prior to the Effective Time, a written
agreement, substantially in the form of Exhibit 3, providing that such Person
will not sell, pledge, transfer, or otherwise dispose of the shares of Subject
Company 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 Parent 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 Parent and Subject Company 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
Parent Common Stock issued to such affiliates of Subject Company in exchange
for shares of Subject Company Common Stock shall not be transferable until such
time as financial results covering at least 30 days of combined operations of
Parent and Subject Company 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 8.10 (and Parent shall be entitled to place restrictive legends
upon certificates for shares of Parent Common Stock issued to affiliates of
Subject Company pursuant to this Agreement to enforce the provisions of this
Section 8.10). Parent shall not be required to maintain the effectiveness of
the Registration Statement under the 1933 Act for the purposes of resale of
Parent Common Stock by such affiliates.
8.11 Employee Benefits and Contracts. (a) Following
the Effective Time, Parent shall provide to officers and employees of the
Subject Company and any Subject Company Subsidiary, employee benefits under
employee benefit and welfare plans of Parent or the Parent Subsidiaries on
terms and conditions which when taken as a whole are substantially similar to
those currently provided by Parent or a Parent Subsidiary 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 Subject Company and any
Subject Company Subsidiary prior to the Effective Time shall be treated as
service with Parent or a Parent Subsidiary participating in such employee
benefit plans.
(b) Except as set forth in the Supplemental Letter,
Parent shall, and shall cause the Parent Subsidiaries to, honor in accordance
with their terms the Subject Company Benefit Plans, each as amended to the date
hereof, and other contracts, arrangements, commitments or understandings
disclosed in Section 8.11 of the Subject Company Disclosure Memorandum. Parent
and Subject Company hereby acknowledge that consummation of the Merger will
constitute a "Change in Control" for purposes of all employee benefit plans,
contracts, arrangements and commitments that contain change in control
provisions and, except as set forth in the Supplemental Letter, agree to abide
by the provisions of any employee benefit plan, contract, arrangement or
commitment which relates to a Change in Control.
8.12 Indemnification. (a) After the Effective Time,
Parent shall indemnify, defend and hold harmless the present and former
directors, officers, employees, and agents of the Subject Company and any
Subject Company Subsidiary (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
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expenses, judgments, fines 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 and
the proceedings entitled Nathan J. Esformes, Stanley I. Worton, M.D., and
Leonard Wein, as individual shareholders and on behalf of all other
shareholders of Subject Company v. Abel Holtz, Fana Holtz, Daniel M. Holtz and
Javier J. Holtz, the Bank and Subject Company and Stanley I. Worton, M.D.,
Nathan Esformes v. Abel Holtz, Fana Holtz, Daniel Holtz, Alex Halberstein and
Subject Company) to the full extent permitted under any of Florida Law, Subject
Company's Articles and By-laws as in effect on the date hereof and any
indemnity agreements entered into prior to the date of this Agreement by
Subject Company or any Subject Company Subsidiary and any director, officer,
employee or agent of Subject Company or any Subject Company Subsidiary,
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 Parent is required to effectuate any indemnification, Parent 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
Parent and the Indemnified Party.
(b) Parent shall use its reasonable efforts (and Subject
Company shall cooperate prior to the Effective Time in these efforts) to
maintain in effect for a period of three years after the Effective Time Subject
Company's existing directors' and officers' liability insurance policy
(provided that Parent 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 Subject Company given prior to
the Effective Time, any other policy) with respect to claims arising from facts
or events which occurred prior to the Effective Time and covering persons who
are currently covered by such insurance; provided, that the Surviving
Corporation shall not be obligated to make aggregate annual premium payments
for such three-year period in respect of such policy (or coverage replacing
such policy) which exceed, for the portion related to Subject Company's
directors and officers, 150% of the annual premium payments on Subject
Company's current policy in effect as of the date of this Agreement (the
"Maximum Amount"). If the amount of the premiums necessary to maintain or
procure such insurance coverage exceeds the Maximum Amount, Parent shall use
its reasonable efforts to maintain the most advantageous policies of directors'
and officers' liability insurance obtainable for a premium equal to the Maximum
Amount.
(c) Any Indemnified Party wishing to claim
indemnification under paragraph (a) of this Section 8.12, upon learning of any
such Liability or Litigation, shall promptly notify Parent thereof, provided
that the failure so to notify shall not affect the obligations of Parent under
this Section 8.12 unless and to the extent such failure materially increases
Parent's Liability under this Section 8.12. In the event of any such
Litigation (whether arising before or after the Effective Time), (i) Parent or
the Surviving Corporation shall have the right to assume the defense thereof
and Parent 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
Parent 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 Parent or the Surviving Corporation
and the Indemnified Parties or between the Indemnified Parties, the Indemnified
Parties may retain counsel satisfactory to them, and Parent 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 Parent shall be obligated pursuant to this paragraph (c) to pay for only
two firms of counsel for all Indemnified Parties in any jurisdiction, (ii) the
Indemnified Parties will cooperate in the defense of any such Litigation, and
(iii) neither Parent nor the Surviving Corporation shall be liable for any
settlement effected without its prior written consent or 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) If either Parent or the Surviving Corporation or any
of their respective 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 Parent or the Surviving Corporation, as the
case may be, shall assume the obligations set forth in this Section 8.12
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(e) Parent 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 8.12.
(f) The provisions of this Section 8.12 are intended to
be for the benefit of, and shall be enforceable by, each Indemnified Party and
his or her heirs and representatives.
8.13 Merger Subsidiary Organization. Parent shall
organize Merger Subsidiary under the Laws of the State of Tennessee. Prior to
the Effective Time, the outstanding capital stock of Merger Subsidiary shall
consist of 1,000 shares of Parent Merger Subsidiary Common Stock, all of which
shares shall be owned by Parent. Prior to the Effective Time, 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
as the Parties may otherwise agree. Parent, as the sole stockholder of Merger
Subsidiary, shall vote prior to the Effective Time the shares of Merger
Subsidiary Common Stock in favor of this Agreement.
8.14 State Takeover Laws. Subject Company shall use, and
shall cause Holdings to use, its reasonable efforts to take all necessary steps
to exempt the transactions contemplated by this Agreement from the Takeover
Laws.
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 Approval. The shareholders of Subject
Company shall have approved this Agreement and the consummation of the
transactions contemplated hereby and thereby, including the Merger, as and to
the extent required by Law, or by the provisions of any governing instruments
(without regard to any shares which are voted pursuant to irrevocable proxies,
the validity of which has been contested by the underlying owner, unless the
underlying owner has given written instructions with respect to the voting of
such shares in connection with this Agreement).
(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 and
associated branches) which in the reasonable judgment of the Board of Directors
of Parent 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, Parent 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 by Law or Order (whether temporary,
preliminary, or permanent) or taken any other action which prohibits,
restricts, or makes illegal consummation of the transactions contemplated by
this Agreement.
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(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 Parent Common Stock issuable pursuant
to the Merger shall have been received.
(f) Exchange Listing. The shares of Parent Common Stock
issuable pursuant to the Merger shall have been approved for listing on the
NYSE, subject to official notice of issuance.
(g) Tax Matters. Parent shall have received a written
opinion of counsel from Alston & Bird LLP, and Subject Company shall have
received a written opinion of counsel from Skadden, Arps, Slate, Meagher & Flom
LLP, in form and substance reasonably satisfactory to Parent and Subject
Company, respectively, dated as of the Effective Time, in each case
substantially to the effect that (i) the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, (ii) no gain or loss will be recognized by the shareholders of Subject
Company who exchange all of their Subject Company Common Stock solely for
Parent Common Stock pursuant to the Merger (except with respect to cash
received in lieu of a fractional share interest in Parent Common Stock), (iii)
the tax basis of the Parent Common Stock received by shareholders of Subject
Company who exchange Subject Company Common Stock solely for Parent Common
Stock in the Merger will be the same as the tax basis of the Subject Company
Common Stock surrendered in exchange therefor, (iv) the holding period of the
Parent Common Stock received by shareholders of Subject Company in the Merger
will include the period during which the shares of Subject Company Common Stock
surrendered in exchange therefor were held, provided such Subject Company
Common Stock was held as a capital asset by the holder of such Subject Company
Common Stock at the Effective Time, and (v) neither Subject Company nor Parent
will recognize gain or loss as a consequence of the Merger. In rendering such
Tax Opinion, such counsel shall require and be entitled to rely upon
representations and covenants of officers of Parent, Subject Company,
shareholders of Subject Company and others reasonably satisfactory in form and
substance to such counsel.
9.2 Conditions to Obligations of Parent. The obligations
of Parent 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 Parent 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 Subject
Company 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 specific
date shall speak only as of such date). The representations and warranties of
Subject Company set forth in Sections 5.1, 5.2, 5.3, 5.19, 5.20, and 5.21 of
this Agreement shall be true and correct in all material respects. There shall
not exist inaccuracies in the representations and warranties of Subject Company
set forth in this Agreement (including the representations and warranties set
forth in Sections 5.1, 5.2, 5.3, 5.19, 5.20, and 5.21) such that the aggregate
effect of such inaccuracies has, or is reasonably likely to have, a Material
Adverse Effect on Subject Company, provided that, for purposes of this sentence
only, those representations and warranties which are qualified by references to
"material" or "Material Adverse Effect" or "Knowledge" shall be deemed not to
include such qualifications.
(b) Performance of Agreements and Covenants. Each and
all of the agreements and covenants of Subject Company 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. Subject Company shall have delivered
to Parent (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 Sections 9.2(a) and
9.2(b) of this Agreement have been satisfied,
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and (ii) certified copies of resolutions duly adopted by Subject Company'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 consummation of the transactions contemplated hereby, all in
such reasonable detail as Parent shall request.
(d) Parent Pooling Letter. Parent shall have received a
copy of a letter, dated as of the date of filing of the Registration Statement
with the SEC and as of the Effective Time, addressed to it and in a form
reasonably acceptable to it, from Price Waterhouse LLP to the effect that the
Merger will qualify for pooling of interests accounting treatment.
9.3 Conditions to Obligations of Subject Company. The
obligations of Subject Company 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 Subject Company
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 Parent
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
Parent set forth in Sections 6.1, 6.2, 6.3 and 6.14 of this Agreement shall be
true and correct in all material respects. There shall not exist inaccuracies
in the representations and warranties of Parent set forth in this Agreement
(including the representations and warranties set forth in Sections 6.1, 6.2,
6.3 and 6.14) such that the aggregate effect of such inaccuracies has, or is
reasonably likely to have, a Material Adverse Effect on Parent; provided that,
for purposes of this sentence only, those representations and warranties which
are qualified by references to "material" or "Material Adverse Effect" or
"Knowledge" shall be deemed not to include such qualifications.
(b) Performance of Agreements and Covenants. Each and
all of the agreements and covenants of Parent 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. Parent shall have delivered to Subject
Company (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 Sections 9.3(a) and
9.3(b) of this Agreement have been satisfied, and (ii) certified copies of
resolutions duly adopted by Parent's or Merger Subsidiary's Boards 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 Subject
Company shall request.
(d) Subject Company Pooling Letter. Subject Company
shall have received a copy of the letters contemplated by Section 9.2(d).
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<PAGE> 110
ARTICLE 10
TERMINATION
10.1 Termination. Notwithstanding any other provision of
this Agreement, and notwithstanding the approval of this Agreement by the
shareholders of Subject Company, this Agreement 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 Parent
and the Board of Directors of Subject Company; 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 Subject Company and Section
9.3(a) in the case of Parent 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 Subject Company and Section 9.3(a) of this Agreement in the case of
Parent; 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 Subject Company and Section
9.3(a) in the case of Parent 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 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 the
shareholders of Subject Company fail to vote their approval of this Agreement
and the transactions contemplated hereby as required by the FBCA and this
Agreement at the Shareholders' Meeting 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 April 30, 1998, 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 Parent, upon written notice to Subject Company at
any time prior to the close of business on September 12, 1997, if, as a result
of Parent's due diligence investigation of the Assets, the Liabilities, the
business, and the operating performance of Subject Company and the Subject
Company Subsidiaries, Parent's Board of Directors reasonably determines in good
faith that (i) the financial condition, core operating performance or business
of Subject Company and the Subject Company Subsidiaries taken as a whole as of
the date of this Agreement is materially and adversely different from Parent's
reasonable expectations with respect thereto based on the Subject Company's
Annual Report on Form 10-K for the year ended December 31, 1996, the Subject
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1997
and the June 30, 1997 financial information of the Subject Company and the
Subject Company Subsidiaries set forth in Section 5.7 of the Subject Company
Disclosure Memorandum; or (ii) facts or circumstances exist that lead it
reasonably to conclude that it is unlikely that the Subject Company's budget as
reflected in Section 10.1(f) of the Subject Company Disclosure Memorandum are
realizable in all material respects (without giving effect to any loan loss
provisions that Parent may choose to make or request Subject Company to make to
the extent set forth in set forth in Section 10.1(f) of the Parent Disclosure
Memorandum and without regard to any of the transactions contemplated hereby);
or (iii) Sub-
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<PAGE> 111
ject Company's allowance for loan losses and doubtful accounts established by
Subject Company for contingencies as reflected on the balance sheet included in
the Subject Company's earnings release for the quarter ended June 30, 1997
included in Section 5.7 of the Subject Company Disclosure Memorandum (assuming
for this purpose that such allowance is increased to the extent set forth in
Section 10.1(f) of the Parent Disclosure Memorandum) is materially insufficient
to absorb the losses inherent in Subject Company's Assets; provided, that in
connection with any termination pursuant to this clause (f), Parent's notice
shall specify in reasonable detail the basis for its determination; or
(g) By the Board of Directors of Subject Company upon
written notice to Parent 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
the product of (i) 0.80 and (ii) the Starting Price; and
(2) (i) the quotient obtained by dividing the
Average Closing Price by the Starting Price (such number being
referred to herein as the "Parent 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 Subject
Company refuses to consummate the Merger pursuant to this Section
10.1(g), it shall give prompt written notice thereof to Parent;
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, Parent
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
0.80, the Starting Price, 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 Parent Ratio. If Parent makes an election
contemplated by the preceding sentence, within such five-day period,
it shall give prompt written notice to Subject Company of such
election and the revised Exchange Ratio, whereupon no termination
shall have occurred pursuant to this Section 10.1(g) 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(g).
For purposes of this Section 10.1(g), the following terms
shall have the meanings indicated:
"Average Closing Price" shall mean the average of the
daily last sales prices of Parent 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 Parent) 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 later of the date
(i) of the Shareholders' Meeting and (ii) on which the Consent of the
Board of Governors of the Federal Reserve System shall be received
(without regard to any requisite waiting period thereof).
"Index Group" shall mean the 15 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 as of the
Starting Date. In the event that any such company or companies are
removed from the Index Group as a result of any of the events
described in the preceding sentence, the weights (which shall be
determined based upon the number of outstanding shares
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of common stock) shall be redistributed proportionately for purposes
of determining the Index Price. The 15 bank holding companies and the
weights attributed to them are as follows:
<TABLE>
<CAPTION>
BANK HOLDING COMPANIES WEIGHTING
-------------------------------------------------- ---------
<S> <C>
AmSouth Bancorporation 5.75%
BB&T Corporation 7.55
Crestar Financial Corporation 7.75
First American Corporation 4.12
First of America Bank Corporation 6.18
First Security Corporation 8.12
First Tennessee National Corporation 4.49
Firstar Corporation 10.12
Huntington Bancshares, Inc. 11.16
Marshall & Ilsley Corporation 6.22
Mercantile Bancorporation, Inc. 5.19
National Commerce Bancorp 3.44
Old Kent Financial Corporation 3.34
Regions Financial Corporation 9.58
SouthTrust Corporation 6.99
-------
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 Parent 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 Parent) on the Starting Date.
If Parent or any company belonging to the Index Group 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 Parent shall be appropriately adjusted for the purposes of
applying this Section 10.1(g).
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 shall become void and have no effect, except that (i)
the provisions of this Section 10.2, Section 8.6(b), Section 11.2 and Section
11.3 of this Agreement shall survive any such termination and abandonment, and
(ii) a termination pursuant to the terms of this Agreement shall not relieve
the breaching Party from Liability for an uncured willful breach of a
representation, warranty, covenant, or agreement. The Stock Option Agreement
and the Confidentiality Agreement shall be governed by their respective terms
as to its termination.
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<PAGE> 113
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 for those covenants
and agreements which by their terms apply in whole or in part after the
Effective Time.
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 any other Person, directly
or indirectly through one or more intermediaries, controlling,
controlled by, or under common control with such Person.
"Agreement" shall mean this Agreement, 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.
"Bank" shall mean Capital Bank.
"BHC Act" shall mean the federal Bank Holding Company Act of
1956, as amended.
"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
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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 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.
"ERISA Affiliate" shall mean any trade or business, whether or
not incorporated, that together with Subject Company would be deemed a
"single employer" within the meaning of section 4001(b) of ERISA.
"Exhibits" 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.
"FBCA" shall mean the Florida Business Corporation Act.
"Florida Articles of Merger" shall mean the Articles of Merger
to be executed by Subject Company and Merger Subsidiary and filed with
the Secretary of State of the State of Florida relating to the Merger
as contemplated by Section 1.1 of this Agreement.
"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).
"Holding" shall mean Capital Factors Holding, Inc.
"Holding Financial Statements" shall mean (i) the consolidated
balance sheets (including related notes and schedules, if any) of
Holding as of March 31, 1997, and as of December 31, 1996 and 1995,
and the related statements of earnings, changes in shareholders'
equity, and cash flows (including related notes and schedules, if any)
for the three months ended March 31, 1997 and for each of the three
years ended December 31, 1996, 1995 and 1994, as filed by Holding in
SEC Documents, and (ii) the consolidated balance sheets of Holding
(including related notes and schedules, if any) and related statements
of earnings, 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 March 31,
1997.
"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.
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<PAGE> 115
"Internal Revenue Code" shall mean the Internal Revenue Code
of 1986, as amended, and the rules and regulations promulgated
thereunder.
"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.
"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 Taxes upon the assets or
properties of a Party or its Subsidiaries which are 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 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 in
accordance with applicable Law, 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, (b) changes in GAAP or regulatory accounting principles
generally applicable to banks and their holding companies, (c) actions
and omissions of a Party (or any of its Subsidiaries) taken with the
prior written consent of the other Party, (d) changes in economic
conditions or interest rates generally affecting financial
institutions, or (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 Subject Company
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.
"Merger Subsidiary" shall mean the wholly owned subsidiary of
Parent to be organized to effect the Merger under the Laws of the
State of Tennessee.
"Merger Subsidiary Common Stock" shall mean the $1.00 par
value common stock of Merger Subsidiary.
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<PAGE> 116
"NASD" shall mean the National Association of Securities
Dealers, Inc.
"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.
"Parent Capital Stock" shall mean, collectively, the Parent
Common Stock, the Parent Preferred Stock and any other class or series
of capital stock of Parent.
"Parent Common Stock" shall mean the $5.00 par value common
stock of Parent.
"Parent Disclosure Memorandum" shall mean the written
information entitled "Parent Memorandum" delivered prior to the date
of this Agreement to Subject Company 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.
"Parent Financial Statements" shall mean (i) the consolidated
balance sheets (including related notes and schedules, if any) of
Parent as of March 31, 1997, and as of December 31, 1996 and 1995, and
the related statements of earnings, changes in shareholders' equity,
and cash flows (including related notes and schedules, if any) for the
three months ended March 31, 1997 and for each of the three years
ended December 31, 1996, 1995 and 1994, as filed by Parent in SEC
Documents, and (ii) the consolidated balance sheets of Parent
(including related notes and schedules, if any) and related statements
of earnings, 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 March 31,
1997.
"Parent Preferred Stock" shall mean the no par value preferred
stock of Parent and shall include the (i) Series A Preferred Stock and
(ii) Series E 8% Cumulative, Convertible Preferred Stock, of Parent
("Parent Series E Preferred Stock").
"Parent Rights" shall mean the preferred stock purchase rights
issued pursuant to the Parent Rights Agreement.
"Parent Rights Agreement" shall mean that certain Rights
Agreement, dated January 19, 1989, between Parent and UPNB, as Rights
Agent.
"Parent Subsidiaries" shall mean the Subsidiaries of Parent
and any corporation, bank, or other organization acquired as a
Subsidiary of Parent in the future and owned by Parent at the
Effective Time.
"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 Subject Company or Parent, and
"Parties" shall mean both Subject Company and Parent.
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"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.
"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.
"Proxy Statement" shall mean the proxy statement used by
Subject Company to solicit the approval of its shareholders of the
transactions contemplated by this Agreement, which shall include the
prospectus of Parent relating to the issuance of the Parent Common
Stock to holders of Subject Company Common Stock.
"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 Parent under the 1933 Act with respect to the shares of Parent
Common Stock to be issued to the shareholders of Subject Company 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 the
Comptroller of the Currency, the Federal Deposit Insurance
Corporation, the Department of Banking and Finance of the State of
Florida, 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.
"Rights" shall mean all arrangements, calls, commitments,
Contracts, options, rights to subscribe to, scrip, warrants, or other
binding obligations of any character whatsoever by which a Person is
or may be bound to issue additional shares of its capital stock or
other Rights, or securities or rights convertible into or exchangeable
for, shares of the capital stock of a Person.
"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 Law.
"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' Meeting" shall mean the meeting of the
shareholders of Subject Company 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 Parent by Subject Company,
substantially in the form of Exhibit 1.
"Subject Company Common Stock" shall mean the $1.00 par value
common stock of Subject Company.
"Subject Company Disclosure Memorandum" shall mean the written
information entitled "Subject Company Disclosure Memorandum" delivered
prior to the date of this Agreement to Parent describing in reasonable
detail the matters contained therein and, with respect to each
disclosure made
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<PAGE> 118
therein, specifically referencing each Section of this Agreement under
which such disclosure is being made.
"Subject Company Financial Statements" shall mean (i) the
consolidated statements of financial position (including related notes
and schedules, if any) of Subject Company as of March 31, 1997, and as
of December 31, 1996 and 1995, and the related statements of
operations, shareholders' equity, and cash flows (including related
notes and schedules, if any) for the three months ended March 31,
1997, and for each of the three fiscal years ended December 31, 1996,
1995 and 1994, as filed by Subject Company in SEC Documents, and (ii)
the consolidated statements of financial position of Subject Company
(including related notes and schedules, if any) and related statements
of operations, shareholders' equity, and cash flows (including related
notes and schedules, if any) included in SEC Documents filed with
respect to periods ended subsequent to March 31, 1997.
"Subject Company Stock Plans" shall mean the existing stock
option and other stock-based compensation plans of Subject Company.
"Subject Company Subsidiaries" shall mean the Subsidiaries of
Subject Company, which shall include Subject Company Subsidiaries
described in Section 5.4 of this Agreement and any corporation, bank,
or other organization acquired as a Subsidiary of Subject Company in
the future and owned by Subject Company at the Effective Time.
"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 equity 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 in substantially the
form of Exhibit 4.
"Surviving Corporation" shall mean Merger Subsidiary as the
surviving corporation resulting from the Merger.
"Tax" or "Taxes" shall mean all taxes, charges, fees, levies
or other assessments, including, without limitation, all net income,
gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, withholding, payroll, employment, excise,
estimated, severance, stamp, occupation, property or other taxes,
customs duties, fees, assessments or charges of any kind whatsoever,
together with any interest and any penalties, additions to tax or
additional amounts imposed by any taxing authority (domestic or
foreign).
"Tennessee Articles of Merger" shall mean the Articles of
Merger to be executed by Merger Subsidiary and filed with the
Secretary of State of Tennessee, relating to the Merger as
contemplated by Section 1.1 of this Agreement.
"TBCA" shall mean the Tennessee Business Corporation Act.
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(b) The terms set forth below shall have the meanings ascribed
thereto in the referenced sections:
<TABLE>
<S> <C>
Average Closing Price . . . . . . . . . . . . . . . Section 10.1(g)
Closing . . . . . . . . . . . . . . . . . . . . . . Section 1.2
Determination Date . . . . . . . . . . . . . . . . Section 10.1(g)
Effective Time . . . . . . . . . . . . . . . . . . Section 1.3
ERISA Affiliate . . . . . . . . . . . . . . . . . . Section 5.14(c)
Exchange Agent . . . . . . . . . . . . . . . . . . Section 4.1
Exchange Ratio . . . . . . . . . . . . . . . . . . Section 3.1(c)
Indemnified Party . . . . . . . . . . . . . . . . . Section 8.12(a)
Index Group . . . . . . . . . . . . . . . . . . . . Section 10.1(g)
Index Price . . . . . . . . . . . . . . . . . . . . Section 10.1(g)
Index Ratio . . . . . . . . . . . . . . . . . . . . Section 10.1(g)
Merger . . . . . . . . . . . . . . . . . . . . . . Section 1.1
Parent Ratio . . . . . . . . . . . . . . . . . . . Section 10.1(g)
Parent SEC Reports . . . . . . . . . . . . . . . . Section 6.12
Starting Date . . . . . . . . . . . . . . . . . . . Section 10.1(g)
Starting Price . . . . . . . . . . . . . . . . . . Section 10.1(g)
Subject Company Benefit Plans . . . . . . . . . . . Section 5.14(a)
Subject Company Contracts . . . . . . . . . . . . . Section 5.15
Subject Company ERISA Plan . . . . . . . . . . . . Section 5.14(a)
Subject Company Options . . . . . . . . . . . . . . Section 3.5(a)
Subject Company Pension Plan . . . . . . . . . . . Section 5.14(a)
Subject Company SEC Reports . . . . . . . . . . . . Section 5.17
Takeover Laws . . . . . . . . . . . . . . . . . . . Section 5.20
Tax Opinion . . . . . . . . . . . . . . . . . . . . Section 9.1(g)
</TABLE>
(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, 1996.
(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 Subject Company and except for Salomon Brothers Inc. as to
Parent, 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 Subject Company or
Parent other than those disclosed in the previous sentence, each of Subject
Company and Parent, as the case may be, agrees to indemnify and hold the other
Party harmless of and from any Liability incurred by such party in respect of
any such claim.
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11.4 Entire Agreement. Except as otherwise expressly
provided herein, this Agreement (including the other documents and instruments
referred to herein) and the Confidentiality Agreement constitute 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 Section 8.12 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 has been obtained;
provided, that after any such approval by the holders of Subject Company Common
Stock, except as contemplated herein, there shall be made no amendment that has
any of the effects set forth in Section 607.1103 of the FBCA without the
further approval of such shareholders.
11.6 Waivers. (a) Prior to or at the Effective Time,
Parent, 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 Subject Company, to waive or
extend the time for the compliance or fulfillment by Subject Company of any and
all of its obligations under this Agreement, and to waive any or all of the
conditions precedent to the obligations of Parent 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 Parent.
(b) Prior to or at the Effective Time, Subject Company,
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 Parent, to waive or extend the
time for the compliance or fulfillment by Parent of any and all of its
obligations under this Agreement, and to waive any or all of the conditions
precedent to its obligations of Subject Company 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 Subject Company.
(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 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 of a
waiver of any other condition or of the breach of any other term of this
Agreement.
11.7 Assignment. 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 person 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:
Subject Company: Capital Bancorp
1221 Brickell Avenue
Miami, Florida
Attention: Daniel M. Holtz
Telecopy Number: (305) 371-8428
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Copy to Subject Counsel: Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022
Attention: William S. Rubenstein, Esq.
Telecopy Number: (212) 735-2000
Parent: Union Planters Corporation
7130 Goodlett Farms Parkway
Memphis, Tennessee 38018
Attention: Jackson W. Moore
Telecopy Number: (901) 580-2939
Copy to Counsel: Union Planters Corporation
7130 Goodlett Farms Parkway
Memphis, Tennessee 38018
Attention: E. James House, Jr., Esq.
Telecopy Number: (901) 580-2939
and
Alston & Bird LLP
601 Pennsylvania Avenue, N.W.
North Building, Suite 250
Washington, D.C. 20004
Attention: Frank M. Conner III, Esq.
Telecopy Number: (202) 508-3333
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.
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.
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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 enforceable, 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: CAPITAL BANCORP
By: /s/ Timothy E. Kish By: /s/ Daniel M. Holtz
-------------------------------------- -------------------------------------
Timothy E. Kish Daniel M. Holtz
Senior Vice President, General Counsel Chairman of the Board, President and
and Corporate Secretary Principal Executive Officer
[CORPORATE SEAL]
ATTEST: UNION PLANTERS CORPORATION
By: /s/ E. James House, Jr. By: /s/ Jackson W. Moore
-------------------------------------- -------------------------------------
E. James House, Jr. Jackson W. Moore
Secretary President and Chief Operating Officer
[CORPORATE SEAL]
</TABLE>
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APPENDIX B
PLAN OF MERGER
OF
CAPITAL BANCORP
INTO AND WITH
UNION PLANTERS FLORIDA HOLDING CORPORATION
Pursuant to this Plan of Merger ("Plan of Merger"), Capital
Bancorp ("Capital"), a corporation organized and existing under the laws of the
State of Florida, shall be merged into and with Union Planters Florida Holding
Corporation ("Florida Holding"), 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").
ARTICLE 1
DEFINITIONS
Except as otherwise provided herein, the capitalized terms set
forth below shall have the following meanings:
1.1 "Capital Common Stock" shall mean the $1.00 par value
common stock of Capital.
1.2 "Capital Companies" shall mean, collectively, Capital
and all Capital Subsidiaries.
1.3 "Capital Stock Plans" shall mean the existing stock
option and other stock-based compensation plans of Capital.
1.4 "Effective Time" shall mean the date and time on
which the Merger becomes effective pursuant to the Laws of the State of Florida
and the State of Tennessee as defined in Section 2.2 of this Plan of Merger.
1.5 "Exchange Agent" shall mean the exchange agent
selected by UPC.
1.6 "FBCA" shall mean the Florida Business Corporation
Act.
1.7 "Florida Articles of Merger" shall mean the Articles
of Merger to be executed by Capital and Florida Holding and filed with the
Secretary of State of the State of Florida relating to the Merger as
contemplated by Section 2.1 of this Plan of Merger.
1.8 "Florida Holding Common Stock" shall mean the $1.00
par value common stock of Florida Holding.
1.9 "Internal Revenue Code" shall mean the Internal
Revenue Code of 1986, as amended, and the rules and regulations promulgated
thereunder.
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1.10 "Law" shall have the meaning set forth in the Merger
Agreement.
1.11 "Merger" shall mean the merger of Capital into and
with Florida Holding as provided in Section 2.1 of this Plan of Merger.
1.12 "Merger Agreement" shall mean the Amended and
Restated Agreement and Plan of Merger, dated as of August 12, 1997, by and
between UPC and Capital.
1.13 "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.
1.14 "Surviving Corporation" shall refer to Florida
Holding as the surviving corporation resulting from the Merger.
1.15 "TBCA" shall mean the Tennessee Business Corporation
Act.
1.16 "Tennessee Articles of Merger" shall mean the
Articles of Merger to be executed by Florida Holding and filed with the
Secretary of State of Tennessee, relating to the Merger as contemplated by
Section 2.1 of this Plan of Merger.
1.17 "UPC Common Stock" shall mean the $5.00 par value
common stock of UPC.
1.18 "UPC Companies" shall mean, collectively, UPC and
all UPC Subsidiaries.
1.19 "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.
1.20 "UPC Preferred Stock" shall mean the no par value
preferred stock of UPC and shall include the (i) Series A Preferred Stock and
(ii) Series E, 8% Cumulative, Convertible Preferred Stock, of UPC.
1.21 "UPC Rights" shall mean the preferred stock purchase
rights issued pursuant to the UPC Rights Agreement.
1.22 "UPC Rights Agreement" shall mean that certain Rights
Agreement, dated January 19, 1989, between UPC and UPNB, as Rights Agent.
1.23 "UPNB" shall mean Union Planters National Bank, a
wholly-owned subsidiary of UPC.
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, Capital shall be merged
into and with Florida Holding in accordance with the provisions of Section
607.1107 of the FBCA and 48-21-109 of the TBCA and with the effect provided in
Section 607.1106 of the FBCA and 48-21-108 of TBCA. Florida Holding shall be
the Surviving Corporation of the Merger and shall continue to be governed by
the Laws of the State of Tennessee.
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2.2 Effective Time. The Merger shall become effective on
the date and at the time the Florida Articles of Merger reflecting the Merger
shall become effective with the Secretary of State of the State of Florida and
the Tennessee Articles of Merger shall become effective with the Secretary of
State of the State of Tennessee.
2.3 Charter. The Charter of Florida Holding (the
"Charter"), 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 Florida Holding (the
"Bylaws"), 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.
2.5 Directors and Officers. The directors of Florida
Holding 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 Bylaws of the Surviving Corporation. The officers of Florida Holding
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 Bylaws 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, Florida Holding, Capital, 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 Florida Holding Common Stock issued and
outstanding immediately prior to the Effective Time shall remain issued and
outstanding from and after the Effective Time.
(c) Each share of Capital Common Stock (excluding shares
held by any Capital 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 .8525 shares of UPC
Common Stock (as subject to possible adjustment as set forth in Section 10.1(g)
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 Capital 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 Capital or UPC. Each of the shares of
Capital Common Stock held by any Capital 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.
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3.4 Fractional Shares. Notwithstanding any other
provision of this Plan of Merger, each holder of shares of Capital 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 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.
(a) At the Effective Time, each option to purchase or
other right with respect to shares of Capital Common Stock pursuant to stock
options, stock appreciation rights or other rights, including stock awards
("Capital Options") granted by Capital under the Capital 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 Capital Option, in accordance with the terms of the Capital
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 Capital and the Committee of Capital's Board
of Directors (including, if applicable, the entire Board of Directors of
Capital) administering such Capital Stock Plan, (ii) each Capital 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 Capital Option shall be equal to the number of
shares of Capital Common Stock subject to such Capital Option immediately prior
to the Effective Time multiplied by the Exchange Ratio and rounding down to the
nearest whole share, and (iv) the per share exercise price under each such
Capital Option shall be adjusted by dividing the per share exercise price under
each such Capital Option by the Exchange Ratio and rounding up to the nearest
cent. Notwithstanding the clauses (iii) and (iv) of the first sentence of this
Section 3.5, each Capital 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 Capital 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 Capital Stock Plan an appropriate
notice setting forth such participant's rights pursuant thereto and the grants
subject to such Capital 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
Capital Stock Plan to ensure, to the extent required by, and subject to the
provisions of, such Capital Stock Plan, that Capital 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-8, 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) Without limiting the foregoing, and provided that the
right contained in this paragraph (c) is not inconsistent with any of the
conditions contained in Article 9 hereof, each holder of a Capital Option that
is not an "incentive stock option", whether or not then vested, shall have the
right to elect to convert, at the Effective Time, all or a portion of his or
her Capital Options which are not "incentive stock options" and which have not
expired prior to the Effective Time into the right to receive such number of
shares (rounded to the nearest whole share) of UPC Common Stock as are equal in
value (determined by valuing each share of UPC Common Stock at the Average
Closing Price (as defined in Section 10.1(g)) to the excess of (i) the product
of the number of shares of Capital Common Stock subject to such option times
the Exchange Ratio times the Average Closing Price of the UPC Common Stock over
(ii) the product of (A) the exercise price per share of Capital Common Stock
subject to such option and (B) the number of shares of Capital Common Stock
subject to such option. The foregoing right shall be exercised by delivery to
UPC of written notice of election (specifying the number of Capital Options
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covered by such election) by the holder of such Capital Option not later than
two business days prior to the Effective Time.
(d) All contractual restrictions or limitations on
transfer with respect to Capital Common Stock awarded under the Capital Stock
Plans or any other plan, program, or Contract of Capital or any of the Capital
Subsidiaries, 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 Plan of Merger.
ARTICLE 4
DELIVERY OF CONSIDERATION
4.1 Exchange Procedures. Promptly after the Effective
Time, UPC and Capital shall cause the Exchange Agent to mail to the former
shareholders of Capital appropriate transmittal materials (which shall specify
that delivery shall be effected, and risk of loss and title to the certificates
theretofore representing shares of Capital Common Stock shall pass, only upon
proper delivery of such certificates to the Exchange Agent). Capital shall
have the right to review the transmittal materials. 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 Capital 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
Capital 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 Capital
Common Stock is entitled as a result of the Merger until such holder surrenders
such holder's certificate or certificates representing the shares of Capital
Common Stock for exchange as provided in this Section 4.1. The certificate or
certificates of Capital 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 Exchange Agent shall
be liable to a holder of Capital 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 Capital Shareholders. At the
Effective Time, the stock transfer books of Capital shall be closed as to
holders of Capital Common Stock immediately prior to the Effective Time and no
transfer of Capital 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 Capital 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 Capital in respect of
such shares of Capital Common Stock in accordance with the terms of this Plan
of Merger 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 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 Capital 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 Capital Common Stock certificate, both the
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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.
In the event any Capital Common Stock certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such certificate to be lost, stolen or destroyed and, if required by
UPC, the posting by such person of a bond in such amount as UPC may reasonably
direct as indemnity against any claim that may be made against it with respect
to such certificate, the Exchange Agent shall issue in exchange for such lost,
stolen or destroyed certificate the shares of UPC Common Stock and cash in lieu
of fractional shares deliverable in respect thereof pursuant to this Plan of
Merger.
ARTICLE 5
MISCELLANEOUS
5.1 Conditions Precedent. Consummation of the Merger by
Florida Holding shall be conditioned on the satisfaction of, or waiver by UPC
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 Capital shall be
conditioned on the satisfaction of, or waiver by Capital 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 C
[OPINION OF SANDLER, O'NEILL & PARTNERS, LP]
October 9, 1997
Board of Directors
Capital Bancorp
1221 Brickell Avenue
Miami, FL 33131
Ladies and Gentlemen:
Capital Bancorp ("Capital") and Union Planters Corporation ("UPC")
have entered into an Amended and Restated Agreement and Plan of Merger,
dated as of August 12, 1997 (the "Agreement"), pursuant to which Capital will
be merged with and into a wholly-owned subsidiary of UPC to be formed in
connection with the merger (the "Merger"). Upon consummation of the Merger,
each share of Capital common stock, par value $1.00 per share, issued and
outstanding immediately prior to the Merger (the "Capital Shares"), other than
certain shares specified in the Agreement, will be converted into the right to
receive 0.8525 shares of UPC common stock, par value $5.00 per share, subject
to possible adjustment as set forth in the Agreement (the "Exchange Ratio").
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 the Capital Shares.
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 August 12, 1997, between Capital and UPC; (iii)
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, 1996; (iv)
Capital'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, 1996; (v)
UPC's unaudited consolidated financial statements and management's discussion
and analysis of the financial condition and results of operations contained in
its Quarterly Report on Form 10-Q for the quarters ended March 31 and June 30,
1997, respectively; (vi) Capital's unaudited consolidated financial statements
and management's discussion and analysis of the financial condition and results
of operations contained in its Quarterly Report on Form 10-Q for the quarters
ended March 31 and June 30, 1997, respectively; (vii) certain financial
analyses and forecasts of Capital prepared by and reviewed with management of
Capital and the views of senior management of Capital regarding Capital's past
and current business operations, results thereof, financial condition and
future prospects; (viii) the status of certain legal and administrative
proceedings relating to Capital; (ix) 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; (x) the pro forma impact of
the Merger on UPC; (xi) the publicly reported historical price and trading
activity for the common stock of UPC, Capital and Capital Factors Holding, Inc.
("Factors"), including a comparison of certain financial and stock market
information for UPC, Capital and Factors with similar information for certain
other companies the securities of which are publicly traded; (xii) the
financial terms of certain recent business combinations in the banking
industry, to the extent publicly available; (xiii) the current market
environment generally and the banking environment in particular; and (xiv) such
other information, financial studies, analyses and investigations and
financial, economic and market criteria as we considered relevant.
C-1
<PAGE> 130
Board of Directors
Capital Bancorp
October 9, 1997
Page 2
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 that was publicly available or
otherwise furnished to, reviewed by or discussed with us, and we do not assume
any responsibility or liability therefor. We did not make an independent
evaluation or appraisal of the specific assets, the collateral securing assets
or the liabilities of UPC or Capital or any of their subsidiaries, or the
collectibility of any such assets, nor have we been furnished with any such
evaluations or appraisals (relying, where relevant, on the analyses and
estimates of UPC and Capital). 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 Capital and UPC of the respective
future financial performances of UPC and Capital and that such performances
will be achieved. We have also assumed that there has been no material change
in UPC's or Capital's assets, financial condition, results of operations,
business or prospects since June 30, 1997, the date of the last financial
statements noted above. We have assumed that UPC and Capital will remain as
going concerns for all periods relevant to our analyses and that the conditions
precedent to the Agreement are not waived.
Our opinion is necessarily based on financial, 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 this opinion. We have not undertaken to update, revise or reaffirm this
opinion or otherwise comment upon events occurring after the date hereof. We
are expressing no opinion herein as to what the value of UPC common stock will
be when issued to Capital's shareholders pursuant to the Agreement or the
prices at which Capital's or UPC's common stock will trade at any time.
We have acted as Capital's financial advisor in connection with its
consideration of the Merger and will receive a fee for our services, a
significant portion of which is contingent upon consummation of the Merger. We
have also received a fee for rendering this opinion. We have also provided and
continue to provide certain other investment banking services for Capital and
have received and will continue to receive compensation for such services.
In the ordinary course of our business, we may actively trade the
equity securities of UPC and Capital 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 Capital in
connection with the Merger and does not constitute a recommendation to any
stockholder of Capital as to how such stockholder should vote at any meeting of
stockholders called 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, as of
the date hereof, the Exchange Ratio is fair, from a financial point of view, to
the holders of Capital Shares.
Very truly yours,
/s/ SANDLER O'NEILL & PARTNERS, L.P.
C-2
<PAGE> 131
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Restated Charter of the Registrant provides as follows:
TWELFTH: INDEMNIFICATION OF CERTAIN PERSONS:
To the fullest extent permitted by Tennessee law, the
Corporation may indemnify or purchase and maintain insurance to
indemnify any of its directors, officers, employees or agents and any
persons who may serve at the request of the Corporation as directors,
officers, employees, trustees or agents of any other corporation,
firm, association, national banking association, state-chartered bank,
trust company, business trust, organization or any other type of
entity whether or not the Corporation shall have any ownership
interest in such entity. Such indemnification(s) may be provided for
in the Bylaws, or by resolution of the Board of Directors or by
appropriate contract with the person involved.
Article V, INDEMNIFICATION, of the Registrant's Amended and Restated
Bylaws provides as follows:
The Corporation does hereby indemnify its directors and
officers to the fullest extent permitted by the laws of the State of
Tennessee and by ARTICLE TWELFTH of its Charter. The Corporation may
indemnify any other person to the extent permitted by the Charter and
by applicable law.
Indemnification of corporate directors and officers is
governed by Sections 48-18-501 through 48-18-509 of the Tennessee
Business Corporation Act (the "Act"). Under the Act, a person may be
indemnified by a corporation against judgments, fines, amounts paid in
settlement and reasonable expenses (including attorneys' fees)
actually and necessarily incurred by him in connection with any
threatened or pending suit or proceeding or any appeal thereof (other
than an action by or in the right of the corporation), whether civil
or criminal, by reason of the fact that he is or was a director or
officer of the corporation or is or was serving at the request of the
corporation as a director or officer, employee or agent of another
corporation of any type or kind, domestic or foreign, if such director
or officer acted in good faith for a purpose which he reasonably
believed to be in the best interest of the corporation and, in
criminal actions or proceedings only, in addition, had no reasonable
cause to believe that his conduct was unlawful. A Tennessee
corporation may indemnify a director or officer thereof in a suit by
or in the right of the corporation against amounts paid in settlement
and reasonable expenses, including attorneys' fees, actually and
necessarily incurred as a result of such suit unless such director or
officer did not act in good faith or with the degree of diligence,
care and skill which ordinarily prudent men exercise under similar
circumstances and in like positions.
A person who has been wholly successful, on the merits or
otherwise, in the defense of any of the foregoing types of suits or
proceedings is entitled to indemnification for the foregoing amounts.
A person who has not been wholly successful in any such suit or
proceeding may be indemnified only upon the order of a court or a
finding that the director or officer met the required statutory
standard of conduct by (i) a majority vote of a disinterested quorum
of the Board of Directors, (ii) the Board of Directors based upon the
written opinion of independent legal counsel to such effect, or (iii)
a vote to the shareholders.
II-1
<PAGE> 132
ITEM 21. EXHIBITS.
The following exhibits are filed herein or have been, as
noted, previously filed:
<TABLE>
<CAPTION>
Exhibit No. Description
----------- --------------------------------------------------------
<S> <C>
2.1 Amended and Restated Agreement and Plan of Merger, dated
as of August 12, 1997, by and between Union Planters
Corporation and Capital Bancorp. (Included as Appendix
A to the Proxy Statement included as part of this
Registration Statement.)
2.2 Plan of Merger of Capital Bancorp into and with Union
Planters Florida Holding Corporation. (Included as
Appendix B to the Proxy Statement included as part of
this Registration Statement.)
2.3 Stock Option Agreement, dated as of August 12, 1997, by
and between Capital Bancorp and Union Planters
Corporation. (Incorporated by reference to Exhibit 2.2
to the Current Report on Form 8-K of UPC, dated August
12, 1997.)
4.1 Restated Charter of Union Planters Corporation.
(Incorporated by reference to Exhibit 3(a) to the Annual
Report on Form 10-K of UPC for the fiscal year ended
December 31, 1996.)
4.2 Amended and Restated Bylaws of Union Planters
Corporation. (Incorporated by reference to exhibit 3(d)
to the Annual Report on Form 10-K of UPC for the fiscal
year ended December 31, 1996 (File No. 0-6919).)
*5.1 Opinion of E. James House, Jr., Secretary and Manager of
the Legal Department of Union Planters Corporation, as
to the validity of the shares of UPC Common Stock.
8.1 Opinion of Alston & Bird LLP as to federal income tax
consequences.
*23.1 Consent of Price Waterhouse LLP, independent
accountants for Union Planters Corporation.
*23.2 Consent of Deloitte & Touche LLP, independent auditors
for Capital Bancorp.
*23.3 Consent of E. James House, Jr., Secretary and Manager
of the Legal Department of Union Planters Corporation
(included in Exhibit 5.1).
23.4 Consent of Alston & Bird LLP (included in Exhibit 8.1).
23.5 Consent of Sandler O'Neill & Partners, LP (to be filed
by amendment).
*24.1 Power of Attorney (contained on the signature page
hereof).
*99.1 Form of proxy of Capital Bancorp.
</TABLE>
- -----------
* previously filed
II-2
<PAGE> 133
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report pursuant
to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(2) That for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part
of this registration statement as of the time it was declared effective.
(3) That for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(5) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this
Form S-4, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding to
the request.
(6) To supply by means of a post-effective amendment all
information concerning a transaction, and the company being acquired involved
therein, that was not the subject of and included in the registration statement
when it became effective.
(7) That prior to any public reoffering of the securities
registered hereunder through the use of a prospectus which is a part of this
registration statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), the issuer undertakes that such
reoffering prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
(8) That every prospectus: (i) that is filed pursuant to Paragraph
(7) immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to the
registration statement and will not be used until such amendment is effective,
and that, for purposes of determining any liability under the Securities Act of
1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-3
<PAGE> 134
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this amendment to this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Memphis, State of Tennessee on this the 8th day of October, 1997.
REGISTRANT
UNION PLANTERS CORPORATION
By: /s/ Benjamin W. Rawlins, Jr.
-----------------------------
Benjamin W. Rawlins, Jr.
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and at the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ Benjamin W. Rawlins, Jr. Chairman of the Board, Chief Executive October 8, 1997
- ---------------------------------- Officer, Director (Principal --------------------------
Benjamin W. Rawlins, Jr. Executive Officer)
* President, Chief Operating Officer,
- ---------------------------------- Director --------------------------
Jackson W. Moore
* Executive Vice President and
- ---------------------------------- Chief Financial Officer --------------------------
John W. Parker (Principal Financial Officer)
* Senior Vice President, Treasurer,
- ---------------------------------- and Chief Accounting Officer --------------------------
M. Kirk Walters
* Vice Chairman of the Board
- ---------------------------------- and Director --------------------------
Edgar H. Bailey
</TABLE>
II-4
<PAGE> 135
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
* Director
- ---------------------------------- -------------------------
Albert M. Austin
Director
- ---------------------------------- -------------------------
Marvin E. Bruce
Director
- ---------------------------------- -------------------------
George W. Bryan
* Director
- ---------------------------------- -------------------------
James E. Harwood
* Director
- ---------------------------------- -------------------------
Parnell S. Lewis, Jr.
* Director
- ---------------------------------- -------------------------
C. J. Lowrance, III
* Director
- ---------------------------------- -------------------------
Stanley D. Overton
* Director
- ---------------------------------- -------------------------
Dr. V. Lane Rawlins
Director
- ---------------------------------- -------------------------
Donald F. Schuppe
Director
- ---------------------------------- -------------------------
Mike P. Sturdivant
Director
- ---------------------------------- -------------------------
Richard A. Trippeer, Jr.
* Director
- ---------------------------------- -------------------------
Spence L. Wilson
* By: /s/ Benjamin W. Rawlins, Jr.
-----------------------------
Benjamin W. Rawlins, Jr.
as Attorney-in-Fact
</TABLE>
II-5
<PAGE> 136
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBER EXHIBIT NUMBERED PAGE
------ -------------------------------------------------------------------------------- -------------
<S> <C>
8.1 Opinion of Alston & Bird LLP as to federal income tax consequences . . .
23.5 Consent of Sandler O'Neill & Partners, L.P. . . . . . . . . . . . . . . .
</TABLE>
<PAGE> 1
EXHIBIT 8.1
ALSTON & BIRD LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
404-881-7000
Fax: 404-881-7777 Telex: 54-2996
Philip C. Cook (404) 881-7000
October 9, 1997
Union Planters Corporation
7130 Goodlett Farms Parkway
Memphis, Tennessee 38018
Re: Proposed Plan of Merger Involving Union Planters
Corporation and Capital Bancorp
Ladies and Gentlemen:
We have acted as counsel to Union Planters Corporation ("Parent"), a
corporation organized and existing under the laws of the State of Delaware, in
connection with the proposed merger of Capital Bancorp ("Subject Company"), a
Corporation organized and existing under the Laws of the State of Florida with
and into a wholly-owned subsidiary of Parent to be organized under the Laws of
the State of Tennessee ("UPC Merger Subsidiary"), with UPC Merger Subsidiary as
the surviving entity. The Merger will be effected pursuant to the Amended and
Restated Agreement and Plan of Merger by and between Subject Company and Parent
made and entered into as of August 12, 1997 (the "Agreement"). In our capacity
as counsel to Parent, our opinion has been requested with respect to certain of
the federal income tax consequences of the proposed Merger ("Tax Opinion").
In rendering this opinion, we have examined (i) the Internal Revenue
Code of 1986, as amended (the "Code") and Treasury regulations, (ii) the
legislative history of applicable sections of the Code, and (iii) appropriate
Internal Revenue Service and court decisional authority. In addition, we have
relied upon certain information made known to us as more fully described below.
All capitalized terms used herein without definition shall have the respective
meanings specified in the Agreement, and unless otherwise specified, all
section references herein are to the Code.
<PAGE> 2
Union Planters Corporation
October 9, 1997
Page 2
INFORMATION RELIED UPON
In rendering the opinions expressed herein, we have examined such
documents as we have deemed appropriate, including:
(1) the Agreement;
(2) the Registration Statement on Form S-4 filed by
Parent with the Securities and Exchange Commission
under the Securities Act of 1933, on September 25,
1997, as amended, including the Proxy
Statement/Prospectus for the Special Meeting of the
shareholders of Capital Bancorp; and
(3) such additional documents as we have considered
relevant.
In our examination of such documents, we have assumed, with your
consent, that all documents submitted to us as photocopies faithfully reproduce
the originals thereof, that such originals are authentic, that all such
documents have been or will be duly executed to the extent required, and that
all statements set forth in such documents are accurate. We have also obtained
such additional information and representations as we have deemed relevant and
necessary through consultation with various officers and representatives of
Parent and Subject Company.
You have advised us that the proposed transaction will enable the
combined organization to realize certain economies of scale, provide a wider
array of banking and banking-related services to consumers and businesses, and
provide for a stronger market position and for greater financial resources to
meet competitive challenges within the Miami, Florida market area.
To achieve these goals, the following will occur pursuant to the
Agreement:
(1) Parent will form UPC Merger Subsidiary by transferring
property to it solely in exchange for all the outstanding shares of UPC Merger
Subsidiary Common Stock.
(2) Subject to the terms and conditions of the Agreement, at
the Effective Time, Subject Company shall be merged with and into UPC Merger
Subsidiary in accordance with the provisions of Section 607.1107 of the FBCA
and Section 48-21-109 of the TBCA and with the effect provided in Section
607.1106 of the FBCA and Section 48-21-108 of the TBCA (the "Merger"). UPC
Merger Subsidiary 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 the Agreement, which has
been approved and adopted by the respective Boards of Directors of Subject
Company and Parent and will be approved and adopted by the Board of Directors
of UPC Merger Subsidiary upon its organization.
- 2 -
<PAGE> 3
Union Planters Corporation
October 9, 1997
Page 3
(3) Subject to the provisions of Article 3 of the Agreement,
at the Effective Time, by virtue of the Merger and without any action on the
part of Parent, UPC Merger Subsidiary, Subject Company, or the shareholders of
any of the foregoing, the shares of the constituent corporations shall be
converted as follows:
(a) Each share of Parent Capital Stock, including any
associated Parent 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 Subject Company Common Stock (excluding
shares held by Subject Company, any Subject Company Subsidiary, Parent
or any Parent Subsidiary, 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 .8525
shares of Parent Common Stock (subject to possible adjustment as set
forth in Section 10.1(g) of the Agreement, the "Exchange Ratio").
Pursuant to the Parent Rights Agreement, each share of Parent Common
Stock issued in connection with the Merger upon conversion of Subject
Company Common Stock shall be accompanied by a Parent Right.
(4) In the event Parent changes the number of shares of
Parent 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.
(5) Each of the shares of Subject Company Common Stock held
by Subject Company, any Subject Company Subsidiary, Parent or any Parent
Subsidiary, in each case other than in 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.
(6) Notwithstanding any other provision of the Agreement,
each holder of shares of Subject Company Common Stock exchanged pursuant to the
Merger who would otherwise have been entitled to receive a fractional share of
Parent 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 share of Parent Common Stock multiplied by 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 Parent) 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 -
<PAGE> 4
Union Planters Corporation
October 9, 1997
Page 4
(7) At the Effective Time, each option to purchase or other
right with respect to shares of Subject Company Common Stock pursuant to stock
options, stock appreciation rights or other rights, including stock awards
("Subject Company Options") granted by Subject Company under the Subject
Company Stock Plans, which are outstanding at the Effective Time, whether or
not exercisable, shall be converted into and become options with respect to
Parent Common Stock, and Parent shall assume each Subject Company Option on
substantially the same terms and conditions as the applicable Subject Company
Stock Plan and stock option or other agreement by which it is evidenced.
With your consent, we have also relied on certain factual matters
confirmed to us by you as true both now and as of the Effective Time:
1. The aggregate fair market value of the consideration to be
received in the Merger by holders of Subject Company Common Stock will be
approximately equal to the fair market value of the Subject Company Common
Stock surrendered in exchange therefor, as determined by arm's length
negotiations between the managements of Subject Company and Parent. In
connection with the Merger, no holder of Subject Company Common Stock will
receive in exchange for such stock, directly or indirectly, any consideration
other than Parent Common Stock and cash in lieu of a fractional share thereof.
2. There is no plan or intention by any of the holders of
capital Common Stock who own five percent (5%) or more of the Subject Company
Common Stock (other than Alex Halberstein and Leon J. Simkins), and to the best
knowledge of the management of Subject Company, there is no plan or intention
on the part of any of the holders of Subject Company Common Stock who own less
than five percent (5%) of Subject Company Common Stock to sell, exchange,
transfer or otherwise dispose of a number of shares of Parent Common Stock to
be received by them in connection with the Merger that would reduce the Subject
Company shareholders' ownership of Parent Common Stock to a number of shares
having a value, as of the Effective Time, of less than fifty percent (50%) of
the total value of all of the formerly outstanding stock of Subject Company
immediately prior to the Effective Time. For purposes of this representation,
shares of Subject Company Common Stock exchanged for cash or other property or
exchanged for cash in lieu of fractional shares of Parent Common Stock are
treated as outstanding shares of Subject Company Common Stock at the Effective
Time. Moreover, shares of Subject Company Common Stock which are sold, redeemed
or disposed of prior to the Merger and in contemplation or as part of the
Merger, and shares of Parent Common Stock which are received by holders of
Subject Company Common Stock in connection with the Merger and which are
otherwise sold, redeemed, or disposed of subsequent to the Merger will be taken
into account for purposes of this representation. For purposes of this
representation and notwithstanding anything to the contrary herein, you have
assumed that Alex Halberstein and Leon J. Simkins have a plan or intention to
sell for cash all the Parent Common Stock that they will receive in the Merger.
- 4 -
<PAGE> 5
Union Planters Corporation
October 9, 1997
Page 5
3. In the Merger, Subject Company will transfer to UPC Merger
Subsidiary and UPC Merger Subsidiary will acquire from Subject Company assets
representing at least ninety percent (90%) of the fair market value of Subject
Company's net assets and at least seventy percent (70%) of the fair market
value of Subject Company's gross assets held immediately prior to the Merger.
For purposes of this representation, included as assets of Subject Company held
immediately prior to the Merger will be (i) amounts paid pursuant to the Merger
to holders of Subject Company Common Stock in lieu of fractional shares of
Parent Common Stock, (ii) amounts used to pay Subject Company's reorganization
expenses, (iii) all payments, redemptions and distributions made by Subject
Company in contemplation or as part of the Merger, and (iv) all dispositions by
Subject Company prior to the Merger that were made in contemplation of the
Merger (including, for purposes of this representation, any branch reductions
or sales following the Merger that are intended to achieve cost savings or
other efficiencies). Any dispositions as described in (iv) will be for full
fair market value.
4. Prior to the Merger, Parent will be in control of UPC
Merger Subsidiary within the meaning of Section 368(c) of the Code. Following
the Merger, UPC Merger Subsidiary will not issue, and Parent will not cause UPC
Merger Subsidiary to issue, additional shares of stock of UPC Merger Subsidiary
that would result in Parent ceasing to control UPC Merger Subsidiary within the
meaning of Section 368(c) of the Code.
5. None of Parent, UPC Merger Subsidiary or any corporation
affiliated with either of Parent or UPC Merger Subsidiary has any plan or
intention to purchase, redeem or otherwise acquire any of the Parent Common
Stock issued pursuant to the Merger. After the Merger, no dividends or
distributions will be made to the former Subject Company shareholders by Parent
other than regular, normal dividends or distributions made to all holders of
Parent Common Stock.
6. Parent has no plan or intention to liquidate UPC Merger
Subsidiary, to merge UPC Merger Subsidiary with or into another corporation, or
to sell, exchange, transfer or otherwise dispose of any stock of UPC Merger
Subsidiary.
7. The assumption by UPC Merger Subsidiary of the liabilities
of Subject Company and the acquisition by UPC Merger Subsidiary of the assets
of Subject Company which are subject to liabilities, pursuant to the Merger, is
for a bona fide business purpose, and the principal purpose of Parent and UPC
Merger Subsidiary for such assumption of liabilities and acquisition of assets
subject to liabilities is not the avoidance of federal income tax on the
transfer of such assets of Subject Company to UPC Merger Subsidiary pursuant to
the Merger. Each of the liabilities of Subject Company assumed by UPC Merger
Subsidiary and each of the liabilities to which the acquired assets of Subject
Company are subject is associated with the assets of Subject Company and were
incurred by Subject Company in the ordinary course of its business.
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Union Planters Corporation
October 9, 1997
Page 6
8. Following the Merger, UPC Merger Subsidiary will continue
(and Parent will cause UPC Merger Subsidiary to continue) the historic business
of Subject Company or use a significant portion of Subject Company's historic
business assets in a business. No assets of Subject Company have been sold,
transferred or otherwise disposed of which would prevent Parent from continuing
the historic business of Subject Company or from using a significant portion of
Subject Company's historic business assets in a business following the Merger.
UPC Merger Subsidiary has no plan or intention to sell, exchange, transfer or
otherwise dispose of (and Parent has no plan or intention to cause UPC Merger
Subsidiary to sell, exchange, transfer or otherwise dispose of) any of the
assets of Subject Company acquired in the Merger, except for dispositions made
in the ordinary course of business or transfers described in Section
368(a)(2)(C) of the Code.
9. Parent, UPC Merger Subsidiary, Subject Company and the
holders of Subject Company Common Stock each has paid and will pay its or their
own expenses incurred in connection with or as part of the Merger or related
transactions except for liabilities of Subject Company to pay its own expenses
which are assumed by UPC Merger Subsidiary pursuant to the Merger and which
will be paid solely out of the assets of Subject Company as constituted
immediately prior to the Merger, and except that each of Parent and Subject
Company 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 Parent and Subject Company at
December 31, 1996. None of Parent, UPC Merger Subsidiary or Subject Company has
paid or will pay, directly or indirectly, any expenses incurred by any holder
of Subject Company Common Stock in connection with or as part of the Merger or
any related transactions. None of Parent, UPC Merger Subsidiary or Subject
Company has agreed to assume, nor will it directly or indirectly assume, any
expense or other liability, whether fixed or contingent, of any holder of
Subject Company Common Stock.
10. There is no intercorporate indebtedness existing between
Parent and Subject Company or between UPC Merger Subsidiary and Subject Company
that was issued, acquired or will be settled at a discount.
11. None of Parent, UPC Merger Subsidiary or Subject Company
is an "investment company" within the meaning of Section 368(a)(2)(F) of the
Code or a "real estate investment trust" within the meaning of Section 856 of
the Code.
12. None of Parent, UPC Merger Subsidiary or Subject Company
is under the jurisdiction of a court in a Title 11 or similar case within the
meaning of Section 368(a)(3)(A) of the Code.
13. The total adjusted basis and the total fair market value
of the assets of Subject Company to be acquired by UPC Merger Subsidiary in the
Merger each exceeds the
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Union Planters Corporation
October 9, 1997
Page 7
total liabilities of Subject Company to be assumed, or to be taken on a
subject-to basis, by UPC Merger Subsidiary.
14. No stock of UPC Merger Subsidiary will be issued in the
Merger.
15. The payment of cash in lieu of fractional shares of
Parent Common Stock in the Merger is solely for the purpose of avoiding the
expense and inconvenience to Parent of issuing fractional shares and does not
represent separately bargained-for consideration. The total cash consideration
that will be paid in the Merger to holders of Subject Company Common Stock
instead of issuing fractional shares of Parent Common Stock will not exceed one
percent (1%) of the total consideration that will be issued in the Merger to
holders of Subject Company Common Stock. The fractional share interests of each
holder of Subject Company Common Stock will be aggregated and no holder of
Subject Company Common Stock will receive cash in an amount equal to or greater
than the value of one full share of Parent Common Stock.
16. None of the compensation received by any shareholders of
Subject Company is or will be separate consideration for, or allocable to, any
of their shares of Subject Company Common Stock to be surrendered in the
Merger. None of the shares of Parent Common Stock received by any shareholder
of Subject Company is or will be separate consideration for, or allocable to,
any employment, consulting or similar arrangement which may be entered into
between Parent, UPC Merger Subsidiary or any affiliate thereof and such
shareholder for services rendered or to be rendered by such shareholder. Any
compensation paid or to be paid to any shareholder of Subject Company who will
be an employee of or perform advisory services for Parent, UPC Merger
Subsidiary or any affiliate thereof after the Merger, will be in consideration
of services actually rendered or to be rendered, will be commensurate with
amounts paid to third parties bargaining at arm's length for similar services,
and has been bargained for independent of negotiations specifically regarding
the consideration to be paid for Subject Company Common Stock.
17. Subject Company has no authorized stock other than
Subject Company Common Stock. Immediately prior to the Merger, the only capital
stock of Subject Company that will be issued and outstanding will be Subject
Company Common Stock.
18. All shares of Parent Common Stock into which shares of
Subject Company Common Stock will be converted pursuant to the Merger will be
newly issued or treasury shares and will be issued by Parent directly to
holders of Subject Company Common Stock pursuant to the Merger.
19. Not taking into consideration the Stock Option Agreement
or any Subject Company Common Stock, securities or instruments owned or
beneficially owned in a fiduciary or representative capacity or in connection
with a debt previously contracted, during the five-year period ending at the
Effective Time, none of Parent, UPC Merger Subsidiary, or
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Union Planters Corporation
October 9, 1997
Page 8
any entity affiliated with either Parent or UPC Merger Subsidiary has owned or
owns, beneficially or of record, more than five percent (5%) of any class of
stock or securities of Subject Company or any instruments giving the holder
thereof the right to acquire any such stock or securities.
20. Subject Company has not and will not prior to the Merger
redeem any of its stock, make any distribution with respect to its stock, or
dispose of any of its assets in contemplation or as part of the Merger,
excluding for purposes of this representation regular, normal dividends.
21. There exist no options, warrants, convertible securities
or other rights to acquire Subject Company Common Stock, other than the Stock
Option Agreement or Subject Company Options.
22. Except for the possible issuance of Subject Company
Common Stock pursuant to the exercise of options previously granted under the
Subject Company Stock Plan or the Stock Option Agreement, Subject Company will
not issue any additional shares of Subject Company Common Stock prior to the
Merger.
23. Subject Company will be merged with and into UPC Merger
Subsidiary in accordance with the applicable provisions of the Florida Business
Corporation Act and the Tennessee Business Corporation Act.
24. The Merger is being effected for bona fide business
reasons and will be carried out strictly in accordance with the Agreement, as
described in the Registration Statement, and none of the material terms and
conditions therein have been or will be waived or modified.
25. Subject Company in not a "domestic building and loan
association" within the meaning of Section 7701(a)(19) of the Code.
26. No shares of Subject Company Common Stock are held by any
subsidiary of Subject Company.
27. At the Effective Time, there will be no accrued but
unpaid dividends on shares of Subject Company Common Stock, except as necessary
to comply with section 7.2(c) of the Agreement.
28. Parent has no plan or intention to liquidate, merge or
otherwise dispose after the Merger any entity affiliated with Subject Company
immediately prior to the Merger.
29. None of Subject Company, Parent or any entity affiliated
with either Subject Company or Parent will take any position on any federal,
state or local income or
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Union Planters Corporation
October 9, 1997
Page 9
franchise tax return, or take any other tax reporting position, that is
inconsistent with the treatment of the Merger an a reorganization within the
meaning of Section 368(a) of the Code.
30. The management of Parent is not aware of any plan or
intention to take any action that would cause the Parent Rights to become
exercisable.
31. Subject Company is not a United States real property
holding corporation as defined in Section 897(c) of the Code.
OPINIONS
Based on the foregoing assumptions, we are of the opinion that:
(1) The Merger will qualify as a reorganization within the
meaning of Sections 368(a) of the Code.
(2) No gain or loss will be recognized by Subject Company
upon the transfer of its assets to UPC Merger Subsidiary solely in exchange for
UPC Common Stock, Parent Rights and the assumption by UPC Merger Subsidiary of
the liabilities of Subject Company.
(3) No gain or loss will be recognized by Parent or UPC
Merger Subsidiary upon the receipt by UPC Merger Subsidiary of Subject
Company's assets solely in exchange for UPC Common Stock, Parent Rights and the
assumption by UPC Merger Subsidiary of the liabilities of Subject Company.
(4) No gain or loss will be recognized by a Subject Company
shareholder upon the receipt of UPC Common Stock and Parent Rights solely in
exchange for all of its shares of Subject Company Common Stock.
(5) The basis of the UPC Common Stock received by a Subject
Company shareholder in the Merger will be the same as the basis of the Subject
Company Common Stock surrendered in exchange therefor less the basis allocated
to any fractional share of UPC Common Stock settled by cash payment.
(6) The holding period of the UPC Common Stock received by a
Subject Company shareholder (including the holding period of any fractional
share interest) will include the holding period of the Subject Company Common
Stock surrendered in exchange therefor, provided the Subject Company Common
Stock was held as a capital asset on the date of the exchange.
(7) The payment of cash in lieu of fractional shares of
Parent Common Stock will be treated as if the fractional shares were issued as
part of the exchange and then
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Union Planters Corporation
October 9, 1997
Page 10
redeemed by Parent. These cash payments will be treated under Section 302(a) of
the Code as having been received as distributions in full payment in exchange
for the fractional shares of Parent Common Stock redeemed. Generally, any gain
or loss recognized upon such exchange will be capital gain or loss, provided
the fractional share would constitute a capital asset in the hands of the
exchanging shareholder.
The opinions expressed herein are based upon existing statutory,
regulatory, and judicial authority, any of which may be changed at any time
with retroactive effect. In addition, our opinions are based solely on the
documents that we have examined, the additional information that we have
obtained, and the statements set out herein, which we have assumed are true on
the date the Merger is consummated. Our opinions cannot be relied upon if any
of the facts contained in such documents or if such additional information is,
or later becomes, inaccurate, or if any of the statements set out herein is, or
later becomes, inaccurate. Finally, our opinions are limited to the tax matters
specifically covered thereby, and we have not been asked to address, nor have
we addressed, any other tax consequences of the proposed Merger, including for
example any issues related to intercompany transactions, accounting methods,
bad-debt reserves, or changes in accounting methods resulting from the Merger.
This opinion is being provided solely for the use of Union Planters
Corporation. No other person or party shall be entitled to rely on this
opinion.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and consent to any references to this opinion or Alston
& Bird LLP under the captions "Summary - Certain Federal Income Tax
Consequences," and "Description of the Transaction - Certain Federal Income Tax
Consequences."
Very truly yours,
ALSTON & BIRD LLP
By: /s/ PHILIP C. COOK
------------------------
Philip C. Cook
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EXHIBIT 23.5
CONSENT OF SANDLER O'NEILL & PARTNERS, L.P.
We hereby consent to the inclusion of our opinion letter to the Board
of Directors of Capital Bancorp (the "Company") as Appendix C to the Proxy
Statement/Prospectus relating to the proposed merger of the Company with and
into Union Planters Corporation contained in the Registration Statement on Form
S-4, as amended (File No. 333-36403), and to the references to our firm and such
opinion in such Proxy Statement/Prospectus. In giving such consent, we do not
admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended (the "Act"), or the
rules and regulations of the Securities and Exchange Commission thereunder (the
"Regulations"), nor do we admit that we are experts with respect to any part of
such Registration Statement within the meaning of the term "experts" as used in
the Act or the Regulations.
/s/ SANDLER O'NEILL & PARTNERS, L.P.
October 7, 1997
