<PAGE> 1
Filed pursuant to Rule 424(b)(3)
Registration No. 333-31575
CITIZENS OF HARDEMAN COUNTY FINANCIAL SERVICES, INC.
114 Main Street
Whiteville, Tennessee 38008
July 30, 1997
TO THE SHAREHOLDERS OF CITIZENS OF HARDEMAN COUNTY FINANCIAL SERVICES, INC.:
You are cordially invited to attend a special meeting of the
shareholders of Citizens of Hardeman County Financial Services, Inc.
("Citizens") to be held at the main office of The Whiteville Bank, 114 Main
Street, Whiteville, Tennessee 38008, at 9:00 a.m., local time, on Thursday,
September 4, 1997 (the "Special Meeting").
At the Special Meeting you will have the opportunity to consider and
vote on a proposal to approve the Agreement and Plan of Reorganization dated as
of December 12, 1996, along with the Plan of Merger annexed thereto as Exhibit
A, (the "Reorganization Agreement"), pursuant to which Citizens would be merged
with and into Union Planters Community Bancorp, Inc. ("Community"), a
wholly-owned subsidiary of Union Planters Corporation ("UPC"), a bank holding
company headquartered in Memphis, Tennessee (the "Merger"). Simultaneously
with the Merger, The Whiteville Bank, a wholly-owned subsidiary bank of
Citizens, would be merged with and into First State Bank of Fayette County
("First State Bank"), a wholly-owned subsidiary of Community (the "Bank
Merger"). As a result of the Merger and the Bank Merger, Citizens would be
acquired by UPC and the main office and branch of The Whiteville Bank would
become branches of First State Bank. The Boards of Directors of Citizens, UPC
and Community have each unanimously approved the Reorganization Agreement.
In the Merger, holders of Citizens' common stock, $100.00 par value
per share ("Citizens Common Stock") outstanding immediately prior to the
Effective Time of the Merger, would receive in exchange for each of their
shares, 434.074 shares of UPC's common stock, $5.00 par value per share, ("UPC
Common Stock"). In no event would UPC issue a fractional share of UPC Common
Stock, but instead would make a cash payment to settle any fractional share
equal to the amount determined by multiplying the fraction by the last sale
price of UPC Common Stock on the New York Stock Exchange on the last trading
day prior to the Effective Time of the Merger.
Based on the market value of the UPC Common Stock on July 25
1997, the value of the UPC Common Stock to be received for each share of
Citizens Common Stock would be approximately $22,571.85. The value of UPC
Common Stock, which is traded on the New York Stock Exchange under the symbol
"UPC", is subject to fluctuation, and the value of the UPC Common Stock to be
received upon consummation of the Merger may be more or less than $52.00.
The annexed Notice of Special Meeting of Shareholders and
Prospectus/Proxy Statement explain the Merger, the Exchange Ratio and the
Reorganization Agreement and provide more specific information relative to the
Special Meeting. Please read these materials carefully and thoughtfully
consider the information contained in them. The approvals of not only
Citizens' shareholders, but also those of certain federal and state
governmental regulatory agencies, are required to consummate the Merger. Only
the
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holders of record of Citizens Common Stock on [record date for shareholders]
are entitled to vote at the Special Meeting.
Whether or not you plan to attend the Special Meeting in person, you
are urged to complete, sign, date and promptly return the enclosed Proxy
Appointment Sheet (on blue paper) to assure that your shares of Citizens Common
Stock will be voted at the Special Meeting. There is included with this
material a postage-paid addressed envelope for returning your Proxy Appointment
Sheet. No additional postage is required if mailed in the United States.
Your Board of Directors has unanimously approved the Reorganization
Agreement and believes that the Merger is in the best interests of Citizens and
the Citizens shareholders. Accordingly, the Board of Directors of Citizens
unanimously recommends that you vote "FOR" approval of the Reorganization
Agreement and Plan of Merger being considered.
Sincerely,
Citizens of Hardeman County Financial Services, Inc.
- ------------------------------------- ---------------------------
By: Frank T. Bass By: James R. Bellar
President and Chief Executive Officer Secretary
PLEASE DO NOT SEND IN YOUR STOCK CERTIFICATES AT THIS TIME
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CITIZENS OF HARDEMAN COUNTY FINANCIAL SERVICES, INC.
114 MAIN STREET
WHITEVILLE, TENNESSEE 38008
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 4, 1997
NOTICE IS HEREBY GIVEN that a special meeting (the "Special Meeting") of the
shareholders of Citizens of Hardeman County Financial Services, Inc.
("Citizens") has been called by the Board of Directors of Citizens and will be
held at the main office of The Whiteville Bank, 114 Main Street, Whiteville,
Tennessee, on Thursday, September 4, 1997 at 9:00 a.m., local time, for the
following purposes:
1. To consider and vote upon a proposal to approve the Agreement
and Plan of Reorganization dated as of December 12, 1996, together with the
Plan of Merger annexed thereto as Exhibit A (collectively, the "Reorganization
Agreement") by and between Citizens, Union Planters Corporation ("UPC"), a
Tennessee-chartered bank holding company headquartered in Memphis, Tennessee,
and Union Planters Community Bancorp, Inc. ("Community"), a wholly-owned
subsidiary of UPC, pursuant to which: (i) Citizens would merge with and into
Community (the "Merger"); (ii) each share of Citizens' common stock, $100.00
par value per share ("Citizens Common Stock"), issued and outstanding
immediately prior to the Effective Time of the Merger would be exchanged for
434.074 shares of UPC common stock, $5.00 par value per share ("UPC Common
Stock"); and (iii) The Whiteville Bank would be merged with and into First
State Bank of Fayette County ("First State Bank"), all as more fully described
in the accompanying Prospectus/Proxy Statement. No fractional shares of UPC
Common Stock would be issued, but instead UPC would settle any fractional share
with a cash payment determined by multiplying the fraction by the last sale
price of UPC Common Stock on the New York Stock Exchange on the last trading
day prior to the Effective Time of the Merger; and
2. To transact such other business as may properly come before
the Special Meeting or any adjournments or postponements thereof. Management
is not aware of any other business to be transacted at the Special Meeting.
Only Citizens shareholders of record at the close of business on
[record date for shareholders], will be entitled to receive notice of and to
vote at the Special Meeting and at any adjournments or postponements thereof.
Citizens shareholders have the right to exercise statutory dissenters'
rights with respect to the Merger and to receive the "fair value" of their
shares of Citizens Common Stock in cash if the Merger is actually consummated.
Numerous steps must be taken to properly perfect these dissenters' rights. The
right to dissent and the mechanics to properly perfect statutory dissenters'
rights are more specifically discussed in the accompanying Prospectus/Proxy
Statement. In addition, a copy of the Tennessee statutes governing dissenters'
rights is attached as Appendix D to the accompanying Prospectus/Proxy
Statement.
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Whether or not you plan to attend the Special Meeting, please sign and
date the enclosed Proxy Appointment Sheet (on blue paper) and return it at once
in the stamped return envelope in order to ensure that your shares of Citizens
Common Stock will be represented at the Special Meeting. PLEASE DO NOT SEND IN
ANY STOCK CERTIFICATES AT THIS TIME. If you should attend in person, your
Proxy Appointment Sheet can be revoked if you wish and you may vote in person
your own shares.
By Order of the Board of Directors
- ------------------------------------- ------------------------------
By: Frank T. Bass By: James R. Bellar
President and Chief Executive Officer Secretary
Whiteville, Tennessee
DATED: July 30, 1997
THE BOARD OF DIRECTORS OF CITIZENS OF HARDEMAN COUNTY FINANCIAL SERVICES, INC.,
BY UNANIMOUS VOTE, RECOMMENDS THAT SHAREHOLDERS OF CITIZENS OF HARDEMAN COUNTY
FINANCIAL SERVICES, INC. VOTE "FOR" APPROVAL OF THE REORGANIZATION AGREEMENT
AND PLAN OF MERGER.
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PROSPECTUS
210,526 SHARES OF COMMON STOCK
OF
UNION PLANTERS CORPORATION
PROXY STATEMENT
CITIZENS OF HARDEMAN COUNTY FINANCIAL SERVICES, INC.
SPECIAL MEETING TO BE HELD SEPTEMBER 4, 1997
This Prospectus and Proxy Statement (hereinafter referred to as the
"Prospectus/Proxy Statement") relates to up to 210,526 shares of the common
stock, $5.00 par value per share, ("UPC Common Stock") of Union Planters
Corporation ("UPC"), a Tennessee-chartered bank holding company, to be issued
to holders of the common stock, $100.00 par value per share ("Citizens Common
Stock") of Citizens of Hardeman County Financial Services, Inc. ("Citizens"), a
Tennessee-chartered bank holding company, upon consummation of the merger (the
"Merger") described herein. In the Merger, Citizens would be merged with and
into Union Planters Community Bancorp, Inc. ("Community"), a
Tennessee-chartered bank holding company and wholly-owned subsidiary of UPC,
pursuant to the terms of the Agreement and Plan of Reorganization dated as of
December 12, 1996, by and between Citizens, UPC and Community, along with the
Plan of Merger ("Plan of Merger") annexed thereto as Exhibit A (collectively,
the "Reorganization Agreement"). Simultaneously with the Merger, The
Whiteville Bank, a wholly-owned subsidiary bank of Citizens, would be merged
with and into First State Bank of Fayette County ("First State Bank"), a
wholly-owned subsidiary of Community (the "Bank Merger"). As a result of the
Merger and the Bank Merger, Citizens would be acquired by UPC and the main
office and branch of The Whiteville Bank would become branches of First State
Bank. In the Merger, those persons who are record holders of Citizens Common
Stock issued and outstanding immediately prior to the Effective Time of the
Merger ("Citizens Record Holders") would receive in exchange for each of their
shares of Citizens Common Stock 434.074 shares of UPC Common Stock (the
"Exchange Ratio"). The Exchange Ratio is not subject to adjustment based upon
fluctuations in the market price of UPC Common Stock but may be adjusted in a
manner deemed reasonable by the Board of Directors of UPC (the "UPC Board")
either in the event of a stock split, reverse stock split, stock dividend or
similar change in the capital accounts of Citizens or should there be more than
483 fully diluted shares of Citizens Common Stock outstanding immediately prior
to the Effective Time of the Merger. As of the date of this Prospectus/Proxy
Statement, 485 shares of Citizens Common Stock are issued and outstanding and
the Exchange Ratio set forth above is adjusted to reflect these 485 shares.
See "THE MERGER--Adjustment of Exchange Ratio."
Shares of the UPC Common Stock are now, and the UPC Common Stock to be
issued in connection with the Merger are expected to be, listed for trading on
the New York Stock Exchange (the "NYSE") under the symbol "UPC." On December
11, 1996, the business day prior to the announcement of the Merger, the last
reported sale price of UPC Common Stock on the NYSE was $39.375 per share. The
last reported sale price of UPC Common Stock on the NYSE on Friday, July 25,
1997, was $52.00 per share. Based on the market value of the UPC
<PAGE> 6
Common Stock on July 25, 1997, the value of the UPC Common Stock to be received
for each share of Citizens Common Stock would be approximately $22,571.85.
However, the value of UPC Common Stock is subject to fluctuation, and the value
of the UPC Common Stock to be received by Citizens Record Holders upon
consummation of the Merger may be more or less than $52.00 per share.
This Prospectus also serves as a Proxy Statement of Citizens and is
being furnished in connection with the solicitation of proxies by the Board of
Directors of Citizens (the "Citizens Board") for use at its special meeting of
shareholders (including any adjournments or postponements thereof) (the
"Special Meeting") to be held on Thursday, September 4, 1997, to consider and
vote upon the Reorganization Agreement. The annexed Notice of Special Meeting
of Shareholders and this Prospectus/Proxy Statement explain the Merger, the
Exchange Ratio, the Reorganization Agreement and provide specific information
relative to the Special Meeting. Please read these materials carefully, and
thoughtfully consider the information contained in them.
All information contained in this Prospectus/Proxy Statement
pertaining to UPC and its subsidiaries (the "UPC Companies" and, any one of
them, a "UPC Company"), including Community, has been supplied by UPC and all
information pertaining to Citizens and its subsidiaries, including The
Whiteville Bank (the "Citizens Companies" and, any one of them, an "Citizens
Company") has been supplied by Citizens. This Prospectus/Proxy Statement and
the accompanying proxy appointment sheet (the "Proxy Appointment Sheet") are
first being mailed to the Citizens shareholders on or about July 30, 1997.
THE SHARES OF UPC COMMON STOCK 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.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION") OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS/PROXY STATEMENT IS JULY 29, 1997.
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<S> <C>
AVAILABLE INFORMATION iv
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE v
SUMMARY 1
The Parties 1
Special Meeting of Citizens Shareholders 3
Votes Required; Record Date 3
The Merger 4
Reasons for the Merger; Recommendations of the Citizens Board 4
The Fairness Opinion 5
Effective Time of the Merger 5
Exchange of Stock Certificates 5
Regulatory Approvals and Other Conditions 6
Waiver, Amendment and Termination 6
Limitation on Negotiations 6
Management after the Merger 7
Interests of Certain Persons in the Merger 7
Certain Federal Income Tax Consequences of the Merger 7
Accounting Treatment 8
Certain Differences in Shareholders' Rights 8
Dissenters' Rights 8
Market Prices of Common Stock 8
Selected Consolidated Financial Data 10
Recent Developments Affecting UPC 15
Equivalent and Pro Forma Per Share Data 16
THE SPECIAL MEETING 18
Time and Place of Special Meeting; Solicitation of Proxies; Revocation 18
Votes Required 19
Voting 19
Dissenters' Rights 19
Recommendation of the Citizens Board 20
THE MERGER 20
General 20
Adjustment of Exchange Ratio 21
Background of and Reasons for the Merger 21
The Fairness Opinion 22
Effective Time of the Merger 24
Exchange of Certificates 25
Conditions to Consummation of the Merger 25
</TABLE>
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<TABLE>
<S> <C>
Representations and Warranties 27
Regulatory Approvals 27
Waiver, Amendment and Termination 28
Dissenters' Rights 29
Conduct of Business Pending the Merger 30
Limitation on Negotiations 30
Management after the Merger 31
Employee Benefit Plans 31
Interests of Certain Persons in the Merger 32
Certain Federal Income Tax Consequences of the Merger 32
Accounting Treatment 34
Expenses and Fees 34
Resales of UPC Common Stock 35
BUSINESS OF CITIZENS 36
General 36
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION OF CITIZENS 36
General 37
Results of Operations 37
Analysis of Financial Condition 39
Certain Statistical Data 40
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT OF CITIZENS 42
General 43
Payment of Dividends 46
Capital Adequacy 46
Support of Subsidiary Banks 48
Prompt Corrective Action 49
DESCRIPTION OF UPC COMMON AND PREFERRED STOCK 50
General 50
UPC Common Stock 51
UPC Preferred Stock 53
EFFECT OF THE MERGER ON RIGHTS OF STOCKHOLDERS 53
Anti-takeover Provisions Generally 54
Authorized Capital Stock 54
Amendment of Charter and Bylaws 56
</TABLE>
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<TABLE>
<S> <C>
Classified Board of Directors and Absence of Cumulative Voting 56
Director Removal and Vacancies 57
Indemnification 57
Special Meeting of Stockholders 58
Business Combinations 59
Dissenters' Rights 61
Stockholders' Rights to Examine Books and Records 61
Dividends 62
LEGAL OPINIONS 62
EXPERTS 62
INDEX TO APPENDICES 63
</TABLE>
A -- Agreement and Plan of Reorganization between Union Planters
Corporation, Union Planters Community Bancorp, Inc. and Citizens of
Hardeman County Financial Services, Inc. dated as of December 12,
1996, together with the related Plan of Merger annexed thereto as
Exhibit 1
B -- Unaudited Consolidated Financial Statements of Citizens of Hardeman
County Financial Services, Inc. as of and for the years ended
December 31, 1996 and 1995 (and notes thereto), and for the three
months ended March 31, 1997 and 1996
C -- Fairness Opinion of Southard Financial
D -- Sections 48-23-101, et al, of the Tennessee Business Corporation
Act, pertaining to applicable dissenters' rights provisions
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AVAILABLE INFORMATION
UPC is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, (the "Exchange Act") and in accordance
therewith is required to file reports, proxy statements and other information
with the Commission. Copies of such reports, proxy statements and other
information, can be obtained, at prescribed rates, from the Commission by
addressing written requests for such copies to the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549. In addition, such reports, proxy statements and other information can
be inspected and copied at the public reference facilities referred to above,
at the regional offices of the Commission at Room 1024, 7 World Trade Center,
13th Floor, New York, New York 10048 and Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661, or, if such reports or
proxy statements have been filed electronically, through the Internet Web site
maintained by the Commission at (http://www.sec.gov). Furthermore, UPC Common
Stock is listed on the NYSE. Reports, proxy statements and other information
concerning UPC may be inspected at the offices of the New York Stock Exchange,
Inc., 20 Broad Street, New York, New York 10005.
This Prospectus/Proxy Statement constitutes part of the Registration
Statement on Form S-4 of UPC (including any exhibits, appendices and amendments
thereto, the "Registration Statement") filed with the Commission under the
Securities Act of 1933, as amended (the "Securities Act"), relating to the
securities offered hereby. This Prospectus/Proxy Statement does not contain
all of the information in the Registration Statement, certain portions of which
have been omitted consistent with the rules and regulations of the Commission.
For further information about UPC and the securities offered hereby, reference
is made to the Registration Statement. The Registration Statement may be
inspected and copied, at prescribed rates, at the Commission's public reference
facilities at the addresses set forth above.
Certain financial and other information relating to UPC is contained
in the documents indicated below under "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
All information contained in this Prospectus/Proxy Statement or
incorporated herein by reference with respect to UPC was supplied by UPC and
all information contained in this Prospectus/Proxy Statement or incorporated
herein by reference with respect to Citizens was supplied by Citizens.
Although neither UPC nor Citizens has actual knowledge that would indicate that
any statements or information (including financial statements) relating to the
other party contained or incorporated herein are inaccurate or incomplete,
neither UPC nor Citizens warrants the accuracy or completeness of such
statements or information as they relate to the other party.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS/PROXY STATEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS
PROSPECTUS/PROXY STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO PURCHASE, THE SECURITIES OFFERED BY THIS
PROSPECTUS/PROXY STATEMENT
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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
PROSPECTUS/PROXY STATEMENT NOR ANY DISTRIBUTION OF THE SECURITIES BEING OFFERED
PURSUANT TO THIS PROSPECTUS/PROXY STATEMENT SHALL, UNDER ANY CIRCUMSTANCES,
CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF UPC OR
CITIZENS OR THE INFORMATION SET FORTH HEREIN SINCE THE DATE OF THIS
PROSPECTUS/PROXY STATEMENT.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission by UPC
pursuant to the Exchange Act (Commission File No. 1-10160 except as otherwise
indicated) are hereby incorporated by reference herein:
(a) UPC's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996;
(b) UPC's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997;
(c) UPC's Current Reports on Form 8-K, dated January 16, 1997,
April 17, 1997 and July 17, 1997;
(d) The description of the current management and Board of
Directors of UPC contained in the Proxy Statement filed
pursuant to Section 14(a) of the Exchange Act for UPC's Annual
Meeting of Shareholders held April 17, 1997;
(e) UPC's Registration Statement on Form 8-A dated January 19,
1989, filed on February 1, 1989 (Commission File Number
0-6919), in connection with UPC's designation and
authorization of its Series A Preferred Stock; and
(f) The description of the UPC Common Stock contained in UPC's
Registration Statement under Section 12(b) of the Exchange Act
and any amendment or report filed for the purpose of updating
such description.
UPC's Annual Report on Form 10-K for the year ended December 31, 1996
incorporates by reference specific portions of UPC's Annual Report to
Shareholders for that year (UPC's "Annual Report to Shareholders" which is
Exhibit 13 to said Form 10-K) but does not incorporate other portions of UPC's
Annual Report to Shareholders. The portion of UPC's Annual Report to
Shareholders captioned "Letter to Shareholders" and certain other portions of
UPC's Annual Report to Shareholders not specifically incorporated into UPC's
Annual Report on Form 10-K are not incorporated herein and are not a part of
the Registration Statement.
All documents filed by UPC pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus/Proxy Statement and
prior to the date of the Special Meeting shall be deemed to be incorporated by
reference into this Prospectus/Proxy
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Statement and to be a part hereof from the date of filing of such documents.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes hereof to the extent that a statement contained herein or in any
subsequently filed document which also is, or is deemed to be, incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed to constitute a part hereof, except
as so modified or superseded.
THIS PROSPECTUS/PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF THESE
DOCUMENTS (OTHER THAN EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE
SPECIFICALLY INCORPORATED BY REFERENCE) ARE AVAILABLE WITHOUT CHARGE, UPON THE
WRITTEN OR ORAL REQUEST OF ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM
THIS PROSPECTUS/PROXY STATEMENT IS DELIVERED. SUCH REQUESTS FOR DOCUMENTS
RELATING TO UPC SHOULD BE DIRECTED TO UNION PLANTERS CORPORATION, POST OFFICE
BOX 387, MEMPHIS, TENNESSEE 38147 (TELEPHONE (901) 580-6495), ATTENTION: E.
JAMES HOUSE, JR., SECRETARY. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS, ANY REQUEST SHOULD BE MADE BY Friday, August 29, 1997.
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SUMMARY
The following is a summary of certain information contained in this
Prospectus/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 Prospectus/Proxy Statement and is qualified in its entirety by
the more detailed information appearing elsewhere or incorporated by reference
into this Prospectus/Proxy Statement. Citizens shareholders are urged to read
carefully the entire Prospectus/Proxy Statement, including each of the
Appendices. As used in this Prospectus/Proxy Statement, the terms "UPC" and
"Citizens" refer to those entities, respectively, and, where the context
requires, to those entities and their respective subsidiaries.
THE PARTIES
Union Planters Corporation. UPC is a multi-state bank holding company
headquartered in Memphis, Tennessee. At March 31, 1997, UPC had total
consolidated assets of approximately $14.9 billion, total consolidated loans of
approximately $10.4 billion, total consolidated deposits of approximately $11.4
billion and total consolidated stockholders' equity of approximately $1.4
billion. As of that date, UPC was one of the fifty largest bank holding
companies in the United States and the largest independent bank holding company
headquartered in Tennessee as measured by total consolidated assets.
UPC conducts its business activities through its principal bank
subsidiary, the $5.7 billion asset Union Planters National Bank ("UPNB"),
founded in 1869 and headquartered in Memphis, Tennessee, and through 32 other
bank subsidiaries and one savings bank subsidiary (collectively, the "UPC
Banking Subsidiaries"), which are located in Tennessee, Mississippi, Missouri,
Arkansas, Louisiana, Alabama and Kentucky. Through the UPC Banking
Subsidiaries, UPC provides a diversified range of financial services in the
communities in which it operates, including consumer, commercial and corporate
lending; retail banking; and other ancillary financial services traditionally
furnished by full-service financial institutions. UPC also is engaged in
mortgage origination and servicing; investment management and trust services;
the issuance and servicing of credit and debit cards; the origination,
packaging and securitization of loans, primarily government-guaranteed portions
of Small Business Administration loans; the purchase of delinquent Federal
Housing Administration and Department of Veterans Affairs ("FHA/VA")
government-insured/guaranteed loans from third parties and from Government
National Mortgage Association ("GNMA") pools serviced for others; full service
and discount brokerage; and the sale of annuities and bank-eligible insurance
products.
Through the UPC Banking Subsidiaries, UPC operates approximately 433
banking offices and 560 automated teller machines. UPC's assets at March 31,
1997 are allocable by state to its banking offices (before consolidating
adjustments) approximately as follows: $9.9 billion in Tennessee, $2.3 billion
in Mississippi, $1.2 billion in Missouri, $750 million in Arkansas, $598
million in Louisiana, $442 million in Alabama and $116 million in Kentucky.
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Acquisitions have been, and are expected to continue to be, an
important part of the expansion of UPC's business. UPC completed twelve
acquisitions in 1993, thirteen in 1994, three in 1995 and seven in 1996, adding
approximately $1.3 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 four financial institutions in addition
to Citizens, with aggregate total assets of approximately $1.9 billion at March
31, 1997 (collectively, the "Other Pending Acquisitions"). For additional
information regarding the Other Pending Acquisitions, see "--Recent
Developments Affecting UPC-Other Pending Acquisitions" and "Equivalent and Pro
Forma Per Share Data." For a discussion of UPC's acquisition program and UPC
management's philosophy on that subject, see the caption "Acquisitions" (on
page 6) and Note 2 to UPC's audited consolidated financial statements for the
years ended December 31, 1996, 1995 and 1994 (on pages 45 and 46) contained in
UPC's Annual Report to Shareholders which is Exhibit 13 to UPC's Annual Report
on Form 10-K for the year ended December 31, 1996, which Exhibit 13 is
incorporated by reference herein to the extent indicated above in
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
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. See "--Recent Developments Affecting UPC."
UPC's corporate office is located at 7130 Goodlett Farms Parkway,
Memphis, Tennessee 38018, and its telephone number is (901) 580-6000.
Additional information concerning UPC is included in the documents incorporated
by reference into this Prospectus/Proxy Statement. See "AVAILABLE INFORMATION"
and "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
Citizens of Hardeman County Financial Services, Inc. Citizens is a
bank holding company headquartered in Whiteville, Tennessee. Through The
Whiteville Bank, Citizens' wholly-owned subsidiary bank, Citizens provides
traditional deposit and lending services to individual and corporate customers
through its main office and one branch location. At March 31, 1997, on a
consolidated basis, Citizens had total assets of approximately $61.6 million,
total loans of approximately $36.9 million, total deposits of approximately
$56.1 million and total stockholders' equity of approximately $4.8 million.
Citizens' corporate office is located at 114 Main Street, Whiteville,
Tennessee 38008 and its telephone number is (901) 254-8541. Additional
information concerning Citizens is included herein under various headings
including, but not limited to, "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION OF CITIZENS" and in the unaudited consolidated financial
statements (and notes thereto) of Citizens for the years ended December 31,
2
<PAGE> 15
1996 and 1995, and for the three months ended March 31, 1997 and 1996, copies
of which are annexed to this Prospectus/Proxy Statement as Appendix B.
Union Planters Community Bancorp, Inc. Community is a bank holding
company and a wholly-owned subsidiary of UPC. Community's primary subsidiaries
are, or will be as of the Effective Time of the Merger, Union Planters Bank of
West Tennessee, Humboldt, Tennessee, and First State Bank of Fayette County,
Somerville, Tennessee ("First State Bank"). As noted earlier, it is
contemplated that simultaneously with the Merger, The Whiteville Bank will be
merged with and into First State Bank (the "Bank Merger") with the main office
and branch of The Whiteville Bank becoming branches of First State Bank, which
will change its name to Union Planters Bank of Southwest Tennessee.
Community's corporate offices are located at 7130 Goodlett Farms Parkway,
Memphis, Tennessee 38018 and its telephone number is (901) 580-6000.
SPECIAL MEETING OF CITIZENS SHAREHOLDERS
This Prospectus/Proxy Statement is being furnished to the holders of
Citizens Common Stock in connection with the solicitation by the Citizens Board
of proxies for use at the Special Meeting of the Citizens shareholders to be
held on Thursday, September 4, 1997, at 9:00 a.m., local time, at the main
office of The Whiteville Bank, 114 Main Street, Whiteville, Tennessee. At the
Special Meeting, Citizens shareholders will be asked to consider and vote upon
a proposal to approve the Reorganization Agreement. See "THE SPECIAL MEETING."
VOTES REQUIRED; RECORD DATE
The Citizens Board has fixed the close of business on July 28, 1997
as the record date (the "Record Date") for determination of the shareholders
entitled to notice of, and to vote at, the Special Meeting. Only Citizens
shareholders of record on the Record Date will be entitled to receive notice of
and to vote at the Special Meeting. Each share of Citizens Common Stock is
entitled to one vote. On the Record Date there were 485 shares of Citizens
Common Stock issued and outstanding. The affirmative votes of the holders of
at least a majority of the shares of Citizens Common Stock outstanding on the
Record Date are required to approve the Reorganization Agreement. See "THE
SPECIAL MEETING--Votes Required."
The directors and executive officers of Citizens (the "Citizens
Management Group") held beneficially as of the Record Date 365.5 shares, or
approximately 75.36% of the outstanding shares of Citizens Common Stock.
Citizens has been advised by the members of the Citizens Management Group that
they intend to vote their shares of Citizens Common Stock "FOR" approval of the
Reorganization Agreement. Should all members of the Citizens Management Group
vote "FOR" approval of the Reorganization Agreement, then the Reorganization
Agreement will receive requisite shareholder approval. Notwithstanding that
fact, each shareholder's vote is important and each shareholder is urged to
vote, in person or by proxy, at the Special Meeting. See "THE SPECIAL MEETING"
and "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF
CITIZENS." Furthermore, any
3
<PAGE> 16
shareholder wishing to exercise dissenters' rights should vote against the
Merger and take certain additional steps. See "--Dissenters' Rights," "THE
SPECIAL MEETING--Dissenters' Rights" and "THE MERGER--Dissenters' Rights."
THE MERGER
The Reorganization Agreement provides for the acquisition of Citizens
by UPC through the merger of Citizens with and into Community, with Community
surviving the Merger. At the Effective Time of the Merger, each share of
Citizens Common Stock issued and outstanding immediately prior to the Effective
Time of the Merger (excluding shares held by Citizens, UPC or their respective
subsidiaries, in each case other than shares held in a fiduciary capacity or in
satisfaction of debts previously contracted) would be converted into, and
exchanged for 434.074 shares of UPC Common Stock (the "Exchange Ratio"),
subject to possible adjustment as described under "DESCRIPTION OF
TRANSACTION--Adjustment of Exchange Ratio."
No fractional shares of UPC Common Stock would be issued. Rather,
cash (without interest) would be paid in lieu of any fractional share interest
remaining after aggregating all whole and fractional shares to which any
Citizens shareholder would be entitled upon consummation of the Merger, in an
amount equal to such fractional part of a share of UPC Common Stock multiplied
by the market value of one share of UPC Common Stock at the Effective Time of
the Merger. The market value of one share of UPC Common Stock at the Effective
Time of the Merger would be the last sale price of the UPC common stock on the
NYSE-Composite Transactions List (as published in The Wall Street Journal or,
if not published thereunder, another authoritative source as selected by UPC)
on the last trading day prior to the Effective Time of the Merger.
(Hereinafter, the shares of UPC Common Stock and any cash issuable to the
Citizens Record Holders in the Merger in exchange for their shares of Citizens
Common Stock are referred to collectively as the "Consideration"). See "THE
MERGER--General."
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE CITIZENS BOARD
The Citizens Board believes that the Reorganization Agreement and the
Merger are in the best interests of Citizens and its shareholders and has
approved the matter to be voted upon by the Citizens shareholders. The
Citizens Board recommends that Citizens shareholders vote "FOR" approval of the
Reorganization Agreement. The Citizens Board believes that the Merger would
result in a company with expanded opportunities for profitable growth and that
the combined resources and capital of Citizens and UPC would provide an
enhanced ability to compete in the changing and competitive financial services
industry. See "THE MERGER--Background of and Reasons for the Merger."
In approving the Reorganization Agreement, the Citizens Board
considered, among other things, Citizens' financial condition, the financial
terms and the income tax consequences of the Merger, the likelihood of the
Merger being approved by regulatory authorities without undue conditions or
delay, legal advice concerning the proposed Merger, the views of Southard
4
<PAGE> 17
Financial as to the fairness of the Exchange Ratio, from a financial point of
view, to the shareholders of Citizens and, in general, the fairness of the
terms of the Merger to Citizens' shareholders. See "THE MERGER--Background of
and Reasons for the Merger."
THE FAIRNESS OPINION
Southard Financial has rendered a written opinion (the "Fairness
Opinion") to the Citizens 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, and as of the date of this
Prospectus/Proxy Statement, the Exchange Ratio is fair, from a financial point
of view, to the shareholders of Citizens. The opinion of Southard Financial is
attached as Appendix C to this Prospectus/Proxy Statement. Citizens
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 "THE MERGER--The Fairness Opinion."
EFFECTIVE TIME OF THE MERGER
Subject to the conditions to the obligations of the parties to effect
the Merger, the Effective Time of the Merger would occur on the date and at the
time that the Articles of Merger reflecting the Merger become effective with
the Tennessee Secretary of State. See "THE MERGER--Effective Time of the
Merger," "--Conditions to Consummation of the Merger," and "--Waiver, Amendment
and Termination."
NO ASSURANCE CAN BE PROVIDED THAT THE CONDITIONS PRECEDENT TO THE
MERGER CAN OR WILL BE SATISFIED. CITIZENS AND UPC ANTICIPATE THAT ALL
CONDITIONS TO THE CONSUMMATION OF THE MERGER WOULD BE SATISFIED SO THAT THE
MERGER CAN BE CONSUMMATED DURING THE FOURTH QUARTER OF 1997. HOWEVER, DELAYS
IN THE CONSUMMATION OF THE MERGER COULD OCCUR.
EXCHANGE OF STOCK CERTIFICATES
Promptly after the Effective Time of the Merger, UPC would cause Union
Planters National Bank, Memphis, Tennessee, acting in its capacity as exchange
agent for UPC (the "Exchange Agent"), to mail to each Citizens Record Holder a
letter of transmittal, together with instructions as to how to effect the
surrender and cancellation of the certificate or certificates held by such
Citizens Record Holder which, immediately prior to the Effective Time of the
Merger, represented outstanding shares of Citizens Common Stock (the "Citizens
Certificates") in exchange for certificates representing shares of UPC Common
Stock. Cash would be paid to the holders of Citizens Common Stock in lieu of
the issuance of any fractional shares of UPC Common Stock. In no event would
the holder of any surrendered Certificate be entitled to receive interest on
any cash to be issued to such holder, and in no event would Citizens, UPC or
the Exchange Agent be liable to any holder of Citizens Common Stock for any UPC
Common Stock, dividends thereon or cash delivered in good faith to a public
official pursuant to applicable abandoned property law.
5
<PAGE> 18
REGULATORY APPROVALS AND OTHER CONDITIONS
The Merger is subject to approval by the Board of Governors of the
Federal Reserve System (the "Federal Reserve"). The Bank Merger is subject to
approval by the Federal Deposit Insurance Corporation (the "FDIC") and review
by the Tennessee Department of Financial Institutions (the "TDFI"). UPC has
filed the necessary applications and received approvals to consummate the
Merger and the Bank Merger. Citizens shareholders should clearly understand
that the receipt of any regulatory approval of the Merger does not constitute a
recommendation by any such governmental agency, and should not be considered as
such. See "THE MERGER--Regulatory Approvals."
Consummation of the Merger is subject to various other conditions,
including receipt of the required approval of Citizens shareholders, receipt of
an opinion of counsel as to the tax-free nature of certain aspects of the
Merger, receipt of a letter from the independent accountants of UPC that the
Merger would qualify for pooling of interests accounting treatment, and certain
other conditions. See "--Certain Federal Income Tax Consequences of the
Merger," "-- Accounting Treatment" and "THE MERGER--Conditions to Consummation
of the Merger."
WAIVER, AMENDMENT AND TERMINATION
Prior to the Effective Time of the Merger, either Citizens or UPC may
unilaterally waive any default or obligation of the other party under, or any
condition precedent to its own obligations under, the Reorganization Agreement.
Any provision of the Reorganization Agreement, including all conditions
precedent to consummation of the Merger, may be amended (to the extent
permitted by law) by an agreement in writing which is approved by the UPC Board
and the Citizens Board; provided, however, that the provisions of the
Reorganization Agreement relating to the manner or basis in which shares of UPC
Common Stock will be exchanged for Citizens Common Stock may not be amended in
any material respect after the Special Meeting without the requisite approval
of the issued and outstanding shares of Citizens Common Stock entitled to vote
thereon.
The Reorganization Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time of the Merger by mutual
action of the Boards of Directors of Citizens and UPC, or by the action of the
Board of Directors of either company under certain circumstances. If for any
reason the Merger should not be consummated, Citizens would continue to operate
as a bank holding company under its present management. See "THE
MERGER--Waiver, Amendment and Termination."
LIMITATION ON NEGOTIATIONS
Citizens is prohibited from soliciting or knowingly encouraging any
"Acquisition Proposal" (defined generally as any tender offer, exchange offer
or other proposal for a merger, consolidation, acquisition of all the stock,
assets or earning power of, or other business combination involving any of the
Citizens Companies or the acquisition of a substantial equity
6
<PAGE> 19
interest in, or a substantial portion of the assets or earning power of, any of
the Citizens Companies). As protection against possible violation of this
limitation, Citizens has agreed to pay to UPC the sum of $750,000 in
immediately available funds in the event and at the time that Citizens enters
into a letter of intent or agreement with respect to an Acquisition Proposal or
supports or indicates an intent to support an Acquisition Proposal other than
pursuant to the Reorganization Agreement. See "THE MERGER--Limitation on
Negotiations."
MANAGEMENT AFTER THE MERGER
The directors and officers of Community immediately prior to the
Effective Time of the Merger would continue as directors and officers of
Community, as the surviving company, following the Merger. Each of the current
officers and directors of Community is an officer or a director of UPC.
Information concerning the current management and the UPC Board is included in
the documents incorporated herein by reference. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE."
The Bank Merger will be consummated simultaneously with the Merger so
that the main office and branch of The Whiteville Bank will become branches of
First State Bank. Following the time of such Bank Merger, the name of First
State Bank, as the survivor of the Bank Merger, will be changed to Union
Planters Bank of Southwest Tennessee. The directors and executive officers of
First State Bank immediately prior to the effective time of the Bank Merger
would continue to be the directors and executive officers of First State Bank
after the effective time of the Bank Merger.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of the Citizens Management Group have interests in the
Merger in addition to their interests as shareholders of Citizens generally.
Those interests relate to, among other things, provisions in the Reorganization
Agreement regarding non-compete agreements and termination of existing deferred
compensation arrangements with Mr. Frank Bass and Ms. Peggy Campbell. See "THE
MERGER--Interests of Certain Persons in the Merger."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
It is intended that the Merger would be treated as a reorganization
within the meaning of Section 368 of the Internal Revenue Code of 1986, as
amended (the "Code"). Accordingly, no gain or loss would be recognized by an
Citizens shareholder upon the exchange of such shareholder's Citizens Common
Stock for shares of UPC Common Stock. Subject to the provisions and
limitations of Section 302(a) of the Code, gain or loss would be recognized
with respect to cash received in lieu of fractional shares. Gain recognition,
if any, would not be in excess of the amount of cash received. See "THE
MERGER--Certain Federal Income Tax Consequences of the Merger." Consummation
of the Merger is conditioned upon receipt by Citizens and UPC of an opinion of
Wyatt, Tarrant & Combs substantially to this effect. DUE TO THE INDIVIDUAL
NATURE OF THE TAX CONSEQUENCES OF THE MERGER, CITIZENS SHAREHOLDERS ARE
7
<PAGE> 20
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 "THE
MERGER--Certain Federal Income Tax Consequences of the Merger."
ACCOUNTING TREATMENT
It is intended that the Merger would be accounted for as a pooling of
interests for accounting and financial reporting purposes. Consummation of the
Merger is conditioned upon receipt by UPC of an opinion of Price Waterhouse LLP
substantially to this effect. See "THE MERGER--Accounting Treatment."
CERTAIN DIFFERENCES IN SHAREHOLDERS' RIGHTS
At the Effective Time of the Merger, Citizens shareholders, whose
rights are currently governed by the Tennessee Business Corporation Act (the
"Tennessee Act") and by Citizens' Charter and Bylaws, would automatically
become UPC shareholders and, though they would continue to be governed by the
Tennessee Act, their rights as UPC shareholders would be determined by UPC's
Restated Charter (the "UPC Charter") and UPC's Amended and Restated Bylaws (the
"UPC Bylaws"). The rights of UPC shareholders under the UPC Charter and UPC
Bylaws differ from the rights of Citizens shareholders in certain important
respects. For a discussion of material differences between the rights of UPC
shareholders and the rights of Citizens shareholders, see "EFFECT OF THE MERGER
ON RIGHTS OF SHAREHOLDERS."
DISSENTERS' RIGHTS
Under the Tennessee Act, a Citizens shareholder may perfect his or her
statutory dissenters' rights with respect to the proposed Merger. A
dissenting Citizens shareholder must take specific action in order to properly
"perfect" his or her dissenters' rights and thereby to be entitled to receive
in cash the "fair value" of his or her shares of Citizens Common Stock in the
event the Merger is actually consummated. See "THE SPECIAL
MEETING--Dissenters' Rights," "THE MERGER--Dissenters' Rights," "THE
MERGER--Conditions to Consummation of the Merger" and Sections 48-23-101, et
al, of the Tennessee Code Annotated, a copy of which is attached hereto as
Appendix D.
MARKET PRICES OF COMMON STOCK
UPC Common Stock. The UPC Common Stock is listed on the NYSE under
the symbol "UPC." It is anticipated that the shares of UPC Common Stock
issuable in the Merger in exchange for Citizens Common Stock would be approved
for listing on the NYSE at or prior to the Effective Time of the Merger. The
following table sets forth for the periods indicated the high and low closing
sale prices of the UPC Common Stock on the NYSE and the cash dividends declared
per share of UPC Common Stock for the periods indicated:
8
<PAGE> 21
<TABLE>
<CAPTION>
PRICE RANGE CASH DIVIDENDS
------------------------------ DECLARED PER
1997 HIGH LOW SHARE
----------- -------- --------------
<S> <C> <C> <C>
First Quarter $47.75 $38.38 $ .320
Second Quarter 52.13 41.25 .375
Third Quarter .400
Through July 25, 1997 52.00 51.00
------ ------ ------
Total $1.095
======
1996
First Quarter $31.75 $29.00 $ 0.27
Second Quarter 31.25 29.63 0.27
Third Quarter 36.25 28.63 0.27
Fourth Quarter 41.38 34.63 0.27
------
Total $ 1.08
======
1995
First Quarter $24.50 $20.88 $ 0.23
Second Quarter 28.13 23.13 0.25
Third Quarter 30.75 26.13 0.25
Fourth Quarter 32.25 29.63 0.25
------
Total $ 0.98
======
</TABLE>
On December 11, 1996, the business day prior to the date the Merger
was publicly announced, the last reported sale price of the UPC Common Stock on
the NYSE was $39.375 per share. On Friday, July 25, 1997, the last sale price
of UPC Common Stock as reported on the NYSE was $52.00 per share.
The holders of UPC Common Stock are entitled to receive dividends
when, as and if declared by the UPC Board 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 would remain unchanged after completion of the Merger. The
declaration and payment of dividends thereafter would depend upon business
conditions, operation results, capital and reserve requirements, the UPC
Board's consideration of other relevant factors, and whether or not UPC is
otherwise restricted by contract or agreement from paying dividends. UPC
currently is a party to an agreement pursuant to which it would not be able to
pay dividends in the event of a default under the agreement or in certain other
circumstances. See "DESCRIPTION OF UPC COMMON AND PREFERRED STOCK--UPC Common
Stock--Dividends."
UPC is a legal entity separate and distinct from its subsidiaries and
its revenues depend in significant part on the payment of dividends and fees
from its subsidiary depository
9
<PAGE> 22
institutions. UPC's subsidiary depository institutions are subject to certain
legal restrictions on the amount of dividends they are permitted to pay.
Citizens Common Stock. Citizens Common Stock has never been listed or
publicly traded on any securities exchange or actively traded in the
over-the-counter market. Management of Citizens is aware of no trades of
Citizens Common Stock over the past two years. In April, 1997, Citizens issued
two additional shares of Citizens Common Stock to a former officer of The
Whiteville Bank pursuant to the exercise of an option to acquire two shares
granted to that former officer in 1988. The exercise price paid for these two
shares was $3,200.00 per share. The outstanding shares of Citizens Common
Stock are currently held by approximately eleven holders of record.
In each of its past two fiscal years, Citizens paid a cash dividend,
on an annual basis, of $12.00 per share. The Reorganization Agreement
prohibits Citizens from paying any dividends while consummation of the Merger
is pending, with the exception of its regular annual cash dividend of $12.00,
which was paid in December 1996. See "THE MERGER--Conduct of Business Pending
the Merger." Citizens' revenues are derived primarily from dividends paid to
it by The Whiteville Bank. The amount of dividends that The Whiteville Bank
may pay are restricted by federal and state banking laws and regulations.
SELECTED CONSOLIDATED FINANCIAL DATA
The following tables present for both UPC and Citizens selected
consolidated financial data for each of the five years ended December 31, 1996
and for the three months ended March 31, 1997 and 1996. The information for
UPC has been derived from the consolidated financial statements of UPC,
including the unaudited consolidated financial statements of UPC incorporated
into this Prospectus/Proxy Statement by reference to UPC's Quarterly Report on
Form 10-Q for the quarterly period ended March 31, 1997, and the audited
consolidated financial statements of UPC incorporated into this
Prospectus/Proxy Statement by reference to UPC's 1996 Annual Report on Form
10-K for the year ended December 31, 1996, and should be read in conjunction
therewith and with the notes thereto. See "INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE." The information for Citizens has been derived from the
unaudited consolidated financial statements of Citizens for the years ended
December 31, 1996 and 1995, as well as for the three months ended March 31,
1997 and 1996, copies of which are attached to this Prospectus/Proxy Statement
as Appendix B, and should be read in conjunction therewith and with the notes
thereto, and other unaudited financial statements of Citizens for the years
ended December 31, 1994, 1993 and 1992. Management of Citizens has concluded
that it would not be practicable to include audited financial statements of
Citizens in this Prospectus/Proxy Statement for the following reasons: (1)
Citizens has not in the past provided its shareholders with audited financial
statements; (2) Citizens' financial condition and operations have been reviewed
on numerous occasions by the FDIC and the TDFI, its primary federal and state
regulators; (3) Citizens regularly files reports with the Federal Reserve and
The Whiteville Bank, Citizens' wholly-owned subsidiary bank, regularly files
reports with the FDIC and the
10
<PAGE> 23
TDFI; and (4) an audit of Citizens' financial statements would be unduly
burdensome, expensive and of little real value to the six shareholders of
Citizens who are not directors of Citizens.
Historical results are not necessarily indicative of results to be
expected for any future period for either UPC or Citizens. In the opinions of
the management of both UPC and Citizens, all adjustments, consisting only of
normal recurring adjustments necessary to arrive at a fair statement of results
of operations of their respective entities, have been included for the
unaudited periods.
11
<PAGE> 24
UNION PLANTERS CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Three Months Ended
March 31,(1) Years Ended December 31, (1)
----------------------- -----------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---------- ---------- --------- ---------- ----------- ----------- ----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net interest income $ 155,276 $ 147,742 $ 605,962 $ 535,997 $ 504,500 $ 439,290 $ 357,365
Provision for losses on loans 12,414 12,949 57,395 27,381 9,661 22,660 37,367
Investment securities gains (losses) 116 61 4,081 409 (22,515) 3,508 11,880
Other noninterest income 57,336 53,696 222,250 203,014 160,109 154,254 136,162
Noninterest expense 109,229 117,971 570,634 452,635 486,836 408,888 362,028
---------- --------- --------- ---------- ----------- ----------- -----------
Earnings before income taxes,
extraordinary item, and
accounting changes 91,085 70,579 204,264 259,404 145,597 165,504 106,012
Applicable income taxes 31,893 23,427 70,526 86,648 45,174 51,864 30,219
---------- --------- --------- ---------- ----------- ----------- -----------
Earnings before extraordinary item
and accounting changes 59,192 47,152 133,738 172,756 100,423 113,640 75,793
Extraordinary item and accounting
changes, net of taxes - - - - - 637 2,847
---------- --------- --------- ---------- ----------- ----------- -----------
Net earnings $ 59,192 $ 47,152 $ 133,738 $ 172,756 $ 100,423 $ 114,277 $ 78,640
========== ========= ========= ========== =========== =========== ===========
PER COMMON SHARE DATA (2) & (5)
Primary
Earnings before extraordinary item and
accounting changes $ 0.86 $ 0.70 $ 1.95 $ 2.72 $ 1.52 $ 2.19 $ 1.75
Net earnings 0.86 0.70 1.95 2.72 1.52 2.20 1.75
Fully diluted
Earnings before extraordinary item and
accounting changes $ 0.84 $ 0.68 $ 1.92 $ 2.64 $ 1.52 $ 2.14 $ 1.73
Net earnings 0.84 0.68 1.92 2.64 1.52 2.15 1.73
Cash dividends 0.32 0.27 1.08 0.98 0.88 0.72 0.60
Book value 20.05 19.00 19.55 18.52 15.42 14.80 14.08
(continued on following page)
- ------------------------------
</TABLE>
(1) Reference is made to "Basis of Presentation" in Note 1 to UPC's
consolidated financial statements contained in the 1996 Annual
Report to Shareholders.
(2) Share and per share amounts have been retroactively restated for
significant acquisitions accounted for as poolings of interests.
12
<PAGE> 25
UNION PLANTERS CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Three Months Ended
March 31,(1) Years Ended December 31, (1)
----------------------- -----------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---------- ---------- --------- ---------- ----------- ----------- -----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT PERIOD END)
Total assets $14,932,464 $15,242,137 $15,222,563 $14,383,222 $13,425,063 $11,866,609 $10,180,375
Loans, net of unearned income 10,362,226 9,611,613 10,434,070 9,041,059 8,436,650 6,615,884 5,364,377
Allowance for losses on loans 163,980 166,825 166,853 156,388 154,131 141,999 114,130
Investment Securities 3,008,886 3,880,625 2,956,234 3,573,054 3,592,482 3,854,767 3,370,321
Deposits 11,395,301 11,792,889 11,490,262 11,074,722 10,702,569 9,879,780 8,714,306
Short-term borrowings 536,377 834,389 714,146 838,283 699,838 300,414 343,452
Long term debt (3)
Parent company 373,096 214,761 373,459 214,758 114,790 114,729 74,292
Subsidiary banks 953,469 865,064 1,035,257 811,819 693,002 463,055 202,847
Total shareholders' equity 1,395,263 1,297,878 1,352,874 1,213,162 1,008,594 935,730 670,267
Average assets 14,936,790 15,112,315 15,274,782 13,661,748 13,105,179 11,565,505 9,475,049
Average shareholders' equity 1,346,040 1,241,143 1,283,575 1,119,232 1,042,990 813,140 623,869
Average shares outstanding
(in thousands)
Primary 66,763 64,083 64,987 60,385 59,587 43,192 35,463
Fully Diluted 70,824 68,845 69,518 64,995 59,929 47,422 38,307
PROFITABILITY AND CAPITAL RATIOS
Return on average assets 1.61% 1.25% 0.88% 1.26% 0.77% 0.99% 0.83%
Return on average common equity 18.50% 15.86% 10.61% 16.16% 9.76% 14.92% 13.15%
Net interest income (taxable-equivalent)/
average earning assets (4) 4.71% 4.37% 4.41% 4.38% 4.31% 4.29% 4.26%
Loans/deposits 90.93% 81.50% 90.81% 81.64% 78.83% 66.96% 61.56%
Common and preferred dividend payout
ratio 37.78% 33.58% 50.64% 32.74% 40.99% 28.34% 32.95%
Equity/assets (period end) 9.34% 8.52% 8.89% 8.43% 7.51% 7.89% 6.58%
Average shareholders' equity/avg. total
assets 9.01% 8.21% 8.40% 8.19% 7.96% 7.03% 6.58%
Leverage ratio 10.26% 8.09% 9.61% 8.08% 7.53% 7.62% 6.36%
Tier 1 capital/risk-weighted assets 16.55% 13.63% 15.29% 13.39% 12.75% 14.07% 11.70%
Total capital/risk-weighted assets 19.68% 16.81% 18.32% 16.68% 14.97% 16.51% 13.64%
ASSET QUALITY RATIOS (6)
Allowance/period end loans 1.85% 1.95% 1.86% 1.92% 1.98% 2.27% 2.20%
Nonperforming loans/total loans 0.63% 0.66% 0.74% 0.56% 0.44% 0.65% 1.16%
Allowance/nonperforming loans 296% 294% 253% 344% 444% 346% 189%
Nonperforming assets/loans & foreclosed
properties 0.81% 0.78% 0.92% 0.67% 0.58% 0.96% 1.83%
Provision/average loans 0.56% 0.60% 0.66 0.34% 0.14% 0.37% 0.74%
Net charge-offs/average loans 0.69% 0.42% 0.60% 0.34% 0.09% 0.27% 0.52%
</TABLE>
- ------------------------------
(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.
13
<PAGE> 26
CITIZENS SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
Three Months Ended
March 31,(1) Years Ended December 31,
----------------------- ----------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---------- ---------- --------- ---------- ----------- ----------- -----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net interest income $ 541 $ 498 $ 2,117 $ 1,888 $ 1,865 $ 1,877 $ 1,659
Provision for Credit Losses 40 35 95 37 49 328 330
Noninterest Income 91 81 303 285 230 461 382
Noninterest Expense 334 322 1,441 1,361 1,380 1,399 1,414
---------- --------- --------- ---------- ----------- ----------- -----------
Net Income $ 161 $ 144 $ 551 $ 470 $ 425 $ 373 $ 251
========== ========= ========= ========== =========== =========== ===========
PER COMMON SHARE DATA
Net income Per Common Share $ 333.69 $ 298.98 $1,140.15 $ 972.73 $ 879.92 $ 772.26 $ 519.67
Cash Dividends Per Common Share -0- -0- 12.00 12.00 12.00 12.00 12.00
Book Value Per Common Share 9,867.33 8,906.51 9,690.49 8,732.19 6,751.55 6,861.28 6,134.58
BALANCE SHEET DATA (AT PERIOD END)
Total Assets $ 61,534 $ 56,341 $ 61,371 $ 54,584 $ 48,936 $ 45,676 $ 41,642
Loan Net of Unearned Income 36,930 32,250 36,054 31,950 29,885 26,611 24,024
Investment Securities 15,904 15,425 15,386 13,619 12,436 14,267 13,169
Reserve for Loan Losses 493 464 420 434 485 384 362
Total Deposits 56,069 51,372 56,161 49,830 45,254 41,964 38,435
Shareholders' Equity 4,766 4,302 4,681 4,218 3,261 3,314 2,963
SELECTED FINANCIAL RATIOS
Return on Average Assets 1.09% 1.04% .95% .91% .90% .85% .62%
Return on Average Shareholders' Equity 14.18% 14.93% 12.67% 12.57% 12.93% 11.88% 8.83%
Dividend Payout Ratio -0- -0- 1.05% 1.16% 1.36% 1.55% 2.31%
Equity Capital to Total Average Assets 8.11% 7.79% 8.11% 7.74% 6.23% 7.59% 7.36%
Allowance for Credit Losses to Net Loans 1.33% 1.44% 1.16% 1.36% 1.62% 1.44% 1.51%
</TABLE>
14
<PAGE> 27
RECENT DEVELOPMENTS AFFECTING UPC
Other Pending Acquisitions. UPC has entered into definitive
agreements to acquire the following four financial institutions in addition to
Citizens, which UPC's management considers probable of consummation and which
are expected to close in 1997 (collectively, the "Other Pending Acquisitions").
<TABLE>
<CAPTION>
Asset Size
Institution (In Millions)(1) Type of Consideration
- -------------------------------- ---------------- --------------------------------
<S> <C> <C>
Magna Bancorp, Inc., Hattiesburg, $1,381 Approximately 7.1 million shares
Mississippi, and its subsidiaries of UPC Common Stock
including Magnolia Federal Bank
for Savings ("Magna")
First Acadian Bancshares, Inc., 80 Approximately 358,725 shares of
Thibodaux, Louisiana, and its UPC Common Stock
subsidiary, Acadian Bank ("FAB")
SBT Bancshares, Inc., Selmer, 102 Approximately 612,233 shares of
Tennessee, and its subsidiary UPC Common Stock
Selmer Bank & Trust Co. ("SBT")
Sho-Me Financial Corporation, Approximately 1,153,051 shares of
Mount Vernon, Missouri, and its 304 UPC Common Stock
subsidiary First Savings Bank, FSB
("Sho-Me")
______
$1,867
======
</TABLE>
(1) Approximate total assets at March 31, 1997.
Earnings Considerations Related to 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. 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 the elimination of duplicate facilities, branch closures,
data processing charges, cancellation of vendor contracts, the potential for
additional provisions for loan losses and similar costs which normally arise
from the consolidation of operational activities.
Aggregate charges expected to arise with respect to the acquisition of
Citizens and the Other Pending Acquisitions (primarily the Magna acquisition)
have been preliminarily estimated to be in the range of $9 million to $11
million after taxes. 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 is
15
<PAGE> 28
provided as a preliminary estimate of the significant charges which may in the
aggregate be required and should be viewed accordingly.
EQUIVALENT AND PRO FORMA PER SHARE DATA
The following table presents selected, comparative, unaudited per
share data for: (i) UPC Common Stock and Citizens Common Stock on an historical
basis; (ii) UPC Common Stock on a pro forma basis, giving effect to the Merger
and all Other Pending Acquisitions; (iii) Citizens Common Stock on an
equivalent pro forma basis, UPC only; and (iv) Citizens Common Stock on an
equivalent pro forma basis, including the Merger and all Other Pending
Acquisitions, for the periods indicated. Pro forma per share data is not
presented separately for Citizens because it would not be significantly
different from UPC's results. See "Recent Developments Affecting UPC--Other
Pending Acquisitions."
The pro forma data for 1996 and the three month period ended March 31,
1997 reflect the Merger and all Other Pending Acquisitions as of January 1,
1996. The pro forma data for 1995 and 1994 reflect only the assumed
acquisition of Magna because the Merger and Other Pending Acquisitions are not
considered significant to UPC from a financial statement presentation
standpoint. The pro forma data reflects the Merger and UPC's Other Pending
Acquisitions, each of which, except for the Sho-Me transaction, are expected to
be accounted for using the pooling of interests method of accounting. The
Sho-Me transaction is expected to be accounted for using the purchase method of
accounting. See "--Recent Developments Affecting UPC-Other Pending
Acquisitions." These data are not necessarily indicative of the results of the
future operations of either UPC, Citizens or the Other Pending Acquisitions, or
the actual results that would have occurred had the Merger been consummated on
January 1, 1996. The information is derived from, and should be read in
conjunction with, the historical consolidated financial statements of UPC
(including related notes thereto) which are incorporated by reference herein,
and the historical consolidated financial statements of Citizens (including
related notes thereto), which are included in this Prospectus/Proxy Statement
as Appendix B. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE,"
"--Selected Consolidated Financial Data" and "--Recent Developments Affecting
UPC."
16
<PAGE> 29
UNION PLANTERS CORPORATION
HISTORICAL AND PRO FORMA COMPARATIVE PER SHARE DATA
<TABLE>
<CAPTION>
Year Ended December 31, (1)
Three Months Ended --------------------------------------
March 31, 1997 1996 1995 1994
------------------ ---- ---- ----
<S> <C> <C> <C> <C>
EARNINGS BEFORE EXTRAORDINARY ITEMS
AND ACCOUNTING CHANGES
UPC
Primary $ 0.86 $ 1.95 $ 2.72 $ 1.52
Fully Diluted 0.84 1.92 2.64 1.52
Citizens 333.69 1,140.15 972.73 879.92
UPC pro forma (all Other Pending
Acquisitions, including Citizens)
Primary 0.85 2.00 2.74 1.59
Fully diluted 0.83 1.97 2.67 1.58
Citizens equivalent pro forma (UPC only)(1)
Primary 373.30 846.44 1,180.68 659.79
Fully diluted 364.62 833.42 1,145.96 659.79
Citizens equivalent pro forma (all Other
Pending Acquisitions, including Citizens)(1)
Primary 368.96 868.15 1,189.36 690.18
Fully Diluted 360.28 855.13 1,158.98 685.84
CASH DIVIDENDS PER SHARE
UPC 0.32 1.08 0.98 0.88
Citizens -- 12.00 12.00 12.00
Citizens equivalent pro forma (1) 138.90 468.80 425.39 381.99
March 31, 1997 December 31, 1996
-------------- -----------------
BOOK VALUE PER COMMON SHARE
UPC $ 20.05 $ 19.55
Citizens 9,867.33 9,690.49
UPC pro forma (all Other Pending
Acquisitions, including Citizens) 20.02 19.56
Citizens equivalent pro forma (UPC only)(1) 8,703.18 8,486.15
Citizens equivalent pro forma (all Other
Pending Acquisitions, including Citizens)(1) 8,690.16 8,490.49
</TABLE>
___________________________________
(1) The equivalent pro forma per share data for Citizens is computed by
multiplying UPC's information by an Exchange Ratio of 434.074.
17
<PAGE> 30
THE SPECIAL MEETING
TIME AND PLACE OF SPECIAL MEETING; SOLICITATION OF PROXIES; REVOCATION
Each copy of this Prospectus/Proxy Statement is accompanied by a Proxy
Appointment Sheet furnished in connection with the Citizens Board's
solicitation of proxies for use at the Special Meeting and at any adjournments
or postponements thereof. The Special Meeting is scheduled to be held at 9:00
a.m., local time, on Thursday, September 4, 1997 at the main office of
Whiteville Bank, 114 Main Street, Whiteville, Tennessee. Only Citizens
shareholders at the close of business on July 28, 1997 (the "Record Date") are
entitled to receive notice of and to vote at the Special Meeting. At the
Special Meeting, Citizens shareholders will consider and vote upon a proposal
to approve the Reorganization Agreement, including the Plan of Merger. Holders
of Citizens Common Stock are entitled to one vote on each matter considered and
voted upon at the Special Meeting for each share of Citizens Common Stock held
of record as of the Record Date. If a signed Proxy Appointment Sheet is
returned to Citizens and the Citizens shareholder has not marked his or her
vote with respect to the proposed Merger, all of the shares represented by that
Proxy Appointment Sheet will be voted "FOR" approval of the Reorganization
Agreement. If matters other than the consideration of the proposed Merger
properly come before the Special Meeting, the proxy will be voted by the
persons named therein in a manner which they consider to be in the best
interest of Citizens. Citizens' management is not aware of any other matters
to be acted upon at the Special Meeting.
CITIZENS SHAREHOLDERS ARE REQUESTED TO COMPLETE, DATE AND SIGN THE
ACCOMPANYING PROXY APPOINTMENT SHEET AND RETURN IT PROMPTLY TO CITIZENS IN THE
ENCLOSED, POSTAGE-PAID ENVELOPE. FAILURE TO RETURN YOUR PROPERLY EXECUTED
PROXY APPOINTMENT SHEET OR FAILURE TO VOTE AT THE SPECIAL MEETING WILL HAVE THE
SAME EFFECT AS A VOTE AGAINST THE APPROVAL OF THE REORGANIZATION AGREEMENT.
CITIZENS SHAREHOLDERS SHOULD NOT FORWARD ANY STOCK CERTIFICATES WITH THEIR
PROXY APPOINTMENT SHEETS.
Any Citizens shareholder who has executed and delivered a Proxy
Appointment Sheet to Citizens may nevertheless revoke it at any time before it
is voted by attending the Special Meeting and voting in person, by giving
notice of revocation in writing or by submitting a signed Proxy Appointment
Sheet bearing a later date by mail, delivery or facsimile to Citizens of
Hardeman County Financial Services, Inc., 114 Main Street, Whiteville,
Tennessee 38008, Attention: James R. Bellar, Secretary (facsimile number (901)
254-9030), provided such notice or later dated Proxy Appointment Sheet is
actually received by Citizens before the vote of Citizens shareholders has been
taken.
In addition to solicitation of proxies from Citizens shareholders by
use of the mail, proxies also may be solicited by personal interview, telephone
and facsimile by directors, officers and employees of Citizens who will not be
specifically compensated for such services. It is possible that banks,
brokerage houses and other institutions, nominees or fiduciaries will be
requested to forward the soliciting materials to their principals and obtain
authorization for the execution of proxies. All costs of soliciting proxies,
assembling and mailing the Prospectus/Proxy Statement, all papers which now
accompany or hereafter may supplement the same, as well as reasonable
18
<PAGE> 31
out-of-pocket expenses incurred by such banks, brokerage houses and other
institutions, nominees or fiduciaries for forwarding proxy materials to and
obtaining proxies from their principals, will be borne by Citizens; provided,
however, that UPC and Citizens, respectively, will bear the cost of all
Commission filing fees incurred in connection with the Merger and the costs of
printing the Prospectus/Proxy Statement in proportion to the relative sizes of
their respective assets.
VOTES REQUIRED
The affirmative votes of a majority of the outstanding shares of
Citizens Common Stock entitled to vote at the Special Meeting are required in
order to approve the Reorganization Agreement. As of the Record Date, there
were 485 shares of Citizens Common Stock outstanding and entitled to vote at
the Special Meeting, with each share entitled to one vote.
The Citizens Management Group held beneficially as of the Record Date
365.5 shares, or approximately 75.36% of the outstanding shares of Citizens
Common Stock. Citizens has been advised by the members of the Citizens
Management Group that they intend to vote their shares of Citizens Common Stock
"FOR" approval of the Reorganization Agreement. Should all members of the
Citizens Management Group vote "FOR" approval of the Reorganization Agreement,
then the Reorganization Agreement will receive requisite shareholder approval.
Notwithstanding that fact, each shareholder's vote is important and each
shareholder is urged to vote, in person or by proxy, at the Special Meeting.
Furthermore, any shareholder wishing to exercise dissenters' rights should vote
against the Merger and take certain additional steps. See "-- Dissenters'
Rights" and "THE MERGER--Dissenters' Rights."
VOTING
A majority of the outstanding shares of Citizens Common Stock present
in person or by proxy will constitute a quorum for the transaction of business
at the Special Meeting. Proxies marked to abstain from voting will be treated
as shares that are present at the Special Meeting for purposes of determining
the presence of a quorum for the transaction of business at the Special
Meeting.
The proposal to approve the Reorganization Agreement requires the
affirmative votes of the holders of a majority ( i.e., 243) of the 485 issued
and outstanding shares of Citizens Common Stock as of the Record Date.
Therefore, failure to return a properly executed Proxy Appointment Sheet or to
vote in person at the Special Meeting, and abstentions, will have the same
effect as a vote against approval of the Reorganization Agreement.
DISSENTERS' RIGHTS
Citizens shareholders have the right to dissent to the proposed Merger
and to receive the "fair value" of their shares of Citizens Common Stock in the
event the Merger is actually consummated. There are numerous steps a
dissenting Citizens shareholder must take to properly "perfect" his or her
statutory dissenters' rights. See "THE MERGER--Dissenters' Rights," "THE
MERGER--Conditions to Consummation of the Merger" and Sections 48-23-101, et
al, of the Tennessee Code Annotated, a copy of which is attached hereto as
Appendix D.
19
<PAGE> 32
RECOMMENDATION OF THE CITIZENS BOARD
For the reasons described below, the Citizens Board has adopted and
approved the Reorganization Agreement and believes that the Merger is in the
best interest of Citizens and the Citizens shareholders and recommends that the
Citizens shareholders vote "FOR" the approval of the Reorganization Agreement.
See "THE MERGER--Background of and Reasons for the Merger."
THE MERGER
The following information describes certain 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 Reorganization
Agreement attached as Appendix A to this Prospectus/Proxy Statement and
incorporated herein by reference. All shareholders are urged to read the
Appendix in its entirety.
GENERAL
The Reorganization Agreement provides for the acquisition of Citizens
by UPC through the Merger of Citizens with and into Community, a wholly-owned
subsidiary of UPC, with Community surviving the Merger. Simultaneously with
the Merger, The Whiteville Bank, a wholly-owned subsidiary bank of Citizens,
would be merged with and into First State Bank, a wholly-owned subsidiary of
Community (the "Bank Merger"). As a result of the Merger and the Bank Merger,
Citizens would be acquired by UPC and the main office and branch of The
Whiteville Bank would become branches of First State Bank. At the Effective
Time of the Merger, each share of Citizens Common Stock issued and outstanding
(excluding shares held by Citizens, UPC or their respective subsidiaries, in
each case other than shares held in a fiduciary capacity or in satisfaction of
debts previously contracted) would be converted exclusively into, and exchanged
for, 434.074 shares of UPC Common Stock, subject to possible adjustment as
described in "--Adjustment of Exchange Ratio" below. Shares of Citizens Common
Stock held by Citizens, UPC or their respective subsidiaries, other than those
shares held in a fiduciary capacity or in satisfaction of debts previously
contracted, would be canceled and retired with no consideration at the
Effective Time of the Merger.
No fractional shares of UPC Common Stock would be issued. Rather,
cash (without interest) would be paid in lieu of any fractional share interest
remaining after aggregating all whole and fractional shares to which any
Citizens Record Holder 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 the UPC Common Stock on the NYSE-Composite Transactions
List (as published by The Wall Street Journal or, if not published therein, any
other authoritative source selected by UPC) on the last trading day prior to
the Effective Time of the Merger.
As of the Citizens Record Date, Citizens had 485 shares of Citizens
Common Stock issued and outstanding. Taking into the account the Exchange
Ratio of 434.074 shares of UPC Common Stock for each share of Citizens Common
Stock which will be validly issued and outstanding
20
<PAGE> 33
prior to the Effective Time of the Merger, it is anticipated that, upon
consummation of the Merger, UPC would issue approximately 210,526 shares of UPC
Common Stock.
ADJUSTMENT OF EXCHANGE RATIO
The Exchange Ratio may be adjusted, in UPC's sole discretion, if
Citizens effects any stock split, reverse stock split, stock dividend or
similar change in the number of outstanding shares of any of its capital stock,
or should there be more than 483 shares of Citizens Common Stock outstanding,
prior to the Effective Time of the Merger. Any such adjustment elected by UPC
must be made in good faith and be fair and reasonable in giving effect to such
change in Citizens's capital account. Citizens has covenanted not to: (1)
issue, sell, pledge or encumber any shares of Citizens Common Stock or any
other capital stock of any of the Citizens Companies; or (2) adjust, split,
combine or reclassify any capital stock of any of the Citizens Companies.
In April, 1997, Citizens issued two additional shares of Citizens
Common Stock to a former officer of The Whiteville Bank pursuant to the
exercise by such former officer of an option to acquire two shares granted to
him in 1988. The exercise price paid for these two shares was $3,200.00 per
share. With these two shares, there are 485 shares of Citizens Common Stock
outstanding as of the date of this Prospectus/Proxy Statement. As permitted by
the Reorganization Agreement under the provisions discussed above, the Exchange
Ratio has been adjusted to 434.074 to reflect the issuance of these two shares.
BACKGROUND OF AND REASONS FOR THE MERGER
Background of the Merger. In June 1996, Frank T. Bass, the President
and Chief Executive Officer of Citizens and the Bank and the holder of
approximately 69% of the outstanding shares of Citizens Common Stock,
determined after careful consideration that it would be in his and his family's
long-term best interest if all of his shares of Citizens Common Stock were
sold. At that point, Citizens retained its counsel to assist in obtaining
offers to acquire all of the outstanding shares of Citizens Common Stock.
Citizens' counsel contacted approximately two dozen financial institutions and
individuals in the region, including UPC, in an effort to determine if those
financial institutions or persons would be interested in making an offer to
acquire Citizens. As a result of those contacts, during August 1996, Citizens
received preliminary acquisition proposals from three financial institutions
and one individual, including UPC. Based on the preliminary offer submitted by
UPC, information related to the proposed transaction was exchanged between
Citizens and UPC and negotiations ensued between them. On October 11, 1996,
the Citizens Board met for the purposes of considering and acting upon a
revised acquisition proposal from UPC to acquire Citizens. That revised
acquisition proposal was approved by the Citizens Board. At that point,
negotiations commenced regarding a definitive agreement for the transaction
and, on December 5, 1996, the Citizens Board approved the Reorganization
Agreement.
Citizens' Reasons for the Merger. In reaching its decision to approve
the Reorganization Agreement and the Merger, the Citizens Board consulted with
its counsel, as well as with Citizens' management, and considered a number of
factors, including, without limitation, the following:
21
<PAGE> 34
1. The Citizens Board's familiarity with and review of Citizens'
business, operations, earnings, financial condition and future
capital requirements;
2. The Citizens Board's belief that the terms of the
Reorganization Agreement are attractive to Citizens
shareholders in that the Reorganization Agreement would allow
Citizens shareholders to become shareholders in UPC, an
institution which is the largest bank holding company
headquartered in the area, whose stock is traded on the NYSE,
and the recent earnings performance of UPC;
3. UPC's wide range of banking products and services and its
dividend payment history;
4. The Citizens Board's belief, based upon analysis of the
anticipated financial effects of the Merger, that, upon
consummation of the Merger, UPC and its banking subsidiaries
would be well capitalized institutions, the financial
positions of which will be well in excess of all applicable
regulatory capital requirements;
5. The current and prospective economic and regulatory
environment and competitive constraints facing the banking
industry and financial institutions in Citizens' market area;
6. The Citizens Board's belief that, in light of the reasons
discussed above, UPC was the most attractive choice as a long
term affiliation partner of the Citizens; and
7. The expectation that the Merger will generally be a tax-free
transaction to Citizens and its shareholders.
The Citizens Board did not assign any specific or relative weight to any of the
factors discussed above in their considerations.
THE CITIZENS BOARD RECOMMENDS THAT CITIZENS SHAREHOLDERS VOTE "FOR"
APPROVAL OF THE REORGANIZATION AGREEMENT.
THE FAIRNESS OPINION
Pursuant to a letter agreement dated as of October 16, 1996 (the
"Southard Financial Agreement"), Citizens retained Southard Financial, a
Memphis, Tennessee financial valuation consulting firm, to render its opinion
as to the fairness, from a financial point of view to the holders of Citizens
Common Stock of the consideration to be paid in the Merger (the "Fairness
Opinion"). In connection with this engagement, Southard Financial evaluated
the financial terms of the Merger, but was not asked to, and did not, recommend
the specific ratio of exchange between the respective common stock of UPC and
Citizens and did not assist in negotiating the Merger. The Exchange Ratio was
determined by UPC and Citizens after arm's length negotiations. Citizens did
not place any limitations on the scope of Southard Financial's investigation or
review.
22
<PAGE> 35
Southard Financial provided a written Fairness Opinion and supporting
documentation to the Citizens Board. The full text of the Fairness Opinion,
dated June 30, 1997, which sets forth certain assumptions made, matters
considered and limitations on the review performed by Southard Financial is
attached to this Prospectus/Proxy Statement as Appendix C and is incorporated
herein by reference. The summary of the Fairness Opinion set forth in this
Prospectus/Proxy Statement is qualified in its entirety by reference to the
Fairness Opinion.
In arriving at its opinion, Southard Financial conducted interviews
with officers of Citizens and reviewed the documents indicated in the Fairness
Opinion. Southard Financial did not independently verify the accuracy and/or
the completeness of the financial and other information reviewed in rendering
its opinion. Southard Financial did not, and was not requested to, solicit
third party indications of interest in acquiring any or all of the assets of
Citizens.
In connection with rendering its opinion, Southard Financial performed
a variety of financial analyses which are summarized below. Southard Financial
believes that its analyses must be considered as a whole and that considering
only selected factors could create an incomplete view of the analyses and the
process underlying the opinion. In its analyses, Southard Financial made
numerous assumptions, many of which are beyond the control of Citizens and UPC.
Any estimates contained in the analyses prepared by Southard Financial are not
necessarily indicative of future results or values, which may vary
significantly from such estimates. Estimates of value of companies do not
purport to be appraisals or necessarily reflect the prices at which companies
or their securities may actually be sold. None of the analyses performed by
Southard Financial was assigned a greater significance than any other.
Dividend Yield Analysis. In evaluating the impact of the proposed
Merger on the shareholders of Citizens, Southard Financial reviewed the
dividend paying histories of Citizens and UPC. Based upon this review, it is
reasonable to expect that the shareholders of Citizens, in total, will receive
dividends substantially above the level currently paid by Citizens after
consummation of the Merger (defined as post-Merger combined dividend per share
times the Exchange Ratio). Based upon 1996 dividend payments for UPC and
Citizens and an Exchange Ratio of 434.074 shares of UPC Common Stock for each
share of Citizens Common Stock, the shareholders of Citizens will see a 39 fold
increase in dividends.
Earnings Yield Analysis. In evaluating the impact of the proposed
Merger on the shareholders of Citizens, Southard Financial determined that,
based upon an Exchange Ratio of 434.074 shares of UPC Common Stock for each
share of Citizens Common Stock, the shareholders of Citizens would realize an
increase of 3.8% in their earnings per share, based upon 1996 operating
earnings of UPC and Citizens. The analysis also suggests expected higher
earnings yields for Citizens shareholders in subsequent years if the Merger is
consummated.
Book Value Analysis. In evaluating the impact of the proposed Merger
on the shareholders of Citizens, Southard Financial determined that the
shareholders of Citizens would have seen a decrease in the book value of their
investment had the Merger been consummated at year-end 1996. Reported book
value of Citizens at December 31, 1996 was $9,237.00 per share (assuming that
485 shares were outstanding on that date). Reported book value of UPC at
December 31, 1996 was $19.55 per share. Had the Merger been consummated as of
December
23
<PAGE> 36
31, 1996, each former share of Citizens Common Stock would have had a book
value of $8,486.15 (UPC year-end 1996 book value of $19.55 per share times
434.074 shares). This represents 91.9% of Citizens' book value as of December
31, 1996.
Analysis of Alternatives. In evaluating the fairness of the proposed
Merger to the shareholders of Citizens, Southard Financial reviewed with
management other offers received for the acquisition or merger of Citizens.
Further, Southard Financial considered recent public market merger pricing
information.
Analysis of Market Transactions. Based upon the terms of the
Reorganization Agreement and the June 27, 1997 price of UPC Common Stock,
Citizens shareholders would receive 225% of Citizens' March 31, 1997 book value
per share and 18.5 times Citizens' reported 1996 earnings. Based upon the
review conducted by Southard Financial, the pricing for Citizens in the Merger
is within the range of pricing multiples seen in recent bank acquisitions.
Fundamental Analysis. Southard Financial reviewed the financial
characteristics of Citizens and UPC with respect to profitability, capital
ratios, liquidity, asset quality and other factors. Southard Financial
compared Citizens and UPC to a universe of publicly traded banks and bank
holding companies and to peer groups as listed by the Federal Financial
Institutions Examination Counsel. Southard Financial found that the
post-Merger combined entity will have capital ratios and profitability ratios
near those of the public peer group.
Liquidity. Unlike Citizens Common Stock, shares of UPC Common Stock
to be received in the Merger will be registered with the SEC, and UPC Common
Stock is actively traded on the NYSE. Further, except in the case of officers,
directors and certain large shareholders of Citizens, UPC shares received will
be freely tradeable with no restrictions.
Southard Financial is a financial valuation consulting firm,
specializing in the valuation of closely-held companies and financial
institutions. Since its founding in 1987, Southard Financial has provided
approximately 2,000 valuation opinions for clients in 43 states. Further,
Southard Financial provides valuation services for approximately 100 financial
institutions annually. For rendering the Fairness Opinion, Southard Financial
received a fee of $14,000 plus reasonable out of pocket expenses. Southard
Financial has never been engaged previously by Citizens or UPC. Neither
Southard Financial nor its principals owns an interest in the securities of
Citizens or UPC.
EFFECTIVE TIME OF THE MERGER
Subject to the conditions to the obligations of the parties to effect
the Merger, the Effective Time of the Merger would occur on the date and at the
time that the Articles of Merger relating to the Merger become effective with
the Tennessee Secretary of State. 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 would be satisfied. Citizens and UPC
anticipate that all conditions to consummation of the Merger would be satisfied
so that the Merger can be consummated during the fourth quarter of 1997.
However, delays in the consummation of the Merger could occur. See
"--Conditions to Consummation of the Merger."
24
<PAGE> 37
The Board of Directors of either Citizens or UPC generally may
terminate the Reorganization Agreement if the Merger is not consummated by
December 31, 1997, unless the failure to consummate by that date is the result
of a willful breach of the Reorganization Agreement by the party seeking
termination. See "--Waiver, Amendment and Termination."
EXCHANGE OF CERTIFICATES
Promptly after the Effective Time of the Merger, UPC and Citizens
would cause the Exchange Agent, to mail to the each Citizens Record Holder a
letter of transmittal, together with instructions for the exchange of the
Citizens Certificates previously representing shares of Citizens Common Stock
for certificates representing shares of UPC Common Stock.
CITIZENS SHAREHOLDERS SHOULD NOT SEND IN THEIR CITIZENS CERTIFICATES
UNTIL THEY RECEIVE THE LETTER OF TRANSMITTAL AND INSTRUCTIONS FROM THE EXCHANGE
AGENT.
Upon surrender to the Exchange Agent of Citizens Certificates,
together with a properly completed letter of transmittal, there would be issued
and mailed to each Citizens Record Holder who properly surrenders such items a
certificate or certificates representing the whole number of shares of UPC
Common Stock, after aggregation of all whole and fractional shares, to which
such Citizens Record Holder is entitled, if any, and a check for the amount to
be paid in lieu of any remaining fractional share (without interest), together
with all undelivered dividends or distributions in respect of such shares
(without interest thereon). 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 of the Merger, the declaration would include dividends
or other distributions on all shares of UPC Common Stock issuable pursuant to
the Reorganization Agreement; however, beginning 30 days after the Effective
Time of the Merger no dividend or other distribution payable after the
Effective Time of the Merger to the holders of UPC Common Stock would be paid
to any Citizens Record Holder with respect to any Citizens Common Stock
Certificate which has not yet been surrendered until such Certificate is
surrendered in accordance with the Exchange Agent's instructions. Upon
surrender of such Citizens Common Stock Certificate, however, the UPC Common
Stock certificate, together with all undelivered dividends or other
distributions (without interest), and any undelivered cash payments to be paid
in lieu of fractional shares (without interest), would be delivered and paid
with respect to each share represented by such certificate.
After the Effective Time of the Merger, no transfers of shares of
Citizens Common Stock would be recognized on Citizens' stock transfer books.
CONDITIONS TO CONSUMMATION OF THE MERGER
The respective obligations of UPC and Citizens to effect the Merger
are subject to the satisfaction, or waiver by the party entitled to the
benefits thereof, of various conditions prior to the Effective Time of the
Merger, including: (i) the approval of the Reorganization Agreement by the
shareholders of Citizens; (ii) the receipt of all regulatory approvals required
for consummation of the Merger; (iii) 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
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on UPC or Citizens; (iv) the absence of any law, order or other action of any
court or governmental or regulatory authority of competent jurisdiction which
prohibits, restricts or makes illegal the consummation of the Merger; (v) the
effectiveness of the Registration Statement and the receipt of all necessary
Commission and state approvals relating to the issuance or trading of the
shares of UPC Common Stock issuable pursuant to the Merger; (vi) the approval
of the shares of UPC Common Stock issuable pursuant to the Merger for listing
on the NYSE, subject to official notice of issuance; (vii) the receipt of a
letter from Price Waterhouse LLP addressed to UPC, dated as of the Effective
Time of the Merger, to the effect the Merger would qualify for pooling of
interests accounting treatment; and (viii) the receipt of a favorable opinion
of Wyatt, Tarrant & Combs as to the tax-free nature (except for cash received
in lieu of fractional shares) of the Merger. See "THE SPECIAL MEETING,"
"--Regulatory Approvals," "--Certain Federal Income Tax Consequences of the
Merger," "--Accounting Treatment" and "--Waiver, Amendment and Termination."
The obligations of UPC to effect the Merger are further subject to the
satisfaction, or waiver by UPC, of various conditions prior to the Effective
Time of the Merger, including: (i) the accuracy, as of the date of the
Reorganization Agreement and as of the Effective Time of the Merger, of the
representations and warranties of Citizens as set forth in the Reorganization
Agreement; (ii) the performance of all agreements and the compliance with all
covenants of Citizens as set forth in the Reorganization Agreement; (iii) the
receipt of various certificates from the officers of Citizens; (iv) the receipt
by UPC from each affiliate of Citizens of a written letter providing that,
except as contemplated by the Reorganization Agreement or in compliance with
applicable provisions of the Securities Act, such affiliate will not sell,
pledge, transfer or otherwise dispose of the shares of Citizens Common Stock
held, or the shares UPC Common Stock to be received upon consummation of the
Merger, by such affiliate; (v) the receipt from Citizens of an opinion of
counsel that Citizens is duly organized, validly existing and in good standing
under the laws of Tennessee and that Citizens has valid authority to enter and
perform the requirements of the Reorganization Agreement; (vi) the compliance
by Citizens, at the time of the closing of the Merger, with certain financial
covenants, including one requiring it to maintain total deposits of at least
$50 million; and (vii) the execution by Frank T. Bass, as President and Chief
Executive Officer of Citizens, and the use of the best efforts of Citizens to
cause the execution by each other member of the Citizens Board and each
chairman of the board, president or chief executive officer of The Whiteville
Bank, of a non-compete agreement with UPC, Citizens and The Whiteville Bank.
See "--Representations and Warranties," "--Resales of UPC Common Stock,"
"--Employee Benefit Plans" and "--Waiver, Amendment and Termination."
The obligations of Citizens to effect the Merger are further subject
to the satisfaction, or waiver by Citizens, of various conditions prior to the
Effective Time of the Merger, including: (i) the accuracy, as of the date of
the Reorganization Agreement and as of the Effective Time of the Merger, of the
representations and warranties of UPC as set forth in the Reorganization
Agreement; (ii) the performance of all agreements and the compliance with all
covenants of UPC as set forth in the Reorganization Agreement; (iii) the
receipt of various certificates from the officers of UPC; (iv) the receipt from
UPC of an opinion of counsel that UPC is duly organized, validly existing and
in good standing under the laws of Tennessee and that UPC has valid authority
to enter and perform the requirements of the Reorganization Agreement; and (v)
the receipt of the Fairness Opinion from Southard Financial. See
"--Representations and Warranties," "Employee Benefit Plans" and "--Waiver,
Amendment and Termination."
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No assurance can be provided as to when or if all of the conditions
precedent to the Merger can or would be satisfied or lawfully waived by the
party permitted to do so. In the event the Merger should not be effected on or
before December 31, 1997, the Reorganization Agreement may be terminated and
the Merger abandoned by either the Citizens Board or the UPC Board. See
"--Waiver, Amendment, and Termination."
REPRESENTATIONS AND WARRANTIES
UPC and Citizens have made certain representations and warranties to
each other in the Reorganization Agreement relating to, among other things,
their respective organization, standing and authority; their respective
authority to execute and deliver the Reorganization Agreement and to consummate
the transactions contemplated thereby and the absence of any breaches as a
result thereto; capital stock; filings with the Commission and financial
statements; the absence of any undisclosed liabilities or certain changes or
events; compliance with laws; legal proceedings; reports; the truth and
accuracy of various statements; and certain accounting, tax and regulatory
matters. Citizens has made additional representations and warranties in the
Reorganization Agreement with respect to its subsidiaries; its financial
statements; certain tax matters; the adequacy of its allowance for possible
loan losses; its assets; its intellectual property rights; certain
environmental matters; labor relations; employee benefit plans; material
contracts; the applicability of various state takeover laws; compliance with
provisions of Citizens' Charter; and the effectiveness of its charter
documents.
REGULATORY APPROVALS
The Merger requires the prior approval of the Federal Reserve pursuant
to Section 3 of the Bank Holding Company Act (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
may be to substantially lessen competition or to tend to create a monopoly, or
if it would be 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 15th day 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. Because, as discussed below, UPC has filed an
application with the FDIC, and submitted a copy thereof to the TDFI, for their
respective approval and review and approval of the proposed Bank Merger, UPC
has requested that the Federal Reserve waive the requirement that UPC file an
application for prior approval to acquire Citizens. The Federal Reserve agreed
by letter dated April 10, 1997 to waive the application requirement and
approved the Merger contingent upon UPC's receipt of the FDIC approval of the
Bank Merger.
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The Bank Merger is subject to approval by the FDIC under the Bank
Merger Act, and is subject to review and approval by the TDFI under Tennessee
banking law. An application was filed with the FDIC, and a copy thereof was
submitted to the TDFI, on February 27, 1997 for their respective review and
approvals of the Bank Merger. FDIC approval was received by UPC on April 10,
1997, and is valid until October 10, 1997, unless extended.
RECEIPT OF REGULATORY APPROVAL FROM THE FDIC OR ANY OTHER GOVERNMENTAL
AGENCY IS NOT, AND SHOULD NOT BE CONSIDERED AS, A RECOMMENDATION BY THE FDIC OR
ANY OTHER GOVERNMENTAL AGENCY FOR APPROVAL OF THE MERGER BY CITIZENS
SHAREHOLDERS.
WAIVER, AMENDMENT AND TERMINATION
To the extent permitted by applicable law, Citizens and UPC, with the
approval of their respective Boards of Directors, may amend the Reorganization
Agreement by a written agreement at any time before or after approval of the
Reorganization Agreement by the Citizens shareholders; provided, however, that
after the Special Meeting, no amendment may in any material respect modify the
Consideration. Furthermore, UPC would have the unilateral right to revise the
structure of the Merger in order to achieve tax benefits or for any other
reason which UPC may deem advisable; provided, however, that UPC may not,
without the approval of the Citizens Board, make any revision to the structure
of the Merger which would: (i) change the amount of the Consideration; (ii)
change the intended tax-free effect of the Merger to UPC, Community, Citizens
or any Citizens Record Holder; (iii) would permit UPC to pay the Consideration
other than by delivery of shares of UPC Common Stock registered with the
Commission.
In addition, prior to or at the Effective Time of the Merger, either
Citizens or UPC, or both, acting through their respective Boards of Directors,
chief executive officers or other authorized officers, may: (i) waive any
default in the performance of any term of the Reorganization Agreement by the
other party; (ii) waive or extend the time for the compliance or fulfillment by
the other party of any and all of its obligations under the Reorganization
Agreement; and (iii) waive any or all of the conditions precedent to the
obligations of the other party under the Reorganization Agreement except any
condition that, if not satisfied, would result in the violation of any
applicable law or governmental regulation. No such waiver would be effective
unless in a writing executed by a duly authorized officer of Citizens or UPC,
as the case may be.
The Reorganization Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time of the Merger: (i) by the
mutual consent of the Boards of Directors of Citizens and UPC; or (ii) by the
Board of Directors of Citizens or UPC (provided, in the case of (a), (b) and
(e) below only, that the terminating party is not then in breach of any
representation or warranty contained in the Reorganization Agreement under the
applicable standards set forth in the Reorganization Agreement or in material
breach of any covenant or other agreement contained in the Reorganization
Agreement) (a) in the event of any inaccuracy of any representation or warranty
of the other party contained in the Reorganization 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
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ability to refuse to consummate the Merger under the applicable standards set
forth in the Reorganization Agreement, (b) in the event of a material breach by
the other party of any covenant or agreement contained in the Reorganization
Agreement which cannot be, or has not been, cured within 30 days after the
giving of written notice to the breaching party of such breach, (c) if any
approval of any regulatory authority required for consummation of the Merger
and the other transactions contemplated by the Reorganization Agreement has
been denied by final nonappealable action, or if any action taken by such
authority is not appealed within the time limit for appeal or the shareholders
of Citizens fail to approve the Reorganization Agreement, (d) if the Merger is
not consummated by December 31, 1997, provided that the failure to consummate
is not due to a willful breach by the party electing to terminate, or (e) if
any of the conditions precedent to the obligations of such party to consummate
the Merger cannot be satisfied or fulfilled by December 31, 1997. See
"--Representations and Warranties."
If the Merger should be terminated as described above, the
Reorganization Agreement would become void and have no effect, except that
certain provisions thereof, including those relating to the obligations to
share certain expenses, to maintain the confidentiality of certain information
obtained and with respect to the return of all documents obtained from the
other party under the Reorganization Agreement, would survive. In addition,
termination of the Reorganization Agreement would not relieve any breaching
party from liability for any uncured willful breach of a representation,
warranty, covenant or agreement giving rise to such termination, unless the
termination is the result of failure to obtain required regulatory approvals,
failure to obtain the approval of the Citizens shareholders or failure to
consummate the Merger by December 31, 1997. Finally, the provision in the
Reorganization Agreement relating to limitations on Citizens' ability to enter
a letter of intent or agreement with a third party regarding an Acquisition
Proposal would be governed by its own terms as to its termination. See "--The
Stock Option Agreement."
DISSENTERS' RIGHTS
Citizens shareholders have the right to dissent from the Merger and
obtain in cash the fair value of their shares of Citizens Common Stock.
In order to perfect dissenters' rights with respect to the Merger, a
Citizens shareholder must: (i) deliver to Citizens, before the vote is taken,
written notice of his or her intent to demand payment for his or her shares of
Citizens Common Stock if the Merger is consummated; and 2) not vote his or her
shares of Citizens Common Stock in favor of the Reorganization Agreement.
Subsequent to shareholder approval of the Reorganization Agreement, UPC would
be required under Tennessee law to send to each Citizens shareholder who has
perfected dissenters' rights in accordance with the steps disclosed above,
written notice setting forth instructions for receipt of payment for their
shares. Upon receipt of such notice, dissenting Citizens shareholders would
become entitled to receive payment for their shares of Citizens Common Stock
when they: (i) demand payment; (ii) certify that they received their shares
prior to the date of the first public announcement of UPC's and Citizens'
intention to merge; and (iii) deposit with UPC certificates representing their
shares of Citizens Common Stock in accordance with the instructions set forth
in the notice. A copy of Sections 48-23-101, et al, of the Tennessee Act is
attached to this Prospectus/Proxy Statement as Appendix D.
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CONDUCT OF BUSINESS PENDING THE MERGER
Pursuant to the Reorganization Agreement, Citizens has agreed that
unless the prior written consent of UPC has been obtained, and except as
otherwise expressly contemplated in the Reorganization Agreement, Citizens
would, among other things: (i) operate its business only in the usual, regular
and ordinary course; and (ii) not undertake any action which would materially
adversely affect the ability of any party to perform their respective covenants
and agreements under the Reorganization Agreement.
In addition, Citizens has agreed that, prior to the earlier of the
Effective Time of the Merger or termination of the Reorganization Agreement, it
would not, except with the prior written consent of UPC or as specifically
permitted by the Reorganization Agreement, agree or commit to undertake certain
actions, including, but not limited to, any of the following: (i) amend its
Charter (the "Citizens Charter") or Bylaws (the "Citizens Bylaws"); (ii)
repurchase, redeem or otherwise acquire or exchange any shares, or any
securities convertible into any shares, of the capital stock of any Citizens
Company; (iii) declare or pay any dividend or make any other distribution in
respect of any Citizens capital stock, with the exception of its regular cash
dividend of $12.00 per share, the declaration of which shall be consistent with
past practices; or (iv) except pursuant to the Reorganization Agreement, issue,
sell, pledge, encumber or authorize the issuance of, or otherwise permit to
become outstanding, any additional shares of Citizens Common Stock or any other
capital stock of any Citizens Company, or any stock appreciation rights, or any
option, warrant, conversion, or other right to acquire any such stock or any
security convertible into any such stock.
LIMITATION ON NEGOTIATIONS
The Reorganization Agreement provides that the Citizens Companies
shall not solicit or knowingly encourage any Acquisition Proposal by any
person. Furthermore, except to the extent necessary to comply with the
fiduciary duties of the Citizens Board, as advised by legal counsel, the
Citizens Companies are prohibited from furnishing any non-public information
that it is not legally obligated to furnish, negotiating with respect to or
entering into any agreement with respect to, any Acquisition Proposal.
Citizens must promptly notify UPC immediately following receipt of any
Acquisition Proposal. As protection against possible violation of this
limitation, Citizens has agreed to pay to UPC the sum of $750,000 in
immediately available funds in the event and at the time that Citizens enters
into a letter of intent or agreement with respect to an Acquisition Proposal or
supports or indicates an intent to support an Acquisition Proposal other than
pursuant to the Reorganization Agreement. The limitation would remain in
effect until December 31, 1997 or, if earlier, such time as the Reorganization
Agreement shall have been terminated: (i) by the mutual consent of the Boards
of Directors of Citizens and UPC; or (ii) by Citizens (a) in the event of any
inaccuracy of any representation or warranty of the other party contained in
the Reorganization 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
Reorganization Agreement, (b) if any approval of any regulatory authority
required for consummation of the Merger and the other transactions contemplated
by the Reorganization 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, (c) if
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any of the conditions precedent to the obligations of such party to consummate
the Merger cannot be satisfied or fulfilled by December 31, 1997, other than
conditions precedent to the obligations of both Citizens and UPC, or (d) with
certain exceptions, in the event of a material breach by the other party of any
covenant or agreement contained in the Reorganization 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. See "--Conditions to Consummation of the
Merger" and "--Waiver, Amendment and Termination." These provisions may have
the effect of discouraging competing offers to acquire or merge with Citizens.
MANAGEMENT AFTER THE MERGER
The Reorganization Agreement provides that Community's directors and
officers in place immediately prior to the Effective Time of the Merger would
continue to be the directors and officers of Community after the Effective Time
of the Merger until such directors or officers are replaced in accordance with
Community's charter and bylaws. The current directors and officers of
Community are employees of UPC.
Simultaneously with the Merger, The Whiteville Bank will be merged
into First State Bank, with First State Bank surviving this Bank Merger, and
the main office and the branch of The Whiteville Bank will become branches of
First State Bank. Following the time of such Bank Merger, the name of First
State Bank, as the survivor of the Bank Merger, will be changed to Union
Planters Bank of Southwest Tennessee. In addition, the directors and executive
officers of First State Bank immediately prior to the effective time of the
Bank Merger would continue to be the directors and executive officers of Union
Planters Bank of Southwest Tennessee after the effective time of the Bank
Merger.
EMPLOYEE BENEFIT PLANS
Following the Effective Time of the Merger, UPC would be obligated
under the Reorganization Agreement to provide to officers and employees of the
Citizens Companies employee benefits under employee benefit and welfare plans
on terms and conditions which, when taken as a whole, are substantially similar
to those currently provided by the UPC Companies to their similarly situated
officers and employees. For purposes of participation in (but not for vesting
or benefit accrual under) any such UPC employee benefit plan, the service of
the employees of the Citizens Companies prior to the Effective Time of the
Merger would be treated as service with a UPC Company participating in such
employee benefit plan. To the extent permitted by Citizens' profit sharing
plan or applicable law, as soon as reasonably practical after consummation of
the Merger, Citizens' profit sharing plan will be terminated and distributions
will be made in accordance with the requirements of such plan.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of the Citizens Management Group have interests in the
Merger that would be in addition to any interests they may have as shareholders
of Citizens generally. These interests are set forth in provisions in the
Reorganization Agreement relating to non- compete agreements, as described
below, and the obligations of Mr. Frank Bass and Ms Peggy Campbell to accept
termination of their respective deferred compensation arrangements provided by
Citizens
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at or prior to the Closing for $25,000 and $15,000, respectively, against full
and complete releases with respect to such terminations.
Prior to the closing and as a condition thereto, Frank T. Bass,
President and Chief Executive Officer of Citizens, would be required under the
Reorganization Agreement to execute, and Citizens would be required to use its
best efforts to cause all the members of the Boards of Directors of Citizens
and of The Whiteville Bank to execute, non-compete agreements with UPC and
Community providing that, for a term of three years from the date of the
closing, such persons would be prohibited from, among other things, becoming
involved in any way in the formation or organization of a new financial
institution in Hardeman County, Tennessee. The members of the Boards of
Directors of Citizens and of The Whiteville Bank would not receive any
additional consideration in exchange for their execution of the non-compete
agreements.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The parties to the Merger have not and do not intend to seek a ruling
from the IRS as to the federal income tax consequences of the Merger. Instead,
UPC and Citizens have obtained the opinion of Wyatt, Tarrant & Combs (counsel
to UPC) (the "Tax Opinion") as to certain of the expected federal income tax
consequences of the Merger, a copy of which is attached as an exhibit to the
Registration Statement.
The Tax Opinion does not address, among other matters: (i) state,
local, foreign or other federal tax consequences of the Merger not specifically
addressed therein; (ii) federal income tax consequences to shareholders of
Citizens subject to special rules under the Code, such as foreign persons,
tax-exempt organizations, insurance companies, financial institutions, dealers
in stocks and securities, and person who do not own such stock as a capital
asset; (iii) federal income tax consequences affecting shares of Citizens stock
acquired upon exercise of stock options, stock purchase plan rights or
otherwise as compensation; and (iv) the tax consequences to holders of
warrants, options or other rights to acquire shares of such stock.
Subject to the conditions, qualifications, representations and
assumptions contained herein, and in the Tax Opinion, counsel has opined that:
1. The acquisition by Community of substantially all of the
assets of Citizens in exchange for shares of UPC Common Stock and the
assumption of liabilities of Citizens pursuant to the Merger will constitute a
reorganization within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(D) of
the Code.
2. Citizens, UPC and Community will each be "a party to a
reorganization" within the meaning of Section 368(b) of the Code.
3. No gain or loss will be recognized by Citizens as a result of
the Merger (except for the inclusion in income of the amount of the bad-debt
reserve maintained by Citizens and any other amounts resulting from any
required change in accounting methods and any income and deferred gain
recognized pursuant to Treasury Regulations issued under Section 1502).
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4. No gain or loss will be recognized by Community or UPC as a
result of the Merger (except for the inclusion in income of the amount of the
bad-debt reserve maintained by Citizens and any other amounts resulting from
any required change in accounting methods and any income and deferred gain
recognized pursuant to Treasury Regulations issued under Section 1502).
5. The tax basis of the assets received by Community will be the
same as the tax basis of such assets of Citizens immediately prior to the
Merger.
6. The holding period of the assets of Citizens received by
Community will in each instance include the period for which such assets were
held by Citizens.
7. No gain or loss will be recognized by the shareholders of
Citizens as a result of the exchange of Citizens Common Stock for UPC Common
Stock pursuant to the Merger, except that a gain or loss will be recognized on
the receipt of any cash in lieu of a fractional share. Assuming that the
Citizens Common Stock is a capital asset in the hands of the respective
Citizens shareholders, any gain or loss recognized as a result of the receipt
of cash in lieu of a fractional share will be a capital gain or loss equal to
the difference between the cash received and that portion of the holder's tax
basis in the Citizens Common Stock allocable to the fractional share.
8. The tax basis of UPC Common Stock to be received by the
shareholders of Citizens will be the same as the tax basis of the Citizens
Common Stock surrendered in exchange therefor (reduced by any amount allocable
to a fractional share interest for which cash is received).
9. The holding period of the UPC Common Stock to be received by
shareholders of Citizens will include the holding period of the Citizens Common
Stock surrendered in exchange therefor, provided the Citizens shares were held
as a capital asset by the shareholders of Citizens on the date of the exchange.
10. A shareholder of Citizens who perfects his dissenter's rights
and who receives payment of the fair market value of his shares of Citizens
Common Stock will be treated as having received such payment in redemption of
such stock. Such redemption will be subject to the conditions and limitations
of Section 302 of the Code.
The Tax Opinion is based on the Code, the Treasury Regulations
promulgated thereunder, judicial decisions and administrative pronouncements of
the Internal Revenue Service (the "IRS"), all existing and in effect on the
date of this Registration Statement and all of which are subject to change at
any time, possibly retroactively. Any such change could have a material impact
on the conclusions reached in the Tax Opinion. The Tax Opinion represents only
such counsel's best judgment as to the expected federal income tax consequences
of the Merger and is not binding on the IRS or the courts. The IRS may
challenge the conclusions stated therein and shareholders of Citizens may incur
the cost and expense of defending positions taken by them with respect to the
Merger. A successful challenge by the IRS could have material adverse
consequences to the parties to the Merger, including shareholders of Citizens
and UPC.
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In rendering the Tax Opinion, counsel has relied, as to factual
matters, solely on the continuing accuracy of (i) the description of the facts
relating to the Merger contained in the Merger Agreement and Registration
Statement, (ii) the factual representations and warranties contained in the
Reorganization Agreement and this Registration Statement and related documents
and agreements, and (iii) certain factual matters addressed by representations
made by certain executive officers of Citizens and UPC, as further described in
the Tax Opinion and Exhibits thereunder. Events occurring after the date of
the Tax Opinion could alter the facts upon which the Tax Opinion is based, in
which event the conclusions reached therein and in this summary could be
materially impacted.
ACCORDINGLY, FOR ALL OF THE ABOVE REASONS, SHAREHOLDERS OF CITIZENS
AND UPC ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX
CONSEQUENCES TO THEM OF THE MERGER, INCLUDING THE APPLICABILITY AND EFFECT OF
FEDERAL, STATE, LOCAL AND OTHER TAX LAWS.
ACCOUNTING TREATMENT
Consummation of the Merger is conditioned upon the eligibility of the
Merger to 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 Citizens would be carried forward at their previously recorded
amounts. Only the current year UPC financial information will be restated as
though Citizens had been combined at the beginning of the year, due to the
insignificance of Citizens.
In order for the Merger to qualify for pooling of interests accounting
treatment, substantially all (90% or more) of the outstanding Citizens Common
Stock must be exchanged for UPC Common Stock with substantially similar terms.
There are certain other criteria that must be satisfied in order for the Merger
to qualify for pooling of interests accounting treatment.
For information concerning certain conditions to be imposed on the
exchange of Citizens Common Stock for UPC Common Stock in the Merger by persons
deemed to be "affiliates" of Citizens 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 Reorganization Agreement provides, in general, that each of the
parties would bear and pay all direct costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated by the
Reorganization Agreement, including fees and expenses of its own financial or
other consultants, investment bankers, accountants and counsel, except that
each of UPC and Citizens would bear and pay the filing fees and printing costs
incurred in connection with the Registration Statement and this
Prospectus/Proxy Statement based on the relative asset sizes of the parties at
December 31, 1995.
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RESALES OF UPC COMMON STOCK
Shares of UPC Common Stock to be issued to Citizens Record Holders in
connection with the Merger would be registered under the Securities Act. All
shares of UPC Common Stock received by Citizens Record Holders upon
consummation of the Merger would be freely transferable by those shareholders
of Citizens and UPC who are not deemed to be "Affiliates" of Citizens or UPC.
"Affiliates" generally are defined as persons or entities who control, are
controlled by or are under common control with Citizens or UPC (including,
generally, executive officers and directors).
Rules 144 and 145 promulgated by the Commission under the Securities
Act restrict the sale of UPC Common Stock received in the Merger by Affiliates
and certain of their family members and related interests. Generally speaking,
prior to the first anniversary of the Effective Time of the Merger, Affiliates
of Citizens 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
anniversary of the Effective Time of the Merger, such Affiliates of Citizens
who do not otherwise qualify as 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 144 or 145 as summarized herein
generally would be subject to UPC's having satisfied its Exchange Act reporting
requirements for specified periods prior to the time of sale. Affiliates would
receive additional information regarding the effect of Rules 144 and 145 on
their ability to resell UPC Common Stock received in the Merger. Affiliates
also would be permitted to resell UPC Common Stock received in the Merger
pursuant to an effective registration statement under the Securities Act or an
available exemption from the Securities Act registration requirements. This
Prospectus/Proxy Statement does not cover any resales of UPC Common Stock
received by persons who may be deemed to be Affiliates of Citizens.
Citizens has agreed to use its reasonable efforts to cause each person
who may be deemed to be an Affiliate of Citizens to execute and deliver to UPC
not later than 30 days prior to the Effective Time of the Merger, a written
agreement (each, an "Affiliate Agreement") providing that such Affiliate will
not sell, pledge, transfer or otherwise dispose of the shares of Citizens
Common Stock held by such Affiliate (except as contemplated by such Affiliate
Agreement or by the Reorganization Agreement) or any shares of UPC Common Stock
obtained by such Affiliate as a result of the Merger (i) except in compliance
with the Securities Act and the rules and regulations of the Commission
thereunder and (ii) in any case, until such time as financial results covering
at least 30 days of combined operations of UPC and Citizens shall have been
published. Consummation of the Merger is conditioned upon the receipt by UPC
from each Affiliate of Citizens of executed Affiliate Agreements. The stock
certificates representing UPC Common Stock issued in the Merger to persons who
qualify as Affiliates of Citizens will bear a legend summarizing the foregoing
restrictions. See "--Conditions to Consummation of the Merger."
35
<PAGE> 48
BUSINESS OF CITIZENS
GENERAL
Citizens was incorporated under the laws of Tennessee on September 20,
1984 and is a registered bank holding company under the Bank Holding Company
Act of 1956, as amended. Citizens' principal office is in Whiteville,
Tennessee. Citizens engages in the banking business through its wholly-owned
subsidiary, The Whiteville Bank. As of March 31, 1997, Citizens' consolidated
assets were equal to $61.6 million.
The Whiteville Bank is located in Whiteville, Tennessee and operates
one branch office in Bolivar, Tennessee. As of March 31, 1997, The Whiteville
Bank had total assets of approximately $61.3 million and deposits of
approximately $56.1 million.
The Whiteville Bank provides a wide range of retail banking services,
including: checking and savings accounts; certificates of deposits; individual
retirement accounts; commercial, real estate, consumer and agricultural loans;
and safe deposit boxes. There is no individual customer or group of customers
the loss of which will have a material adverse effect on the operations of the
bank. No significant portion of The Whiteville Bank's loans is concentrated
within a single industry or group of related industries.
Properties. The Whiteville Bank operates in two locations: one in
Whiteville, Tennessee at 144 East Main Street and one in Bolivar, Tennessee at
201 West Market Street. Both of the properties from which The Whiteville Bank
operates are owned by The Whiteville Bank.
Employees. The Whiteville Bank had 29 full-time equivalent employees
as of March 31, 1997. Citizens has no employees that are not otherwise
employed by The Whiteville Bank.
Competitive Conditions. Citizens and The Whiteville Bank compete in
Hardeman County, Tennessee and, within Hardeman County, particularly in the
communities of Whiteville and Bolivar. For deposits and loans, The Whiteville
Bank competes with other banks, savings institutions, credit unions, finance
companies, mortgage companies, insurance companies, governmental agencies and
other financial institutions, some of which are not subject to the same degree
of regulation and restriction as Citizens and The Whiteville Bank and many of
which have financial resources greater than those of Citizens and The
Whiteville Bank.
Legal Proceedings. Citizens is not a party to any legal proceedings
or other litigation. The Whiteville Bank is a party to certain legal
proceedings and litigation that have arisen in the ordinary course of its
business, and these proceedings are not expected to have a material impact on
the Whiteville Bank's operations or financial condition.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION OF CITIZENS
The discussion presented below analyzes major factors and trends
regarding the financial condition and results of Citizens' operations for the
three months ended March 31, 1997 and 1996 and for the years ended December 31,
1996 and 1995. For a complete understanding of this discussion, reference
should be made to Citizens' financial statements and the related notes included
as Appendix B with this Proxy Statement/Prospectus.
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<PAGE> 49
GENERAL
Citizens, through its wholly-owned subsidiary, The Whiteville Bank,
conducts a commercial banking business which consists of attracting deposits
from the general public and applying those funds to the origination of
commercial, consumer and real estate loans (including commercial loans secured
by real estate). Citizens' profitability depends upon net interest income,
which is the difference between interest income generated from interest-earning
assets (such as loans and investments) less the interest expenses incurred on
interest-bearing liabilities (such as customer deposits and other borrowed
funds). Net interest income is affected by the relative amounts of
interest-earning assets and interest-bearing liabilities, and the interest
rates earned and paid on these balances. Net interest income is dependent upon
Citizens' interest rate spread, which is the difference between the average
yield earned on its interest-earning assets and the average rate paid on its
interest-bearing liabilities. When the interest-earning assets approximate or
exceed interest-bearing liabilities, any positive interest rate spread will
generate net interest income. The interest rate spread is impacted by interest
rates, deposit flows and loan demand. Additionally, Citizens' profitability is
affected by such factors as the level of non-interest income and expenses, the
provision for loan losses and the effective tax rate paid by Citizens on its
income. Non-interest income consists primarily of loan fees and other fees and
income from various deposit account products and services offered to Citizens'
customers. Non-interest expense consists of compensation and benefits,
occupancy related expenses, deposit insurance premiums paid to the FDIC, and
other expenses.
RESULTS OF OPERATIONS
Net Income.
Net income was $161,171 ($333.69 per share) for the three months ended
March 31, 1997 compared with net income of $144,405 ($298.98 per share) for the
three months ended March 31, 1996, an increase of $16,766 or 11.6%. The
primary factor contributing to the increase in net income for the three months
in 1997 compared with 1996 was the growth in Citizens' loan portfolio.
Net income was $550,694 for 1996 ($1,140.15 per share) compared with
net income of $469,829 for 1995 ($927.73 per share). The $80,865 increase in
net income for 1996 was attributable to an increase in net interest income
resulting from growth in Citizens' loan portfolio and investment portfolio and
an increase in service fee income from products and services offered by
Citizens.
Net Interest Income.
Net interest income was $541,064 for the first three months of 1997,
an increase of $42,578 or 8.5% compared with the first three months of 1996,
resulting principally from an increase in Citizens' level of interest-earning
assets. The increase in Citizens' interest earning assets was offset to some
extent by an increase in interest-bearing liabilities in 1997 compared to 1996.
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<PAGE> 50
Net interest income was $2,116,594 for 1996, an increase of $229,298
or 12.1% compared with net interest income of $1,887,296 for 1995. The
increase in net interest income was the result of an increase in Citizens'
interest earning assets, particularly its loan and investment portfolios.
Provision for Loan Losses.
The amount of the provision for loan losses is based on periodic
evaluations of the loan portfolio, with particular attention directed toward
non-performing and other potential problem loans. During these evaluations,
consideration is given to such factors as management's evaluation of specific
loans, the level and composition of non-performing loans, historical loss
experience, results of examinations by regulatory agencies, the market value of
collateral, the strength and availability of guaranties, concentrations of
credit, and other judgmental factors.
Citizens recorded a $40,000 provision for loan losses during the three
months ended March 31, 1997 compared with a provision of $35,173 during the
first three months of 1996. Citizens' ratio of net charge-offs to average
loans improved during the first three months of 1997, and additional amounts
were provided to compensate for ongoing growth in the loan portfolio in order
to maintain the allowance for loan losses at a level deemed by management to be
adequate.
The 1996 provision for loan losses of $95,174 compared with $37,000 in
1995. The increase in the 1996 provision occurred as a result of the 12.8%
growth in the loan portfolio and to bring the allowance up to a level deemed
adequate by management for loan charge-offs in 1995 and 1996.
Non-Interest Income.
Non-interest income is generated primarily from fees associated with
non-interest and interest bearing deposit accounts and through loan fees.
Non-interest income for the first three months of 1997 was $90,687, an increase
of $10,179 or 12.6% compared with non-interest income of $80,508 for the first
three months for 1995. Non-interest income increased from 1996 to 1995
primarily as a result of obtaining higher fee income from Citizens'
non-interest and interest bearing accounts.
Non-Interest Expense.
Non-interest expense (excluding income taxes paid) was $333,707 for
the first three months of 1997, an increase of $11,636 or 3.6% compared with
non-interest expense (excluding income taxes paid) of $322,071 for the first
three months of 1996. The increase in non- interest expense is primarily due
to additional personnel expenses generated by Citizens.
Non-interest expense (excluding income taxes paid) was $1,440,837 for
1996, an increase of $79,890 or 5.9% compared with non-interest expense of
$1,360,947 for 1995 (excluding income taxes paid). In 1996, Citizens
experienced increased personnel-related expenses along with slightly increased
occupancy expenses.
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<PAGE> 51
ANALYSIS OF FINANCIAL CONDITION
Loans and Asset Quality.
Citizens' loans are diversified by borrower and industry groups. Loan
growth has occurred each year over the past two years and can be attributed to
increased loan demand from improving economic conditions. As of March 31,
1997, Citizens' loan portfolio consisted of loans totalling $36,929,749 as
compared to loans totalling $36,053,876 as of December 31, 1996 and $31,950,385
as of December 31, 1995.
Non-performing loans.
Citizens' financial statements are prepared on the accrual basis of
accounting, including the recognition of interest income on its loan portfolio,
unless a loan is placed on a non-accrual basis. Loans are placed on a
non-accrual basis when there are serious doubts regarding the collectibility of
all principal and interest due under the terms of the loan. Amounts received
on non-accrual loans generally are applied first to principal and then to
interest after all principal has been collected. The classification of a loan
on non-accrual status does not necessarily indicate that the principal is
uncollectible, in whole or in part. A determination as to collectibility is
made by Citizens on a case by case basis. Citizens considers both the adequacy
of the collateral and other resources of the borrower in determining the steps
to be taken to collect non-accrual loans. The final determination as to these
steps is made on a case by case basis. Alternatives that are considered are
foreclosure, collecting on guaranties, restructuring the loan or collection
lawsuits. As of March 31, 1997, Citizens had loans accounted for as
non-accrual totalling $208,000 as compared to $193,000 at December 31, 1996 and
$248,000 at December 31, 1995.
Allowance for Loan Losses.
In originating loans, management of Citizens recognizes that credit
losses will be experienced and the risk of loss will vary with, among other
things, general economic conditions, the type of loan being made, the
creditworthiness of the borrower over the term of the loan and, in the case of
a secured loan, the quality of the collateral for such loan. The allowance for
loan losses represents Citizens' estimate of the allowance necessary to provide
for losses incurred in the loan portfolio. In making this determination,
Citizens analyzes the ultimate collectibility of its loan portfolio,
incorporating feedback provided by internal loan staff and provided by
examinations performed by regulatory agencies. Citizens makes an ongoing
evaluation as to the adequacy for allowance for loan losses. The determination
by Citizens of the appropriate level of the allowance amount was $493,040 at
March 31, 1997. The allowance for loan losses is based on estimates, and
ultimate losses will vary from current estimates. These estimates are reviewed
periodically and as adjustments, either positive or negative, become necessary,
they are reported in earnings in the periods in which they become known.
Investment Activities.
The investment portfolio (including federal funds sold), which was
31.6% of Citizens' asset base as of March 31, 1997, is being managed to
minimize interest rate risk, maintain sufficient liquidity and maximize return.
Citizens' financial planning anticipates income streams
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<PAGE> 52
based on normal maturity and reinvestment. Prior to January 1, 1994, all debt
securities were carried at amortized costs. Effective January 1, 1994,
Citizens adopted SFAS No. 115, and classified investments as held to maturity
or available for sale.
Deposit Activities.
Deposits are attracted through the offering of a broad variety of
deposit instruments, including checking accounts, money market accounts,
regular savings accounts, term certificate accounts (including "jumbo"
certificates in denominations of $100,000 or more), and retirement savings
plans. Citizens' total deposits equalled $56,069,011 as of March 31, 1997,
representing a slight decrease of $91,578 or .2% compared with the balance of
total deposits as of December 31, 1996. Citizens' balance of total deposits
was $56,160,589 as of December 31, 1996, an increase of $6,331,173 or 12.7%
compared with a balance of total deposits for December 31, 1995 of $49,829,416.
Increases occurred in 1996 in all major deposit categories except for only
nominal increases in retirement savings accounts.
Liquidity.
Liquidity measures the ability of a bank to meet maturing obligations
and its existing commitments, to withstand fluctuations in deposit levels, to
fund its operations and to provide for the credit needs of its customers. The
liquidity of a bank principally depends on cash flows from operating
activities, investment in and maturity of assets, changes in balances of
deposits and borrowings, and its ability to borrow funds.
Citizens' investment securities portfolio, federal funds sold and its
cash and due from bank deposit balances serve as the primary sources of
liquidity. At March 31, 1997, 23.1% of Citizens' deposit liabilities were in
the form of time deposits of $100,000 and over. Substantially all of these
large deposits were obtained from Citizens' market area and none of such
deposits were brokered deposits. Management believes the deposits to be a
stable source of funds. Citizens presently has no non-deposit, short-term
borrowings.
Capital Resources.
Citizens' equity at March 31, 1997 was $4,782,664, which compared with
$4,697,488 at December 31, 1996. The increase in equity has been the result of
ongoing earnings and a decline in the unrealized loss on investment securities
held as available for sale. As of March 31, 1997, Citizens' Tier 1 leverage
ratio was 8.11%, which exceeds minimum federal regulatory capital maintenance
requirements.
CERTAIN STATISTICAL DATA
The financial information set forth below has been derived from
Citizens' financial statements and from other financial and statistical data of
Citizens.
The following table presents the aggregate amount of loans made by
Citizens which as of the end of each stated period were accounted for on a
non-accrual basis, were accruing loans
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<PAGE> 53
which are contractually past due 90 days or more as to principal or interest
payments, or loans which are troubled debt restructuring as defined in SFAS No.
15 ("Accounting by Debtors and Creditors for Troubled Debt Restructuring").
Non-accrual, Past Due and Restructured Loans
(In Thousands)
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
----------------- -----------------
<S> <C> <C>
Loans Accounted for on $ 193 $ 248
Non-Accrual Status
Past Due 90 Days or More 257 405
and Accruing
Loans Restructured and in -0- -0-
Compliance with Modified
Terms
</TABLE>
Loans are placed on a non-accrual basis when there are serious doubts
regarding the collectibility of all principal and interest due under the terms
of the loan. Generally, when a loan becomes over 90 days delinquent, it is
placed on a non-accrual status unless there are factors that warrant, in the
opinion of management, the continuation of the accrual of interest on the loan.
In addition, other loans showing a high apparent risk and potential for
deterioration in financial strength or collateral value may be placed on a
non-accrual status. All loans classified by Citizens, as of the date
indicated, as potential problem loans are included in the previous table.
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The following table presents an analysis of Citizens' loan loss
experience for the periods indicated.
Analysis of the Allowance for Loan Losses
(In Thousands)
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1996 December 31, 1995
----------------- -----------------
<S> <C> <C>
Balance at beginning of period $ 434 $ 485
Charge-Offs:
Real Estate Loans -0- 38
Installment Loans 51 48
Commercial Loans 82 36
------- ------
Total Charge-Offs 133 122
------- ------
Recoveries:
Real Estate Loans -0- -0-
Installment Loans 20 19
Commercial Loans 3 15
------- ------
Total Recoveries 23 34
------- ------
Net Charge-Offs (110) (88)
Provision for Loan Losses 95 37
------- ------
Balance at End of Period $ 419 $ 434
======= ======
Ratio of Net Charge-Offs During the
Period to Average Net Loans
Outstanding During the Period .32% .28%
</TABLE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF CITIZENS
Citizens has no other class of voting securities issued or outstanding
other than the Citizens Common Stock. The following table provides information
concerning the shares of Citizens Common Stock beneficially owned, directly or
indirectly, by each director and executive officer of Citizens and by each
person known to Citizens to be the beneficial owner, directly or indirectly, of
more than 5% of the outstanding shares of Citizens Common Stock, as of the
Record Date. Unless otherwise noted, the named persons own the shares directly
and have sole voting and investment power with respect to the shares indicated.
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<TABLE>
<CAPTION>
Name & Address of Amount & Nature of Percent of
Beneficial Owner Beneficial Ownership Class
- -------------------------------- -------------------- ----------
<S> <C> <C>
Frank T. Bass (1) (2) 334.5 68.97%
Della Webb Rhodes 53 10.93%
500 North Montgomery Avenue
Apartment 307
Sheffield, Alabama 35660
William A. Thomas 27 5.57%
856 Skyline Drive
Jackson, Tennessee 38301
James R. Bellar (1) (3) 1 *
Louis Wellons (1) (4) 10 2.06%
Margaret D. Whitenton (1) (4) (5) 20 4.12%
All Directors and Executive Officers as 365.5 75.36%
a Group (4 persons)
</TABLE>
- ------------------
* less than 1%
(1) Being an officer or a director of Citizens, this person's address is
the same as that of Citizens, 114 Main Street, Whiteville, Tennessee
38008.
(2) President, Chief Executive Officer and Director of Citizens.
(3) Secretary and Director of Citizens.
(4) Director of Citizens.
(5) All shares are held jointly with spouse.
CERTAIN REGULATORY CONSIDERATIONS
The following discussion sets forth certain of the material elements
of the regulatory framework applicable to banks and bank holding companies and
provides certain specific information related to UPC and Citizens. A more
complete discussion of the federal and state regulatory environment within
which UPC and its bank and thrift subsidiaries operate is included in UPC's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996, under
the caption GOVERNMENTAL SUPERVISION AND REGULATION OF FINANCIAL INSTITUTIONS.
GENERAL
UPC and Citizens are both bank holding companies registered with the
Federal Reserve under the BHC Act. As such, UPC and Citizens, and their
respective non-bank subsidiaries are
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<PAGE> 56
subject to the supervision, examination, and reporting requirements of the BHC
Act and the regulations of the Federal Reserve. In addition, as a savings and
loan holding company, UPC is registered with the Office of Thrift Supervision
("OTS") and is subject to regulation, supervision, examination, and reporting
requirements of the OTS.
The BHC Act requires every bank holding company to obtain the prior
approval of the Federal Reserve before: (i) it may acquire direct or indirect
ownership or control of any voting shares of any bank if, after such
acquisition, the bank holding company will directly or indirectly own or
control more than 5.0% of the voting shares of the bank; (ii) it or any of its
subsidiaries, other than a bank, may acquire all or substantially all of the
assets of any bank; or (iii) it may merge or consolidate with any other bank
holding company. Similar federal statutes require savings and loan holding
companies and other companies to obtain the prior approval of the OTS before
acquiring direct or indirect ownership or control of a savings association.
The BHC Act further provides that the Federal Reserve may not approve
any transaction that would result in a monopoly or would be in furtherance of
any combination or conspiracy to monopolize or attempt to monopolize the
business of banking in any section of the United States, or the effect of which
may be substantially to lessen competition or to tend to create a monopoly in
any section of the country, or that in any other manner would be in restraint
of trade, unless the anticompetitive effects of the proposed transaction are
clearly outweighed by the public interest in meeting the convenience and needs
of the community to be served. The Federal Reserve is also required to
consider the financial and managerial resources and future prospects of the
bank holding companies and banks concerned and the convenience and needs of the
community to be served. Consideration of financial resources generally focuses
on capital adequacy, and consideration of convenience and needs issues includes
the parties' performance under the Community Reinvestment Act of 1977, as
amended (the "CRA").
The BHC Act, as amended by the interstate banking provisions of the
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
("Interstate Banking Act"), which became effective on September 29, 1995,
repealed the prior statutory restrictions on interstate acquisitions of banks
by bank holding companies, such that UPC, as well as any other bank holding
company located in Tennessee, may now acquire a bank or bank holding company
located in any other state, and any bank holding company located outside of
Tennessee may lawfully acquire any Tennessee-based bank, regardless of state
law to the contrary, in either case subject to certain deposit-percentage,
aging requirements, and other restrictions. The Interstate Banking Act also
generally provides that, after June 1, 1997, national and state-chartered banks
may branch interstate through acquisitions of banks in other states (whole bank
acquisitions), through the acquisition of existing branches of other banks in
other states (branch acquisitions) or through the establishment of a new branch
in another state (de novo branching), depending upon the laws of the states
involved. States have the ability either to "opt in" and allow interstate
branching, choosing whether to allow such by whole bank acquisition, branch
acquisition or de novo branching, or some combination thereof, or to "opt out"
and prohibit interstate branching altogether. Each state in which UPC has a
banking subsidiary has opted-in to interstate branching, but most states
currently limit interstate branching to whole bank acquisitions. Therefore,
UPC would be able to consolidate all of its bank subsidiaries into a single
bank with interstate branches, should it choose to do so. UPC has no current
plans to substantially
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<PAGE> 57
consolidate all of its bank subsidiaries into one or a few single banks, and
anticipates limited use of interstate branching in certain geographical areas.
The BHC Act generally prohibits bank holding companies such as UPC and
Citizens 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
reasonably can be expected to produce benefits to the public, such as greater
convenience, increased competition, or gains in efficiency, that outweigh
possible adverse effects, such as undue concentration of resources, decreased
or unfair competition, conflicts of interest, or unsound banking practices.
For example, factoring accounts receivable, acquiring or servicing loans,
leasing personal property, conducting discount securities brokerage activities,
performing certain data processing services, acting as agent or broker in
selling credit life insurance and certain other types of insurance in
connection with credit transactions, and performing certain insurance
underwriting activities all have been determined by the Federal Reserve to be
permissible activities of bank holding companies. The BHC Act does not place
territorial limitations on permissible non-banking activities of bank holding
companies. Despite prior approval, the Federal Reserve has the power to order
a holding company or its subsidiaries to terminate any activity or to terminate
its ownership or control of any subsidiary when it has reasonable cause to
believe that continuation of such activity or such ownership or control
constitutes a serious risk to the financial safety, soundness, or stability of
any bank subsidiary of that bank holding company.
Each of the bank and thrift subsidiaries of UPC, as well as the bank
subsidiary of Citizens, is a member of the Federal Deposit Insurance
Corporation (the "FDIC"), and as such, their respective deposits are insured by
the FDIC to the maximum extent provided by law. Each such "insured" depository
institution is also subject to numerous state and federal statutes and
regulations that affect its business, activities, and operations, and each is
supervised and examined by one or more state or federal bank regulatory
agencies.
Bank subsidiaries which are state-chartered banks and which are not
members of the Federal Reserve System, are subject to regulation, supervision,
and examination by the FDIC and the state banking authorities of the states in
which they are located. Bank subsidiaries which are national banking
associations are subject to regulation, supervision, and examination by the OCC
and the FDIC. Thrift subsidiaries are subject to regulation, supervision, and
examination by the OTS and the FDIC. The federal banking regulator for each of
the bank and thrift subsidiaries, as well as the appropriate state banking
authorities in the case of those depository institution subsidiaries that are
state-chartered, regularly examine the operations of banks and thrifts and are
given authority to approve or disapprove mergers, consolidations, the
establishment of branches, and similar corporate actions. The federal and
state banking regulators also have the power to prevent the continuance or
development of unsafe or unsound banking practices or other violations of law.
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PAYMENT OF DIVIDENDS
UPC and Citizens are each legal entities separate and distinct from
their respective bank, thrift, and other subsidiaries. The principal sources
of cash flow of both UPC and Citizens, including the cash flow required to pay
dividends to their respective shareholders, are dividends and management fees
received from their bank and thrift subsidiaries. There are statutory and
regulatory limitations on the payment of dividends by these
depository-institution subsidiaries to UPC and Citizens, as well as by UPC and
Citizens to their respective shareholders.
All banks are subject to the respective laws and regulations of the
states in which they are chartered as to the payment of dividends. Each
national banking association subsidiary is required by federal law to obtain
the prior approval of the OCC for the payment of dividends if the total of all
dividends declared by the bank in any year would exceed the total of (i) such
bank's net profits (as defined and interpreted by regulation) for that year,
plus (ii) the retained net profits (as defined and interpreted by regulation)
for the preceding two years, less any required transfers to surplus. In
addition, national banks may lawfully pay only dividends to the extent that
their retained net profits (including the portion transferred to surplus)
exceed statutory bad debts (as defined by regulation).
If, in the opinion of its federal banking regulator, a bank or thrift
under its jurisdiction is engaged in or is about to engage in an unsafe or
unsound practice (which, depending on the financial condition of the depository
institution, could include the payment of dividends), such authority may
require, after notice and hearing, that such institution cease and desist from
such practice. The federal banking agencies have indicated that paying
dividends that deplete a depository institution's capital base to an inadequate
level would be an unsafe and unsound banking practice. Under the Federal
Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"), a depository
institution may not pay any dividend if payment would cause it to become
undercapitalized or if it already is undercapitalized. See "--Prompt
Corrective Action." Moreover, the federal agencies have issued policy
statements that provide that bank holding companies and insured banks should
generally only pay dividends out of current operating earnings.
At March 31, 1997, under dividend restrictions imposed under federal
and state laws, the bank and thrift subsidiaries of UPC and the bank subsidiary
of Citizens, without obtaining governmental approvals, could have lawfully
declared aggregate dividends to UPC and Citizens of approximately $111.4
million and $3.6 million, respectively.
The payment of dividends by UPC and Citizens and their bank and thrift
subsidiaries may also be affected or limited by other factors, such as the
requirement to maintain adequate capital above regulatory guidelines.
CAPITAL ADEQUACY
UPC, Citizens, and their respective bank and thrift subsidiaries are
required to comply with the capital adequacy standards established by the
Federal Reserve and, in the case of UPC, the OTS, and by the appropriate
federal banking regulator in the case of each of the bank and thrift
subsidiaries. There are two basic measures of capital adequacy for bank
holding companies
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<PAGE> 59
and their bank and thrift subsidiaries 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, or bank of thrift subsidiary, to be
considered to be "well-capitalized."
The risk-based capital standards are designed to make regulatory
capital requirements more sensitive to differences in risk profile among banks
and bank holding companies, to account for off-balance-sheet exposure, and to
minimize disincentives for holding liquid assets. Assets and off-balance-sheet
items are assigned to broad risk categories, each with appropriate weighting.
The resulting capital ratios represent capital as a percentage of total
risk-weighted assets and off-balance-sheet items.
The minimum guideline for the ratio ("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
one-half of Total Capital must consist of common stock, minority interests in
the equity accounts of consolidated subsidiaries, noncumulative perpetual
preferred stock, and a limited amount of cumulative perpetual preferred stock,
less goodwill and certain other intangible assets ("Tier 1 Capital"). The
remainder may consist of subordinated debt, other preferred stock, and a
limited amount of loan loss reserves ("Tier 2 Capital"). At March 31, 1997,
UPC's consolidated Total Capital Ratio and its Tier 1 Risk-Based Capital Ratio
(i.e., the ratio of Tier 1 Capital to risk-weighted assets) were 19.68% and
16.55%, respectively, and Citizens's consolidated Total Capital and Tier 1
Risk-Based Capital Ratios were 10.42% and 11.55% respectively.
In addition, the Federal Reserve has established minimum leverage
ratio guidelines for bank holding companies. These guidelines provide for a
minimum ratio (the "Leverage Ratio") of Tier 1 Capital to average assets, less
goodwill and certain other intangible assets, of 3.0% for bank holding
companies that meet certain specified criteria, including having the highest
regulatory rating. All other bank holding companies generally are required to
maintain a Leverage Ratio of at least 3.0%, plus an additional cushion of 100
to 200 basis points. UPC's and Citizens's respective Leverage Ratios at March
31, 1997, were 10.26% and 7.34%, respectively. The guidelines also provide
that bank holding companies experiencing internal growth or making acquisitions
will be expected to maintain strong capital positions substantially above the
minimum supervisory levels without significant reliance on intangible assets.
Furthermore, the Federal Reserve has indicated that it will consider a
"Tangible Tier 1 Capital Leverage Ratio" (deducting all intangibles) and other
indicia of capital strength in evaluating proposals for expansion or new
activities.
Each of UPC's and Citizens's respective bank and thrift subsidiaries
is subject to risk-based and leverage capital requirements adopted by its
federal banking regulator, which are substantially similar to those adopted by
the Federal Reserve for bank holding companies as discussed above. Each of
UPC's and Citizens's respective bank and thrift subsidiaries was deemed to be
"well-capitalized" under applicable capital guidelines as of March 31, 1997.
Neither UPC, Citizens, nor any of their respective bank and thrift subsidiaries
has been advised by any federal banking agency of any specific minimum capital
ratio requirement applicable to it.
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Failure to meet capital guidelines could subject a bank or thrift to a
variety of enforcement remedies, including issuance of a capital directive, the
termination of deposit insurance by the FDIC, a prohibition on the taking of
brokered deposits, and certain other restrictions on its business. As
described below, substantial additional restrictions can be imposed upon
FDIC-insured depository institutions that fail to meet applicable capital
requirements. See "--Prompt Corrective Action."
The federal bank regulators continue to indicate their desire to raise
capital requirements applicable to banking organizations beyond their current
levels. In this regard, the Federal Reserve, the OCC, and the FDIC have,
pursuant to FDICIA, proposed an amendment to the risk-based capital standards
that would calculate the change in an institution's net economic value
attributable to increases and decreases in market interest rates and would
require banks with excessive interest rate risk exposure to hold additional
amounts of capital against such exposures. The OTS has already included an
interest-rate risk component in its risk-based capital guidelines for savings
associations that it regulates.
SUPPORT OF SUBSIDIARY BANKS
Under Federal Reserve policy, bank holding companies such as UPC and
Citizens are expected to serve as a source of financial strength for, and to
commit their resources resources to support, each of its bank subsidiaries.
This support may be required at times when, absent such Federal Reserve policy,
a bank holding company may not be inclined to provide it. In addition, any
capital loans by a bank holding company to any of its bank or thrift
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 bank or thrift subsidiary would
be assumed by the bankruptcy trustee and entitled to priority of payment.
Under the Federal Deposit Insurance Act ("FDIA"), a depository
institution insured by the FDIC can be held liable for any loss incurred by, or
reasonably expected to be incurred by, the FDIC after August 9, 1989, in
connection with (i) the default of a commonly controlled FDIC-insured
depository institution or (ii) any assistance provided by the FDIC to any
commonly controlled FDIC-insured depository institution "in danger of default."
"Default" is defined generally as the appointment of a conservator or receiver,
and "in danger of default" is defined generally as the existence of certain
conditions indicating that a default is likely to occur in the absence of
regulatory assistance. The FDIC's claim for damages is superior to claims of
shareholders of the insured depository institution or its holding company, but
is subordinate to claims of depositors, secured creditors, and holders of
subordinated debt (other than affiliates) of the commonly controlled insured
depository institution. The bank and thrift subsidiaries of UPC and Citizens
are subject to these cross-guarantee provisions. As a result, any loss
suffered by the FDIC in respect of any of these subsidiaries would likely
result in assertion of the cross-guarantee provisions, the assessment of such
estimated losses against the banks' or the thrifts' depository institution
affiliates, and a potential loss of UPC's investments in such other banking and
thrift subsidiaries.
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PROMPT CORRECTIVE ACTION
FDICIA establishes a system of "prompt corrective action" to resolve
the problems of undercapitalized institutions. Under this system, which became
effective in December 1992, the federal banking regulators are required to
establish five capital categories (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, and critically
undercapitalized) and to take certain mandatory supervisory actions, and are
authorized to take other discretionary actions, with respect to institutions in
the three undercapitalized categories, the severity of which will depend upon
the capital category in which the institution is placed. Generally, subject to
a narrow exception, FDICIA requires the appropriate banking regulator to
appoint a receiver or conservator for an institution that is critically
undercapitalized. The federal banking agencies have specified by regulation
the relevant capital level for each category.
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 Risk-Based Capital Ratio of 6.0% or greater, and a Leverage
Ratio of 5.0% or greater and (ii) is not subject to any written agreement,
order, capital directive, or prompt corrective action directive issued by the
appropriate federal banking agency is deemed to be "well capitalized." An
institution with a Total Capital Ratio of 8.0% or greater, a Tier 1 Risk-Based
Capital Ratio of 4.0% or greater, and a Leverage Ratio of 4.0% or greater is
considered to be "adequately capitalized." A depository institution that has a
Total Capital Ratio of less than 8.0%, a Tier 1 Risk-Based Capital Ratio of
less than 4.0%, or a Leverage Ratio of less than 4.0% is considered to be
"undercapitalized." A depository institution that has a Total Capital Ratio of
less than 6.0%, a Tier 1 Risk-Based Capital Ratio of less than 3.0%, or a
Leverage Ratio of less than 3.0% is considered to be "significantly
undercapitalized," and an institution that has a tangible equity capital to
assets ratio equal to or less than 2.0% is deemed to be "critically
undercapitalized." For purposes of the regulation, the term "tangible equity"
includes core capital elements counted as Tier 1 Capital for purposes of the
risk-based capital standards, plus the amount of outstanding cumulative
perpetual preferred stock (including related surplus), minus all intangible
assets with certain exceptions. A depository institution may be deemed to be
in a capitalization category that is lower than is indicated by its actual
capital position if it receives an unsatisfactory examination rating.
An institution that is categorized as undercapitalized, significantly
undercapitalized, or critically undercapitalized is required to submit an
acceptable capital restoration plan to its appropriate federal banking agency.
Under FDICIA, a bank holding company must guarantee that a subsidiary
depository institution will meet its capital restoration plan, subject to
certain limitations. The obligation of a controlling bank holding company
under FDICIA to fund a capital restoration plan is limited to the lesser of
5.0% of an undercapitalized subsidiary's assets or the amount required to meet
regulatory capital requirements. An undercapitalized institution is also
generally prohibited from increasing its average total assets, making
acquisitions, establishing any branches, or engaging in any new line of
business, except in accordance with an accepted capital restoration plan or
with the approval of the FDIC. In addition, the appropriate federal banking
agency is given authority with respect to any undercapitalized depository
institution to take any of the actions it is required to, or may take with
respect to a significantly undercapitalized institution as described below if
it determines "that those actions are necessary to carry out the purpose" of
FDICIA.
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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.
Each of UPC's and Citizens's respective bank and thrift subsidiaries
was deemed to be "well-capitalized" under applicable capital guidelines as of
March 31, 1997.
DESCRIPTION OF UPC COMMON AND PREFERRED STOCK
GENERAL
UPC's Charter currently authorizes the issuance of 100,000,000 shares
of common stock having a par value of $5.00 per share (the "UPC Common Stock")
and 10,000,000 shares of preferred stock having no par value (the "UPC
Preferred Stock"). As of June 30, 1997, 66,790,144 shares of UPC Common Stock
were issued and outstanding and approximately 2,947,000 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 3,259,000 shares were authorized for issuance pursuant to said
plans but not yet subject to option grants or otherwise issued; and
approximately 3,166,545 shares were authorized for issuance and reserved for
conversion of certain outstanding shares of UPC Preferred Stock. In addition,
as of June 30, 1997, 2,533,236 shares of UPC's 8% Cumulative, Convertible
Preferred Stock, Series E (the "Series E Preferred Stock") were issued and
outstanding. As of June 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 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. UPNB, a wholly-owned subsidiary of UPC, is the Registrar, Transfer
Agent and Dividend Disbursing Agent for shares of UPC Common Stock. Its street
address is Union Planters National Bank, Corporate Trust Department, 6200
Poplar Avenue, Third Floor, Memphis, Tennessee 38119. Its mailing address is
P.O. Box 387, Memphis, Tennessee 38147.
Dividends. Subject to the preferential dividend rights applicable to
outstanding shares of the UPC Preferred Stock and subject to applicable
requirements, if any, with respect to the setting aside of sums for purchase,
retirement or sinking funds, if any, for all outstanding UPC Preferred Stock,
the holders of the UPC Common Stock are entitled to receive, to the extent
permitted by law, only such dividends as may be declared from time to time by
the UPC Board.
UPC has the right to, and may from time to time, enter into borrowing
arrangements or issue other debt instruments, the provisions of which may
restrict payment of dividends and other distributions on UPC Common Stock and
UPC Preferred Stock. UPC has entered into such an arrangement which, under
certain circumstances, would prohibit UPC from paying dividends on, or making
any other distributions with respect to, any capital stock of UPC, including
the UPC Common Stock and Preferred Stock. In December, 1996 UPC caused to be
formed Union Planters Capital Trust A ("Capital Trust"), a Delaware statutory
business trust, for the purpose of issuing up to $200,000,000 of 8.20% Capital
Trust Pass-through SecuritiesSM (TruPSSM) (the "Capital Securities"), all of
which are currently outstanding. UPC owns all of the common stock interests in
the Capital Trust and the Capital Securities represent preferred stock
interests in the Capital Trust. The proceeds received by the Capital Trust
from the sale of the common securities to UPC and the sale of the Capital
Securities in the offering was used by the Capital Trust to purchase
$206,186,000 of UPC's Junior Subordinated Deferrable Interest Debentures due
2026 (the "UPC Subordinated Debentures"). The only assets of the Capital Trust
are the UPC Subordinated Debentures. All payments to be made by UPC on the UPC
Subordinated Debentures, including but not limited to, interest payments and
payments upon redemption or maturity, are to be paid to a trustee for the
benefit of the holders of the Capital Securities; provided, however, that UPC's
rights to distributions as a common stock holder of the Capital Trust are
subordinated to the prior right of the holders of the Capital Securities.
Interest and other payments to be made on the UPC Subordinated Debentures is
coordinated with the distributions and other payments to be made on the Capital
Securities so that they are to be made on the same day; therefore, UPC's
payments on the UPC Subordinated Debentures flow through to the holders of the
Capital Securities and UPC as the holder of the common stock of the Capital
Trust.
Interest on the UPC Subordinated Debentures and, therefore,
distributions on the Capital Securities accrue at 8.20% per annum, is
cumulative, and is payable semi-annually in arrears on June 15 and December 15
of each year, commencing June 15, 1997. UPC has the right, at any time and
subject to certain conditions, to defer payments of interest on the UPC
Subordinated Debentures for extension periods ("Extension Periods"), each not
exceeding 10 consecutive
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semiannual periods; provided, that no Extension Period may extend beyond the
maturity date of the UPC Subordinated Debentures. As a consequence of UPC's
extension of an interest payment period on the UPC Subordinated Debentures,
distributions on the Capital Securities would likewise be deferred (though such
distributions would continue to accrue with interest thereon compounded
semiannually (to the extent permitted by law), since interest would continue to
accrue, with interest thereon compounded semiannually on the UPC Subordinated
Debentures during any such Extension Period (to the extent permitted by law).
In the event UPC exercises its right to extend an interest payment
period, or should UPC become in default under the UPC Subordinated Debentures,
such as in a failure to make an interest or other payment when due or should
UPC default under any other indebtedness for borrowed money where the aggregate
principal amount of such indebtedness accelerated due to such default exceeds
$25 million, then subject to certain exceptions, (i) UPC shall not declare or
pay any dividend on, make any distributions with respect to, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of its
capital stock or rights to acquire such capital stock or make any guarantee
payments with respect to the foregoing and (ii) UPC shall not make any payment
of interest on or principal of (or premium, if any, on), or repay, repurchase
or redeem, any debt securities issued by UPC which rank pari passu with or
junior to the UPC Subordinated Debentures.
The UPC Subordinated Debentures and the Capital Securities were
initially issued on December 12, 1996. UPC has no current intent to extend the
interest payment period and is currently aware of no fact that would lead it to
believe that it would otherwise default in the making of any payments due on
the UPC Subordinated Debt Securities. For a more detailed discussion with
respect to the Capital Securities and the UPC Subordinated Debentures, see Note
9, "Borrowings - Other Long-Term Debt" in the Union Planters Annual Report on
Form 10-K for the period ended December 31, 1996 on page 52 thereof. See,
"INCORPORATION BY REFERENCE."
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 in
connection with UPC's Capital Securities and those 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 stockholders 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 with or into 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 stockholders, including the holders UPC Common Stock and UPC
Preferred Stock, to participate in the distribution of the assets of a
subsidiary of UPC in connection with the subsidiary's
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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 discussion of UPC Common Stock, see "EFFECT OF MERGER ON
RIGHTS OF Citizens STOCKHOLDERS."
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
(Commission File No. 0-6919) which is incorporated by reference herein.
Series E Preferred Stock. 2,533,236 shares of Series E Preferred Stock
were outstanding as of June 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 election of the holder at the rate of 1.25 shares of UPC
Common Stock for each share of Series E Preferred Stock. The Series E
Preferred Stock is not subject to any sinking fund provisions and has no
preemptive rights. Such shares have a liquidation preference of $25.00 per
share plus unpaid dividends accrued thereon and, at UPC's option and with the
prior approval of the Federal Reserve, are subject to redemption by UPC at any
time at a redemption price of $25.00 per share plus any unpaid dividend.
Holders of Series E Preferred Stock have no voting rights except as required by
law and in certain other limited circumstances.
EFFECT OF THE MERGER ON RIGHTS OF STOCKHOLDERS
As a result of the Merger, holders of Citizens Common Stock will be
exchanging their shares of a Tennessee corporation governed by the Tennessee
Act and Citizens' Charter and Bylaws, for shares of UPC, a Tennessee
corporation governed by the Tennessee Act and UPC's Charter of Incorporation,
as amended, and Bylaws. Certain significant differences exist between the
rights of Citizens stockholders and those of UPC stockholders. The differences
deemed material by Citizens and UPC are summarized below. 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 UPC's Board of
Directors. The following discussion is necessarily general; it is not intended
to be a complete statement of all differences affecting the rights of
stockholders and their respective entities, and it is qualified in its entirety
by reference to the of Tennessee as well as to UPC's Charter and Bylaws and
Citizens' Charter and Bylaws.
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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 Stockholders," "-- Actions by
Stockholders Without a Meeting," "-- Stockholder 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 UPC's Board
of Directors 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 stockholders as appropriate under the circumstances, including, if the
Board determines that a sale of control is in their best interests, by
enhancing the Board's ability to maximize the value to be received by the
stockholders upon such a sale.
Although UPC's management believes the Protective Provisions are
beneficial to UPC's stockholders, the Protective Provisions also may tend to
discourage some takeover bids. As a result, UPC's stockholders 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 an
undesirable acquisition offer can be a very expensive and time-consuming
process. To the extent that the Protective Provisions discourage undesirable
proposals, UPC may be able to avoid those expenditures of time and money.
The Protective Provisions also may discourage open market purchases by
a potential acquirer. Such purchases may increase the market price of UPC
Common Stock temporarily, enabling stockholders 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
stockholders to replace the Board of Directors or management, even if a
majority of the stockholders 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 66,790,144 shares were issued and
outstanding as of June 30, 1997, and (ii) 10,000,000 of no par value preferred
stock ("UPC Preferred Stock"), of which no shares of UPC Series A Preferred
Stock, and 2,533,236 shares of UPC Series E Preferred Stock were issued and
outstanding as of June 30, 1997. UPC's Board of Directors may authorize the
issuance of additional shares of UPC Common Stock without further action by
UPC's stockholders, 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.
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Similarly, with certain exceptions, UPC's Board of Directors may
issue, without any further action by the stockholders, shares of UPC Preferred
Stock, in one or more classes or series, with such voting, conversion,
dividends, and liquidation rights as specified in UPC's Charter. In providing
for the issuance of such shares, UPC's Board of Directors 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 stockholder 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 stockholders, may have the effect of discouraging or increasing
the cost of unsolicited attempts to acquire control of UPC.
In 1989, the UPC Board of Directors 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 stockholder on a fair and equal basis. Each Preferred Share Right
trades in tandem with the share of UPC Common Stock to which it relates until
the occurrence of certain events indicating a potential change in control of
UPC. Upon the occurrence of such an event, the Preferred Share Rights would
separate from UPC Common Stock and each holder of a Preferred Share Right
(other than the potential acquirer) would be entitled to purchase certain
equity securities at prices below their market value. UPC has authorized
750,000 shares of Series A Preferred Stock for issuance under the 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 stockholder of UPC, including the right to vote or
receive dividends.
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CITIZENS. Citizens' Charter authorizes the issuance of up to 500
shares of Citizens Common Stock, of which 485 shares were issued and
outstanding as of the Record Date, and no shares of preferred stock. Citizens'
Board of Directors may authorize the issuance of only 15 additional authorized
shares of Citizens Common Stock without further action by Citizens'
stockholders.
AMENDMENT OF CHARTER AND BYLAWS
UPC. The Charter of UPC generally provides that amendments thereto
may be adopted in any manner permitted by the TBCA. The TBCA generally
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 stockholders.
The Charter of UPC 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 of UPC 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 of UPC relating to
business combinations.
The Board of Directors of UPC may adopt, amend, or repeal the Bylaws
by a majority vote of the entire Board of Directors. The Bylaws adopted by the
Board of Directors may then be further amended or repealed by an action of
UPC's stockholders.
UPC's Charter also provides that all corporate powers of UPC shall be
exercised by the Board of Directors except as otherwise provided by law. The
UPC Board 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, including the authority to adopt, amend and repeal the Bylaws, to
submit any action to the stockholders, to fill vacancies on the Board 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.
CITIZENS. The Charter of Citizens does not address its amendment,
therefore, the TBCA applies and the Citizens' Charter may be amended by the
vote of a majority of the outstanding shares. Citizens' Bylaws may be amended
by a majority of Citizens' Board.
CLASSIFIED BOARD OF DIRECTORS AND ABSENCE OF CUMULATIVE VOTING
UPC. The Charter of UPC provides that UPC's Board of Directors is
divided into three classes, with each class to be as nearly equal in number as
possible. The directors in each class serve three-year terms of office. The
effect of UPC's having a classified Board of Directors is that only
approximately one-third of the members of the Board are elected each year,
which effectively requires two annual meetings for UPC's stockholders to change
a majority of the members of the Board. The purpose of dividing UPC's Board of
Directors into classes is to facilitate continuity and stability of leadership
of UPC by ensuring that experienced personnel familiar with UPC will be
represented on UPC's Board at all times, and to permit UPC's management to plan
for the future for a reasonable time. However, by potentially delaying the
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<PAGE> 69
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 stockholder 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
stockholder 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 stockholder 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
stockholders. With cumulative voting, it may be possible for minority
stockholders 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 stockholder who acquires less than a
majority of the shares of UPC Common Stock to obtain representation on UPC's
Board of Directors.
CITIZENS. Citizens' Bylaws provide for only one class of directors
and further provides that its directors are to be elected annually. Citizens'
stockholders do not have cumulative voting rights.
DIRECTOR REMOVAL AND VACANCIES
UPC. UPC's Charter provides that a director may be removed by the
stockholders only upon the affirmative vote of the holders of 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
stockholder from circumventing the classified board system by removing
directors and filling the vacancies with new individuals selected by that
stockholder. Accordingly, the provision may have the effect of impending
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 stockholders, 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 stockholders at which directors are elected.
CITIZENS. Members of Citizens' Board may be removed with or without
cause by the vote of the holders of a majority of the outstanding shares of
Citizens Common Stock entitled to vote thereon. Therefore, it is easier to
remove directors of Citizens than to remove directors of UPC.
INDEMNIFICATION
UPC. Under the TBCA, subject to certain exceptions, a corporation may
indemnify an individual made a party to a proceeding, because he is or was a
director, against liability incurred in the proceeding if (i) he conducted
himself in good faith; (ii) he reasonably believed (a) in the case of conduct
in his official capacity with the corporation, that his conduct was in the best
interests of the corporation, and (b) in all other cases, that his conduct was
at least not opposed
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to the corporation's best interests; and (iii) in the case of any criminal
proceeding, he had no reasonable cause to believe his conduct was unlawful (the
"Standard of Conduct"). Moreover, unless limited by its articles of
incorporation, a corporation must indemnity a director who was wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which he was a party because he is or was a director of the corporation against
reasonable expenses incurred by him 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 good faith belief that he or
she has met the Standard of Conduct and an undertaking by or on behalf of a
director of his good faith belief that he or she has met the Standard of
Conduct and an undertaking by or on behalf of a director to repay such amount
unless it shall ultimately be determined that he is entitled to be indemnified
by the corporation against such expenses. Before any such indemnification is
made, it must be determined that such indemnification would not be precluded by
Part 5 of the TBCA.
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 1933 Act and is therefore unenforceable.
CITIZENS. Neither Citizens' Charter nor Bylaws address
indemnification.
SPECIAL MEETING OF STOCKHOLDERS
UPC. UPC's Bylaws provide that special meetings of stockholders 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.
CITIZENS. TCBA provides that special meetings of stockholders may be
called by such persons as may be authorized by a corporation's certificate of
incorporation or bylaws. Citizens' Bylaws provide that special meetings of
stockholders may be called only by resolution of a majority of the whole Board
of Directors. Because a special meeting may be necessary for a potential
acquirer to gain control of Citizens, this requirement could discourage or make
more difficult an attempt to gain control of Citizens, and could tend to
perpetuate the incumbent directors and management.
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BUSINESS COMBINATIONS
UPC. The Charter of UPC requires the affirmative vote of the holders
of two-thirds of UPC's outstanding 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.
The requirement of a supermajority vote of stockholders to approve
certain business transactions, as described above, may discourage a change in
control of UPC by allowing a minority of UPC's stockholders to prevent a
transaction favored by the majority of the stockholders. 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 imposes certain restrictions on business combinations, including, but not
limited to, combinations with interested stockholders similar to those
described above.
The Tennessee Business Combination Act 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 stockholder" (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 stockholder, unless the business combination or
the transaction pursuant to which the interested stockholder became such was
approved by the UPC Board of Directors before the interested stockholder became
such, and the business combination satisfies any other applicable requirements
imposed by law or by UPC's Charter or Bylaws. The Tennessee Business
Combination Act 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 stockholder approval is required when a stockholder seeks to
acquire the power to vote shares at the next level. In the absence of such
approval, the additional shares acquired by the stockholder may not be voted
until they are transferred to another person in a
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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 Tennessee Business Combination Act 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 stockholder on or before the date such stockholder became an
interested stockholder, or for seeking to enforce or implement the provisions
of the Tennessee Business Combination Act or the Tennessee CSAA, or for failing
to adopt or recommend any charter or bylaw amendment or provision in respect of
any one or more of these acts or the Tennessee GA, or for opposing any merger,
exchange, tender offer or significant disposition of the assets of the resident
domestic corporation or any subsidiary of such corporation because of a good
faith belief that such merger, exchange, tender offer or significant
disposition of assets would adversely affect the corporation's employees,
customers, suppliers, the communities in which the corporation or its
subsidiaries operate or are located or any other relevant factor if such
factors are permitted to be considered by the board of directors under the
corporation's charter in connection with the merger, exchange, tender offer or
significant disposition of assets.
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 of Directors until at least the second
annual meeting of the stockholders 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 stockholders 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
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context. The provisions described above also may make it more difficult for
UPC's stockholders to replace the UPC Board of Directors 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 of Directors and management.
DISSENTERS' RIGHTS
UPC. Under the TBCA, a stockholder 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 stockholder approval is not required by the TBCA; (ii)
consummation of a plan of share exchange to which the corporation is party as
the corporation whose shares will be acquired if the stockholder 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 stockholder 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 stockholders 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 stockholder 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 stockholder vote, to the
extent the charter, bylaws, or a resolution of the board of directors provide
that voting or nonvoting stockholders are entitled to dissent and obtain
payment for their shares. UPC's Charter and Bylaws do not provide for any such
additional dissenters' rights.
CITIZENS. Because the Citizens Common Stock is not publicly traded,
holders of Citizens Common Stock have the right to exercise dissenter's rights.
See "The Merger -- Dissenters' Rights" and Appendix D hereto.
STOCKHOLDERS' RIGHTS TO EXAMINE BOOKS AND RECORDS
The TBCA provides that a stockholder 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. The written demand must 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 stockholder desires to inspect.
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DIVIDENDS
UPC's ability to pay dividends on UPC Common Stock is governed by
Tennessee corporate law as is Citizens' ability to pay dividends on Citizens
Common Stock. 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
stockholders whose preferential rights are superior to those receiving the
distribution.
There are various statutory limitations on the ability of UPC's
Banking Subsidiaries to pay dividends to UPC and on The Whiteville Bank's
ability to pay dividends to Citizens. See "CERTAIN REGULATORY
CONSIDERATIONS--Payment of Dividends."
LEGAL OPINIONS
The validity of the shares of the UPC Common Stock offered hereby
would 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.
The tax consequences of the Merger to the Citizens Record Holders, in
general, would be passed upon by Wyatt, Tarrant & Combs, counsel to UPC.
EXPERTS
The consolidated financial statements of Union Planters Corporation
incorporated into this Prospectus/Proxy Statement by reference to the Annual
Report on Form 10-K of Union Planters Corporation for the year ended December
31, 1996 has been so incorporated in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm experts in
auditing and accounting.
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UNION PLANTERS CORPORATION
INDEX TO APPENDICES
<TABLE>
<CAPTION>
APPENDIX
NUMBER
- --------
<S> <C>
A -- Agreement and Plan of Reorganization between Union Planters
Corporation, Union Planters Community Bancorp, Inc. and
Citizens of Hardeman County Financial Services, Inc. dated as
of December 12, 1996, together with the related Plan of Merger
annexed thereto as Exhibit 1
B -- Unaudited Consolidated Financial Statements of Citizens of
Hardeman County Financial Services, Inc. as of and for the
years ended December 31, 1996 and 1995 (and notes thereto),
and for the three months ended March 31, 1997 and 1996 (and
notes thereto)
C -- Fairness Opinion of Southard Financial
D -- Sections 48-23-101, et al, of the Tennessee Business
Corporation Act, pertaining to applicable dissenters' rights
provisions
</TABLE>
<PAGE> 76
APPENDIX A
Agreement and Plan of Reorganization between Union Planters Corporation, Union
Planters Community Bancorp, Inc. and Citizens of Hardeman County Financial
Services, Inc., dated as of December 12, 1996, together with the related Plan
of Merger annexed thereto as Exhibit 1
<PAGE> 77
EXECUTION COPY
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF DECEMBER 12, 1996
BETWEEN
UNION PLANTERS CORPORATION,
UNION PLANTERS COMMUNITY BANCORP, INC.
AND
CITIZENS OF HARDEMAN COUNTY FINANCIAL SERVICES, INC.
<PAGE> 78
TABLE OF CONTENTS
<TABLE>
<S> <C>
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 1
TERMS OF THE MERGER
1.1 Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Time and Place of Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Charter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.8 UPC's Right to Revise the Structure of the Transaction . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2
MANNER OF CONVERTING SHARES AND OPTIONS; EXCHANGE RATIO
2.1 Conversion; Cancellation and Exchange of Shares; Exchange Ratio . . . . . . . . . . . . . . . . . . 3
2.2 No Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.3 Anti-Dilution Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE 3
EXCHANGE OF SHARES
3.1 Exchange Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.2 Rights of Former Citizens Record Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF CITIZENS
4.1 Organization, Standing, and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.2 Authority; No Breach of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.3 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.4 Citizens Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.5 Citizens Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.6 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.7 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.8 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.9 Allowance for Possible Loan Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.10 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.11 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.12 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.13 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.14 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.15 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
i
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<TABLE>
<S> <C> <C>
4.16 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.17 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.18 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.19 Statements True and Correct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.20 Accounting, Tax and Regulatory Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.21 State Takeover Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.22 Charter Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.23 Charter Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF UPC
5.1 Organization, Standing, and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.2 Authority: No Breach By Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.3 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.4 SEC Filings: Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.5 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.6 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.7 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.8 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.9 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.10 Statements True and Correct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.11 Accounting, Tax and Regulatory Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 6
CONDUCT OF BUSINESS PENDING CONSUMMATION
6.1 Affirmative Covenants of Citizens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.2 Negative Covenants of Citizens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.3 Covenants of UPC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.4 Adverse Changes in Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.5 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE 7
ADDITIONAL AGREEMENTS
7.1 Registration Statement: Proxy Statement: Shareholder Approvals . . . . . . . . . . . . . . . . . . . 22
7.2 Exchange Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.3 Applications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.4 Filings with State Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.5 Agreement as to Efforts to Consummate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.6 Investigation and Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.7 Press Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.8 Certain Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.9 Accounting and Tax Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.10 State Takeover Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.11 Charter Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.12 Agreement of Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
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<PAGE> 80
<TABLE>
<S> <C> <C>
7.13 Employee Benefits and Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 8
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
8.1 Conditions to Obligations of Each Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.2 Conditions to Obligations of UPC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.3 Conditions to Obligations of Citizens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 9
TERMINATION
9.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.3 Non-Survival of Representations and Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE 10
GENERAL PROVISIONS
10.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.3 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.5 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.6 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.7 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.8 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.9 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.11 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.12 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.13 Enforcement of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.14 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.15 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.16 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
</TABLE>
iii
<PAGE> 81
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") dated as of the
12th day of December, 1996, by and between UNION PLANTERS CORPORATION ("UPC"),
a corporation chartered and existing under the laws of the State of Tennessee
which is registered both as a bank holding company and as a savings and loan
holding company and whose principal offices are located at 7130 Goodlett Farms
Parkway, Memphis, Shelby County, Tennessee 38018; CITIZENS OF HARDEMAN COUNTY
FINANCIAL SERVICES, INC., ("Citizens"), a corporation chartered and existing
under the laws of the State of Tennessee which is registered as a bank holding
company and whose principal offices are located are located at 114 Main Street,
Whiteville, Tennessee 38008, and UNION PLANTERS COMMUNITY BANCORP, INC.,
("Merger Subsidiary" or "Surviving Corporation", as the context may require), a
corporation chartered and existing under the laws of the State of Tennessee
which is a wholly- owned subsidiary of UPC and whose principal offices are
located at 7130 Goodlett Farms Parkway, Memphis, Shelby County, Tennessee
38018.
Certain other capitalized terms used in this Agreement and in the Plan
of Merger are defined below in Section 10.1.
RECITALS
A. Citizens is the beneficial owner and holder of record of all
of the issued and outstanding shares of capital stock of The Whiteville Bank
(the "Citizens Bank Subsidiary"), and Citizens desires to have itself and,
indirectly, all of its assets, including the capital stock it owns of Citizens
Bank Subsidiary, acquired by UPC on the terms and subject to the conditions set
forth in this Agreement and the Plan of Merger annexed hereto as Exhibit 1.
B. UPC desires to acquire Citizens and, indirectly, Citizens's
assets, including the capital stock of the Citizens Bank Subsidiary, on the
terms and subject to the conditions set forth in this Agreement and the Plan of
Merger.
C. The Board of Directors of Citizens deems it desirable and in
the best interests of Citizens, the Citizens Bank Subsidiary, and the
shareholders of Citizens that Citizens be merged with and into Merger
Subsidiary (which would survive the merger as the Surviving Corporation, as
defined herein) on the terms and subject to the conditions set forth in this
Agreement and in the manner provided in this Agreement and the Plan of Merger
(the "Merger") and has directed that this Agreement and the Plan of Merger be
submitted to the shareholders of Citizens with the recommendation that they be
approved by them.
D. The Boards of Directors of UPC, as a party to the Merger and
as sole shareholder of Merger Subsidiary, and Merger Subsidiary deem it
desirable and in the best interests of UPC and Merger Subsidiary and the
shareholders of UPC that Citizens be merged with and into Merger Subsidiary on
the terms and subject to the conditions set forth in this Agreement and in the
manner provided in this Agreement and the Plan of Merger.
E. The respective Boards of Directors of UPC, Merger Subsidiary
and Citizens have each adopted (or will each adopt) resolutions setting forth
and adopting this Agreement and the Plan of Merger, and have directed that this
Agreement and the annexed Plan of Merger and all resolutions adopted by said
Boards of Directors and by the Citizens Shareholders related to this Agreement,
be submitted with appropriate applications to, and filed with all applicable
Regulatory Authorities as may be necessary in order to obtain all Consents
required to consummate the proposed Merger and the transactions contemplated in
this Agreement in accordance with this Agreement, the Plan of Merger and
applicable law.
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NOW THEREFORE, in consideration of the foregoing premises and the
mutual representations, warranties, covenants and agreements herein contained
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Parties agree as follows:
ARTICLE 1
TERMS OF THE MERGER
1.1 MERGER. Subject to the terms and conditions of this Agreement,
at the Effective Time Citizens shall be merged with and into Merger Subsidiary
in accordance with the provisions of Section 48-21-102 of the Tennessee Code
and with the effect provided in Section 48-21-108 of the Tennessee Code (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 Citizens, UPC, and Merger Subsidiary, and the Plan of Merger, in
substantially the form of Exhibit 1 which has been approved and adopted by the
Boards of Directors of Citizens, Merger Subsidiary, and by the Board of
Directors of UPC in its capacity as sole shareholder of Merger Subsidiary.
1.2 TIME AND PLACE OF CLOSING. The Closing will take place at 9:00
A.M. on the date that the Effective Time occurs (or the immediately preceding
day if the Effective Time is earlier than 9:00 A.M.) or at such other time as
the Parties, acting through their chief executive officers or chief financial
officers, may mutually agree. The Closing shall be held at the Union Planters
Administrative Center, Union Planters Corporation Executive Offices (Fourth
Floor), 7130 Goodlett Farms Parkway, Memphis, Shelby County, Tennessee 38018,
or at such other place as the Parties, acting through their chief executive
officers or chief financial officers, may mutually agree.
1.3 EFFECTIVE TIME. The Merger and other transactions contemplated
by this Agreement shall become effective on the date and at the time the
Articles of Merger reflecting the Merger shall become effective with the
Secretary of State of the State of Tennessee (the "Effective Time").
1.4 CHARTER. The Charter of Merger Subsidiary in effect
immediately prior to the Effective Time shall be the Charter of the Surviving
Corporation until otherwise amended or repealed.
1.5 BYLAWS. The Bylaws of Merger Subsidiary in effect immediately
prior to the Effective Time shall be the Bylaws of the Surviving Corporation
until otherwise amended or repealed.
1.6 NAME. The name of Merger Subsidiary shall remain unchanged
after the Effective Time, unless and until otherwise renamed.
1.7 DIRECTORS AND OFFICERS. The directors and officers of Merger
Subsidiary in office immediately prior to the Effective Time, together with
such additional persons as may thereafter be elected or appointed, shall serve
as the directors and officers of the Surviving Corporation from and after the
Effective Time in accordance with the Bylaws of the Surviving Corporation,
unless and until their successors shall have been elected or appointed and
shall have qualified or until they shall have been removed in the manner
provided therein.
1.8 UPC'S RIGHT TO REVISE THE STRUCTURE OF THE TRANSACTION. UPC
shall have the unilateral right to revise the structure of the Merger in order
to achieve tax benefits or for any other reason which UPC may deem advisable;
provided, however, that UPC shall not have the right, without the approval of
the Board of Directors of Citizens, to make any revision to the structure of
the Merger which (i) changes the amount of the Consideration which the Citizens
Record Holders are to receive as determined in the
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manner provided in 2.1(c) of this Agreement; (ii) changes the intended tax-free
effect of the Merger to UPC, Merger Subsidiary, Citizens to any Citizens Record
Holder; or (iii) would permit UPC to pay the Consideration other than by
delivery of shares of UPC Common Stock registered with the SEC (in the manner
described in Section 7.1 of this Agreement). UPC may exercise this right of
revision by giving written notice to Citizens in the manner provided in Section
10.8 of this Agreement, which notice shall be in the form of an amendment to
this Agreement and the Plan of Merger or in the form of an Amended and Restated
Agreement and Amended and Restated Plan of Merger.
ARTICLE 2
MANNER OF CONVERTING SHARES AND OPTIONS; EXCHANGE RATIO
2.1 CONVERSION; CANCELLATION AND EXCHANGE OF SHARES; EXCHANGE
RATIO. At the Effective Time, by virtue of the Merger becoming effective and
without any action on the part of UPC, Merger Subsidiary, Citizens, or the
shareholders of any of the foregoing, the shares of the constituent
corporations shall be converted as follows:
(a) UPC CAPITAL STOCK. 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) MERGER SUBSIDIARY COMMON STOCK. 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 and
shall represent all of the issued and outstanding capital stock of Merger
Subsidiary as the Surviving Corporation.
(c) CITIZENS COMMON STOCK. Each share of Citizens Common
Stock (excluding shares held by any Citizens 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
represent any interest (equity, shareholder or otherwise) in Citizens and
shall, [except for those shares held by any Citizens Record Holders who shall
have properly perfected such Holders' dissenters' rights and shall have
maintained the perfected status of such dissenters' rights through the
Effective Time ("Citizens Dissenting Shareholders"), whose rights shall be
governed by the provisions of Sections 48-23-101 through 48-23-302 of the
Tennessee Code], automatically be converted exclusively into, and constitute
only the right of each Citizens Record Holder to receive in exchange for such
Holder's shares of Citizens Common Stock, the Consideration to which the
Citizens Record Holder is entitled as provided in this Section 2.1(c).
(i) THE EXCHANGE RATIO. Subject to any
adjustments which may be required by an event described in Subsection
2.1(c)(iii) below, the number of shares of UPC Common Stock to be exchanged for
each share of Citizens Common Stock which shall be issued and outstanding
immediately prior to the Effective Time shall be based on an exchange ratio
(the "Exchange Ratio") of 435.872 shares of UPC Common Stock for each share of
Citizens Common Stock which shall be validly issued and outstanding immediately
prior to the Effective Time. The Exchange Ratio is based upon there being no
more than an aggregate of 483 fully diluted shares of Citizens Common Stock
validly issued and outstanding immediately prior to the Effective Time.
Therefore, the maximum aggregate number of shares of UPC Common Stock which UPC
would be required to issue in exchange for all outstanding shares of Citizens
Common Stock, based on the Exchange Ratio, would be 210,526 shares of UPC
Common Stock. Citizens Common Stock held by any Citizens Company, other than in
a fiduciary capacity or as a result of debts previously contracted, shall not
be considered as outstanding immediately prior to the Effective Time for
purposes of the Exchange Ratio. No fractional shares of UPC Common Stock shall
be issued in the
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Merger and if, after aggregating all of the whole and fractional shares of UPC
Common Stock to which a Citizens Record Holder shall be entitled based upon the
Exchange Ratio, there should be a fractional share of UPC Common Stock
remaining, such fractional share shall be settled by a cash payment therefor
pursuant to Article 3 of this Agreement, which cash settlement shall be based
upon the Current Market Price Per Share (as defined below) of one (1) full
share of UPC Common Stock.
(ii) DEFINITION OF "CURRENT MARKET PRICE PER
SHARE." The "Current Market Price Per Share" shall be the closing price per
share of the UPC Common Stock on the NYSE Composite Transaction 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 prior to the
Effective Date.
(iii) EFFECT OF STOCK SPLITS, REVERSE STOCK SPLITS,
STOCK DIVIDENDS AND SIMILAR CHANGES IN THE CAPITAL OF CITIZENS. Should Citizens
effect any stock splits, reverse stock splits, stock dividends or similar
changes in its respective capital accounts subsequent to the date of this
Agreement but prior to the Effective Time, or should there be more than 483
fully diluted shares of Citizens Common Stock outstanding immediately prior to
the Effective Time, the Exchange Ratio may, in UPC's sole discretion if such
change in the capital accounts constitutes a breach of any of Citizens's
representations, warranties or covenants, be adjusted in such a manner as the
Board of Directors of UPC shall deem in good faith to be fair and reasonable in
order to give effect to such changes. Notwithstanding the foregoing, nothing
in this subparagraph (iii) shall be deemed to be a waiver of the inaccuracy of
any representation or warranty or breach of any covenant by Citizens set forth
herein.
(d) SHARES HELD BY CITIZENS OR UPC. Each of the shares of
Citizens Common Stock held by any Citizens 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.
(e) DISSENTERS' RIGHTS OF CITIZENS SHAREHOLDERS. Any
Citizens Record Holder who shall comply strictly with the provisions of
Sections 48-23-201 et. seq. of the Tennessee Code ("Citizens Dissenting
Shareholders"), shall be entitled to dissent from the Merger and to seek those
appraisal remedies afforded by the Tennessee Code.
2.2 NO STOCK OPTIONS. As of the date of this Agreement there are
no options, Rights, warrants, scrip or similar rights of any nature, including
stock option, stock appreciation or similar rights, issued and outstanding by
Citizens or any Citizens Company to purchase shares of Citizens Common Stock,
any other capital stock of Citizens, or any other securities or instruments of
any nature which are convertible into or exchangeable for, or which derive
their value, in whole or in part from, shares of Citizens Common Stock or any
other capital stock of Citizens or any Citizens Company. Therefore, at the
Effective Time there will be no issued and outstanding options, securities,
Rights or instruments of any nature whatsoever to purchase or otherwise acquire
shares of Citizens Common Stock or any other capital stock of Citizens or any
Citizens Company, or which derive their value, in whole or in part from
Citizens Common Stock or any other capital stock of any Citizens Company.
2.3 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 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.
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<PAGE> 85
ARTICLE 3
EXCHANGE OF SHARES
3.1 EXCHANGE PROCEDURES. Promptly after the Effective Time, UPC
and Citizens shall cause the Exchange Agent to mail to the Citizens Record
Holders appropriate transmittal materials (which shall specify that delivery
shall be effected, and risk of loss and title to the certificates theretofore
representing shares of Citizens Common Stock shall pass, only upon proper
delivery of such certificates to the Exchange Agent). The Exchange Agent may
establish reasonable and customary rules and procedures in connection with its
duties. After the Effective Time, each Citizens Record Holder of Citizens
Common Stock (other than shares to be canceled pursuant to Section 2.1(d) 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 2.1(c) of this Agreement, together with all
undelivered dividends or distributions in respect of such shares (without
interest thereon) pursuant to Section 3.2 of this Agreement. To the extent
required by Section 2.1(c) of this Agreement, each Citizens Record Holder also
shall receive, upon surrender of the certificate or certificates representing
his or her shares of Citizens Common Stock outstanding immediately prior to the
Effective Time, 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 Citizens Record Holder
is entitled as a result of the Merger until such Citizens Record Holder
surrenders such holder's certificate or certificates representing the shares of
Citizens Common Stock for exchange as provided in this Section 3.1. The
certificate or certificates of Citizens Common Stock so surrendered shall be
duly endorsed as the Exchange Agent may require. Any other provision of this
Agreement notwithstanding, neither UPC nor the Exchange Agent shall be liable
to a Citizens Record Holder for any amounts paid or property delivered in good
faith to a public official pursuant to any applicable abandoned property Law.
Adoption of this Agreement by the shareholders of Citizens shall constitute
ratification of the appointment of the Exchange Agent.
3.2 RIGHTS OF FORMER CITIZENS RECORD HOLDERS. At the Effective
Time, the stock transfer books of Citizens shall be closed as to holders of
Citizens Common Stock outstanding immediately prior to the Effective Time, and
no transfer of Citizens Common Stock by any Citizens Record Holder shall
thereafter be made or recognized. Until surrendered for exchange in accordance
with the provisions of Section 3.1 of this Agreement, each certificate
theretofore representing shares of Citizens Common Stock (other than shares to
be canceled pursuant to Section 2.1(d) of this Agreement) shall from and after
the Effective Time represent for all purposes only the right to receive the
Consideration provided in Section 2.1(c) 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 Citizens in respect of such
shares of Citizens Common Stock in accordance with the terms of this Agreement
and which remain unpaid at the Effective Time. Whenever a dividend or other
distribution is declared by UPC on the UPC Common Stock, the record date for
which is at or after the Effective Time, the declaration shall include
dividends or other distributions on all shares of UPC Common Stock issuable
pursuant to this Agreement, but beginning 30 days after the Effective Time no
dividend or other distribution payable to the holders of record of UPC Common
Stock as of any time subsequent to the Effective Time shall be delivered to a
Citizens Record Holder until such Citizens Record Holder surrenders his or her
certificate or certificates evidencing Citizens Common Stock for exchange as
provided in Section 3.1 of this Agreement. However, upon surrender of such
Citizens Common Stock certificate, both the UPC Common Stock certificate 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.
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<PAGE> 86
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF CITIZENS
Except as disclosed in the Citizens Disclosure Memorandum, Citizens
hereby represents and warrants to UPC as follows:
4.1 ORGANIZATION, STANDING, AND POWER. Citizens is a corporation
duly organized, validly existing, and in good standing under the Laws of the
State of Tennessee and has the corporate power and authority to carry on its
business as now conducted and to own, lease, and operate its Assets. Citizens
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 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 Citizens.
4.2 AUTHORITY; NO BREACH OF AGREEMENT.
(a) Citizens has the corporate power and authority
necessary to execute, deliver, and perform its obligations under this Agreement
and the Plan of Merger and to consummate the transactions contemplated hereby
and thereby. The execution, delivery, and performance of this Agreement and the
Plan of Merger, as appropriate, and the consummation of the transactions
contemplated herein and therein, including the Merger, have been duly and
validly authorized by all necessary corporate action in respect thereof on the
part of Citizens, subject to the approval of this Agreement and the Plan of
Merger by the holders of a majority (or such greater percentage as may be
required by the Charter of Citizens or other applicable Law) of the outstanding
shares of Citizens Common Stock, which is the only shareholder vote required
for approval of this Agreement and the Plan of Merger and consummation of the
Merger by Citizens. Subject to the receipt of such requisite shareholder
approval, this Agreement and the Plan of Merger represent legal, valid, and
binding obligations of Citizens, enforceable against Citizens in accordance
with their respective terms (except in all cases as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, receivership,
conservatorship, moratorium, or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the
discretion of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement
or the Plan of Merger, as appropriate, by Citizens, nor the consummation by
Citizens of the transactions contemplated hereby or thereby, nor compliance by
Citizens with any of the provisions hereof or thereof will (i) conflict with or
result in a breach of any provision of Citizens's Charter or Bylaws, or (ii)
except as disclosed in Section 4.2(b) of the Citizens Disclosure Memorandum,
constitute or result in a Default under, or require any Consent pursuant to, or
result in the creation of any Lien on any material Asset of any Citizens
Company under, any Contract or Permit of any Citizens Company, or, (iii)
subject to receipt of the requisite Consents referred to in Section 7.3 of this
Agreement, violate any Law or Order applicable to any Citizens Company or any
of their respective Material Assets.
(c) Other than in connection or compliance with the
provisions of the Securities Laws, applicable state corporate Laws, 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 Citizens Employee 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 Citizens, no notice to, filing with, or Consent of,
any public body
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<PAGE> 87
or authority is necessary for the consummation by Citizens of the Merger and
the other transactions contemplated in this Agreement and the Plan of Merger.
(d) No Citizens Company is a party to, or subject to, or
bound by, any agreement or judgment, order, letter of understanding, writ,
prohibition, injunction or decree of any court or other governmental body of
competent jurisdiction, or any Law which would prevent the execution and
delivery of this Agreement and the Plan of Merger by Citizens, or the
consummation of the transactions contemplated hereby and thereby, and no action
or proceeding is pending against any Citizens Company in which the validity of
this Agreement, the transactions contemplated hereby or any action which has
been taken by any of such Parties in connection herewith or in connection with
the transaction contemplated hereby is at issue.
4.3 CAPITAL STOCK.
(a) The authorized capital stock of Citizens consists of
500 shares of Citizens Common Stock, $100.00 par value per share, of which 483
shares are issued and outstanding as of the date of this Agreement, and not
more than 483 shares will be issued and outstanding at the Effective Time. All
of the issued and outstanding shares of capital stock of Citizens are duly and
validly issued and outstanding and are fully paid and nonassessable under the
Tennessee Code and Citizens's Charter. None of the outstanding shares of
capital stock of Citizens has been issued in violation of any preemptive rights
of the current or past shareholders of Citizens.
(b) Except as set forth in Section 4.3(a) of this
Agreement, there are no shares of capital stock or other equity securities of
Citizens outstanding and no outstanding Rights relating to the capital stock of
Citizens.
4.4 CITIZENS SUBSIDIARIES. Citizens has disclosed in Section 4.4
of the Citizens Disclosure Memorandum all of the Citizens Subsidiaries that are
corporations (identifying its jurisdiction of incorporation, each jurisdiction
in which the character of its Assets or the nature or conduct of its business
requires it to be qualified and/or licensed to transact business, and the
number of shares owned and percentage ownership interest represented by such
share ownership) and all of the Citizens Subsidiaries that are general or
limited partnerships or other non-corporate entities, including limited
liability companies (identifying the Law under which such entity is organized,
each jurisdiction in which the character of its Assets or the nature or conduct
of its business requires it to be qualified and/or licensed to business, and
the amount and nature of the ownership interest therein of all Citizens
Companies). Citizens or one of its wholly owned Subsidiaries owns all of the
issued and outstanding shares of capital stock (or other equity interests) of
each Citizens Subsidiary. No capital stock (or other equity interest) of any
Citizens Subsidiary is or may become required to be issued (other than to
another Citizens Company) by reason of any Rights, and there are no Contracts
by which any Citizens Subsidiary is bound to issue (other than to another
Citizens Company) additional shares of its capital stock (or other equity
interests) or Rights or by which any Citizens Company is or may be bound to
transfer any shares of the capital stock (or other equity interests) of any
Citizens Subsidiary (other than to another Citizens Company). There are no
Contracts relating to the rights of any Citizens Company to vote or to dispose
of any shares of the capital stock (or other equity interests) of any Citizens
Subsidiary. All of the shares of capital stock (or other equity interests) of
each Citizens Subsidiary held by a Citizens Company are fully paid and
nonassessable under the applicable corporation or similar Law of the
jurisdiction in which such Subsidiary is incorporated or organized and are
owned by the Citizens Company free and clear of any Lien. Each Citizens
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
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Citizens 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 Citizens. The only Citizens Subsidiary that is a depository
institution is Citizens Bank Subsidiary. Citizens Bank Subsidiary 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, to the extent provided by law. The minute book and other
organizational documents and Records for each Citizens Subsidiary have been
made available to UPC for its review, and are true and complete as in effect as
of the date of this Agreement and accurately reflect all amendments thereto and
all proceedings of the Board of Directors and shareholders thereof.
4.5 CITIZENS FINANCIAL STATEMENTS. Citizens has delivered to UPC
(or will deliver, when available, with respect to periods ended after the date
of this Agreement) true, correct and complete copies of (i) all Call Reports,
including any amendments thereto, filed with any Regulatory Authorities by
Citizens Bank Subsidiary for the years ended December 31, 1992, 1993, 1994 and
1995, and thereafter, together with any correspondence with any Regulatory
Authorities concerning any of the aforesaid financial statements and Reports
(the "Citizens Financial Statements"). Such Citizens Financial Statements (i)
were (or will be) prepared from the Records of Citizens and/or each Citizens
Subsidiary; (ii) were (or will be) prepared in accordance with regulatory
accounting principles consistently applied; (iii) present (or, when prepared,
will present) Citizens's and each Citizens Subsidiary's financial condition and
the results of its operations, changes in stockholders' equity and cash flows
at the relevant dates thereof and for the periods covered thereby; (iv) do
contain or reflect (or, when prepared, will contain and reflect) all necessary
adjustments and accruals for an accurate presentation of Citizens's and each
Citizens Subsidiary's financial condition and the results of Citizens's and
each Citizens Subsidiary's operations and cash flows for the periods covered by
such financial statements; and (v) in the opinion of the Board of Directors, do
contain and reflect (or, when prepared, will contain and reflect) adequate
provisions or Allowances for loan losses, for ORE reserves and for all
reasonably anticipatable Liabilities and Taxes, with respect to the periods
then ended.
4.6 ABSENCE OF UNDISCLOSED LIABILITIES. No Citizens Company has
any Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Citizens, except Liabilities which are
accrued or reserved against in the consolidated balance sheets of Citizens as
of September 30, 1996 and December 31, 1995 included in the Citizens Financial
Statements or reflected in the notes or schedules, if any, thereto, and
delivered with the Citizens Disclosure Memorandum prior to the date of this
Agreement. No Citizens Company has incurred or paid any Liability since the
Balance Sheet Date, except for such Liabilities incurred or paid in the
ordinary course of business consistent with past business practice and which
are not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Citizens.
4.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as described in
Section 4.7 of the Citizens Disclosure Memorandum, since the Balance Sheet Date
there has not been:
(a) any material transaction by any Citizens Company
which was not undertaken in the ordinary course of business and in conformity
with past practice.
(b) any loss of a key employee or any damage, destruction
or loss, whether or not covered by insurance, which has had or which may be
reasonably expected to have in a Material Adverse Effect on any Citizens
Company.
(c) any acquisition or disposition by any Citizens
Company of any Asset having a fair
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market value, singularly or in the aggregate for each Citizens Company, in an
amount greater than Fifty Thousand Dollars ($50,000), except in the ordinary
course of business and in conformity with past practice.
(d) any mortgage, pledge or subjection to Lien, of any
kind on any of the Assets of any Citizens Company, except to secure extensions
of credit in the ordinary course of business and in conformity with past
practice.
(e) any amendment, modification or termination of any
Contract relating to any Citizens Company or to which any Citizens Company is a
party which would or may be reasonably expected to have a Material Adverse
Effect on Citizens.
(f) any increase in, or commitment to increase, the
compensation payable or to become payable to any officer, director, employee or
agent of any Citizens Company, or any bonus payment or similar arrangement made
to or with any of such officers, directors, employees or agents, other than
routine increases made in the ordinary course of business not exceeding the
greater of ten percent (10%) per annum or $5,000 for any of them individually.
(g) any incurring of, assumption of, or taking of, by any
Citizens Company, any Asset subject to any Liability, except for Liabilities
incurred or assumed or Assets taken subsequent to the Balance Sheet Date in the
ordinary course of business and in conformity with past practice.
(h) any material alteration in the manner of keeping the
books, accounts or Records of any Citizens Company, or in the accounting
policies or practices therein reflected.
(i) any release or discharge (or partial release or
discharge) of any obligation or Liability of any Person related to or arising
out of any loan made by any Citizens Company, except in the ordinary course of
business and in conformity with past practice.
4.8 TAX MATTERS.
(a) All Tax Returns required to be filed by or on behalf
of any of the Citizens Companies have been timely filed or requests for
extensions have been timely filed, granted, and have not expired for periods
ended on or before December 31, 1995, and on or before the date of the most
recent fiscal year end immediately preceding the Effective Time, and all Tax
Returns filed are complete and accurate. All Taxes shown on filed Tax Returns
have been paid. There is no audit examination, deficiency, or refund Litigation
with respect to any Taxes, except as fully reserved against in the Citizens
Financial Statements made available prior to the date of this Agreement. All
Taxes and other Liabilities due with respect to completed and settled
examinations or concluded Litigation have been paid. There are no Liens with
respect to Taxes upon any of the Assets of the Citizens Companies.
(b) None of the Citizens Companies has executed an
extension or waiver of any statute of limitations on the assessment or
collection of any Tax due (excluding such statutes that relate to years
currently under examination by the Internal Revenue Service or other applicable
taxing authorities) that is currently in effect.
(c) Adequate provision for any Taxes due or to become due
for any of the Citizens Companies for the period or periods through and
including the date of the respective Citizens Financial Statements has been
made and is reflected on such Citizens Financial Statements.
(d) Reserved.
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(e) Each of the Citizens Companies is in compliance with,
and its Records contain all information and documents (including properly
completed IRS Forms W-9) necessary to comply with, all applicable information
reporting and Tax withholding requirements under federal, state, and local tax
Laws, and such records identify with specificity all accounts subject to backup
withholding under Section 3406 of the IRC.
(f) Except as set forth in Section 4.8(f) of the Citizens
Disclosure Memorandum, none of the Citizens Companies has made any payments, is
obligated to make any payments, or is a party to any Contract that could
obligate it to make any payments that would be disallowed as a deduction under
Section 28OG or 162(m) of the Internal Revenue Code.
(g) There has not been an ownership change, as defined in
the IRC Section 382(g), of any of the Citizens Companies that occurred during
or after any Taxable Period in which the Companies incurred a net operating
loss that carries over to any Taxable Period ending after December 31, 1995.
(h) Except as set forth in Section 4.8(h) of the Citizens
Disclosure Memorandum, none of the Citizens Companies is a party to any tax
allocation or sharing agreement and none of the Citizens Companies has been a
member of an affiliated group filing a consolidated federal income tax return
(other than a group the common parent of which was Citizens) or has any
Liability for taxes of any Person (other than Citizens and its Subsidiaries)
under Treasury Regulation Section 1.1502-6 (or any similar provision of state,
local, or foreign law) as a transferee or successor or by Contract or
otherwise.
4.9 ALLOWANCE FOR POSSIBLE LOAN LOSSES. The allowance for possible
loan or credit losses, including any allowances or reserves for losses on ORE
and other collateral taken in satisfaction, or partial satisfaction of a debt
previously contracted, (the "Allowance") shown on the consolidated balance
sheets of Citizens included in the most recent Citizens Financial Statements
dated prior to the date of this Agreement was, and the Allowance shown on the
consolidated balance sheets of Citizens included in the Citizens Financial
Statements as of dates subsequent to the execution of this Agreement will be,
as of the dates thereof, in the reasonable opinion of management of Citizens
adequate (within the meaning of GAAP and applicable regulatory requirements or
guidelines) to provide for all known and reasonably anticipated losses relating
to or inherent in the loan and lease portfolios (including accrued interest
receivables and ORE reserves) of the Citizens Companies and other extensions of
credit (including letters of credit and commitments to make loans or extend
credit) by the Citizens Companies as of the dates thereof. Except as described
in Section 4.9 of the Citizens Disclosure Memorandum (by loan type, loan
number, classification and outstanding balance), no Citizens Company has any
Loan or other extension of credit which has been (or should have been in
management's reasonable opinion) classified as "Other Assets Especially
Mentioned," "Substandard," "Doubtful" or "Loss", or similar classifications,
that were not classified in any Citizens Company's most recent report of
examination. Section 4.9 of the Citizens Disclosure Memorandum also lists all
Loans or extensions of credit which are included on Citizens's or any Citizens
Company's "watch list." The net book value of any Citizens Company's assets
acquired through foreclosure in satisfaction of problem loans ("ORE") are
carried on the balance sheet of the Citizens Financial Statements at fair value
at the time of acquisition less estimated selling costs which approximates the
net realizable value of the ORE in accordance with the American Institute of
Certified Public Accountants' Statement of Position 92-3.
4.10 ASSETS. Except as disclosed or reserved against in the
Citizens Financial Statements made available prior to the date of this
Agreement, the Citizens Companies have good and marketable title, free and
clear of all Liens, to all of their respective Assets. All tangible Assets used
in the businesses of the Citizens Companies are in good condition, reasonable
wear and tear excepted, and are usable in the ordinary course of business
consistent with Citizens's past practices. All Assets which are material to
Citizens's business on a consolidated basis, held under leases or subleases by
any of the Citizens
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Companies, are held under valid Contracts enforceable in accordance with their
respective terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or other Laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceedings may be brought), and
each such Contract is in full force and effect. To the best of management's
knowledge, the Citizens Companies currently maintain insurance similar in
amounts, scope, and coverage to that maintained by other peer banking
organizations. None of the Citizens Companies has received notice from any
insurance carrier that (i) such insurance would 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 4.10 of the Citizens Disclosure Memorandum there are presently no
claims pending under any such policies of insurance and no notices have been
given by any Citizens Company under such policies.
4.11 INTELLECTUAL PROPERTY. All of the Intellectual Property rights
of the Citizens Companies are in full force and effect and constitute legal,
valid, and binding obligations of the respective parties thereto, and there
have not been, and, to the Knowledge of Citizens, there currently are not, any
Defaults thereunder by any Citizens Company. A Citizens Company owns or is the
valid licensee of all such Intellectual Property rights free and clear of all
Liens or claims of infringement. None of the Citizens Companies or, to the
Knowledge of Citizens, their respective predecessors, has misused the
Intellectual Property rights of others and none of the Intellectual Property
rights as used in the business conducted by any such Citizens Company infringes
upon or otherwise violates the rights of any Person, nor has any Person
asserted a claim of such infringement. Except as disclosed in Section 4.11 of
the Citizens Disclosure Memorandum, no Citizens Company is obligated to pay any
royalties to any Person with respect to any such Intellectual Property. Each
Citizens Company owns or has the valid right to use all of the Intellectual
Property rights which it is presently using, or in connection with performance
of any material Contract to which it is a party. No officer, director, or
employee of any Citizens Company is party to any Contract which requires such
officer, director or employee to assign any interest in any Intellectual
Property or keep confidential any trade secrets, proprietary data, customer
information, or other business information or except as disclosed in Section
4.11 of the Citizens Disclosure Memorandum, which restricts or prohibits such
officer, director, or employee from engaging in activities competitive with any
Person, including any Citizens Company.
4.12 ENVIRONMENTAL MATTERS. Except as set forth in Section 4.12 of
the Citizens Disclosure Memorandum:
(a) To the Knowledge of Citizens, each Citizens Company,
its Participation Facilities, and its Operating Properties are, and have been,
in compliance with an Environmental Laws, except for violations which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Citizens.
(b) To the Knowledge of Citizens, there is no Litigation
pending or threatened before any court, governmental agency, or authority or
other forum in which any Citizens Company or any of its Operating Properties or
Participation Facilities (or Citizens in respect of such Operating Property or
Participation Facility) has been or, with respect to threatened Litigation, may
be named as a defendant (i) for alleged noncompliance (including by any
predecessor) with any Environmental Law or (ii) relating to the release into
the environment of any Hazardous Material, whether or not occurring at, on,
under, adjacent to, or affecting (or potentially affecting) a site owned,
leased, or operated by any Citizens Company or any of its Operating Properties
or Participation Facilities, except for such Litigation pending or threatened
that is not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Citizens, nor is there any reasonable basis for any
Litigation of a type described in this sentence.
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(c) During the period of (i) any Citizens Company's
ownership or operation of any of their respective current properties, (ii) any
Citizens Company's participation in the management of any Participation
Facility, or (iii) any Citizens Company's holding of a security interest in an
Operating Property, to the Knowledge of Citizens, 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 Citizens. Prior
to the period of (i) any Citizens Company's ownership or operation of any of
their respective current properties, (ii) any Citizens Company's participation
in the management of any Participation Facility, or (iii) any Citizens
Company's holding of a security interest in an Operating Property, to the
Knowledge of Citizens, 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 Citizens.
4.13 COMPLIANCE WITH LAWS. Citizens is duly registered as a bank
holding company under the BHC Act. Each Citizens Company 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, and there has occurred no Default under
any such Permit. Except as set forth in Section 4.13 of the Citizens Disclosure
Memorandum, none of the Citizens Companies:
(a) is in violation of any Laws, Orders, or Permits
applicable to its business or employees conducting its business; and
(b) has received any notification or communication from
any agency or department of federal, state, or local government or any
Regulatory Authority or the staff thereof (i) asserting that any Citizens
Company is not in compliance with any of the Laws or Orders which such
governmental authority or Regulatory Authority enforces, (ii) threatening to
revoke any Permits, or (iii) requiring any Citizens Company to enter into or
consent to the issuance of a cease and desist order, formal agreement,
directive, 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.
4.14 LABOR RELATIONS. No Citizens Company is the subject of any
Litigation asserting that it or any other Citizens Company has committed an
unfair labor practice (within the meaning of the National Labor Relations Act
or comparable state law) or seeking to compel it or any other Citizens Company
to bargain with any labor organization as to wages or conditions of employment,
nor is there any strike or other labor dispute involving any Citizens Company,
pending or threatened, or to the Knowledge of Citizens, is there any activity
involving any Citizens Company's employees seeking to certify a collective
bargaining unit or engaging in any other organization activity.
4.15 EMPLOYEE BENEFIT PLANS.
(a) Citizens has disclosed in Section 4.15(a) of the
Citizens Disclosure Memorandum, and has delivered or made available to UPC
prior to the date of this Agreement copies in each case of, all pension,
retirement, profit-sharing, deferred compensation, stock option, employee stock
ownership, severance pay, vacation, bonus, or other incentive plan, all other
written employee programs, arrangements, or agreements, all medical, vision,
dental, or other health plans, all life insurance plans, and all other employee
benefit plans or fringe benefit plans, including "employee benefit plans* as
that term is defined in Section 3(3) of ERISA, currently adopted, maintained
by, sponsored in whole or in part by, or contributed to by any Citizens Company
or ERISA Affiliate thereof for the benefit of employees, retirees, dependents,
spouses, directors, independent contractors, or other beneficiaries and under
which employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries are
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eligible to participate (collectively, the "Citizens Benefit Plans"). Any of
the Citizens 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 "Citizens
ERISA Plan." Each Citizens 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 "Citizens Pension Plan." No Citizens Pension Plan is or has been a
multi employer plan within the meaning of Section 3(37) of ERISA.
(b) All Citizens 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 Citizens. Each
Citizens ERISA Plan which is intended to be qualified under Section 401(a) of
the Internal Revenue Code has received a favorable determination letter from
the Internal Revenue Service, and Citizens is not aware of any circumstances
likely to result in revocation of any such favorable determination letter. No
Citizens Company has engaged in a transaction with respect to any Citizens
Benefit Plan that, assuming the taxable period of such plan expired as of the
date hereof, would subject any Citizens Company to a Tax imposed by either
Section 4975 of the Internal Revenue Code or Section 502(i) of ERISA.
(c) No Citizens Pension Plan has any "unfunded current
liability," as that term is defined in Section 302(d)(8)(A) of ERISA, and the
fair market value of the assets of any such plan exceeds the plan's "benefit
liabilities," as that term is defined in Section 4001(a)(16) of ERISA, when
determined under actuarial factors that would apply if the plan terminated in
accordance with all applicable legal requirements. Since the date of the most
recent actuarial evaluation, there has been (i) no material change in the
financial position of any Citizens Pension Plan, (ii) no change in the
actuarial assumptions with respect to any Citizens Pension Plan, and (iii) no
increase in benefits under any Citizens 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 Citizens or
materially adversely affect the funding status of any such plan. Neither any
Citizens Pension Plan nor any "single-employer plan," within the meaning of
Section 4001(a)(15) of ERISA, currently or formerly maintained by any Citizens
Company, or the single-employer plan of any entity which is considered one
employer with Citizens under Section 4001 of ERISA or Section 414 of the
Internal Revenue Code or Section 302 of ERISA (whether or not waived) (an
"ERISA Affiliate") has an "accumulated funding deficiency" within the meaning
of Section 412 of the Internal Revenue Code or Section 302 of ERISA. No
Citizens Company has provided, or is required to provide, security to a
Citizens Pension Plan or to any single-employer plan of an ERISA Affiliate
pursuant to Section 401(a)(29) of the Internal Revenue Code.
(d) Within the six-year period preceding the Effective
Time, no Liability under Subtitle C or D of Title IV of ERISA has been or is
expected to be incurred by any Citizens Company with respect to any ongoing,
frozen, or terminated single-employer plan or the single-employer plan of any
ERISA Affiliate. No Citizens Company has incurred any withdrawal Liability with
respect to a multiemployer plan under Subtitle B of Title IV of ERISA
(regardless of whether based on contributions of an ERISA Affiliate). No notice
of a "reportable event," within the meaning of Section 4043 of ERISA for which
the 30-day reporting requirement has not been waived, has been required to be
filed for any Citizens Pension Plan or by any ERISA Affiliate within the
12-month period ending on the date hereof.
(e) Except as disclosed in Section 4.15(e) of the
Citizens Disclosure Memorandum, no Citizens Company has any Liability for
retiree health and life benefits under any of the Citizens Benefit Plans and
there are no restrictions on the rights of such Citizens Company to amend or
terminate any such retiree health or benefit Plan without incurring Liability
thereunder.
(f) Except as disclosed in Section 4.15(f) of the
Citizens Disclosure Memorandum, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (i)
result in any payment (including severance, unemployment compensation, golden
parachute, or otherwise) becoming due to any director or any employee of any
Citizens Company
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from any Citizens Company under any Citizens Benefit Plan or otherwise, (ii)
increase any benefits otherwise payable under any Citizens 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 Citizens Company and their respective
beneficiaries, other than entitlements accrued pursuant to funded retirement
plans subject to the provisions of Section 412 of the Internal Revenue Code or
Section 302 of ERISA, have been fully reflected on the Citizens Financial
Statements to the extent required by and in accordance with GAAP.
4.16 MATERIAL CONTRACTS. Except as disclosed in Section 4.16 of the
Citizens Disclosure Memorandum, none of the Citizens Companies, nor any of
their respective Assets, businesses, or operations, is a party to, or is bound
or affected by, or receives benefits under, (i) any employment, severance,
termination, consulting, or retirement Contract (ii) any Contract relating to
the borrowing of money by any Citizens Company or the guarantee by any Citizens
Company of any such obligation (other than Contracts evidencing deposit
liabilities, purchases of federal funds, fully-secured repurchase agreements,
and Federal Home Loan Bank advances of depository institution Subsidiaries,
trade payables, and Contracts relating to borrowings or guarantees made in the
ordinary course of business), (iii) any Contracts which prohibit or restrict
any Citizens Company from engaging in any business activities in any geographic
area, line of business, or otherwise in competition with any other Person, (iv)
any Contracts between or among Citizens Companies, (v) any exchange-traded or
over-the-counter swap, forward, future, option, cap, floor, or collar financial
Contract, or any other interest rate or foreign currency protection Contract
(not disclosed in the Citizens 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 Citizens SEC Report (whether
or not Citizens is subject to the filing requirements of the SEC) filed (or
which would have been filed if Citizens were subject to the SEC reporting
requirements) by Citizens with the SEC prior to the date of this Agreement
(together with all Contracts referred to in Sections 4.10 and 4.15(a) of this
Agreement, (the "Citizens Contracts"). With respect to each Citizens Contract:
(i) the Contract is in full force and effect; (ii) no Citizens Company is in
Default thereunder, (iii) no Citizens Company has repudiated or waived any
material provision of any such Contract; and (iv) no other party to any such
Contract is, to the Knowledge of Citizens, in Default in any respect or has
repudiated or waived any material provision thereunder. Except as set forth in
Section 4.16 of the Citizens Disclosure Memorandum all of the indebtedness of
any Citizens Company for money borrowed is prepayable at any time by such
Citizens Company without penalty or premium.
4.17 LEGAL PROCEEDINGS. There is no Litigation instituted or
pending, or, to the Knowledge of Citizens, threatened (or unasserted but
considered probable of assertion and which if asserted would have at least a
reasonable probability of an unfavorable outcome) against any Citizens Company,
or against any Asset, employee benefit plan, interest, or right of any of them
that is reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Citizens, nor are there any Orders of any Regulatory
Authorities, other governmental authorities, or arbitrators outstanding against
any Citizens Company. Section 4.17 of the Citizens Disclosure Memorandum
includes a report of all material Litigation as of the date of this Agreement
to which any Citizens Company is a party and which names a Citizens Company as
a defendant or cross-defendant.
4.18 REPORTS. Since January 1, 1991, or the date of organization if
later, each Citizens Company has timely filed all reports and statements,
together with any amendments required to be made with respect thereto, that it
was required to file with (i) the SEC, if applicable, including Forms 10-K,
Forms 10-Q, Forms 8-K, and proxy statements, (ii) other Regulatory Authorities,
and (iii) any applicable state
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securities or banking authorities (except, in the case of state securities
authorities, failures to file which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Citizens). As of
their respective dates, each of such reports and documents, including the
financial statements, exhibits, and schedules thereto, complied in all material
respects with all applicable Laws. As of its respective date, each such report
and document did not, in all material respects, contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements made therein light of the circumstances
under which they were made, not misleading.
4.19 STATEMENTS TRUE AND CORRECT. No statement, certificate,
instrument, or other writing furnished or to be furnished by any Citizens
Company to UPC pursuant to this Agreement or any other document, agreement, or
instrument referred to herein contains, or will contain, any untrue statement
of material fact or will omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. None of the information supplied or to be supplied by any
Citizens Company or any Affiliate thereof for inclusion in the Registration
Statement to be filed by UPC with the SEC will, when the Registration Statement
becomes effective, be false or misleading with respect to any material fact, or
omit to state any material fact necessary to make the statements therein not
misleading. None of the information supplied or to be supplied by any Citizens
Company or any Affiliate thereof for inclusion in the Proxy Statement to be
mailed to Citizens's shareholders in connection with the Shareholders' Meeting,
and any other documents to be filed by a Citizens Company or any Affiliate
thereof with the SEC or any other Regulatory Authority in connection with the
transactions contemplated hereby, will, at the respective time such documents
are filed, and with respect to the Proxy Statement, when first mailed to the
shareholders of Citizens, 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 any Citizens Company or any Affiliate thereof is responsible for
filing with any Regulatory Authority in connection with the transactions
contemplated hereby will comply as to form in all material respects with the
provisions of applicable Law.
4.20 ACCOUNTING, TAX AND REGULATORY MATTERS. No Citizens Company or
any Affiliate thereof has taken any action or has any Knowledge of any fact or
circumstance relating to Citizens 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 IRC, or (ii) materially impede or delay
receipt of any Consents of Regulatory Authorities referred to in Section 8.1(b)
of this Agreement or result in the imposition of a condition or restriction of
the type referred to in the last sentence of such section.
4.21 STATE TAKEOVER LAWS. Each Citizens Company has taken all
necessary action to exempt the transactions contemplated by this Agreement and
the Plan of Merger from, or if necessary challenge the validity or applicability
of any applicable "moratorium," "fair price," "business combination," "control
share," or other anti-takeover Laws (collectively, "Takeover Laws"), including
Sections 48-103-101 through 48-103-312 of the Tennessee Code.
4.22 CHARTER PROVISIONS. Each Citizens Company has taken all action
so that the entering into of this Agreement and the Plan of Merger and the
consummation of the Merger and the other transactions contemplated by this
Agreement and the Plan of Merger do not and will not result in the grant of any
rights to any Person under the Charter, Bylaws or other governing instruments
of any Citizens Company or restrict or impair the ability of UPC or any of its
Subsidiaries to vote, or otherwise to exercise the rights of a
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shareholder with respect to, shares of any Citizens Company that may be directly
or indirectly acquired or controlled by it.
4.23 CHARTER DOCUMENTS. Citizens has previously provided UPC true
and correct copies of the Articles of Incorporation and Bylaws of Citizens and
the Articles of Incorporation or Articles of Association or Articles of
Agreement and Bylaws of each Citizens Company, as amended to date, and each are
in full force and effect.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF UPC
Except as disclosed in the UPC Disclosure Memorandum, UPC hereby
represents and warrants to Citizens as follows:
5.1 ORGANIZATION, STANDING, AND POWER. UPC and Merger Subsidiary
are both corporations duly organized, validly existing, and in good standing
under the Laws of the State of Tennessee, and each has the corporate power and
authority to carry on its business as now conducted and to own, lease and
operate its material Assets. UPC is duly qualified or licensed to transact
business as a foreign corporation in good standing in the States of the United
States and foreign jurisdictions where the character of its Assets or the
nature or conduct of its business requires it to be so qualified or licensed,
except for such jurisdictions in which the failure to be so qualified or
licensed is not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on UPC.
5.2 AUTHORITY: NO BREACH BY AGREEMENT.
(a) UPC and Merger Subsidiary each 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 Plan of
Merger (as to Merger Subsidiary) and the consummation of the transactions
contemplated herein, including the Merger, have been duly and validly
authorized by all necessary corporate action in respect thereof on the part of
UPC and Merger Subsidiary including the approval of UPC in its capacity as the
sole shareholder of Merger Subsidiary. This Agreement represents a legal,
valid, and binding obligation of UPC, enforceable against UPC in accordance
with its terms (except in all cases as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or similar Laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding
may be brought).
(b) Neither the execution and delivery of this Agreement
by UPC, nor the consummation by UPC, and Merger Subsidiary of the transactions
contemplated hereby, nor compliance by UPC and Merger Subsidiary with any of
the provisions hereof will (i) conflict with or result in a breach of any
provision of any UPC Company's Charter (or similar governing instrument) or
Bylaws, or (ii) constitute or result in a Default under, or require any Consent
pursuant to, or result in the creation of any Lien on any Asset of any UPC
Company under any Contract or Permit of any UPC Company, or (iii) subject to
receipt of the requisite approvals referred to in Section 8.1(b) of this
Agreement, violate any Law or Order applicable to any UPC Company or any of
their respective material Assets.
(c) Other than in connection or compliance with the
provisions of the Securities Laws, applicable state corporate and the 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
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Guaranty Corporation with respect to any employee benefit plans, or under the
HSR Act, and other than Consents, filings, or notifications which, if not
obtained or made, are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on UPC, no notice to, filing with, or
Consent of, any public body or authority is necessary for the consummation by
UPC and Merger Subsidiary of the Merger and the other transactions contemplated
in this Agreement.
5.3 CAPITAL STOCK. The authorized capital stock of UPC consists of
(i) 100,000,000 shares of UPC Common Stock, of which 46,356,179 shares are
issued and outstanding as of September 30, 1996, and (ii) 10,000,000 shares of
UPC Preferred Stock, of which no shares of UPC Series A Preferred Stock, no
shares of UPC Series B Preferred Stock, and 3,380,688 shares of UPC Series E
Preferred Stock are issued and outstanding. All of the issued and outstanding
shares of UPC Capital Stock are, and all of the shares of UPC Common Stock to
be issued in exchange for shares of Citizens 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 Tennessee Code and the UPC Charter. None of the outstanding shares of
UPC Capital Stock has been, and none of the shares of UPC Common Stock to be
issued in exchange for shares of Citizens Common Stock upon consummation of the
Merger will be, issued in violation of any preemptive rights of the current or
past shareholders of UPC. UPC has reserved for issuance a sufficient number of
shares of UPC Common Stock for the purpose of issuing shares of UPC Common
Stock in accordance with the provisions of Sections 2.1(c) and 2.2 of this
Agreement.
5.4 SEC FILINGS: FINANCIAL STATEMENTS.
(a) UPC has filed and made available to Citizens all SEC
documents required to be filed by UPC since December 31, 1993. The UPC SEC
Reports (i) at the time filed, complied in all material respects with the
applicable requirements of the Securities Laws and (ii) did not, at the time
they were filed (or, if amended or superseded by a filing prior to the date of
this Agreement, then on the date of such filing) contain any untrue statement
of a material fact or omit to state a material fact required to be stated in
such UPC SEC Reports or necessary in order to make the statements in such UPC
SEC Reports, in light of the circumstances under which they were made, not
misleading. Except for UPC Subsidiaries that are registered as a broker, dealer
or investment advisor, no UPC Subsidiary is required to file any SEC Documents.
(b) Each of the UPC Financial Statements (including, in
each case, any related notes) contained in the UPC SEC Reports, including any
UPC SEC Reports filed after the date of this Agreement until the Effective
Time, complied as to form in all material respects with the applicable
published rules and regulations of the SEC with respect thereto, was prepared
in accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes to such financial statements
or, in the case of unaudited interim statements, as permitted by Form 10-Q of
the SEC), and fairly presented in all material respects the consolidated
financial position of UPC and its Subsidiaries as at the respective dates and
the consolidated results of its operations and cash flows for the periods
indicated, except that the unaudited interim financial statements were or are
subject to normal and recurring year-end adjustments which were not or are not
expected to be material in amount or effect.
5.5 ABSENCE OF UNDISCLOSED LIABILITIES. No UPC Company has any
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on UPC, except Liabilities which are
accrued or reserved against in the consolidated balance sheets of UPC as of
September 30, 1996, included in the UPC Financial Statements made available
prior to the date of this Agreement or reflected in the notes thereto. No UPC
Company has incurred or paid any liability since September 30, 1996, except for
such Liabilities incurred or paid (i) in the ordinary course of business
consistent with past business practice and which are not reasonably likely to
have, individually or in the
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aggregate, a Material Adverse Effect on UPC or (ii) in connection with the
transactions contemplated by this Agreement.
5.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since September 30,
1996, except as disclosed in the UPC Financial Statements delivered prior to
the date of this Agreement or contemplated by pending federal legislation
applicable to financial institutions generally, (i) there have been no events,
changes, or occurrences which have had, or are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on UPC, and (ii)
the UPC Companies have not taken any action, or failed to take any action,
prior to the date of this Agreement, which action or failure, if taken after
the date of this Agreement, would represent or result in a material breach or
violation of any of the covenants and agreements of UPC provided in Article 6
of this Agreement.
5.7 COMPLIANCE WITH LAWS. UPC is duly registered as a bank holding
company under the BHC Act and as a savings and loan holding company under the
HOLA. Each UPC Company has in effect all Permits necessary for it to own,
lease, or operate its material Assets and to carry on its business as now
conducted, and there has occurred no Default under any such Permit. No UPC
Company:
(a) is in violation of any Laws, Orders, or Permits
applicable to its business or employees conducting its business; and
(b) has received any notification or communication from
any agency or department of federal, state, or local government or any
Regulatory Authority or the staff thereof (i) asserting that any UPC Company is
not in compliance with any of the Laws or Orders which such governmental
authority or Regulatory Authority enforces, (ii) threatening to revoke any
Permits, or (iii) requiring any UPC Company to enter into or consent to the
issuance of a cease and desist order, formal agreement, directive, commitment
or memorandum of understanding, or to adopt any Board resolution or similar
undertaking, which restricts materially the conduct of its business, or in any
manner relates to its capital adequacy, its credit or reserve policies, its
management, or the payment of dividends.
5.8 LEGAL PROCEEDINGS. There is no Litigation instituted or
pending, or, to the Knowledge of UPC, threatened (or unasserted but considered
probable of assertion and which if asserted would have at least a reasonable
probability of an unfavorable outcome) against any UPC Company, or against any
Asset, interest, or right of any of them, that is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on UPC.
5.9 REPORTS. Since January 1, 1993, UPC has filed all reports and
statements, together with any amendments required to be made with respect
thereto, that it was required to file with (i) the SEC, including, but not
limited to, Forms 10-K, Forms 10-Q, Forms 8-K, and proxy statements, (ii) other
Regulatory Authorities, and (iii) any applicable state securities or banking
authorities (except, in the case of state securities authorities, failures to
file which are not reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on UPC). As of their respective dates, each of such
reports and documents, including the financial statements, exhibits, and
schedules thereto, complied in all material respects with all applicable Laws.
As of its respective date, each such report and document did not, in all
material respects, contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
5.10 STATEMENTS TRUE AND CORRECT. No statement, certificate,
instrument or other writing furnished or to be furnished by any UPC Company or
any Affiliate thereof to Citizens pursuant to this Agreement or any other
document, agreement, or instrument referred to herein contains or will contain
any untrue statement of material fact or will omit to state a material fact
necessary to make the statements
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therein, in light of the circumstances under which they were made, not
misleading. None of the information supplied or to be supplied by any UPC
Company or any Affiliate thereof for inclusion in the Registration Statement to
be filed by UPC with the SEC, will, when the Registration Statement becomes
effective, be false or misleading with respect to any material fact, or omit to
state any material fact necessary to make the statements therein not
misleading. None of the information supplied or to be supplied by any UPC
Company or any Affiliate thereof for inclusion in the Proxy Statement to be
mailed to Citizens's Shareholders in connection with the Shareholders'
Meetings, and any other documents to be filed by any UPC Company or any
Affiliate thereof with the SEC or any other Regulatory Authority in connection
with the transactions contemplated hereby, will, at the respective time such
documents are filed, and with respect to the Proxy Statement, when first mailed
to the shareholders of Citizens, 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' Meetings, be false or
misleading with respect to any material fact, or omit to state any material
fact necessary to correct any statement in any earlier communication with
respect to the solicitation of any proxy for the Shareholders' Meetings. All
documents that any UPC Company or any Affiliate thereof is responsible for
filing with any Regulatory Authority in connection with the transactions
contemplated hereby will comply as to form in all material respects with the
provisions of applicable Law.
5.11 ACCOUNTING, TAX AND REGULATORY MATTERS. No UPC Company or any
Affiliate thereof has taken any action or has any Knowledge of any fact or
circumstance relating to UPC or Merger Subsidiary 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 8.1(b) of this Agreement or result in the imposition of
a condition or restriction of the type referred to in the last sentence of such
Section.
ARTICLE 6
CONDUCT OF BUSINESS PENDING CONSUMMATION
6.1 AFFIRMATIVE COVENANTS OF CITIZENS. Unless the prior written
consent of UPC shall have been obtained, and except as otherwise expressly
contemplated herein, Citizens shall, and shall cause each of its Subsidiaries
to: (i) operate its business only in the usual, regular, and ordinary course
(which shall include matters of the type set forth in Section 6.1 of the
Citizens Disclosure Memorandum), (ii) preserve intact its business organization
and Assets and maintain its rights and franchises, and (iii) take no action
which would (a) materially adversely affect the ability of any Party to obtain
any Consents required for the transactions contemplated hereby without
imposition of a condition or restriction of the type referred to in the last
sentence of Section 8.1(b) of this Agreement or prevent the transactions
contemplated hereby, including the Merger, from qualifying for
pooling-of-interests accounting treatment or as a reorganization within the
meaning of Section 368(a) of the IRC or (b) materially adversely affect the
ability of any Party to perform its covenants and agreements under this
Agreement.
6.2 NEGATIVE COVENANTS OF CITIZENS. 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, Citizens covenants
and agrees that it will not do or agree or commit to do, or permit any of its
Subsidiaries to do or agree or commit to do, any of the following without the
prior written consent of the chief executive officer, president, or chief
financial officer of UPC, which consent shall not be unreasonably withheld:
(a) amend the Charter, Bylaws, or other governing
instruments of any Citizens Company; or
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(b) incur any additional debt obligation or other
obligation for borrowed money (other than indebtedness of a Citizens Company to
another Citizens Company) in excess of an aggregate of $100,000 (for the
Citizens Companies on a consolidated basis) except in the ordinary course of
the business of Citizens Subsidiaries consistent with past practices (which
shall include, for Citizens Subsidiaries that are depository institutions,
creation of deposit liabilities, purchases of federal funds, advances from the
Federal Reserve Bank or Federal Home Loan Bank, and entry into repurchase
agreements fully secured by U.S. government or agency securities), or impose,
or suffer the imposition on any Asset of any Citizens Company of any Lien or
permit any such Lien to exist (other than in connection with deposits,
repurchase agreements, bankers acceptances, "treasury tax and loan" accounts
established in the ordinary course of business, the satisfaction of legal
requirements in the exercise of trust powers, and Liens in effect as of the
date hereof that are disclosed in the Citizens Disclosure Memorandum); or
(c) repurchase, redeem, or otherwise acquire or exchange
(other than exchanges in the ordinary course under employee benefit plans),
directly or indirectly, any shares, or any securities convertible into any
shares, of the capital stock of any Citizens Company, or declare or pay any
dividend or make any other distribution in respect of Citizens's capital stock,
with the exception of its regular annual cash dividend of Twelve Dollars per
share, the declaration date of which shall be consistent with past practices;
or
(d) except pursuant to this 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 Citizens Common Stock or any other
capital stock of any Citizens Company, or any stock appreciation rights, or any
option, warrant, conversion, or other Right to acquire any such stock, or any
security convertible into any such stock or any stock equivalent type rights;
or
(e) adjust, split, combine or reclassify any capital
stock of any Citizens Company or issue or authorize the issuance of any other
securities in respect of or in substitution for shares of Citizens Common
Stock, or sell, lease, mortgage or otherwise dispose of or otherwise encumber
any shares of capital stock of any Citizens Subsidiary, (unless any such shares
of stock are sold or otherwise transferred to another Citizens Company) or any
Asset, other than in the ordinary course of business for reasonable and
adequate consideration; or
(f) except for purchases of U.S. Treasury securities or
U.S. Government agency securities, which in either case have maturities of
three years or less, 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
Citizens Subsidiary, or otherwise acquire direct or indirect control over any
Person, other than in connection with (i) foreclosures in the ordinary course
of business, (ii) acquisitions of control by a depository institution
Subsidiary in its fiduciary capacity, or (iii) the creation of new wholly owned
Subsidiaries organized to conduct or continue activities otherwise permitted by
this Agreement; or
(g) grant any increase in compensation or benefits to the
employees or officers of any Citizens Company, except in accordance with past
practice disclosed in Section 6.2(g) of the Citizens 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 6.2(g) of the Citizens Disclosure
Memorandum; and enter into or amend any severance agreements with officers of
any Citizens Company; grant any material increase in fees or other increases in
compensation or other benefits to directors of any Citizens Company except in
accordance with past practice disclosed in Section 6.2(g) of the Citizens
Disclosure Memorandum; or voluntarily accelerate the vesting of any stock
options or other stock-based compensation or employee benefits (other than the
acceleration of vesting which occurs under a benefit plan upon a change of
control of Citizens); or
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(h) enter into or amend any employment Contract between
any Citizens Company and any Person (unless such amendment is required by Law)
that the Citizens Company does not have the unconditional right to terminate
without Liability (other than Liability for services already rendered), at any
time on or after the Effective Time; or
(i) adopt any new employee benefit plan of any Citizens
Company or terminate or withdraw from, or make any material change in or to,
any existing employee benefit plans of any Citizens Company other than any such
change that is required by Law or that, in the opinion of counsel is necessary
or advisable to maintain the tax qualified status of any such plan, or make any
distributions from such employee benefit plans, except as required by Law, the
terms of such plans or consistent with past practice; provided, however,
Citizens or any Citizens Company shall terminate the deferred compensation
arrangement with Frank Bass and Peggy F. Campbell for $25,000 and $15,000,
respectively, each to be paid in a lump sum as soon as reasonably practical
after the Effective Time, but only against receipt of a full and complete
release from Mr. Bass and Ms. Campbell of all liability any Citizens Company
and/or any UPC Company may have with respect to each such deferred compensation
arrangements; or
(j) make any significant change in any Tax or accounting
methods or systems of internal accounting controls, except as may be
appropriate to conform to changes in Tax Laws or regulatory accounting
requirements or GAAP; or
(k) commence any Litigation other than in accordance with
past practice, settle any Litigation involving any Liability of any Citizens
Company for material money damages or restrictions upon the operations of any
Citizens Company; or
(l) enter into, modify, amend, or terminate any material
Contract (excluding any loan Contract) or waive, release, compromise, or assign
any material rights or claims.
6.3 COVENANTS OF UPC. From the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, UPC
covenants and agrees that it shall (i) continue to conduct its business and the
business of its Subsidiaries in a manner designed in its reasonable judgment to
enhance the long-term value of the UPC Common Stock and the business prospects
of the UPC Companies, and (ii) take no action which would (a) materially
adversely affect the ability of any Party to obtain any Consents required for
the transactions contemplated hereby without imposition of a condition or
restriction of the type referred to in the last sentence of Section 8.1(b) of
this Agreement or prevent the transactions contemplated hereby, including the
Merger, from qualifying for pooling-of-interests accounting treatment or as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, or (b) materially adversely affect the ability of any Party to perform
its covenants and agreements under this Agreement, provided, that the foregoing
shall not prevent any UPC Company from acquiring any other Assets or businesses
or from discontinuing or disposing of any of its Assets or business if such
action is, in the judgment of UPC, desirable in the conduct of the business of
UPC and its Subsidiaries and would not, in the judgment of UPC, likely delay
the Effective Time to a date subsequent to the date set forth in Section 9.1(e)
of this Agreement.
6.4 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.
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6.5 REPORTS. Each Party and its Subsidiaries shall file all
reports required to be filed by it with Regulatory Authorities between the date
of this Agreement and the Effective Time and shall deliver to the other Party
copies of all such reports promptly after the same are filed. If financial
statements are contained in any such reports filed with any Regulatory
Authority pursuant to the Securities Laws, 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 or regulatory accounting (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
any Regulatory Authorities pursuant to the Securities Laws 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 7
ADDITIONAL AGREEMENTS
7.1 REGISTRATION STATEMENT: PROXY STATEMENT: SHAREHOLDER
APPROVALS. UPC shall file the Registration Statement with the SEC, and shall
use its reasonable efforts to cause the Registration Statement to become
effective under the 1933 Act and take any action required to be taken under the
applicable state Blue Sky or securities Laws in connection with the issuance of
the shares of UPC Common Stock upon consummation of the Merger. Citizens shall
furnish all information concerning it and the holders of its capital stock as
UPC may reasonably request in connection with such action. Citizens shall call
a Shareholders' Meeting, to be held as soon as reasonably practicable after the
Registration Statement is declared effective by the SEC, for the purpose of
voting upon approval of this Agreement and the Plan of Merger and such other
related matters as it deems appropriate. In connection with the Shareholders'
Meeting, (i) UPC and Citizens shall prepare and file with the SEC a Proxy
Statement and mail such Proxy Statement to the shareholders of Citizens, (ii)
the Parties shall furnish to each other all information concerning them that
they may reasonably request in connection with such Proxy Statement, (iii) the
Board of Directors of Citizens shall recommend (subject to compliance with
their fiduciary duties as advised by counsel) to their shareholders the
approval of the matters submitted for approval, and (iv) the Board of Directors
and officers of Citizens shall (subject to compliance with their fiduciary
duties as advised by counsel) use their reasonable efforts to obtain such
shareholders' approvals.
7.2 EXCHANGE LISTING. UPC shall use its reasonable efforts to
list, prior to the Effective Time, on the NYSE, subject to official notice of
issuance, the shares of UPC Common Stock to be issued to the holders of
Citizens Common Stock or Citizens Stock Options pursuant to the Merger, and UPC
shall give all notices and make all filings with the NYSE required in
connection with the transactions contemplated herein.
7.3 APPLICATIONS. UPC shall prepare and file, and Citizens shall
cooperate in the preparation and, where appropriate, filing of applications
with all Regulatory Authorities having jurisdiction over the transactions
contemplated by this Agreement seeking the requisite Consents necessary to
consummate the transactions contemplated by this Agreement. At least two
business days prior to filing UPC shall use its reasonable best efforts to
provide Citizens 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.
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7.4 FILINGS WITH STATE OFFICES. Upon the terms and subject to the
conditions of this Agreement, UPC and Citizens shall execute and file the
Articles of Merger with the Secretary of State of the State of Tennessee in
connection with the Closing.
7.5 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 8 of this Agreement; provided, however, that nothing herein shall
preclude either Party from exercising its rights under this 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 nothing in this Section 7.5 shall be construed to obligate UPC or
Merger Subsidiary to take any action to meet any condition required for it to
obtain any Consent if UPC shall, in its sole discretion, deem such condition to
be unreasonable or to constitute a significant impediment upon UPC's ability to
carry on its business or acquisition programs to require UPC to increase its
capital ratios to amounts in excess of the Federal Reserves minimum capital
ratio guidelines which may from time to time be in effect.
7.6 INVESTIGATION AND CONFIDENTIALITY.
(a) Prior to the Effective Time, each Party shall keep
the other Party advised of all material developments relevant to its business
and to consummation of the Merger and shall permit the other Party to make or
cause to be made such investigation of the business and properties of it and
its Subsidiaries and of their respective financial and legal conditions as the
other Party reasonably requests, provided that such investigation shall be
reasonably related to the transactions contemplated hereby and shall not
interfere unnecessarily with normal operations. No investigation by a Party
shall affect the representations and warranties of the other Party.
(b) Each Party shall, and shall cause its advisers and
agents to, maintain the confidentiality of all confidential information
furnished to it by the other Party concerning its and its Subsidiaries'
businesses, operations, and financial positions and shall not use such
information for any purpose except in furtherance of the transactions
contemplated by this Agreement. If this Agreement is terminated prior to the
Effective Time, each Party shall promptly return or certify the destruction of
all documents and copies thereof, and all work papers containing confidential
information received from the other Party.
(c) Citizens shall use its reasonable efforts to exercise
its rights under confidentiality agreements entered into with Persons which are
considering an Acquisition Proposal with Citizens to preserve the
confidentiality of the information relating to Citizens provided to such
Persons and their Affiliates and Representatives.
7.7 PRESS RELEASES. Prior to the Effective Time, Citizens and UPC
shall consult with each other as to the form and substance of any press release
or other public disclosure materially related to this Agreement or any other
transaction contemplated hereby; provided, that nothing in this Section 7.7
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.
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7.8 CERTAIN ACTIONS.
(a) Except with respect to this Agreement and the Plan of
Merger and the transactions contemplated hereby and thereby, after the date of
this Agreement, no Citizens Company nor any Affiliate thereof nor any
Representatives thereof retained by any Citizens Company shall directly or
indirectly solicit or knowingly encourage any Acquisition Proposal by any
Person. Except to the extent necessary to comply with the fiduciary duties of
Citizens's Board of Directors as advised by counsel, no Citizens Company and no
Affiliate or Representative of Citizens or any Citizens Company shall furnish
any non-public information that it is not legally obligated to furnish,
negotiate with respect to, or enter into, or agree to enter into any Contract
with respect to, any Acquisition Proposal, but Citizens 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. Citizens shall promptly notify UPC orally
and in writing in the event that it receives any inquiry or proposal relating
to any such transaction. Citizens 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.
(b) As a condition of and as an inducement to UPC's
entering this Agreement, Citizens covenants, acknowledges, and agrees that it
shall be a specific, absolute, and unconditionally binding condition precedent
to Citizens entering into a letter of intent, agreement in principle, or
definitive agreement (whether or not considered binding, non-binding,
conditional or unconditional) with any third-party with respect to an
Acquisition Proposal, or supporting or indicating an intent to support an
Acquisition Proposal, other than this Agreement and the transactions
contemplated in this Agreement regardless of whether Citizens has otherwise
complied with the provisions of Section 7.8(a) hereof, that Citizens or such
third-party which is a party of the Acquisition Proposal shall have paid UPC
the sum of Seven Hundred Fifty Thousand Dollars ($750,000), which sum
represents the (i) direct costs and expenses (including, but not limited to,
fees and expenses incurred by UPC's financial or other consultants, printing
costs, investment bankers, accountants, and counsel) incurred by or on behalf
of UPC in negotiating and undertaking to carry out the transactions
contemplated by this Agreement; and (ii) indirect costs and expenses of UPC in
connection with the transactions contemplated by this Agreement, including
UPC's management time devoted to negotiation and preparation for the
transactions contemplated by this Agreement and (iii) UPC's loss as a result of
the transactions contemplated by this Agreement not being consummated.
Accordingly, Citizens hereby stipulates and covenants that prior to Citizens
entering into a letter of intent, agreement in principle, or definitive
agreement (whether binding, non-binding, conditional or unconditional) with any
third-party with respect to an Acquisition Proposal or supporting or indicating
an intent to support an Acquisition Proposal, either Citizens or such
third-party shall have paid to UPC the amount set forth above in immediately
available funds to satisfy the specific absolute, and unconditionally binding
condition precedent imposed by this Section 7.8. Notwithstanding anything to
the contrary in this Section 7.8(b) in the event such Acquisition Proposal
should be the result of a hostile take over of Citizens, any sums due UPC
hereunder shall be paid only at the closing of the transactions set forth in
such Acquisition Proposal. UPC acknowledges that under no circumstances shall
any officer or director of Citizens (unless such officer or director shall have
an interest in a potential acquiring party in any Acquisition Proposal) be held
personally liable to UPC for any amount of the foregoing payment. On payment of
such amount to UPC, UPC shall have no cause of action or claim (either in law
or equity) whatsoever against Citizens, or any officer or director of Citizens,
with respect to or in connection with such Acquisition Proposal, this Agreement
or the Plan of Merger.
(c) The requirements, conditions, and obligations imposed
by this Section 7.8 shall continue in full force and effect from the date of
this Agreement until September 30, 1997, unless and until the earlier of any of
the following events shall occur, in which event Citizens shall not be
obligated to pay the amount required by this Section 7.8 as a condition
precedent to such transaction.
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This Agreement shall have been terminated by (i) mutually by the
Parties pursuant to Section 9.1(a) of this Agreement; (ii) by Citizens pursuant
to Section 9.1(b) of this Agreement; (iii) Reserved; (iv) by either Party
pursuant to Section 9.1(d)(i) of this Agreement; (v) by Citizens pursuant to
Section 9.1(f) of this Agreement, other than due to the failure to satisfy
Section 8.1(a); or (vi) by Citizens pursuant to Section 9.1(c) of this
Agreement, but in such event only on the basis of (a) material inaccuracy
(without waiver thereof) of representations and warranties of UPC as
contemplated by the provisions of Section 8.3(a) of this Agreement; (b)
noncompliance by UPC with its obligations as required by the provisions of
Section 8.3(b) of this Agreement; or (c) the failure of UPC to deliver all
certificates as required by the provisions of Section 8.3(c) of this Agreement,
or to satisfy the conditions set forth in Section 8.3(d) of this Agreement.
7.9 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.
7.10 STATE TAKEOVER LAWS. Each Citizens Company shall take all
necessary steps to exempt the transactions contemplated by this Agreement from,
or if necessary challenge the validity or applicability of any applicable,
Takeover Law.
7.11 CHARTER PROVISIONS. Each Citizens Company shall take all
necessary action to ensure that the entering into of this Agreement and the
Plan of Merger and the consummation of the Merger and the other transactions
contemplated hereby and thereby do not and will not result in the grant of any
rights to any Person under the Charter, Bylaws, or other governing instruments
of any Citizens Company or restrict or impair the ability of UPC or any of its
Subsidiaries to vote, or to exercise the rights of a shareholder with respect
to, shares of any Citizens Company that may be directly or indirectly acquired
or controlled by it.
7.12 AGREEMENT OF AFFILIATES. Citizens has disclosed in Section
7.12 of the Citizens Disclosure Memorandum all Persons whom it reasonably
believes is an "affiliate" of Citizens for purposes of Rule 145 under the 1933
Act. Citizens shall use its reasonable efforts to cause each such Person to
deliver to UPC not later than 30 days prior to the Effective Time, a written
agreement, substantially in the form of Exhibit 3, providing that such Person
will not sell, pledge, transfer, or otherwise dispose of the shares of Citizens
Common Stock held by such Person except as contemplated by such agreement or by
this Agreement and will not sell, pledge, transfer, or otherwise dispose of the
shares of UPC Common Stock to be received by such Person upon consummation of
the Merger except in compliance with applicable provisions of the 1933 Act and
the rules and regulations thereunder and until such time as financial results
covering at least 30 days of combined operations of UPC and Citizens have been
published within the meaning of Section 201.01 of the SEC's Codification of
Financial Reporting Policies. If the Merger will qualify for
pooling-of-interests accounting treatment, shares of UPC Common Stock issued to
such affiliates of Citizens in exchange for shares of Citizens Common Stock
shall not be transferable until such time as financial results covering at
least 30 days of combined operations of UPC and Citizens 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 7.12 (and UPC shall be entitled
to place restrictive legends upon certificates for shares of UPC Common Stock
issued to affiliates of Citizens pursuant to this Agreement to enforce the
provisions of this Section 7.12). UPC shall not be required to maintain the
effectiveness of the Registration Statement under the 1933 Act for the purposes
of resale of UPC Common Stock by such affiliates.
7.13 EMPLOYEE BENEFITS AND CONTRACTS. Following the Effective Time,
UPC shall provide to officers and employees of the Citizens Companies employee
benefits under employee benefit and welfare
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plans, on terms and conditions which when taken as a whole are substantially
similar to those currently provided by the UPC Companies to their similarly
situated officers and employees. To the extent permitted by Citizens' profit
sharing plan and applicable law, as soon as reasonably practical after
consummation of the Merger Citizens' profit sharing plan will be terminated and
distributions made in accordance therewith. For purposes of participation, but
not vesting or other benefit accrual, under any such UPC employee benefit
plans, the service of the employees of the Citizens Companies prior to the
Effective Time shall be treated as service with a UPC Company participating in
such employee benefit plan. Nothing herein shall be deemed to have reduced,
contracted, enlarged, undertaken, authorized, approved or otherwise to have
affected whatever contractual rights the officers or employees of Citizens may
have under existing documentation other than as expressly stated herein, and
nothing herein shall be deemed to be an employment contract, agreement or
understanding, or offer of employment by UPC or any of its direct or indirect
Subsidiaries after the Effective Time.
ARTICLE 8
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
8.1 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
10.6 of this Agreement:
(a) SHAREHOLDER APPROVALS. The shareholders of Citizens
shall have approved this Agreement and the Plan of Merger, and the consummation
of the transactions contemplated hereby and thereby, including the Merger, as
and to the extent required by Law, by the provisions of any governing
instruments.
(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, which in the reasonable judgment of the Board of
Directors of UPC would so materially adversely impact the financial or economic
benefits of the transactions contemplated by this Agreement that, had such
condition or requirement been known, UPC would not, in its reasonable judgment,
have entered into this Agreement.
(c) CONSENTS. Each Party shall have obtained any and all
Consents required for consummation of the Merger (other than those referred to
in Sections 8.1(b) and 8.1(c) of this Agreement) or for the preventing of any
Default under any Contract or Permit of such Party which, if not obtained or
made, is reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on such Party.
(d) LEGAL PROCEEDINGS. No court or governmental or
regulatory authority of competent jurisdiction shall have enacted, issued,
promulgated, enforced, or entered any Law or Order (whether temporary,
preliminary, or permanent) or taken any other action which prohibits,
restricts, or makes illegal consummation of the transactions contemplated by
this Agreement and the Plan of Merger.
(e) REGISTRATION STATEMENT. The Registration Statement
shall be effective under the 1933 Act, no stop orders suspending the
effectiveness of the Registration Statement shall have been issued, no action,
suit, proceeding, or investigation by the SEC to the effectiveness thereof
shall have been initiated and be continuing, and all necessary approvals under
state securities Laws or the 1933 Act or
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1934 Act relating to the issuance or trading of the shares of UPC Common Stock
issuable pursuant to the Merger shall have been received.
(f) EXCHANGE LISTING. The shares of UPC Common Stock
issuable pursuant to the Merger shall have been approved for listing on the
NYSE, subject to official notice of issuance.
(g) POOLING LETTERS. Each of the Parties shall have
received copies of the letters, dated as of the date of filing of the
Registration Statement with the SEC and as of the Effective Time, addressed to
UPC, from Price Waterhouse LLP to the effect that the Merger will qualify for
pooling-of-interests accounting treatment.
(h) TAX MATTERS. Each Party shall have received a written
opinion of counsel from Wyatt, Tarrant & Combs in form reasonably satisfactory
to such Parties (the "Tax Opinion"), to the effect that (i) the Merger would
constitute a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code, (ii) the exchange in the Merger of Citizens Common Stock
for UPC Common Stock will not give rise to gain or loss to the shareholders of
Citizens with respect to such exchange (except to the extent of any cash
received), and (ii) none of Citizens or UPC will recognize gain or loss as a
consequence of the Merger (except for the inclusion in income of the amount of
the bad-debt reserve maintained by Citizens and any other amounts resulting
from any required change in accounting methods and any income and deferred gain
recognized pursuant to Treasury regulations issued under Section 1502 of the
Internal Revenue Code). In rendering such Tax Opinion, such counsel shall be
entitled to rely upon representations of officers of Citizens and UPC
reasonably satisfactory in form and substance to such counsel.
8.2 CONDITIONS TO OBLIGATIONS OF UPC. The obligations of UPC to
perform this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following
conditions, unless waived by UPC pursuant to Section 10.6(a) of this Agreement:
(a) REPRESENTATIONS AND WARRANTIES. For purposes of this
Section 8.2(a), the accuracy of the representations and warranties of Citizens
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
Citizens set forth in Section 4.3 of this Agreement shall be true and correct.
The representations and warranties of Citizens set forth in Sections 4.20, 4.21,
and 4.22 of this Agreement shall be true and correct in all material respects.
There shall not exist inaccuracies in the representations and warranties of
Citizens set forth in this Agreement (including the representations and
warranties set forth in Sections 4.3, 4.20, 4.21, and 4.22) such that the
aggregate effect of such inaccuracies has, or is reasonably likely to have, a
Material Adverse Effect on Citizens.
(b) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all
of the agreements and covenants of Citizens 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, including the obligation in Section 6.2(i) of this Agreement
to terminate the deferred compensation arrangements with Mr. Bass and Ms.
Campbell.
(c) CERTIFICATES. Citizens shall have delivered to UPC
(i) a certificate, dated as of the Effective Time and signed on its behalf by
its President and the Cashier of the Citizens Bank Subsidiary, to the effect
that the conditions of its obligations set forth in Section 8.2(a) and 8.2(b)
of this Agreement have been satisfied, and (ii) certified copies of resolutions
duly adopted by Citizens's Board of Directors and shareholders evidencing the
taking of all corporate action necessary to authorize the execution, delivery,
and performance of this Agreement and the Plan of Merger, and the consummation
of the
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transactions contemplated hereby and thereby, all in such reasonable detail as
UPC and its counsel shall request.
(d) AFFILIATES AGREEMENTS. UPC shall have received from
each affiliate of Citizens the affiliates letter referred to in Section 7.12 of
this Agreement, to the extent necessary to assure in the reasonable judgment of
UPC that the transactions contemplated hereby will qualify for
pooling-of-interests accounting treatment.
(e) LEGAL OPINION. Citizens shall have delivered to UPC
an opinion of counsel, dated as of the Closing Date, addressed to and in form
and substance satisfactory to UPC, to the effect that:
(i) Citizens is a Tennessee corporation duly
organized, validly existing, and in good standing under the laws of the State
of Tennessee;
(ii) This Agreement and the Plan of Merger have
each been duly and validly authorized, executed and delivered on behalf of
Citizens by a duly authorized officer or representative of Citizens, and
(assuming this Agreement is a binding obligation of UPC) constitute a valid and
binding obligation of Citizens enforceable in accordance with its terms, subject
as to enforceability to applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally and subject to the application of equitable principles and judicial
discretion;
(iii) The execution, delivery and performance of
this Agreement and the Plan of Merger, and the consummation of the transactions
contemplated herein and therein, including the Merger, have been duly and
validly authorized by all necessary corporate and shareholder action in respect
thereof on the part of Citizens.
(F) MAINTENANCE OF CERTAIN COVENANTS, ETC. At the time of
Closing, (i) the total deposits of Citizens shall be not less than $50,000,000;
(ii) the total consolidated stockholders' equity of Citizens shall have been
not less than its level at October 10, 1996, and shall have increased since
that date through normal earnings growth, except for expenses as contemplated
by Sections 10.2 and 10.3 of this Agreement; (iii) the tangible equity capital
of Citizens shall be not less than its reported level as of the Balance Sheet
Date, and shall have increased since that time through earnings growth, except
for expenses as contemplated by Sections 10.2 and 10.3 of this Agreement; (iv)
Citizens shall own, free and clear of any Liens, all of the outstanding capital
stock of Citizens Bank Subsidiary; (vi) from and after the Balance Sheet Date,
there shall have been no extraordinary sale of assets, nor any material
investment portfolio restructuring by any Citizens Company; and (vii) Mr. Bass
and Ms. Campbell shall have delivered the releases contemplated in Section
6.2(i) of this Agreement. The financial criteria and calculations set forth
above shall be determined in accordance with GAAP assuming that Citizens and
each other Citizens Company shall have been operated consistently in the normal
course of their respective businesses; provided, however, that the effects of
any balance sheet expansion through abnormal, unusual, nonrecurring or
out-of-the-ordinary borrowings or by the realization of extraordinary or
nonrecurring gains otherwise than in the ordinary course of business or other
income from the disposition of assets or liabilities or through similar
transactions shall be eliminated from the calculations;
(G) NON-COMPETE AGREEMENTS. Frank T. Bass shall have
entered into, and Citizens shall have used its best efforts to cause each other
director of Citizens and each chairman of the board and each president or chief
executive officer of each Citizens Bank Subsidiary to enter into, a non-compete
agreement with UPC, Merger Subsidiary and Citizens Bank Subsidiary
substantially in the form of UPC's standard form noncompete agreement, a copy
which is annexed hereto as Exhibit 3.
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8.3 CONDITIONS TO OBLIGATIONS OF CITIZENS. The obligations of
Citizens to perform this Agreement and the Plan of Merger and consummate the
Merger and the other transactions contemplated hereby are subject to the
satisfaction of the following conditions, unless waived by Citizens pursuant to
Section 10.6(b) of this Agreement:
(a) REPRESENTATIONS AND WARRANTIES. For purposes of this
Section 8.3(a), the accuracy of the representations and warranties of UPC set
forth in this Agreement shall be assessed as of the date of this Agreement and
as of the Effective Time with the same effect as though all such representations
and warranties had been made on and as of the Effective Time (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date). The representations and warranties of UPC set forth
in Section 5.3 of this Agreement shall be true and correct (except for
inaccuracies which are de minimus in amount). The representations and warranties
of UPC set forth in Section 5.11 of this Agreement shall be true and correct in
all material respects. There shall not exist inaccuracies in the representations
and warranties of UPC set forth in this Agreement (including the representations
and warranties set forth in Sections 5.3 and 5.11) such that the aggregate
effect of such inaccuracies has, or is reasonably likely to have, a Material
Adverse Effect on UPC.
(b) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all
of the agreements and covenants of UPC to be performed and complied with
pursuant to this Agreement and the other agreements contemplated hereby prior
to the Effective Time shall have been duly performed and complied with in all
material respects.
(c) CERTIFICATES. UPC shall have delivered to Citizens
(i) a certificate, dated as of the Effective Time and signed on its behalf by
its chief executive officer and its chief financial officer, to the effect that
the conditions of its obligations set forth in Section 8.3(a) and 8.3(b) of
this Agreement have been satisfied, and (ii) certified copies of resolutions
duly adopted by UPC's Board of Directors evidencing the taking of all corporate
action necessary to authorize the execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated hereby, all in
such reasonable detail as Citizens and its counsel shall request.
(d) LEGAL OPINION. UPC shall have delivered to Citizens
an opinion of counsel, which may be in-house counsel of UPC, dated as of the
Closing Date, addressed to and in form and substance satisfactory to Citizens,
to the effect that:
(i) UPC and Merger Subsidiary are both Tennessee
corporations duly organized, validly existing, and in good standing under the
laws of the State of Tennessee;
(ii) This Agreement and the Plan of Merger has
been duly and validly authorized, executed and delivered on behalf of UPC and
Merger Subsidiary by duly authorized officers or representatives thereof, and
(assuming this Agreement is a binding obligation of Citizens) constitutes a
valid and binding obligation of UPC and Merger Subsidiary enforceable in
accordance with its terms, subject as to enforceability to applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditors' rights generally and subject to the application
of equitable principles and judicial discretion;
(iii) The execution, delivery and performance of
this Agreement and the Plan of Merger, as appropriate, and the consummation of
the transactions contemplated herein and therein, including the Merger, have
been duly and validly authorized by all necessary corporate and shareholder
action in respect thereof on the part of UPC and Merger Subsidiary.
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(E) FAIRNESS OPINION. Citizens shall have received a
"fairness opinion" from its independent financial adviser to the effect that,
in the opinion of such adviser, the Consideration to be received by the
Citizens Record Holders pursuant to the terms and conditions of this Agreement
is fair to the shareholders of Citizens from a financial point of view, and
such fairness opinion shall not have been withdrawn prior to the Closing Date.
ARTICLE 9
TERMINATION
9.1 TERMINATION. Notwithstanding any other provision of this
Agreement, and notwithstanding the approval of this Agreement by the
shareholders of UPC or Citizens, this Agreement and the Plan of Merger may be
terminated and the Merger abandoned at any time prior to the Effective Time:
(a) By mutual consent of the Board of Directors of UPC
and the Board of Directors of Citizens, 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 8.2(a) of this Agreement in the case of Citizens and Section 8.3(a) in
the case of UPC or in material breach of any covenant or other agreement
contained in this Agreement) in the event of an inaccuracy of any
representation or warranty of the other Party contained in this Agreement which
cannot be or has not been cured within 30 days after the giving of written
notice to the breaching Party of such inaccuracy and which inaccuracy would
provide the terminating Party the ability to terminate the Merger under the
applicable standard set forth in Section 8.2(a) of this Agreement in the case
of Citizens and Section 8.3(a) of this Agreement in the case of UPC; or
(c) By the Board of Directors of either Party (provided
that the terminating Party is not then in breach of any representation or
warranty contained in this Agreement under the applicable standard set forth in
Section 8.2(a) of this Agreement in the case of Citizens and Section 8.3(a) in
the case of UPC or in material breach of any covenant or other agreement
contained in this Agreement) in the event of a material breach by the other
Party of any covenant or agreement contained in this Agreement which cannot be
or has not been cured within 30 days after the giving of written notice to the
breaching Party of such breach; or
(d) By the Board of Directors of either Party in the
event (i) any Consent of any Regulatory Authority required for consummation of
the Merger shall have been denied by final nonappealable action of such
Regulatory Authority or if any action taken by such Regulatory Authority is not
appealed within the time limit for appeal or (ii) the shareholders Citizens
fail to vote their approval of this Agreement and the transactions contemplated
hereby as required by the Tennessee Code and Citizens's Charter and Bylaws; or
(e) By the Board of Directors of either Party in the
event that the Merger shall not have been consummated by September 30, 1997, if
the failure to consummate the transactions contemplated hereby on or before
such date is not caused by any willful breach of this Agreement by the Party
electing to terminate pursuant to this Section 9.1(e) and further, if UPC shall
have filed all applications necessary to obtain the necessary Consents of
banking Regulatory Authorities within sixty (60) days of the date hereof, and
if the Closing shall not have occurred because of a delay caused by a bank
Regulatory Authority in its review of the application before it, or by the SEC
in its review of the Registration Statement to be filed by UPC, then Citizens
shall, upon UPC's written request, extend the September 30, 1997, date for a
reasonable time, in no event less than 30 days, in order for UPC to obtain all
Consents of bank
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Regulatory Authorities required and/or all Consents of the SEC and any other
securities Regulatory Authorities, and for the expiration of any stipulated
waiting periods; or
(f) By the Board of Directors of either Party (provided
that the terminating Party is not then in breach of any representation or
warranty contained in this Agreement under the applicable standard set forth in
Section 8.2(a) of this Agreement in the case of Citizens and Section 8.3(a) in
the case of UPC or in material breach of any covenant or other agreement
contained in this Agreement) in the event that any of the conditions precedent
to the obligations of such Party to consummate the Merger cannot be satisfied
or fulfilled by the date specified in Section 9.1(e) of this Agreement as the
same may be extended pursuant to Section 9.1(e).
9.2 EFFECT OF TERMINATION. In the event of the termination and
abandonment of this Agreement pursuant to Section 9.1 of this Agreement, this
Agreement and the Plan of Merger shall become void and have no effect, except
that (i) the provisions of this Section 9.2 and Article 10 and Section 7.6(b)
and 7.8 of this Agreement shall survive any such termination and abandonment;
(ii) a termination pursuant to Sections 9.1(b), 9.1(c) or 9.1(f) of this
Agreement shall not relieve the breaching Party from Liability for an uncured
willful breach of a representation, warranty, covenant, or agreement giving
rise to such termination; and (iii) Section 7.8 of this Agreement shall be
governed by its own terms.
9.3 NON-SURVIVAL OF REPRESENTATIONS AND COVENANTS. The respective
representations, warranties, obligations, covenants, and agreements of the
Parties shall not survive the Effective Time except this Section 9.3 and
Articles 1, 2, 3 and 10 and Sections 7.8, 7.12, 7.13, and 7.14 of this
Agreement.
ARTICLE 10
GENERAL PROVISIONS
10.1 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
offeror exchange offer or any proposal for a merger, consolidation,
acquisition of all of the stock or assets or earning power 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 or earning power of such Party
or any of its Subsidiaries.
"AFFILIATE" of a Party means any Person, partnership, corporation,
association, limited liability company, business trust, or other legal
entity directly or indirectly controlling, controlled by or under
common Control, with that Party.
"AGREEMENT" shall mean this Agreement, the Plan of Merger, and the
Exhibits delivered pursuant hereto and incorporated herein by
reference.
"ALLOWANCES" shall mean the allowances for loan, lease and other
credit losses, including losses in connection with ORE, of any Person.
"ARTICLES OF MERGER" shall mean the Articles of Merger to be executed
by UPC, Merger Subsidiary and Citizens and filed with the Secretary of
State of the State of Tennessee pursuant to Section
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48-21-107 of the Tennessee Code, relating to the merger of Citizens
with and into Merger Subsidiary as contemplated by this Agreement and
the Plan of Merger.
"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.
"BALANCE SHEET DATE" shall mean December 31, 1995.
"BHC ACT" shall mean the Bank Holding Company Act of 1956, as amended.
"BUSINESS DAY" shall mean any Monday, Tuesday, Wednesday, Thursday or
Friday that is not a federal or state holiday generally recognized or
observed by banks in the State of Tennessee.
"CITIZENS BANK SUBSIDIARY" shall mean The Bank of Whiteville.
"CITIZENS COMMON STOCK" shall mean the common stock of Citizens,
$100.00 par value per share.
"CITIZENS COMPANY(IES)" shall mean Citizens and all of its
Subsidiaries, whether direct or indirect.
"CITIZENS DISCLOSURE MEMORANDUM" shall mean the written information
entitled "Citizens of Hardeman County Financial Services, Inc.
Disclosure Memorandum" delivered prior to the date of this Agreement
to UPC describing in reasonable detail the matters contained therein
and, with respect to each disclosure made therein, specifically
referencing each Section of this Agreement under which such disclosure
is being made. Information disclosed with respect to one Section shall
not be deemed to be disclosed for purposes of any other Section not
specifically referenced with respect thereto.
"CITIZENS EMPLOYEE PLANS" shall mean any pension plans, profit sharing
plans, deferred compensation plans, stock option plans, cafeteria
plans, and any other such or related benefit plans or arrangements
offered or funded by Citizens or any Citizens Subsidiary, to or for
the benefit of the officers, directors, employees, independent
contractors or consultants of Citizens or any Citizens Subsidiary.
"CITIZENS RECORD HOLDERS" means those Persons who shall be the holders
of record of any of the issued and outstanding shares of Citizens
Common Stock immediately prior to the Effective Time.
"CONSIDERATION" shall mean the shares of UPC Common Stock and the cash
settlement of any remaining fractional share of UPC Common Stock
deliverable to the Citizens Record Holders pursuant to Section 2.1(c)
of this Agreement.
"CLOSING" shall mean the consummation of the Merger.
"CLOSING DATE" shall mean the date on which the Closing occurs.
"CONSENT" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
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<PAGE> 113
"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.
"CONTROL" shall have the meaning assigned to such term in Section
2(a)(2) of the Bank Holding Company Act of 1956, as amended.
"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 or 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.
"DEPOSITS" shall mean all deposits (including, but not limited to,
certificates of deposit, savings accounts, NOW accounts and checking
accounts) of the Citizens Bank Subsidiaries and other deposit-taking
Affiliates.
"EFFECTIVE DATE" shall mean that date on which the Effective Time of
the Merger shall have occurred.
"EFFECTIVE TIME" shall mean the date and time that the Articles of
Merger shall become effective with the Secretary of State of
Tennessee.
"ENVIRONMENTAL LAWS" shall mean all Laws relating to pollution or
protection of human health or the environment (including ambient air,
surface water, ground water, land surface or subsurface strata) and
which are administered, interpreted or enforced by the United States
Environmental Protection Agency and any 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.
"EXCHANGE AGENT" shall mean Union Planters National Bank, Memphis,
Tennessee, a wholly-owned subsidiary of UPC, acting through its
Corporate Trust Department.
"EXCHANGE RATIO" shall mean the number of shares of UPC Common Stock,
and fractions thereof, to be exchanged for each share of Citizens
Common Stock pursuant to Section 2.1(c) of this Agreement, subject to
such adjustments as may be provided in this Agreement and the Plan of
Merger.
"EXHIBITS" 1 through 3, inclusive, shall mean the Exhibits so marked,
copies of which are attached to this Agreement. Such Exhibits are
hereby incorporated by reference herein and made a part hereof, and
may be referred to in this Agreement and any related instrument or
document without being attached hereto or thereto.
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<PAGE> 114
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"FEDERAL RESERVE" shall mean the Board of Governors of the Federal
Reserve System and shall include the Federal Reserve Bank of St. Louis
when acting under delegated authority.
"GAAP" shall mean generally accepted accounting principles as in
effect from time to time, consistently applied.
"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).
"HSR ACT" shall mean Section 7A of the Clayton Act, as added by Title
Ill 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.
"IRC" 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, Chief Executive Officer, President,
Chief Administrative Officer, Chief Financial Officer, Chief
Accounting Officer, Chief Credit Officer or General Counsel of such
Person, or such other officer of such Person, regardless of title,
charged with or responsible for the oversight of a particular area,
department or function to which the subject matter relates.
"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 property Taxes not yet due and payable, and (ii) for
depository institution
34
<PAGE> 115
<PAGE> 116
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 routine 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.
"MERGER" shall mean the merger of Citizens with and into Merger
Subsidiary, as described in Section 1.1 of this Agreement.
"NYSE" shall mean the New York Stock Exchange, or its successor, upon
which shares of the UPC Common Stock are listed for trading.
"1933 ACT" shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"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.
"ORE" shall mean real estate and other property acquired through
foreclosure, deed in lieu of foreclosure or similar procedures.
"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 UPC and Merger Subsidiary, on the one hand,
or Citizens, and "Parties" shall mean UPC, Merger Subsidiary and
Citizens.
"PENSION PLAN" shall mean any employee pension benefit plan as such
term is defined in Section 3(2) of ERISA which is maintained by the
referenced Party.
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<PAGE> 117
"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.
"PLAN OF MERGER" shall mean the plan of merger providing for the
Merger, in substantially the form of Exhibit 1.
"PROXY STATEMENT" shall mean the proxy statement to be used by
Citizens to solicit proxies with a view to securing the approval of
the Citizens shareholders of this Agreement and the Plan of Merger.
"RECORDS" means all available records, minutes of meetings of the
Board of Directors, committees and shareholders of a Party; original
instruments and other documentation, pertaining to a Party or any of
its Subsidiaries' or assets (including plans and specifications
relating to any realty), Liabilities, Deposits, Contracts, capital
stock, and loans; and all other business and financial records which
are necessary or customary for use in the conduct of such Person or
any of such person's Subsidiary businesses on and after the Effective
Time as it was conducted prior to the Effective Time.
"REGISTRATION STATEMENT" shall mean the Registration Statement on Form
S-4, or other appropriate form, including any pre-effective or
post-effective amendments or supplements thereto, filed with the SEC
by UPC under the 1933 Act with respect to the shares of UPC Common
Stock to be issued to the shareholders of Citizens 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 Federal
Reserve, the Office of Thrift Supervision (including its predecessor,
the Federal Home Loan Bank Board), the Office of the Comptroller of
the Currency, the FDIC, all state regulatory agencies having
jurisdiction over the Parties and their respective Subsidiaries, the
NYSE, the National Association of Securities Dealers and the SEC, or
any respective successor thereto.
"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, understandings, warrants, or
other binding obligations of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for shares of
the capital stock of a Person, or which derive their value in whole or
in part from shares of the capital stock of a Person, including stock
appreciation rights and phantom stock, or by which a Person is or may
be bound to issue additional shares of its capital stock or other
Rights.
"SEC DOCUMENTS" shall mean all forms, proxy statements, registration
statements, reports, schedules, and other documents filed, or required
to be filed, by a Party or any of its Subsidiaries with any Regulatory
Authority pursuant to the Securities Laws.
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"SEC" shall mean the United States Securities and Exchange Commission,
or any successor thereto.
"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 the SEC promulgated thereunder, as
well as any similar state securities laws and any similar rules and
regulations promulgated by the applicable federal or state bank
Regulatory Authorities.
"SHAREHOLDERS MEETING" shall mean the Special Meeting of the
shareholders of Citizens to be held pursuant to Section 7.1 of this
Agreement, including any adjournment or adjournments thereof.
"SUBSIDIARIES" shall mean all of those Persons of which the entity in
question owns or controls 5% or more of the outstanding voting equity
securities or equity interest, either directly or through an unbroken
chain of entities as to each of which 5% or more of the outstanding
equity securities or equity interest is owned directly or indirectly
by its parent; provided, however, that there shall not be included any
Person acquired through foreclosure or in satisfaction of a debt
previously contracted in good faith, any such entity that owns or
operates an automatic teller machine interchange network, or any such
Person the equity securities or equity interest of which are owned or
controlled in a fiduciary capacity or through a small business
development corporation.
"SURVIVING CORPORATION" shall mean Union Planters Community Bancorp,
Inc., as the corporation resulting from and surviving the consummation
of the Merger as set forth in Section 1.1 of this Agreement.
"TAX" or "TAXES" shall mean any federal, state, county, local, or
foreign income, profits, franchise, gross receipts, payroll, sales,
employment, use, property, withholding, excise, occupancy, and other
taxes, assessments, charges, fares, or impositions, including
interest, penalties, and additions imposed thereon or with respect
thereto
"TENNESSEE CODE" shall mean the Tennessee Code Annotated, as amended.
"UPC" shall mean Union Planters Corporation, a corporation chartered
and existing under the laws of the State of Tennessee which is
registered both as a bank holding company and as a savings and loan
holding company and whose principal offices are located at 7130
Goodlett Farms Parkway, Memphis, Shelby County, Tennessee 38018.
"UPC CAPITAL STOCK" shall mean, collectively, the UPC Common Stock,
the UPC Preferred Stock and any other class or series of capital stock
of UPC.
"UPC COMMON STOCK" shall mean the $5.00 par value common stock of UPC.
"UPC COMPANIES" shall mean, collectively, UPC and all UPC
Subsidiaries.
"UPC DISCLOSURE MEMORANDUM" shall mean the written information entitled
"Union Planters Corporation Disclosure Memorandum" delivered prior to
the date of this Agreement to Citizens describing in reasonable detail
the matters contained therein and, with respect to each disclosure made
therein, specifically referencing each Section of this Agreement under
which such disclosure is being made. Information disclosed with respect
to one Section shall be deemed to be disclosed for purposes of any
other Section not specifically referenced with respect thereto.
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"UPC FINANCIAL STATEMENTS" shall mean (i) the consolidated balance
sheets (including related notes and schedules, if any) of UPC as of
September 30, 1996, and as of December 31, 1995 and 1994, and the
related statements of earnings, changes in shareholders' equity, and
cash flows (including related notes and schedules, if any) for the
nine months ended September 30, 1996, and for each of the three years
ended December 31, 1995, 1994, and 1993, as filed by UPC in SEC
Documents, (ii) the consolidated balance sheets of UPC (including
related notes and schedules, if any) and related statements of
earnings, changes in shareholders' equity, and cash flows (including
related notes and schedules, if any) included in SEC Documents filed
with respect to periods ended subsequent to September 30, 1996.
"UPC MERGER SUBSIDIARY" OR "MERGER SUBSIDIARY" shall mean Union
Planters Community Bancorp Inc., a wholly owned subsidiary of UPC.
"UPC PREFERRED STOCK" shall mean the no par value preferred stock of
UPC and shall include the (i) Series A Preferred Stock, (ii) Series B,
$8.00 Nonredeemable, Cumulative, Convertible Preferred Stock ("UPC
Series B Preferred Stock"), and (iii) Series E, 8% Cumulative,
Convertible Preferred Stock, of UPC ("UPC Series E Preferred Stock").
"UPC RIGHTS" shall mean the preferred stock purchase rights issued
pursuant to the UPC Rights Agreement.
"UPC RIGHTS AGREEMENT" shall mean that certain Rights Agreement dated
January 19, 1989, between UPC and UPNB, as Rights Agent.
"UPC SUBSIDIARIES" shall mean the Subsidiaries of UPC.
(b) 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."
10.2 EXPENSES.
(a) Except as otherwise provided in this Section 10.2, each of the
Parties shall bear and pay all direct costs and expenses incurred by it or on
its behalf in connection with the ones contemplated hereunder, including
filing, registration and application fees, printing fees, and fees and expenses
of its own financial or other consultants, investment bankers, accountants, and
counsel, except that each of the Parties shall bear and pay the filing fees
payable in connection with the Registration Statement and the Proxy Statement
and printing costs incurred in connection with the printing of the Registration
Statement and the Proxy Statement based on the relative Asset sizes of the
Parties at December 31, 1995.
(b) Nothing contained in this Section 10.2 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 non-breaching Party.
10.3 BROKERS AND FINDERS. Except for Gerrish & McCreary, P.C. as to
Citizens, 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 ones 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 Citizens or UPC, each of
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Citizens and UPC, as the case may be, agrees to indemnify and hold the other
Party harmless of and from any Liability in respect of any such claim.
10.4 ENTIRE AGREEMENT. Except as otherwise expressly provided
herein, this Agreement (including the other documents and instruments referred
to herein) constitutes the entire agreement between the Parties with respect to
the transactions contemplated hereunder and supersedes all prior arrangements
or understandings with respect thereto, written or oral. Nothing in this
Agreement expressed or implied, is intended to confer upon any Person, other
than the Parties or their respective successors, any rights, remedies,
obligations, or liabilities under or by reason of this Agreement.
10.5 AMENDMENTS. To the extent permitted by Law, this Agreement may
be amended by a subsequent writing signed by each of the Parties upon the
approval of the Boards of Directors of each of the Parties, whether before or
after shareholder approval of this Agreement and the Plan of Merger has been
obtained; provided, that after any such approval by the holders of Citizens
Common Stock, there shall be made no amendment that modifies in any material
respect the Consideration to be received by the Citizens Record Holders.
10.6 WAIVERS.
(a) Prior to or at the Effective Time, UPC, acting
through its Board of Directors, chief executive officer, or other authorized
officer, shall have the right to waive any Default in the performance of any
term of this Agreement by Citizens, to waive or extend the time for the
compliance or fulfillment by Citizens of any and all of its obligations under
this Agreement, and to waive any or all of the conditions precedent to the
obligations of UPC under this Agreement, except any condition which, if not
satisfied, would result in the violation of any Law. No such waiver shall be
effective unless in writing signed by a duly authorized officer of UPC.
(b) Prior to or at the Effective Time, Citizens, acting
through its Board of Directors, chief executive officer, or other authorized
officer, shall have the right to waive any Default in the performance of any
term of this Agreement by UPC, to waive or extend the time for the compliance
or fulfillment by UPC of any and all of its obligations under this Agreement,
and to waive any or all of the conditions precedent to the obligations of
Citizens 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 Citizens.
(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 or a
waiver of any other condition or of the breach of any other term of this
Agreement.
10.7 ASSIGNMENT. Except as expressly contemplated hereby, neither
this Agreement nor any of the rights, interests, or obligations hereunder shall
be assigned by any Party hereto (whether by operation of Law or otherwise)
without the prior written consent of the other Party; provided, however, UPC
and/or UPC Merger Subsidiary may assign all of their rights hereunder to any
other wholly-owned Subsidiary whether now existing or hereafter acquired or
organized. 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.
10.8 NOTICES. All notices or other communications which are
required or permitted hereunder
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shall be in writing and sufficient if delivered by hand, by facsimile
transmission, by registered or certified mail, postage prepaid, or by courier
or overnight carrier, to the persons at the addresses set forth below (or at
such address as may be provided), and shall be deemed to have been delivered as
of the date so delivered:
If to UPC/Merger Subsidiary: Union Planters Corporation
Post Office Box 387 (for mailing)
Memphis, Tennessee 38147
7130 Goodlett Farms Parkway
(for deliveries)
Memphis, Tennessee 38018
Fax: (901) 383-2877
Telephone: (901) 580-6093
Attn: Mr. Jackson W. Moore, President
and
Catherine C. Stallings, General
Counsel/Secretary
Fax: (901) 580-2939 Telephone
(901) 580-6028
With a copy to: Wyatt, Tarrant & Combs, P.L.C.
Post Office Box 775000 (for mailing)
Memphis, TN 38177-5000
6075 Poplar Avenue (Suite 650)
(deliveries)
Memphis, TN 38119
Fax: (901) 537-1010
Telephone: (901)537-1023
Attn: R. Nash Neyland, Esq.
If to Citizens: Citizens of Hardeman County
Financial Services, Inc.
114 Main Street Whiteville,
Tennessee 38008
Fax: (901) 254-9030
Telephone: (901) 254-8541
Attn: Mr. Frank T. Bass,
President and CEO
With a copy to: Gerrish & McCreary, P.C.
200 Seven Oaks Bldg.
700 Colonial Road
Memphis, Tennessee 38117
Fax: (901) 684-2339
Telephone: (901) 767-0900
Attn: Jeffrey C. Gerrish, Esq.
10.9 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.
10.10 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 document.
10.11 CAPTIONS. The captions contained in this Agreement are for
reference purposes only and
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<PAGE> 122
are not part of this Agreement.
10.12 INTERPRETATION. 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.
10.13 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.
10.14 ATTORNEYS' FEES. If any Party hereto shall bring an action at
law or in equity to enforce its rights under this Reorganization Agreement
(including an action based upon a misrepresentation or the breach of any
warranty, covenant, agreement or obligation contained herein), the prevailing
Party in such action shall be entitled to recover from the other Party its
reasonable costs and expenses necessarily incurred in connection with such
action (including fees, disbursements and expenses of attorneys and costs of
investigation).
10.15 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability, without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
10.5 10.16 REMEDIES CUMULATIVE. All remedies provided in this
Agreement, by Law or otherwise, shall be cumulative and not alternative.
IN WITNESS WHEREOF, each of the Parties hereto has duly
executed and delivered this Agreement or has caused this Agreement to be
executed and delivered in its name and on its behalf by its representatives
thereunto duly authorized, all as of the date first written above.
CITIZENS OF HARDEMAN COUNTY
FINANCIAL SERVICES, INC.
By: /s/ Frank T. Bass
--------------------------
Frank T. Bass
Its: President and CEO
ATTEST:
James R. Bellar
- ------------------------
Its: , Secretary
- ---------------------
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UNION PLANTERS CORPORATION
By: /s/ Jackson W. Moore
------------------------------
Jackson W. Moore
Its: President
ATTEST:
/s/ Catherine C. Stallings
- ---------------------------------
Catherine C. Stallings, Secretary
UNION PLANTERS COMMUNITY BANCORP, INC.
By: /s/ Jackson W. Moore
----------------------------
Jackson W. Moore
Its: President
ATTEST:
/s/ Lynn Lanigan
- ------------------------
Lynn Lanigan, Secretary
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<PAGE> 124
EXHIBIT 1
PLAN OF MERGER
OF
CITIZENS OF HARDEMAN COUNTY FINANCIAL SERVICES, INC.
WITH AND INTO
UNION PLANTERS COMMUNITY BANCORP, INC.
Pursuant to this Plan of Merger ("Plan of Merger") dated December 12,
1996, Citizens of Hardeman County Financial Services, Inc. ("Citizens'), a
corporation organized and existing under the laws of the State of Tennessee,
shall be merged with and into Union Planters Community Bancorp, Inc. ("Merger
Subsidiary"), a corporation organized and existing under the laws of the State
of Tennessee, and which is a wholly owned subsidiary of Union Planters
Corporation ("UPC"), a corporation organized and existing under the laws of the
State of Tennessee.
ARTICLE 1
TERMS OF MERGER
1.1 The Merger. Subject to the terms and conditions of that
certain Agreement and Plan of Reorganization dated as of the 12th day of
December, 1996 between Citizens, Merger Subsidiary and UPC (the "Merger
Agreement") and this Plan of Merger, at the Effective Time, Citizens shall be
merged with and into Merger Subsidiary in accordance with the provisions of
Section 48-21-102 of Tennessee Code Annotated and with the effect provided in
Section 48-21-108 of Tennessee Code Annotated (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 the Merger Agreement and this Plan of
Merger.
1.2 Time and Place of Closing. The Closing will take place at 9:00
a.m. on the date that the Effective Time occurs (or the immediately preceding
day if the Effective Time is earlier than 9:00 a.m.), or at such other time as
the Parties, acting through their chief executive officers, or chief financial
officers, may mutually agree. The Closing shall be held at the Union Planters
Administrative Center, Union Planters Corporation Executive Offices (Fourth
Floor), 7130 Goodlett Farms Parkway, Memphis, Shelby County, Tennessee 38018,
or at such other place as the Parties, acting through their chief executive
officers or chief financial officers, may mutually agree.
1.3 Effective Time. The Merger and other transactions contemplated
by the Merger Agreement and this Plan of Merger shall become effective on the
date and at the time the Articles of Merger reflecting the Merger shall become
effective with the Secretary of State of Tennessee (the "Effective Time").
<PAGE> 125
1.4 Charter. The Charter of Merger Subsidiary in effect immediately
prior to the Effective Time shall be the Charter of the Surviving Corporation
until otherwise amended or repealed.
1.5 Bylaws. The Bylaws of Merger Subsidiary in effect immediately
prior to the Effective Time shall be the Bylaws of the Surviving Corporation
until otherwise amended or repealed.
1.6 Name. The name of Merger Subsidiary shall remain unchanged
after the Effective Time, unless and until otherwise renamed.
1.7 Directors and Officers. The directors and officers of Merger
Subsidiary in office immediately prior to the Effective Time, together with
such additional persons as may thereafter be elected or appointed, shall serve
as the directors and officers of the Surviving Corporation from and after the
EffectiveTime in accordance with the bylaws of the Surviving Corporation,
unless and until their successors shall have been elected or appointed and
shall have qualified or until they shall have been removed in the manner
provided therein.
ARTICLE 2
MANNER OF CONVERTING SHARES AND OPTIONS; EXCHANGE RATIO
2.1 Conversion, Cancellation and Exchange of Shares: Exchange
Ratio. At the Effective Time, by virtue of the Merger becoming effective and
without any action on the part of UPC, Merger Subsidiary, Citizens, or the
shareholders of any of the foregoing, the shares of the constituent
corporations shall be converted as follows:
(a) UPC Capital Stock. 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) Merger Subsidiary Common Stock. 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 and
shall represent all of the issued and outstanding capital stock of Merger
Subsidiary as the Surviving Corporation.
(c) Citizens Common Stock. Each share of Citizens Common
Stock (excluding shares held by any Citizens 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 and held by the
Citizens Record Holders shall cease to represent any interest (equity,
shareholder or otherwise) in Citizens and shall, except for those shares held
by any Citizens Record Holders who shall have property perfected such Holders'
dissenters' rights and shall have maintained the perfected status of such
dissenters' rights through the Effective Time ("Citizens Dissenting
Shareholders"), whose rights shall be governed by the provisions of Sections
48-23-101 et. seq. of Tennessee Code Annotated, automatically be converted
exclusively into, and constitute only the
<PAGE> 126
right of each such Citizens Record Holder to receive in exchange for such
Holders shares of Citizens Common Stock, the Consideration to which the
Citizens Record Holder is entitled as provided in this Section 2.1(c).
(1) The Exchange Ratio. Subject to any
adjustments which may be required by an event described in Subsection 2.1(c)(3)
below, the number of shares of UPC Common Stock to be exchanged for each share
of Citizens Common Stock which shall be issued and outstanding immediately
prior to the Effective Time shall be based on an exchange ratio (the "Exchange
Ratio") of 435.872 shares of UPC Common Stock for each share of Citizens Common
Stock. The Exchange Ratio is based upon there being no more than an aggregate
of 483 fully diluted shares of Citizens Common Stock validly issued and
outstanding immediately prior to the Effective Time (which for purposes of the
Exchange Ratio shall be determined by counting all unexercised Citizens Stock
Options and any other Rights issued and outstanding immediately prior to the
Effective Time, if any, as if they had been fully exercised prior to the
Effective Time). Therefore, assuming all Citizens Stock Options and Rights, if
any, had been exercised prior to the Effective Time, the maximum aggregate
number of shares of UPC Common Stock which UPC would be required to issue in
exchange for all outstanding shares of Citizens Common Stock, based on the
Exchange Ratio, would be 210,526 shares of UPC Common Stock. Citizens Common
Stock held by any Citizens Company, other than in a fiduciary capacity or as a
result of debts previously contracted, shall not be considered as outstanding
immediately prior to the Effective Time for purposes of the Exchange Ratio. No
fractional shares of UPC Common Stock shall be issued in the Merger and if,
after aggregating all of the whole and fractional shares of UPC Common Stock to
which a Citizens Record Holder shall be entitled based upon the Exchange Ratio,
there should be a fractional share of UPC Common Stock remaining, such
fractional share shall be settled by a cash payment therefor pursuant to
Article 3 of this Plan of Merger, which cash settlement shall be based upon the
Current Market Price Per Share (as defined below) of one (1) full share of UPC
Common Stock.
(2) Definition of "Current Market Price Per
Share." The "Current Market Price Per Share" shall be the closing price per
share of the UPC Common Stock on the NYSE Composite Transaction List (as
reported by The Watt Street Journal or, if not reported thereby, any other
authoritative source selected by UPC) on the last trading day prior to the
Effective Date.
(3) Effect of Stock Splits, Reverse Stock Splits,
Stock Dividends and Similar Chances in the Capital Stock or Accounts of
Citizens. Should Citizens effect any stock splits, reverse stock splits, stock
dividends or similar changes in its respective capital accounts subsequent to
the date of this Agreement but prior to the Effective Time, or should there be
more than 483 fully diluted shares of Citizens Common Stock outstanding
immediately prior to the Effective Time, determined consistent with Section
2.1(c)(1) above, the Exchange Ratio may, in UPC's sole discretion if such
change in the capital accounts constitutes a breach of any of Citizens'
representations, warranties or covenants, be adjusted in such a manner as the
Board of Directors of UPC shall deem in good faith to be fair and reasonable in
order to give effect to such changes. Notwithstanding the foregoing, nothing in
this subparagraph (3) shall be deemed to be a waiver of the inaccuracy of any
representation or warranty or breach of any covenant by Citizens set forth
<PAGE> 127
herein.
(d) Shares Held by Citizens or UPC. Each of the shares of
Citizens Common Stock held by any Citizens 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.
(e) Dissenters' Rights of Citizens Shareholders. Any
Citizens Record Holder of shares of Citizens Common Stock who shall comply
strictly with the provisions of Sections 48-23-101 et. seq. of Tennessee Code
Annotated ("Citizens Dissenting Shareholders"), shall be entitled to dissent
from the Merger and to seek those appraisal remedies afforded by the Section
48-23-101 et. seq. of Tennessee Code Annotated.
(f) 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 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.
ARTICLE 3
EXCHANGE OF SHARES
3.1 Exchange Procedures. Promptly after the Effective Time, UPC
and Citizens shall cause the Exchange Agent to mail to the Citizens Record
Holders appropriate transmittal materials (which shall specify that delivery
shall be effected, and risk of loss and title to the certificates theretofore
representing shares of Citizens Common Stock shall pass, only upon proper
delivery of such certificates to the Exchange Agent). The Exchange Agent may
establish reasonable and customary rules and procedures in connection with its
duties. After the Effective Time, each Citizens Record Holder of Citizens Common
Stock (other than shares to be canceled pursuant to Section 2.1 (d) 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 2.1 (c) of this Plan of Merger, together with
all undelivered dividends or distributions in respect of such shares (without
interest thereon). pursuant to Section 3.2 of this Plan of Merger. To the
extent required by Section 2.1 (c) of this Plan of Merger, each Citizens Record
Holder also shall receive, upon surrender of the certificate or certificates
representing his or her shares of Citizens Common Stock outstanding immediately
prior to the Effective Time, 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 Citizens
Record Holder is entitled as a result of the Merger until such Citizens Record
Holder surrenders such holders certificate or certificates representing the
shares of Citizens Common Stock for exchange as provided in this Section 3. 1.
The certificate or certificates of Citizens Common Stock so surrendered shall
be duly endorsed as the Exchange Agent may require. Any other provision of this
Agreement
<PAGE> 128
notwithstanding, neither UPC nor the Exchange Agent shall be liable to a
Citizens Record Holder for any amounts paid or property delivered in good faith
to a public official pursuant to any applicable abandoned property Law.
Adoption of this Agreement by the shareholders of Citizens shall constitute
ratification of the appointment of the Exchange Agent.
3.2 Rights of Former Citizens Record Holders. At the Effective
Time, the stock transfer books of Citizens shall be closed as to holders of
Citizens Common Stock outstanding immediately prior to the Effective Time, and
no transfer of Citizens Common Stock by any Citizens Record Holder shall
thereafter be made or recognized. Until surrendered for exchange in accordance
with the provisions of Section 3.1 of this Plan of Merger, each certificate
theretofore representing shares of Citizens Common Stock (other than shares to
be canceled pursuant to Section 2.1 (d) 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 Section 2.1 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 Citizens in respect of such
shares of Citizens Common Stock in accordance with the terms of this Agreement
and which remain unpaid at the Effective Time. Whenever a dividend or other
distribution is declared by UPC on the UPC Common Stock, the record date for
which is at or after the Effective Time, the declaration shall include
dividends or other distributions on all shares of UPC Common Stock issuable
pursuant to this Agreement, but beginning 30 days after the Effective Time no
dividend or other distribution payable to the holders of record of UPC Common
Stock as of any time subsequent to the Effective Time shall be delivered to a
Citizens Record Holder until such Citizens Record Holder surrenders his or her
certificate or certificates evidencing Citizens Common Stock for exchange as
provided in Section 3.1 of this Plan of Merger. However, upon surrender of such
Citizens Common Stock certificate, both the UPC Common Stock certificate
(together with all such undelivered dividends or other distributions, without
interest) and any undelivered dividends and cash payments payable hereunder
(without interest), shall be delivered and paid with respect to each share
represented by such certificate.
ARTICLE 4
MISCELLANEOUS
4.1 Conditions Precedent. Consummation of the Merger by Merger
Subsidiary shall be conditioned on the satisfaction of or waiver by UPC of the
conditions precedent to the Merger set forth in Sections 8.1 and 8.2 of the
Merger Agreement. Consummation of the Merger by Citizens shall be conditioned
on the satisfaction of, or waiver by Citizens of, the conditions precedent
to the Merger set forth in Sections 8.1 and 8.3 of the Merger Agreement.
4.2 Termination. This Plan of Merger may be terminated at any time
prior to the Effective Time by the Parties hereto as provided in Article 9 of
the Merger Agreement.
4.3 Amendments. To the extent permitted by Law, this Plan of
Merger 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 Merger
<PAGE> 129
APPENDIX B
B-1
Unaudited Consolidated Financial Statements of Citizens of Hardeman County
Financial Services as of and for the years ended December 31, 1996 and 1995
(and notes thereto)
<PAGE> 130
CITIZENS OF HARDEMAN COUNTY FINANCIAL SERVICES INC.
AND ITS SUBSIDIARY THE WHITEVILLE BANK
Unaudited Consolidated Balance Sheets
For the years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
Assets
1996 1995
------------ -------------
<S> <C> <C>
CASH AND CASH EQUIVALENTS
Cash on hand $ 1,083,728 $ 1,360,061
Due from banks 833,546 607,137
Federal funds sold 4,700,000 4,800,000
Time deposit 100,000 100,000
----------- ------------
Total cash and cash equivalents 6,717,274 6,867,198
----------- ------------
INVESTMENT SECURITIES
To be held to maturity (fair value of $7,098,232
and $7,580,667) 7,154,707 7,627,943
Available for sale (Amortized cost of $8,271,648 and $5,972,068) 8,230,985 5,990,784
----------- ------------
15,385,692 13,618,727
----------- ------------
LOANS
Real estate 17,907,660 15,461,995
Commercial 9,761,167 8,888,470
Installment 8,647,085 7,901,735
Less unearned discount (262,036) (301,815)
----------- ------------
Less allowance for loan losses 36,053,876 31,950,385
419,562 433,934
----------- ------------
35,634,314 31,516,451
----------- ------------
BANK PREMISES AND EQUIPMENT
Land, buildings, and fixtures 1,931,405 1,662,600
Furniture and equipment 807,288 761,077
----------- ------------
2,738,693 2,423,677
Less accumulated depreciation 1,042,560 928,592
----------- ------------
1,696,133 1,495,085
----------- ------------
OTHER ASSETS
Deferred income tax benefit 203,725 152,461
Foreclosed real estate 676,544 124,432
Accrued interest receivable 899,858 728,676
Prepaid expenses 141,900 81,229
Refundable income taxes 15,701 -0-
----------- ------------
1,937,728 1,086,798
----------- ------------
TOTAL ASSETS $61,371,141 $ 54,584,259
=========== ============
</TABLE>
See accompanying notes.
1
<PAGE> 131
CITIZENS OF HARDEMAN COUNTY FINANCIAL SERVICES INC.
AND ITS SUBSIDIARY THE WHITEVILLE BANK
Unaudited Consolidated Balance Sheets - continued
For the years ended December 31, 1996 and 1995
Liabilities and Stockholders' Equity
<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
DEPOSITS
Demand deposits (including $8,609,503
and $6,104,870) in NOW accounts $11,972,151 $ 9,094,761
Certificates of Deposit greater than $100,000 12,737,377 10,908,309
Other Interest Bearing Deposits 31,451,061 29,826,346
----------- ------------
56,160,589 49,829,416
----------- ------------
OTHER LIABILITIES
Accrued interest payable 409,926 408,031
Accrued expenses 120,118 103,319
Income taxes payable -0- 25,847
----------- ------------
Total liabilities 56,690,633 50,366,613
----------- ------------
STOCKHOLDERS' EQUITY
Common stock ($100 par value, 500 shares authorized,
483 issued and outstanding) 48,300 48,300
Additional paid in capital 1,311,100 1,311,100
Retained earnings 3,438,619 2,893,721
Unrealized gain (loss) on investment securities
available for sale (117,511) (35,475)
----------- ------------
Total stockholders' equity 4,680,508 4,217,646
----------- ------------
Total liabilities and stockholders' equity $61,371,141 $54,584,259
=========== ============
</TABLE>
See accompanying notes.
2
<PAGE> 132
CITIZENS OF HARDEMAN COUNTY FINANCIAL SERVICES INC.
AND ITS SUBSIDIARY THE WHITEVILLE BANK
Unaudited Consolidated Statements of Income
For the years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 3,537,074 $ 3,245,777
Interest on investment securities:
U.S. Treasury and U.S. Government
agency securities 823,711 635,448
State and municipal securities 92,876 81,061
Interest on federal funds 195,512 204,016
Other interest and dividends 47,449 49,195
----------- -----------
4,696,622 4,215,497
----------- -----------
INTEREST EXPENSE
Certificates of deposit 2,155,980 1,974,608
Savings accounts 64,630 56,948
Demand deposit accounts 278,056 221,287
Individual retirement accounts 81,362 75,358
----------- -----------
2,580,028 2,328,201
----------- -----------
NET INTEREST INCOME 2,116,594 1,887,296
PROVISION FOR LOAN LOSSES 95,174 37,000
----------- -----------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 2,021,420 1,850,296
OTHER INCOME (EXPENSE)
Service fees and commissions 199,650 173,920
Gain on sale of investment 28,733 35,266
Other 74,186 75,432
----------- -----------
302,569 284,618
----------- -----------
OTHER EXPENSES
Salaries and wages 656,686 624,532
Employee benefits 155,166 140,339
Occupancy expenses 112,468 95,017
Furniture and equipment expenses 121,165 117,701
Other operating expenses 395,352 383,358
----------- -----------
1,440,837 1,360,947
----------- -----------
INCOME BEFORE INCOME TAXES 883,152 773,967
INCOME TAXES
Currently payable 334,299 285,666
Deferred liability (benefit) (1,841) 18,472
----------- -----------
332,458 304,138
----------- -----------
NET INCOME $ 550,694 $ 469,829
=========== ===========
</TABLE>
See accompanying notes.
3
<PAGE> 133
CITIZENS OF HARDEMAN COUNTY FINANCIAL SERVICES INC.
AND ITS SUBSIDIARY THE WHITEVILLE BANK
Unaudited Statement of Changes in Stockholder's Equity
For the years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
Unrealized
Common Pain In Retained Gain (Loss)
Stock Capital Earnings on Securities
----- ------- -------- -------------
<S> <C> <C> <C> <C>
Balance 1-1-95 $48,300 $1,311,100 $2,429,688 $(245,148)
Net earnings $973 per share 469,829
Dividends paid $12 per share (5,796)
Unrealized gain (loss) on
securities net of deferred
income tax benefit in the
amount of $118,284 209,673
-------- ---------- ---------- ---------
Balance 12-31-95 48,300 1,311,100 2,893,721 (35,475)
Net earnings $1,140 per share 550,694
Dividends paid $12 per share (5,796)
Unrealized gain (loss) on
securities net of deferred
income tax benefit in the
amount of $23,708
(82,036)
-------- ---------- ----------- ---------
Balance 12-31-96 $ 48,300 $1,311,100 $ 3,438,619 $(117,511)
======== ========== =========== =========
</TABLE>
See accompanying notes.
4
<PAGE> 134
CITIZENS OF HARDEMAN COUNTY FINANCIAL SERVICES INC.
AND ITS SUBSIDIARY THE WHITEVILLE BANK
Unaudited Consolidated Statements of Cash Flows
For the years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received $ 4,459,164 $ 4,012,095
Fees and other income received 273,836 246,895
Interest paid (2,578,134) (2,235,835)
Cash paid to suppliers and employees (1,346,223) (1,244,576)
Income taxes paid (395,847) (254,327)
----------- -----------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 412,796 524,252
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities and sale
of securities 6,188,170 2,933,044
Purchase of securities (8,566,625) (3,677,902)
Net (increase) decrease in customer loans (4,206,219) (2,153,152)
Purchase of bank premises and equipment (315,016) (582,416)
Proceeds from sales of foreclosed
real estate -0- 70,700
----------- -----------
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES (6,899,690) (3,409,726)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in demand, NOW and
savings accounts 3,227,249 (19,966)
Net increase in certificates of deposit 3,103,925 4,595,432
Dividends paid 5,796 5,796
----------- -----------
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES 6,336,970 4,581,262
----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (149,924) 1,695,788
CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR 6,867,198 5,171,410
----------- -----------
CASH AND CASH EQUIVALENTS, END OF
YEAR $ 6,717,274 $ 6,867,198
=========== ===========
</TABLE>
See accompanying notes.
6
<PAGE> 135
CITIZENS OF HARDEMAN COUNTY FINANCIAL SERVICES INC.
AND ITS SUBSIDIARY THE WHITEVILLE BANK
Unaudited Consolidated Statements of Cash Flows - continued
For the years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
--------- --------
<S> <C> <C>
RECONCILIATION OF NET INCOME
TO NET CASH PROVIDED BY
OPERATING ACTIVITIES
Net income $550,694 $469,829
-------- --------
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 113,968 113,704
Provisions for loan losses 95,174 37,000
Net accretion of investment securities (66,276) (66,311)
Gain (losses) on foreclosed real estate 28,224 -0-
Gain on sale of investment securities (28,733) (35,266)
(Increases) decreases in assets:
Accrued interest receivable (171,182) (137,091)
Prepaid expenses and other assets (60,671) 16,683
Refundable income taxes (41,548) -0-
Increases (decreases) in liabilities:
Accrued interest payable 1,894 92,366
Accrued expenses 16,801 1,999
Income taxes payable and deferred
income taxes (25,549) 31,339
-------- --------
TOTAL ADJUSTMENTS (137,898) 54,423
-------- --------
NET CASH PROVIDED BY OPERATING
ACTIVITIES $412,796 $524,252
======== ========
</TABLE>
See accompanying notes.
5
<PAGE> 136
CITIZENS OF HARDEMAN COUNTY FINANCIAL SERVICES INC.
AND ITS SUBSIDIARY THE WHITEVILLE BANK
Notes to Unaudited Consolidated Financial Statements
December 31, 1996 and 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of the Company conform with generally
accepted accounting principles and practices within the banking industry. The
policies that materially affect financial position and results of operations
are summarized as follows:
NATURE OF OPERATIONS. Citizens of Hardeman County Financial Services Inc. (the
Company) is a bank-holding company which owns one hundred percent (100%) of the
outstanding common stock of The Whiteville Bank (the Bank). The Bank provides
a variety of financial services through its branches located in two cities in
Hardeman County, Tennessee. The Bank's primary deposit products are demand
deposits, savings accounts, and certificates of deposit. The primary lending
products are commercial business loans, real estate loans, and installment
loans.
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include the
accounts of the Company and its subsidiary. All material intercompany accounts
and transactions have been eliminated in consolidation.
USE OF ESTIMATES. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Material estimates that are particularly susceptible to significant change
relate to the determination of the allowance for losses on loans and the
valuation of real estate acquired in connection with foreclosures or in
satisfaction of loans.
While management uses available information to recognize losses on loans and
foreclosed real estate, future additions to the allowances may be necessary
based on changes in local economic conditions. In addition, regulatory
agencies, as an integral part of their examination process, periodically review
the Bank's allowance for losses on loans and foreclosed real estate. Such
agencies may require the Bank to recognize additions to the allowance based on
their judgment about information available to them at the time of their
examination. Because of these factors, it is reasonably possible that the
allowance for losses on loans and foreclosed real estate may change materially
in the near term.
CASH AND CASH EQUIVALENTS. For purposes of reporting cash flows, cash and cash
equivalents include cash on hand, amounts due from banks, and federal funds
sold. By maintaining certain minimum deposits in other financial institutions,
the Bank receives a reduction in fees for services provided by those
institutions. These deposits frequently exceed federally insured limits.
7
<PAGE> 137
CITIZENS OF HARDEMAN COUNTY FINANCIAL SERVICES INC.
AND ITS SUBSIDIARY THE WHITEVILLE BANK
Notes to Unaudited Consolidated Financial Statements
December 31, 1996 and 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
SECURITIES HELD TO MATURITY. Securities for which the Bank has the positive
intent and ability to hold to maturity are reported at cost, adjusted for
premiums and discounts that are recognized in interest income using the
interest method over the period to maturity.
SECURITIES AVAILABLE FOR SALE. Securities that management designates will be
sold to meet liquidity or other needs are classified as securities held to
maturity. Unrealized holding gains and losses, net of tax, on securities
available for sale are reported as a net amount in a separate component of
stockholders' equity until realized. Gains and losses on the sale of
securities available for sale are determined using the specific-identification
method. Premiums and discounts are recognized in interest income over the
period to maturity.
LOANS. Unrealized interest on installment loans is recognized as income over
the term of the loans using the sum-of-the-months-digits method which
approximates the interest method.
Loans are placed on nonaccrual when a loan is specifically determined to be
impaired or when, in the opinion of management, there is an indication that the
borrower may be unable to meet payments as they become due. Any unpaid
interest previously accrued on those loans is reversed from income. Interest
income generally is not recognized on specific impaired loans unless the
likelihood of further loss is remote. Interest payments received on such loans
are applied as a reduction of the loan principle balance. Interest income on
other nonaccrual loans is recognized only to the extent of interest payments
received.
The Company adopted the provisions of SFAS No. 114, Accounting by Creditors for
Impairment of a Loan, as amended by SFAS No. 118, Accounting by Creditors for
Impairment of a Long-Income Recognition and Disclosures, during 1995. SFAS No.
114 prescribes a valuation methodology for impaired loans as defined by the
statement. Generally, a loan is considered impaired if management believes it
is probable that all amounts due will not be collected according to the
contractual terms in the loan agreement. An impaired loan must be valued using
the present value of expected cash flows discounted at the loan's effective
interest rate, the loan's observable market value, or the fair value of the
loan's underlying collateral. The adoption of these standards had no impact on
the allowance for losses on loans or on net income for the years ended December
31, 1996 and 1995, and the related disclosures are not significant.
The allowance for loan losses is maintained at a level which, in management's
judgment, is adequate to absorb credit losses inherent in the loan portfolio.
The amount of the allowance is based on management's evaluation of the
collectibility of the loan portfolio, including the nature of the portfolio,
credit concentrations, trends in historical loss experience, specific impaired
loans, and economic conditions. Allowances for impaired loans are generally
determined based on collateral values or the present value of estimated cash
flows. The allowance is increased by a provision for loan losses, which is
charged to expense, and reduced by charge-offs, net of recoveries.
8
<PAGE> 138
CITIZENS OF HARDEMAN COUNTY FINANCIAL SERVICES INC.
AND ITS SUBSIDIARY THE WHITEVILLE BANK
Notes to Unaudited Consolidated Financial Statements
December 31, 1996 and 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
PREMISES AND EQUIPMENT. Premises and equipment are stated at cost, less
accumulated depreciation. Depreciation is computed on the straight-line
depreciation method and accelerated depreciation methods for both financial
statement purposes and income tax purposes. Premises are depreciated over 20
to 50 years and furniture, fixtures and equipment are depreciated over 3 to 10
years.
Additions and major renewals and betterments are capitalized and depreciated
over their estimated useful lives. Repairs, maintenance, and minor renewals
are charged to operating expense as incurred. When property is replaced or
otherwise disposed of, the cost of such assets and the related accumulated
depreciation are removed from the accounts. The gain or loss, if any, is
recorded in the statement of income.
FORECLOSED REAL ESTATE. Real estate properties acquired through, or in lieu
of, loan foreclosure are initially recorded at fair value at the date of
foreclosure, establishing a new cost basis. After foreclosure, valuations are
periodically performed by management and the real estate is carried at the
lower of (1) the asset's new cost basis or (2) fair value minus estimated costs
to sell. Revenue and expenses from operations and additions to the valuation
allowance are included in loss on foreclosed real estate. Foreclosed assets
are not depreciated. The carrying value of foreclosed real estate was $676,544
at December 31, 1996 and $124,432 at December 31, 1995.
DEFERRED INCOME TAXES. Deferred tax assets and liabilities are reflected at
currently enacted income tax rates applicable to the period in which the
deferred tax assets or liabilities are expected to be realized or settled. As
changes in tax laws or rates are enacted, deferred tax assets and liabilities
are adjusted through the provision for income taxes.
OFF BALANCE SHEET FINANCIAL INSTRUMENTS. Off balance sheet financial
instruments are commitments to extend credit and letters of credit. Such
financial instruments are recorded in the financial statements when they are
funded.
NET INCOME PER SHARE OF COMMON STOCK. Net income per share of common stock is
computed by dividing net income by the 483 shares of stock outstanding as of
December 31, 1996 and 1995.
9
<PAGE> 139
CITIZENS OF HARDEMAN COUNTY FINANCIAL SERVICES INC.
AND ITS SUBSIDIARY THE WHITEVILLE BANK
Notes to Unaudited Consolidated Financial Statements - continued
December 31, 1996 and 1995
NOTE 2 - SECURITIES. The Company has adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities." As a result, securities were classified in the balance sheet
according to management's intent as either securities held to maturity or
securities available for sale.
The amortized cost and approximate market values of securities at December 31,
1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996
-----------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
SECURITIES HELD TO MATURITY:
US Government securities $ 107,654 $ -0- $ 96 $ 107,558
Securities of US government
agencies and corporations 6,479,671 39,614 83,433 6,435,852
Obligations of states and
political subdivisions 567,382 1,678 14,238 554,822
----------- ---------- --------- ----------
$ 7,154,707 $ 41,292 $ 97,767 $7,098,232
----------- ---------- --------- ----------
SECURITIES AVAILABLE FOR SALE:
US Government securities $ 352,672 $ 9,099 $ -0- $ 361,771
Securities of US Government
agencies and corporations 6,869,061 3,048 60,912 6,811,197
Obligations of state and
political subdivisions 514,377 27,765 1,398 540,744
Other securities 535,538 -0- 18,265 517,273
----------- ---------- --------- ----------
$ 8,271,648 $ 39,912 $ 80,575 $8,230,985
----------- ---------- --------- ----------
</TABLE>
10
<PAGE> 140
CITIZENS OF HARDEMAN COUNTY FINANCIAL SERVICES INC.
AND ITS SUBSIDIARY THE WHITEVILLE BANK
Notes to Unaudited Consolidated Financial Statements - continued
December 31, 1996 and 1995
NOTE 2 - SECURITIES - continued
<TABLE>
<CAPTION>
1995
----------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
SECURITIES HELD TO MATURITY:
Securities of US government $6,373,902 $ 15,361 $ 60,664 $ 6,328,599
agencies and corporations
Obligations of states and
political subdivisions 1,254,041 8,456 10,429 1,252,068
---------- -------- ---------- -----------
$7,627,943 $ 23,817 $ 71,093 $ 7,580,667
---------- -------- ---------- -----------
SECURITIES AVAILABLE FOR SALE:
US Government securities $ 468,851 $ 17,352 $ -0- $ 486,203
Securities of US Government
agencies and corporations 3,860,337 48,758 35,332 3,873,763
Obligations of state and
political subdivisions 1,077,388 4,537 16,599 1,065,326
Other securities 565,492 -0- -0- 565,492
---------- -------- ---------- -----------
$5,972,068 $ 70,647 $ 51,931 $ 5,990,784
---------- -------- ---------- -----------
</TABLE>
The scheduled maturities of securities available for sale and securities held
to maturity at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
Securities Available for Sale Securities Held to Maturity
----------------------------------------------------------------
Amortized Market Amortized Market
Cost Value Cost Value
---- ----- ---- -----
<S> <C> <C> <C> <C>
Due in one year or less $ 146,349 $ 146,145 $ 874,065 $ 872,488
Due from one year to five years 4,653,468 4,610,127 553,076 549,222
Due from five years to ten years 2,354,890 2,341,960 6,844,507 6,809,275
---------- ----------- ----------- -----------
$7,154,707 $ 7,098,232 $ 8,271,648 $ 8,230,985
---------- ----------- ----------- -----------
</TABLE>
Proceeds from sales of securities were $6,188,170 in 1996 and $2,933,044 in
1995. Gross gains of $30,775 in 1996 and $66,424 in 1995 were realized on
those sales. Gross losses realized were $2,042 in 1996 and $31,158 in 1995.
Securities with a book value of approximately $8,400,000 and $8,599,643 at
December 31, 1996 and 1995, respectively, were pledged to secure various
deposits.
11
<PAGE> 141
CITIZENS OF HARDEMAN COUNTY FINANCIAL
SERVICES AND ITS SUBSIDIARY THE
WHITEVILLE BANK
Notes to Unaudited Consolidated Financial Statements - continued
December 31, 1996 and 1995
NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSES
A summary of transactions in the allowance for loan losses for the years ended
December 31, 1996 and 1995, is as follows:
<TABLE>
<CAPTION>
1996 1995
----------- ---------
<S> <C> <C>
Balance, beginning of period $ 433,934 $ 485,143
Provision charged to operations 95,174 37,000
Loans charged off (132,738) (122,347)
Recoveries 23,192 34,138
----------- ---------
Balance, end of period $ 419,562 $ 433,934
----------- ---------
</TABLE>
At December 31, 1996 and 1995, loans consist of the following (in thousands):
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Real estate loans $ 17,908 $ 15,462
Commercial and industrial loans 9,761 8,888
Loans to individuals for household,
family and other consumer expenditures 8,647 7,902
--------- ---------
Total loans $ 36,316 $ 32,252
Less-Unearned interest (262) (302)
Allowance for loan losses (420) (434)
--------- ---------
Net loans $ 35,634 $ 31,516
--------- ---------
</TABLE>
In the normal course of business, the Company and its subsidiary make loans to
directors and executive officers on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with other borrowers. Loans to directors and executive officers
totaled $201,188 at December 31, 1996.
At December 31, 1996 and 1995, loans that were specifically classified as
impaired were insignificant in relation to the Bank's loan portfolio. The
Company has no commitments to loan additional funds to the borrowers of
impaired loans.
12
<PAGE> 142
CITIZENS OF HARDEMAN COUNTY FINANCIAL SERVICES
AND ITS SUBSIDIARY THE WHITEVILLE BANK
Notes to Consolidated Financial Statements - continued
December 31, 1996 and 1995
NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSES - continued
The Company's only significant concentration of credit at December 31, 1996,
occurred in real estate loans which totaled $17,907,660. While real estate
loans accounted for 49% of total loans, these loans were primarily residential
development and construction loans, residential mortgage loans, commercial
loans secured by commercial properties and consumer loans. Substantially all
real estate loans are secured by properties located in Tennessee.
NOTE 4 - PREMISES AND EQUIPMENT. Premises and equipment as of December 31,
1996 and 1995 summarized as follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Land $ 150,885 $ 150,885
Buildings and leasehold improvements 1,780,520 1,511,715
Furniture, fixtures and equipment 807,288 761,077
----------- -----------
2,738,693 2,423,677
Accumulated depreciation 1,042,560 928,592
----------- -----------
$ 1,696,133 $ 1,495,085
----------- -----------
</TABLE>
Depreciation expense for the years ended December 31, 1996 and 1995 was
$113,967 and $113,704, respectively.
NOTE 5 - INCOME TAXES. The Company files consolidated federal and state income
tax returns with its subsidiary. The provision for income taxes in the
statements of income for the years ended December 31, 1996 and 1995 includes
the following:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Current tax expense $ 334,299 $285,666
Deferred income taxes related to:
Provision for loan losses (4,455) (18,042)
Other 2,614 36,514
--------- -------
Provision for income taxes $ 332,458 $304,138
--------- --------
</TABLE>
13
<PAGE> 143
CITIZENS OF HARDEMAN COUNTY FINANCIAL SERVICES
AND ITS SUBSIDIARY THE WHITEVILLE BANK
Notes to Unaudited Consolidated Financial Statements - continued
December 31, 1996 and 1995
NOTE 5 - INCOME TAXES - continued
The income tax provision is different from the expected tax provision computed
by multiplying income before income taxes by the statutory federal income tax
rates. The reasons for this difference are as follows:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Expected tax at statutory rates, net of
surtax exemption $ 301,190 $ 263,148
Increase (decrease) resulting from tax of:
Tax exempt interest on obligations of states
and political subdivisions (4,245) (6,086)
State income taxes, net of federal income tax
benefit 37,908 32,334
Other (2,395) 14,742
--------- ---------
Provision for income taxes $ 332,458 $ 304,138
--------- ---------
</TABLE>
As of December 31, 1996, deferred tax assets recognized for deductible
temporary differences totaled $189,794 and deferred tax liabilities for taxable
temporary differences totaled $9,752.
NOTE 6 - EMPLOYEE BENEFIT PLANS. The Company's subsidiary bank has a profit
sharing employee benefit plan covering substantially all employees who have
completed at least one year of service and met minimum age requirements. The
Bank's annual contribution is discretionary and was $11,000 in 1996 and $9,000
in 1995. The subsidiary bank also has a deferred compensation plan with two
executive officers. The accumulated liability for this plan was $90,958 at
December 31, 1996.
NOTE 7 - STOCK OPTION. The Company's subsidiary bank granted a continuous
stock option for two shares of stock to an employee on March 1, 1988, for a
total purchase price of $6,400 ($3,200 for each share). This option was still
outstanding at December 31, 1996.
NOTE 8 - LIQUIDITY AND CAPITAL RESOURCES. The Company's primary source of
funds with which to pay its obligations is the receipt of dividends from its
subsidiary bank. Bank regulations limit the amount of dividends that may be
paid without prior approval of the Bank's regulatory authorities. It is
management's intention to limit the amount of dividends paid in order to
maintain compliance with capital guidelines and to maintain a strong capital
position in the subsidiary bank.
14
<PAGE> 144
CITIZENS OF HARDEMAN COUNTY FINANCIAL SERVICES
AND ITS SUBSIDIARY THE WHITEVILLE BANK
Notes to Unaudited Consolidated Financial Statements - continued
December 31, 1996 and 1995
NOTE 9 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK. The Bank is a
party to financial instruments with off-balance-sheet risk in the normal
course of business to meet the financing needs of their customers. These
financial instruments include various commitments to extend credit and standby
letters of credit. These instruments expose the Bank to varying degrees of
credit and interest rate risk in excess of the amount recognized in the
accompanying consolidated balance sheets. To manage this risk, the Bank uses
the same management policies and procedures for financial instruments with
off-balance-sheet risk as they do for financial instruments whose risk is
reflected on the consolidated balance sheets.
The credit risk of all financial instruments varies based on many factors,
including the value of collateral held and other security arrangements. To
mitigate credit risk, the Bank generally determines the need for specific
covenant, guarantee, and collateral requirements on a case-by-case basis,
depending on the customer's creditworthiness. The amount and type of
collateral held to reduce credit risk vary, but may include real estate,
machinery, equipment, inventory, and accounts receivable as well as cash on
deposit, stocks, bonds and other marketable securities that are generally held
in the Bank's possession. This collateral is valued and inspected to ensure
both its existence and adequacy. The Bank requests additional collateral when
appropriate.
At December 31, 1996, commitments under standby letters of credit and
undisbursed loan commitments aggregated $465,905. The Bank's credit exposure
for these financial instruments is represented by their contractual amounts.
The Bank does not anticipate any material losses as a result of the commitments
under standby letters of credit and undisbursed loan commitments.
NOTE 10 - FAIR VALUES OF FINANCIAL INSTRUMENTS. SFAS No. 126, Exemption from
Certain Required Disclosures about Financial Instruments for Certain Nonpublic
Entities provides exemption for certain entities from the requirements of SFAS
No. 107, Disclosures About Fair Value of Financial Instruments. The Company
meets the criteria for this exemption and has not presented such information.
NOTE 11 - EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS. In March, 1995, the
Financial Accounting Standards Board issued Statement No. 121 "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of". This statement generally requires that long-lived assets (including
certain intangible assets) used by an entity be reviewed for impairment when
events or changes in circumstances indicate the carrying amount of an asset may
not be recoverable. This review must estimate the future cash flows expected
to result from the use of the asset and its eventual disposition. If expected
future cash flows (discounted and without interest charges) are less than the
carrying amount of the asset, an impairment is recognized. Management believes
this statement does not materially impact the Bank's financial statements.
15
<PAGE> 145
CITIZENS OF HARDEMAN COUNTY FINANCIAL SERVICES
AND ITS SUBSIDIARY THE WHITEVILLE BANK
Notes to Unaudited Consolidated Financial Statements - continued
December 31, 1996 and 1995
In May, 1995, the Financial Accounting Standards Board issued Statement No. 122
"Accounting for Mortgage Servicing Rights". Because the Bank does not service
mortgages and has acquired no mortgage servicing rights, management believes
this statement will have no effect on the Bank's financial statements.
During 1995, the FASB issued SFAS No. 123, Accounting for Stock-Based
Compensation, which is effective for fiscal years beginning after December 15,
1995. The Company has not adopted the provisions of SFAS No. 123, as no
stock-based compensation plans have been adopted by the Company.
During 1996, the FASB issued SFAS No. 125, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities, which is
effective for transfers and servicing of financial assets and extinguishments
of liabilities occurring after December 31, 1996, and shall be applied
prospectively. The Company adopted the provisions of SFAS No. 125 during 1997,
which had no material impact on the Company's financial position, results of
operations or liquidity.
NOTE 12 - SUBSEQUENT EVENTS. The Company has entered into an agreement with
Union Planters Corporation, Memphis, TN, wherein all outstanding stock of the
Company is to be acquired by Union Planters Corporation. Management expects to
consummate the acquisition on October 1, 1997.
NOTE 13 - REGULATORY REQUIREMENTS. The Bank is subject to the regulations of
certain federal and state agencies and undergoes periodic examinations by those
regulatory agencies. The Bank is subject to dividend restrictions. These
restrictions limit the amount of dividends the Bank may declare without the
prior approval of the federal and state agencies. This restriction was removed
in 1997.
In addition, the Bank is required to maintain certain minimum ratios of total
capital to total "risk weighted" assets as defined by the OCC. As of December
31, 1996, the Tier I and total capital ratios required for the Bank to be
considered adequately capitalized is 8% for each Tier. The Bank's actual
ratios as of that date were 10.26% and 11.21%. The Bank's leverage ratio as of
December 31, 1996 was 9.26%.
16
<PAGE> 146
APPENDIX B
B-2
Unaudited Consolidated Balance Sheet of Citizens of Hardeman County
Financial Services as of March 31, 1997 and unaudited consolidated Statements
of Income and Cash Flows for the three months ended March 31, 1997 and 1996
(and notes thereto)
<PAGE> 147
CITIZENS OF HARDEMAN COUNTY FINANCIAL SERVICES INC.
AND ITS SUBSIDIARY THE WHITEVILLE BANK
Unaudited Consolidated Balance Sheet as of March 31, 1997
<TABLE>
<CAPTION>
Assets
1997
-----------
<S> <C>
CASH AND CASH EQUIVALENTS
Cash on hand $ 1,263,309
Due from banks 829,450
Federal funds sold 3,500,000
Time deposit 100,000
-----------
Total cash and cash equivalents 5,692,759
-----------
INVESTMENT SECURITIES
To be held to maturity (fair value of $6,253,572
and $8,383,097) 6,349,202
Available for sale (Amortized cost $9,580,397) 9,554,338
-----------
15,903,540
-----------
LOANS
Real estate 17,863,463
Commercial 10,736,187
Installment 8,586,862
Less unearned discount (256,763)
-----------
Less allowance for loan losses 36,929,749
493,040
-----------
36,436,709
-----------
BANK PREMISES AND EQUIPMENT
Land, buildings, and fixtures 1,942,991
Furniture and equipment 808,104
-----------
2,751,095
Less accumulated depreciation 1,068,717
-----------
1,682,378
-----------
OTHER ASSETS
Deferred income tax benefit 269,012
Foreclosed real estate 473,433
Accrued interest receivable 904,882
Prepaid expenses 172,046
-----------
1,819,373
-----------
$61,534,759
===========
</TABLE>
See accompanying notes.
1
<PAGE> 148
CITIZENS OF HARDEMAN COUNTY FINANCIAL SERVICES INC.
AND ITS SUBSIDIARY THE WHITEVILLE BANK
Unaudited Consolidated Balance Sheet as of March 31, 1997
Liabilities and Stockholders' Equity
<TABLE>
<CAPTION>
1997
-----------
<S> <C>
DEPOSITS
Demand deposits (including $6,377,618
and $6,990,582) in NOW accounts $10,161,677
Certificates of Deposit greater than $100,000 13,801,909
Other interest bearing deposits 32,105,425
-----------
56,069,011
-----------
OTHER LIABILITIES
Accrued interest payable 485,051
Accrued expenses 105,167
Income taxes payable 109,605
-----------
699,823
-----------
Total liabilities 56,768,834
-----------
STOCKHOLDERS' EQUITY
Common stock ($100 par value, 500 shares authorized,
483 issued and outstanding) 48,300
Additional paid in capital 1,311,100
Retained earnings 3,593,994
Unrealized gain (loss) on investment securities
available for sale (187,469)
-----------
Total stockholders' equity 4,765,925
-----------
Total liabilities and stockholders' equity $61,534,759
===========
</TABLE>
See accompanying notes.
2
<PAGE> 149
CITIZENS OF HARDEMAN COUNTY FINANCIAL SERVICES INC.
AND ITS SUBSIDIARY THE WHITEVILLE BANK
Unaudited Consolidated Statements of Income
For the three month period ended March 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
---------- ---------
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 935,024 $ 849,763
Interest on investment securities:
U.S. Treasury and U.S. Government
agency securities 234,238 171,398
State and municipal securities 15,304 31,290
Interest on federal funds 53,173 61,859
Other interest and dividends 11,646 12,350
---------- ---------
1,249,385 1,126,660
---------- ---------
INTEREST EXPENSE
Certificates of deposit 583,954 527,605
Savings accounts 38,238 28,419
Demand deposit accounts 64,092 52,546
Individual retirement accounts 22,037 19,604
---------- ---------
708,321 628,174
---------- ---------
NET INTEREST INCOME 541,064 498,486
PROVISION FOR LOAN LOSSES 40,000 35,173
---------- ---------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 501,064 463,313
OTHER INCOME (EXPENSE)
Service fees and commissions 47,728 40,853
Gain on sale of investment 13,829 25,579
Other 29,130 14,076
---------- ---------
90,687 80,508
---------- ---------
OTHER EXPENSES
Salaries and wages 139,968 130,770
Employee benefits 36,442 56,371
Occupancy expenses 28,594 26,737
Furniture and equipment expenses 32,996 28,257
Other operating expenses 95,707 79,936
---------- ---------
333,707 322,071
---------- ---------
INCOME BEFORE INCOME TAXES 258,044 221,750
INCOME TAXES
Currently payable 112,979 78,251
Deferred liability (benefit) (16,106) (906)
---------- ---------
96,873 77,345
---------- ---------
NET INCOME $ 161,171 $ 144,405
========== =========
</TABLE>
See accompanying notes.
3
<PAGE> 150
CITIZENS OF HARDEMAN COUNTY FINANCIAL SERVICES INC.
AND ITS SUBSIDIARY THE WHITEVILLE BANK
Unaudited Consolidated Statements of Cash Flows
For the three month period ended March 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received $ 1,244,361 $ 1,058,518
Fees and other income received 90,687 80,508
Interest paid (633,196) (571,621)
Cash paid to suppliers and employees (363,853) (334,951)
Income taxes paid -0- (25,847)
------------ ------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 337,999 206,607
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities and sale
of securities 1,103,002 1,692,894
Purchase of securities (1,761,739) (3,797,690)
Net (increase) decrease in customer loans (802,395) (269,515)
Capital expenditures (12,402) (200,903)
Proceeds from sales of foreclosed
real estate 208,394 -0-
------------ ------------
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES (1,265,140) (2,575,214)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in demand, NOW and
savings accounts (1,449,593) 1,234,178
Net increase in certificates of deposit 1,358,015 308,650
Dividends paid (5,796) (5,796)
------------ ------------
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES (97,374) 1,537,032
------------ ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (1,024,515) (831,575)
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 6,717,274 6,867,198
------------ ------------
CASH AND CASH EQUIVALENTS, END OF
PERIOD $ 5,692,759 $ 6,035,623
============ ============
</TABLE>
See accompanying notes.
5
<PAGE> 151
CITIZENS OF HARDEMAN COUNTY FINANCIAL SERVICES INC.
AND ITS SUBSIDIARY THE WHITEVILLE BANK
Unaudited Consolidated Statements of Cash Flows - continued
For the three month period ended March 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
RECONCILIATION OF NET INCOME
TO NET CASH PROVIDED BY
OPERATING ACTIVITIES
Net income $161,171 $144,405
-------- --------
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 26,401 26,071
Provisions for loan losses 40,000 35,173
Net accretion of investment securities 53,596 20,589
Gain (Loss) on sale of investment securities (13,829) (25,579)
(Increases) decreases in assets:
Accrued interest receivable (5,024) (68,142)
Prepaid expenses and other assets (30,146) (12,880)
Refundable income taxes 15,701 -0-
Increases (decreases) in liabilities:
Accrued interest payable 75,125 56,553
Accrued expenses (14,951) 12,468
Income taxes payable and deferred
income taxes 29,955 17,949
-------- --------
TOTAL ADJUSTMENTS 176,828 62,202
-------- --------
NET CASH PROVIDED BY OPERATING
ACTIVITIES $337,999 $206,607
======== ========
</TABLE>
See accompanying notes.
4
<PAGE> 152
CITIZENS OF HARDEMAN COUNTY FINANCIAL SERVICES INC.
AND ITS SUBSIDIARY THE WHITEVILLE BANK
Notes to Unaudited Consolidated Financial Statements
March 31, 1997 and 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of the Company conform with generally
accepted accounting principles and practices within the banking industry. The
policies that materially affect financial position and results of operations
are summarized as follows:
NATURE OF OPERATIONS. Citizens of Hardeman County Financial Services Inc. (the
Company) is a bank-holding company which owns one hundred percent (100%) of the
outstanding common stock of The Whiteville Bank (the Bank). The Bank provides
a variety of financial services through its branches located in two cities in
Hardeman County, Tennessee. The Bank's primary deposit products are demand
deposits, savings accounts, and certificates of deposit. The primary lending
products are commercial business loans, real estate loans, and installment
loans.
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include the
accounts of the Company and its subsidiary. All material intercompany accounts
and transactions have been eliminated in consolidation.
USE OF ESTIMATES. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Material estimates that are particularly susceptible to significant change
relate to the determination of the allowance for losses on loans and the
valuation of real estate acquired in connection with foreclosures or in
satisfaction of loans.
While management uses available information to recognize losses on loans and
foreclosed real estate, future additions to the allowances may be necessary
based on changes in local economic conditions. In addition, regulatory
agencies, as an integral part of their examination process, periodically review
the Bank's allowance for losses on loans and foreclosed real estate. Such
agencies may require the Bank to recognize additions to the allowance based on
their judgment about information available to them at the time of their
examination. Because of these factors, it is reasonably possible that the
allowance for losses on loans and foreclosed real estate may change materially
in the near term.
CASH AND CASH EQUIVALENTS. For purposes of reporting cash flows, cash and cash
equivalents include cash on hand, amounts due from banks, and federal funds
sold. By maintaining certain minimum deposits in other financial institutions,
the Bank receives a reduction in fees for services provided by those
institutions. These deposits frequently exceed federally insured limits.
6
<PAGE> 153
CITIZENS OF HARDEMAN COUNTY FINANCIAL SERVICES INC.
AND ITS SUBSIDIARY THE WHITEVILLE BANK
Notes to Unaudited Consolidated Financial Statements
March 31, 1997 and 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
SECURITIES HELD TO MATURITY. Securities for which the Bank has the positive
intent and ability to hold to maturity are reported at cost, adjusted for
premiums and discounts that are recognized in interest income using the
interest method over the period to maturity.
SECURITIES AVAILABLE FOR SALE. Securities that management designates will be
sold to meet liquidity or other needs are classified as securities available
for sale. Unrealized holding gains and losses, net of tax, on securities
available for sale are reported as a net amount in a separate component of
stockholders' equity until realized. Gains and losses on the sale of
securities available for sale are determined using the specific-identification
method. Premiums and discounts are recognized in interest income over the
period to maturity.
LOANS. Unrealized interest on installment loans is recognized as income over
the term of the loans using the sum-of-the-months-digits method which
approximates the interest method.
Loans are placed on nonaccrual when a loan is specifically determined to be
impaired or when, in the opinion of management, there is an indication that the
borrower may be unable to meet payments as they become due. Any unpaid
interest previously accrued on those loans is reversed from income. Interest
income generally is not recognized on specific impaired loans unless the
likelihood of further loss is remote. Interest payments received on such loans
are applied as a reduction of the loan principle balance. Interest income on
other nonaccrual loans is recognized only to the extent of interest payments
received.
The Company adopted the provisions of SFAS No. 114, Accounting by Creditors for
Impairment of a Loan, as amended by SFAS No. 118, Accounting by Creditors for
Impairment of a Long-Income Recognition and Disclosures, during 1995. SFAS No.
114 prescribes a valuation methodology for impaired loans as defined by the
statement. Generally, a loan is considered impaired if management believes
that it is probable that all amounts due will not be collected according to the
contractual terms in the loan agreement. An impaired loan must be valued using
the present value of expected cash flows discounted at the loan's effective
interest rate, the loan's observable market value, or the fair value of the
loan's underlying collateral. The adoption of these standards had no impact on
the allowance for losses on loans or on net income for the periods ended March
31, 1997 and 1996, and the related disclosures are not significant.
The allowance for loan losses is maintained at a level which, in management's
judgment, is adequate to absorb credit losses inherent in the loan portfolio.
The amount of the allowance is based on management's evaluation of the
collectibility of the loan portfolio, including the nature of the portfolio,
credit concentrations, trends in historical loss experience, specific impaired
loans, and economic conditions. Allowances for impaired loans are generally
determined based on collateral values or the present value of estimated cash
flows. The allowance is increased by a provision for loan losses, which is
charged to expense, and reduced by charge-offs, net of recoveries.
7
<PAGE> 154
CITIZENS OF HARDEMAN COUNTY FINANCIAL SERVICES INC.
AND ITS SUBSIDIARY THE WHITEVILLE BANK
Notes to Unaudited Consolidated Financial Statements
March 31, 1997 and 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
PREMISES AND EQUIPMENT. Premises and equipment are stated at cost, less
accumulated depreciation. Depreciation is computed on the straight-line
depreciation method and accelerated depreciation methods for both financial
statement purposes and income tax purposes. Premises are depreciated over 20
to 50 years and furniture, fixtures and equipment are depreciated over 3 to 10
years.
Additions and major renewals and betterments are capitalized and depreciated
over their estimated useful lives. Repairs, maintenance, and minor renewals
are charged to operating expense as incurred. When property is replaced or
otherwise disposed of, the cost of such assets and the related accumulated
depreciation are removed from the accounts. The gain or loss, if any, is
recorded in the statement of income.
FORECLOSED REAL ESTATE. Real estate properties acquired through, or in lieu
of, loan foreclosure are initially recorded at fair value at the date of
foreclosure, establishing a new cost basis. After foreclosure, valuations are
periodically performed by management and the real estate is carried at the
lower of (1) the asset's new cost basis or (2) fair value minus estimated costs
to sell. Revenue and expenses from operations and additions to the valuation
allowance are included in loss on foreclosed real estate. Foreclosed assets
are not depreciated. The carrying value of foreclosed real estate was $473,433
at March 31, 1997.
DEFERRED INCOME TAXES. Deferred tax assets and liabilities are reflected at
currently enacted income tax rates applicable to the period in which the
deferred tax assets or liabilities are expected to be realized or settled. As
changes in tax laws or rates are enacted, deferred tax assets and liabilities
are adjusted through the provision for income taxes.
OFF BALANCE SHEET FINANCIAL INSTRUMENTS. Off balance sheet financial
instruments are commitments to extend credit and letters of credit. Such
financial instruments are recorded in the financial statements when they are
funded.
NET INCOME PER SHARE OF COMMON STOCK. Net income per share of common stock is
computed by dividing net income by the 483 shares of stock outstanding as of
March 31, 1997 and 1996.
8
<PAGE> 155
CITIZENS OF HARDEMAN COUNTY FINANCIAL SERVICES INC.
AND ITS SUBSIDIARY THE WHITEVILLE BANK
Notes to Unaudited Consolidated Financial Statements - continued
March 31, 1997 and 1996
NOTE 2 - SECURITIES. The Company has adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities." As a result, securities were classified in the balance sheet
according to management's intent as either securities held to maturity or
securities available for sale.
The amortized cost and approximate market values of securities at March 31,
1997 and 1996 are as follows:
<TABLE>
<CAPTION>
March 31, 1997
-----------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
SECURITIES HELD TO MATURITY:
US Government securities $ 99,124 $ 149 $ -0- $ 99,273
Securities of US government
agencies and corporations 5,680,287 12,783 114,591 5,578,479
Obligations of states and
political subdivisions 569,791 6,138 109 575,820
----------- ---------- ---------- ----------
$ 6,349,202 $ 19,070 $ 114,700 $6,253,572
----------- ---------- ---------- ----------
SECURITIES AVAILABLE FOR SALE:
US Government securities $ 207,584 $ -0- $ 454 $ 207,130
Securities of US Government
agencies and corporations 8,341,183 349 1,971 8,339,561
Obligations of state and
political subdivisions 496,092 -0- 5,718 490,374
Other securities 535,538 -0- 18,265 517,273
----------- ---------- ---------- ----------
$ 9,580,397 $ 349 $ 26,408 $9,554,338
----------- ---------- ---------- ----------
</TABLE>
9
<PAGE> 156
CITIZENS OF HARDEMAN COUNTY FINANCIAL SERVICES INC.
AND ITS SUBSIDIARY THE WHITEVILLE BANK
Notes to Unaudited Consolidated Financial Statements - continued
March 31, 1997 and 1996
NOTE 2 - SECURITIES - continued
The scheduled maturities of securities available for sale and securities held
to maturity at March 31, 1997 are as follows:
<TABLE>
<CAPTION>
Securities Available for Sale Securities Held to Maturity
----------------------------------------------------------------
Amortized Market Amortized Market
Cost Value Cost Value
---- ----- ---- -----
<S> <C> <C> <C> <C>
Due in one year or less $7,963,506 $7,993,915 $ 99,124 $ 99,273
Due from one year to five years 1,616,891 1,560,423 5,518,918 5,438,109
Due from five years to ten years -0- -0- 731,160 716,190
---------- ---------- ----------- -----------
$9,580,397 $9,554,338 $6,349,202 $6,253,572
---------- ---------- ----------- -----------
</TABLE>
Proceeds from sales of securities were $1,103,002 during the three months ended
March 31, 1997 and $1,692,894 during the three months ended March 31, 1996.
Gross gains of $14,530 during the three months ended March 31, 1997 and $26,648
during the three months ended March 31, 1996 were realized on those sales.
Gross losses realized were $701 during the three months ended March 31, 1997
and $1,069 during the three months ended March 31, 1996.
Securities with a book value of approximately $10,336,000 at March 31, 1997
were pledged to secure various deposits.
A summary of transactions in the allowance for loan losses for the three month
period ended March 31, 1997, is as follows:
<TABLE>
<CAPTION>
March 31, 1997
--------------
<S> <C>
Balance, beginning of period $ 419,138
Provision charged to operations 40,000
Loans charged off (12,018)
Recoveries 45,920
------------
Balance, end of period $ 493,040
------------
</TABLE>
10
<PAGE> 157
CITIZENS OF HARDEMAN COUNTY FINANCIAL SERVICES
AND ITS SUBSIDIARY THE WHITEVILLE BANK
Notes to Unaudited Consolidated Financial Statements - continued
March 31, 1997 and 1996
NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSES
At March 31, 1997, loans consist of the following (in thousands):
<TABLE>
<CAPTION>
March 31, 1997
--------------
<S> <C>
Real estate loans $ 17,864
Commercial and industrial loans 10,736
Loans to individuals for household,
family and other consumer expenditures 8,587
----------
Total loans $ 37,187
Less-Unearned interest (257)
Allowance for loan losses (493)
----------
Net loans $ 36,437
----------
</TABLE>
In the normal course of business, the Company and its subsidiary make loans to
directors and executive officers on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with other borrowers. Loans to directors and executive officers
totaled $225,000 at March 31, 1997.
At March 31, 1997, loans that were specifically classified as impaired were
insignificant in relation to the Bank's loan portfolio. The Company has no
commitments to loan additional funds to the borrowers of impaired loans.
The Company's only significant concentration of credit at March 31, 1997,
occurred in real estate loans which totaled $17,863,463. While real estate
loans accounted for 48% of total loans, these loans were primarily residential
development and construction loans, residential mortgage loans, commercial
loans secured by commercial properties and consumer loans. Substantially all
real estate loans are secured by properties located in Tennessee.
11
<PAGE> 158
CITIZENS OF HARDEMAN COUNTY FINANCIAL SERVICES
AND ITS SUBSIDIARY THE WHITEVILLE BANK
Notes to Unaudited Consolidated Financial Statements - continued
March 31, 1997 and 1996
NOTE 4 - PREMISES AND EQUIPMENT. Premises and equipment as of March 31, 1997
are summarized as follows:
<TABLE>
<CAPTION>
March 31, 1997
--------------
<S> <C>
Land $ 150,885
Buildings and leasehold improvements 1,792,106
Furniture, fixtures and equipment 808,104
-----------
Accumulated depreciation $ 2,751,095
1,068,716
-----------
$ 1,682,379
-----------
</TABLE>
Depreciation expense for the three month period ended March 31, 1997 and 1996
was $26,401 and $26,071 respectively.
NOTE 5 - INCOME TAXES. The Company files consolidated federal and state income
tax returns with its subsidiary. The provision for income taxes in the
statements of income for the three months ended March 31, 1997 and 1996,
includes the following:
<TABLE>
<CAPTION>
March 31, 1997 March 31, 1996
-------------- --------------
<S> <C> <C>
Current tax expense $ 112,979 $ 78,251
Deferred income taxes related to:
Provision for loan losses (15,200) -0-
Other (906) (906)
--------- --------
Provision for income taxes $ 96,873 $ 77,345
--------- --------
</TABLE>
12
<PAGE> 159
CITIZENS OF HARDEMAN COUNTY FINANCIAL SERVICES
AND ITS SUBSIDIARY THE WHITEVILLE BANK
Notes to Unaudited Consolidated Financial Statements - continued
March 31, 1997 and 1996
NOTE 5 - INCOME TAXES - continued
The income tax provision is different from the expected tax provision computed
by multiplying income before income taxes by the statutory federal income tax
rates. The reasons for this difference are as follows:
<TABLE>
<CAPTION>
March 31, 1997 March 31, 1996
-------------- --------------
<S> <C> <C>
Expected tax at statutory rates, net of
surtax exemption $ 83,887 $ 69,733
Increase (decrease) resulting from tax of:
Tax exempt interest on obligations of states
and political subdivisions (840) (1,537)
State income taxes, net of federal income tax
benefit 11,598 8,702
Other 2,228 447
---------- --------
Provision for income taxes $ 96,873 $ 77,345
---------- --------
</TABLE>
As of March 31, 1997, deferred tax assets recognized for deductible temporary
differences totaled $708,381 and deferred tax liabilities for taxable temporary
differences totaled $454.
NOTE 6 - EMPLOYEE BENEFIT PLANS. The Company's subsidiary bank has a profit
sharing employee benefit plan covering substantially all employees who have
completed at least one year of service and met minimum age requirements. The
Bank's contribution is discretionary. The Bank did not make a contribution in
1997 but did contribute $3,000 during the three months ended March 31, 1996.
The subsidiary bank also has a deferred compensation plan with two executive
officers. The accumulated liability for this plan was $93,340 at March 31,
1997.
NOTE 7 - STOCK OPTION. The Company's subsidiary bank granted a continuous
stock option for two shares of stock to an employee on March 1, 1988, for a
total purchase price of $6,400 ($3,200 for each share). This option was still
outstanding at March 31, 1997. (See Note 12 - Subsequent Events).
NOTE 8 - LIQUIDITY AND CAPITAL RESOURCES. The Company's primary source of
funds with which to pay its obligations is the receipt of dividends from its
subsidiary bank. Bank regulations limit the amount of dividends that may be
paid without prior approval of the Bank's regulatory authorities. It is
management's intention to limit the amount of dividends paid in order to
maintain compliance with capital guidelines and to maintain a strong capital
position in the subsidiary bank.
13
<PAGE> 160
CITIZENS OF HARDEMAN COUNTY FINANCIAL SERVICES
AND ITS SUBSIDIARY THE WHITEVILLE BANK
Notes to Unaudited Consolidated Financial Statements - continued
March 31, 1997 and 1996
NOTE 9 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK. The Bank is a
party to financial instruments with off-balance-sheet risk in the normal
course of business to meet the financing needs of their customers. These
financial instruments include various commitments to extend credit and standby
letters of credit. These instruments expose the Bank to varying degrees of
credit and interest rate risk in excess of the amount recognized in the
accompanying consolidated balance sheets. To manage this risk, the Bank uses
the same management policies and procedures for financial instruments with
off-balance-sheet risk as they do for financial instruments whose risk is
reflected on the consolidated balance sheets.
The credit risk of all financial instruments varies based on many factors,
including the value of collateral held and other security arrangements. To
mitigate credit risk, the Bank generally determines the need for specific
covenant, guarantee, and collateral requirements on a case-by-case basis,
depending on the customer's creditworthiness. The amount and type of
collateral held to reduce credit risk vary, but may include real estate,
machinery, equipment, inventory, and accounts receivable as well as cash on
deposit, stocks, bonds and other marketable securities that are generally held
in the Bank's possession. This collateral is valued and inspected to ensure
both its existence and adequacy. The Bank requests additional collateral when
appropriate.
At March 31, 1997, commitments under standby letters of credit and undisbursed
loan commitments aggregated $467,905. The Bank's credit exposure for these
financial instruments is represented by their contractual amounts. The Bank
does not anticipate any material losses as a result of the commitments under
standby letters of credit and undisbursed loan commitments.
NOTE 10 - FAIR VALUES OF FINANCIAL INSTRUMENTS. SFAS No. 126, Exemption from
Certain Required Disclosures about Financial Instruments for Certain Nonpublic
Entities provides exemption for certain entities from the requirements of SFAS
No. 107, Disclosures About Fair Value of Financial Instruments. The Company
meets the criteria for this exemption and has not presented such information.
NOTE 11 - EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS. In March, 1995, the
Financial Accounting Standards Board issued Statement No. 121 "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of". This statement generally requires that long-lived assets (including
certain intangible assets) used by an entity be reviewed for impairment when
events or changes in circumstances indicate the carrying amount of an asset may
not be recoverable. This review must estimate the future cash flows expected
to result from the use of the asset and its eventual disposition. If expected
future cash flows (discounted and without interest charges) are less than the
carrying amount of the asset, an impairment is recognized. Management believes
this statement does not materially impact the Bank's financial statements.
14
<PAGE> 161
CITIZENS OF HARDEMAN COUNTY FINANCIAL SERVICES
AND ITS SUBSIDIARY THE WHITEVILLE BANK
Notes to Unaudited Consolidated Financial Statements - continued
March 31, 1997 and 1996
In May, 1995, the Financial Accounting Standards Board issued Statement No. 122
"Accounting for Mortgage Servicing Rights". Because the Bank does not service
mortgages and has acquired no mortgage servicing rights, management believes
this statement will have no effect on the Bank's financial statements.
During 1995, the FASB issued SFAS No. 123, Accounting for Stock-Based
Compensation, which is effective for fiscal years beginning after December 15,
1995. The Company has not adopted the provisions of SFAS No. 123, as no
stock-based compensation plans have been adopted by the Company.
During 1996, the FASB issued SFAS No. 125, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities, which is
effective for transfers and servicing of financial assets and extinguishments
of liabilities occurring after December 31, 1996, and shall be applied
prospectively. The Company adopted the provisions of SFAS No. 125 during 1997,
which had no material impact on the Company's financial position, results of
operations or liquidity.
NOTE 12 - SUBSEQUENT EVENTS. The Company has entered into an agreement with
Union Planters Corporation, Memphis, TN, wherein all outstanding stock of the
Company is to be acquired by Union Planters Corporation. Management expects to
consummate the acquisition on October 1, 1997.
The stock option mentioned in Note 7 above, was exercised in April, 1997.
NOTE 13 - REGULATORY REQUIREMENTS. The Bank is required to maintain certain
minimum ratios of total capital to total "risk weighted" assets as defined by
the OCC. As of March 31, 1997, the Tier I and total capital ratios required
for the Bank to be considered adequately capitalized is 8% for each Tier. The
Bank's actual ratios as of that date were 10.42% and 11.55%. The Bank's
leverage ratio as of March 31, 1996 was 7.34%.
15
<PAGE> 162
APPENDIX C
Fairness Opinion of Southard Financial
16
<PAGE> 163
June 30, 1997
Board of Directors
Citizens of Hardeman County Financial Services, Inc.
Whiteville, Tennessee
RE: FAIRNESS OPINION RELATIVE TO PENDING AGREEMENT OF CITIZENS OF HARDEMAN
COUNTY FINANCIAL SERVICES, INC., WHITEVILLE, TENNESSEE, TO MERGE WITH
AND INTO UNION PLANTERS CORPORATION, MEMPHIS, TENNESSEE
Directors:
The Board of Directors of Citizens of Hardeman County Financial Services, Inc.
("Citizens") retained Southard Financial, in its capacity as a financial
valuation and consulting firm, to render its opinion of the fairness, from a
financial viewpoint, of the acquisition of Citizens by Union Planters
Corporation ("UPC"). Southard Financial and its principals have no past,
present, or future contemplated financial, equity, or other interest in either
Citizens or UPC. This opinion is issued based upon financial data as of March
31, 1997.
APPROACH TO ASSIGNMENT
The approach to this assignment was to consider the following factors:
- A review of the financial performance and position of Citizens and the
value of its common stock;
- A review of the financial performance and position of UPC and the
value of its common stock;
- A review of recent bank merger transactions;
- A review of the current and historical market prices of bank holding
companies in Tennessee and surrounding states;
- A review of the investment characteristics of the common stock of
Citizens and UPC;
- A review of the Agreement and Plan of Merger between UPC and Citizens,
dated December 12, 1996;
- An evaluation of the impact of the merger on the expected return to
the current shareholders of Citizens; and,
- An evaluation of other factors as were considered necessary to render
this opinion.
It is Southard Financial's understanding that the merger and resulting exchange
of the stock of UPC for the outstanding common stock of Citizens constitutes a
non-taxable exchange for federal income tax purposes.
<PAGE> 164
Board of Directors
Citizens of Hardeman County Financial Services, Inc.
Page 2
DUE DILIGENCE REVIEW PROCESS
In performing this assignment, Southard Financial reviewed the documents
specifically outlined in Exhibit 1 pertaining to Citizens and in Exhibit 2
pertaining to UPC.
REVIEW OF CITIZENS OF HARDEMAN COUNTY FINANCIAL SERVICES, INC.
Southard Financial visited with the management of Citizens in Whiteville,
Tennessee. Discussions included questions regarding the current and historical
financial position and performance of Citizens, its outlook for the future, and
other pertinent factors.
REVIEW OF UNION PLANTERS CORPORATION
At the request of Citizens management, Southard Financial did not visit with
the management of UPC. Nevertheless, Southard Financial reviewed publicly
available information relative to UPC and its stock.
MERGER DOCUMENTATION
Southard Financial reviewed the Agreement and Plan of Merger (the "Agreement").
Appropriate aspects of this agreement were discussed with the management of
Citizens. (See Exhibit 3, Terms of the Agreement and Plan of Merger.)
Southard Financial did not independently verify the information reviewed, but
relied on such information as being complete and accurate in all material
respects. Southard Financial did not make any independent evaluation of the
assets of UPC or Citizens, but reviewed data supplied by the management of both
institutions.
MAJOR CONSIDERATIONS
Numerous factors were considered in the overall review of the proposed merger.
The review process included considerations regarding Citizens, UPC, and the
proposed merger. The major considerations are as follows:
CITIZENS OF HARDEMAN COUNTY FINANCIAL SERVICES, INC.
- Historical earnings;
- Historical dividend payments;
- Outlook for future performance, earnings, and dividends;
- Economic conditions and outlook in Citizens's market;
- The competitive environment in Citizens's market;
- Comparisons with peer banks;
- Potential risks in the loan and securities portfolios;
- Recent minority stock transactions in Citizens's common stock; and,
- Other such factors as were deemed appropriate in rendering this
opinion.
2
<PAGE> 165
Board of Directors
Citizens of Hardeman County Financial Services, Inc.
Page 3
UNION PLANTERS CORPORATION
- Historical earnings;
- Historical dividend payments;
- Outlook for future performance, earnings, and dividends;
- Economic conditions and outlook in UPC's market;
- The competitive environment in UPC's market;
- Comparisons with peer banks;
- Recent minority stock transactions in UPC's common stock; and,
- Other such factors as were deemed appropriate in rendering this
opinion.
COMMON FACTORS
- Historical and current bank merger pricing; and,
- Current market prices for minority blocks of common stocks of regional
bank holding companies in Tennessee and surrounding states.
THE PROPOSED MERGER
- The terms of the Agreement and Plan of Merger and its amendments;
- The specific pricing of the merger;
- Adequacy of the consideration paid to the shareholders of Citizens;
- The assumption that the merger will be treated as a tax-free exchange;
- The impact of the merger on UPC's capital and liquidity positions;
- The historical dividend payments of UPC and the likely impact on the
dividend income of the current shareholders of Citizens (equivalency
of cash dividends);
- Pro-forma combined income statements for UPC post-merger and the
expected returns to Citizens shareholders (equivalency of earnings
yield);
- The market for minority blocks of UPC common stock; and,
- Other such factors as deemed appropriate.
OVERVIEW OF FAIRNESS ANALYSIS
In connection with rendering its opinion, Southard Financial performed a
variety of financial analyses, which are summarized below. Southard Financial
believes that its analyses must be considered as a whole and that considering
only selected factors could create an incomplete view of the analyses and the
process underlying the opinion. The preparation of a fairness opinion is a
complex process involving subjective judgments and is not susceptible to
partial analyses. In its analyses, Southard Financial made numerous
assumptions, many of which are beyond the control of Citizens and UPC. Any
estimates contained in the analyses prepared by Southard Financial are not
necessarily indicative of future results or values, which may vary
significantly from such estimates. Estimates of value of companies do not
purport to be appraisals or necessarily reflect the prices at which companies
or their securities may actually be sold. None of the analyses performed by
Southard Financial was assigned a greater significance than any other. (More
details on the analyses prepared by Southard Financial are contained in
Exhibits 3-7.)
3
<PAGE> 166
Board of Directors
Citizens of Hardeman County Financial Services, Inc.
Page 4
DIVIDEND YIELD ANALYSIS
In evaluating the impact of the proposed merger on the shareholders of
Citizens, Southard Financial reviewed the dividend paying histories of Citizens
and UPC. Based upon this review, it is reasonable to expect that the
shareholders of Citizens, in total, will receive dividends substantially above
the level currently paid by Citizens, after the merger is completed (defined as
post merger dividends per share times the exchange ratio). This is predicated
on the assumption that UPC will continue per share dividends at or above
current levels (see Exhibit 4).
EARNINGS YIELD ANALYSIS
In evaluating the impact of the proposed merger on the shareholders of
Citizens, Southard Financial determined that, based upon the proposed exchange
ratio, the shareholders of Citizens would have seen a decrease in earnings per
share- fully diluted (defined as post merger combined earnings per share times
the exchange ratio), had the merger been consummated by year-end 1996.
However, it must be noted that UPC incurred significant expenses related to
merger and other non-recurring events in 1996. Adjusted for the non-recurring
expenses, the shareholders of Citizens would have seen an increase in earnings
per share. In addition, UPC earnings in the first quarter of 1997 and
estimates for all of 1997 indicate a significant improvement (see Exhibit 4).
The analysis also suggests expected higher earnings yields for Citizens
shareholders in subsequent years if the merger is consummated (see Exhibit 4).
BOOK VALUE ANALYSIS
In evaluating the impact of the proposed merger on the shareholders of
Citizens, Southard Financial determined that the shareholders of Citizens would
have experienced a negative impact on the book value of their investment had
the merger been consummated prior to December 31, 1996, or prior to March 31,
1997 (see Exhibit 4). However, it is important to note that the market price
of UPC stock was twice its book value at both year-end 1996 and quarter-end
March 1997.
ANALYSIS OF ALTERNATIVES
In evaluating the fairness of the proposed merger to the shareholders of
Citizens, Southard Financial reviewed with management the terms of other offers
received for the purchase/merger of Citizens. Further, Southard Financial
considered recent public market merger pricing information (see Exhibit 5).
ANALYSIS OF MARKET TRANSACTIONS
Based upon the merger terms and the June 27, 1997 market price of UPC common
stock, Citizens shareholders will receive about 225% of March 31, 1997 book
value of Citizens, about 217% of estimated June 30, 1997 book value of
Citizens, 18.5 times reported 1996
4
<PAGE> 167
Board of Directors
Citizens of Hardeman County Financial Services, Inc.
Page 5
earnings of Citizens, and 15.9 times estimated 1997 earnings of Citizens.
Based upon the review conducted by Southard Financial, the pricing for Citizens
in the merger is within the range of multiples seen in recent bank acquisitions
(see Exhibit 5).
FUNDAMENTAL ANALYSIS
Southard Financial reviewed the financial characteristics of Citizens and UPC
with respect to profitability, capital ratios, liquidity, asset quality, and
other factors. Southard Financial compared Citizens and UPC to a universe of
publicly traded banks and bank holding companies and to peer groups prepared by
the Federal Financial Institutions Examination Council (FFIEC). Southard
Financial found that the post-merger combined entity will have capital ratios
and profitability ratios near those of the public peer group and the FFIEC peer
group (predominantly non-publicly traded banks). (See Exhibits 6-7.)
LIQUIDITY
Unlike Citizens stock, UPC shares are traded on the New York Stock Exchange.
Further, UPC shares received will be freely tradeable with no restrictions.
SUMMARY OF ANALYSES
The summary set forth does not purport to be a complete description of the
analyses performed by Southard Financial. The analyses performed by Southard
Financial are not necessarily indicative of actual values, which may differ
significantly from those suggested by such analyses. Southard Financial did
not appraise any individual assets or liabilities of Citizens or UPC.
Throughout the due diligence process, all information provided by Citizens,
UPC, and third party sources, was relied upon by Southard Financial without
independent verification.
Based upon the analyses discussed above, and other analyses performed by
Southard Financial, the impact of the merger on the shareholders of Citizens is
expected to be favorable.
FAIRNESS OPINION
Based upon the analyses of the foregoing and such matters as were considered
relevant, it is the opinion of Southard Financial that the terms of the offer
for the acquisition of Citizens of Hardeman County Financial Services, Inc. by
Union Planters Corporation pursuant to the Merger Agreement and Plan of Merger
are fair, from a financial viewpoint, to the shareholders of Citizens of
Hardeman County Financial Services, Inc.
5
<PAGE> 168
Board of Directors
Citizens of Hardeman County Financial Services, Inc.
Page 6
Thank you for this opportunity to be of service to the shareholders of Citizens
of Hardeman County Financial Services, Inc.
Sincerely yours,
SOUTHARD FINANCIAL
/s/ David A. Harris
-------------------------
David A. Harris, CFA, ASA
/s/ Douglas K. Southard
---------------------------------
Douglas K. Southard, DBA, CFA, ASA
Attachments:
Exhibit 1: Citizens of Hardeman County Financial Services, Inc.,
Document Review List
Exhibit 2: Union Planters Corporation, Document Review List
Exhibit 3: Terms of the Merger Agreement and Plan of Merger
Exhibit 4: Expected Impact of the Merger on the Shareholders of
Citizens of Hardeman County Financial Services, Inc.
Exhibit 5: Comparison of the Merger Pricing to Public Market Transactions
Exhibit 6: Overview of Citizens of Hardeman County Financial Services, Inc.
Exhibit 7: Overview of Union Planters Corporation
Exhibit 8: Qualifications of Southard Financial
6
<PAGE> 169
EXHIBIT 1
CITIZENS OF HARDEMAN COUNTY FINANCIAL SERVICES, INC.
DOCUMENT REVIEW LIST
1. Consolidated Reports of Condition and Income ("Call Report") of The
Whiteville Bank for the periods ended December 31, 1992-96 and March
31, 1997.
2. Uniform Bank Performance Report ("UBPR") of The Whiteville Bank for
the periods ended December 31, 1995-96.
3. Parent Company Only Financial Statements for Small Bank Holding
Companies (FR Y-9SP) of Citizens of Hardeman County Financial
Services, Inc. for the periods ended December 31, 1992-96.
4. Compiled Consolidated Financial Statements of Citizens of Hardeman
County Financial Services, Inc. and Subsidiaries for the periods ended
March 31, 1996 and 1997 (draft report dated June 20, 1997).
5. List of Stockholders of Citizens of Hardeman County Financial Services,
Inc.
6. Information on the Whiteville, Hardeman County, economy.
7. Confidential Evaluation Material of Citizens of Hardeman County
Financial Services, Inc. and The Whiteville Bank, dated July 12, 1996.
8. Disclosure Memorandum of Citizens of Hardeman County Financial
Services, Inc. and The Whiteville Bank.
9. Additional pertinent information deemed necessary to render this
opinion.
7
<PAGE> 170
EXHIBIT 2
UNION PLANTERS CORPORATION
DOCUMENT REVIEW LIST
1. Annual Reports of Union Planters Corporation, including audited
financial statements of Union Planters Corporation and Subsidiaries
for the years ended December 31, 1991-96.
2. Securities and Exchange Commission Form 10-K of Union Planters
Corporation for the years ended December 31, 1994-96.
3. Securities and Exchange Commission Form 10-Q of Union Planters
Corporation for the quarters ended March 31, 1996-97, June 30, 1996,
and September 30, 1996.
4. Bank Holding Company Performance Reports of Union Planters Corporation
for the periods ended June 1996 and December 1995.
5. Analyst reports on Union Planters Corporation through May 1997:
Stephens, Inc. (May 15); Smith Barney, Inc. (May 14); Keefe, Bruyette
& Woods, Inc. (May 9); Morgan Stanley & Co., Inc.(May 9); and, UBS
Securities, LLC (April 25).
6. Additional pertinent information deemed necessary to render this
opinion.
8
<PAGE> 171
EXHIBIT 3
TERMS OF THE
AGREEMENT AND PLAN OF MERGER
The Agreement and Plan of Merger, by and between Union Planters Corporation and
Citizens of Hardeman County Financial Services, Inc. dated as of December 12,
1996 (the "Agreement") contains several provisions. The following are key
provisions of the Agreement:
In exchange for each share of Citizens common stock outstanding, Citizens
shareholders will receive 434.074 shares of UPC common stock.
The parties intend for the merger to qualify as a "reorganization" under the
Internal Revenue Code. Thus, the exchange of Citizens stock for UPC stock
is expected to qualify as a tax-free exchange for Federal income tax
purposes. The exchange of cash for shares or fractional shares may have tax
consequences.
No fractional shares will be issued by UPC. Citizens shareholders who would
otherwise have been entitled to fractional shares (after aggregating all
shares owned) will receive cash based upon the current market price per
share on one full share of UPC common stock.
The Agreement may be terminated by either party:
- upon the mutual consent of the Board of Directors of each institution;
- upon a breach by either party of any representation, warranty or covenant;
- if the merger is not consummated by December 31, 1997;
- upon the failure by either party to obtain regulatory or shareholder
approvals;
- under the terms and conditions as set forth in the Agreement.
The exchange ratio will be adjusted to reflect any reclassification,
recapitalization, split-up, combination or exchange of shares, or stock
dividend which might occur at UPC subsequent to the date of the Agreement
but prior to the consummation of the merger.
9
<PAGE> 172
EXHIBIT 4
EXPECTED IMPACT OF THE MERGER
ON THE SHAREHOLDERS OF
CITIZENS OF HARDEMAN COUNTY FINANCIAL SERVICES, INC.
The following is a summary of the various analyses undertaken in conjunction
with this fairness opinion. This summary is not intended to represent all
analyses performed by Southard Financial, but is presented here for the
convenience of Citizens and its shareholders.
According to the Agreement, Citizens shareholders would receive 434.074 shares
of UPC stock for each share of Citizens stock exchanged under the Agreement.
The analysis presented below is on a fully diluted basis. For Citizens, it is
assumed that 485 shares were outstanding throughout the period of analysis.
EARNINGS Citizens earned $1,204 per share in 1996 on a fully-diluted
basis. UPC earned $1.92 per share in 1996. Had the merger
been consummated prior to January 1, 1996, each former
Citizens share would have earned $833.42 in 1996 (UPC 1996
earnings of $1.92 per share times 434.074 equivalent shares).
It is important to note that UPC earnings in 1996 included
$66.4 million (after taxes) of merger-related and other
significant net charges. Adjusted for these non-recurring
items, UPC earnings for 1996 would have been about $2.88 per
share. Therefore, on an ongoing basis, each Citizens share
would have earned about $1,250 (UPC 1996 adjusted earnings of
$2.88 per share times 434.047 equivalent shares), or 3.8%
above Citizens 1996 earnings, had the merger been consummated
prior to January 1, 1996.
According to six recent investment research reports, UPC is
expected to earn about $3.50 per share in 1997 (estimates
ranged between $3.50 and $3.55 per share). Further, Citizens
is estimated to earn about $1,400 per share in 1997 (the
mid-range of annualized first quarter earnings of $1,329 per
share and management's estimate for the year of $1,443 per
share). Based upon these estimates, each Citizens share would
have been expected to earn about $1,519 (UPC estimated
earnings of $3.50 per share times 434.074 equivalent shares)
in 1997, or 8.5% above estimated Citizens 1997 earnings, had
the merger been consummated prior to January 1, 1997.
10
<PAGE> 173
EXHIBIT 4
EXPECTED IMPACT OF THE MERGER
ON THE SHAREHOLDERS OF
CITIZENS OF HARDEMAN COUNTY FINANCIAL SERVICES, INC.
(continued)
DIVIDENDS Each share of Citizens stock received dividends of $12.00 in
1996. Had the merger been consummated prior to January 1,
1996, each former share of Citizens stock would have received
dividends of $468.80 in 1996 (UPC 1996 dividends of $1.08 per
share times 434.074 equivalent shares). This represents a
substantial increase over the dividends paid to Citizens
shareholders in 1996. Given estimated UPC dividends of $1.28
per share in 1997 and the expectation for continued Citizens
dividends of $12.00 per share, similar results would be
expected for 1997.
BOOK VALUE Reported book value of Citizens was $9,237 per share at
December 31, 1996. Reported book value of UPC at December 31,
1996 was $19.55 per share. Had the merger been consummated
prior to December 31, 1996, each former Citizens share would
have book value of $8,486 (UPC book value of $19.55 per share
times 434.074 equivalent shares). This represents 91.9% of
Citizens book value at December 31, 1996. As of March 31,
1997, Citizens shareholders would have seen a decrease of
about 11.7% in their book value ($9,861 per share for Citizens
versus $20.05 per share for UPC times 434.074 equivalent
shares).
Despite the unfavorable impact on the book value of Citizens
shares, it is important to note that UPC shares were trading
at twice their book value as of year-end 1996 (199%) and
quarter-end March 1997 (203%). Further, based upon the
closing price of UPC near quarter-end June 1997, the stock was
trading at about 250% of book value (see below).
LIQUIDITY There have been no transactions of Citizens stock in many
years, other than the April 1997 exercise of an option to
purchase two shares of Citizens stock at $3,200 per share
(approximate book value in 1988 when the option was issued).
There are no remaining options to purchase Citizens stock.
Unlike Citizens stock, UPC shares are traded on the New York
Stock Exchange. Further, UPC shares received will be freely
tradeable with no restrictions. During the first quarter of
1997, UPC shares traded in the range of $38.38-44.75 per
share. The closing price of UPC stock was $39.00 per share on
December 31, 1996, $40.625 per share on March 31, 1997 and
$51.25 per share on June 27, 1997.
11
<PAGE> 174
EXHIBIT 5
COMPARISON OF THE MERGER PRICING
TO PUBLIC MARKET TRANSACTIONS
Southard Financial compared the pricing terms of the Agreement to the pricing
of recent acquisitions of banks and bank holding companies across the United
States, and to the minority interest prices of publicly traded banks and bank
holding companies in the Southeast.
Pricing data for recent acquisitions of banks and bank holding companies
(nationwide and in Tennessee and in contiguous states) is summarized as
follows:
<TABLE>
<CAPTION>
Price/ Price/ Price/ Equity/
Transactions Announced in 1997 1 Earnings Book Val Assets ROAA Assets ROAE
- ---------------------------------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Nationwide (58) 19.9x 208.0% 19.65% 1.13% 10.06% 12.20%
TN and Contiguous States (12) 19.3 209.8 21.50 1.20 11.06 11.89
Tennessee (0) none none none none none none
Transactions Announced in 1992 2
- ---------------------------------
Nationwide (173) 19.0 191.4 19.52 1.13 9.96 11.91
TN and Contiguous States (38) 20.5 189.0 24.13 1.14 10.72 11.53
Tennessee (1) 16.2 174.4 22.37 1.62 12.77 12.69
Citizens 3 18.5 225.6 17.61 1.10 7.41 15.04
</TABLE>
(1) Through May 31; only includes transactions for Banks with assets under $1
billion for which sufficient data was available
(2) Through December 31; only includes transactions for Banks with assets
under $1 billion for which sufficient data was available
(3) Based upon recent UPC stock price of $51.25 per share and exchange ratio
of 434.074 shares, and Citizens earnings in 1996 and book value as of
March 31, 1997
Based upon the current market price of UPC's stock of $51.25 per share, the
merger of Citizens into UPC will take place at 18.48 times 1996 Citizens
earnings, 15.89 times estimated 1997 Citizens earnings, and 225.6% of March 31,
1997 Citizens book value. The price/earnings ratio is near the market
transactions, while the price/book value multiple for Citizens is above the
market transactions due to its lower equity/assets ratio.
12
<PAGE> 175
EXHIBIT 5
COMPARISON OF THE MERGER PRICING
TO PUBLIC MARKET TRANSACTIONS
(continued)
In determining the attractiveness of owning UPC stock, it is important to
examine UPC's recent pricing in comparison with recent pricing multiples for
publicly traded banks and bank holding companies. This pricing data is
presented below as of December 31, 1996, the most recent year-end for the
banking industry. However, based upon our review of the market for bank
stocks, the multiples indicated below were not materially different at the end
of June 1997.
<TABLE>
<CAPTION>
Price/ Price/ Current Current
Publicly Traded Banks 1 Earnings Book Val ROAE Yield
----------------------------------- -------- -------- ------ -------
<S> <C> <C> <C> <C>
All Banks (219) 14.07x 181.2% 12.35% 2.38%
South Central Banks (54) 14.92 195.9 12.25 2.44
TN and Contiguous States (46) 15.01 194.0 11.97 2.46
Tennessee Banks (1) 15.01 184.2 12.96 2.15
UPC - 12/31/96 Price ($39.00) 20.31 199.5 10.61 2.77
UPC - 03/31/97 Price ($40.625) 19.53 202.6 18.50 3.15
UPC - 06/27/97 Price ($51.25) 14.64(2) 249.4(3) na 2.50
</TABLE>
(1) As of December 31, 1996; subject to certain screens performed by
Southard Financial
(2) Based upon estimated 1997 UPC earnings of $3.50 per share
(3) Based upon estimated current UPC book value of $20.55 per share
Based upon an analysis of the data provided above, UPC's price/earnings
multiple, price/book value multiple, return on average equity, and current
dividend yield are all near or above the range of other publicly traded banks
in its region.
13
<PAGE> 176
EXHIBIT 6
OVERVIEW OF
CITIZENS OF HARDEMAN COUNTY FINANCIAL SERVICES, INC.
The Whiteville Bank ("Whiteville"), was founded in 1900 in Whiteville, Hardeman
County, Tennessee. In August 1984, Citizens of Hardeman County Financial
Services, Inc. ("Citizens") was formed to acquire a majority interest of
Whiteville stock. Citizens is currently a one bank holding company which owns
100% of the outstanding stock of Whiteville.
Whiteville serves its market, defined as Hardeman, Fayette, McNairy, and
Haywood counties (within about a 75-mile radius of Whiteville), with two
facilities: the main office in Whiteville, which maintains about 40% of the
total deposits; and a branch in Bolivar, about ten miles east of Whiteville,
with about 60% of total deposits. Whiteville is the only bank in Whiteville
(population about 5,000 including 3,800 prison population) and the oldest bank
in Hardeman County. There are four other banks in Bolivar (population about
8,500).
Whiteville had total assets of $61.3 million at March 31, 1997, and equity of
7.41% of assets (below peer averages). Total loans (net of unearned income)
were 60.3% of total assets at March 31, 1997, or slightly above peer averages.
The historical composition of Whiteville's balance sheet was extremely stable.
Whiteville earned $422 thousand (0.90% of average assets) in 1994, $497
thousand (0.97%) in 1995, and $578 thousand (1.00%) in 1996. ROAA averaged
0.96% over the 1994-96 period, below the 1.23% peer average. However, ROAA
improved in each year over the 1991-96 period, and is expected to improve
further in 1997. ROAE also improved over the period and averaged 13.3% over
the 1994-96 period, above the 12.1% average for the peer group.
The assets of Citizens consist solely of its investment in Whiteville and some
cash (no debt). As of March 31, 1997 reported book value of Citizens was $4.78
million, or $9,861.16 per share for the 485 issued and outstanding shares
(including the two option shares exercised in April 1997). Earnings were
$1,204.12 per share in 1996, $1,024.74 per share in 1995, and $876.29 per share
in 1994. Dividends of $12.00 per share were paid in each year over the 1992-96
period.
Further details on Citizens and Whiteville are documented in Southard
Financial's file.
14
<PAGE> 177
EXHIBIT 7
OVERVIEW OF
UNION PLANTERS CORPORATION
Union Planters Corporation ("UPC") serves the Mid-South market with banking
offices in Tennessee, Mississippi, Arkansas, Missouri, Alabama, Kentucky, and
Louisiana. UPC acquired 23 financial institutions over the 1994-96 period, the
most significant of which were its acquisitions of Grenada Sunburst System
Corporation in December 1994 ($2.5 billion in assets) and its acquisition of
Leader Financial Corporation in October 1996 ($3.4 billion in assets).
UPC had total assets of $14.93 billion at March 31, 1997, and equity of 9.34%
of assets (including convertible preferred stock). Total loans (net of
unearned income) were 69.4% of total assets at March 31, 1997, or near peer
averages. The historical composition of UPC's balance sheet reflects an
increase in loans as a percent of assets.
UPC earned $100.4 million (0.77% of average assets) in 1994, $172.7 million
(1.26%) in 1995, and $133.7 million (0.88%) in 1996. However, UPC incurred
substantial non-recurring expenses for merger related and other items as
follows (after taxes): $66.4 million in 1996; $9.5 million in 1995; and $51.4
million in 1994.
As of March 31, 1997, reported book value of UPC was $1.40 billion, or $20.05
per share. Fully diluted earnings were $1.92 per share in 1996, $2.64 per
share in 1995, and $1.52 per share in 1994. Adjusted for the non-recurring
charges noted above, fully diluted earnings on an ongoing basis were
approximately $2.88 per share in 1996, $2.79 per share in 1995, and $2.38 per
share in 1994.
UPC paid common stock dividends of $1.08 per share in 1996, up from $0.98 per
share in 1995 and $0.88 per share in 1994. Dividends were $0.32 per share in
the first quarter of 1997, implying an annual rate of $1.28 per share, or 18.5%
above the 1996 level.
In all, UPC is in good financial condition. More details on UPC are contained
in Southard Financial's file.
15
<PAGE> 178
EXHIBIT 8
QUALIFICATIONS OF SOUTHARD FINANCIAL
16
<PAGE> 179
AN OVERVIEW OF SOUTHARD FINANCIAL
BACKGROUND - Founded in 1987.
- Principals have combined business valuation
experience of over twenty-five years.
- Clients served throughout the United States,
with concentration in the Southeast.
- Broad industry experience.
- Services provided for public and closely-held
companies.
- Annual valuation services provided for over
100 ESOPs, making Southard Financial one of
the largest ESOP appraisers in the United
States.
PROFESSIONAL
CREDENTIALS - Southard Financial's principals, Douglas K.
Southard and David A. Harris, are senior
members of the American Society of Appraisers
(ASA).
- Both principals of Southard Financial are
Chartered Financial Analysts (CFA).
- Both principals are current or former
officers of the West Tennessee Chapter of the
ASA.
EDUCATIONAL
CREDENTIALS - Douglas Southard holds Doctor of Business
Administration and Master of Business
Administration degrees from Indiana
University, with concentrations in finance,
economics, and quantitative analysis.
- David Harris holds the Master of Business
Administration degree from Memphis State
University, with a concentration in finance
and business investments.
BUSINESS
ETHICS - Southard Financial and its principals adhere
to the ethical standards of the Institute of
Chartered Financial Analysts and the American
Society of Appraisers.
- All reports conform to the Uniform Standards
of Professional Appraisal Practice.
- Southard Financial is committed to providing
unbiased opinions to be used for decision
making.
- Fees for valuation services are not
contingent upon the conclusion of value or
the completion of a transaction.
17
<PAGE> 180
BIOSKETCH
DOUGLAS K. SOUTHARD, DBA, CFA, ASA
EDUCATIONAL AND PROFESSIONAL CREDENTIALS
Doctor of Business Administration, 1981, Indiana University
Master of Business Administration, 1976, Indiana University
Bachelor of Arts, 1975, Rhodes College (formerly Southwestern at Memphis)
Chartered Financial Analyst, 1987, Institute of Chartered Financial Analysts
(now part of the Association for Investment Management and Research)
Senior Member, 1987, American Society of Appraisers, Business Valuation
PROFESSIONAL BACKGROUND
Founder and Principal, Southard Financial, Memphis TN
Partner, Mercer Capital Management, Inc., Memphis TN (1984-87)
Consulting Associate, Mercer Capital Management, Inc.,
Memphis TN (1983-84)
Principal, Douglas K. Southard, Financial Consultant,
Memphis TN (1982-83)
ACADEMIC POSITIONS HELD
Assistant Professor of Finance, Rhodes College, Memphis TN
Assistant Professor of Finance, Virginia Polytechnic Institute & State
University, Blacksburg VA
Lecture in Finance, Indiana University, Bloomington IN
RELATED EXPERIENCE
Frequent Speaker, professional organizations, business
valuation topics
Expert Witness, business valuation, local, state and federal courts
Board of Directors, Management Computing Solutions, Inc., Memphis TN
Board of Directors, Columbian Rope Company, Auburn NY
Advisory Board, MicroAge, Memphis TN
Board of Directors, Explorer Systems, Inc., Memphis, TN
Former Officer, West Tennessee Chapter, American Society of Appraisers
PUBLICATIONS
"Using the Capital Asset Pricing Model to Determine
Capitalization Rates: Adjusting for Differences in Financial
Structure, " with Severin C. Carlson, Business Valuation Review, June
1991
"Business Valuation Can Serve in Lifetime Planning," with Z.C. Mercer,
Memphis Business Journal, April 1-5, 1985
"Valuation Process Holds Keys to Executive Wealth," with Z.C. Mercer,
Memphis Business Journal, March 25-29, 1985
"What IRA's Are Worth," with Z.C. Mercer, The Southern Banker, June 1984
18
<PAGE> 181
BIOSKETCH
DAVID A. HARRIS, CFA, ASA
EDUCATIONAL AND PROFESSIONAL CREDENTIALS
Master of Business Administration, 1982, Memphis State University
Bachelor of Arts, 1979, Colorado State University
Chartered Financial Analyst, 1989, Institute of Chartered
Financial Analysts (now part of the Association for
Investment Management and Research)
Senior Member, 1990, American Society of Appraisers, Business Valuation
PROFESSIONAL BACKGROUND
Principal, Southard Financial, Memphis TN
Associate, Mercer Capital Management, Inc., Memphis TN (1985-90)
Financial Analyst, Methodist Hospitals of Memphis, Inc. (1983-85)
Cost Analyst, Schering-Plough, Inc., Memphis TN (1982-83)
PROFESSIONAL/COMMUNITY SERVICE
President, West Tennessee Chapter, American Society of
Appraisers (1994-95)
Vice President, West Tennessee Chapter, American Society of Appraisers
(1993-94)
President, West Tennessee Chapter, American Society of
Appraisers (1990-91)
Board of Directors, Solomon Schechter Day School of Memphis, Inc. (1993-94)
Vice President, Sea Isle Park Neighborhood Association, Memphis TN
(1992-96) Board of Directors, Sea Isle Park Neighborhood Association,
Memphis TN (1990-96) Business Liaison, Junior Achievement of Memphis TN
(1984-85)
RELATED EXPERIENCE
Expert Witness, business valuation
Co-Author, "The Perils of Excess," with Z. C. Mercer, ABA Banking Journal,
October 1987
19
<PAGE> 182
SOUTHARD
FINANCIAL
SERVICES FOR COMMUNITY BANKS
Valuation Services
Minority Stock Appraisals
- ESOPs
- Dissenting Shareholders
- Insider Transactions
- Gift & Estate Taxes
- Charitable Gifts
- Private Placements/Offerings
- Share Repurchase Plans
- Dividend Reinvestment Plans
- Stock Option Plans
- Other Purposes
Control Valuations
- Pricing Merger/Acquisition Candidates
- Negotiating Pricing/Terms
- Fairness Opinions for Buyers and Sellers
- Evaluation of Offers Received
Consulting Services
Economic & Financial Analysis
- Branch Feasibility Studies
- Holding Company Formations
- Expert Witness Testimony
Strategic Planning
- Long-range Financial Plans
- Evaluation of Financing Alternatives
- Board of Director Seminars
20
<PAGE> 183
APPENDIX D
Sections 48-23-101, et al, of the Tennessee Business Corporation Act,
pertaining to applicable dissenters' rights provisions
<PAGE> 184
CHAPTER 23
BUSINESS CORPORATIONS--DISSENTERS' RIGHTS
<TABLE>
<CAPTION>
SECTION SECTION
<S> <C> <C>
PART 1--RIGHT TO DISSENT AND 48-23-203. Dissenters' notice.
OBTAIN PAYMENT FOR SHARES 48-23-204. Duty to demand payment.
48-23-205. Share restrictions.
48-23-101. Definitions. 48-23-206. Payment.
48-23-102. Right to dissent. 48-23-207. Failure to take action.
48-23-103. Dissent by nominees and 48-23-208. After-acquired shares.
beneficial owners. 48-23-209. Procedure if shareholder
dissatisfied with
payment of offer.
PART 2--PROCEDURE FOR EXERCISE OF
DISSENTERS' RIGHTS
PART 3--JUDICIAL APPRAISAL OF SHARES
48-23-201. Notice of dissenters'
rights. 48-23-301. Court action.
48-23-202. Notice of intent to 48-23-302. Court costs and counsel
demand payment. fees.
</TABLE>
PART 1--RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
48-23-101. Definitions--(1) "Beneficial shareholder" means the person who is
a beneficial owner of shares held by a nominee as the record shareholder;
(2) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer;
(3) "Dissenter" means a shareholder who is entitled to dissent from corporate
action under Section 48-23-102 and who exercises that right when and in the
manner required by Part 2 of this chapter;
(4) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action;
(5) "Interest" means interest from the effective date of the corporate action
that give rise to the shareholder's right to dissent until the date of payment,
at the average auction rate paid on United States treasury bills with a
maturity of six (6) months (or the closest maturity thereto) as of the auction
date for such treasury bills closest to such effective date;
(6) "Record shareholder" means the person in whose name shares are registered
in the records of a corporation or the beneficial owner of shares to the extent
of the rights granted by a nominee certificate on file with a corporation; and
(7) "Shareholder" means the record shareholder or the beneficial shareholder.
[Acts 1986, ch. 887, Section 13.01]
I-1
<PAGE> 185
48-23-102. RIGHT TO DISSENT.--(a) A shareholder is entitled to dissent from,
and obtain payment of the fair value of the Shareholder's shares in the event
of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a party:
(A) If shareholder approval is required for the merger by Section
48-21-104 or the charter and the shareholder is entitled to vote on the merger;
or
(B) If the corporation is a subsidiary that is merged with its parent
under Section 48-21-105;
(2) 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;
(3) Consummation of a sale or exchange of all, or substantially all, of the
property of the corporation 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 a sale for cash pursuant to a plan by which all or substantially all
of the net proceeds of the sale will be distributed to the shareholders within
one (1) year after the date of sale;
(4) An amendment of the charter that materially and adversely effects 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,
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 is to be acquired for cash under Section
48-16-104; or
(5) Any corporate action taken pursuant to a shareholder vote to the extent
the charter, bylaws, or a resolution of the board of directors provides that
voting or nonvoting shareholders are entitled to dissent and obtain payment for
their shares.
(b) A shareholder entitled to dissent and obtain payment for the
Shareholder's shares under this chapter may not challenge the corporate action
creating the Shareholder's entitlement unless the action is unlawful or
fraudulent with respect to the shareholder or the corporation.
(c) Notwithstanding the provisions of subsection (a), no shareholder may
dissent as to any shares of a security which, as of the date of the
effectuation of the transaction which would otherwise give rise to dissenters'
rights, is listed on an exchange registered under Section 6 of the Securities
Exchange Act of 1934, as amended, or is a "national market system security," as
defined in rules promulgated pursuant to the Securities Exchange Act of 1934,
as amended [Acts 1986, ch. 887, Section 13.02]
48-23-103. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.--(a) A record
shareholder may assert dissenters' rights as to fewer than all the shares
registered in the record Shareholder's name only if the record Shareholder
dissents with respect to all shares beneficially owned by any one (1)
I-2
<PAGE> 186
person and notifies the corporation in writing of the name and address of each
person on whose behalf the record Shareholder asserts dissenters' rights. The
rights of a partial dissenter under this subsection are determined as if the
shares as to which the partial dissenter dissents and the partial dissenter's
other shares were registered in the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares of
any one (1) or more classes held on the beneficial Shareholder's behalf only if
the beneficial Shareholder:
(1) Submits to the corporation the record shareholder's written consent to
the dissent not later than the time the beneficial shareholder asserts
dissenters' rights; and
(2) Does so with respect to all shares of the same class of which the person
is the beneficial shareholder or over which he has power to direct the vote.
[Acts 1986, ch. 887, Section 13.03]
PART 2--PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
48-23-201. NOTICE OF DISSENTER'S RIGHTS.--(a) If proposed corporate action
creating dissenters' rights under Section 48-23-102 is submitted to a vote at
a shareholders' meeting, the meeting notice must state that shareholders are or
may be entitled to assert dissenters' rights under this chapter and be
accompanied by a copy of this chapter.
(b) If corporate action creating dissenters' rights under Section 48-23-102
is taken without a vote of shareholders, the corporation shall notify in
writing all shareholders entitled to assert dissenters' rights that the action
was taken and send them the dissenters' notice described in Section 48-23-203.
(c) A corporation's failure to give notice pursuant to this section will not
invalidate the corporate action. [Acts 1986, ch. 887, Section 13.20.]
48-23-202. NOTICE OF INTENT TO DEMAND PAYMENT.--(a) If proposed corporate
action creating dissenters' rights under Section 48-23-102 is submitted to a
vote at a shareholders' meeting, a shareholder who wishes to assert dissenters'
rights must:
(1) Deliver to the corporation, before the vote is taken, written notice of
the Shareholder's intent to demand payment for the Shareholder's shares if the
proposed action is effectuated; and
(2) Not vote the Shareholder's shares in favor of the proposed action. No
such written notice of intent to demand payment is required of any shareholder
to whom the corporation failed to provide the notice required by Section
48-23-201.
(b) A shareholder who does not satisfy the requirements of subsection (a) is
not entitled to payment for the Shareholder's shares under this chapter. [Acts
1986, ch. 887, Section 13.21.]
48-23-203. DISSENTERS' NOTICE.--(a) If proposed corporate action creating
dissenters' rights under Section 48-23-102 is authorized at a shareholders'
meeting, the corporation shall deliver a written dissenters' notice to all
shareholders who satisfied the requirements of Section 48-23-202.
(b) The dissenters' notice must be sent no later than ten (10) days after the
corporate action was authorized by the shareholders or effectuated, whichever
is the first to occur, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the payment demand is received;
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(3) Supply a form for demanding payment that includes the date of the first
announcement to news media or to shareholders of the principal terms of the
proposed corporate action and requires that the person asserting dissenters'
rights certify whether or not the person acquired beneficial ownership of the
shares before that date;
(4) Set a date by which the corporation must receive the payment demand,
which date may not be fewer than one (1) nor more than two (2) months after the
date the subsection (a) notice is delivered; and
(5) Be accompanied by a copy of this chapter if the corporation has not
previously sent a copy of this chapter to the shareholder pursuant to Section
48-23-201 [Acts 1986, ch. 887 Section 13.22.]
48-23-204. DUTY TO DEMAND PAYMENT.--(a) A shareholder sent a dissenters'
notice described in Section 48-23-203 must demand payment, certify whether the
Shareholder acquired beneficial ownership of the shares before the date
required to be set forth in the dissenters' notice pursuant to Section
48-23-203 (b)(3), and deposit the Shareholder's certificates in accordance with
the terms of the notice.
(b) The shareholder who demands payment and deposits the Shareholder's share
certificates under subsection (a) retains all other rights of a shareholder
until these rights are cancelled or modified by the effectuation of the
proposed corporate action.
(c) A shareholder who does not demand payment or deposit the Shareholder's
share certificates where required, each by the date set in the dissenters'
notice, is not entitled to payment for his shares under this chapter.
(d) A demand for payment filed by a shareholder may not be withdrawn unless
the corporation with which it was filed, or the surviving corporation, consents
thereto. [Acts 1986, ch. 887 Section 13.23.]
48-23-205. SHARE RESTRICTIONS.--(a) The corporation may restrict the
transfer of uncertificated shares from the date the demand for their payment is
received until the proposed corporate action is effectuated or the restrictions
released under Section 48-23-207.
(b) The person for whom dissenters' rights are asserted as to uncertificated
shares retains all other rights of a shareholder until these rights are
cancelled or modified by the effectuation of the proposed corporate action.
[Acts 1986, ch. 887 , Section 13.24.]
48-23-206. PAYMENT.--(a) Except as provided in Section 48-23-208, as soon
as the proposed corporate action is effectuated, or upon receipt of a payment
demand, whichever is later, the corporation shall pay each dissenter who
complied with Section 48-23-204 the amount the corporation estimates to be the
fair value of each dissenter's shares, plus accrued interest.
(b) The payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year ending not
more than sixteen (16) months before the date of payment, an income statement
for that year, a statement of changes in shareholders' equity for that year,
and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under Section
48-23-209; and
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(5) A copy of this chapter if the corporation has not previously sent a copy
of this chapter to the shareholder pursuant to Section 48-23-201 or Section
48-23-203. [Acts 1986, ch. 887, Section 13.25.]
48-23-207. FAILURE TO TAKE ACTION.--(a) If the corporation does not
effectuate the proposed action that gave rise to the dissenters' rights within
two (2) months after the date set for demanding payment and depositing share
certificates, the corporation shall return the deposited certificates and
release the transfer restrictions imposed on uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation effectuates the proposed action, it must send a
new dissenters' notice under Section 48-23-203 and repeat the payment demand
procedure. [Acts 1986, ch. 887, Section 13.26.]
48-23-208. AFTER-ACQUIRED SHARES.--(a) A corporation may elect to withhold
payment required by Section 48-23-206 from a dissenter unless the dissenter
was the beneficial owner of the shares before the date set forth in the
dissenters' notice as the date of the first announcement to news media or to
shareholders of the principal terms of the proposed corporate action.
(b) To the extent the corporation elects to withhold payment under subsection
(a), after effectuating the proposed corporate action, it shall estimate the
fair value of the shares, plus accrued interest, and shall pay this amount to
each dissenter who agrees to accept it in full satisfaction of the dissenter's
demand. The corporation shall send with its offer a statement of its estimate
of the fair value of the shares, an explanation of how the interest was
calculated, and a statement of the dissenter's right to demand payment under
Section 48-23-209. [Acts 1986, ch. 887, Section 13.27.]
48-23-209. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.--(a)
A dissenter may notify the corporation in writing of the dissenter's own
estimate of the fair value of his the dissenter's shares and amount of interest
due, and demand payment of the dissenter's estimate (less any payment under
Section 48-23-206), or reject the corporation's offer under Section 48-23-208
and demand payment of the fair value of the dissenter's shares and interest
due, if:
(1) The dissenter believes that the amount paid under Section 48-23-206 or
offered under Section 48-23-208 is less than the fair value of the dissenter's
shares or that the interest due is incorrectly calculated;
(2) The corporation fails to make payment under Section 48-23-206 within two
(2) months after the date set for demanding payment; or
(3) The corporation, having failed to effectuate the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within two (2) months after the date set for
demanding payment.
(b) A dissenter waives the dissenter's right to demand payment under this
section unless the dissenter notifies the corporation of the dissenter's
demand in writing under subsection (a) within one (1) month after the
corporation made or offered payment for the dissenter's shares. [Acts 1986, ch.
887, Section 13.28.]
PART 3--JUDICIAL APPRAISAL OF SHARES
48-23-301. COURT ACTION.--(a) If a demand for payment under Section
48-23-209 remains unsettled, the corporation shall commence a proceeding within
two (2) months after receiving the payment
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demand and petition the court to determine the fair value of the shares and
accrued interest. If the corporation does not commence the proceeding within
the two-month period, it shall pay each dissenter whose demand remains
unsettled the amount demanded.
(b) The corporation shall commence the proceeding in a court of record having
equity jurisdiction in the county where the corporation's principal office (or,
if none in this state, its registered office) is located. If the corporation
is a foreign corporation without a registered office in this state, it shall
commence the proceeding in the county in this state where the registered office
of the domestic corporation merged with or whose shares were acquired by the
foreign corporation was located.
(c) The corporation shall make all dissenters (whether or not residents of
this state) whose demands remain unsettled, parties to the proceeding as in an
action against their shares and all parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
(d) The jurisdiction of the court in which the proceeding is commenced under
subsection (b) is plenary and exclusive. The court may appoint one (1) or more
persons as appraisers to receive evidence and recommend decision on the
question of fair value. The appraisers have the powers described in the order
appointing them, or in any amendment to it. The dissenters are entitled to the
same discovery rights as parties in other civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled to judgment:
(1) For the amount, if any, by which the court finds the fair value of the
dissenter's shares, plus accrued interest, exceeds the amount paid by the
corporation; or
(2) For the fair value, plus accrued interest, of the dissenter's
after-acquired shares for which the corporation elected to withhold payment
under Section 48-23-208. [Acts 1986, ch. 887, Section 13.03.]
48-23-302. COURT COSTS AND COUNSEL FEES.--(a) The court in an appraisal
proceeding commenced under Section 48-23-301 shall determine all costs of the
proceeding, including the reasonable compensation and expenses of appraisers
appointed by the court. The court shall assess the costs against the
corporation, except that the court may assess costs against all or some of the
dissenters, in amounts the court finds equitable, to the extent the court finds
the dissenters acted arbitrarily, vexatiously, or not in good faith in
demanding payment under Section 48-23-209.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the courts find equitable against:
(1) The corporation and in favor of any or all dissenters if the court finds
the corporation did not substantially comply with the requirements of Part 2 of
this chapter; or
(2) Either the corporation or a dissenter, in favor of any other party, if
the court finds that the party against whom the fees and expenses are assessed
acted arbitrarily, vexatiously, or not in good faith with respect to the rights
provided by this chapter.
(c) If the court finds that the services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated, and that the fees
for those service should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded to
the dissenters who were benefited. [Acts 1986, ch. 887, 13.31.]
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PROXY APPENDIX H
REVOCABLE PROXY
CITIZENS OF HARDEMAN COUNTY FINANCIAL SERVICES, INC.
________________________________________________________________________________
SPECIAL MEETING OF SHAREHOLDERS
THURSDAY, SEPTEMBER 4, 1997
________________________________________________________________________________
The undersigned hereby appoints Frank T. Bass and James Bellar with full
powers of substitution, to act as proxies for the undersigned, to vote all
shares of Common Stock of Citizens of Hardeman County Financial Services, Inc.
("Citizens") which the undersigned is entitled to vote at a Special Meeting of
Shareholders ("Special Meeting"), to be held at the main office of The
Whiteville Bank, 114 Main Street, Whiteville, Tennessee, on Thursday, September
4, 1997 at 9:00 a.m., local time, and at any and all adjournments thereof, as
follows:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C>
1. The approval of the Reorganization Agreement (the
"Reorganization Agreement"), dated December 12, 1996,
between Union Planters Corp. ("UPC"), Union Planters
Community Bancorp, Inc. ("Community") and Citizens
of Hardeman County Financial Services, Inc.
("Citizens"), including the Plan of Merger attached
thereto as Exhibit 1, pursuant to which Citizens
would be merged with and into Community (the "Merger")
with Community surviving the Merger as a wholly-owned
subsidiary of UPC. [ ] [ ] [ ]
</TABLE>
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED OR
ANY OTHER BUSINESS IS PRESENTED AT SUCH MEETING, THIS PROXY WILL BE VOTED FOR
THE PROPOSITION STATED. IF ANY OTHER BUSINESS IS PRESENTED AT THE SPECIAL
MEETING, THIS PROXY WILL BE VOTED AS DETERMINED BY A MAJORITY OF THE BOARD OF
DIRECTORS. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER
BUSINESS TO BE PRESENTED AT THE MEETING.
________________________________________________________________________________
<PAGE> 191
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Special
Meeting or at any adjournment thereof and after notification to the Secretary
of the Company at the Meeting of the shareholder's decision to terminate this
proxy, then the power of said attorneys and proxies shall be deemed terminated
and of no further force and effect.
The undersigned acknowledges receipt from Citizens prior to the
execution of this proxy, of a notice of the Special Meeting and a
Prospectus/Proxy Statement dated July 29, 1997.
Dated: ___________________
<TABLE>
<S> <C>
__________________________________ _________________________________
PRINT NAME OF SHAREHOLDER PRINT NAME OF SHAREHOLDER
__________________________________ _________________________________
SIGNATURE OF SHAREHOLDER SIGNATURE OF SHAREHOLDER
</TABLE>
Please sign exactly as your name appears on the envelope in which this card was
mailed. When signing as attorney, executor, administrator, trustee or guardian,
please give your full title. If shares are held jointly, each holder should
sign.
________________________________________________________________________________
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
________________________________________________________________________________
