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As filed with the Securities and Exchange Commission on June 18, 1998
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
UNION PLANTERS CORPORATION
(Exact Name of Registrant as Specified in its Charter)
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TENNESSEE 6712 62-0859007
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
Incorporation or Organization) Classification Code Number)
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7130 GOODLETT FARMS PARKWAY
MEMPHIS, TENNESSEE 38018
(901) 580-6000
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
E. JAMES HOUSE, JR., ESQ.
SECRETARY AND MANAGER OF THE LEGAL DEPARTMENT OF
UNION PLANTERS CORPORATION
7130 GOODLETT FARMS PARKWAY
MEMPHIS, TENNESSEE 38018
(901) 580-6495
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
WITH COPIES TO:
CHERYL W. PATTERSON, ESQ. DAVID M. WASHBURN
Wyatt, Tarrant & Combs Winstead Sechrest & Minick P.C.
6075 Poplar Avenue Bank One Center
Suite 650 910 Travis Street, Suite 2400
Memphis, TN 38177 Houston, Texas 77002
(901) 537-1013 (713) 650-2748
-----------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If the securities being registered on this form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
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CALCULATION OF REGISTRATION FEE
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TITLE OF EACH PROPOSED PROPOSED
CLASS OF MAXIMUM MAXIMUM
SECURITIES AMOUNT OFFERING AGGREGATE AMOUNT OF
TO BE TO BE PRICE OFFERING REGISTRATION
REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE
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Common Stock, $5.00 par 423,925 shares $32.88 $13,940,304 $4,112.39
value per share (and associated (with Preferred
Preferred Share Rights) Share Rights)
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(1) This Registration Statement covers the maximum number of shares of common
stock of the Registrant which is expected to be issued in connection with
the merger described herein.
(2) Estimated solely for the purpose of calculating the Registration Fee and
based, pursuant to Rule 457(f)(2) under the Securities Act of 1933, as
amended, on the book value per share of the Common Stock of Alvin
Bancshares, Inc. as of the latest practicable date prior to the filing of
this Registration Statement.
DELAYING AMENDMENT
The Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1993 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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ALVIN BANCSHARES, INC.
221 S. GORDON STREET
ALVIN, TEXAS 77511
JUNE __, 1998
TO THE SHAREHOLDERS OF ALVIN BANCSHARES, INC.
You are cordially invited to attend a special meeting of the shareholders
(the "Special Meeting") of Alvin Bancshares, Inc. ("ABI") to be held at the
main office of ABI, located at 221 S. Gordon Street, Alvin, Texas, 77511 at
_:__ _.m., local time, on ______, 1998, notice of which is enclosed.
At the Special Meeting, you will be asked to consider and vote on a
proposal to approve the Agreement and Plan of Merger (the "Agreement") and a
related Plan of Merger (the "Plan of Merger") by and between ABI, Union
Planters Corporation, a Tennessee corporation ("UPC"), and Union Planters
Holding Corporation ("UPHC"), a Tennessee corporation and wholly-owned
subsidiary of UPC. Pursuant to the Agreement and the Plan of Merger, ABI will
merge (the "Merger") with and into UPHC, with the effect that UPHC will be the
surviving corporation resulting from the Merger. Upon consummation of the
Merger, each share of ABI common stock issued and outstanding (excluding shares
held by ABI or UPC, or their respective subsidiaries, in each case other than
shares held in a fiduciary capacity or as a result of debts previously
contracted and excluding shares held by dissenting shareholders) will be
converted into and exchanged for the right to receive .5340 of a share of UPC
common stock and the associated Preferred Share Rights (as defined in the
accompanying Proxy Statement/Prospectus), with cash being paid in lieu of
issuing fractional shares. The Agreement does not include any termination
provisions based on indices or price formulas relating to UPC common stock.
Enclosed are the (i) Notice of Special Meeting, (ii) Proxy
Statement/Prospectus, (iii) proxy card for the Special Meeting and (iv)
pre-addressed return envelope for the proxy card. The Proxy
Statement/Prospectus describes in more detail the Agreement, the Plan of
Merger, and the proposed Merger, including a description of your rights as a
shareholder of ABI to exercise statutory dissenters' rights, the conditions to
consummation of the Merger and the effects of the Merger on the rights of ABI
shareholders. Please read these materials carefully and consider thoughtfully
the information set forth in them.
THE BOARD OF DIRECTORS OF ABI HAS UNANIMOUSLY APPROVED AND ADOPTED THE
AGREEMENT AND THE PLAN OF MERGER AND CONSUMMATION OF THE MERGER CONTEMPLATED
THEREBY, AND RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE AGREEMENT AND THE
PLAN OF MERGER.
Approval of the Agreement and the Plan of Merger will require the
affirmative vote of the holders of two thirds of the issued and outstanding
shares of ABI Common Stock entitled to be voted at the Special Meeting. Whether
or not you plan to attend the Special Meeting, you are urged to complete, sign,
and return promptly the enclosed proxy card. If you attend the Special Meeting,
you may vote in person even if you previously returned your proxy card. The
proposed Merger with UPC is a significant step for ABI and your vote on this
matter is of great importance.
ON BEHALF OF THE BOARD OF DIRECTORS, I URGE YOU TO VOTE FOR ADOPTION OF
THE AGREEMENT AND THE PLAN OF MERGER BY MARKING THE ENCLOSED PROXY CARD "FOR"
ITEMS ONE AND TWO.
I look forward to seeing you at the Special Meeting.
Sincerely,
James F. Eubank, II
Chairman of the Board
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ALVIN BANCSHARES, INC.
221 S. GORDON STREET
ALVIN, TEXAS 77511
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD AT _:__ _.M. ON ________, 1998
NOTICE IS HEREBY GIVEN that a Special Meeting of the shareholders (the
"Special Meeting") of Alvin Bancshares, Inc. ("ABI") will be held at the main
office of ABI, located at 221 S. Gordon Street, Alvin, Texas, 77511 on
________, 1998, at _:__ _.m., local time, for the following purposes:
1. MERGER. To consider and vote upon a proposal to approve the
Agreement and Plan of Merger, dated as of March 18, 1998 (the "Agreement"), and
the related Plan of Merger (the "Plan of Merger"), by and between ABI, Union
Planters Corporation, a Tennessee corporation ("UPC"), and Union Planters
Holding Corporation, a Tennessee corporation and wholly-owned subsidiary of UPC
("UPHC"), pursuant to which (i) ABI will merge (the "Merger") with and into
UPHC, with the effect that UPHC will be the surviving corporation resulting
from the Merger, and (ii) each share of the $1.00 par value common stock of ABI
("ABI Common Stock") issued and outstanding at the effective time of the Merger
(excluding shares held by ABI or UPC, or their respective subsidiaries, in each
case other than shares held in a fiduciary capacity or as a result of debts
previously contracted and excluding shares held by dissenting shareholders)
will be converted into and exchanged for the right to receive .5340 of a share
of the $5.00 par value common stock of UPC, and the associated Preferred Share
Rights (as defined in the accompanying Proxy Statement/Prospectus), and cash in
lieu of issuing any fractional shares. Copies of each of the Agreement and the
Plan of Merger are set forth as Appendix A and Appendix B, respectively, to the
accompanying Proxy Statement/Prospectus and are incorporated by reference
therein; and
2. OTHER BUSINESS. To transact such other business as may
properly come before the Special Meeting or any adjournments or postponements
of the Special Meeting.
Only shareholders of record at the close of business on ________, 1998
will be entitled to receive notice of and to vote at the Special Meeting or any
adjournment or postponement thereof. APPROVAL OF THE AGREEMENT AND THE PLAN OF
MERGER REQUIRES THE AFFIRMATIVE VOTE OF THE HOLDERS OF AT LEAST TWO THIRDS OF
THE ISSUED AND OUTSTANDING SHARES OF ABI COMMON STOCK ENTITLED TO BE VOTED AT
THE SPECIAL MEETING.
ABI shareholders have the right to dissent from the Merger and to
receive the "fair value" of their shares of ABI Common Stock in cash, provided
the proper steps are taken to "perfect" statutory dissenters' rights. Statutory
dissenters' rights are more fully discussed in various sections of the
accompanying Proxy Statement/Prospectus, and a copy of the Texas statutes
governing statutory dissenters' rights is attached thereto as Appendix E. ABI
shareholders considering the exercise of their dissenters' rights should
carefully review these materials and information before voting with respect to
the Agreement and the Plan of Merger.
THE BOARD OF DIRECTORS OF ABI UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS
VOTE FOR APPROVAL OF THE AGREEMENT AND THE PLAN OF MERGER.
BY ORDER OF THE BOARD OF DIRECTORS
Virgil McDonald
Secretary to the Board
Alvin, Texas
June ____, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE,
DATE, AND SIGN THE ENCLOSED FORM OF PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED POSTAGE PAID RETURN ENVELOPE IN ORDER TO ENSURE THAT YOUR
SHARES WILL BE REPRESENTED AT THE SPECIAL MEETING.
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PROSPECTUS
COMMON STOCK, $5.00 PAR VALUE
UNION PLANTERS CORPORATION
PROXY STATEMENT
FOR SPECIAL MEETING OF SHAREHOLDERS OF
ALVIN BANCSHARES, INC.
This Prospectus of Union Planters Corporation, a bank holding company
organized and existing under the laws of the State of Tennessee ("UPC"),
relates to up to 423,925 shares of common stock, $5.00 par value, of UPC
(together with associated "Preferred Share Rights" (as defined herein) "UPC
Common Stock"), which are issuable to the shareholders of Alvin Bancshares,
Inc., a corporation organized and existing under the laws of the State of Texas
("ABI"), upon consummation of the proposed merger (the "Merger") of ABI with
and into Union Planters Holding Corporation, ("UPHC") a corporation organized
under the laws of the State of Tennessee, which is a wholly-owned subsidiary of
UPC, with the effect that UPHC will be the surviving corporation of the Merger.
The Merger will be consummated pursuant to the terms of the Agreement and Plan
of Merger, dated as of March 18, 1998 (the "Agreement"), and the related Plan
of Merger (the "Plan of Merger"), by and between UPC, ABI and UPHC. At the
effective time of the Merger (the "Effective Time"), except as described
herein, each issued and outstanding share of common stock, par value $1.00 per
share, of ABI ("ABI Common Stock") will be converted into and exchanged for the
right to receive .5340 of a share of UPC Common Stock (the "Exchange Ratio").
Cash (without interest) will be paid in lieu of the issuance of any fractional
shares of UPC Common Stock. The Agreement does not include any termination
provisions based on indices or price formulas relating to UPC Common Stock.
This Prospectus also serves as the Proxy Statement of ABI, and is
being furnished to the shareholders of ABI in connection with the solicitation
of proxies by the ABI Board for use at its Special Meeting of shareholders
(including any adjournment or postponement thereof, the "Special Meeting"), to
be held on ________, 1998, to consider and vote upon the Agreement and the Plan
of Merger and the transactions contemplated therein. This Proxy
Statement/Prospectus ("Proxy Statement") and related materials enclosed
herewith are being mailed to shareholders of ABI on or about ________, 1998.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS, SAVINGS ACCOUNTS, OR OTHER
OBLIGATIONS OF A DEPOSITORY INSTITUTION AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
---------------
The date of this Proxy Statement is June 2, 1998.
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AVAILABLE INFORMATION
UPC is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, is required to file reports, proxy and information statements, and
other information with the Securities and Exchange Commission (the "SEC").
Copies of such reports, proxy and information statements, and other information
can be obtained, at prescribed rates, from the SEC by addressing written
requests for such copies to the Public Reference Section at the SEC at 450
Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. In addition, such
reports, proxy and information statements, and other information can be
inspected and copied at the public reference facilities referred to above and
at the regional offices of the SEC at 7 World Trade Center, 13th Floor, New
York, New York 10048 and Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. The SEC also maintains a site on the World
Wide Web at http://www.sec.gov that contains reports, proxy and information
statements, and other information regarding registrants that file
electronically with the SEC. The shares of UPC Common Stock are listed and
traded on the New York Stock Exchange (the "NYSE") under the symbol "UPC," and
reports, proxy and information statements, and other information concerning UPC
also may be inspected at the offices of the NYSE, 20 Broad Street, New York,
New York 10005. The shares of ABI Common Stock are not listed or traded on any
exchange or market.
This Proxy Statement constitutes part of the Registration Statement on
Form S-4 of UPC (including any exhibits and amendments thereto, the
"Registration Statement") filed with the SEC under the Securities Act of 1933,
as amended (the "Securities Act"), relating to the securities offered hereby.
This Proxy Statement does not include all of the information in the
Registration Statement, certain portions of which have been omitted pursuant to
the rules and regulations of the SEC. For further information about UPC, ABI
and the securities offered hereby, reference is made to the Registration
Statement. The Registration Statement may be inspected and copied, at
prescribed rates, at the SEC's public reference facilities at the addresses set
forth above.
All information contained in this Proxy Statement or incorporated
herein by reference with respect to UPC was supplied by UPC, and all
information contained in this Proxy Statement or incorporated herein by
reference with respect to ABI was supplied by ABI.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROXY STATEMENT DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, THE
SECURITIES OFFERED BY THIS PROXY STATEMENT IN ANY JURISDICTION TO OR FROM ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY STATEMENT NOR ANY DISTRIBUTION
OF THE SECURITIES BEING OFFERED PURSUANT TO THIS PROXY STATEMENT SHALL, UNDER
ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF UPC OR ABI OR THE INFORMATION SET FORTH OR INCORPORATED BY REFERENCE
HEREIN SINCE THE DATE OF THIS PROXY STATEMENT.
THIS PROXY STATEMENT CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WITH
RESPECT TO THE FINANCIAL CONDITION, RESULTS OF OPERATIONS, AND BUSINESS OF UPC
FOLLOWING THE CONSUMMATION OF THE MERGER AND THE OTHER ACQUISITIONS (AS DEFINED
UNDER "BUSINESS OF UPC - RECENT DEVELOPMENTS"), INCLUDING STATEMENTS RELATING
TO THE COST SAVINGS AND REVENUE ENHANCEMENTS THAT ARE EXPECTED TO BE REALIZED
FROM THE MERGER AND THE OTHER ACQUISITIONS AND THE EXPECTED IMPACT OF THE
MERGER AND THE OTHER ACQUISITIONS ON UPC'S FINANCIAL PERFORMANCE. THESE
FORWARD-LOOKING STATEMENTS INVOLVE CERTAIN RISKS AND UNCERTAINTIES. FACTORS
THAT MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY
SUCH FORWARD-LOOKING STATEMENTS INCLUDE, AMONG OTHER THINGS, THE FOLLOWING
POSSIBILITIES: (I) EXPECTED COST SAVINGS FROM THE MERGER AND THE OTHER
ACQUISITIONS CANNOT BE FULLY REALIZED; (II) DEPOSIT ATTRITION, CUSTOMER LOSS,
OR REVENUE LOSS FOLLOWING THE MERGER AND THE OTHER ACQUISITIONS IS GREATER THAN
EXPECTED; (III) COMPETITIVE PRESSURE IN THE BANKING INDUSTRY INCREASES
SIGNIFICANTLY; (IV) COSTS OR DIFFICULTIES RELATED TO THE INTEGRATION OF THE
BUSINESSES OF UPC AND THE INSTITUTIONS TO BE ACQUIRED ARE GREATER THAN
EXPECTED; (V) CHANGES IN THE INTEREST RATE ENVIRONMENT REDUCE MARGINS; (VI)
GENERAL ECONOMIC CONDITIONS, EITHER NATIONALLY OR REGIONALLY, ARE LESS
FAVORABLE THAN EXPECTED,
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RESULTING IN, AMONG OTHER THINGS, A DETERIORATION IN CREDIT QUALITY; (VII)
CHANGES OCCUR IN THE REGULATORY ENVIRONMENT; (VIII) CHANGES OCCUR IN BUSINESS
CONDITIONS AND INFLATION; (IX) CHANGES OCCUR IN THE SECURITIES MARKETS; AND (X)
DISRUPTIONS OF THE OPERATIONS OF UPC OR ANY OF ITS SUBSIDIARIES OR ANY OTHER
GOVERNMENTAL OR PRIVATE ENTITY AS A RESULT OF THE "YEAR 2000 PROBLEM". THE
FORWARD-LOOKING EARNINGS ESTIMATES INCLUDED IN THIS PROXY STATEMENT HAVE NOT
BEEN EXAMINED OR COMPILED BY THE INDEPENDENT PUBLIC ACCOUNTANTS OF UPC OR ABI,
NOR HAVE SUCH ACCOUNTANTS APPLIED ANY PROCEDURES THERETO. ACCORDINGLY, SUCH
ACCOUNTANTS DO NOT EXPRESS AN OPINION OR ANY OTHER FORM OF ASSURANCE ON THEM.
FURTHER INFORMATION ON OTHER FACTORS THAT COULD AFFECT THE FINANCIAL RESULTS OF
UPC AFTER THE MERGER AND THE OTHER ACQUISITIONS IS INCLUDED IN THE SEC FILINGS
INCORPORATED BY REFERENCE HEREIN.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents previously filed with the SEC by UPC pursuant
to the Exchange Act are hereby incorporated by reference herein (SEC File No.
1-10160):
(a) UPC's Annual Report on Form 10-K for the year ended December
31, 1997 (provided that any information included or
incorporated by reference in response to Items 402(a)(8),
(i), (k), or (1) of Regulation S-K of the SEC shall not be
deemed to be incorporated herein and is not part of the
Registration Statement) (the "UPC 1997 Form 10-K");
(b) UPC's Quarterly Report on Form 10-Q for the three months
ended March 31, 1998 and its amendment to such form on Form
10-Q/A (the "UPC March 31, 1998 Form 10-Q");
(c) UPC's Current Reports on Form 8-K dated January 15, 1998,
February 23, 1998 and April 16, 1998.
(d) The description of the current management and Board of
Directors of UPC contained in the Proxy Statement of UPC
filed pursuant to Section 14(a) of the Exchange Act with
respect to UPC's Special Meeting of Shareholders held on
April 16, 1998;
(e) UPC's Registration Statement on Form 8-A dated January 19,
1989, filed on February 1, 1989; (SEC File No. 0-6919) in
connection with UPC's designation and authorization of its
Series A Preferred Stock; and
(f) The description of the UPC Common Stock contained in UPC's
Registration Statement under Section 12(b) of the Exchange
Act and any amendment or report filed for the purpose of
updating such description.
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 Proxy Statement and prior to
final adjournment of the Special Meeting shall be deemed to be incorporated by
reference in this Proxy Statement and to be a part hereof from the date of
filing of such documents. Any statement contained herein or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes hereof to the extent that a statement
contained herein or in any subsequently filed document which also is, or is
deemed to be, incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed to
constitute a part hereof, except as so modified or superseded.
UPC will provide without charge, upon the written or oral request of
any person, including any beneficial owner, to whom this Proxy Statement is
delivered, a copy of any and all information (excluding certain exhibits)
relating to UPC that has been incorporated by reference in the Registration
Statement. Such requests should be directed to E. James House, Jr., Secretary
and Manager of the Legal Department, Union Planters Corporation, 7130 Goodlett
Farms Parkway, Memphis, Tennessee 38018 (telephone (901) 580-6584). In order to
ensure timely delivery of the documents, any request should be made by
_____________, 1998.
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TABLE OF CONTENTS
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SUMMARY ....................................................................................................... 1
The Parties............................................................................................ 1
Meeting of Shareholders................................................................................ 2
The Merger............................................................................................. 3
Comparative Market Prices of Common Stock.............................................................. 6
Historical and Pro Forma Comparative Per Share Data.................................................... 7
Selected Financial Data................................................................................ 8
SPECIAL MEETING OF ABI SHAREHOLDERS............................................................................. 13
Date, Place, Time, and Purpose......................................................................... 13
Record Date, Voting Rights, Required Vote, and Revocability of Proxies................................. 13
Solicitation of Proxies................................................................................ 14
Dissenters' Rights..................................................................................... 14
Recommendation......................................................................................... 15
DESCRIPTION OF THE TRANSACTION.................................................................................. 15
General .............................................................................................. 15
Background of the Merger............................................................................... 15
Recommendation of the ABI Board; Reasons for the Merger................................................ 16
UPC's Reasons for the Merger........................................................................... 17
Effective Time of the Merger........................................................................... 17
Dissenters' Rights..................................................................................... 18
Distribution of UPC Stock Certificates................................................................. 19
Limitation on Negotiations............................................................................. 19
Conditions to Consummation of the Merger............................................................... 20
Regulatory Approval.................................................................................... 20
Waiver, Amendment, and Termination..................................................................... 21
Conduct of Business Pending the Merger................................................................. 22
Management and Operations After the Merger............................................................. 24
Interests of Certain Persons in the Merger............................................................. 24
Material Federal Income Tax Consequences of the Merger................................................. 25
Accounting Treatment................................................................................... 26
Expenses and Fees...................................................................................... 27
Resales of UPC Common Stock............................................................................ 27
EFFECT OF THE MERGER ON RIGHTS OF SHAREHOLDERS.................................................................. 28
Anti-takeover Provisions Generally..................................................................... 28
Authorized Capital Stock............................................................................... 29
Preemptive Rights...................................................................................... 30
Amendment of Charter and Bylaws........................................................................ 30
Classified Board of Directors and Absence of Cumulative Voting......................................... 31
Director Removal and Vacancies......................................................................... 31
Limitations on Director Liability...................................................................... 31
Indemnification........................................................................................ 32
Special Meetings of Shareholders....................................................................... 33
Actions by Shareholders Without a Meeting.............................................................. 33
Shareholder Nominations and Proposals.................................................................. 34
Business Combinations ................................................................................. 34
Limitations on Ability to Vote Stock................................................................... 36
Dissenters' Rights of Appraisal........................................................................ 37
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Shareholders' Rights to Examine Books and Records...................................................... 37
Dividends.............................................................................................. 38
COMPARATIVE MARKET PRICES AND DIVIDENDS......................................................................... 39
BUSINESS OF ABI................................................................................................. 40
General .............................................................................................. 40
Lending Activities..................................................................................... 40
Property .............................................................................................. 40
Competition............................................................................................ 40
Non-Performing Assets.................................................................................. 40
Investment Activities.................................................................................. 40
Legal Proceedings...................................................................................... 40
Beneficial Ownership of ABI Common Stock............................................................... 41
Regulation............................................................................................. 41
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF ALVIN BANCSHARES, INC. AND SUBSIDIARIES............................................ 42
Results of Operations.................................................................................. 42
Provision for Credit Losses............................................................................ 47
Capital Resources, Liquidity and Financial Condition................................................... 48
Investment Securities.................................................................................. 52
Deposits .............................................................................................. 53
Loans .............................................................................................. 54
Allowance for Credit Losses and Risk Elements.......................................................... 54
Nonaccrual, Past Due and Restructured Loans............................................................ 55
Return on Equity and Assets............................................................................ 55
BUSINESS OF UPC................................................................................................. 56
General .............................................................................................. 56
Recent Developments.................................................................................... 58
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION.......................................................... 60
CERTAIN REGULATORY CONSIDERATIONS............................................................................... 67
General .............................................................................................. 67
Payment of Dividends................................................................................... 68
Capital Adequacy....................................................................................... 69
Support of Subsidiary Institutions..................................................................... 70
Prompt Corrective Action............................................................................... 70
DESCRIPTION OF UPC CAPITAL STOCK................................................................................ 72
UPC Common Stock....................................................................................... 72
UPC Preferred Stock.................................................................................... 73
OTHER MATTERS................................................................................................... 73
SHAREHOLDER PROPOSALS........................................................................................... 73
EXPERTS ....................................................................................................... 74
OPINIONS ....................................................................................................... 74
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APPENDICES:
Appendix A --- Agreement and Plan of Merger, dated as of March 18,
1998, by and between Union Planters Corporation, Union
Planters Holding Corporation and Alvin Bancshares, Inc.
Appendix B --- Plan of Merger of Alvin Bancshares, Inc. with and into Union
Planters Holding Corporation
Appendix C --- ABI's Unaudited Consolidated Financial Statements as of and
for the three months ended March 31, 1998 and 1997 and ABI's
Audited Consolidated Financial Statements for the fiscal
years ended December 31, 1997, 1996 and 1995.
Appendix D --- Copy of Articles 5.11, 5.12 and 5.13 of the Texas Business
Corporation Act regarding Dissenters' Rights
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SUMMARY
The following is a summary of certain information contained in this
Proxy Statement and the documents incorporated herein by reference. This
summary is not intended to be a complete description of the matters covered in
this Proxy Statement and is qualified in its entirety by the more detailed
information appearing elsewhere or incorporated by reference in this Proxy
Statement. Shareholders are urged to read carefully the entire Proxy Statement,
including the Appendices. As used in this Proxy Statement, the terms "UPC" and
"ABI" refer to Union Planters Corporation and Alvin Bancshares, Inc.,
respectively, and, where the context requires, to those entities and their
respective subsidiaries.
THE PARTIES
ABI. ABI, a Texas corporation, is a bank holding company registered
with the Board of Governors of the Federal Reserve System (the "Federal
Reserve") under the Bank Holding Company Act of 1956, as amended (the "BHC
Act"). At March 31, 1998, ABI had total consolidated assets of approximately
$121 million, total consolidated loans of approximately $58.3 million, total
consolidated deposits of approximately $106.8 million, and total consolidated
shareholders' equity of approximately $13.9 million.
ABI conducts its business activities through its principal bank
subsidiary, Alvin State Bank ("Alvin State Bank"), which was organized in 1906
as a commercial bank chartered under the laws of the State of Texas. Alvin
State Bank's primary market area covers all or a portion of Brazoria and
Galveston counties in southeast Texas which are serviced through its two full
service offices in Alvin and Friendswood, Texas. Through Alvin State Bank, ABI
is engaged generally in the business of attracting deposits from the public and
originating personal and commercial loans.
The principal executive offices of ABI are located at 221 S. Gordon
Street, Alvin, Texas 77511 and its telephone number at such address is (281)
331-6411. Additional information with respect to ABI and its subsidiaries is
included elsewhere herein. See "BUSINESS OF ABI" AND "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF ABI AND ITS
SUBSIDIARIES".
UPC. UPC, a Tennessee corporation, is a bank holding company
registered with the Federal Reserve under the BHC Act. As of March 31, 1998,
UPC had total consolidated assets of approximately $18.4 billion, total
consolidated loans of approximately $12.7 billion, total consolidated deposits
of approximately $13.6 billion, and total consolidated shareholders' equity of
approximately $1.8 billion.
UPC conducts its business activities through its principal bank
subsidiary, the $15.7 billion asset Union Planters Bank, National Association
("UPB"), a multi-state national banking association headquartered in Memphis,
Tennessee with branches in Tennessee, Arkansas, Missouri, Kentucky, Alabama,
Mississippi and Louisiana, one federally chartered savings association
headquartered in Tennessee, two other Tennessee state-chartered banks
headquartered in Tennessee, two recently acquired Arkansas state-chartered
banks, and one Florida state-chartered bank headquartered in Miami, Florida
(collectively with UPB, the "UPC Banking Subsidiaries"). Through the UPC
Banking Subsidiaries, UPC provides a diversified range of financial services in
the communities in which it operates and maintains approximately 518 banking
offices and 676 automated teller machines ("ATMs"). UPC's total deposits at
March 31, 1998 are allocable by state (before consolidating adjustments)
approximately as follows: $6.7 billion in Tennessee; $2.9 billion in
Mississippi; $1.3 billion in Florida; $1.2 billion in Missouri; $596 million in
Arkansas; $598 million in Louisiana; $412 million in Alabama; and $103 million
in Kentucky.
Acquisitions have been, and are expected to continue to be, an
important part of UPC's business strategy. UPC completed 13 acquisitions in
1994, three in 1995, seven in 1996, and six in 1997, adding approximately $3.8
billion in total assets in 1994, $1.3 billion in 1995, $4.2 billion in 1996 and
$3.6 billion in 1997. In 1998, UPC has completed the acquisition of two
institutions with approximately $520 million in total assets (the "Recently
1
<PAGE> 12
Completed Acquisitions"). As of June 1, 1998, UPC was a party to definitive
agreements to acquire ten financial institutions, in addition to ABI, and to
purchase certain branch locations and assume deposit liabilities of California
Federal Bank in Florida (the "CalFed Branch Purchase") (collectively referred to
as the "Other Pending Acquisitions"). The Other Pending Acquisitions had
aggregate total assets of approximately $13.0 billion at March 31, 1998. For
purposes of this Proxy Statement, the Recently Completed Acquisitions and the
Other Pending Acquisitions are collectively referred to as the "Other
Acquisitions". The largest of the Other Pending Acquisitions is UPC's proposed
acquisition of Magna Group, Inc. ("MGR"), in St. Louis, Missouri, which had
total consolidated assets of approximately $7.3 billion at March 31, 1998. On
May 1, 1998 MGR consummated the acquisition of Charter Financial, Inc., and its
subsidiary, Charter Bank, S.B. (the "Charter Acquisition"). Charter is located
in Sparta, Illinois and had at the time of consummation total assets of
approximately $406 million, total deposits of approximately $309 million, and
total shareholders' equity of approximately $67 million. The Charter Acquisition
was accounted for as a purchase. For purposes of this Proxy Statement, including
the historical and equivalent pro forma data, the terms "Other Acquisitions" and
"Other Pending Acquisitions" include the completed Charter Acquisition. For a
description of the Other Acquisitions in addition to the Merger, see "BUSINESS
OF UPC -- Recent Developments" and "Pro Forma Condensed Consolidated Financial
Information." For a discussion of UPC's acquisition program, including a
discussion of the significant charges UPC has incurred incidental to
acquisitions in the past three fiscal years, see the caption "Acquisitions"
(pages 10, 11 and 12) in UPC's 1997 Annual Report to Shareholders and Note 2 to
UPC's audited consolidated financial statements for the years ended December 31,
1997, 1996, and 1995 (pages 49 and 50) in such Annual Report to Shareholders.
UPC's 1997 Annual Report to Shareholders is included as Exhibit 13 to the UPC
1997 Form 10-K and Exhibit 13 is incorporated by reference herein to the extent
indicated herein.
UPC expects to continue to take advantage of the consolidation of the
financial services industry by further developing its franchise through the
acquisition of financial institutions and other entities engaged in lines of
business permissible for banks and bank holding companies. 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 Common 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.
The principal executive offices of UPC are located at 7130 Goodlett
Farms Parkway, Memphis, Tennessee 38018, and its telephone number at such
address is (901) 580-6000. Additional information with respect to UPC and its
subsidiaries is included elsewhere herein and in documents incorporated by
reference in this Proxy Statement. See "AVAILABLE INFORMATION," "DOCUMENTS
INCORPORATED BY REFERENCE," and "BUSINESS OF UPC."
UPHC. UPHC, a Tennessee corporation, is a wholly-owned subsidiary of
UPC. UPHC is a bank holding company itself which owns all of the common stock
of UPB. Certain of the directors and officers of UPHC are executive officers of
UPC.
MEETING OF SHAREHOLDERS
This Proxy Statement is being furnished to the holders of ABI Common
Stock in connection with the solicitation of proxies by the Board of Directors
of ABI (the "ABI Board") for use at the Special Meeting held at the main office
of ABI, located at 221 S. Gordon Street, Alvin, Texas 77511, at _:__ _.m.,
local time, on ______, 1998. At the Special Meeting ABI shareholders will be
asked to consider and vote upon (i) a proposal to approve the Agreement and the
Plan of Merger and (ii) such other business as may properly come before the
Special Meeting.
See "SPECIAL MEETING OF ABI SHAREHOLDERS -- Date, Place, Time, and Purpose."
The ABI Board has fixed the close of business on ________, 1998, as
the record date (the "ABI Record Date") for determination of the shareholders
entitled to notice of and to vote at the Special Meeting. Only holders of
record of shares of ABI Common Stock on the ABI Record Date will be entitled to
receive notice of and to vote at the Special Meeting. Each share of ABI Common
Stock is entitled to one vote on each matter submitted to ABI
2
<PAGE> 13
shareholders for a vote. On the ABI Record Date, there were 793,867 shares of
ABI Common Stock outstanding. See "SPECIAL MEETING OF ABI SHAREHOLDERS --
Record Date, Voting Rights, Required Vote, and Revocability of Proxies."
Approval of the Agreement and the Plan of Merger and the transactions
contemplated thereby requires the affirmative vote of the holders of at least
two thirds of the issued and outstanding shares of ABI Common Stock entitled to
be voted at the Special Meeting. As of the ABI Record Date the Chairman of the
Board of ABI, James F. Eubank, II, was entitled to vote pursuant to a voting
agreement, 657,035 shares or approximately 82.76% of the outstanding shares of
ABI Common Stock.
As of the ABI Record Date, UPC held no shares of ABI Common Stock in a
fiduciary capacity for others, or as a result of debts previously contracted,
and ABI held ______ shares of ABI Common Stock in a fiduciary capacity for
others. See "SPECIAL MEETING OF ABI SHAREHOLDERS -- Record Date, Voting Rights,
Required Vote, and Revocability of Proxies."
For information with respect to the number and percentage of shares of
ABI Common Stock beneficially owned by directors and executive officers of ABI
and with respect to the beneficial owners of 5.0% or more of the outstanding
shares of ABI Common Stock, see "SPECIAL MEETING OF ABI SHAREHOLDERS" and
"BUSINESS OF ABI -- Beneficial Ownership of ABI Common Stock."
THE MERGER
GENERAL. The Agreement provides for the acquisition of ABI by UPC
pursuant to the merger of ABI with and into UPHC, a wholly-owned subsidiary of
UPC, with the effect that UPHC will be the surviving corporation resulting from
the Merger. At the Effective Time, each share of ABI Common Stock then issued
and outstanding (excluding shares held by ABI, UPC, or their respective
subsidiaries, in each case other than shares held in a fiduciary capacity or as
a result of debts previously contracted and excluding shares held by dissenting
shareholders) will be converted into and exchanged for the right to receive
.5340 of a share of UPC Common Stock (the "Exchange Ratio").
No fractional shares of UPC Common Stock will be issued. Rather, cash
(without interest) will be paid in lieu of any fractional share interest to
which any ABI shareholder would otherwise be entitled upon consummation of the
Merger, in an amount equal to such fractional part of a share of UPC Common
Stock multiplied by the closing price of one share of UPC Common Stock on the
NYSE - Composite Transactions List (as reported by The Wall Street Journal or,
if not reported thereby, another authoritative source as reasonably selected by
UPC) on the last trading day preceding the Effective Time. See "DESCRIPTION OF
THE TRANSACTION -- General."
The market price of the UPC Common Stock may change significantly
prior to the Effective Time of the Merger. The Agreement does not contain any
provisions which would cause an adjustment to the Exchange Ratio prior to
consummation of the Merger based on the market price of UPC Common Stock.
UPC has reserved the right to revise the structure of the Merger in
order to achieve tax benefits or for any other reason it deems advisable,
subject to certain limitations. See "DESCRIPTION OF THE TRANSACTION - Right to
Restructure the Transaction."
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARD OF DIRECTORS OF
ABI. The ABI Board believes that the Agreement and the Merger are in the best
interests of ABI and its shareholders. If the Merger is consummated, the
shareholders of ABI will acquire an equity interest in a much larger and more
diversified enterprise. The UPC Common Stock is traded on the NYSE, and
accordingly, is more readily marketable than the ABI Common Stock. The ABI
Board believes that the Merger will result in a company with expanded
opportunities for profitable growth and that the combined resources of ABI and
UPC will provide an enhanced ability to compete in the changing and competitive
financial services industry. THE ABI BOARD UNANIMOUSLY RECOMMENDS THAT ABI
3
<PAGE> 14
SHAREHOLDERS VOTE FOR APPROVAL OF THE AGREEMENT AND THE PLAN OF MERGER. See
"DESCRIPTION OF THE TRANSACTION -- Recommendation of the ABI Board; Reasons for
the Merger."
In unanimously approving the Agreement and the Plan of Merger, the ABI
Board considered, among other things, ABI's and UPC's financial condition, the
financial terms and income tax consequences of the Merger and the likelihood of
the Merger being approved by regulatory authorities without undue conditions or
delay. See "DESCRIPTION OF THE TRANSACTION -- Recommendation of the ABI Board;
Reasons for the Merger."
EFFECTIVE TIME. Subject to the conditions to the obligations of the
parties to effect the Merger, the Effective Time will occur on the date and at
the time that the Articles of Merger become effective with the Secretaries of
State of the State of Tennessee and the State of Texas. Subject to the terms
and conditions of the Agreement, unless otherwise agreed upon by ABI and UPC,
the Agreement provides that the parties will use their reasonable efforts to
cause the Effective Time to occur on such date as may be designated by UPC
within 30 days following the last to occur of (i) the effective date of the
last consent of any regulatory authority having authority over and approving or
exempting the Merger (taking into account any requisite waiting period in
respect thereof), (ii) the date on which the shareholders of ABI approve the
Agreement and the Plan of Merger, and (iii) the date on which all other
conditions precedent (other than those conditions which relate to actions to be
taken at the Closing) to each party's obligations under the Agreement have been
satisfied or waived (to the extent waivable by such party). It is anticipated
that the Effective Time will occur on August 1, 1998, approximately ___ days
following the date of the Special Meeting. See "DESCRIPTION OF THE TRANSACTION
- -- Effective Time of the Merger," "-- Conditions to Consummation of the
Merger," and "-- Waiver, Amendment, and Termination."
NO ASSURANCE CAN BE PROVIDED THAT THE NECESSARY SHAREHOLDER AND
REGULATORY APPROVALS CAN BE OBTAINED OR THAT THE OTHER CONDITIONS PRECEDENT TO
THE MERGER CAN OR WILL BE SATISFIED. ABI AND UPC ANTICIPATE THAT ALL CONDITIONS
TO THE CONSUMMATION OF THE MERGER WILL BE SATISFIED SO THAT THE MERGER CAN BE
CONSUMMATED ON OR ABOUT AUGUST 1, 1998. HOWEVER, DELAYS IN THE CONSUMMATION OF
THE MERGER COULD OCCUR.
EXCHANGE OF STOCK CERTIFICATES. Promptly after the Effective Time, UPC
will cause UPB, acting in its capacity as exchange agent for UPC (the "Exchange
Agent"), to mail to each holder of record of a certificate or certificates
(collectively, the "Certificates") which, immediately prior to the Effective
Time, represented outstanding shares of ABI Common Stock, a letter of
transmittal and instructions for use in effecting the surrender and
cancellation of the Certificates in exchange for certificates representing
shares of UPC Common Stock. Cash will be paid to the holders of ABI Common
Stock in lieu of issuing any fractional shares of UPC Common Stock. In no event
will the holder of any surrendered Certificate(s) be entitled to receive
interest on any cash to be issued to such holder, and in no event will ABI,
UPC, or the Exchange Agent be liable to any holder of ABI Common Stock for any
UPC Common Stock or dividends thereon or cash delivered in good faith to a
public official pursuant to any applicable abandoned property, escheat, or
similar law.
REGULATORY APPROVAL AND OTHER CONDITIONS. The Merger is subject to the
prior approval of the Federal Reserve and the Texas Department of Banking (the
"Texas Department"). Applications have been filed with the Federal Reserve and
the Texas Department for the requisite approval and on June 10, 1998 the
Federal Reserve notified UPC of its approval. Approval by the Federal Reserve
is subject to expiration of statutory waiting periods as herein described. The
Texas Department has elected not to disapprove the Merger. THERE CAN BE NO
ASSURANCE THAT ADDITIONAL REGULATORY APPROVALS WILL BE OBTAINED OR AS TO THE
TIMING OF ANY SUCH APPROVALS. It is anticipated that following consummation of
the Merger and UPC's proposed acquisition of Merchants Bancshares, Inc.
("Merchants"), Alvin State Bank will merge with a subsidiary of Merchants (the
"Bank Merger"). The Bank Merger is expected to occur in the fourth quarter of
1998, subject to receipt of applicable regulatory approvals, the receipt of
which are not conditions to consummation of the Merger.
Consummation of the Merger is subject to various other conditions,
including receipt of the required approval of the ABI shareholders, receipt of
opinions of counsel as to the tax-free nature of certain aspects of the Merger,
receipt of a letter from UPC's independent accountants to the effect that the
Merger will qualify for pooling-
4
<PAGE> 15
of-interests accounting treatment and certain other conditions at the Effective
Time. See "DESCRIPTION OF THE TRANSACTION -- Regulatory Approval" and "--
Conditions to Consummation of the Merger."
WAIVER, AMENDMENT, AND TERMINATION. The Agreement may be terminated
and the Merger abandoned at any time prior to the Effective Time by mutual
consent of the ABI Board and the Board of Directors of UPC (the "UPC Board"),
or by the action of the Board of Directors of either company under certain
circumstances, including, but not limited to, if the Merger is not consummated
by December 31, 1998 unless the failure to consummate by such date is due to a
willful breach of the Agreement by the party seeking to terminate the
Agreement. To the extent permitted by law, the Agreement may be amended upon
the written agreement of UPC and ABI without approval of the holders of ABI
Common Stock, whether before or after approval of the Agreement and the Plan of
Merger by the ABI shareholders; provided, that, after any such approval by the
ABI shareholders, there shall be no amendment that modifies in any material
respect the consideration to be received by such shareholders without the
further approval of such shareholders. The Merger may be abandoned
notwithstanding approval of the matters relating to the Agreement required to
be approved by the ABI shareholders. See "DESCRIPTION OF THE TRANSACTION --
Waiver, Amendment, and Termination."
DISSENTERS' RIGHTS. Holders of ABI Common Stock have the right under
Article 5.12 of the Texas Business Corporation Act ("Texas BCA") to dissent
from the Merger and, upon consummation of the Merger and such holders' further
compliance with Articles 5.11, 5.12 and 5.13 of the Texas BCA, to be paid the
"fair value" of their shares of ABI Common Stock in cash. See "DESCRIPTION OF
THE TRANSACTION -- Dissenters' Rights", and Appendix D hereto, which is a copy
of Articles 5.11, 5.12 and 5.13 of the Texas BCA.
INTERESTS OF CERTAIN PERSONS IN THE MERGER. Members of ABI's
management and the ABI Board have interests in the Merger in addition to their
interests as shareholders of ABI generally by virtue of the indemnification and
insurance provisions of the Agreement. See "DESCRIPTION OF THE TRANSACTION --
Interests of Certain Persons in the Merger."
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER. It is intended
that the Merger will be treated as a reorganization within the meaning of
Section 368 of the Internal Revenue Code of 1986, as amended (the "Code").
Accordingly, for federal income tax purposes, no gain or loss will be
recognized by an ABI shareholder upon the exchange of all of such shareholder's
shares of ABI Common Stock solely for shares of UPC Common Stock (except with
respect to cash received in lieu of a fractional share of UPC Common Stock).
Consummation of the Merger is conditioned upon receipt by UPC of an opinion of
Wyatt, Tarrant & Combs and upon receipt by ABI of an opinion of Winstead
Sechrest & Minick P.C. in each case dated the date of the Effective Time,
substantially to this effect. The conditions relating to the receipt of the tax
opinions may be waived by both UPC and ABI. Neither UPC nor ABI currently
intends to waive conditions relating to the receipt of the tax opinions. If the
conditions relating to receipt of tax opinions were waived and the material
federal income tax consequences of the Merger were materially different from
those described in this Proxy Statement, ABI would resolicit the approval of
its shareholders prior to consummating the Merger. A dissenting holder of ABI
Common Stock who perfects his or her dissenters' rights will recognize gain or
loss measured by the difference between the value received by such shareholder
for his or her shares of ABI Common Stock and his or her tax basis in such
stock. TAX CONSEQUENCES OF THE MERGER FOR INDIVIDUAL TAXPAYERS CAN VARY,
HOWEVER, AND ALL ABI SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS
TO DETERMINE THE EFFECT OF THE MERGER ON THEM UNDER FEDERAL, STATE, LOCAL, AND
FOREIGN TAX LAWS. For a further discussion of the federal income tax
consequences of the Merger including a description of the tax opinions issued
as of the date of the Proxy Statement, see "DESCRIPTION OF THE TRANSACTION --
Material Federal Income Tax Consequences of the Merger."
ACCOUNTING TREATMENT. It is currently intended that the Merger will be
accounted for as a pooling of interests transaction for accounting and
financial reporting purposes and UPC's obligations to consummate the Merger are
conditioned upon the availability of such accounting treatment. UPC will not
consummate the Merger if such accounting treatment is not available. See
"DESCRIPTION OF THE TRANSACTION -- Accounting Treatment."
5
<PAGE> 16
CERTAIN DIFFERENCES IN SHAREHOLDERS' RIGHTS. At the Effective Time,
ABI shareholders, whose rights are governed by ABI's Articles of Incorporation,
(the "Charter"), and ABI's Bylaws (the "Bylaws") and by the Texas BCA, will
automatically become UPC shareholders, and their rights as UPC shareholders
will be governed by UPC's Restated Charter (the "Charter") and Bylaws and by
the Tennessee Business Corporation Act ("TBCA"). The rights of UPC shareholders
differ from the rights of ABI shareholders in certain important respects,
including with respect to certain anti-takeover provisions provided for in
UPC's Charter and Bylaws. See "EFFECT OF THE MERGER ON RIGHTS OF SHAREHOLDERS."
LIMITATION ON NEGOTIATIONS. Pursuant to Section 8.8 of the Agreement,
ABI is prohibited from soliciting or knowingly encouraging any "Acquisition
Proposal" (defined generally as any tender offer, exchange offer or other
proposal for a merger, acquisition of all or a substantial portion of the stock
or assets of, or other business combination involving ABI). As protection
against possible violation of this limitation, ABI has agreed,under certain
circumstances, to pay to UPC the sum of $1,200,000 in immediately available
funds in the event and at the time that ABI 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 Agreement.
This provision would survive the termination of the Agreement under certain
circumstances. See "DESCRIPTION OF THE TRANSACTION - Limitation on
Negotiations".
CONDUCT OF BUSINESS PENDING THE MERGER. Each party has agreed in the
Agreement to, among other things, operate its business and to take no action
that would materially adversely affect the ability of any party to perform its
covenants and agreements under the Agreement. In addition, ABI has agreed not
to take certain actions relating to the operation of ABI pending consummation
of the Merger without the prior written consent of UPC, except as otherwise
permitted by the Agreement, including, among other things: (i) becoming
responsible for any obligation for borrowed money in excess of an aggregate of
$100,000, except in the ordinary course of business consistent with past
practices; (ii) paying any dividends, except as permitted by the Agreement in
accordance with past practices, or, exchanging any shares of its capital stock,
issuing any additional shares of its capital stock, or giving any person the
right to acquire any such shares; (iii) acquiring control over any other
entity; (iv) subject to certain exceptions, granting any increase in
compensation or benefits, or paying any bonus, to any of its directors,
officers, or employees; or (v) except as previously disclosed to UPC or
permitted by the Agreement, modifying or adopting any employee benefit plans,
including any employment contract. See "DESCRIPTION OF THE TRANSACTION --
Conduct of Business Pending the Merger."
COMPARATIVE MARKET PRICES OF COMMON STOCK
Shares of UPC Common Stock are traded on the NYSE under the symbol
"UPC." Shares of ABI Common Stock are not traded on any exchange or in the
over-the-counter market.
The following table sets forth the reported closing sale prices per
share for UPC Common Stock and the equivalent per share prices giving effect to
the Merger (as explained below) for ABI Common Stock on (i) March 24, 1998, the
last trading day preceding the public announcement of the execution of the
Agreement, and (ii) June 10, 1998, the latest practicable date prior to the
mailing of this Proxy Statement:
<TABLE>
<CAPTION>
UPC Equivalent Price
Common Stock Per ABI Share (1)
------------ -----------------
<S> <C> <C>
March 24, 1998 $63.63 $33.98
June 16, 1998 55.00 29.37
</TABLE>
- ---------------------
(1) The equivalent price per share of ABI Common Stock at each specified
date represents the closing sale price of a share of UPC Common Stock
on such date multiplied by an Exchange Ratio of .5340. See
"COMPARATIVE MARKET PRICES AND DIVIDENDS."
6
<PAGE> 17
There can be no assurance as to what the market price of the UPC
Common Stock will be if and when the Merger is consummated, or anytime
thereafter.
HISTORICAL AND PRO FORMA COMPARATIVE PER SHARE DATA
The following table sets forth certain comparative per share data
relating to earnings before extraordinary items and accounting changes, cash
dividends and book value on: (i) a historical basis for UPC and ABI; (ii) a pro
forma combined basis per share of UPC Common Stock, giving effect to the Merger
and the Other Acquisitions (as defined under "BUSINESS OF UPC -- Recent
Developments"); (iii) an equivalent pro forma basis per share of ABI Common
Stock, giving effect to UPC only; and (iv) an equivalent pro forma basis per
share of ABI Common Stock, giving effect to the Merger and the Other
Acquisitions. The UPC pro forma combined information and the ABI equivalent pro
forma information give effect to the Merger and the Other Acquisitions and
reflect an Exchange Ratio of .5340 of a share of UPC Common Stock for each
outstanding share of ABI Common Stock. The Merger and each of the Other Pending
Acquisitions (excluding the acquisitions of Duck Hill Bank, the Charter
Acquisition and the CalFed Branch Purchase) are expected to be, and the
Recently Completed Acquisition of Security Bancshares, Inc. was, accounted for
using the pooling-of-interests method of accounting. The Recently Completed
Acquisition of Sho-Me Financial Corp. and the Charter Acquisition were, and
the Other Pending Acquisitions of Duck Hill Bank and the CalFed Branch Purchase
are expected to be accounted for using the purchase method of accounting. The
pro forma information as of and for the three months ended March 31, 1998 and
for 1997 reflects the acquisition of ABI and the Other Acquisitions as of
January 1, 1997. The pro forma information for 1996 and 1995 reflect only the
acquisitions of MGR, Peoples First Corporation ("Peoples"), AMBANC Corp.
("AMBANC") and Merchants because the Merger and the Other Acquisitions (other
than MGR, Peoples, AMBANC and Merchants) are not, individually or in the
aggregate, considered material to UPC from a financial statement presentation
standpoint. Furthermore, the pro forma impact of the CalFed Branch Purchase on
the pro forma statement of earnings for each of the periods presented has been
excluded due to the lack of information available for operation of the branches
on a historical basis. The pro forma data are presented for information
purposes only and are not necessarily indicative of the results of operations
or combined financial position that would have resulted had the Merger or the
Other Acquisitions been consummated at the dates or during the periods
indicated, nor are they necessarily indicative of future results of operations
or combined financial position. The pro forma book value per share data
reflects preliminary estimates by UPC of acquisition-related charges to be
incurred in connection with consummation of the Merger and the Other
Acquisitions; however, the earnings per share amounts do not reflect the
estimated acquisition-related charges. For additional information with respect
to the estimated charges UPC anticipates it would incur in connection with the
Merger and the Other Acquisitions, see "BUSINESS OF UPC -- Recent
Developments." For a discussion of UPC's acquisition program, including a
discussion of the significant charges UPC has incurred incidental to
acquisitions over the past three fiscal years, see the caption "Acquisitions"
(pages 10, 11 and 12) in UPC's 1997 Annual Report to Shareholders and Note 2 to
UPC's audited consolidated financial statements for the years ended December
31, 1997, 1996, and 1995 (pages 49 and 50) contained in UPC's 1997 Annual
Report to Shareholders. UPC's 1997 Annual Report to Shareholders is included as
Exhibit 13 to UPC's 1997 Form 10-K and Exhibit 13 is incorporated by reference
herein to the extent indicated herein. See "DOCUMENTS INCORPORATED BY
REFERENCE."
The information shown below should be read in conjunction with, and is
qualified in its entirety by, the historical consolidated financial statements
of UPC and ABI, including the respective notes thereto. See "DOCUMENTS
INCORPORATED BY REFERENCE," "-- Selected Financial Data," "PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION," "BUSINESS OF UPC -- Recent Developments"
and "APPENDIX C" hereto, which includes copies of ABI's Unaudited Consolidated
Financial Statements as of and for the three months ended March 31, 1998 and
1997 and ABI's Audited Consolidated Financial Statements for the fiscal years
ended December 31, 1997, 1996 and 1995 (collectively, the "ABI Financial
Statements").
7
<PAGE> 18
UNION PLANTERS CORPORATION AND ALVIN BANCSHARES, INC.
HISTORICAL AND PRO FORMA COMPARATIVE PER SHARE DATA
<TABLE>
<CAPTION>
Three
Months
Ended
March 31, Years Ended December 31, (1)
-------------------------------------------------
1998 1997 1996 1995
------- ------- ------- --------
<S> <C> <C> <C> <C>
EARNINGS BEFORE EXTRAORDINARY ITEMS
AND ACCOUNTING CHANGES
UPC
Basic...................................................... $ .89 $ 2.54 $ 2.13 $ 2.79
Diluted.................................................... .86 2.45 2.05 2.66
ABI
Basic...................................................... .44 2.15 2.06 1.98
UPC pro forma (all Other Acquisitions including ABI)
Basic ..................................................... .80 2.52 2.24 2.56
Diluted.................................................... .78 2.45 2.17 2.46
ABI equivalent pro forma (UPC only) (1) ....................
Basic...................................................... .48 1.36 1.14 1.49
Diluted.................................................... .46 1.31 1.09 1.42
ABI equivalent pro forma (all Other
Acquisitions including ABI)(1)
Basic...................................................... .43 1.35 1.20 1.37
Diluted.................................................... .42 1.31 1.16 1.31
CASH DIVIDENDS PER SHARE
UPC......................................................... .50 1.495 1.08 .98
ABI......................................................... - 1.00 1.00 1.00
ABI equivalent pro forma (1)................................ .27 .80 .58 .52
</TABLE>
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997
--------------- -----------------
<S> <C> <C>
BOOK VALUE PER COMMON SHARE
UPC.......................................................... $ 21.13 $ 20.72
ABI.......................................................... 17.56 17.11
UPC pro forma (all Other Acquisitions including ABI)......... 20.82 21.73
ABI equivalent proforma (UPC only) (1)....................... 11.28 11.06
ABI equivalent pro forma (all Other Acquisitions
including ABI) (1)........................................... 11.12 11.60
</TABLE>
- ---------------------
(1) The equivalent pro forma per share data for ABI is computed by
multiplying UPC's pro forma information by .5340 the Exchange Ratio.
SELECTED FINANCIAL DATA
The following tables present selected consolidated financial data for UPC
and ABI for the three month periods ended March 31, 1998 and 1997 and for the
five-year period ended December 31, 1997. The information for UPC has been
derived from the consolidated financial statements of UPC, including the
unaudited consolidated financial statements of UPC incorporated in this Proxy
Statement by reference to the UPC March 31, 1998 Form 10-Q, and the audited
consolidated financial statements of UPC incorporated in this Proxy Statement
by reference to the UPC 1997 Form 10-K, and should be read in conjunction
therewith and with the notes thereto. See "DOCUMENTS INCORPORATED BY
REFERENCE." The information for ABI has been derived from the unaudited
consolidated financial statements of ABI for the three month periods ended
March 31, 1998 and 1997 and the audited consolidated financial statements of
ABI included in this Proxy Statement as Appendix C, and should be read in
conjunction therewith and with the notes thereto. Historical results are not
necessarily indicative of results to be expected for any future period. In the
opinion of the respective managements of UPC and ABI, all adjustments (which
include normal recurring adjustments and those related to the adoption of new
accounting principles) necessary to arrive at a fair statement of interim
results of operations of UPC and ABI, respectively, have been included. With
respect to UPC and ABI, results for the three months ended March 31, 1998 are
not necessarily indicative of results which may be expected for any other
interim period or for the year as a whole. For information concerning UPC's
Other Acquisitions, see "BUSINESS OF UPC -- Recent Developments" and
"PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION."
8
<PAGE> 19
UPC SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,(1) YEARS ENDED DECEMBER 31,(2)
------------------ --------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- ------------ -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net interest income........ $ 190,707 $ 190,590 $ 770,385 $ 744,852 $ 669,451 $ 627,439 $ 558,036
Provision for losses on
loans.................... 17,909 22,004 113,633 68,948 33,917 15,989 35,235
Investment securities gains
(losses)................. 5,215 173 2,104 4,099 1,433 (21,302) 6,686
Other noninterest income... 90,503 82,811 359,506 316,403 292,277 237,129 228,996
Noninterest expense........ 153,624 148,646 697,704 731,817 607,189 634,965 550,045
----------- ----------- ----------- ----------- ----------- ------------ -----------
Earnings before income
taxes, extraordinary
item, and accounting
changes.................. 114,892 102,924 320,658 264,589 322,055 192,312 208,438
Applicable income taxes.... 40,320 36,479 111,897 93,115 110,799 63,058 66,570
----------- ----------- ----------- ----------- ----------- ------------ -----------
Earnings before
extraordinary item and
accounting changes....... 74,572 66,445 208,761 171,474 211,256 129,254 141,868
Extraordinary item and
accounting changes, net
of taxes................. -- -- -- -- -- -- 4,505
----------- ----------- ----------- ----------- ----------- ------------ -----------
Net earnings............... $ 74,572 $ 66,445 $ 208,761 $ 171,474 $ 211,256 $ 129,254 $ 146,373
=========== =========== =========== =========== =========== ============ ===========
PER COMMON SHARE DATA(3)
Basic
Earnings before
extraordinary item
and accounting
changes.............. $ .89 $ .82 $ 2.54 $ 2.13 $ 2.79 $ 1.67 $ 2.19
Net earnings........... .89 .82 2.54 2.13 2.79 1.67 2.27
Diluted
Earnings before
extraordinary item
and accounting
changes.............. .86 .79 2.45 2.05 2.66 1.63 2.13
Net earnings........... .86 .79 2.45 2.05 2.66 1.63 2.21
Cash dividends............. .50 .32 1.495 1.08 .98 .88 .72
Book value................. 21.13 20.00 20.72 19.57 18.34 15.28 14.50
</TABLE>
(continued on following page)
9
<PAGE> 20
UPC SELECTED CONSOLIDATED FINANCIAL DATA (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,(1) YEARS ENDED DECEMBER 31,(2)
------------------ --------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- ------------ -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT PERIOD
END)
Total assets............... $18,413,614 $18,054,916 $18,105,079 $18,330,588 $17,182,861 $ 15,893,162 $14,180,524
Loans, net of unearned
income................... 12,727,659 12,560,838 12,658,564 12,578,571 10,917,307 10,074,458 8,077,152
Allowance for losses on
loans.................... 223,837 192,943 225,389 189,118 179,968 174,604 172,330
Investment securities...... 3,287,664 3,449,824 3,247,680 3,387,217 3,970,036 4,016,506 4,124,679
Total Deposits............. 13,581,227 13,386,397 13,440,269 13,514,144 13,047,488 12,506,212 11,732,707
Short-term borrowings...... 442,051 611,757 831,627 961,051 974,416 887,074 392,980
Long-term debt(4)
Parent company......... 373,242 373,468 373,746 373,459 214,758 114,790 114,729
Subsidiary banks....... 1,630,693 1,473,599 1,176,158 1,332,534 1,087,273 819,982 481,193
Total shareholders'
equity................... 1,809,442 1,663,363 1,746,866 1,618,883 1,450,546 1,202,686 1,111,158
Average assets............. 18,005,794 18,031,648 17,991,160 18,202,355 16,263,164 15,472,568 13,823,185
Average shareholders'
equity................... 1,760,458 1,615,979 1,690,992 1,533,348 1,334,995 1,226,852 973,087
Average shares outstanding
(in thousands)(3)
Basic.................. 83,379 78,904 80,336 77,240 72,512 71,678 56,169
Diluted................ 86,974 84,465 85,195 83,542 78,798 77,579 60,832
PROFITABILITY AND CAPITAL
RATIOS
Return on average assets... 1.68% 1.49% 1.16% .94% 1.30% .84% 1.06%
Return on average common
equity................... 17.50 17.16 12.54 11.38 16.56 10.74 15.88
Net interest income
(taxable-
equivalent)/average
earning assets(5)........ 4.80 4.80 4.79 4.56 4.60 4.56 4.58
Loans/deposits............. 93.72 93.83 94.18 93.08 83.67 80.56 68.84
Common and preferred
dividend payout ratio.... 57.03 37.71 54.96 44.57 29.25 35.03 24.42
Equity/assets (period
end)..................... 9.83 9.21 9.65 8.83 8.44 7.57 7.84
Average shareholders'
equity/average total
assets................... 9.78 8.96 9.40 8.42 8.21 7.93 7.04
Leverage ratio............. 10.72 10.05 10.48 9.50 8.11 7.56 7.73
Tier 1
capital/risk-weighted
assets................... 15.66 14.88 15.51 14.92 13.28 12.58 13.65
Total capital/risk-weighted
assets................... 20.71 17.55 18.12 17.60 16.21 14.67 15.92
CREDIT QUALITY RATIOS(6)
Allowance/period-end
loans.................... 1.95% 1.76% 1.99% 1.72% 1.82% 1.87% 2.27%
Nonperforming loans/total
loans.................... .81 .85 .92 .91 .85 .74 1.18
Allowance/nonperforming
loans.................... 240 207 215 188 213 252 193
Nonperforming assets/loans
and foreclosed
properties............... 1.01 1.14 1.13 1.21 1.09 1.08 1.76
Provision/average loans.... .62 .81 1.01 .65 .35 .19 .47
Net charge-offs/average
loans.................... .79 .67 .72 .61 .32 .27 .34
</TABLE>
- ---------------
(1) Interim period ratios have been annualized were applicable.
(2) Reference is made to "Basis of Presentation" in Note 1 to UPC's consolidated
financial statements contained in UPC's 1997 Annual Report to Shareholders.
(3) Share and per share amounts have been retroactively restated for significant
acquisitions accounted for as poolings of interests and to reflect the
change in presentation of EPS as discussed in Notes 2 and 16 to the
consolidated financial statements contained in UPC's 1997 Annual Report to
Shareholders.
(4) Long-term debt includes Medium-Term Bank Notes, Federal Home Loan Bank
(FHLB) advances, Trust Preferred Securities, variable rate asset-backed
certificates, subordinated notes and debentures, obligations under capital
leases, mortgage indebtedness, and notes payable with maturities greater
than one year.
(5) Average balances and calculations do not include the impact of the net
unrealized gain or loss on available for sale securities.
(6) FHA/VA government-insured/guaranteed loans have been excluded, since they
represent minimal credit risk to UPC.
10
<PAGE> 21
ALVIN BANCSHARES, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA (In Thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,(1) Years Ended December 31,
---------------------- ------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- ---------- --------- -------- --------- ---------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net interest income.................. $ 1,445 $ 1,394 $ 5,664 $ 5,379 $ 5,167 $ 4,948 $ 4,834
Provision for losses on loans........ 291 70 120 50
Other noninterest income............. 354 358 1,485 1,387 1,358 1,276 1,160
Noninterest expense.................. 1,274 1,006 4,287 4,243 4,076 3,840 3,752
-------- -------- --------- ------- -------- --------- ---------
Earnings before income taxes......... 525 746 2,571 2,453 2,329 2,334 2,242
Applicable income taxes.............. 178 253 860 820 760 652 615
-------- -------- --------- -------- -------- --------- ---------
Net earnings......................... $ 347 $ 493 $ 1,711 $ 1,633 $ 1,569 $ 1,682 $ 1,627
======== ======== ========= ======== ======== ========= =========
PER COMMON SHARE DATA
Basic Net Earnings................... $ .44 $ .62 $ 2.15 $ 2.06 $ 1.98 $ 2.12 $ 2.05
Cash Dividends....................... 1.00 1.00 1.00 1.00 0.60
Book value........................... 17.56 16.55 17.11 15.94 14.89 13.82 12.79
BALANCE SHEET DATA (AT PERIOD END)
Total assets......................... $120,951 $109,607 $139,931 $110,325 $105,633 $ 93,605 $ 95,940
Loans, net of unearned income........ 58,283 58,516 61,039 57,650 48,209 50,044 45,929
Allowance for losses on loans........ 513 583 536 559 562 569 706
Investment Securities................ 44,371 34,075 47,228 35,677 37,697 34,300 30,977
Deposits............................. 106,753 96,351 125,615 96,962 93,214 81,723 85,051
Total shareholders' equity........... 13,945 13,139 13,584 12,653 11,819 10,971 10,158
Average assets....................... 125,234 110,096 113,521 104,613 96,914 91,862 89,783
Average shareholders' equity......... 13,127 12,078 12,834 11,623 10,687 9,605 8,438
Average shares outstanding
Primary........................... 794 794 794 794 794 794 794
Fully diluted..................... 794 794 794 794 794 794 794
</TABLE>
- --------------------------
(continued on the following page)
11
<PAGE> 22
ALVIN BANCSHARES, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA (CONTINUED)
<TABLE>
<CAPTION>
Three Months Ended
March 31, (1) Years Ended December 31,
------------------- ---------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------ ------- ------- ------ ------ ------ ------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
PROFITABILITY AND CAPITAL RATIOS
Return on average assets................................ 1.10% 1.78% 1.50% 1.55% 1.60% 1.80% 1.78%
Return on average common equity......................... 10.04 15.20 12.53 12.91 13.17 15.24 16.15
Net interest income (taxable equivalent)/average
earning assets....................................... 5.12 5.60 5.50 5.67 5.90 6.46 6.38
Loans/deposits.......................................... 54.12 60.13 48.17 58.88 51.12 60.54 53.17
Common dividend payout ratio............................ N/A N/A 46.41 48.62 50.61 47.21 48.80
Equity/assets (period end).............................. 11.53 11.99 9.71 11.47 11.19 11.72 10.59
Average shareholders' equity/average total assets ...... 10.97 11.69 11.94 11.97 12.14 11.83 11.02
Leverage ratio (Tier 1 Capital/Total Assets) ........... 10.96 11.21 9.17 10.73 10.12 11.80 10.59
Tier 1 Capital/risk-weighted assets..................... 19.36 17.89 17.98 17.86 16.71 18.45 18.28
Total Capital/risk-weighted assets...................... 20.36 19.14 19.05 19.26 18.47 19.40 19.53
CREDIT QUALITY RATIOS
Allowance/period-end loans (2).......................... .88 1.00 .88 .97 1.17 1.14 1.54
Nonperforming loans/total loans (3)..................... 1.25 1.14 1.61 1.65 2.55 3.36 4.13
Allowance/nonperforming loans........................... 70.27 87.67 54.69 58.78 45.65 33.87 37.20
Provision/average loans................................. .49 .14 .24 .11
Net charge-offs/average loans........................... .15 .34 .53 .14 .26 .40
</TABLE>
- -------------------------
(1) Interim period ratios have been annualized where applicable.
(2) Allowance divided by loans, net of unearned income.
(3) Nonperforming loans divided by loans, net of unearned income.
12
<PAGE> 23
SPECIAL MEETING OF ABI SHAREHOLDERS
DATE, PLACE, TIME, AND PURPOSE
This Proxy Statement is being furnished to the holders of ABI Common
Stock in connection with the solicitation of proxies by the ABI Board for use
at the Special Meeting and at any adjournments or postponements thereof at
which ABI shareholders will be asked to vote upon a proposal to approve the
Agreement and the Plan of Merger. The Special Meeting will be held at the main
office of ABI, located at 221 S. Gordon Street, Alvin, Texas 77511 at _:__
_.m., local time, on ________, 1998. See "DESCRIPTION OF THE TRANSACTION."
RECORD DATE, VOTING RIGHTS, REQUIRED VOTE, AND REVOCABILITY OF PROXIES
The close of business on ______, 1998, has been fixed as the ABI
Record Date for determining holders of outstanding shares of ABI Common Stock
entitled to notice of and to vote at the Special Meeting. Only holders of ABI
Common Stock of record on the books of ABI at the close of business on the ABI
Record Date are entitled to notice of and to vote at the Special Meeting. As of
the ABI Record Date, there were 793,867 shares of ABI Common Stock issued and
outstanding held by approximately ____ holders of record.
Each holder of record of shares of ABI Common Stock on the ABI Record
Date is entitled to cast one vote per share on the proposal to approve the
Agreement and the Plan of Merger, and on any other matter properly submitted
for the vote of the ABI shareholders at the Special Meeting. The presence,
either in person or by properly executed proxy, of the holders of a majority of
the outstanding shares of ABI Common Stock entitled to vote at the Special
Meeting is necessary to constitute a quorum at the Special Meeting.
ABI intends to count shares of ABI Common Stock present in person at
the Special Meeting but not voting, and shares of ABI Common Stock for which it
has received proxies but with respect to which holders of shares have abstained
on any matter, as present at the Special Meeting for purposes of determining
the presence or absence of a quorum for the transaction of business. Approval
of the Agreement and the Plan of Merger requires the affirmative vote of the
holders of at least two thirds of the issued and outstanding shares of ABI
Common Stock entitled to vote at the Special Meeting. Given that the approval
of the Agreement and the Plan of Merger requires the affirmative vote of the
holders of at least two thirds of the outstanding shares of ABI Common Stock
entitled to vote thereon, any abstention or non-voting share with respect to
such shares of ABI Common Stock will have the same effect as a vote AGAINST the
approval of the Agreement and the Plan of Merger.
Shares of ABI Common Stock represented by properly executed proxies,
if such proxies are received prior to or at the Special Meeting and not
revoked, will be voted in accordance with the instructions indicated on the
proxies. IF NO INSTRUCTIONS ARE INDICATED, SUCH PROXIES WILL BE VOTED FOR THE
PROPOSAL TO APPROVE THE AGREEMENT AND THE PLAN OF MERGER AND IN THE DISCRETION
OF THE PROXYHOLDER AS TO ANY OTHER MATTER WHICH MAY COME PROPERLY BEFORE THE
SPECIAL MEETING. IF NECESSARY, THE PROXYHOLDER MAY VOTE IN FAVOR OF A PROPOSAL
TO ADJOURN THE SPECIAL MEETING IN ORDER TO PERMIT FURTHER SOLICITATION OF
PROXIES IN THE EVENT THERE ARE NOT SUFFICIENT VOTES TO APPROVE THE FOREGOING
PROPOSAL AT THE TIME OF THE SPECIAL MEETING. HOWEVER, NO PROXYHOLDER WILL VOTE
ANY PROXIES VOTED AGAINST APPROVAL OF THE AGREEMENT AND THE PLAN OF MERGER FOR
A PROPOSAL TO ADJOURN THE SPECIAL MEETING.
An ABI shareholder who has given a proxy solicited by the ABI Board
may revoke it at any time prior to its exercise at the Special Meeting by
either (i) giving written notice of revocation to the Secretary of ABI, (ii)
properly submitting to ABI a duly executed proxy bearing a later date, or (iii)
attending the Special Meeting and voting in person. All written notices of
revocation and other communications with respect to revocation of proxies
should be addressed as follows: Alvin Bancshares, Inc., 221 S. Gordon Street,
Alvin, Texas 77511; Attention: Virgil McDonald, Secretary.
13
<PAGE> 24
As of the ABI Record Date the Chairman of the Board of ABI, James F.
Eubank, II, had the right to vote 657,035 shares, or approximately 82.76% of
the outstanding shares of ABI Common Stock. Mr. Eubank has indicated his intent
to vote all of such shares for approval of the Agreement and Plan of Merger.
Assuming that he does so, Mr. Eubank alone has sufficient votes to obtain the
requisite shareholder approval for the Agreement and Plan of Merger. The
directors and executive officers of UPC owned, as of the ABI Record Date, no
shares of ABI Common Stock.
As of the ABI Record Date, UPC held no shares of ABI Common Stock in a
fiduciary capacity for others, or as a result of debts previously contracted.
In addition, as of the ABI Record Date, Alvin State Bank, as fiduciary,
custodian and agent, had sole or shared voting power over __ shares, or __% of
the issued and outstanding shares of ABI Common Stock, under trust agreements
and other instruments and agreements, including shares held as trustee or agent
of various ABI employee benefit and stock purchase plans. It is the policy of
Alvin State Bank not to vote such shares in the absence of instructions from
other appropriate parties having an interest in such stock, such as
co-fiduciaries and participants in such plans, unless Alvin State Bank has sole
authority with respect to shares thereto.
For information with respect to beneficial owners of 5% or more of the
outstanding shares of ABI Common Stock, and information with respect to the
number and percentage of outstanding shares of ABI Common Stock beneficially
owned by the directors and executive officers of ABI, see "BUSINESS OF ABI --
Beneficial Ownership of ABI Common Stock."
SOLICITATION OF PROXIES
Proxies may be solicited by the directors, officers, and employees of
ABI by mail, in person, or by telephone or telegraph. Such persons will receive
no additional compensation for such services. All expenses associated with the
solicitation of proxies, other expenses associated with the Special Meeting and
expenses related to the printing and mailing of this Proxy Statement will be
shared by UPC and ABI as provided in the Agreement. See "DESCRIPTION OF THE
TRANSACTION - Expenses and Fees."
DISSENTERS' RIGHTS
HOLDERS OF ABI COMMON STOCK HAVE THE RIGHT TO DISSENT FROM THE MERGER
AND, ASSUMING THE MERGER IS CONSUMMATED, TO RECEIVE IN CASH AN AMOUNT
DETERMINED TO BE THE "FAIR VALUE" OF THEIR SHARES OF ABI COMMON STOCK. IN ORDER
TO BE ENTITLED TO FULLY EXERCISE DISSENTERS' RIGHTS, A ABI SHAREHOLDER CHOOSING
TO DISSENT (A "DISSENTING SHAREHOLDER") MUST NOT VOTE FOR APPROVAL OF THE
AGREEMENT AND THE PLAN OF MERGER AND MUST GIVE NOTICE OF HIS OR HER INTENTION
TO DISSENT, MAKE DEMAND FOR PAYMENT FOR HIS OR HER SHARES OF ABI COMMON STOCK
AND TAKE CERTAIN OTHER PROCEDURAL STEPS TO "PERFECT" SUCH DISSENTING
SHAREHOLDER'S RIGHTS UNDER ARTICLES 5.11, 5.12 AND 5.13 OF THE TEXAS BCA. SEE
"DESCRIPTION OF THE TRANSACTION -- DISSENTERS' RIGHTS" AND APPENDIX D HERETO,
WHICH IS A COPY OF ARTICLES 5.11, 5.12 AND 5.13 OF THE TEXAS BCA GOVERNING
STATUTORY DISSENTERS' RIGHTS.
It is not necessary for an ABI shareholder to vote against
consummation of the Merger in order to perfect his or her right to dissent and
demand appraisal. However, no such shareholder may vote for approval and
adoption of the Agreement and the Plan of Merger and thereafter demand his or
her appraisal rights. Because all proxies submitted which do not specify how
such proxy is to be voted will be voted in favor of the adoption and approval
of the Agreement and the Plan of Merger, an ABI shareholder who desires to
dissent from approval of the Merger should not submit such a proxy. An ABI
shareholder who votes for approval and adoption of the Agreement and the Plan
of Merger or who submits a proxy which does not specify how such proxy is to be
voted will waive any rights of dissent and appraisal. A vote against
consummation of the Merger will not satisfy the statutory requirement that a
Dissenting Shareholder give notice of his or her intention to dissent and make
demand for payment for his or her shares of ABI Common Stock.
14
<PAGE> 25
RECOMMENDATION
THE ABI BOARD HAS UNANIMOUSLY APPROVED THE AGREEMENT, THE PLAN OF
MERGER, AND THE MERGER CONTEMPLATED THEREBY, BELIEVES THAT THE PROPOSAL TO
APPROVE THE AGREEMENT AND THE PLAN OF MERGER IS IN THE BEST INTERESTS OF ABI
AND ITS SHAREHOLDERS, AND RECOMMENDS THAT THE ABI SHAREHOLDERS VOTE FOR
APPROVAL OF THE AGREEMENT AND THE PLAN OF MERGER.
DESCRIPTION OF THE TRANSACTION
The following information describes material aspects of the Merger.
This description does not purport to be complete and is qualified in its
entirety by reference to the Appendices hereto, including the Agreement and the
Plan of Merger, which are attached as Appendices A and B, respectively, to this
Proxy Statement and incorporated herein by reference. All shareholders are
urged to read the Appendices in their entirety.
GENERAL
The Agreement provides for the acquisition of ABI by UPC pursuant to
the merger of ABI with and into UPHC, a wholly-owned subsidiary of UPC
organized under the laws of the State of Tennessee, with the effect that UPHC
will be the surviving corporation resulting from the Merger. At the Effective
Time, each share of ABI Common Stock then issued and outstanding (excluding
shares held by ABI, UPC, or their respective subsidiaries, in each case other
than shares held in a fiduciary capacity or as a result of debts previously
contracted and shares held by dissenting shareholders) will be converted into
and exchanged for the right to receive .5340 of a share of UPC Common Stock
(the "Exchange Ratio").
No fractional shares of UPC Common Stock will be issued. Rather, cash
(without interest) will be paid in lieu of any fractional share to which any
ABI shareholder would be entitled upon consummation of the Merger, in an amount
equal to such fractional part of a share of UPC Common Stock multiplied by the
closing price of such common stock on the NYSE (as reported by The Wall Street
Journal or, if not reported thereby, another authoritative source as reasonably
selected by UPC) on the last trading day preceding the Effective Time.
As of the ABI Record Date, ABI had 793,867 shares of ABI Common Stock
outstanding. Based upon the Exchange Ratio and assuming there are no Dissenting
Shareholders, upon consummation of the Merger, UPC will issue approximately
423,925 shares of UPC Common Stock. Accordingly, UPC would then have
outstanding approximately 85,394,824 shares of UPC Common Stock, based on the
number of shares of UPC Common Stock outstanding on May 31, 1998 (excluding
shares to be issued pursuant to Other Acquisitions and shares to be issued
pursuant to the exercise of stock options and for other purposes.)
The actual market value of a share of UPC Common Stock at the
Effective Time, at the time certificates for those shares are delivered
following surrender and exchange of Certificates for shares of ABI Common Stock
and at any time thereafter, may be more or less than the market price of the
UPC Common Stock on the date of execution of the Agreement. ABI shareholders
are urged to obtain current market quotations for UPC Common Stock. See
"COMPARATIVE MARKET PRICES AND DIVIDENDS."
BACKGROUND OF THE MERGER
In July of 1997 management of ABI contacted Deloitte & Touche LLP
regarding strategies for maximizing shareholder value and to discuss its
possible assistance to ABI in regard to the sale of all of the outstanding
shares of ABI. Between July and August, 1997, Deloitte & Touche LLP accumulated
data on ABI and prepared a Confidential Information Memorandum. Deloitte &
Touche LLP also estimated the price range obtainable for ABI Common Stock and
identified possible acquisition candidates. ABI engaged Deloitte & Touche LLP
to provide the Confidential Information Memorandum to prospective purchasers
and to analyze any offers, including analysis of the pricing and financial
terms of such offers. Approximately 30 institutions were initially contacted.
Those contacted
15
<PAGE> 26
were selected based on their likely interest in an acquisition and their
financial ability to make such an acquisition. Deloitte & Touche LLP proceeded
to solicit bids from various candidates. Several indications of interest were
received over a four-month period.
On February 13, 1998 ABI received by fax a letter of intent from UPC
offering to acquire all of the outstanding shares of ABI Common Stock in a
tax-free exchange of UPC shares. This offer was secured by First Capital Group,
LLC, an investment banking firm. On February 16, 1998, ABI retained First
Capital Group, LLC to assist ABI in structuring a potential business
combination with UPC. Management of ABI considered UPC's offer superior to all
other offers received based on the overall mix of consideration, the historical
performance of UPC Common Stock, the fact that UPC Common Stock has
historically paid a dividend, and ABI management's view that the Merger would
permit ABI to maintain or improve the quality of its service to the community.
ABI executed the letter of intent subject to execution of a definitive
Agreement and Plan of Merger and ABI Board approval. A draft of an Agreement
and Plan of Merger was received in early March, 1998. This draft, other offers,
and other relevant information was reviewed by the ABI Board, and the ABI Board
also received the advice of ABI's counsel and First Capital Group, LLC. The ABI
Board then approved the transaction and the Agreement and Plan of Merger, and
ABI and UPC executed the final version of the Agreement and Plan of Merger on
March 18, 1998.
RECOMMENDATION OF THE ABI BOARD; REASONS FOR THE MERGER.
The ABI Board believes that the Merger is fair to, and in the best
interests of, ABI and its shareholders. If the Merger is consummated, the
shareholders of ABI will acquire an equity interest in a much larger and more
diversified enterprise. The UPC Common Stock is traded on the NYSE, and,
accordingly, is more readily marketable than the ABI Common Stock. ACCORDINGLY,
THE ABI BOARD HAS UNANIMOUSLY APPROVED THE AGREEMENT AND THE PLAN OF MERGER AND
RECOMMENDS THAT THE HOLDERS OF ABI COMMON STOCK VOTE FOR THE APPROVAL OF THE
AGREEMENT AND THE PLAN OF MERGER AND THE CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED THEREBY.
The terms of the Merger, including the Exchange Ratio, are the result
of arm's-length negotiations between representatives of ABI and UPC. In
reaching its decision to approve the Agreement, the ABI Board consulted with
its legal advisors regarding the terms of the transaction and with management
of ABI, and, without assigning any relative or specific weights, considered a
number of factors, both from a short-term and long-term perspective, including,
without limitation, the following:
(a) the ABI Board's familiarity with and review of ABI's
business, financial condition, results of operations, and prospects,
including, without limitation, its potential growth and profitability
and the business risks associated therewith;
(b) the current and prospective environment in which ABI
operates, including national and local economic conditions, the
competitive environment for commercial banks and other financial
institutions generally and the increasing consolidation in the
financial services industry and the competitive effects of such
increased consolidation on smaller financial institutions such as ABI;
(c) information concerning the business, financial
condition, results of operations and prospects of UPC, including the
recent performance of UPC Common Stock, the historical financial data
of UPC, customary statistical measurements of UPC financial
performance, and the future prospects for UPC Common Stock following
the Merger;
(d) the value to be received by holders of ABI Common
Stock pursuant to the Agreement in relation to the historical trading
prices of ABI Common Stock;
(e) the lack of an established trading market for shares
of ABI Common Stock;
(f) the financial and other significant terms of the
proposed Merger with UPC, and the review by ABI with its legal and
financial advisors of the provisions of the Agreement;
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(g) the ABI Board's belief that the receipt of UPC
Common Stock in the Merger generally will permit holders of ABI Common
Stock to defer any federal income tax liability associated with any
increase in the value of their stock that may follow the Merger (see
"-- Material Federal Income Tax Consequences of the Merger") and to
become shareholders of UPC, an institution with a strong history of
operations, earnings performance, dividend payments, and share
liquidity; and
(h) the alternative strategic courses available to ABI,
including remaining independent and exploring other potential business
combination transactions, including, in particular, the potential
values that could be derived therefrom.
UPC'S REASONS FOR THE MERGER
In adopting the Agreement and the Plan of Merger, the UPC Board
considered a number of additional factors concerning the benefits of the
Merger. Without assigning any relative or specific weights to the factors, the
UPC Board considered the following additional material factors:
(a) a review, based in part on a presentation by UPC's
management, of (i) the business, operations, earnings, and financial
condition, including the capital levels and asset quality, of ABI on a
historical, prospective, and pro forma basis and in comparison to
other financial institutions in the area, (ii) the demographic,
economic, and financial characteristics of the markets in which ABI
operates, including existing competition, history of the market areas
with respect to financial institutions, and average demand for credit,
on a historical and prospective basis, and (iii) the results of UPC's
due diligence review of ABI; and
(b) a variety of factors affecting and relating to the
overall strategic focus of UPC, including UPC's desire to expand into
the markets in Texas served by ABI.
EFFECTIVE TIME OF THE MERGER
Subject to the conditions to the obligations of the parties to effect
the Merger, the Effective Time will occur on the date and at the time that
Articles of Merger reflecting the Merger become effective with the Secretaries
of State of the State of Tennessee and the State of Texas. Subject to the terms
and conditions of the Agreement, unless otherwise agreed upon in writing by UPC
and ABI, the Agreement provides that the parties will use their reasonable
efforts to cause the Effective Time to occur on such date as may be designated
by UPC within 30 days following the last to occur of (i) the effective date of
the last required consent of any regulatory authority having authority over and
approving or exempting the Merger, (ii) the date on which the shareholders of
ABI approve the Agreement and the Plan of Merger, and (iii) the date on which
all other conditions precedent (other than those conditions which relate to
actions to be taken at the Closing) to each party's obligations under the
Agreement have been satisfied or waived (to the extent waivable by such party).
It is anticipated that the Effective Time will occur ______ days following the
Special Meeting.
No assurance can be provided that the necessary shareholder and
regulatory approvals can be obtained or that other conditions precedent to the
Merger can or will be satisfied. ABI and UPC anticipate that all conditions to
consummation of the Merger will be satisfied so that the Merger can be
consummated on or about August 1, 1998. However, delays in the consummation of
the Merger could occur.
The Board of Directors of either ABI or UPC generally may terminate
the Agreement and the Plan of Merger if the Merger is not consummated by
December 31, 1998, unless the failure to consummate the transactions
contemplated by the Agreement on or before such date is caused by any willful
breach of the Agreement by the party seeking termination or certain other
specific conditions exist. See "-- Conditions to Consummation of the Merger"
and "-- Waiver, Amendment, and Termination."
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DISSENTERS' RIGHTS
Any owner of ABI Common Stock may dissent from approval of the
Agreement, the Plan of Merger and the Merger by complying with procedures
described in this section. Such a person is sometimes referred to as a
"Dissenting Shareholder" herein. The following summary does not purport to be a
complete statement of dissenters' rights of appraisal, and such summary is
qualified in its entirety by reference to Articles 5.11, 5.12 and 5.13 of the
Texas BCA, which are reproduced in full as Appendix D to this Proxy Statement.
Under the Texas BCA, any shareholder of ABI may object to the Merger
and demand payment of the fair value of his or her shares of ABI Common Stock
after filing with ABI, at 221 S. Gordon Street, Alvin, Texas, 77511, Attention:
President, prior to the Special Meeting, a written objection to the Merger,
setting out that his or her right of dissent will be exercised and giving his
or her address to which notice is to be delivered or mailed.
If the Merger is effected and an ABI shareholder having made demand
did not vote in favor thereof, written notice of the consummation of the Merger
will be sent, within ten (10) days of such event, to such shareholder, and such
shareholder may, within ten (10) days thereafter, make written demand to ABI,
at 221 S. Gordon Street, Alvin, Texas, 77511, Attention: President, for payment
of the fair value of his or her shares of ABI Common Stock. Such demand must
state the number and class of shares of ABI Common Stock held by the
shareholder and his or her estimate of the fair value of such shares.
It is not necessary for an ABI shareholder to vote against
consummation of the Merger in order to perfect his or her right to dissent and
demand appraisal. However, no Dissenting Shareholder may vote for approval and
adoption of the Agreement and the Plan of Merger and thereafter demand his or
her appraisal rights. Because all proxies submitted which do not specify how
such proxy is to be voted will be voted in favor of the adoption and approval
of the Agreement and the Plan of Merger, an ABI shareholder who desires to
dissent from approval of the Merger should not submit such a proxy.
Unless demand for payment is made by a Dissenting Shareholder within
the ten-day period specified in the statute, he or she will be bound by the
Merger and his or her rights of appraisal will be terminated. A vote against
consummation of the Merger will not satisfy the statutory requirement that a
shareholder give notice of his or her intention to dissent and make demand for
payment of his or her shares of ABI Common Stock. Upon making such demand (and
satisfying the other conditions described above), such Dissenting Shareholder
will cease to be a shareholder of ABI and will become a creditor of UPHC.
Within twenty (20) days of making written demand for payment of the
fair value of his or her shares of ABI Common Stock, a Dissenting Shareholder
must submit his or her Certificate(s) formerly representing shares of ABI
Common Stock to UPHC for notation on the Certificates that such a demand has
been made. Failure to submit the Certificates for notation will, at the option
of UPHC, terminate the Dissenting Shareholder's appraisal rights and he or she
will be conclusively presumed to have approved the Merger and his or her right
to be paid the fair value of his or her shares of ABI Common Stock will
terminate. Such a shareholder then will only be entitled to receive shares of
UPC Common Stock, and cash in lieu of fractional shares, in exchange for his or
her ABI Common Stock.
Within twenty (20) days after receiving any demand for payment, UPHC
will send each of the Dissenting Shareholders written notice to the effect that
either it will pay the amount claimed, or that it will pay some other amount as
the fair value.
If, within sixty (60) days after the date the Merger is effected, UPHC
and the Dissenting Shareholder can agree upon the fair value, such value will
be paid and all rights of the Dissenting Shareholder will cease. If agreement
as to the fair value cannot be reached within such 60-day period, either the
Dissenting Shareholder or UPHC may, within sixty (60) days after the expiration
of the 60-day period, file an action in a court of competent jurisdiction,
asking for a finding and determination of the fair value of such shares. Court
costs will be allocated between the parties in such manner as the court may
determine.
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For a discussion of certain federal income tax consequences in
connection with exercising dissenters' rights, see "DESCRIPTION OF THE
TRANSACTION -- Material Federal Income Tax Consequences."
DISTRIBUTION OF UPC STOCK CERTIFICATES
Promptly after the Effective Time, UPC and ABI will cause UPB, acting
in its capacity as Exchange Agent, to mail to the former shareholders of ABI a
letter of transmittal, together with instructions for the exchange of the
Certificates representing shares of ABI Common Stock for certificates
representing shares of UPC Common Stock.
ABI SHAREHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY
RECEIVE THE LETTER OF TRANSMITTAL AND INSTRUCTIONS.
Upon surrender to the Exchange Agent of Certificates for ABI Common
Stock, together with a properly completed letter of transmittal, there will be
issued and mailed to each holder of ABI Common Stock surrendering such items a
certificate or certificates representing the number of shares of UPC Common
Stock to which such holder is entitled and a check for the amount to be paid in
lieu of any fractional share (without interest), if any, together with all
undelivered dividends or distributions in respect of such shares (without
interest thereon), if any. UPC will not be obligated to deliver the
consideration to which any former holder of ABI Common Stock is entitled as a
result of the Merger until the holder surrenders such holder's Certificates
representing the shares of ABI Common Stock. Whenever a dividend or other
distribution is declared by UPC on UPC Common Stock, the record date for which
is at or after the Effective Time, the declaration will include dividends or
other distributions on all shares issuable pursuant to the Agreement, but
beginning 30 days after the Effective Time no dividend or other distribution
payable after the Effective Time with respect to UPC Common Stock will be paid
to the holder of any unsurrendered ABI Common Stock Certificate until the
holder duly surrenders such Certificate. Upon surrender of such ABI Common
Stock Certificate, however, both the UPC Common Stock certificate, together
with all undelivered ABI Common Stock dividends or other distributions (without
interest) and any undelivered cash payment to be paid in lieu of a fractional
share (without interest), will be delivered and paid with respect to the shares
represented by such Certificate. In the event any ABI Common Stock Certificate
has been lost, stolen, or destroyed, upon the making of an affidavit of that
fact by the person claiming the Certificate to be lost, stolen, or destroyed
and, if required by UPC, the posting by such person of a bond in such amount as
UPC may reasonably direct as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent will issue in
exchange for such lost, stolen, or destroyed Certificate the shares of UPC
Common Stock and cash in lieu of fractional shares deliverable in respect
thereof pursuant to the Agreement.
At the Effective Time, other than with respect to holders of shares of
ABI Common Stock who dissent from the Merger pursuant to Article 5.11 of the
Texas BCA, the stock transfer books of ABI will be closed to holders of ABI
Common Stock and no transfer of shares of ABI Common Stock by any such holder
will thereafter be made or recognized. If Certificates representing shares of
ABI Common Stock are presented for transfer after the Effective Time, they will
be canceled and exchanged for shares of UPC Common Stock and a check for the
amount due in lieu of fractional shares and undelivered dividends, if any,
deliverable in respect thereof.
LIMITATION ON NEGOTIATIONS
Section 8.8 of the Agreement provides that ABI 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 ABI Board,
as advised by legal counsel, ABI is 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. ABI must promptly notify UPC immediately following receipt of any
Acquisition Proposal. As protection against possible violation of this
limitation, ABI has agreed, under certain circumstances, to pay to UPC the sum
of $1,200,000 in immediately available funds in the event and at the time that
ABI 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 Agreement. The limitation would survive termination
of the Agreement in certain circumstances. This provision may have, or may have
had, the effect of discouraging competing offers to acquire or merge with ABI.
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CONDITIONS TO CONSUMMATION OF THE MERGER
Consummation of the Merger is subject to various conditions, including
(i) receipt of the approval of the shareholders of ABI of the Agreement and the
Plan of Merger, and the consummation of the transactions contemplated thereby,
including the Merger, as and to the extent required by the law or by the
provisions of any governing instrument (ii) receipt of certain regulatory
approvals required for consummation of the Merger, (iii) receipt by UPC of a
written opinion of counsel from Wyatt, Tarrant & Combs and by ABI of a written
opinion of counsel from Winstead Sechrest & Minick P.C. as to the tax-free
nature of the Merger (except to the extent of cash received), (iv) receipt of
approval of the shares of UPC Common Stock issuable pursuant to the Merger for
listing on the NYSE, subject to official notice of issuance, (v) the
Registration Statement being declared effective under the Securities Act, (vi)
the accuracy, as of the date of the Agreement and as of the Effective Time, of
the representations and warranties of ABI and UPC as set forth in the
Agreement, (vii) the performance of all agreements and the compliance with all
covenants of ABI and UPC as set forth in the Agreement, (viii) receipt of all
consents required for consummation of the Merger or for the preventing of any
default under any contract or permit which, if not obtained or made, is
reasonably likely to have, individually or in the aggregate, a material adverse
effect on ABI or UPC, (ix) receipt by UPC, as of the Effective Time, of a
letter from Price Waterhouse LLP, its independent accountants, to the effect
that the Merger will qualify for pooling-of-interests accounting treatment, (x)
the absence of any law or order or any action taken by any court, governmental,
or regulatory authority of competent jurisdiction prohibiting, restricting, or
making illegal the consummation of the transactions contemplated by the
Agreement, (xi) receipt by UPC of agreements from each affiliate of ABI, and
(xii) satisfaction of certain other conditions, including the receipt of
certain legal opinions and various certificates from the officers of ABI and
UPC. See "-- Regulatory Approval" and "-- Waiver, Amendment, and Termination."
No assurance can be provided as to when or if all of the conditions
precedent to the Merger can or will be satisfied or waived by the party
permitted to do so. Except in limited circumstances, in the event the Merger is
not effected on or before December 31, 1998, the Agreement may be terminated
and the Merger abandoned by the Board of Directors of either ABI or UPC. See
"-- Waiver, Amendment, and Termination."
REGULATORY APPROVAL
THE MERGER MAY NOT PROCEED IN THE ABSENCE OF RECEIPT OF THE REQUISITE
REGULATORY APPROVALS. THERE CAN BE NO ASSURANCE THAT SUCH REGULATORY APPROVALS
WILL BE OBTAINED OR AS TO THE TIMING OF SUCH APPROVALS. APPLICATIONS FOR THE
APPROVALS DESCRIBED BELOW HAVE BEEN SUBMITTED TO THE APPROPRIATE REGULATORY
AUTHORITIES.
It is a condition to the consummation of the Merger that UPC and ABI
shall have received all applicable regulatory approvals to consummate the
transactions contemplated by the Agreement. There can be no assurance that such
approvals will not contain terms, conditions or requirements which cause such
approvals to fail to satisfy such condition to the consummation of the Merger.
Neither ABI nor UPC are aware of any material governmental approvals or actions
that are required for consummation of the Merger, except as described below.
Should any other approval or action be required, it presently is contemplated
that such approval or action would be sought.
The Merger is subject to the prior approval of the Federal Reserve
pursuant to Section 3 of the BHC Act. In evaluating the Merger, the Federal
Reserve must consider, among other factors, the financial and managerial
resources and future prospects of the institutions and the convenience and
needs of the communities to be served. The relevant statutes prohibit the
Federal Reserve from approving the Merger if (i) it would result in a monopoly
or be in furtherance of any combination or conspiracy to monopolize or attempt
to monopolize the business of banking in any part of the United States or (ii)
its effect in any section of the country could be to substantially lessen
competition or to tend to create a monopoly, or if it would result in a
restraint of trade in any other manner, unless the Federal Reserve should find
that any anticompetitive effects are outweighed clearly by the public interest
and the probable effect of the transaction in meeting the convenience and needs
of the communities to be served. The Merger may not be consummated until the
30th day (which the Federal Reserve may reduce to 15 days) following the date
of the Federal Reserve approval, during which time the United States Department
of Justice would be
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afforded the opportunity to challenge the transaction on antitrust grounds. The
commencement of any antitrust action would stay the effectiveness of the
approval of the agencies, unless a court of competent jurisdiction should
specifically order otherwise. By letter dated June 8, 1998, the Federal Reserve
notified UPC of its approval of the Merger. The Merger is also subject to the
approval of the Texas Department. In its evaluation, this regulatory authority
will take into account considerations similar to those applied by the Federal
Reserve. The Texas Department has elected not to disapprove the Merger.
It is anticipated that following consummation of the Merger and UPC's
proposed acquisition of Merchants, Alvin State Bank will be merged with and
into a subsidiary of Merchants (the "Bank Merger"). The Bank Merger is expected
to occur in the fourth quarter of 1998, subject to receipt of applicable
regulatory approvals, the receipt of which are not conditions to consummation
of the Merger.
WAIVER, AMENDMENT, AND TERMINATION
To the extent permitted by law, the Agreement may be amended by a
subsequent writing signed by each of the parties upon the approval of the Board
of Directors of each of the parties, whether before or after shareholder
approval of the Agreement and the Plan of Merger has been obtained; provided
however, that after any such approval by the holders of ABI Common Stock,
except as contemplated by the Agreement, there shall be made no amendment that
has modified in any material respect the consideration to be received by ABI
shareholders without the further approval of such shareholders. In addition,
prior to or at the Effective Time, either ABI or UPC, or both, acting through
their respective Boards of Directors, chief executive officers, or other
authorized officers, may waive any default in the performance of any term of
the Agreement by the other party, may waive or extend the time for the
compliance or fulfillment by the other party of any and all of its obligations
under the Agreement, and may waive any of the conditions precedent to the
obligations of such party under the Agreement, except any condition that, if
not satisfied, would result in the violation of any applicable law or
governmental regulation. No such waiver will be effective unless written and
unless executed by a duly authorized officer of ABI or UPC, as the case may be.
The Agreement and the Plan of Merger may be terminated and the Merger
abandoned at any time prior to the Effective Time (i) by the mutual consent of
the Boards of Directors of ABI and UPC; or (ii) by the ABI Board or the UPC
Board (a) in the event of any inaccuracy of any representation or warranty of
the other party contained in the Agreement which cannot be or has not been
cured within 30 days after giving written notice to the breaching party of such
inaccuracy and which inaccuracy would provide the terminating party the ability
to refuse to consummate the Merger under the applicable standards set forth in
the Agreement (provided that the terminating party is not then in breach of any
representation or warranty contained in the Agreement under the applicable
standards set forth in the Agreement or in material breach of any covenant or
other agreement contained in the Agreement), (b) in the event of a material
breach by the other party of any covenant or agreement contained in the
Agreement which cannot be or has not been cured within 30 days after the giving
of written notice to the breaching party of such breach (provided that the
terminating party is not then in breach of any representation or warranty
contained in the Agreement under the applicable standards set forth in the
Agreement or in material breach of any covenant or other agreement contained in
the Agreement), (c) if (1) any consent of any regulatory authority required for
consummation of the Merger and the other transactions contemplated by the
Agreement has been denied by final nonappealable action, or if any action taken
by such authority is not appealed within the time limit for appeal or (2) the
shareholders of ABI fail to vote their approval of the Agreement and the
transactions contemplated thereby as required by the Texas BCA and the
Agreement at the Special Meeting, or (d) if the Merger is not consummated by
December 31, 1998, provided that the failure to consummate is not caused by any
willful breach of the Agreement by the party electing to terminate, or certain
other events arise which prevent consummation by such date, such as litigation
arising in connection with an Acquisition Proposal by a third party.
If the Merger is terminated as described above, the Agreement and the
Plan of Merger will become void and have no effect, except that certain
provisions of the Agreement, including those relating to the obligations to
share certain expenses, maintain the confidentiality of certain information
obtained, and return all documents obtained from the other party under the
Agreement, will survive. The obligation of ABI to pay the $1,200,000
termination
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fee in the event ABI enters into a letter of intent or agreement with respect
to an Acquisition Proposal will survive until the earlier of (i) the Effective
Time, (ii) June 30, 1999 or (iii) the date on which the Agreement is terminated
for specified reasons. In addition, termination of the Agreement for any reason
other than those requiring payment of the $1,200,000 termination fee, will not
relieve any breaching party from liability for any uncured willful breach of a
representation, warranty, covenant, or agreement giving rise to such
termination. See "-- Expenses and Fees."
CONDUCT OF BUSINESS PENDING THE MERGER
Pursuant to the Agreement, ABI has agreed that unless the prior
written consent of UPC has been obtained, and except as otherwise expressly
contemplated in the Agreement, each of ABI and its subsidiaries will (i)
operate its business only in the usual, regular, and ordinary course, (ii) use
reasonable efforts to preserve intact its business organization and assets and
maintain its rights and franchises, and (iii) take no action which would (a)
materially adversely affect the ability of any party to obtain any consents
required for the transactions contemplated by the Agreement or prevent the
transactions contemplated by the Agreement, including the Merger, from
qualifying for pooling-of-interests accounting treatment or as a reorganization
within the meaning of Section 368(a) of the Code (see "-- Material Federal
Income Tax Consequences of the Merger"), or (b) materially adversely affect the
ability of any party to perform its covenants and agreements under the
Agreement.
In addition, ABI has agreed that, except as specifically permitted by
the Agreement or other documents or instruments executed in connection with the
Agreement, prior to the earlier of the Effective Time or termination of the
Agreement, ABI will not, except with the prior written consent of the chief
executive officer, president, or chief financial officer of UPC (which consent
shall not be unreasonably withheld), agree or commit to do, or permit any of
its subsidiaries to agree or commit to do, any of the following: (i) amend the
Charter of Incorporation, Bylaws, or other governing instruments of ABI or any
ABI subsidiary (each an "ABI company" and together, the "ABI companies"); (ii)
incur any additional debt obligation for borrowed money (other than
indebtedness of an ABI company to another ABI company) in excess of an
aggregate of $100,000 (for the ABI companies on a consolidated basis) except in
the ordinary course of business of the ABI subsidiaries consistent with past
practices (which shall include, for Alvin State Bank, the creation of deposit
liabilities, purchases of federal funds, advances from the Federal Reserve Bank
or the Federal Home Loan Bank, and entry into repurchase agreements fully
secured by U.S. government or agency securities), or impose, or suffer the
imposition, on any material asset of any ABI company of any lien or permit any
such lien to exist (other than in connection with deposits, repurchase
agreements, bankers acceptances, "treasury tax and loan" accounts established
in the ordinary course of business, the satisfaction of legal requirements in
the exercise of trust powers, and liens in effect as of the date of the
Agreement that were previously disclosed to UPC by ABI); (iii) repurchase,
redeem, or otherwise acquire or exchange (other than exchanges in the ordinary
course under employee benefit plans), directly or indirectly, any shares, or
any securities convertible into any shares, of the capital stock of any ABI
company, or declare or pay any dividend or make any other distribution in
respect of any ABI Common Stock, provided that ABI may (to the extent legally
and contractually permitted to do so), but shall not be obligated to, declare
and pay a cash dividend on the shares of ABI Common Stock at a rate not in
excess of the product of (a) $.83 cents multiplied by (b) the whole number of
calendar months elapsed since December 31, 1997 with usual and regular record
and payment dates in accordance with past practice, provided that,
notwithstanding the provisions of the Agreement, the parties shall cooperate in
selecting the Effective Time to ensure that, with respect to the quarterly
period in which the Effective Time occurs, the holders of ABI Common Stock do
not become entitled to receive both a dividend in respect of their ABI Common
Stock and a dividend in respect of UPC Common Stock or fail to be entitled to
receive any dividend; (iv) except for the Agreement, issue, sell, pledge,
encumber, authorize the issuance of, enter into any contract to issue, sell,
pledge, encumber, or authorize the issuance of, or otherwise permit to become
outstanding, any additional shares of ABI Common Stock, or any other capital
stock, or any stock appreciation rights, or any option, warrant, conversion, or
other right to acquire any such stock, or any security convertible into any
such stock; (v) adjust, split, combine, or reclassify any capital stock of any
ABI company or issue or authorize the issuance of any other securities in
respect of or in substitution for shares of ABI Common Stock, or sell, lease,
mortgage, or otherwise dispose of or otherwise encumber any shares of capital
stock of any ABI company (unless any such shares of stock are sold or otherwise
transferred to another ABI company) or any assets having a book value in excess
of $50,000 other than in the ordinary course of business for reasonable
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and adequate consideration; (vi) except for purchases of investment securities
acquired in the ordinary course of business consistent with past practices,
purchase any securities or make any material investment, either by purchase of
stock or securities, contributions to capital, asset transfers, or purchase of
any assets, in any person other than a wholly-owned ABI subsidiary, or
otherwise acquire direct or indirect control over any person, with certain
exceptions; (vii) grant any increase in compensation or benefits to the
employees or officers of any ABI company, except in the ordinary course of
business consistent with past practices as previously disclosed to UPC by ABI
or as required by law; pay any severance or termination pay or any bonus other
than pursuant to written policies or written contracts in effect on the date of
the Agreement and previously disclosed to UPC by ABI; enter into or amend any
severance agreements with officers of any ABI company; grant any material
increase in fees or other increases in compensation or other benefits to
directors of any ABI company or voluntarily accelerate the vesting of any stock
options or other stock-based compensation or employee benefits (other than the
acceleration of vesting which occurs under a benefit plan upon a change of
control of ABI); (viii) enter into or amend any employment contract between any
ABI company and any person (unless such amendment is required by law) that the
ABI company does not have the unconditional right to terminate without
liability (other than liability for services already rendered), at any time on
or after the Effective Time; (ix) adopt any new employee benefit plan of any
ABI company or terminate or withdraw from, or make any material change in or
to, any existing employee benefit plans of any ABI company other than any such
change that is required by law or that, in the opinion of counsel, is necessary
or advisable to maintain the tax qualified status of any such plan, or make any
distribution from such employee benefit plans, except as required by law or the
terms of the plans, or in a manner consistent with past practices; (x) make any
material change in any tax or accounting methods or systems of internal
accounting controls, except as may be appropriate to conform to changes in tax
laws or regulatory accounting requirements or generally accepted accounting
principles; (xi) commence any litigation other than in accordance with past
practice or settle any litigation involving any liability of any ABI company
for material money damages or restrictions upon the operations of any ABI
company; or (xii) except in the ordinary course consistent with past practice,
enter into, modify, amend, or terminate any material contract (excluding any
loan contract) or waive, release, compromise, or assign any material rights or
claims.
ABI has also agreed that, except with respect to the Agreement, the
Plan of Merger, and the transactions contemplated thereby, no ABI company or
any representatives thereof shall directly or indirectly solicit any
Acquisition Proposal or, except to the extent necessary to comply with the
fiduciary duties of the ABI Board as advised by counsel, furnish any non-public
information that it is not legally obligated to furnish, negotiate with respect
to, or enter into any contract with respect to, any Acquisition Proposal, but
ABI may communicate information about such an Acquisition Proposal to its
shareholders if and to the extent that it is required to do so in order to
comply with its legal obligations as advised by counsel.
The Agreement also provides that from the date of the Agreement until
the earlier of the Effective Time or the termination of the Agreement, UPC
covenants and agrees that it will (i) continue to conduct its business and the
business of its subsidiaries in a manner designed, in its reasonable judgment,
to enhance the long-term value of the UPC Common Stock and the business
prospects of UPC and its subsidiaries and (ii) take no action which would (a)
materially adversely affect the ability of any party to obtain any consents
required for the transactions contemplated by the Agreement or prevent the
transactions contemplated by the Agreement, including the Merger, from
qualifying for pooling-of-interests accounting treatment or as a reorganization
within the meaning of Section 368(a) of the Code (see "-- Material Federal
Income Tax Consequences of the Merger") and (b) materially adversely affect the
ability of any party to perform its covenants and agreements under the
Agreement.
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MANAGEMENT AND OPERATIONS AFTER THE MERGER
Consummation of the Merger will not alter the present Board of
Directors or management team of UPC or UPHC immediately after the Merger is
consummated. It is anticipated that after the consummation of the Merger, Alvin
State Bank would be merged with and into Merchants in the Bank Merger, with the
effect that Merchants would be the surviving association and the main office
and branches of Alvin State Bank would become branches of Merchants and an
advisory board would be established comprised of certain current directors of
ABI. It is not anticipated that the directors or executive officers of
Merchants, UPC, or UPHC would change as a result of the Bank Merger. Officers
of Alvin State Bank would become regional officers of Merchants. Information
concerning the management of UPC is included in the documents incorporated
herein by reference. See "DOCUMENTS INCORPORATED BY REFERENCE." For additional
information regarding the interests of certain persons in the Merger, see "--
Interests of Certain Persons in the Merger."
UPHC will be the surviving corporation resulting from the Merger and
shall continue to be governed by the laws of the State of Tennessee and operate
in accordance with its Charter and Bylaws.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Members of ABI's management and the ABI Board may be deemed to have
interests in the Merger that are in addition to their interests as shareholders
of ABI generally by virtue of the indemnification and insurance provisions of
the Agreement described below. The ABI Board was aware of these interests and
considered them, among other matters, in approving the Agreement and the
transactions contemplated thereby. The Agreement provides that UPC will,
subject to the conditions set forth therein, indemnify the present and former
directors, officers, employees, and agents of ABI and its subsidiaries against
all Liabilities (as defined in the Agreement) arising out of actions or
omissions occurring at or prior to the Effective Time (including the
transactions contemplated by the Agreement) to the full extent permitted under
any of Tennessee law and ABI's Charter and Bylaws. This provision of the
Agreement is consistently included in UPC's standard form merger agreement and
is not intended to broaden in any manner the scope of indemnification to which
the present and former directors, officers, employees, and agents of ABI and
its subsidiaries are entitled, but serves to ratify the legal obligations of
ABI and its subsidiaries (to be assumed by UPHC upon consummation of the
Merger) to provide indemnification in accordance with Tennessee law, ABI's
Charter and Bylaws, and any indemnification agreements to which ABI or its
subsidiaries is a party with an indemnified person. The indemnification
provided under the provisions of such instruments will be subject to the same
standards that are currently applicable for determining whether indemnified
parties are entitled to indemnification under such instruments.
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MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following is a summary of the material anticipated federal income
tax consequences of the Merger to ABI shareholders who hold their ABI Common
Stock as a capital asset (generally, property held for investment). This summary
is based on the federal income tax laws as now in effect and as currently
interpreted. No assurance can be given that future changes in such laws or
interpretations, including amendments to applicable statutes or regulations or
changes in judicial or administrative rulings, some of which may have
retroactive effect, will not affect the accuracy of any statements in this Proxy
Statement. This summary does not purport to address all aspects of the possible
federal income tax consequences of the Merger that may be relevant to U.S.
shareholders of ABI. The tax discussion set forth below is included for general
information only and should not be construed as tax advice to a particular
shareholder of ABI. In particular, and without limiting the foregoing, this
summary does not address the federal income tax consequences of the Merger to
ABI shareholders in light of their particular circumstances or status
(including, for example, foreign persons, tax-exempt entities, dealers in
securities, insurance companies, corporations, holders who acquired ABI Common
Stock pursuant to the exercise of an employee stock option or right or otherwise
as compensation, and holders who hold ABI Common Stock as part of a hedge,
straddle, or conversion transaction). Nor does this summary address (i) any
consequences of the Merger under any state, local, estate, or foreign tax laws
or (ii) the tax consequences of the parties to the Agreement of the inclusion in
income of the amount of the bad-debt reserve maintained by ABI and/or its
subsidiaries and any other amounts resulting from any required change in
accounting methods and any income and deferred gain recognized pursuant to
regulations issued under Section 1502 of the Code. ABI SHAREHOLDERS, THEREFORE,
ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES
TO THEM OF THE MERGER, INCLUDING TAX RETURN REPORTING REQUIREMENTS, THE
APPLICATION AND EFFECT OF FEDERAL, FOREIGN, STATE, LOCAL, AND OTHER TAX LAWS,
AND THE IMPLICATIONS OF ANY PROPOSED CHANGES IN THE TAX LAWS.
As of the Date of this Proxy Statement Wyatt, Tarrant & Combs, counsel
for UPC, and Winstead Sechrest & Minick P.C., counsel for ABI, have advised UPC
and ABI, respectively, that in their opinions:
(a) The Merger will be treated as a reorganization within
the meaning of Section 368(a) of the Code;
(b) ABI, UPC and UPHC will each be a "party to a
reorganization" within the meaning of Section 368(b) of the Code;
(c) No gain or loss will be recognized by the ABI
shareholders who exchange all of their ABI Common Stock solely for UPC Common
Stock pursuant to the Merger (except with respect to cash received in lieu of a
fractional share interest in UPC Common Stock);
(d) The aggregate tax basis of the UPC Common Stock
received by ABI shareholders who exchange all of their ABI Common Stock solely
for UPC Common Stock pursuant to the Merger (including any fractional shares
for which cash is received) will be the same as the aggregate tax basis of the
ABI Common Stock surrendered in exchange therefor;
(e) The holding period of UPC Common Stock received by
ABI shareholders in the Merger (including any fractional shares for which cash
is received) will include the period during which the shares of ABI Common
Stock surrendered in exchange therefor were held, provided that the ABI Common
Stock was held as a capital asset by the holder at the Effective Time; and
(f) Neither ABI, UPC nor UPHC will recognize gain or
loss as a consequence of the Merger.
In addition, each party's obligation to consummate the Merger is
conditioned upon the receipt by UPC of the opinion of Wyatt, Tarrant & Combs,
counsel to UPC, and upon the receipt by ABI of the opinion of Winstead
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Sechrest & Minick P.C., counsel to ABI (collectively, the "Tax Opinions"), each
dated the Effective Time, substantially to the foregoing effect. The conditions
relating to the receipt of the Tax Opinions may be waived by both UPC and ABI.
Neither UPC nor ABI currently intends to waive the conditions relating to the
receipt of the Tax Opinions. If the conditions relating to receipt of the Tax
Opinions were waived and the material federal income tax consequences of the
Merger were materially different from those summarized above, ABI would
resolicit the approval of its shareholders prior to consummating the Merger.
The Tax Opinions summarized above are or will be based on facts,
representations and assumptions set forth or referred to in such opinions which
are consistent with the state of facts existing at the Effective Time. In
rendering the Tax Opinions, such counsel required and shall require, and are
entitled to rely upon, representations and covenants contained in certificates
of officers of ABI, UPC, and UPHC. The Tax Opinions do not address any state,
local, or other tax consequences of the Merger. In addition, the Tax Opinions
do not bind the Internal Revenue Service (the "IRS") nor preclude the IRS from
adopting a contrary position.
Based upon the current ruling position of the IRS, cash received by a
holder of ABI Common Stock in lieu of a fractional share interest in UPC Common
Stock will be treated as received in exchange for such fractional share
interest, and gain or loss will be recognized for federal income tax purposes
measured by the difference between the amount of cash received and the portion
of the basis of the share of ABI Common Stock allocable to such fractional
share interest. Such gain or loss will constitute capital gain or loss if the
ABI Common Stock was held as a capital asset at the Effective Time, and will be
a long-term capital gain or loss if the holding period for such shares was
greater than one year at the Effective Time. Any capital gain recognized as a
result of the Merger will be taxed at rates applicable to capital gains. The
tax rate applicable to capital gains of an individual taxpayer varies depending
on the taxpayer's holding period for such shares. Pursuant to recently enacted
legislation, in the case of an individual, any such capital gain will be
subject to a maximum federal income tax rate of (A) 20% if the holder's holding
period in such stock was more than 18 months on the date of the Effective Time
and (B) 28% if the holder's holding period was more than one year but not more
than 18 months on the date of the Effective Time. The deductibility of capital
losses is subject to limitations for both individuals and corporations.
A Dissenting Shareholder who perfects his or her dissenters' rights
will recognize gain or loss measured by the difference between the value
received by such shareholder for his or her shares of ABI Common Stock and his
or her tax basis in such stock.
ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for as a pooling
of interests. Under the pooling-of-interests method of accounting, the recorded
amounts of the assets and liabilities of ABI will be carried forward at their
previously recorded amounts. Since the Merger is not considered material to UPC
from a financial statement presentation standpoint, the operating results will
be included in UPC's results from the Effective Time of the Merger forward.
In order for the Merger to qualify for pooling-of-interests accounting
treatment, substantially all (90% or more) of the outstanding ABI Common Stock
must be exchanged for UPC Common Stock with substantially similar terms. There
are certain other criteria that must be satisfied in order for the Merger to
qualify as a pooling of interests, some of which criteria cannot be satisfied
until after the Effective Time. In addition, it is a condition to UPC's
obligation to close the Merger that Price Waterhouse LLP deliver, as of the
Effective Time, a letter to UPC to the effect that the Merger will qualify for
pooling-of-interests accounting treatment. UPC will not consummate the Merger
if pooling-of-interests treatment is not available.
For information concerning certain conditions to be imposed on the
exchange of ABI Common Stock for UPC Common Stock in the Merger by affiliates
of ABI 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."
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EXPENSES AND FEES
The Agreement provides that each of the parties will bear and pay its
own expenses in connection with the transactions contemplated by the Agreement,
including fees and expenses of its own financial or other consultants,
investment bankers, accountants, and counsel, except that each of UPC and ABI
will bear and pay the filing fees payable in connection with the Registration
Statement and this Proxy Statement and the printing costs and certain other
third-party costs in connection with the Registration Statement and this Proxy
Statement based on the relative asset sizes of the parties at December 31,
1997.
RESALES OF UPC COMMON STOCK
UPC Common Stock to be issued to shareholders of ABI in connection
with the Merger will be registered under the Securities Act. All shares of UPC
Common Stock received by holders of ABI Common Stock and all shares of UPC
Common Stock issued and outstanding immediately prior to the Effective Time
will be freely transferable upon consummation of the Merger by those
shareholders of ABI not deemed to be "Affiliates" of ABI or UPC. "Affiliates"
generally are defined as persons or entities who control, are controlled by, or
are under common control with ABI or UPC at the time of the Special Meeting
(generally, executive officers, directors, and 10% or greater shareholders).
Rule 145 promulgated under the Securities Act restricts the sale of
UPC Common Stock received in the Merger by Affiliates and certain of their
family members and related interests. Under the rule, during the one-year
period following the Effective Time, Affiliates of ABI or UPC may resell
publicly the UPC Common Stock received by them in the Merger within certain
limitations as to the amount of UPC Common Stock sold in any three-month period
and as to the manner of sale. After the one-year period, such Affiliates of ABI
who are not Affiliates of UPC may resell their shares without restriction. The
ability of Affiliates to resell shares of UPC Common Stock received in the
Merger under Rule 145 will be subject to UPC having satisfied its Exchange Act
reporting requirements for specified periods prior to the time of sale.
Affiliates will receive additional information regarding the effect of Rule 145
on their ability to resell UPC Common Stock received in the Merger. Affiliates
also would be permitted to resell UPC Common Stock received in the Merger
pursuant to an effective registration statement under the Securities Act or an
available exemption from the Securities Act registration requirements. The
registration to which this Proxy Statement relates does not cover any resales
of UPC Common Stock received by persons who may be deemed to be Affiliates of
ABI or UPC.
ABI has agreed to use its reasonable efforts to cause each person who
may be deemed to be an Affiliate of ABI to execute and deliver to UPC not later
than 40 days prior to the Effective Time, an agreement (each, an "Affiliate
Agreement") providing that such Affiliate will not sell, pledge, transfer, or
otherwise dispose of any ABI Common Stock held by such Affiliate except as
contemplated by the Agreement or the Affiliate Agreement, and will not sell,
pledge, transfer or otherwise dispose of any UPC Common Stock received by such
Affiliate upon consummation of the Merger (i) except in compliance with the
Securities Act and the rules and regulations thereunder and (ii) until such
time as financial results covering 30 days of combined operations of UPC and
ABI have been published. If the Merger qualifies for pooling-of-interests
accounting treatment, shares of UPC Common Stock issued to such Affiliates of
ABI in exchange for shares of ABI Common Stock will not be transferable until
such time as financial results covering at least 30 days of combined operations
of UPC and ABI have been published, regardless of whether each such Affiliate
has provided an Affiliate Agreement (and UPC shall be entitled to place
restrictive legends upon certificates for shares of UPC Common Stock issued to
Affiliates of ABI). Certificates representing shares of ABI Common Stock
surrendered for exchange by any person who is an Affiliate of ABI for purposes
of Rule 145(c) under the Securities Act shall not be exchanged for certificates
representing shares of UPC Common Stock until UPC has received such a written
agreement from such person. Prior to publication of such results, UPC will not
transfer on its books any shares of UPC Common Stock received by an Affiliate
pursuant to the Merger. The stock certificates representing UPC Common Stock
issued to Affiliates in the Merger may bear a legend summarizing the foregoing
restrictions. See "-- Conditions to Consummation of the Merger."
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EFFECT OF THE MERGER ON RIGHTS OF SHAREHOLDERS
As a result of the Merger, holders of ABI Common Stock will be
exchanging their shares of a Texas corporation governed by the Texas BCA and
ABI's Charter and Bylaws, for shares of UPC, a Tennessee corporation governed
by the TBCA and UPC's Charter and Bylaws. Certain significant differences exist
between the rights of ABI shareholders and those of UPC shareholders. In
particular, UPC's Charter and Bylaws contain several provisions that may be
deemed to have an anti-takeover effect in that they could impede or prevent an
acquisition of UPC unless the potential acquiror has obtained the approval of
the UPC Board. The following discussion is necessarily general; it is not
intended to be a complete statement of all differences affecting the rights of
shareholders and their respective entities, and it is qualified in its entirety
by reference to the Texas BCA and the TBCA as well as to UPC's Charter and
Bylaws and ABI's Charter and Bylaws.
ANTI-TAKEOVER PROVISIONS GENERALLY
The provisions of UPC's Charter and Bylaws described below under the
headings, "-- Authorized Capital Stock," "-- Amendment of Charter and Bylaws,"
"-- Classified Board of Directors and Absence of Cumulative Voting," "--
Director Removal and Vacancies," "-- Limitations on Director Liability," "--
Indemnification," "-- Special Meeting of Shareholders," "-- Actions by
Shareholders Without a Meeting," "-- Shareholder Nominations and Proposals" and
"-- Business Combinations" are referred to herein as the "Protective
Provisions." In general, one purpose of the Protective Provisions is to assist
the UPC Board in playing a role if any group or person attempts to acquire
control of UPC, so that the UPC Board can further protect the interests of UPC
and its shareholders as appropriate under the circumstances, including, if the
UPC Board determines that a sale of control is in the best interests of UPC's
shareholders, by enhancing the UPC Board's ability to maximize the value to be
received by the shareholders upon such a sale.
Although UPC's management believes the Protective Provisions are,
therefore, beneficial to UPC's shareholders, the Protective Provisions also may
tend to discourage some takeover bids. As a result, UPC's shareholders may be
deprived of opportunities to sell some or all of their shares at prices that
represent a premium over prevailing market prices. On the other hand, defeating
undesirable acquisition offers can be a very expensive and time-consuming
process. To the extent that the Protective Provisions discourage undesirable
proposals, UPC may be able to avoid those expenditures of time and money.
The Protective Provisions also may discourage open market purchases by
a potential acquiror. Such purchases may increase the market price of UPC
Common Stock temporarily, enabling shareholders to sell their shares at a price
higher than that which otherwise would prevail. In addition, the Protective
Provisions may decrease the market price of UPC Common Stock by making the
stock less attractive to persons who invest in securities in anticipation of
price increases from potential acquisition attempts. The Protective Provisions
also may make it more difficult and time consuming for a potential acquiror to
obtain control of UPC through replacing the Board of Directors and management.
Furthermore, the Protective Provisions may make it more difficult for UPC's
shareholders to replace the Board of Directors or management, even if a
majority of the shareholders 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.
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AUTHORIZED CAPITAL STOCK
UPC. UPC's Charter currently authorizes the issuance of up to (i)
300,000,000 shares of UPC Common Stock, of which 84,970,899 shares were
outstanding as of May 31, 1998, and (ii) 10,000,000 shares of no par value
preferred stock ("UPC Preferred Stock" and, together with the UPC Common Stock,
"UPC Capital Stock"), of which no shares of UPC Series A Preferred Stock, and
1,156,231 shares of UPC Series E Preferred Stock were issued and outstanding as
of May 31, 1998. At the 1998 annual meeting of shareholders of UPC, the UPC
shareholders approved an amendment to the UPC Charter to increase the number of
authorized shares of UPC Common Stock from 100,000,000 shares to 300,000,000
shares.
The UPC Board may authorize the issuance of additional authorized
shares of UPC capital stock without further action by UPC's shareholders,
unless such action is required in a particular case by applicable laws or
regulations or by any stock exchange upon which UPC Common Stock may be listed.
With certain exceptions, the UPC Board may issue, without any further
action by the shareholders, shares of UPC Preferred Stock, in one or more
classes or series, with such voting, conversion, dividend, and liquidation
rights specified in UPC's Charter. In providing for the issuance of such
shares, the UPC Board may determine, among other things, the distinctive
designation and number of shares comprising a series of preferred stock, the
dividend rate or rates on the shares of such series and the relation of such
dividends to the dividends payable on other classes of stock, whether the
shares of such series shall be convertible into or exchangeable for shares of
any other class or series of UPC Capital Stock, the voting powers if any of
such series, and any other preferences, privileges, and powers of such series.
In the event of the voluntary or involuntary liquidation, dissolution,
distribution of assets, or winding up of UPC, the holders of any series of UPC
Preferred Stock will have priority over holders of UPC Common Stock.
The authority to issue additional authorized shares of UPC Common
Stock or UPC Preferred Stock provides UPC with the flexibility necessary to
meet its future needs without the delay resulting from seeking shareholder
approval. The authorized but unissued shares of UPC Common Stock and UPC
Preferred Stock will be issuable from time to time for any corporate purpose,
including, without limitation, stock splits, stock dividends, employee benefit
and compensation plans, acquisitions, and public or private sales for cash as a
means of raising capital. Such shares could be used to dilute the stock
ownership of persons seeking to obtain control of UPC. In addition, the sale of
a substantial number of shares of UPC voting stock to persons who have an
understanding with UPC concerning the voting of such shares, or the
distribution or declaration of a dividend of shares of UPC voting stock (or the
right to receive UPC voting stock) to UPC shareholders, may have the effect of
discouraging or increasing the cost of unsolicited attempts to acquire control
of UPC.
In 1989, the UPC Board adopted a Share Purchase Rights Plan
("Preferred Share Rights Plan") and distributed a dividend of one Preferred
Share Unit Purchase Right ("Preferred Share Right") for each outstanding share
of UPC Common Stock. In addition, under the Preferred Share Rights Plan, one
Preferred Share Right is to be automatically, and without further action by
UPC, distributed in respect to each share of UPC Common Stock issued after
adoption of the Preferred Share Rights Plan. Accordingly, shareholders of ABI
will each receive one Preferred Share Right for each share of UPC Common Stock
received in the Merger. The Preferred Share Rights are generally designed to
deter coercive takeover tactics and to encourage all persons interested in
potentially acquiring control of UPC to treat each shareholder on a fair and
equal basis. Each Preferred Share Right trades in tandem with the share of UPC
Common Stock to which it relates until the occurrence of certain events
indicating a potential change in control of UPC. Upon the occurrence of such an
event, the Preferred Share Rights would separate from UPC Common Stock and each
holder of a Preferred Share Right (other than the potential acquiror) would be
entitled to purchase certain equity securities of UPC at prices below their
market value. UPC has authorized 750,000 shares of Series A Preferred Stock for
issuance under the Preferred Share Rights Plan and no shares have been issued
as of the date of this Proxy Statement. Until a Preferred Share Right is
exercised, the holder thereof, as such, has no rights of a shareholder of UPC,
including the right to vote or receive dividends.
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ABI. ABI's Charter ("ABI's Charter") authorizes the issuance of up to
1,000,000 shares of ABI Common Stock, of which 793,867 shares were issued and
outstanding as of the ABI Record Date and 100,000 shares of cumulative
Preferred Stock, none of which are issued and outstanding. The ABI Board
generally may authorize the issuance of additional previously authorized shares
of ABI Capital Stock without further action by ABI's shareholders, unless such
action is required in a particular case by applicable laws or regulations, upon
receipt of valid consideration in exchange for such shares.
PREEMPTIVE RIGHTS
UPC. The TBCA provides that, unless a Tennessee corporation's charter
expressly provides for preemptive rights, shareholders of a Tennessee
corporation do not have a preemptive right to acquire proportional amounts of
the corporation's unissued shares upon a decision of the board of directors to
issue shares. The UPC Charter denies preemptive rights to its shareholders.
ABI. Under the Texas BCA, the shareholders of a Texas corporation have
a preemptive right under certain circumstances to acquire proportional amounts
of the corporation's unissued shares upon a decision of the board of directors
to issue shares except to the extent limited or denied by the corporation's
articles of incorporation. The ABI Charter expressly denies any such preemptive
right for its shareholders.
AMENDMENT OF CHARTER AND BYLAWS
UPC. UPC's Charter generally provides that amendments thereto may be
adopted in any manner permitted by the TBCA. The TBCA provides that a
corporation's charter may be amended by a majority of votes entitled to be cast
on the amendment, subject to any condition the Board of Directors may place on
its submission of the amendment to the shareholders. The UPC Charter requires a
vote of two-thirds or more of the shares of capital stock entitled to vote in
an election of directors to amend the articles of the Charter governing
directors and to remove a director from office whether with or without cause. A
two-thirds vote is also required to amend, alter, or repeal the articles of the
UPC Charter relating to business combinations.
The UPC Board may adopt, amend, or repeal the Bylaws by a majority
vote of the entire Board of Directors. The Bylaws may also be amended or
repealed by action of UPC's shareholders.
UPC's Charter provides that all corporate powers of UPC shall be
exercised by the Board of Directors except as otherwise provided by law. The
Board of Directors may designate an executive committee consisting of five or
more directors and may authorize such committee to exercise all of the
authority of the Board of Directors, including the authority to adopt, amend
and repeal the Bylaws, to submit any action to the shareholders, to fill
vacancies on the Board of Directors or any committee, to declare dividends or
other corporate distributions, and to issue or reissue any capital stock or any
warrant, right or option to acquire capital stock of the corporation.
ABI. The Texas BCA provides that an amendment to a Texas corporation's
articles of incorporation requires the adoption by the corporation's board of
directors of a resolution to so amend and approval of the amendment by at least
two-thirds of the outstanding shares of stock of the corporation (or such
lesser number as may be set forth in the corporation's articles of
incorporation). ABI's Charter does not alter the statutorily prescribed voting
requirement.
The ABI Bylaws may be altered, amended or repealed, or new Bylaws may
be adopted, by a majority vote of the ABI Board at any duly held meeting of the
ABI Board or by the holders of a majority of the shares of stock represented at
any duly held shareholders' meeting.
The ABI Bylaws provide that all corporate powers of ABI shall be
exercised by the Board of Directors except as otherwise provided by law, ABI's
Charter or other provisions of the Bylaws. The ABI Board may designate an
executive committee, or any other committee, consisting of one or more
directors and may authorize
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such committee(s) to exercise all of the authority of the ABI Board except as
prohibited by law. To date, the ABI Board has not created any such committees.
CLASSIFIED BOARD OF DIRECTORS AND ABSENCE OF CUMULATIVE VOTING
UPC. The Charter of UPC provides that the UPC Board is divided into
three classes, with each class to be as nearly equal in number as possible. The
directors in each class serve three-year terms of office. The effect of UPC's
having a classified Board of Directors is that only approximately one-third of
the members of the Board are elected each year, which effectively requires two
annual meetings for UPC's shareholders to change a majority of the members of
the Board. The purpose of dividing the UPC Board into classes is to facilitate
continuity and stability of leadership of UPC by ensuring that experienced
personnel familiar with UPC will be represented on the UPC Board at all times,
and to permit UPC's management to plan for the future for a reasonable amount
of time. However, by potentially delaying the time within which an acquiror
could obtain working control of the UPC Board, this provision may discourage
some potential mergers, tender offers, or takeover attempts.
Pursuant to the Charter of UPC, each shareholder is entitled to one
vote for each share of UPC Common Stock held and is not entitled to cumulative
voting rights in the election of directors. With cumulative voting, a
shareholder has the right to cast a number of votes equal to the total number
of such holder's shares multiplied by the number of directors to be elected.
The shareholder has the right to distribute all of his votes in any manner
among any number of candidates or to accumulate such shares in favor of one
candidate. Directors are elected by a plurality of the total votes cast by all
shareholders. With cumulative voting, it may be possible for minority
shareholders to obtain representation on the Board of Directors. Without
cumulative voting, the holders of more than 50% of the shares of UPC Common
Stock generally have the ability to elect 100% of the directors. As a result,
the holders of the remaining UPC voting capital stock effectively may not be
able to elect any person to the Board of Directors. The absence of cumulative
voting thus could make it more difficult for a shareholder who acquires less
than a majority of the shares of UPC Common Stock to obtain representation on
the UPC Board.
ABI. ABI's Bylaws provide for an unclassified Board of Directors with
three members. Each holder of ABI Common Stock is entitled to one vote for each
share held and is not entitled to cumulative voting in the election of
directors.
DIRECTOR REMOVAL AND VACANCIES
UPC. UPC's Charter provides that a director may be removed by the
shareholders only upon the affirmative vote of the holders of at least
two-thirds of the voting power of all shares of capital stock entitled to vote
generally in the election of directors. The purpose of this provision is to
prevent a majority shareholder from circumventing the classified board system
by removing directors and filling the vacancies with new individuals selected
by that shareholder. Accordingly, the provision may have the effect of impeding
efforts to gain control of the Board of Directors by anyone who obtains a
controlling interest in UPC Common Stock. Vacancies on the Board of Directors
may be filled by the Board of Directors or shareholders, as provided under the
UPC Bylaws and the TBCA. The term of a director appointed to fill a vacancy
expires at the next meeting of shareholders at which directors are elected.
ABI. ABI's Bylaws provide that at any meeting of the ABI shareholders
called expressly for removal, the holders of a majority of the shares then
entitled to vote for the election of such directors may remove a director, or
the entire ABI Board, with or without cause. Vacancies on the ABI Board may be
filled by majority vote of the ABI Board, as provided under the ABI Bylaws and
the Texas BCA. Under the Texas BCA, the ABI Board may fill not more than two
vacancies created by an increase in the number of directors during the period
between any two successive annual meetings. The term of a director appointed to
fill a vacancy expires at the expiration of the term of the director's
predecessor in office.
LIMITATIONS ON DIRECTOR LIABILITY
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UPC. UPC's Charter does not address the issue of director liability
to the corporation.
ABI. ABI's Charter provides that a director of ABI shall not be liable
for the performance of his duties in reliance on information prepared or
presented by one or more officers or employees of ABI whom he reasonably
believes to be reliable and competent in the matters presented, or by counsel,
public accountants, or other persons as to matters which he reasonably believes
to be within such person's professional or expert competence.
INDEMNIFICATION
UPC. Under the TBCA, subject to certain exceptions, a Tennessee
corporation may indemnify an individual made a party to a proceeding, because
he or she is or was a director, against liability incurred in the proceeding if
(i) he or she conducted himself or herself in good faith; (ii) he or she
reasonably believed (a) in the case of conduct in his or her official capacity
with the corporation, that his or her conduct was in the best interests of the
corporation, and (b) in all other cases, that his or her conduct was at least
not opposed to the corporation's best interests; and (iii) in the case of any
criminal proceeding, he or she had no reasonable cause to believe his or her
conduct was unlawful (the "Standard of Conduct"). Moreover, unless limited by
its charter of incorporation, a Tennessee corporation must indemnify a director
who was wholly successful, on the merits or otherwise, in the defense of any
proceeding to which he or she was a party because he or she is or was a
director of the corporation against reasonable expenses incurred by him or her
in connection with the proceeding. Expenses incurred by a director in defending
a proceeding may be paid by the corporation in advance of the final disposition
of such proceeding upon receipt of a written affirmation by the director of his
or her good faith belief that he or she has met the Standard of Conduct, a
written undertaking by or on behalf of a director to repay such amount if it
shall ultimately be determined that he or she is entitled to be indemnified by
the corporation against such expenses and a determination is made that the
facts known to those making the determination would preclude indemnification.
Before any such indemnification is made, it must be determined that such
indemnification would not be precluded by the TBCA.
A director of a Tennessee corporation may also apply for court-ordered
indemnification under certain circumstances. Unless a Tennessee corporation's
charter 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 charter of incorporation, bylaws, general or specific
action of its board of directors, or contract.
UPC's Charter and Bylaws provide for the indemnification of its
directors and officers, to the fullest extent permitted by Tennessee law.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, or persons controlling
UPC pursuant to the foregoing provisions, UPC has been informed that, in the
opinion of the SEC, such indemnification is against public policy as expressed
in the Securities Act and is therefore unenforceable.
ABI. Under the Texas BCA, a Texas corporation has the power to
indemnify any person who was, is or is threatened to be made a named defendant
or respondent in any proceeding by reason of the fact that he or she is or was
a director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, partner, venturer,
proprietor, trustee, employee, agent or similar functionary of another
corporation, employee benefit plan, other enterprise or other entity (an
"Indemnified Person"). Indemnification is authorized against liabilities
incurred in connection with a proceeding, including any appeal thereof, if the
Indemnified Person acted in accordance with the Standard of Conduct. However,
if an Indemnified Person is found liable to the corporation or is found liable
on the basis that a personal benefit was improperly received by such
Indemnified Person, whether or not the benefit resulted from an action taken in
the Indemnified Person's official capacity, then indemnification (i) is limited
to reasonable expenses actually incurred by the Indemnified Person in
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<PAGE> 43
connection with the proceeding and (ii) shall not be made in connection with
any proceeding in which the Indemnified Person has been found liable for
willful or intentional misconduct in the performance of his or her duty to the
corporation.
The board of directors, special legal counsel or the shareholders may
determine whether a person has met the Standard of Conduct and the dollar
amount of any indemnification. The termination of any proceeding by judgement,
order, settlement or conviction, or on a plea of nolo contendere or its
equivalent, is not of itself determinative that the person did not meet the
Standard of Conduct. In addition, a corporation must indemnify an Indemnified
Person for reasonable expenses incurred by the Indemnified Person if he or she
has been wholly successful, on the merits or otherwise, in the defense of the
proceeding.
Expenses incurred by an Indemnified Person in defending a proceeding
may be paid by the corporation in advance of the final deposition of such
proceeding if the Indemnified Person provides to the corporation a written
affirmation of his or her good faith belief that he or she has met the Standard
of Conduct and a written undertaking by or on behalf of the Indemnified Person
to repay any amounts advanced if it is ultimately determined that he or she has
not met the Standard of Conduct, is found liable to the corporation or is found
liable based on a personal benefit improperly received by such person.
Notwithstanding any findings by the board of directors, special legal
counsel or the shareholders, and despite any adjudication of liability, any
court of competent jurisdiction may, upon application of an Indemnified Person,
determine that the Indemnified Person is entitled to indemnification in view of
all the relevant circumstances. However, if the Indemnified Person is found
liable to the corporation or is found liable to the corporation based on a
personal benefit improperly received by the Indemnified Person, then
indemnification is limited to reasonable expenses actually incurred by the
Indemnified Person in connection with the proceeding.
ABI's Charter provides for indemnification of directors and officers
generally along the lines of the indemnification provisions of the Texas BCA as
described above, provided that the Board of Directors of ABI determines that
indemnification in a specific case is in the best interests of ABI. ABI's
Charter provides that the indemnification rights under the Charter are not
exclusive of any other rights of indemnification under any vote of shareholders
or disinterested directors, as a matter of law, or otherwise, and that no
indemnification may be made under the Charter if not permitted by applicable
law. See "DESCRIPTION OF TRANSACTION -- Interest of Certain Persons in the
Merger."
SPECIAL MEETINGS OF SHAREHOLDERS
UPC. UPC's Bylaws provide that special meetings of UPC shareholders
may be called, unless otherwise prescribed by law, for any purpose or purposes
whatever at any time by the Chairman of the Board, the President, the
Secretary, or the holders of not less than one-tenth of the shares entitled to
vote at such meeting.
ABI. ABI's Bylaws provide that special meetings of shareholders may be
called, unless otherwise prescribed by law, for any purpose or purposes
whatever at any time by the President, the Board of Directors, or the holders
of not less than one-tenth of the shares entitled to vote at such meeting.
ACTIONS BY SHAREHOLDERS WITHOUT A MEETING
UPC. UPC's Charter and Bylaws provide that any action required or
permitted to be taken by UPC shareholders at a duly called meeting of
shareholders may be effected by the unanimous written consent of the
shareholders entitled to vote on such action.
ABI. ABI's Bylaws state that any action required or permitted to be
taken by the shareholders at a meeting of the shareholders may be taken without
a meeting, upon unanimous written consent of the shareholders entitled to vote
on such action.
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<PAGE> 44
SHAREHOLDER NOMINATIONS AND PROPOSALS
UPC. UPC's Charter and Bylaws do not address whether a shareholder may
nominate members of the Board of Directors.
Holders of UPC Common Stock are entitled to submit proposals to be
presented at an annual meeting of shareholders. UPC's Bylaws provide that any
proposal of a shareholder which is to be presented at any annual meeting of
Shareholders shall be sent so as to be received by UPC not less than 120 days
in advance of the date of the proxy statement issued in connection with the
previous year's annual meeting.
ABI. ABI's Charter and Bylaws also do not address whether a
shareholder may nominate members of the Board of Directors.
BUSINESS COMBINATIONS
UPC. UPC's Charter requires the affirmative vote of a super-majority
of the outstanding shares of UPC Common Stock for approval of a merger,
consolidation, or a sale or lease of all or substantially all of the assets of
UPC if the other party to the transaction is a beneficial owner of 10% or more
of the outstanding shares of UPC Common Stock. A majority 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
is owned by UPC or any UPC company.
The requirement of a supermajority vote of shareholders to approve
certain business transactions, as described above, may discourage a change in
control of UPC by allowing a minority of UPC's shareholders to prevent a
transaction favored by the majority of the shareholders. Also, in some
circumstances, the Board of Directors could cause a two-thirds vote to be
required to approve a transaction thereby enabling management to retain control
over the affairs of UPC and their positions with UPC. The primary purpose of
the supermajority vote requirement, however, is to encourage negotiations with
UPC's management by groups or corporations interested in acquiring control of
UPC and to reduce the danger of a forced merger or sale of assets.
As a Tennessee corporation, UPC is or could be subject to various
legislative acts set forth in Chapter 35 of Title 48 of the Tennessee Code,
which impose certain restrictions on business combinations, including, but not
limited to, combinations with interested shareholders similar to those
described above.
The TBCA generally prohibits a "business combination" (generally
defined to include mergers, share exchanges, sales and leases of assets,
issuances of securities, and similar transactions) by UPC or a subsidiary with
an "interested shareholder" (generally defined as any person or entity which
beneficially owns 10% or more of the voting power of any class or series of
UPC's stock then outstanding) within five years after the person or entity
becomes an interested shareholder, unless the business combination or the
transaction pursuant to which the interested shareholder became such was
approved by the UPC Board before the interested shareholder became such, and
the business combination satisfies any other applicable requirements imposed by
law or by UPC's Charter or Bylaws. The TBCA also severely limits the extent to
which UPC or any of its officers or directors could be held liable for
resisting any business combination.
The Tennessee Control Share Acquisition Act (the "Tennessee CSAA")
generally provides that any person or group of persons that acquires the power
to vote more than specified levels (one-fifth, one-third, or a majority) of the
shares of certain Tennessee corporations will not have the right to vote such
shares unless granted voting rights by the holders of a majority of the votes
entitled to be cast, excluding "interested shares." Interested shares are those
shares held by the acquiring person, officers of the corporation, and employees
of the corporation who are also directors of the corporation. If approval of
voting power for the shares is obtained at one of the specified levels,
additional shareholder approval is required when a shareholder seeks to acquire
the power to vote shares at the next level. In the absence of such approval,
the additional shares acquired by the shareholder may not be voted until they
34
<PAGE> 45
are transferred to another person in a transaction other than a control share
acquisition. The Tennessee CSAA applies only to those Tennessee corporations
whose charters or bylaws contain an express declaration that control share
acquisitions in respect of the shares of such corporations are governed by and
subject to the provisions of such act.
UPC's Charter and Bylaws do not currently contain such an express declaration.
The Tennessee Greenmail Act ("Tennessee GA") prohibits a Tennessee
corporation having a class of voting stock registered or traded on a national
securities exchange or registered with the SEC pursuant to Section 12(g) of the
Exchange Act from purchasing, directly or indirectly, any of its shares at a
price above the market value of such shares (defined as the average of the
highest and lowest closing market price of such shares during the 30 trading
days preceding the purchase or preceding the commencement or announcement of a
tender offer if the seller of such shares has commenced a tender offer or
announced an intention to seek control of the corporation) from any person who
holds more than 3% of the class of securities to be purchased if such person
has held such shares for less than two years, unless the purchase has been
approved by the affirmative vote of a majority of the outstanding shares of
each class of voting stock issued by such corporation or the corporation makes
an offer, of at least equal value per share, to all holders of shares of such
class.
The TBCA provides that no Tennessee corporation having any class of
voting stock registered or traded on a national securities exchange or
registered with the SEC pursuant to Section 12(g) of the Exchange Act or any of
its officers or directors may be held liable at law or in equity for either
having failed to approve the acquisition of shares by an interested shareholder
on or before such interested shareholder's share acquisition date, or for
seeking to enforce or implement the provisions of the TBCA or the Tennessee
CSAA, or for failing to adopt or recommend any charter or bylaw amendment or
provision in respect of any one or more of these acts or the Tennessee GA, or
for opposing any merger, exchange, tender offer, or significant disposition of
the assets of the resident domestic corporation or any subsidiary of such
corporation because of a good faith belief that such merger, exchange, tender
offer, or significant disposition of assets would adversely affect the
corporation's employees, customers, suppliers, the communities in which the
corporation or its subsidiaries operate or are located or any other relevant
factor if such factors are permitted to be considered by the board of directors
under the corporation's charter in connection with the merger, exchange, tender
offer or significant disposition of assets.
The acts described above along with the provisions of UPC's Charter
regarding business combinations might be deemed to make UPC less attractive as
a candidate for acquisition by another company than would otherwise be the case
in the absence of such provisions. For example, if another company should seek
to acquire a controlling interest of less than 66-2/3% of the outstanding
shares of UPC Common Stock, the acquiror would not thereby obtain the ability
to replace a majority of the UPC Board until at least the second annual meeting
of shareholders following the acquisition, and furthermore the acquiror would
not obtain the ability immediately to effect a merger, consolidation, or other
similar business combination unless the described conditions were met.
As a result, UPC's shareholders may be deprived of opportunities to
sell some or all of their shares at prices that represent a premium over
prevailing market prices in a takeover context. The provisions described above
also may make it more difficult for UPC's shareholders to replace the UPC Board
or management, even if the holders of a majority of the UPC Common Stock should
believe that such replacement is in the interests of UPC. As a result, such
provisions may tend to perpetuate the incumbent UPC Board and management.
ABI. ABI's Charter and Bylaws do not address the voting requirements
for business combinations. The Texas BCA, however, requires the affirmative
vote of the holders of at least a majority of the outstanding shares of a Texas
corporation for approval of a merger, share exchange or acquisition, or sale,
lease, exchange or other disposition of all or substantially all of the
corporation's property and assets other than in the usual and regular course of
business..
The Texas BCA generally prohibits a "business combination" (defined
below) with an "affiliated shareholder" (defined as any person who beneficially
owns, or within the preceding three-year period was the beneficial owner of,
20% or more of the outstanding voting shares of the corporation), or any
affiliate or associate
35
<PAGE> 46
of the affiliated shareholder (together with the affiliated shareholder, an
"Affiliated Person"), within three years after the affiliated shareholder first
becomes an affiliated shareholder. Exceptions to this prohibition are discussed
below.
A "business combination" includes (i) a merger, share exchange or
conversion with an Affiliated Person; (ii) a sale, lease, exchange, mortgage,
pledge, transfer or other disposition to or with an Affiliated Person of assets
of the corporation or any subsidiary that (a) has a value equal to 10% or more
of the value of all of the corporation's assets, (b) has a value equal to 10%
or more of the value of the corporation's outstanding common stock or (c)
represents 10% or more of the earning power or net income of the corporation;
(iii) the issuance or transfer by the corporation or a subsidiary to an
Affiliated Person of shares of stock of the corporation or a subsidiary, except
through the exercise of warrants or a share dividend paid pro rata to all of
the corporation's shareholders; (iv) the adoption of a plan or proposal for
liquidation or dissolution of the corporation proposed by or pursuant to any
agreement with an Affiliated Person; (v) a reclassification of securities,
recapitalization, merger of the corporation with a subsidiary or pursuant to
which the assets and liabilities of the corporation are allocated among two or
more surviving corporations or other entities, or any other transaction,
proposed by or pursuant to any agreement with an Affiliated Person that
increases the proportionate ownership percentage of the outstanding shares of
any class or series of voting shares or securities convertible into voting
shares that is beneficially owned by an Affiliated Person; and (vi) the receipt
by an Affiliated Person of the benefit of a loan, advance, guarantee, pledge or
other financial assistance, or any tax advantage provided by or through the
corporation, except receipt that is proportional as a shareholder of the
corporation.
The prohibition against business combinations with an Affiliated
Person does not apply if (i) the business combination or the acquisition of
shares made by the affiliated shareholder on the date such person becomes an
affiliated shareholder is approved by the corporation's board of directors
before the date such person becomes an affiliated shareholder or (ii) the
business combination is approved by the affirmative vote of the shareholders of
at least two-thirds of the corporation's outstanding voting shares not
beneficially owned by an Affiliated Person at a shareholders' meeting called
for that purpose at least six (6) months after the affiliated shareholder
became an affiliated shareholder.
LIMITATIONS ON ABILITY TO VOTE STOCK
UPC. UPC's Charter and Bylaws do not contain any provision restricting
a shareholder's ability to vote shares of UPC voting stock.
ABI. ABI's Charter and Bylaws also do not contain any provision
restricting a shareholder's ability to vote shares of ABI voting stock.
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<PAGE> 47
DISSENTERS' RIGHTS OF APPRAISAL
UPC. Under the TBCA, a shareholder is generally entitled to dissent
from a corporate action, and obtain payment of the fair value of his or her
shares in the event of: (i) consummation of a plan of merger to which the
corporation is a party, unless shareholder approval is not required by the
TBCA; (ii) consummation of a plan of share exchange to which the corporation is
a party as the corporation whose shares will be acquired if the shareholder is
entitled to vote on the plan; (iii) consummation of a sale or exchange of
substantially all of the corporation's property other than in the usual and
regular course of business, if the shareholder is entitled to vote on the sale
or exchange, including a sale in dissolution, but not including a sale pursuant
to court order or to a plan by which substantially all of the net proceeds of
the sale will be distributed in cash to the shareholders within one year after
the date of sale; (iv) an amendment of the charter that materially and
adversely affects rights in respect of a dissenter's shares because it (a)
alters or abolishes a preferential right of the shares, (b) creates, alters, or
abolishes a right in respect of redemption of the shares, including a provision
respecting a sinking fund for the redemption or repurchase of the shares, (c)
alters or abolishes a preemptive right of the holder of the shares to acquire
shares or other securities, (d) excludes or limits the right of the shares to
vote on any matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting rights, or
(e) reduces the number of shares owned by the shareholder to a fraction of a
share if the fractional share so created is to be acquired for cash under the
TBCA; or (v) any corporate action taken pursuant to a shareholder vote, to the
extent the charter, bylaws, or a resolution of the board of directors provide
that voting or nonvoting shareholders are entitled to dissent and obtain
payment for their shares. UPC's Charter and Bylaws do not provide for any such
additional dissenters' rights.
ABI. The rights of appraisal of dissenting shareholders of ABI are
governed by the Texas BCA. Under the Texas BCA, a shareholder is generally
entitled to dissent from specified corporate actions, and obtain payment of the
fair value of his or her shares in the event of (i) consummation of a plan of
merger to which the corporation is a party, unless shareholder approval is not
required by the Texas BCA; (ii) consummation of a sale, lease, exchange or
disposition of all, or substantially all, of the property and assets of the
corporation, unless shareholder approval is not required by the Texas BCA; or
(iii) consummation of a plan of share exchange in which the corporation is the
party whose shares are being acquired. However the Texas BCA further provides
that appraisal rights are not available for any plan of merger or exchange if
(i) the shares of any class or series of stock that is, as of the record date
of the meeting of the shareholders at which a proposal to approve a plan of
merger is to be considered, either listed on a national securities exchange,
listed on the Nasdaq National Market or designated as a national market
security on an interdealer quotation system by the National Association of
Securities Dealers, Inc., or held of record by not less than 2,000
shareholders, (ii) the shareholder is not required to accept for his or her
shares any consideration that is different from the consideration (other than
cash in lieu of fractional shares) to be provided to any other holder of shares
of the same class or series of shares held by such shareholder, and (ii) the
shareholder is not required to accept for his or her shares any consideration
other than (a) shares of a corporation that, immediately after the effective
time of the merger or exchange, will be part of a class or series which is
either listed or authorized for listing on a national securities exchange,
approved for quotation as a national market security on an interdealer
quotation system by the National Association of Securities Dealers, Inc. or
held of record by not less than 2,000 shareholders, (b) cash in lieu of
fractional shares, or (c) any combination of the securities and cash described
in (a) and (b). ABI's Charter and Bylaws do not provide for any additional
dissenters' rights. See Appendix D hereto which is a copy of Articles 5.11,
5.12 and 5.13 of the Texas BCA which governs dissenters' rights.
SHAREHOLDERS' RIGHTS TO EXAMINE BOOKS AND RECORDS
UPC. The TBCA provides that a shareholder of a Tennessee corporation
may inspect and copy books and records during regular business hours, if he or
she gives the corporation written notice of his or her demand at least five
business days before the date of the inspection. In order to inspect certain
records, written demand must also be made in good faith and for a proper
purpose and must describe with reasonable particularity the purpose of the
request and the records the shareholder desires to inspect.
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<PAGE> 48
ABI. The Texas BCA provides that certain shareholders of a Texas
corporation may examine and copy certain books and records of the corporation
at any reasonable time and for any proper purpose if he or she gives the
corporation written demand stating the purpose of such examination. A
shareholder has this examination right if he or she (i) has been a shareholder
of the corporation for at least six months immediately preceding his or her
demand or (ii) is the holder of at least 5% of all the outstanding shares of
the corporation. A holder of a beneficial interest in certain voting trusts is
deemed a holder of shares represented by such beneficial interest for the
purpose of meeting examination requirements. Notwithstanding the foregoing, any
court of competent jurisdiction may compel the production of books and records
for examination by a shareholder upon proof of proper purpose by a beneficial
or record holder of shares, irrespective of the usual holding-period and
percentage-ownership requirements set forth above.
DIVIDENDS
UPC. UPC's ability to pay dividends on their respective capital stock
is governed by Tennessee corporate law. Under Tennessee corporate law,
dividends may be paid so long as the corporation would be able to pay its debts
as they become due in the ordinary course of business and the corporation's
total assets would not be less than the sum of its total liabilities plus the
amount that would be needed, if the corporation were to be dissolved at the
time of the distribution, to satisfy the preferential rights upon dissolution
to shareholders whose preferential rights are superior to those receiving the
distribution.
There are various statutory limitations on the ability of the UPC
banking subsidiaries and ABI's banking subsidiaries to pay dividends to UPC and
ABI, as applicable. See "CERTAIN REGULATORY CONSIDERATIONS -- Payment of
Dividends."
ABI. The Texas BCA provides that, subject to any restrictions in the
corporation's articles of incorporation, a Texas corporation may make
distributions to its shareholders unless (i) after the distribution the
corporation would be insolvent or (ii) the distribution exceeds the surplus of
the corporation. Substantially all of the funds available for the payment of
dividends by ABI are derived from Alvin State Bank. There are various statutory
limitations on the ability of Alvin State to pay dividends to ABI.
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COMPARATIVE MARKET PRICES AND DIVIDENDS
UPC Common Stock is traded on the NYSE under the symbol "UPC." ABI
Common Stock is not traded on any exchange or quoted on any market system. The
following table sets forth, for the indicated periods, the high and low closing
sale prices for the UPC Common Stock as reported by the NYSE, and the cash
dividends declared per share of UPC Common Stock and ABI Common Stock for the
indicated periods. The stock prices and dividend amounts for UPC have been
restated to give effect to stock splits and stock dividends. The stock prices do
not include retail mark-ups, mark-downs or commissions. The high and low prices
for ABI Common Stock are based upon transaction prices reported to management of
ABI and may not be representative of all trades during the reported period.
<TABLE>
<CAPTION>
UPC
---------------------------------------------------------------
Cash
Price Range Dividends
-------------------------------------- Declared
Per
High Low Share
--------- --------------------- -----------------
1998
- --------------------
<S> <C> <C> <C>
First Quarter $67.31 $58.38 $ .50
Second Quarter
(through 6/16/ 98) 62.56 55.00 .50
-----------------
Total $ 1.00
=================
1997
- --------------------
First Quarter $47.75 $38.38 $ .320
Second Quarter 52.13 41.25 .375
Third Quarter 56.50 49.25 .400
Fourth Quarter 67.88 57.00 .400
-----------------
Total $ 1.495
=================
1996
- --------------------
First Quarter $31.75 $29.00 $ .27
Second Quarter 31.25 29.63 .27
Third Quarter 36.25 28.63 .27
Fourth Quarter 41.38 34.63 .27
-----------------
Total $ 1.08
=================
</TABLE>
On June 16, 1998, the last sale price of UPC Common Stock as reported
on the NYSE was $55.00 per share. On March 24, 1998, the last business day prior
to public announcement of the Merger, the last sale price of the UPC Common
Stock as reported by the NYSE was $63.63.
The holders of UPC Common Stock are entitled to receive dividends when
and if declared by the Board of Directors out of funds legally available
therefor. Although UPC currently intends to continue to pay quarterly cash
dividends on the UPC Common Stock, there can be no assurance that UPC's dividend
policy will remain unchanged after completion of the Merger. The declaration and
payment of dividends thereafter will depend upon business conditions, operating
results, capital and reserve requirements, and the UPC Board's consideration of
other relevant factors. The Agreement provides that ABI may not declare and pay
cash dividends, other than regular semi-annual cash dividend, on the shares of
ABI Common Stock, in an amount not to exceed the product of (i) $.83 multiplied
by (ii) the whole number of calendar months elapsed since December 31, 1997 and
prior to the date of declaration of the dividend prior to the Effective Time or
the termination of the Agreement. There is no assurance that ABI will pay any
dividends at any time, or if it does, the amount of dividends it would declare.
Management of ABI is aware of only a few transfers of ABI Common Stock
in the past several years. Generally, it is believed that the most recent
transfers were for approximately $12.00 per share. In December of each of 1995,
1996, and 1997, ABI declared a cash dividend of $1.00 per share. Such dividends
were paid in January of the following year.
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<PAGE> 50
UPC and ABI are each legal entities separate and distinct from their
subsidiaries and their revenues depend in significant part on the payment of
dividends from their respective subsidiary depository institutions. UPC's and
ABI's subsidiary depository institutions are subject to certain legal
restrictions on the amount of dividends they are permitted to pay. See "CERTAIN
REGULATORY CONSIDERATIONS -- Payment of Dividends."
BUSINESS OF ABI
GENERAL
ABI, a Tennessee corporation, is a bank holding company registered with
the Federal Reserve under the BHC Act. ABI was formed in September 1983 to serve
as the holding company for Alvin State Bank.
ABI conducts its business activities through its wholly-owned bank
subsidiary, Alvin State Bank, which was organized in 1906 as a commercial bank
chartered under the laws of the State of Texas. Alvin State Bank operates from
its main office in Alvin, Brazoria County, Texas and at one branch office
located in the Texas County of Galveston. Generally, the commercial banking
activities include domestic activities. The domestic lending activities
primarily involve small- and middle-market commercial borrowers, builders of
residential real estate, owners of commercial or income-producing real estate
and consumers. Alvin State Bank provides long-term financing for owner-occupied
residential real estate.
The principal executive offices of ABI are located at 221 S. Gordon
Street, Alvin, Texas and its telephone number at such address is (281) 331-6411.
Additional information with respect to ABI and its subsidiaries is included
elsewhere herein and in documents incorporated by reference in this Proxy
Statement. See "AVAILABLE INFORMATION" and "DOCUMENTS INCORPORATED BY
REFERENCE."
LENDING ACTIVITIES
The principal lending activity of ABI historically has been the origination of
installment and commercial loans. ABI also makes consumer loans.
PROPERTY
ABI owns, free and clear of any encumbrances, the property on which its main
office is located and the branch located in Friendswood, Texas. ABI also holds,
from time to time, real estate acquired through foreclosure.
COMPETITION
ABI competes with numerous other commercial banks and other financial
institutions in Brazoria and Galveston Counties, Texas.
NON-PERFORMING ASSETS
At March 31, 1998 non-performing assets totaled $581,000 which is comprised of
non-accruing loans.
INVESTMENT ACTIVITIES
As of March 31, 1998 ABI had investments totaling $44.4 million. These
investments were comprised of 56% U.S. Treasury Securities, 32% Government
Agency obligations, 5% Tax-Free Bonds, and 7% other securities. Duration for the
portfolio is 1.39 years.
LEGAL PROCEEDINGS
ABI is not a party to any legal proceedings. Alvin State Bank is a
party to legal proceedings in the ordinary course of business.
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<PAGE> 51
BENEFICIAL OWNERSHIP OF ABI COMMON STOCK
The following table lists, as of March 31, 1998, the number of shares
of ABI Common Stock beneficially owned by each person known to ABI to be the
holder of record of 5.0% or more of the outstanding shares of ABI Common Stock
or by each officer and director of ABI, and by all officers and directors of ABI
as a group.
<TABLE>
<CAPTION>
Amount and Nature
Beneficial
Name and Address Ownership Percent of Class
- ------------------------ ----------------- ----------------
<S> <C> <C>
Tom Blakeney, Jr. 13,965(1) 1.76%
P.O. Box 1906
Alvin, Texas 77512-1906
J.F. Eubank, II 657,035(2) 82.76%
P.O. Box 1906
Alvin, Texas 77512-1906
Yvonne Janke 61,071(3) 7.69%
#2 Woods Edge
Houston, Texas 77024
Virgil McDonald 15,794(4) 1.99%
P.O. Box 1906
Alvin, Texas 77512-1906
All directors and officers as a 657,035(5) 82.76%
group (3 persons)
</TABLE>
- ----------------
(1) Such shares are also included in the number of shares shown as
beneficially owned by James F. Eubank, II. See footnote (2) below.
(2) Mr. Eubank, as the sole Voting Representative under that certain Voting
and Stock Restriction Agreement dated January 3, 1990 (the "Voting
Agreement"), has the sole right to vote all 657,035 shares that are
subject to the Voting Agreement. Of such 657,035 shares, 125,352 shares
are owned by Mr. Eubank, and another 336,392 shares are owned by trusts
of which Mr. Eubank is the trustee. Also includes 13,965 shares owned
by Tom Blakeney, Jr. and 15,794 shares owned by Virgil McDonald that
are subject to the Voting Agreement. See footnotes (1) and (4). Also
includes 60,688 shares that are subject to the Voting Agreement and
that are beneficially owned by Yvonne Janke, Mr. Eubank's sister. See
footnote (3) below.
(3) Includes 61,071 shares owned by trusts of which Ms. Janke is trustee.
Also includes 383 shares owned directly by Ms. Janke. Such shares are
also included in the number of shares shown as beneficially owned by
James F. Eubank, II. See footnote (2) above.
(4) Such shares are also included in the number of shares shown as
beneficially owned by James F. Eubank, II. See footnote (2) above.
(5) Includes all shares that are subject to the Voting Agreement, of which
James F. Eubank, II, the Chairman of the Board of ABI, is the sole
Voting Representative. See footnote (2) above. Excludes 17,275 shares
owned by officers of Alvin State Bank that are not subject to such
Voting Agreement.
As a result of the Merger, such beneficial ownership will decrease to
below 5.0% of the UPC Common Stock that will be issued and outstanding at
consummation.
REGULATION
ABI and Alvin State Bank are subject to various regulatory capital
requirements administered by the federal banking agencies. Any institution that
fails to meet its minimum capital requirements is subject to actions by
regulators that could have a direct material effect on ABI and Alvin State Bank.
Under the capital adequacy guidelines and the regulatory framework for prompt
corrective action, Alvin State Bank must meet specific capital requirements
based on Alvin State Bank's assets, liabilities and certain off-balance sheet
items as calculated under regulatory accounting practices. ABI's and Alvin State
Bank's capital amounts and Alvin State Bank's classification under the
regulatory framework for prompt corrective action are also subject to
qualitative judgments by the regulators regarding the components, risk
weightings and other factors.
To meet the capital adequacy requirements, as ABI and Alvin State Bank
must maintain minimum amounts and ratios as defined in the regulations.
Management of ABI believes that ABI and Alvin State Bank meet all capital
adequacy requirements.
The most recent notification from the Federal Deposit Insurance
Corporation categorized Alvin State Bank as well-capitalized under the
regulatory framework for prompt corrective action. To be categorized as
well-capitalized, Alvin State Bank must maintain certain minimum total
risk-based, Tier I risk-based and Tier I leverage ratios. On June 12, 1998, the
Texas Department completed an examination of Alvin State Bank and preliminarily
notified Alvin State Bank that it would remain categorized as well-capitalized.
41
<PAGE> 52
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF ALVIN BANCSHARES, INC. AND SUBSIDIARIES
The following discussion provides certain information regarding the financial
condition and results of operations of ABI. This discussion should be read in
conjunction with ABI's Consolidated Financial Statements and Notes to
Consolidated Financial Statements presented elsewhere in this Proxy
Statement/Prospectus. See "APPENDIX C -- Index to ABI Consolidated Financial
Statements".
RESULTS OF OPERATIONS
GENERAL. The earnings of ABI depend primarily on net interest income
(i.e., the difference between the income earned on loans and investments and the
interest paid on its deposits and other borrowed funds). Among the factors
affecting net interest income are the type and volume of its deposits and other
borrowed funds, and the relative sensitivity of its interest-earning assets and
its interest-bearing liabilities to changes in market interest rates.
ABI's income is also affected by fees it receives from other banking
services, by its provisions for loan losses and by the level of its operating
expenses. All aspects of ABI's operations are affected by general market,
economic and competitive conditions.
ABI reported net income of $347,000 for the three month period ended
March 31, 1998, a decrease of $146,000 from the three month period ended March
31, 1997. Pre-tax income was $525,000 for the three months ended March 31, 1998,
a $221,000 decrease from the three months ended March 31, 1997.
ABI reported net income of $1,711,000 for the year ended December 31,
1997, an increase of $78,000 from net income of $1,633,000 for the year ended
December 31, 1996. Pretax income was $2,571,000 for the year ended December 31,
1997, a $118,000 increase from the $2,453,000 earned during the year ended
December 31, 1996. ABI had net income of $1,569,000 and pretax income of
$2,329,000 for the year ended December 31, 1995. Changes occurring in the major
components of ABI's income statement for such periods are discussed below.
NET INTEREST INCOME. Net interest income is the primary source of
income for ABI and represents the amount by which interest generated by earning
assets exceeds the cost of funds, primarily interest paid to depositors on
interest-bearing accounts.
Net interest income was $1,445,000 for the three months ended March 31,
1998, a 3.7% increase from net interest income of $1,394,000 for the three
months ended March 31, 1997. The increase in net interest income is primarily
due to the increases in interest on loans and investment securities. Average
rates earned on loans increased to 10.39% as of March 31, 1998, from 10.21% as
of March 31, 1997. Average deposits for the three months ended March 31, 1998,
were $111,972,000 an increase of 14.3% over average deposits of $97,941,000 for
1997. The increase in average deposits is primarily due to the increase in
public funds deposits as a result of the Bank enhancing the interest rate of
this type of account.
Net interest income was $5,664,000 for the year ended December 31,
1997, a 5.3% increase from net interest income of $5,379,000 for the year ended
December 31, 1996. The increase in net interest income resulted primarily from
the increase in interest on loans. Average rates earned on interest-bearing
assets increased to 8.55% as of December 31, 1997 from 8.53% as of December 31,
1996. Average loans of $59,429,000 for the year ended December 31, 1997,
increased 15.3% from average loans of $51,562,000 for 1996. The increase in
average loans resulted from increases in commercial and real estate loans,
partially offset by a decrease in installment loans. Average deposits for the
year ended December 31, 1997 were $100,570,000 an increase of 8.2% over average
deposits of $92,947,000 for 1996.
Net interest income was $5,379,000 for the year ended December 31,
1996, a 4.1% increase from net interest income of $5,167,000 for 1995. The
increase in net interest income was due primarily to the increase in average
42
<PAGE> 53
loans outstanding. Average loans of $51,562,000 for the year ended December 31,
1996 increased 4.0% over average loans of $49,561,000 for 1995. The increase in
average loans outstanding was the result of increased loan demand for fixed and
adjustable rate mortgage loans during 1996. Average deposits for the year ended
December 31, 1996 were $92,947,000 an increase of 7.8% from average deposits of
$86,187,000 for the same period in 1995. The increase in average deposits was
primarily due to the increase in the public funds accounts.
The following table sets forth for the periods indicated an analysis of
net interest income by each major category of interest-earning assets and
interest-bearing liabilities. The rates earned and paid on each major type of
asset and liability account are set forth beside the average level in the
account for the period, and the average yields on all interest-bearing
liabilities are also summarized.
43
<PAGE> 54
<TABLE>
<CAPTION>
Year Ended December 31,
(Dollars in Thousands)
1997 1996
---------------------------- ----------------------------
Average Interest Yield/ Average Interest Yield/
Balance Inc/Exp Rate Balance Inc/Exp Rate
<S> <C> <C> <C> <C> <C> <C>
ASSETS (2) (2)
INTEREST-EARNING ASSETS:
Loans(1) $ 59,429 $6,267 10.55% $ 51,562 $5,509 10.68%
Securities 36,508 2,153 5.90% 37,647 2,275 6.04
Federal funds sold 6,867 379 5.52% 5,214 279 5.35
Deposits in financial institutions 260 15 5.77% 392 24 6.12
--------- ------ ----- --------- ------ -----
Total interest-earning assets/interest
income/average yield 103,064 8,814 8.55% 94,815 8,087 8.53%
Non-interest-earning assets:
Cash and due from banks 7,113 6,424
Other assets 4,773 4,964
Allowance for loan losses (609) (566)
--------- ---------
TOTAL $ 114,341 $ 105,637
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES:
NOW, money market and savings $ 36,526 989 2.71% $ 32,779 667 2.03%
Certificates of deposit 42,813 2,161 5.05% 41,108 2,041 4.96%
--------- ------ ----- --------- ------ -----
Total interest-bearing liabilities/
interest expense/rate 79,339 3,150 3.97% 73,887 2,708 3.67%
NON-INTEREST-BEARING DEMAND DEPOSITS 21,231 19,060
OTHER LIABILITIES 117 43
--------- ---------
Total liabilities 100,687 92,990
--------- ---------
STOCKHOLDERS' EQUITY 13,654 12,647
--------- ---------
TOTAL $ 114,341 $ 105,637
========= =========
NET INTEREST INCOME $5,664 4.58% $5,379 4.86%
====== ===== ====== =====
NET YIELD ON INTEREST-EARNING ASSETS 5.50% 5.67%
===== =====
</TABLE>
<TABLE>
<CAPTION>
1995
----------------------------
Average Interest Yield/
Balance Inc/Exp Rate
<S> <C> <C> <C>
ASSETS (2)
INTEREST-EARNING ASSETS:
Loans(1) $ 49,561 $5,429 10.95%
Securities 31,787 1,993 6.27%
Federal funds sold 5,849 343 5.86%
Deposits in financial institutions 392 24 6.12%
--------- ------ -----
Total interest-earning assets/interest
income/average yield 87,589 7,789 8.89%
Non-interest-earning assets:
Cash and due from banks 5,826
Other assets 5,298
Allowance for loan losses (570)
---------
TOTAL $ 98,143
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES:
NOW, money market and savings $ 30,670 683 2.23%
Certificates of deposit 39,337 1,939 4.93%
--------- ------ -----
Total interest-bearing liabilities/
interest expense/rate 70,007 2,622 3.75%
NON-INTEREST-BEARING DEMAND DEPOSITS 16,180
OTHER LIABILITIES 40
---------
Total liabilities 86,227
---------
STOCKHOLDERS' EQUITY 11,916
---------
TOTAL $ 98,143
=========
NET INTEREST INCOME 5,167 5.14%
====== =====
NET YIELD ON INTEREST-EARNING ASSETS 5.90%
=====
</TABLE>
1) Includes nonaccrual loans.
2) Average balances are based on the average balances outstanding
throughout the years ended December 31, 1997, 1996 and 1995.
44
<PAGE> 55
<TABLE>
<CAPTION>
Three Months Ended March 31,
(Dollars in Thousands)
------------------------------------------------------------
1998 1997
--------------------------- -----------------------------
ASSETS Average Interest Yield Average Interest Yield
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Loans (1) $ 60,158 $1,563 10.39% $ 58,311 $ 1,489 10.21%
Securities 47,116 672 5.71 34,993 507 5.80%
Federal funds sold 5,697 80 5.62 5,837 77 5.28%
Deposits in financial institutions 462 6 5.19%
--------- ------ ----- --------- -------
Total interest-earning assets/interest
income/average yield 112,971 2,315 8.20% 99,603 2,079 8.35%
Non-interest-earning assets:
Cash and due from banks 8,747 7,194
Other assets 4,733 4,758
Allowance for loan losses (524) (563)
--------- ---------
TOTAL $ 125,927 $ 110,992
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES:
NOW, money market and savings $ 46,729 $ 334 2.86% $ 35,854 $ 169 1.89%
Certificates of deposit 42,564 536 5.04 42,209 516 4.89
--------- ------ ----- --------- ------- -----
Total interest-bearing liablities/
interest expense/rate 89,293 870 3.90% 78,063 685 3.51%
NON-INTEREST-BEARING DEMAND DEPOSITS 22,679 19,878
OTHER LIABILITIES 135 77
--------- ---------
Total liabilities 112,107 98,018
---------
STOCKHOLDERS' EQUITY 13,820 12,974
--------- ---------
TOTAL $ 125,927 $ 110,992
========= =========
NET INTEREST INCOME $1,445 4.30 $ 1,394 4.84
====== ===== ======= =====
NET YIELD ON INTEREST-EARNING ASSETS 5.12% 5.60%
===== =====
</TABLE>
1) Includes nonaccrual loans.
2) Average balances are based on the average balances outstanding
throughout the three months ended March 31, 1998 and 1997.
Changes in interest income and interest expense can result from
variances in both volume and rate. ABI has an asset and liability management
strategy designed to provide a proper balance between rate sensitive assets and
rate sensitive liabilities to attempt to maximize interest margins, and to
provide adequate liquidity for anticipated needs.
The following table sets forth for the periods indicated a summary of
the changes in interest earned and interest paid resulting from changes in
volume and rate.
45
<PAGE> 56
<TABLE>
<CAPTION>
(Dollars in Thousands)
Three Months Ended Year Ended
Change March 31, 1998 Change December 31, 1997
----------------------- -----------------------
1998 1997
to Attributed to to Attributed to
---------------------- -----------------------
1997 Volume Rate Mix 1996 Volume Rate Mix
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Loans $ 74 $ 47 $ 26 $ 1 $ 758 $ 840 $ (67) $ (15)
Securities 165 176 (8) (3) (122) (69) (53)
Federal funds sold 3 (2) 5 100 88 9 3
Deposits in financial
institutions (6) (6) (6) 6 (8) (9) (1)
----- ----- ---- ----- ----- ----- ----- -----
Increase(decrease) in interest
income 236 215 17 4 727 851 (112) (12)
INTEREST-BEARING LIABILITIES:
NOW, money market and
savings
Certificates of deposit 165 51 87 27 322 76 223 23
20 4 16 -- 120 85 37 (2)
----- ----- ---- ----- ----- ----- ----- -----
Increase(decrease) in interest
expense 185 55 103 27 442 161 260 21
----- ----- ---- ----- ----- ----- ----- -----
NET INTEREST INCOME
BEFORE ALLOCATION OF
VOLUME/RATE 51 160 (86) (23) 285 690 (372) (33)
ALLOCATION OF VOLUME/RATE (50) (27) (23) (72) 39 33
----- ----- ---- ----- ----- ----- ----- -----
CHANGES IN INTEREST INCOME $ 51 $ 110 $(59) $ $ 285 $ 618 $(333) $ --
===== ===== ==== ===== ===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
Year Ended
Change December 31, 1996
----------------------
1996
to Attributed to
----------------------
1995 Volume Rate Mix
<S> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Loans $ 80 $ 219 $(134) $ (5)
Securities 282 367 (73) (12)
Federal funds sold (64) (37) (30) 3
Deposits in financial
institutions
----- ----- ----- ----
Increase(decrease) in interest
income 298 549 (237) (14)
----- ----- ----- ----
INTEREST-BEARING LIABILITIES:
NOW, money market and
savings
Certificates of deposit (16) 47 (61) (2)
102 87 12 3
----- ----- ----- ----
Increase(decrease) in interest
expense 86 134 (49) 1
----- ----- ----- ----
NET INTEREST INCOME
BEFORE ALLOCATION OF
VOLUME/RATE 212 415 (188) (15)
ALLOCATION OF VOLUME/RATE (27) 12 15
----- ----- ----- ----
CHANGES IN INTEREST INCOME $ 212 $ 388 $(176) $ --
===== ===== ===== ====
</TABLE>
46
<PAGE> 57
PROVISION FOR CREDIT LOSSES
ABI's allowance for credit losses is established through charges to
operating income in the form of the provision for credit losses. Actual credit
losses or recoveries of credit losses are charged or credited directly to the
allowance for credit losses.
ABI recorded no provision for credit losses for the three months ended
March 31, 1998 and 1997. The Bank provided no provision for credit losses due to
the continued quality of its loan portfolio. The allowance for credit losses
expressed as a percentage of outstanding loans was 0.9% and 1.0% as of March 31,
1998 and 1997, respectively.
For the year ended December 31, 1997, ABI recorded a provision for
credit losses of $291,000. For the years ended December 31, 1996 and 1995, ABI
recorded provisions for credit losses of $70,000 and $120,000, respectively. The
allowance for credit losses as of December 31, 1997, 1996 and 1995 were
$536,000, $559,000 and $562,000, respectively. The allowance for credit losses
expressed as a percentage of outstanding loans was 0.9%, 1.0% and 1.2% as of
December 31, 1997, 1996 and 1995, respectively.
Nonaccrual loans were $581,000 as of March 31, 1998 and $322,000 as of
December 31, 1997.
NON-INTEREST INCOME. Non-interest income, which primarily includes
service charges and trust income was $354,000 for the three months ended March
31, 1998 and $358,000 for the three months ended March 31, 1997.
Non-interest income increased 7.1% to $1,485,000 for the year ended
December 31, 1997 from $1,387,000 for the year ended December 31, 1996 primarily
due to a gain of $75,000 on the sale of other real estate.
Non-interest income increased 2.1% from $1,358,000 for the year ended
December 31, 1995 to $1,387,000 for the year ended December 31, 1996. The net
increase was due primarily to increased customer service fees.
NON-INTEREST EXPENSE. Non-interest expense includes expenses which ABI
incurs in the course of operations such as employee compensation and benefits,
occupancy expense and general operating expenses. These expenses increased 26.6%
from $1,006,000 for the three months ended March 31, 1997 to $1,274,000 for the
three months ended March 31, 1998. The increase was due primarily to increased
professional fees relating to the possible sale or merger of ABI.
Non-interest expense increased from $4,243,000 for the year ended
December 31, 1996 to $4,287,000 for the year ended December 31, 1997. The
increase was mainly attributable to an increase in salaries and employee
benefits.
Non-interest expense for the year ended December 31, 1996 increased by
$167,000, from the year ended December 31, 1995 due primarily to increased
salary and benefit costs.
FEDERAL INCOME TAXES. ABI's provision for income taxes was $178,000 and
$253,000 for the three month periods ended March 31, 1998 and 1997,
respectively. As of March 31, 1998, net operating loss carryforwards of
approximately $902,000 are available to offset future taxable income. Certain of
these carryforward amounts may be limited in their utilization. The tax loss
carryforwards expire at various times in years 2002 and 2003.
ABI's provisions for income taxes were $860,000, $820,000 and $760,000
for the years ended December 31, 1997, 1996 and 1995, respectively.
47
<PAGE> 58
CAPITAL RESOURCES, LIQUIDITY AND FINANCIAL CONDITION
CAPITAL RESOURCES - Capital Resources are subject to various regulatory
capital requirements administered by the federal banking agencies. Any
institution that fails to meet its minimum capital requirements is subject to
actions by regulators that could have a direct material effect on the financial
statements. Under the capital adequacy guidelines and the regulatory framework
for prompt corrective action, ABI must meet specific capital requirements based
on Alvin State Bank's assets, liabilities and certain off-balance-sheet items as
calculated under regulatory accounting practices. ABI's and Alvin State Bank's
capital amounts and Alvin State Bank's classification under the regulatory
framework for prompt corrective action are also subject to qualitative judgments
by the regulators regarding the components, risk weightings and other factors.
To meet the capital adequacy requirements, ABI and Alvin State Bank
must maintain minimum amounts and ratios as defined in the regulations.
Management believes that as of March 31, 1998 and December 31, 1997, ABI and
Alvin State Bank met all capital adequacy requirements.
As of December 31, 1997, the most recent notification from the Federal
Deposit Insurance Corporation categorized Alvin State Bank as well-capitalized
under the regulatory framework for prompt corrective action. To be categorized
as well-capitalized, Alvin State Bank must maintain minimum total risk-based,
Tier I risk-based and Tier I leverage ratios as set forth in the table below.
There have been no conditions or events since that notification which ABI
management believes have changed the Bank's category.
48
<PAGE> 59
The following is a summary of the ABI's and the Bank's capital ratios
at March 31, 1998 and December 31, 1997 and 1996:
<TABLE>
<CAPTION>
To Be Well
For Capital Capitalized Under
Adequacy Prompt Corrective
Actual Purposes Action Provisions
----------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
ABI: Amount Ratio Amount Ratio Amount Ratio
(Dollars in Thousands)
As of March 31, 1998:
Total Capital (to Risk-Weighted Assets) $13,945 20.36% $5,478 8.0% N/A N/A
Tier I Capital (to Risk-Weighted Assets) 13,258 19.36% 2,739 4.0% N/A N/A
Tier I Capital (to Total Assets) 13,258 10.96% 3,629 3.0% N/A N/A
As of December 31, 1997:
Total Capital (to Risk-Weighted Assets) $13,585 19.05% $5,703 8.0% N/A N/A
Tier I Capital (to Risk-Weighted Assets) 12,826 17.98% 2,853 4.0% N/A N/A
Tier I Capital (to Total Assets) 12,826 9.17% 4,198 3.0% N/A N/A
As of December 31, 1996:
Total Capital (to Risk-Weighted Assets) $12,653 19.26% $5,257 8.0% N/A N/A
Tier I Capital (to Risk-Weighted Assets) 11,738 17.86% 2,628 4.0% N/A N/A
Tier I Capital (to Total Assets) 11,738 10.73% 3,282 3.0% N/A N/A
ALVIN STATE BANK ONLY:
As of March 31, 1998:
Total Capital (to Risk-Weighted Assets) $13,173 19.42% $5,425 8.0% $ 6,782 10.0%
Tier I Capital (to Risk-Weighted Assets) 13,152 19.39% 2,713 4.0% 4,069 6.0%
Tier I Capital (to Total Assets) 13,152 10.93% 3,609 3.0% 6,014 5.0%
As of December 31, 1997:
Total Capital (to Risk-Weighted Assets) $12,809 18.15% $5,645 8.0% $ 7,057 10.0%
Tier I Capital (to Risk-Weighted Assets) 12,802 18.14% 2,823 4.0% 4,234 6.0%
Tier I Capital (to Total Assets) 12,802 9.20% 4,175 3.0% 6,959 5.0%
As of December 31, 1996:
Total Capital (to Risk-Weighted Assets) $11,712 18.09% $5,183 8.0% $ 6,478 10.0%
Tier I Capital (to Risk-Weighted Assets) 11,720 18.08% 2,592 4.0% 3,887 6.0%
Tier I Capital (to Total Assets) 11,720 10.71% 3,283 3.0% 5,470 5.0%
</TABLE>
LIQUIDITY. ABI's asset and liability management policy is intended to
maintain adequate liquidity and thereby enhance its ability to raise funds to
support asset growth, meet deposit withdrawals and lending needs, maintain
reserve requirements, and otherwise sustain operations. ABI accomplishes this
through management of the maturities of its interest-earning assets and
interest-bearing liabilities. Liquidity is monitored and overall interest rate
risk is assessed through reports showing both sensitivity ratios and existing
dollar "gap" data. ABI believes its present position to be adequate to meet its
current and future liquidity needs.
49
<PAGE> 60
The liquidity of ABI is maintained in the form of readily marketable
investment securities, demand deposits with commercial banks, vault cash and
federal funds sold. While the minimum liquidity requirement for banks is
determined by federal bank regulatory agencies as a percentage of deposit
liabilities, ABI's management monitors liquidity requirements as warranted by
interest rate trends, changes in the economy and the scheduled maturity and
interest rate sensitivity of the investment and loan portfolio, deposits and
anticipated loan findings. In addition to the liquidity provided by the
foregoing, ABI has correspondent relationships as of March 31, 1998 with other
institutions with available secured lines of credit to purchase overnight funds
totaling $4.0 million should additional liquidity be needed.
FINANCIAL CONDITION. From December 31, 1997 to March 31, 1998, ABI
reduced its total assets by approximately $19 million, primarily through
decreases of approximately $12.9 million in cash and cash equivalents, $4.9
million in investment securities available for sale, and $2.8 million in loans.
These decreases were offset by an approximately $18.9 million decrease in
deposits which resulted primarily from the distribution of tax collections by
various tax collecting public entities and a decrease in school district
deposits through the normal operations of the school district. Such collections
accumulate during the last calendar quarter and are distributed during the
succeeding first calendar quarter.
From December 31, 1996 to 1997, total assets increased by approximately
$29.6 million as ABI more aggressively sought public fund deposits. The increase
in deposits was invested primarily in cash, federal funds and investment
securities available for sale.
INTEREST RATE SENSITIVITY. Interest rate sensitivity refers to the
relationship between market interest rates and net interest income resulting
from the repricing of certain assets and liabilities. Interest rate risk arises
when an earning asset matures or when its rate of interest changes in a time
frame different from that of the supporting interest-bearing liability. One way
to reduce the risk of significant adverse effects of market rate fluctuations on
net interest income is to minimize the difference between rate sensitive assets
and liabilities, referred to as "gap", by maintaining a similar interest rate
sensitivity position of the assets and liabilities within a particular time
frame.
Maintaining an equilibrium between rate sensitive assets and
liabilities will reduce some of the risk associated with changes in market
rates, but it will not guarantee a stable net interest spread because yields and
rates may change simultaneously and by different amounts. These changes in
market spreads could materially affect the overall net interest spread even if
assets and liabilities were perfectly matched. If more assets than liabilities
reprice within a given period, an asset sensitive position or "positive gap" is
created. During a positive gap, a decline in market rates will have a negative
impact on net interest income. Alternatively, where more liabilities than assets
reprice in a given period, a liability sensitive position or "negative gap" is
created (rate sensitivity ratio is less than 100%) and a decline in interest
rates will have a positive impact on net interest income.
50
<PAGE> 61
The following table shows the interest rate sensitivity gaps for
different time periods and the cumulative interest rate sensitivity gap as of
March 31, 1998.
<TABLE>
<CAPTION>
0 TO 91 DAYS OVER
90 DAYS TO 1 YEAR 1 YEAR TOTAL
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Loans $35,166 $ 5,201 $17,916 $ 58,283
Securities 10,166 11,923 22,282 44,371
Federal funds sold 6,600 6,600
------- -------- ------- --------
Total interest-earning assets 51,932 17,124 40,198 109,254
------- -------- ------- --------
INTEREST-BEARING LIABILITIES:
NOW, money market and saving deposits 22,378 $ 22,378
Time deposits 8,717 18,263 32,847 59,827
------- -------- ------- --------
Total interest-bearing liabilities 31,095 18,263 32,847 82,205
------- -------- ------- --------
PERIOD GAP $20,837 $ (1,139) $ 7,351 $ 27,049
CUMULATIVE GAP $20,837 $ 19,698 $27,049 $ 27,049
CUMULATIVE GAP AS A PERCENTAGE 17.24% 16.29% 22.38% 22.38%
OF TOTAL ASSETS
</TABLE>
Varying interest rate environments can create unexpected changes in
prepayment levels of assets and liabilities which are not reflected in the
interest sensitivity analysis. These prepayments may have significant effects on
ABI's net interest margin. Because of these factors, an interest sensitivity gap
report may not provide a complete assessment of ABI's exposure to changes in
interest rates.
51
<PAGE> 62
INVESTMENT SECURITIES
Set forth is a distribution of ABI's investment securities by
contractual maturity dates at March 31, 1998 (mortgage-backed securities are
classified in the period of final maturity):
<TABLE>
<CAPTION>
(Dollars in Thousands)
After One But Maturing After Five
Within One Year Within FiveYears But Within Ten Years After Ten Years
--------------- ---------------- -------------------- ---------------- Total
Amount Yield Amount Yield Amount Yield Amount Yield Amount
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SECURITIES HELD TO
MATURITY:
U.S. Treasury securities $ 6,974 5.16% $ 9,868 6.40% $16,842
U.S. government agencies and
corporations 2,498 5.83% 5,120 6.04% 7,618
States and political subdivisions 1,173 5.70% 1,037 5.10% $ 244 6.17% $ 58 6.50% 2,512
Mortgage-backed securities and 1,926
collateralized mortgage
obligations 164 5.95% 1,762 6.11% 2,993
Others 2,993
------- ------ ------ ---- -------
Total securities held to
maturity $13,802 17,787 $ 244 $ 58 $31,891
======= ====== ====== ====== =======
SECURITIES AVAILABLE FOR
SALE:
U.S. Government agencies
and corporations $ 2,986 5.49% $ 1,517 5.69% 4,503
U.S. Treasury securities 6951 5.27% 1,026 5.59% 7,977
------- ------- -----
Total securities available
for sale $ 9,937 $ 2,543 $12,480
======= ======= =======
</TABLE>
52
<PAGE> 63
DEPOSITS
The average balances and average rates paid by category of deposit at
the dates shown below are as follows:
<TABLE>
<CAPTION>
(Dollars in Thousands)
-------------------------------------------
March 31, 1998 1997 1996
-------------- -------------- -----------------
Amount Rate Amount Rate Amount Rate
<S> <C> <C> <C> <C> <C> <C>
NON-INTEREST BEARING:
Demand $ 22,679 $21,231 $19,060
INTEREST BEARING:
NOW, money market and
savings deposits 46,729 2.86% 36,526 2.71% 32,779 2.03%
Certificates of deposit 42,564 5.04% 42,813 5.05% 41,108 4.96%
-------- -------- -------
Total interest bearing 89,293 3.90% 79,339 3.97% 73,887 3.67%
-------- -------- -------
TOTAL $111,972 $100,570 $92,947
======== ======== =======
</TABLE>
The scheduled maturities of certificates of deposit in denominations of
$100,000 or more at March 31, 1998 and December 31, 1997, including public
funds, are shown below:
<TABLE>
<CAPTION>
(Dollars in Thousands)
---------------------------------------
March 31, 1998 December 31, 1997
<S> <C> <C>
Due in three months or less 1,283 $ 2,020
Due in over three to twelve months 3,370 2,542
Due in over twelve months 2,774 345
----------- ----------
TOTAL $ 7,427 $ 4,907
=========== ==========
</TABLE>
53
<PAGE> 64
LOANS
The following table classifies ABI's loans according to
type as of the dates shown:
<TABLE>
<CAPTION>
(Dollars in Thousands)
-------------------------------------
March 31, December 31, 1997
---------------------------
1998 1997 1996 1995
<S> <C> <C> <C> <C>
Commercial, financial and industrial $14,578 $20,177 $17,350 $13,051
Real estate construction 11,905 10,862 7,364 7,218
Real estate mortgage 20,638 21,676 22,450 18,325
Installment 11,410 8,734 11,184 10,292
Lease financing 232 298 323 349
Other 330 255 203 77
------- ------- ------- -------
Total 59,093 62,002 58,874 49,312
Less allowance for loan losses 513 536 559 562
Less unearned income 810 963 1,224 1,103
------- ------- ------- -------
TOTAL NET $57,770 $60,503 $57,091 $47,647
======= ======= ======= =======
</TABLE>
The maturities of loans, net of unearned discount, at March 31, 1998,
were as follows:
<TABLE>
<CAPTION>
(Dollars in Thousands)
<S> <C>
Less than 1 year $ 37,187
1-5 years 18,572
5-15 years 2,524
Over 15 years 0
----------
Total $ 58,283
</TABLE>
ALLOWANCE FOR CREDIT LOSSES AND RISK ELEMENTS
The provision for credit losses represents a determination by ABI's
management of the amount necessary to be charged to operating income and
transferred to the allowance for credit losses to maintain a level which it
considers adequate in relation to the risk of losses inherent in the loan
portfolio. It is ABI's policy to provide for exposure to losses of specifically
identified credits, and a general allowance for the remainder of the loan
portfolio, and, while it is also ABI's policy to charge off in the current
period those loans in which a loss is deemed to exist, risks of losses also
exist which cannot be quantified precisely or attributed to particular loans or
classes of loans.
In assessing the adequacy of its allowance for loan losses, management
relies predominantly on its ongoing review of the loan portfolio, which is
undertaken both to ascertain whether there are probable losses which must be
charged off and to assess the risk characteristics of individually significant
loans and of the portfolio in the aggregate. This review takes into
consideration the judgments of the responsible lending officers, the senior
credit officer, the Chief Executive Officer and the Board of Directors.
54
<PAGE> 65
NONACCRUAL, PAST DUE AND RESTRUCTURED LOANS
The following is an analysis of non-performing assets as of the dates
shown:
<TABLE>
<CAPTION>
(Dollars in Thousands)
March 31, December 31,
----------------------
1998 1997 1996 1995
<S> <C> <C> <C> <C>
Loans accounted for on a nonaccrual basis $581 $322 $ 698 $1,222
Accruing loans which are contractually past
due 90 days or more as to principal or
interest payments 149 658 253 9
---- ---- ------ ------
$730 $980 $ 951 $1,231
==== ==== ====== ======
Total
</TABLE>
The accrual of interest on a loan is discontinued when, in the opinion
of management (based upon such criteria as default in payment, asset
deterioration, decline in cash flow, recurring operating loss, declining sales,
bankruptcy and other financial conditions which could result in default), the
borrower's financial condition is such that the collection of interest is
doubtful.
Placing a loan on nonaccrual status has a two-fold impact on net
interest income. First, it causes an immediate charge against earnings with
respect to that particular loan. Second, it eliminates future interest earnings
with respect to that particular loan. Interest on such loans is not recognized
until all of the principal is collected or until the loan is returned to a
performing status.
RETURN ON EQUITY AND ASSETS
The return on equity and return on assets for the periods shown below
are as follows:
<TABLE>
<CAPTION>
For the Three
Months Ended For the Year Ended
March 31, December 31,
----------------------------------------
1998 (1) 1997 1996 1995
<S> <C> <C> <C> <C>
Return on Average Assets 1.10% 1.50% 1.55% 1.60%
Return on Average Equity 10.04% 12.53% 12.91% 13.17%
Average Equity to Average Assets 10.97% 11.94% 11.97% 12.14%
Dividend Payout Ratio N/A 46.41% 48.62% 50.61%
(1) Annualized
</TABLE>
55
<PAGE> 66
BUSINESS OF UPC
GENERAL
UPC, a Tennessee corporation, is a bank holding company registered with
the Federal Reserve under the BHC Act. As of March 31, 1998, UPC had total
consolidated assets of approximately $18.4 billion, total consolidated loans of
approximately $12.7 billion, total consolidated deposits of approximately $13.6
billion, and total consolidated shareholders' equity of approximately $1.8
billion.
UPC conducts its business activities through its principal bank
subsidiary, the $15.7 billion asset UPB, founded in 1869, headquartered in
Memphis, Tennessee, with branches in Tennessee, Mississippi, Missouri, Arkansas,
Louisiana, Alabama, and Kentucky. UPC also had, as of March 31, 1998, six other
financial institution subsidiaries, the largest of which being Union Planters
Bank of Florida, Miami, Florida, which had total consolidated assets as of March
31, 1998 of approximately $2.2 billion. UPC undertook a corporate reorganization
plan in the fourth quarter of 1997, the primary purpose of which was to
consolidate substantially all of its bank subsidiaries into UPB. This corporate
reorganization was completed January 1, 1998. It is likely that UPC will
continue to consolidate its various bank subsidiaries into UPB in the future, to
the extent allowed by law. Through the UPC Banking Subsidiaries, UPC provides a
diversified range of financial services in the communities in which it operates
and maintains approximately 518 banking offices and 676 ATMs. UPC's total
deposits at March 31, 1998 are allocable by state to its banking offices (before
consolidating adjustments) approximately as follows: $6.7 billion in Tennessee;
$2.9 billion in Mississippi; $1.3 billion in Florida; $1.2 billion in Missouri;
$596 million in Arkansas; $598 million in Louisiana; $412 million in Alabama;
and $103 million in Kentucky.
Acquisitions have been, and are expected to continue to be, an
important part of the expansion of UPC's business. UPC completed 13 acquisitions
in 1994, three in 1995, seven in 1996, and six in 1997, adding approximately
$3.8 billion in total assets in 1994, $1.3 billion in 1995, $4.2 billion in 1996
and $3.6 billion in 1997. In 1998, UPC has completed the acquisition of two
institutions with approximately $520 million in total assets (the "Recently
Completed Acquisitions"). As of June 1, 1998, UPC was a party to definitive
agreements to acquire ten financial institutions, in addition to ABI, and to
purchase certain branch locations and assume deposit liabilities of California
Federal Bank in Florida ("the CalFed Branch Purchase") (collectively referred to
as the "Other Pending Acquisitions"). The Other Pending Acquisitions had
aggregate total assets of approximately $13.0 billion at March 31, 1998. For
purposes of this Proxy Statement, the Recently Completed Acquisitions and the
Other Pending Acquisitions are collectively referred to as the "Other
Acquisitions." The largest of the Other Pending Acquisitions is UPC's proposed
acquisition of MGR which had total consolidated assets of approximately $7.3
billion at March 31, 1998. On May 1, 1998, MGR consummated the acquisition of
Charter Financial, Inc., and its subsidiary, Charter Bank, S.B. (the "Charter
Acquisition"). Charter is located in Sparta, Illinois and had at the time of
consummation, total assets of approximately $406 million, total deposits of
approximately $309 million and total shareholders' equity of approximately $67
million. The Charter Acquisition was accounted for as a purchase. For purposes
of this Proxy Statement, including the historical and equivalent pro forma data,
the terms "Other Acquisitions" and "Other Pending Acquisitions" include the
completed Charter Acquisition. For information with respect to these Other
Acquisitions, see "-- Recent Developments" and "PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION." For a discussion of UPC's acquisition program, see the
caption "Acquisitions" (pages 10, 11 and 12) in UPC's Annual Report to
Shareholders and Note 2 to UPC's audited consolidated financial statements for
the years ended December 31, 1997, 1996 and 1995 (pages 49 and 50) contained in
such Annual Report to Shareholders. UPC's Annual Report to Shareholders is
included as Exhibit 13 to the UPC 1997 Form 10-K and Exhibit 13 is incorporated
by reference herein to the extent indicated herein.
UPC expects to continue to take advantage of the consolidation of the
financial services industry by further developing its franchise through the
acquisition of financial institutions and other entities engaged in lines of
business permissible for banks and bank holding companies. 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
56
<PAGE> 67
earnings are sometimes required incidental to acquisitions. For a discussion of
UPC's acquisition program, including a discussion of the significant charges UPC
has incurred over the past three fiscal years incidental to acquisitions, see
the caption "Acquisitions" (on page 10) in UPC's Annual Report to Shareholders
and Note 2 to UPC's audited consolidated financial statements for the years
ended December 31, 1997, 1996, and 1995 (on pages 49 and 50) contained in such
Annual Report to Shareholders. UPC's Annual Report to Shareholders is included
as Exhibit 13 to the UPC 1997 Form 10-K and Exhibit 13 is incorporated by
reference herein to the extent indicated herein.
The principal executive offices of UPC are located at 7130 Goodlett
Farms Parkway, Memphis, Tennessee 38018, and its telephone number at such
address is (901) 580-6000. Additional information with respect to UPC and its
subsidiary is included in documents incorporated by reference in this Proxy
Statement. See "AVAILABLE INFORMATION" and "DOCUMENTS INCORPORATED BY
REFERENCE."
57
<PAGE> 68
RECENT DEVELOPMENTS
RECENTLY COMPLETED ACQUISITIONS. Since December 31,
1997, UPC has completed the acquisition of two institutions (the "Recently
Completed Acquisitions").
<TABLE>
<CAPTION>
Asset Size Type of
Institution (In Millions) Consideration
- ------------------------------------------------ ------------------- -------------------
<S> <C> <C>
Sho-Me Financial Corporation, Mt. Vernon, $374 Approximately
Missouri, and its subsidiary, 1st Savings Bank, 1,153,459 shares
f.s.b. of UPC Common
Stock
Security Bancshares, Inc., Des Arc, Arkansas, 146 Approximately
and its subsidiaries, Farmers & Merchants Bank, 490,821 shares of
Des Arc, Arkansas, and Merchants and Farmers UPC Common
Bank, West Helena, Arkansas Stock
-------------------
TOTAL $520
===================
</TABLE>
OTHER PENDING ACQUISITIONS. UPC has entered into definitive agreements
to acquire the following financial institutions in addition to ABI
(collectively, the "Other Pending Acquisitions" and, together with the Recently
Completed Acquisitions, the "Other Acquisitions") which UPC's management
considers probable of consummation and which are expected to close in 1998. For
purposes of this Proxy Statement, including the pro forma financial information
included herein, the term "Other Pending Acquisitions" includes the Charter
Acquisition.
58
<PAGE> 69
<TABLE>
<CAPTION>
Institution Asset Size Type of Projected
(In Millions)(1) Consideration(2) Closing Date
- --------------------------------------------- ---------------- ---------------------------- ---------------
<S> <C> <C> <C>
Magna Group, Inc., St. Louis, Missouri, and $7,657 Approximately 35,446,000 3rd Quarter
its subsidiaries, including Magna Bank, St. shares of UPC Common 1998
Louis, Missouri ("MGR")(3) Stock
Peoples First Corporation, Paducah, Kentucky 1,493 Approximately 6,338,000 3rd Quarter
and its subsidiaries, including Peoples First shares of UPC Common 1998
National Bank, Paducah, Kentucky ("Peoples") Stock
Purchase of 24 branches and assumption of 1,465 $110 million deposit 3rd Quarter
$1.5 billion of deposits of California Federal premium in cash 1998
Bank in Florida ("CalFed Branch Purchase")
AMBANC Corporation, Vincennes, Indiana, 734 Approximately 3,398,000 3rd Quarter
and its subsidiaries, AMBANC Illinois, N.A. shares of UPC Common 1998
and AMBANC Indiana ("AMBANC") Stock
Merchants Bancshares, Inc., Houston, Texas, 552 Approximately 2,000,000 3rd Quarter
and its subsidiary, Merchants Bank, Houston, shares of UPC Common 1998
Texas ("Merchants") Stock
TransFlorida Bank, Boca Raton, Florida 318 Approximately 1,655,000 3rd Quarter
shares of UPC Common 1998
Stock
CB&T, Inc., McMinnville, Tennessee, and its 271 Approximately 1,450,000 3rd Quarter
subsidiary, City Bank & Trust Company, shares of UPC Common 1998
McMinnville, Tennessee Stock
Capital Savings Bancorp, Inc., Jefferson City, 232 Approximately 801,000 3rd Quarter
Missouri, and its subsidiary, Capital Savings shares of UPC Common 1998
Bank, FSB, Jefferson City, Missouri Stock
217 Approximately 836,000 3rd Quarter
First National Bancshares of Wetumpka, Inc., shares of UPC Common 1998
Wetumpka, Alabama, and its subsidiary, First Stock
National Bank, Wetumpka, Alabama
First Community Bancshares, Inc., Middleton, 41 Approximately 129,000 3rd Quarter
TN, and its subsidiary, Bank of Middleton, shares of UPC Common 1998
Middleton, Tennessee Stock
Duck Hill Bank, Duck Hill, Mississippi 20 Approximately 42,000 3rd Quarter
-------- shares of UPC Common 1998
Stock
TOTALS $ 13,000
========
</TABLE>
--------------------
(1) Approximate total assets at March 31, 1998
(2) Assumes no adjustment to shares pursuant to exchange ratio adjustment
mechanisms. (3) Includes the proforma impact of the Charter Acquisition.
EARNINGS CONSIDERATIONS RELATED TO THE MERGER AND THE OTHER
ACQUISITIONS. It is expected that either UPC or the institutions to be acquired
in connection with the Merger and the Other Pending Acquisitions will incur
charges arising from such acquisitions and from the assimilation of those
institutions into the UPC organization. Most of
59
<PAGE> 70
the charges are expected to relate to the Magna Group, Inc. and Peoples First
Corporation, Inc. acquisitions. Anticipated charges would normally arise from
matters such as, but not limited to; (i) legal, accounting, financial advisory
and consulting fees; (ii) payment of contractual benefits triggered by a change
of control, early retirement and involuntary separation and related benefits;
(iii) costs associated with elimination of duplicate facilities and branch
consolidations; (iv) data processing charges; (v) cancellation of vendor
contracts, and (vi) other contingencies and similar costs which normally arise
from the consolidation of operational activities.
For a discussion of the significant charges UPC has incurred over the
past three years incidental to its acquisition program, see the caption
"Acquisitions" (pages 10, 11 and 12) in UPC's Annual Report to Shareholders and
note 2 to UPC's audited consolidated financial statements for the years ended
December 31, 1997, 1996 and 1995 (pages 49 and 50) contained in such Annual
Report to Shareholders. UPC's Annual Report to Shareholders is included as
Exhibit 13 to UPC's 1997 Form 10-K and Exhibit 13 is incorporated by reference
herein to the extent indicated herein.
The Merger and the Other Acquisitions (with the exception of Duck Hill
Bank, the Charter Acquisition, and the CalFed Branch Purchase, each of which is
expected to be accounted for as a purchase) are expected to be accounted for as
poolings of interest. UPC currently estimates incurring aggregate pre-tax
charges in the range of $100 million to $115 million (approximately $91 million
related to MGR) before taxes in connection with the consummation of the Merger
and the Other Acquisitions. On an after tax basis these charges are estimated in
the range of $75 million to $80 million (approximately $61 million related to
MGR). 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 pro forma
impact of these charges is included in the pro forma balance sheet information
included in this Proxy Statement. See "SUMMARY-Historical and Pro Forma Per
Share Data," and "Pro Forma Condensed Consolidated Financial Information."
The range of anticipated charges to be incurred in connection with
consummating the Merger and the Other Acquisitions is a preliminary estimate of
the significant charges which may, in the aggregate, be required and should be
viewed accordingly. These charges are reflected in the pro forma consolidated
balance sheet. Moreover, this range has been based on the due diligence that has
been performed to date in connection with the Merger and the Other Acquisitions
and the range may be subject to change and the actual charges incurred may be
higher or lower than what is currently contemplated, once these institutions are
assimilated from an operational perspective and various contingencies are either
satisfied or eliminated. Furthermore, the range of anticipated charges will
change if additional entities are acquired. UPC regularly evaluates the
potential acquisition of, and holds discussions with, various potential
acquisition candidates. As a general rule, UPC will publicly announce such
acquisitions only after a definitive agreement has been reached, and only if UPC
considers the acquisition to be of such a size as to be a significant
acquisition. Since the range of anticipated acquisition-related charges is
likely to change with additional acquisitions, and since UPC regularly engages
in acquisitions, such range could change, and ABI's shareholders should view
such information accordingly.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following tables contain unaudited pro forma condensed consolidated
financial statements including a balance sheet as of March 31, 1998 and
statements of earnings for the three months ended March 31, 1998 and for the
years ended December 31, 1997, 1996, and 1995. These statements present on a pro
forma basis historical results for (i) UPC for all periods, (ii) UPC and MGR for
all periods, (iii) UPC, ABI and the Other Acquisitions (including MGR) as of and
for the three months ended March 31, 1998 and for the year ended December 31,
1997, and (iv) UPC, MGR, Peoples, AMBANC and Merchants for the years ended
December 31, 1996 and 1995 (see "BUSINESS OF UPC - Recent Developments - Other
Pending Acquisitions").
The Merger and all but four of the Other Acquisitions, are expected to
be accounted for using the pooling-of-interests method of accounting. The pro
forma information as of March 31, 1998 and for the three months ended March 31,
1998 and for the year ended December 31, 1997, reflect the acquisition of MGR,
ABI and the Other Acquisitions as of January 1, 1997. The pro forma information
for the years ended December 31, 1996 and 1995,
60
<PAGE> 71
reflect only the acquisitions of MGR, Peoples, AMBANC, and Merchants because the
Merger and the Other Acquisitions (other than MGR, Peoples, AMBANC, and
Merchants) are not individually or in the aggregate, considered material to UPC
from a financial statement presentation standpoint. Furthermore, the pro forma
impact of the CalFed Branch Purchase on the pro forma statement of earnings for
each of the periods presented has been excluded due to lack of information
available for operation of the branches on a historical basis. Pro forma
financial information are presented for information purposes only and are not
necessarily indicative of the results of operations or combined financial
position that would have resulted had the Merger or the Other Acquisitions been
consummated at the dates or during the periods indicated, nor are they
necessarily indicative of future results of operations or combined financial
position. The pro forma balance sheet reflects preliminary estimates by UPC of
acquisition-related charges to be incurred in connection with consummation of
the Merger and the Other Acquisitions; however, the statements of earnings do
not reflect these charges. For additional information with respect to the
estimated charges UPC anticipates it would incur in connection with the Merger
and the Other Acquisitions, see "BUSINESS OF UPC - Recent Developments." For a
discussion of UPC's acquisition program, including a discussion of the
significant charges UPC has incurred incidental to acquisitions over the past
three fiscal years, see the caption "Acquisitions" (pages 10, 11 and 12) in
UPC's 1997 Annual Report to Shareholders and Note 2 to UPC's audited
consolidated financial statements for the years ended December 31, 1997, 1996,
and 1995 (pages 49 and 50) contained in such UPC 1997 Annual Report to
Shareholders. UPC's 1997 Annual Report to Shareholders is included in Exhibit 13
to UPC's 1997 Form 10-K, and Exhibit 13 is incorporated by reference herein to
the extent indicated herein. See "DOCUMENTS INCORPORATED BY REFERENCE."
The unaudited pro forma condensed consolidated financial statements
should be read in conjunction with the consolidated historical financial
statements of UPC which are incorporated by reference herein. Pro forma results
are not necessarily indicative of future operating results. See "DOCUMENTS
INCORPORATED BY REFERENCE."
61
<PAGE> 72
UNION PLANTERS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1998
<TABLE>
<CAPTION>
UPC,
MGR, ABI
UPC AND
PRO FORMA AND OTHER
UPC MGR ADJUSTMENTS MGR ACQUISITIONS
----------- ---------- ----------- ----------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks.......................... $ 660,528 $ 220,317 $ 880,845 $ 1,008,839
Interest-bearing deposits at financial
institutions................................... 20,425 -- 20,425 49,640
Federal funds sold and securities purchased under
agreements to resell........................... 309,415 95,126 404,541 545,801
Trading account assets........................... 163,698 -- 163,698 163,698
Loans held for resale............................ 253,021 -- 253,021 259,017
Investment securities............................ 3,287,664 2,239,113 5,526,777 7,812,071
Loans............................................ 12,754,653 4,379,021 17,133,674 20,272,013
Less: Unearned income....................... (26,994) (93) (27,087) (34,152)
Allowance for losses on loans......... (223,837) (59,928) -- (283,765) (320,107)
----------- ---------- --------- ----------- -----------
Net loans.................................... 12,503,822 4,319,000 16,822,822 19,917,754
Premises and equipment 338,799 117,253 456,052 534,387
Accrued interest receivable...................... 196,595 46,523 243,118 279,665
FHA/VA claims receivable......................... 138,626 -- 138,626 138,626
Mortgage servicing rights........................ 98,089 1,237 99,326 99,832
Goodwill and other intangibles................... 78,927 120,951 199,878 375,339
Other assets..................................... 364,005 91,098 29,060(b) 484,163 519,252
----------- ---------- --------- ----------- -----------
Total assets............................. $18,413,614 $7,250,618 $ 29,060 $25,693,292 $31,703,921
=========== ========== ========= =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest-bearing.......................... $ 2,290,776 $ 641,300 $ 2,932,076 $ 3,781,318
Certificates of deposit of $100,000 and
over....................................... 1,417,728 932,141 2,349,869 2,854,920
Other interest-bearing....................... 9,872,723 3,973,247 13,845,970 17,696,215
----------- ---------- --------- ----------- -----------
Total deposits........................... 13,581,227 5,546,688 -- 19,127,915 24,332,453
Short-term borrowings............................ 442,051 891,706 1,333,757 1,365,605
Short- and medium-term bank notes................ 135,000 -- 135,000 139,743
Federal Home Loan Bank advances.................. 846,291 106,370 952,661 1,215,073
Other long-term debt............................. 1,022,644 9,513 1,032,157 1,037,766
Accrued interest, expenses and taxes............. 182,422 76,604 90,511(b) 349,537 406,185
Other liabilities................................ 394,537 8,759 403,296 410,918
----------- ---------- --------- ----------- -----------
Total liabilities........................ 16,604,172 6,639,640 90,511 23,334,323 28,907,743
----------- ---------- --------- ----------- -----------
Shareholders' equity
Convertible preferred stock.................. 36,972 40 37,012 37,012
Common stock 419,326 68,075 89,631(a) 577,032 662,544
Additional paid-in capital................... 272,157 343,601 (150,257)(a) 457,905 580,938
(7,596)(b)
Retained earnings............................ 1,060,029 267,982 (61,451)(b) 1,266,560 1,489,763
Treasury stock............................... -- (60,626) 60,626(a) -- --
Unearned compensation........................ (9,550) (7,596) 7,596(b) (9,550) (10,021)
Net unrealized gain on available for sale
securities................................. 30,508 (498) -- 30,010 35,942
----------- ---------- --------- ----------- -----------
Total shareholders' equity............... 1,809,442 610,978 (61,451) 2,358,969 2,796,178
----------- ---------- --------- ----------- -----------
Total liabilities and shareholders'
equity................................. $18,413,614 $7,250,618 $ 29,060 $25,693,292 $31,703,921
=========== ========== ========= =========== ===========
</TABLE>
(a) Issuance of shares to acquire MGR (32,563,752 MGR shares outstanding
times the exchange ratio of .9686 equals 31,541,250 shares of UPC Common
Stock to be issued).
(b) Acquisition - related charges -- see "Business of UPC -- Recent
Developments -- Earnings Considerations Related to the Merger and the Other
Acquisitions."
62
<PAGE> 73
UNION PLANTERS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
UPC, MGR, ABI
UPC AND
AND OTHER
UPC MGR ACQUISITIONS
------------- ------------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Interest income
Interest and fees on loans.......................... $ 292,160 $ 388,325 $ 465,341
Interest on investment securities
Taxable.......................................... 41,475 69,870 83,000
Tax-exempt....................................... 7,066 10,836 13,777
Interest on deposits at financial institutions...... 424 470 735
Interest on federal funds sold and securities
purchased under agreements to resell............. 2,710 4,837 6,387
Interest on trading account assets.................. 3,020 3,020 3,020
Interest on loans held for resale................... 2,280 2,280 2,383
----------- ----------- -----------
Total interest income............................ 349,135 479,638 574,643
----------- ----------- -----------
Interest expense
Interest on deposits................................ 124,085 179,549 221,207
Interest on short-term borrowings................... 6,016 17,237 21,987
Interest on long-term debt.......................... 28,327 29,936 30,779
----------- ----------- -----------
Total interest expense........................... 158,428 226,722 273,973
----------- ----------- -----------
Net interest income.............................. 190,707 252,916 300,670
Provision for losses on loans......................... 17,909 21,459 24,775
----------- ----------- -----------
Net interest income after provision for losses on
loans.......................................... 172,798 231,457 275,895
Noninterest income
Service charges on deposit accounts................. 25,746 32,074 36,435
Mortgage servicing income........................... 16,191 16,453 16,890
Bank card income.................................... 7,498 9,426 9,641
Factoring commissions............................... 7,304 7,304 7,304
Trust service income................................ 2,407 5,723 6,381
Profits and commissions from trading activities..... 1,847 1,848 1,848
Investment securities gains......................... 5,215 5,811 6,552
Other income........................................ 29,510 41,058 43,559
----------- ----------- -----------
Total noninterest income......................... 95,718 119,697 128,610
Noninterest expense
Salaries and employee benefits...................... 73,230 96,595 113,940
Net occupancy expense............................... 10,644 15,473 18,137
Equipment expense................................... 10,997 13,694 16,052
Other expense....................................... 58,753 77,892 90,669
----------- ----------- -----------
Total noninterest expense........................ 153,624 203,654 238,798
----------- ----------- -----------
Earnings before income taxes..................... 114,892 147,500 165,707
Applicable income taxes............................. 40,320 52,417 59,139
----------- ----------- -----------
Net earnings..................................... $ 74,572 $ 95,083 $ 106,568
=========== =========== ===========
Earnings per common share
Basic............................................... $ .89 $ .82 $ .80
Diluted............................................. .86 .79 .78
Weighted average shares outstanding (in thousands)
Basic............................................... 83,379 114,868 131,931
Diluted............................................. 86,974 120,157 137,409
</TABLE>
63
<PAGE> 74
UNION PLANTERS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
UPC, MGR, ABI
UPC AND
AND OTHER
UPC MGR ACQUISITIONS
------------- ------------- --------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Interest income
Interest and fees on loans.......................... $1,165,925 $1,536,829 $1,839,742
Interest on investment securities
Taxable........................................ 187,221 290,351 343,598
Tax-exempt..................................... 29,032 40,516 52,133
Interest on deposits at financial institutions...... 2,627 2,627 3,179
Interest on federal funds sold and securities
purchased under agreements to resell.............. 9,114 13,760 18,554
Interest on trading account assets.................. 14,956 14,956 14,956
Interest on loans held for resale................... 7,819 7,819 7,982
---------- ---------- ----------
Total interest income..................... 1,416,694 1,906,858 2,280,144
---------- ---------- ----------
Interest expense
Interest on deposits................................ 494,517 698,778 860,526
Interest on short-term borrowings................... 41,280 81,980 104,620
Interest on long-term debt.......................... 110,512 116,687 120,184
---------- ---------- ----------
Total interest expense.................... 646,309 897,445 1,085,330
---------- ---------- ----------
Net interest income....................... 770,385 1,009,413 1,194,814
Provision for losses on loans............................ 113,633 142,580 154,163
---------- ---------- ----------
Net interest income after provision for
losses on loans......................... 656,752 866,833 1,040,651
Noninterest income
Service charges on deposit accounts................. 107,248 133,352 151,454
Mortgage servicing income........................... 57,265 57,265 58,051
Bank card income.................................... 31,317 38,544 39,239
Factoring commissions............................... 30,140 30,140 30,140
Trust service income................................ 9,020 21,663 24,355
Profits and commissions from trading activities..... 7,295 7,295 7,295
Investment securities gains......................... 2,104 4,688 5,481
Other income........................................ 117,221 139,945 153,075
---------- ---------- ----------
Total noninterest income.................. 361,610 432,892 469,090
---------- ---------- ----------
Noninterest expense
Salaries and employee benefits...................... 284,648 372,959 440,212
Net occupancy expense............................... 44,813 64,140 73,676
Equipment expense................................... 43,812 53,579 62,466
Other expense....................................... 324,431 379,663 430,225
---------- ---------- ----------
Total noninterest expense................. 697,704 870,341 1,006,579
---------- ---------- ----------
Earnings before income taxes.............. 320,658 429,384 503,162
Applicable income taxes.................................. 111,897 147,948 173,787
---------- ---------- ----------
Net earnings.............................. $ 208,761 $ 281,436 $ 329,375
========== ========== ==========
Earnings per common share
Basic............................................... $ 2.54 $ 2.48 $ 2.52
Diluted............................................. 2.45 2.40 2.45
Weighted average shares outstanding (in thousands)
Basic............................................... 80,336 111,418 128,555
Diluted............................................. 85,195 117,884 135,180
</TABLE>
64
<PAGE> 75
UNION PLANTERS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
UPC UPC, MGR,
AND PEOPLES, AMBANC,
UPC MGR AND MERCHANTS
----------- ----------- ----------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Interest income
Interest and fees on loans...................... $1,095,148 $1,380,299 $1,535,342
Interest on investment securities
Taxable.................................... 247,716 340,745 372,233
Tax-exempt................................. 30,839 37,980 45,560
Interest on deposits at financial
institutions.................................. 1,593 1,593 1,910
Interest on federal funds sold and securities
purchased under agreements to resell.......... 16,948 19,462 21,664
Interest on trading account assets.............. 13,895 13,895 13,895
Interest on loans held for resale............... 6,852 6,852 7,241
---------- ---------- ----------
Total interest income................. 1,412,991 1,800,826 1,997,845
---------- ---------- ----------
Interest expense
Interest on deposits............................ 512,668 670,856 755,680
Interest on short-term borrowings............... 64,689 93,501 100,543
Interest on long-term debt...................... 90,782 97,530 97,680
---------- ---------- ----------
Total interest expense................ 668,139 861,887 953,903
---------- ---------- ----------
Net interest income................... 744,852 938,939 1,043,942
Provision for losses on loans........................ 68,948 79,228 84,198
---------- ---------- ----------
Net interest income after provision
for losses on loans................. 675,904 859,711 959,744
Noninterest income
Service charges on deposit accounts............. 107,535 130,978 141,119
Mortgage servicing income....................... 63,003 63,003 63,003
Bank card income................................ 24,975 30,988 31,636
Factoring commissions........................... 26,066 26,066 26,066
Trust service income............................ 10,130 19,512 21,496
Profits and commissions from trading
activities.................................... 5,765 5,765 5,765
Investment securities gains..................... 4,099 4,916 4,942
Other income.................................... 78,929 89,632 94,739
---------- ---------- ----------
Total noninterest income.............. 320,502 370,860 388,766
---------- ---------- ----------
Noninterest expense
Salaries and employee benefits.................. 282,726 351,868 388,972
Net occupancy expense........................... 47,215 65,195 70,142
Equipment expense............................... 44,418 53,149 60,704
Other expense................................... 357,458 399,991 422,915
---------- ---------- ----------
Total noninterest expense............. 731,817 870,203 942,733
---------- ---------- ----------
Earnings before income taxes.......... 264,589 360,368 405,777
Applicable income taxes.............................. 93,115 125,755 139,649
---------- ---------- ----------
Net earnings.......................... $ 171,474 $ 234,613 $ 266,128
========== ========== ==========
Earnings per common share
Basic........................................... $ 2.13 $ 2.18 $ 2.24
Diluted......................................... 2.05 2.11 2.17
Weighted average shares outstanding (in thousands)
Basic........................................... 77,240 104,539 115,726
Diluted......................................... 83,542 112,425 123,714
</TABLE>
65
<PAGE> 76
UNION PLANTERS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
UPC UPC, MGR,
AND PEOPLES, AMBANC,
UPC MGR AND MERCHANTS
----------- ----------- -----------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Interest income
Interest and fees on loans...................... $ 986,230 $1,252,376 $1,388,252
Interest on investment securities
Taxable.................................... 202,890 274,743 304,771
Tax-exempt................................. 32,400 39,666 47,200
Interest on deposits at financial
institutions.................................. 5,284 5,284 6,153
Interest on federal funds sold and securities
purchased under agreements to resell.......... 19,965 21,868 24,547
Interest on trading account assets.............. 14,191 14,191 14,191
Interest on loans held for resale............... 4,858 4,858 5,184
---------- ---------- ----------
Total interest income................. 1,265,818 1,612,986 1,790,298
---------- ---------- ----------
Interest expense
Interest on deposits............................ 478,641 616,666 695,224
Interest on short-term borrowings............... 44,492 64,725 70,706
Interest on long-term debt...................... 73,234 79,293 79,674
---------- ---------- ----------
Total interest expense................ 596,367 760,684 845,604
---------- ---------- ----------
Net interest income................... 669,451 852,302 944,694
Provision for losses on loans........................ 33,917 43,909 47,393
---------- ---------- ----------
Net interest income after provision
for losses on loans................. 635,534 808,393 897,301
Noninterest income
Service charges on deposit accounts............. 102,932 125,419 134,243
Mortgage servicing income....................... 55,903 55,903 55,903
Bank card income................................ 20,758 26,559 27,124
Factoring commissions........................... 19,519 19,519 19,519
Trust service income............................ 8,326 16,964 18,786
Profits and commissions from trading
activities.................................... 12,362 12,362 12,362
Investment securities gains..................... 1,433 1,789 2,008
Other income.................................... 72,477 83,058 87,381
---------- ---------- ----------
Total noninterest income.............. 293,710 341,573 357,326
---------- ---------- ----------
Noninterest expense
Salaries and employee benefits.................. 264,663 337,656 371,136
Net occupancy expense........................... 44,061 61,738 66,224
Equipment expense............................... 42,251 51,218 57,289
Other expense................................... 256,214 302,794 324,295
---------- ---------- ----------
Total noninterest expense............. 607,189 753,406 818,944
---------- ---------- ----------
Earnings before income taxes.......... 322,055 396,560 435,683
Applicable income taxes.............................. 110,799 134,082 145,486
---------- ---------- ----------
Net earnings.......................... $ 211,256 $ 262,478 $ 290,197
========== ========== ==========
Earnings per common share
Basic........................................... $ 2.79 $ 2.56 $ 2.56
Diluted......................................... 2.66 2.46 2.46
Weighted average shares outstanding (in thousands)
Basic........................................... 72,512 99,346 110,196
Diluted......................................... 78,798 106,632 117,604
</TABLE>
66
<PAGE> 77
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 ABI. A more complete
discussion is included in the UPC's 1997 Form 10-K. For information relating to
ABI see the ABI Financial Statements, a copy of which are attached hereto as
Appendix C.
GENERAL
UPC is a bank holding company registered with the Federal Reserve under
the BHC Act. As such, UPC and its non-bank subsidiaries are subject to the
supervision, examination, and reporting requirements of the BHC Act and the
regulations of the Federal Reserve.
The BHC Act requires every bank holding company to obtain the prior
approval of the Federal Reserve before: (i) it may acquire direct or indirect
ownership or control of any voting shares of any bank if, after such
acquisition, the bank holding company will directly or indirectly own or control
more than 5.0% of the voting shares of the bank; (ii) it or any of its
subsidiaries, other than a bank, may acquire all or substantially all of the
assets of any bank; or (iii) it may merge or consolidate with any other bank
holding company.
The BHC Act further provides that the Federal Reserve may not approve
any transaction that would result in a monopoly or would be in furtherance of
any combination or conspiracy to monopolize or attempt to monopolize the
business of banking in any section of the United States, or the effect of which
may be substantially to lessen competition or to tend to create a monopoly in
any section of the country, or that in any other manner would be in restraint of
trade, unless the anticompetitive effects of the proposed transaction are
clearly outweighed by the public interest in meeting the convenience and needs
of the community to be served. The Federal Reserve is also required to consider
the financial and managerial resources and future prospects of the bank holding
companies and banks concerned and the convenience and needs of the community to
be served. Consideration of financial resources generally focuses on capital
adequacy which is discussed below, and consideration of convenience and needs
issues includes the parties' performance under the Community Reinvestment Act of
1977.
The BHC Act, as amended by the interstate banking provisions of the
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 ("Interstate
Banking Act"), which became effective in September 1995, repealed the prior
statutory restrictions on interstate acquisitions of banks by bank holding
companies, such that UPC and any other bank holding company located in Tennessee
may now acquire a bank located in any other state, and any bank holding company
located outside Tennessee may lawfully acquire any Tennessee-based bank,
regardless of state law to the contrary, in either case subject to certain
deposit-percentage limitations, aging requirements, and other restrictions. The
Interstate Banking Act also generally provides that, after June 1, 1997,
national and state-chartered banks may branch interstate through acquisitions of
banks in other states. By adopting legislation prior to that date, a state has
the ability either to "opt in" and accelerate the date after which interstate
branching is permissible or "opt out" and prohibit interstate branching
altogether. None of the states in which the banking subsidiaries of UPC are
currently located has either moved up the date after which interstate branching
will be permissible or "opted out." UPC utilized the provisions of the
Interstate Banking Act at the end of 1997 to merge substantially all of UPC's
Banking Subsidiaries with and into UPB. As a result of such consolidation, UPB
is now a multi-state national bank with branches in Tennessee, Alabama,
Mississippi, Louisiana, Arkansas, Missouri and Kentucky.
The BHC Act generally prohibits UPC from engaging in activities other
than banking or managing or controlling banks or other permissible subsidiaries
and from acquiring or retaining direct or indirect control of any company
engaged in any activities other than those activities determined by the Federal
Reserve to be so closely related to banking or managing or controlling banks as
to be a proper incident thereto. In determining whether a
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<PAGE> 78
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 nonbanking activities
of bank holding companies. Despite prior approval, the Federal Reserve has the
power to order a holding company or its subsidiaries to terminate any activity
or to terminate its ownership or control of any subsidiary when it has
reasonable cause to believe that continuation of such activity or such ownership
or control constitutes a serious risk to the financial safety, soundness, or
stability of any bank subsidiary of that bank holding company.
Each of the UPC Banking Subsidiaries is a member of the Federal Deposit
Insurance Corporation ("FDIC"), and as such, its deposits are insured by the
FDIC to the extent provided by law. Each such subsidiary is also subject to
numerous state and federal statutes and regulations that affect its business,
activities, and operations, and each is supervised and examined by one or more
state or federal bank regulatory agencies.
The regulatory agencies having supervisory jurisdiction over the
respective subsidiary institutions of UPC and ABI (the FDIC and the applicable
state authority in the case of state-chartered nonmember banks, the Office of
Thrift Supervision ("OTS") in the case of federally chartered thrift
institutions, the Federal Reserve in the case of state-chartered member banks,
and the Office of the Comptroller of the Currency ("OCC") in the case of
national banks) regularly examine the operations of such institutions and have
authority to approve or disapprove mergers, consolidations, the establishment of
branches, and similar corporate actions. The federal and state banking
regulators also have the power to prevent the continuance or development of
unsafe or unsound banking practices or other violations of law.
PAYMENT OF DIVIDENDS
UPC is a legal entity separate and distinct from its banking, thrift,
and other subsidiaries. The principal sources of cash flow of UPC, including
cash flow to pay dividends to its shareholders, are dividends from its
subsidiary depository institutions. There are statutory and regulatory
limitations on the payment of dividends by these subsidiary depository
institutions to UPC, as well as by UPC and ABI to their shareholders.
As to the payment of dividends, each of UPC's state-chartered banking
subsidiaries is subject to the respective laws and regulations of the state in
which such bank is located, and to the regulations of the bank's primary federal
regulator. UPC's subsidiary that is a thrift institution is subject to the OTS'
dividend distributions regulation, and those that are national banks are subject
to the regulations of the OCC.
If, in the opinion of the federal banking regulator, a depository
institution under its jurisdiction is engaged in or is about to engage in an
unsafe or unsound practice (which, depending on the financial condition of the
depository institution, could include the payment of dividends), such agency may
require, after notice and hearing, that such institution cease and desist from
such practice. The federal banking agencies have indicated that paying dividends
that deplete a depository institution's capital base to an inadequate level
would be an unsafe and unsound banking practice. Under the Federal Deposit
Insurance Corporation Improvement Act of 1991 ("FDICIA"), a depository
institution may not pay any dividend if payment would cause it to become
undercapitalized or if it already is undercapitalized. See "-- Prompt Corrective
Action." Moreover, the federal agencies have issued policy statements that
provide that bank holding companies and insured banks should generally only pay
dividends out of current operating earnings.
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<PAGE> 79
At March 31, 1998, under dividend restrictions imposed under federal
and state laws, the UPC Banking Subsidiaries, without obtaining governmental
approvals, could declare aggregate dividends to UPC of approximately $172.4
million.
The payment of dividends by UPC and the UPC Banking Subsidiaries may
also be affected or limited by other factors, such as the requirement to
maintain adequate capital above regulatory guidelines.
CAPITAL ADEQUACY
UPC and the UPC Banking Subsidiaries are required to comply with the
capital adequacy standards established by the Federal Reserve in the case of
UPC, and the appropriate federal banking regulator in the case of each of the
UPC Banking Subsidiaries. There are two basic measures of capital adequacy for
bank holding companies and their subsidiary depository institutions that have
been promulgated by the Federal Reserve and each of the federal bank regulatory
agencies: a risk-based measure and a leverage measure. All applicable capital
standards must be satisfied for a bank holding company to be considered in
compliance.
The risk-based capital standards are designed to make regulatory
capital requirements more sensitive to differences in risk profile among
depository institutions and bank holding companies, to account for
off-balance-sheet exposure, and to minimize disincentives for holding liquid
assets. Assets and off-balance-sheet items are assigned to broad risk
categories, each with appropriate weights. The resulting capital ratios
represent capital as a percentage of total risk-weighted assets and
off-balance-sheet items.
The minimum guideline for the ratio ("Total Capital Ratio") of total
capital ("Total Capital") to risk-weighted assets (including certain
off-balance-sheet items, such as standby letters of credit) is 8.0%. At least
half of Total Capital must be composed of common equity, undivided profits,
minority interests in the equity accounts of consolidated subsidiaries,
noncumulative perpetual preferred stock, and a limited amount of cumulative
perpetual preferred stock, less goodwill and certain other intangible assets
("Tier 1 Capital"). The remainder may consist of subordinated debt, other
preferred stock, and a limited amount of loan loss reserves ("Tier 2 Capital").
At March 31, 1998, UPC's consolidated Total Capital Ratio and its Tier 1 Capital
Ratio (i.e., the ratio of Tier 1 Capital to risk-weighted assets) were 20.71%
and 15.66%, respectively and ABI's Total Capital Ratio and Tier 1 Capital Ratio
were 20.36% and 19.36%, respectively.
In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
ratio (the "Leverage Ratio") of Tier 1 Capital to average assets, less goodwill
and certain other intangible assets, of 3.0% for bank holding companies that
meet certain specified criteria, including having the highest regulatory rating.
All other bank holding companies generally are required to maintain a Leverage
Ratio of at least 3.0%, plus an additional cushion of 100 to 200 basis points.
UPC's Leverage Ratio at March 31, 1998, was 10.72% and ABI's Leverage Ratio at
March 31, 1998 was 10.96%. The guidelines also provide that bank holding
companies experiencing internal growth or making acquisitions will be expected
to maintain strong capital positions substantially above the minimum supervisory
levels without significant reliance on intangible assets. Furthermore, the
Federal Reserve has indicated that it will consider a "tangible Tier 1 Capital
Leverage Ratio" (deducting all intangibles) and other indicia of capital
strength in evaluating proposals for expansion or new activities.
Each of the UPC Banking Subsidiaries is subject to risk-based and
leverage capital requirements adopted by its federal banking regulator, which
are substantially similar to those adopted by the Federal Reserve for bank
holding companies. Each of the UPC Banking Subsidiaries was in compliance with
applicable minimum capital requirements as of March 31, 1998. Neither UPC nor
any of the UPC Banking Subsidiaries has been advised by any federal banking
agency of any specific minimum capital ratio requirement applicable to it.
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<PAGE> 80
Failure to meet capital guidelines could subject a bank or thrift to a
variety of enforcement remedies, including issuance of a capital directive, the
termination of deposit insurance by the FDIC, a prohibition on the taking of
brokered deposits, and certain other restrictions on its business. As described
below, substantial additional restrictions can be imposed upon FDIC-insured
depository institutions that fail to meet applicable capital requirements. See
"-- Prompt Corrective Action."
The federal bank regulators continue to indicate their desire to raise
capital requirements applicable to banking organizations beyond their current
levels. In this regard, the Federal Reserve, the FDIC, and the OCC have,
pursuant to FDICIA, proposed an amendment to the risk-based capital standards
that would calculate the change in an institution's net economic value
attributable to increases and decreases in market interest rates and would
require banks with excessive interest rate risk exposure to hold additional
amounts of capital against such exposures. The OTS has already included an
interest-rate risk component in its risk-based capital guidelines for savings
associations that it regulates.
SUPPORT OF SUBSIDIARY INSTITUTIONS
Under Federal Reserve policy, UPC is expected to act as a source of
financial strength for, and to commit resources to support, each of the UPC
Banking Subsidiaries. This support may be required at times when, absent such
Federal Reserve policy, UPC may not be inclined to provide it. In addition, any
capital loans by a bank holding company to any of its banking subsidiaries are
subordinate in right of payment to deposits and to certain other indebtedness of
such banks. In the event of a bank holding company's bankruptcy, any commitment
by the bank holding company to a federal bank regulatory agency to maintain the
capital of a banking subsidiary will be assumed by the bankruptcy trustee and
entitled to a priority of payment.
Under the Federal Deposit Insurance Act (the "FDIA"), a depository
institution insured by the FDIC can be held liable for any loss incurred by, or
reasonably expected to be incurred by, the FDIC after August 9, 1989, in
connection with (i) the default of a commonly controlled FDIC-insured depository
institution or (ii) any assistance provided by the FDIC to any commonly
controlled FDIC-insured depository institution "in danger of default." "Default"
is defined generally as the appointment of a conservator or receiver, and "in
danger of default" is defined generally as the existence of certain conditions
indicating that a default is likely to occur in the absence of regulatory
assistance. The FDIC's claim for damages is superior to claims of shareholders
of the insured depository institution or its holding company, but is subordinate
to claims of depositors, secured creditors, and holders of subordinated debt
(other than affiliates) of the commonly controlled insured depository
institution. The UPC Banking Subsidiaries are subject to these cross-guarantee
provisions. As a result, any loss suffered by the FDIC in respect of any of
these subsidiaries would likely result in assertion of the cross-guarantee
provisions, the assessment of such estimated losses against the depository
institution's banking or thrift affiliates, and a potential loss of UPC's
respective investments in such other subsidiary depository institutions.
PROMPT CORRECTIVE ACTION
FDICIA establishes a system of prompt corrective action to resolve the
problems of undercapitalized institutions. Under this system, which became
effective in December 1992, the federal banking regulators are required to
establish five capital categories (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, and critically
undercapitalized) and to take certain mandatory supervisory actions, and are
authorized to take other discretionary actions, with respect to institutions in
the three undercapitalized categories, the severity of which will depend upon
the capital category in which the institution is placed. Generally, subject to a
narrow exception, FDICIA requires the banking regulator to appoint a receiver or
conservator for an institution that is critically undercapitalized. The federal
banking agencies have specified by regulation the relevant capital level for
each category.
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<PAGE> 81
Under the final agency rules implementing the prompt corrective action
provisions, an institution that (i) has a Total Capital Ratio of 10% or greater,
a Tier 1 Capital Ratio of 6.0% or greater, and a Leverage Ratio of 5.0% or
greater and (ii) is not subject to any written agreement, order, capital
directive, or prompt corrective action directive issued by the appropriate
federal banking agency is deemed to be well capitalized. An institution with a
Total Capital Ratio of 8.0% or greater, a Tier 1 Capital Ratio of 4.0% or
greater, and a Leverage Ratio of 4.0% or greater is considered to be adequately
capitalized. A depository institution that has a Total Capital Ratio of less
than 8.0%, a Tier 1 Capital Ratio of less than 4.0%, or a Leverage Ratio of less
than 4.0% is considered to be undercapitalized. A depository institution that
has a Total Capital Ratio of less than 6.0%, a Tier 1 Capital Ratio of less than
3.0%, or a Leverage Ratio of less than 3.0% is considered to be significantly
undercapitalized, and an institution that has a tangible equity capital to
assets ratio equal to or less than 2.0% is deemed to be critically
undercapitalized. For purposes of the regulation, the term "tangible equity"
includes core capital elements counted as Tier 1 Capital for purposes of the
risk-based capital standards, plus the amount of outstanding cumulative
perpetual preferred stock (including related surplus), minus all intangible
assets with certain exceptions. A depository institution may be deemed to be in
a capitalization category that is lower than is indicated by its actual capital
position if it receives an unsatisfactory examination rating.
An institution that is categorized as undercapitalized, significantly
undercapitalized, or critically undercapitalized is required to submit an
acceptable capital restoration plan to its appropriate federal banking agency.
Under FDICIA, a bank holding company must guarantee that a subsidiary depository
institution meet its capital restoration plan, subject to certain limitations.
The obligation of a controlling bank holding company under FDICIA to fund a
capital restoration plan is limited to the lesser of 5.0% of an undercapitalized
subsidiary's assets or the amount required to meet regulatory capital
requirements. An undercapitalized institution is also generally prohibited from
increasing its average total assets, making acquisitions, establishing any
branches, or engaging in any new line of business, except in accordance with an
accepted capital restoration plan or with the approval of the FDIC. In addition,
the appropriate federal banking agency is given authority with respect to any
undercapitalized depository institution to take any of the actions it is
required to or may take with respect to a significantly undercapitalized
institution as described below if it determines "that those actions are
necessary to carry out the purpose" of FDICIA.
For those institutions that are significantly undercapitalized or
undercapitalized and either fail to submit an acceptable capital restoration
plan or fail to implement an approved capital restoration plan, the appropriate
federal banking agency must require the institution to take one or more of the
following actions: (i) sell enough shares, including voting shares, to become
adequately capitalized; (ii) merge with (or be sold to) another institution (or
holding company), but only if grounds exist for appointing a conservator or
receiver; (iii) restrict certain transactions with banking affiliates as if the
"sister bank" exception to the requirements of Section 23A of the Federal
Reserve Act did not exist; (iv) otherwise restrict transactions with bank or
non-bank affiliates; (v) restrict interest rates that the institution pays on
deposits to "prevailing rates" in the institution's "region;" (vi) restrict
asset growth or reduce total assets; (vii) alter, reduce, or terminate
activities; (viii) hold a new election of directors; (ix) dismiss any director
or senior executive officer who held office for more than 180 days immediately
before the institution became undercapitalized, provided that in requiring
dismissal of a director or senior officer, the agency must comply with certain
procedural requirements, including the opportunity for an appeal in which the
director or officer will have the burden of proving his or her value to the
institution; (x) employ "qualified" senior executive officers; (xi) cease
accepting deposits from correspondent depository institutions; (xii) divest
certain nondepository affiliates which pose a danger to the institution; or
(xiii) be divested by a parent holding company. In addition, without the prior
approval of the appropriate federal banking agency, a significantly
undercapitalized institution may not pay any bonus to any senior executive
officer or increase the rate of compensation for such an officer.
At March 31, 1998, all of the UPC Banking Subsidiaries had the
requisite capital levels to qualify as well capitalized. An institution's
capital category is determined solely for the purposes of applying the prompt
corrective action law and it may not constitute an accurate representation of an
institution's overall financial condition or prospects.
71
<PAGE> 82
DESCRIPTION OF UPC CAPITAL STOCK
UPC's Charter currently authorizes the issuance of 300,000,000 shares
of UPC Common Stock and 10,000,000 shares of UPC Preferred Stock. As of May 31,
1998, 84,970,899 shares of UPC Common Stock were outstanding and approximately
7,792,332 shares were required for issuance in connection with currently
outstanding UPC options, UPC's dividend reinvestment plan and with respect to
conversion rights of the currently outstanding Series E Preferred Stock (defined
below). In addition, as of May 31, 1998, 1,156,231 shares of UPC's 8%
Cumulative, Convertible Preferred Stock, Series E (the "Series E Preferred
Stock") were outstanding. As of May 31, 1998, none of UPC's 750,000 authorized
shares of Series A Preferred Stock were issued and outstanding nor is management
aware of the existence of circumstances from which it may be inferred that such
issuance is imminent. THE CAPITAL STOCK OF UPC DOES NOT REPRESENT OR CONSTITUTE
A DEPOSIT ACCOUNT AND IS NOT INSURED BY THE FDIC, THE BANK INSURANCE FUND, THE
SAVINGS ASSOCIATION INSURANCE FUND, OR ANY GOVERNMENTAL AGENCY.
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. UPB is the Registrar, Transfer Agent and Dividend Disbursing Agent for
shares of UPC Common Stock. Its address is Union Planters Bank, National
Association, Corporate Trust Department, 6200 Poplar Avenue, Third Floor,
Memphis, Tennessee 38119. Its mailing address is P.O. Box 387, Memphis,
Tennessee 38147.
DIVIDENDS. Subject to the preferential dividend rights applicable to
outstanding shares of the UPC Preferred Stock and subject to applicable
requirements, if any, with respect to the setting aside of sums for purchase,
retirement, or sinking funds, if any, for all outstanding UPC Preferred Stock,
the holders of the UPC Common Stock are entitled to receive, to the extent
permitted by law, only such dividends as may be declared from time to time by
the UPC Board.
UPC has the right to, and may from time to time, enter into borrowing
arrangements or issue other debt instruments, the provisions of which may
contain restrictions on payment of dividends and other distributions on UPC
Common Stock and UPC Preferred Stock. In December, 1996, UPC caused to be issued
$200,000,000 in aggregate liquidation amount of 8.20% Capital Trust Pass-through
Securities ("UPC Capital Securities") through a Delaware trust subsidiary.
Pursuant to the terms of the governing instruments, UPC would be prohibited from
paying dividends on any UPC Capital Stock if all quarterly payments on the UPC
Capital Securities had not been paid in full. The UPC Capital Securities mature
in 2026 and may be redeemed under certain circumstances prior to maturity.
LIQUIDATION RIGHTS. In the event of the voluntary or involuntary
liquidation, dissolution, distribution of assets, or winding-up of UPC, after
distribution in full of the preferential amounts required to be distributed to
the holders of UPC Preferred Stock, holders of UPC Common Stock will be entitled
to receive all of the remaining assets of UPC, of whatever kind, available for
distribution to shareholders ratably in proportion to the number of shares of
UPC Common Stock held. The UPC Board may distribute in kind to the holders of
UPC Common Stock such remaining assets of UPC or may sell, transfer, or
otherwise dispose of all or any part of such remaining assets to any other
person or entity and receive payment therefor in cash, stock, or obligations of
such other person or entity, and may sell all or any part of the consideration
so received and distribute any balance thereof in kind to holders of UPC Common
Stock. Neither the merger or consolidation of UPC into or with any other
corporation, nor the merger of any other corporation into UPC, nor any purchase
or redemption of shares of stock of UPC of any class, shall be deemed to be a
dissolution, liquidation, or winding-up of UPC for purposes of this paragraph.
72
<PAGE> 83
Because UPC is a holding company, its right and the rights of its
creditors and shareholders, including the holders of UPC Preferred Stock and UPC
Common Stock, to participate in the distribution of assets of a subsidiary on
its liquidation or recapitalization may be subject to prior claims of such
subsidiary's creditors except to the extent that UPC itself may be a creditor
having recognized claims against such subsidiary.
For a further description of UPC Common Stock, see "EFFECT OF THE
MERGER ON RIGHTS OF SHAREHOLDERS."
UPC PREFERRED STOCK
SERIES A PREFERRED STOCK. UPC's Charter provides for the issuance of up
to 750,000 shares (subject to adjustment by action of the UPC Board) of Series A
Preferred Stock under certain circumstances involving a potential change in
control of UPC. None of such shares are outstanding and management is aware of
no facts suggesting that issuance of such shares may be imminent. The Series A
Preferred Stock is described in more detail in UPC's Registration Statement on
Form 8-A, dated January 19, 1989, and filed February 1, 1989 (SEC File No.
0-6919) which is incorporated by reference herein.
SERIES E PREFERRED STOCK. As of May 31, 1998, 1,156,231 shares of
Series E Preferred Stock were outstanding. All shares of Series E Preferred
Stock have a stated value of $25.00 per share. Dividends are payable at the rate
of $0.50 per share per quarter and are cumulative. The Series E Preferred Stock
is convertible at the rate of 1.25 shares of UPC Common Stock for each share of
Series E Preferred Stock. The Series E Preferred Stock is not subject to any
sinking fund provisions and has no preemptive rights. Such shares have a
liquidation preference of $25.00 per share plus unpaid dividends accrued thereon
and, at UPC's option and with the prior approval of the Federal Reserve, are
subject to redemption by UPC at any time at a redemption price of $25.00 per
share plus any unpaid dividends accrued thereon. Holders of Series E Preferred
Stock have no voting rights except as required by law and in certain other
limited circumstances. See "CERTAIN REGULATORY CONSIDERATIONS -- Payment of
Dividends."
OTHER MATTERS
As of the date of this Proxy Statement, the ABI Board knows of no
matters that will be presented for consideration at the Special Meeting other
than as described in this Proxy Statement. However, if any other matters shall
properly come before the Special Meeting or any adjournment or postponement
thereof and be voted upon, the enclosed proxy shall be deemed to confer
discretionary authority to the individuals named as proxies therein to vote the
shares represented by such proxy as to any such matters.
SHAREHOLDER PROPOSALS
UPC expects to hold its next annual meeting of shareholders after
consummation of the Merger in April 1999. Under SEC rules, proposals of UPC
shareholders intended to be presented at that meeting must be received by UPC at
its principal executive offices no later than the date specified in UPC's 1998
annual meeting proxy statement. It is not currently anticipated that ABI will
hold another annual meeting unless the Merger should not be consummated. In the
event the Merger is not consummated, proposals of ABI shareholders may be
presented at that meeting without prior notice to ABI.
73
<PAGE> 84
EXPERTS
The consolidated financial statements of UPC and subsidiaries
incorporated in this Prospectus/Proxy Statement by reference to the UPC Annual
Report on Form 10-K for the year ended December 31, 1997, have been so
incorporated in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The consolidated financial statements of ABI as of December 31, 1997
and 1996 and for each of the three years in the period ending December 31, 1997
included in this Proxy Statement/Prospectus, have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report appearing herein,
and have been so included in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
OPINIONS
The legality of the shares of UPC Common Stock to be issued in the
Merger will be passed upon by E. James House, Jr., Secretary and Manager of the
Legal Department of UPC. E. James House, Jr. is an officer of, and receives
compensation from, UPC.
Certain tax consequences of the transaction have been passed upon by
Wyatt, Tarrant & Combs for UPC and Winstead Sechrest & Minick P.C. for ABI.
74
<PAGE> 85
EXECUTION COPY
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
UNION PLANTERS CORPORATION,
UNION PLANTERS HOLDING CORPORATION
AND
ALVIN BANCSHARES, INC.
DATED AS OF MARCH 18, 1998
<PAGE> 86
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER...................................... 1
1.1 Merger............................................................................... 1
------
1.2 Time and Place of Closing............................................................ 1
---- --- ----- -- -------
1.3 Effective Time....................................................................... 1
--------- ----
1.4 Restructure of Transaction........................................................... 2
----------- -- -----------
ARTICLE 2
TERMS OF MERGER............................................... 2
2.1 Charter.............................................................................. 2
-------
2.2 Bylaws............................................................................... 2
------
2.3 Directors and Officers............................................................... 2
--------- --- --------
ARTICLE 3
MANNER OF CONVERTING SHARES......................................... 2
3.1 Conversion of Shares................................................................. 2
---------- -- ------
3.2 Anti-Dilution Provisions............................................................. 3
------------- ----------
3.3 Shares Held by Subject Company or Parent............................................. 3
------ ---- -- ------- ------- -- ------
3.4 Fractional Shares.................................................................... 3
---------- ------
ARTICLE 4
EXCHANGE OF SHARES.............................................. 3
4.1 Exchange Procedures.................................................................. 3
-------- ----------
4.2 Rights of Former Subject Company Shareholders........................................ 4
------ -- ------ ------- ------- ------------
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF SUBJECT COMPANY.............................. 4
5.1 Organization, Standing, and Power.................................................... 5
------------- --------- --- -----
5.2 Authority; No Breach by Agreement.................................................... 5
---------- -- ------ -- ---------
5.3 Capital Stock........................................................................ 5
------- -----
5.4 Subject Company Subsidiaries......................................................... 6
------- ------- ------------
5.5 Financial Statements................................................................. 6
--------- ----------
5.6 Absence of Undisclosed Liabilities................................................... 7
------- -- ----------- -----------
5.7 Absence of Certain Changes or Events................................................. 7
------- -- ------- ------- -- ------
5.8 Tax Matters.......................................................................... 7
--- -------
5.9 Assets............................................................................... 8
------
5.10 Intellectual Property................................................................ 9
------------ --------
5.11 Environmental Matters................................................................ 9
------------- -------
5.12 Compliance With Laws................................................................. 10
---------- ---- ----
5.13 Labor Relations...................................................................... 10
----- ---------
5.14 Employee Benefit Plans............................................................... 10
-------- ------- -----
5.15 Material Contracts................................................................... 11
-------- ---------
5.16 Legal Proceedings.................................................................... 12
----- -----------
5.17 Reports.............................................................................. 12
-------
5.18 Statements True and Correct.......................................................... 12
---------- ---- --- -------
5.19 Accounting, Tax, and Regulatory Matters.............................................. 13
----------- ---- --- ---------- -------
5.20 Charter Provisions; Takeover Laws.................................................... 13
------- ----------- -------- ----
</TABLE>
<PAGE> 87
ARTICLE 6
<TABLE>
<S> <C>
REPRESENTATIONS AND WARRANTIES OF PARENT................................... 13
6.1 Organization, Standing and Power..................................................... 13
------------- -------- --- -----
6.2 Authority; No Breach by Agreement.................................................... 13
---------- -- ------ -- ---------
6.3 Capital Stock........................................................................ 14
------- -----
6.4 Parent Subsidiaries.................................................................. 14
------ ------------
6.5 Financial Statements................................................................. 15
--------- ----------
6.6 Absence of Undisclosed Liabilities................................................... 15
------- -- ----------- -----------
6.7 Absence of Certain Changes or Events................................................. 16
------- -- ------- ------- -- ------
6.8 Compliance With Laws................................................................. 16
---------- ---- ----
6.9 Legal Proceedings........................................................... 16
----- -----------
6.10 Reports.............................................................................. 16
-------
6.11 Statements True and Correct.......................................................... 16
---------- ---- --- -------
6.12 Accounting, Tax, and Regulatory Matters.............................................. 17
----------- ---- --- ---------- -------
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION................................... 17
7.1 Affirmative Covenants of Subject Company............................................. 17
----------- --------- -- ------- -------
7.2 Negative Covenants of Subject Company................................................ 17
-------- --------- -- ------- -------
7.3 Covenants of Parent.................................................................. 19
--------- -- ------
7.4 Adverse Changes in Condition......................................................... 19
------- ------- -- ---------
7.5 Reports.............................................................................. 19
-------
ARTICLE 8
ADDITIONAL AGREEMENTS............................................ 20
8.1 Registration Statement; Proxy Statement; Shareholder Approval........................ 20
------------ ---------- ----- ---------- ----------- -------
8.2 Authorization of Shares; Exchange Listing............................................ 20
------------- -- ------- -------- -------
8.3 Applications......................................................................... 21
------------
8.4 Filings With State Offices........................................................... 21
------- ---- ----- -------
8.5 Agreement as to Efforts to Consummate................................................ 21
--------- -- -- ------- -- ----------
8.6 Investigation and Confidentiality.................................................... 21
------------- --- ---------------
8.7 Press Releases....................................................................... 22
----- --------
8.8 Certain Actions...................................................................... 22
------- -------
8.9 Accounting and Tax Treatment......................................................... 23
---------- --- --- ---------
8.10 Agreement of Affiliates.............................................................. 23
--------- -- ----------
8.11 Employee Benefits and Contracts...................................................... 23
-------- -------- --- ---------
8.12 Indemnification...................................................................... 24
---------------
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE.............................. 25
9.1 Conditions to Obligations of Each Party.............................................. 25
---------- -- ----------- -- ---- -----
9.2 Conditions to Obligations of Parent.................................................. 26
---------- -- ----------- -- ------
9.3 Conditions to Obligations of Subject Company......................................... 27
---------- -- ----------- -- ------- -------
ARTICLE 10
TERMINATION................................................. 27
10.1 Termination.......................................................................... 27
-----------
10.2 Effect of Termination................................................................ 29
------ -- -----------
10.3 Non-Survival of Representations and Covenants........................................ 29
------------ -- --------------- --- ---------
ARTICLE 11
MISCELLANEOUS................................................ 29
11.1 Definitions.......................................................................... 29
-----------
11.2 Expenses............................................................................. 35
--------
</TABLE>
<PAGE> 88
<TABLE>
<S> <C>
11.3 Brokers and Finders.................................................................. 35
------- --- -------
11.4 Entire Agreement..................................................................... 35
------ ---------
11.5 Amendments........................................................................... 35
----------
11.6 Waivers.............................................................................. 36
-------
11.7 Assignment........................................................................... 36
----------
11.8 Notices.............................................................................. 36
-------
11.9 Governing Law........................................................................ 37
--------- ---
11.10 Counterparts........................................................................ 37
------------
11.11 Captions............................................................................ 37
--------
11.12 Interpretations..................................................................... 37
---------------
11.13 Enforcement of Agreement............................................................ 37
----------- -- ---------
11.14 Severability........................................................................ 37
------------
</TABLE>
<PAGE> 89
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and
entered into as of March 18, 1998, by and between Alvin Bancshares, Inc., a
Texas corporation having its principal office located in Alvin, Texas ("Subject
Company"), Union Planters Holding Corporation, a Tennessee corporation having
its principal office located in Memphis, Tennessee ("Merger Subsidiary"), and
joined in by Union Planters Corporation, a Tennessee corporation having its
principal office located in Memphis, Tennessee ("Parent").
PREAMBLE
The Boards of Directors of Subject Company, Merger Subsidiary and
Parent are of the opinion that the transactions described herein are in the best
interests of the parties and their respective shareholders. This Agreement and
the Plan of Merger attached hereto at Exhibit 1 and incorporated herein by
reference provide for the acquisition of Subject Company by Parent pursuant to
the merger of Subject Company with and into Merger Subsidiary. At the Effective
Time, the outstanding shares of the common stock of Subject Company shall be
converted into the right to receive shares of the common stock of Parent (except
as provided in Sections 3.1, 3.3 and 3.4 of this Agreement). As a result,
shareholders of Subject Company shall become shareholders of Parent, and
Surviving Corporation shall continue to conduct its business and operations as a
wholly-owned subsidiary of Parent. The transactions described in this Agreement
are subject to the approvals of the shareholders of Subject Company, the FRB,
the Texas State Banking Department, and other applicable federal and state
regulatory authorities, and the satisfaction of certain other conditions
described in this Agreement. It is the intention of the parties to this
Agreement that (i) for federal income tax purposes this Agreement shall
constitute a plan of merger and the Merger shall qualify as a "reorganization"
within the meaning of Section 368(a) of the Internal Revenue Code and (ii) for
accounting purposes the Merger shall qualify for treatment as a
pooling-of-interests.
Certain terms used in this Agreement are defined in Section 11.1 of
this Agreement.
NOW, THEREFORE, in consideration of the above and the mutual
warranties, representations, covenants, and agreements set forth herein, the
parties agree as follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
1.1 Merger. Subject to the terms and conditions of this Agreement and
the Plan of Merger, at the Effective Time, Subject Company shall be merged with
and into Merger Subsidiary in accordance with the provisions of Section
48-21-109 of the TBCA and Article 5.01 of the Texas BCA, and with the effect
provided in Section 48-21-108 of the TBCA and Article 5.06 of the Texas BCA (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 and the Plan of Merger, which have been approved and adopted by the
respective Boards of Directors of Subject Company, Parent and Merger Subsidiary.
1.2 Time and Place of Closing. The Closing will take place at 9:00 A.M.
on the date on which the Effective Time is to occur (or the immediately
preceding day if the Effective Time is to be earlier than 9:00 A.M.), or at such
other time as the Parties, acting through their chief executive officers or
chief financial officers, may mutually agree. The Closing shall be held at such
place as may be mutually agreed upon by the Parties.
1.3 Effective Time. The Merger and other transactions contemplated by
this Agreement shall become effective at the time the Articles of Merger
reflecting the Merger shall become effective with the Secretary of State of the
State of Tennessee and the Secretary of State of the State of Texas (the
"Effective Time"). Subject to the terms and conditions hereof, unless otherwise
mutually agreed upon in writing by the chief executive officers or chief
financial officers of each Party, the Parties shall use their reasonable efforts
to cause the Effective Time to
Alvin Bancshares - Merger Agreement Page 1
<PAGE> 90
occur as soon as is reasonably practicable following the last to occur of (i)
the effective date of the last required Consent of any Regulatory Authority
having authority over and approving or exempting the Merger (taking into account
any requisite waiting period in respect thereof), (ii) the date on which the
shareholders of Subject Company approve this Agreement, and (iii) the date on
which all other conditions precedent (other than those conditions which relate
to actions to be taken at the Closing) to each Party's obligations hereunder
shall have been satisfied or waived (to the extent waivable by such Party).
1.4 Restructure of Transaction. Parent shall, in its reasonable
discretion, have the unilateral right to revise the structure of the Merger
contemplated by this Agreement in order to achieve tax benefits or for any other
reason which Parent may deem advisable; provided, however, that Parent shall not
have the right, without the approval of the Board of Directors of Subject
Company and, if required by the Texas BCA, the holders of the Subject Company
Common Stock, to make any revision to the structure of the Merger which: (i)
changes the amount of the consideration which the holders of shares of Subject
Company Common Stock are entitled to receive (determined in the manner provided
in Section 3.1 of this Agreement); (ii) changes the intended tax free effects of
the Merger to Parent, Subject Company or the holders of shares of Subject
Company Common Stock; (iii) would permit Parent to pay the consideration other
than by delivery of Parent Common Stock registered with the SEC (in the manner
described in Section 4.1 of this Agreement); (iv) would be materially adverse to
the interests of Subject Company or adverse to the holders of shares of Subject
Company Common Stock; (v) would materially impede or delay consummation of the
Merger; or (vi) would require a vote of Parent's shareholders under relevant
state Law. Parent may exercise this right of revision by giving written notice
to Subject Company in the manner provided in Section 11.8 of this Agreement
which notice shall be in the form of an amendment to this Agreement and the Plan
of Merger or in the form of an Amended and Restated Agreement and Plan of
Merger.
ARTICLE 2
TERMS OF MERGER
2.1 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.
2.2 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.
2.3 Directors and Officers. The directors of Merger Subsidiary in
office immediately prior to the Effective Time, together with such additional
persons as may thereafter be elected, shall serve as the directors of the
Surviving Corporation from and after the Effective Time in accordance with the
Bylaws of the Surviving Corporation. The officers of Merger Subsidiary in office
immediately prior to the Effective Time, together with such additional persons
as may thereafter be elected, shall serve as the officers of the Surviving
Corporation from the Effective Time in accordance with the Bylaws of the
Surviving Corporation.
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 Conversion of Shares. Subject to the provisions of this Article 3
(and Article 3 of the Plan of Merger), at the Effective Time, by virtue of the
Merger and without any action on the part of Parent, Merger Subsidiary, Subject
Company, or the shareholders of any of the foregoing, the shares of the
constituent corporations shall be converted as follows:
(a) Each share of Parent Capital Stock, including any
associated Parent Rights, issued and outstanding immediately prior to the
Effective Time shall remain issued and outstanding from and after the Effective
Time.
Alvin Bancshares - Merger Agreement Page 2
<PAGE> 91
(b) Each share of Merger Subsidiary Common Stock issued and
outstanding immediately prior to the Effective Time shall remain issued and
outstanding and shall represent one share of the Surviving Corporation from and
after the Effective Time.
(c) Except for Dissenting Shares, each share of Subject
Company Common Stock, (excluding shares held by Subject Company, any Subject
Company Subsidiary, Parent or any Parent Subsidiary, in each case other than in
a fiduciary capacity or as a result of debts previously contracted) issued and
outstanding at the Effective Time shall cease to be outstanding and shall be
converted into and exchanged for the right to receive .5340 shares of Parent
Common Stock (subject to possible adjustment as set forth in Section 3.2 of this
Agreement, the "Exchange Ratio"). Pursuant to the Parent Rights Agreement, each
share of Parent Common Stock issued in connection with the Merger upon
conversion of Subject Company Common Stock shall be accompanied by a Parent
Right.
(d) Dissenting Shares shall not be converted pursuant to
Section 3.1(c) in the Merger but, at and after the Effective Time, shall
represent only the right to receive payment in accordance with Article 5.12 of
the Texas BCA. If a holder of Dissenting Shares becomes ineligible for payment
under Article 5.12 of the Texas BCA, then such holder's Dissenting Shares shall
cease to be Dissenting Shares and shall be converted in the manner set forth in
Section 3.1(c) effective as of the Effective Time.
3.2 Anti-Dilution Provisions. In the event Parent changes the number of
shares of Parent Common Stock issued and outstanding after the date of this
Agreement and prior to the Effective Time as a result of a stock split, stock
dividend, subdivision, reclassification, conversion or similar recapitalization
with respect to such stock and the record date therefor (in the case of a stock
dividend) or the effective date thereof (in the case of a stock split,
subdivision, reclassification, conversion or similar recapitalization for which
a record date is not established) shall be prior to the Effective Time, the
Exchange Ratio shall be proportionately adjusted.
3.3 Shares Held by Subject Company or Parent. Each of the shares of
Subject Company Common Stock held by Subject Company, any Subject Company
Subsidiary, Parent or any Parent Subsidiary, in each case other than in
fiduciary capacity or as a result of debts previously contracted, shall be
canceled and retired at the Effective Time and no consideration shall be issued
in exchange therefor.
3.4 Fractional Shares. Notwithstanding any other provision of this
Agreement, each holder of shares of Subject Company Common Stock exchanged
pursuant to the Merger who would otherwise have been entitled to receive a
fractional share of Parent Common Stock (after taking into account all
certificates delivered by such holder) shall receive, in lieu thereof, cash
(without interest) in an amount equal to such fractional share of Parent Common
Stock multiplied by the closing price of such common stock on the NYSE-Composite
Transactions List (as reported by The Wall Street Journal or, if not reported
thereby, any other authoritative source reasonably selected by Parent) on the
last trading day preceding the Effective Time. No such holder will be entitled
to dividends, voting rights, or any other rights as a shareholder in respect of
any fractional shares.
ARTICLE 4
EXCHANGE OF SHARES
4.1 Exchange Procedures. Promptly after the Effective Time, Parent and
Subject Company shall cause the exchange agent selected by Parent (the "Exchange
Agent") to mail to the former shareholders of Subject Company appropriate
transmittal materials (which shall specify that delivery shall be effected, and
risk of loss and title to the certificates theretofore representing shares of
Subject Company Common Stock shall pass, only upon proper delivery of such
certificates to the Exchange Agent). Subject Company shall have the right to
review and approve the transmittal materials. The Exchange Agent may establish
reasonable and customary rules and procedures in connection with its duties,
provided such rules and procedures do not have the effect of limiting or
eliminating the obligation of Parent and/or Merger Subsidiary to deliver the
consideration contemplated by Article 3 of this Agreement. After the Effective
Time, each holder of shares of Subject Company Common Stock (other
Alvin Bancshares - Merger Agreement Page 3
<PAGE> 92
than Dissenting Shares or shares to be canceled pursuant to Section 3.3 of this
Agreement) issued and outstanding at the Effective Time shall surrender the
certificate or certificates representing such shares to the Exchange Agent and
shall promptly upon surrender thereof receive in exchange therefor the
consideration provided in Section 3.1(c) of this Agreement, together with all
undelivered dividends and other distributions, if any, in respect of such shares
(without interest thereon) pursuant to Section 4.2 of this Agreement. To the
extent required by Section 3.4 of this Agreement, each holder of shares of
Subject Company Common Stock issued and outstanding at the Effective Time also
shall receive, upon surrender of the certificate or certificates representing
such shares, cash in lieu of any fractional share of Parent Common Stock to
which such holder may be otherwise entitled (without interest). Parent shall not
be obligated to deliver the consideration to which any former holder of Subject
Company Common Stock is entitled as a result of the Merger until such holder
surrenders such holder's certificate or certificates representing the shares of
Subject Company Common Stock for exchange as provided in this Section 4.1 or in
Section 4.2 of this Agreement. The certificate or certificates of Subject
Company Common Stock so surrendered shall be duly endorsed as the Exchange Agent
may reasonably require. Any other provision of this Agreement notwithstanding,
neither Parent, Merger Subsidiary nor the Exchange Agent shall be liable to a
holder of Subject Company Common Stock for any amounts paid or property
delivered in good faith to a public official pursuant to any applicable
abandoned property Law. Adoption of this Agreement by the shareholders of
Subject Company shall constitute ratification of the appointment of the Exchange
Agent.
4.2 Rights of Former Subject Company Shareholders. At the Effective
Time, the stock transfer books of Subject Company shall be closed as to holders
of Subject Company Common Stock immediately prior to the Effective Time and no
transfer of Subject Company Common Stock by any such holder shall thereafter be
made or recognized. Until surrendered for exchange in accordance with the
provisions of Section 4.1 of this Agreement, each certificate theretofore
representing shares of Subject Company Common Stock (other than Dissenting
Shares or shares to be canceled pursuant to Section 3.3 of this Agreement) shall
from and after the Effective Time represent for all purposes only the right to
receive the consideration provided in Sections 3.1(c) and 3.4 of this Agreement
in exchange therefor, subject, however, to the Surviving Corporation's
obligations to pay any dividends or make any other distributions with a record
date prior to the Effective Time which have been declared or made by Subject
Company in respect of such shares of Subject Company Common Stock in accordance
with the terms of this Agreement and which remain unpaid at the Effective Time.
In addition, whenever a dividend or other distribution is declared by Parent on
the Parent Common Stock, the record date for which is at or after the Effective
Time, the declaration shall include dividends or other distributions on all
shares of Parent Common Stock issuable pursuant to this Agreement, but no
dividend or other distribution payable to the holders of record of Parent Common
Stock as of any time subsequent to the Effective Time shall be delivered to the
holder of any certificate representing shares of Subject Company Common Stock
issued and outstanding at the Effective Time until such holder surrenders such
certificate for exchange as provided in Section 4.1 of this Agreement. However,
upon surrender of such Subject Company Common Stock certificate, both a Parent
Common Stock certificate and any undelivered dividends and other distributions
payable hereunder (without interest) shall be delivered and paid with respect to
each share represented by such certificate. In the event any Subject Company
Common Stock certificate shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming such certificate to
be lost, stolen or destroyed and, if reasonably required by Parent, the posting
by such person of a bond in such amount as Parent may reasonably direct as
indemnity against any claim that may be made against it with respect to such
certificate, the Exchange Agent shall issue in exchange for such lost, stolen or
destroyed certificate the shares of Parent Common Stock and cash in lieu of
fractional shares and dividends and other distributions deliverable in respect
thereof pursuant to this Agreement.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF SUBJECT COMPANY
Subject Company hereby represents and warrants to Parent, except as set
forth on the Subject Company Disclosure Memorandum, as follows:
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5.1 Organization, Standing, and Power. Subject Company is a corporation
duly organized, validly existing, and in good standing under the Laws of the
State of Texas, and has the corporate power and authority to carry on its
business as now conducted and to own, lease, and operate its Assets. Subject
Company is duly qualified or licensed to transact business as a foreign
corporation in good standing in each of the States of the United States and in
each foreign jurisdiction where the character of its Assets or the nature or
conduct of its business requires it to be so qualified or licensed, except for
such jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Subject Company.
5.2 Authority; No Breach by Agreement. (a) Subject Company has the
corporate power and authority necessary to execute, deliver, and perform its
obligations under this Agreement and 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, and the consummation of
the transactions contemplated herein and therein, including the Merger, have
been duly and validly authorized by all necessary corporate action (including
valid authorization and adoption of this Agreement by Subject Company's duly
constituted Board of Directors) in respect thereof on the part of Subject
Company, subject to the approval of this Agreement and the Plan of Merger by the
holders of the outstanding shares of Subject Company Common Stock, which is the
only shareholder vote required for approval of this Agreement and consummation
of the Merger by Subject Company. Subject to such requisite shareholder
approval, the receipt of all Consents required from Regulatory Authorities and
the expiration of all mandatory waiting periods, and assuming due authorization,
execution and delivery of this Agreement and the Plan of Merger by each of
Parent and Merger Subsidiary, this Agreement and the Plan of Merger each
represents a legal, valid, and binding obligation of Subject Company,
enforceable against Subject Company in accordance with its terms (except in all
cases as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, receivership, conservatorship, moratorium, or
similar Laws (including provisions of the U.S., Texas and Tennessee
Constitutions) affecting the enforcement of creditors' rights generally and
except that the availability of equitable remedies 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 by Subject Company, nor the consummation by Subject Company
of the transactions contemplated hereby, nor compliance by Subject Company with
any of the provisions hereof or thereof, will (i) conflict with or result in a
breach of any provision of the Charter or Bylaws of Subject Company, or (ii)
constitute or result in a Default under, or require any Consent (excluding
Consents required by Law or Order) pursuant to, or result in the creation of any
Lien on any material Asset of Subject Company or any Subject Company Subsidiary
under, any Contract or Permit of Subject Company or any Subject Company
Subsidiary, except for such Defaults and Liens which are not, and for such
Consents which, if not obtained, are not reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on Subject Company, or (iii)
subject to receipt of the requisite Consents referred to in Section 9.1(b) of
this Agreement, violate any Law or Order applicable to Subject Company, its
Subsidiaries or any of their respective material Assets.
(c) Other than in connection or compliance with the provisions
of the Securities Laws, applicable state corporate and securities Laws, and
other than Consents required from the FRB under Sections 3 and 4 of the BHC Act
and from the Texas Banking Commissioner under Sections 38.001 and 38.004 of the
Texas Finance Code, and other than Consents, filings, or notifications which, if
not obtained or made, are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Subject Company, no notice to, filing
with, or Consent of, any public body or authority is necessary for the
consummation by Subject Company of the Merger and the other transactions
contemplated in this Agreement.
5.3 Capital Stock. (a) The authorized capital stock of Subject Company
consists solely of 1,000,000 shares of Subject Company Common Stock, of which
not more than 793,867 shares of Subject Company Common Stock are outstanding as
of the date of this Agreement (exclusive of treasury shares) and not more than
793,867 shares of Subject Company Common Stock will be issued and outstanding at
the Effective Time, and no shares of preferred stock. All of the issued and
outstanding shares of Subject Company Common Stock are duly and validly issued
and outstanding and are fully paid and nonassessable under the Texas BCA and
Subject Company's Charter
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and Bylaws. None of the outstanding shares of Subject Company Common Stock has
been issued in violation of any preemptive rights of the current or past
shareholders of Subject Company.
(b) Other than as set forth in Section 5.3(a) of this
Agreement, there are no shares of capital stock or other equity securities of
Subject Company outstanding and no outstanding Rights relating to the capital
stock of Subject Company.
5.4 Subject Company Subsidiaries. Subject Company has disclosed in
Section 5.4 of the Subject Company Disclosure Memorandum all of the Subject
Company Subsidiaries that are corporations (identifying its jurisdiction of
incorporation) and all of the Subject Company Subsidiaries that are general or
limited partnerships or other non-corporate entities (identifying the Law under
which such entity is organized, and the amount and nature of the ownership
interest therein of Subject Company Subsidiaries). Except as set forth in
Section 5.4 of the Subject Company Disclosure Memorandum, Subject Company or one
of its wholly-owned Subsidiaries owns all of the issued and outstanding shares
of capital stock (or other equity interests) of each of the Subject Company
Subsidiaries. Except as set forth in Section 5.4 of the Subject Company
Disclosure Memorandum, no capital stock (or other equity interest) of any
Subject Company Subsidiary is or may become required to be issued (other than to
another Subject Company Subsidiary) by reason of any Rights, and there are no
Contracts by which Subject Company or any of the Subject Company Subsidiaries is
bound to issue (other than to Subject Company or another of the Subject Company
Subsidiaries) additional shares of its capital stock (or other equity interests)
or Rights or by which Subject Company or any of the Subject Company Subsidiaries
is or may be bound to transfer any shares of the capital stock (or other equity
interests) of any of Subject Company or any of the Subject Company Subsidiaries
(other than to Subject Company or any of the Subject Company Subsidiaries).
Except as set forth in Section 5.4 of the Subject Company Disclosure Memorandum,
there are no Contracts relating to the rights of Subject Company or any Subject
Company Subsidiary to vote or to dispose of any shares of the capital stock (or
other equity interests) of Subject Company or any Subject Company Subsidiary.
All of the shares of capital stock (or other equity interests) of each Subject
Company Subsidiary held by Subject Company or any Subject Company Subsidiary are
fully paid and nonassessable under the applicable corporation or similar Law of
the jurisdiction in which such Subsidiary is incorporated or organized and are
owned by Subject Company or a Subject Company Subsidiary free and clear of any
Liens. Each Subject Company Subsidiary is either a bank or a corporation, and
each such Subsidiary is duly organized, validly existing, and (as to
corporations) in good standing under the Laws of the jurisdiction in which it is
incorporated or organized, and has the corporate power and authority necessary
for it to own, lease, and operate its Assets and to carry on its business as now
conducted. Each Subject Company Subsidiary is duly qualified or licensed to
transact business as a foreign corporation in good standing in each of the
States of the United States and in each foreign jurisdiction where the character
of its Assets or the nature or conduct of its business requires it to be so
qualified or licensed, except for such jurisdictions in which the failure to be
so qualified or licensed is not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Subject Company. The only Subject
Company Subsidiary that is a depository institution is Alvin State Bank, Alvin,
Texas (the "Bank"). The Bank is an "insured depository institution" as defined
in Section 3(c)(2) of the Federal Deposit Insurance Act and applicable
regulations thereunder, and the deposits in which are insured by the Federal
Deposit Insurance Corporation to the maximum extent permitted by the Federal
Deposit Insurance Act, as amended, and applicable regulations thereunder. The
Bank is a member of the Bank Insurance Fund. The minute book and other
organizational documents (and all amendments thereto) for Subject Company and
each Subject Company Subsidiary that is a "Significant Subsidiary" (as such term
is defined in Rule 1.02(w) of Regulation S-X promulgated under the Securities
Laws) have been or will be made available to Parent for its review, and are true
and complete in all material respects as in effect as of the date of this
Agreement.
5.5 Financial Statements. Subject Company has delivered to Parent (or
will deliver, when available, with respect to periods ended after the date of
this Agreement) true, correct and complete copies of (i) the audited
consolidated statements of financial position (including related notes and
schedules, if any) of Subject Company as of December 31, 1997, and as of
December 31, 1996 and December 31, 1995, and the related statements of
operations, stockholders' equity, and cash flows (including related notes and
schedules, if any) for the years ended December 31, 1997, 1996 and 1995; and
(ii) the unaudited consolidated statements of financial position of Subject
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Company (including related notes and schedules, if any) and related statements
of operations, stockholders' equity, and cash flows (including related notes and
schedules, if any) of Subject Company with respect to any period ending
subsequent to December 31, 1997, and prior to the Closing Date (the "Subject
Company Financial Statements"). Such Subject Company Financial Statements (i)
were (or will be) prepared from the records of Subject Company and/or each
Subject Company Subsidiary; (ii) were (or will be) prepared in accordance with
GAAP (or, where applicable, regulatory accounting principles) consistently
applied; (iii) fairly present (or, when prepared, will fairly present) Subject
Company's and each Subject Company 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, except that the
unaudited interim Subject Company Financial Statements were or are subject to
normal and recurring year-end adjustments which were not expected to be material
in amount or effect; (iv) do contain or reflect (or, when prepared, will contain
and reflect) all necessary adjustments and accruals for a fair presentation of
Subject Company's and each Subject Company Subsidiary's financial condition and
the results of operations and cash flows for the periods covered by such
financial statements; (v) do contain and reflect (or, when prepared, will
contain and reflect) adequate provisions or allowances for loan losses, for
other real estate reserves and for all reasonably anticipated liabilities and
taxes, with respect to the periods then ended; and (vi) do contain and reflect
(or, when prepared, will contain and reflect) adequate provisions for all
reasonably anticipated liabilities for Post Retirement Benefits Other Than
Pensions ("OPEB") pursuant to SFAS Nos. 106 and 112.
5.6 Absence of Undisclosed Liabilities. Neither Subject Company nor any
of the Subject Company Subsidiaries has any Liabilities that are reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Subject Company, except Liabilities which are accrued or reserved against in the
consolidated balance sheets of Subject Company as of December 31, 1997, included
in the Subject Company Financial Statements made available prior to the date of
this Agreement or reflected in the notes thereto. Neither Subject Company nor
any of the Subject Company Subsidiaries has incurred or paid any Liability since
December 31, 1997, except for such Liabilities incurred or paid (i) in the
ordinary course of business consistent with past business practice or which are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Subject Company or (ii) in connection with the transactions
contemplated by this Agreement.
5.7 Absence of Certain Changes or Events. Since December 31, 1997,
except as disclosed in Section 5.7 of the Subject Company Disclosure Memorandum,
there have been no events, changes, or occurrences which have had, or are
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Subject Company.
5.8 Tax Matters. Except as set forth in Section 5.8 of the Subject
Company Disclosure Memorandum:
(a) All Tax Returns required to be filed by or on behalf of
Subject Company or any of the Subject Company Subsidiaries have been timely
filed or requests for extensions have been timely filed, granted, and have not
expired for periods ended on or before December 31, 1997, and on or before the
date of the most recent fiscal year end immediately preceding the Effective
Time, and all such Tax Returns filed are complete and accurate in all material
respects. All Taxes shown on filed Tax Returns have been paid. There is no audit
examination or refund Litigation with respect to any material Taxes, except as
reserved against in the Subject Company Financial Statements made available
prior to the date of this Agreement. All Taxes and other Liabilities due with
respect to completed and settled examinations or concluded Litigation related to
Tax Returns and/or Taxes of Subject Company have been paid. There are no Liens
with respect to Taxes upon any of the Assets of Subject Company or any of the
Subject Company Subsidiaries.
(b) Neither Subject Company nor any of the Subject Company
Subsidiaries has executed an extension or waiver of any statute of limitations
on the assessment or collection of any Tax due (excluding such statutes that
relate to years currently under examination by the Internal Revenue Service or
other applicable taxing authorities) that is currently in effect.
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(c) Adequate provision for any Taxes due or to become due for
Subject Company or the Subject Company Subsidiaries for the period or periods
through and including the date of the respective Subject Company Financial
Statements has been made and is reflected on such Subject Company Financial
Statements.
(d) Deferred Taxes of Subject Company and the Subject Company
Subsidiaries have been provided for in accordance with GAAP.
(e) Subject Company and the Subject Company Subsidiaries are
in compliance with, and the records of Subject Company and each of the Subject
Company Subsidiaries contain all information and documents (including properly
completed Internal Revenue Service Forms W-9) necessary to comply in all
material respects with, all applicable information reporting and Tax withholding
requirements under federal, state, and local Tax Laws, and such records identify
with specificity all accounts subject to backup withholding under Section 3406
of the Internal Revenue Code.
(f) Neither Subject Company nor any of the Subject Company
Subsidiaries has made any payments, is obligated to make any payments, or is a
party to any Contract that could obligate it to make any payments that would be
disallowed as a deduction under Section 280G or 162(m) of the Internal Revenue
Code.
(g) There has not been an ownership change, as defined in
Internal Revenue Code Section 382(g), of Subject Company or any of the Subject
Company Subsidiaries that occurred during or after any Taxable Period in which
Subject Company or any of the Subject Company Subsidiaries incurred a net
operating loss that carries over to any Taxable Period ending after December 31,
1997.
(h) Neither Subject Company nor any of the Subject Company
Subsidiaries is a party to any tax allocation or sharing agreement and neither
Subject Company nor any of the Subject Company Subsidiaries has been a member of
an affiliated group filing a consolidated federal income tax return (other than
a group the common parent of which was Subject Company) or has any Liability for
taxes of any Person (other than Subject Company and the Subject Company
Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local, or foreign Law) as a transferee or successor or by
Contract or otherwise.
5.9 Assets. Except as disclosed or reserved against in the Subject
Company Financial Statements made available prior to the date of this Agreement,
Subject Company and the Subject Company Subsidiaries have good and indefeasible
title, free and clear of all Liens, to all of their respective Assets. All
tangible properties used in the businesses of Subject Company and its
Subsidiaries are in good condition, reasonable wear and tear excepted, and are
usable in the ordinary course of business of Subject Company and its
Subsidiaries, except for instances in which the failure to so be is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Subject Company. All Assets which are material to Subject Company's
business on a consolidated basis, held under leases or subleases by the Subject
Company or any of the Subject Company Subsidiaries, are held under valid
Contracts enforceable in accordance with their respective terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or other Laws (including provisions of the U.S.,
Texas and Tennessee Constitutions) affecting the enforcement of creditors'
rights generally and except that the availability of equitable remedies is
subject to the discretion of the court before which any proceedings may be
brought), and each such Contract is in full force and effect. Subject Company
and the Subject Company Subsidiaries currently maintain insurance in amounts,
scope, and coverage which, in the reasonable opinion of management of Subject
Company, are adequate for the operations of Subject Company and the Subject
Company Subsidiaries. Neither Subject Company nor any of the Subject Company
Subsidiaries has received notice from any insurance carrier that (i) such
insurance will be canceled or that coverage thereunder will be reduced or
eliminated, or (ii) premium costs with respect to such policies of insurance
will be substantially increased. There are presently no claims pending under any
such policies of insurance and no notices have been given by Subject Company or
any of the Subject Company Subsidiaries under such policies.
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5.10 Intellectual Property. All of the Intellectual Property rights of
Subject Company and the Subject Company Subsidiaries are in full force and
effect and, if applicable, constitute legal, valid, and binding obligations of
the respective parties thereto, and there have not been, and, to the Knowledge
of Subject Company, there currently are not, any Defaults thereunder by Subject
Company or a Subject Company Subsidiary. Subject Company or a Subject Company
Subsidiary owns, is the valid licensee of, or otherwise has the unrestricted
right to use, all such Intellectual Property rights free and clear of all Liens
or claims of infringement. Neither Subject Company nor any of the Subject
Company Subsidiaries nor, to the Knowledge of Subject Company, their respective
predecessors has infringed the Intellectual Property rights of others and, to
the Knowledge of Subject Company, none of the Intellectual Property rights as
used in the business conducted by Subject Company or the Subject Company
Subsidiaries infringes upon or otherwise violates the rights of any Person, nor
has any Person asserted a claim of such infringement. Except as set forth in
Section 5.10 of the Subject Company Disclosure Memorandum, neither Subject
Company nor the Subject Company Subsidiaries is obligated to pay any royalties
to any Person with respect to any such Intellectual Property. Subject Company or
a Subject Company Subsidiary owns or has the valid right to use all of the
Intellectual Property rights which it is presently using. To the Knowledge of
Subject Company, no officer, director, or employee of Subject Company or the
Subject Company Subsidiaries is party to any Contract which requires such
officer, director, or employee to assign any interest in any Intellectual
Property or keep confidential any trade secrets, proprietary data, customer
information, or other business information or which restricts or prohibits such
officer, director, or employee from engaging in activities competitive with any
Person, including Subject Company or any of the Subject Company Subsidiaries.
5.11 Environmental Matters. Except as set forth in Section 5.11 of the
Subject Company Disclosure Memorandum:
(a) To the Knowledge of Subject Company, each of Subject
Company and the Subject Company Subsidiaries, its Participation Facilities, and
its Operating Properties are, and have been, in compliance with all
Environmental Laws, except for violations which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on Subject
Company.
(b) To the Knowledge of Subject Company, there is no
Litigation pending or threatened before any court, governmental agency, or
authority or other forum in which Subject Company, any of the Subject Company
Subsidiaries or any of their respective Operating Properties or Participation
Facilities (or Subject Company in respect of such Operating Property or
Participation Facility) has been or, with respect to threatened Litigation, may
be named as a defendant (i) for alleged noncompliance (including by any
predecessor) with any Environmental Law or (ii) relating to the release into the
environment of any Hazardous Material, whether or not occurring at, on, under,
adjacent to, or affecting (or potentially affecting) a site owned, leased, or
operated by Subject Company or any of the Subject Company Subsidiaries or any of
their respective Operating Properties or Participation Facilities, except for
such Litigation pending or threatened that is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Subject Company,
nor, to the Knowledge of Subject Company, is there any reasonable basis for any
Litigation of a type described in this sentence.
(c) During the period of (i) Subject Company's or any of the
Subject Company Subsidiaries' ownership or operation of any of their respective
current properties, (ii) Subject Company's or any of the Subject Company
Subsidiaries' participation in the management of any Participation Facility, or
(iii) Subject Company's or any of the Subject Company Subsidiaries' holding of a
security interest in an Operating Property, to the Knowledge of Subject Company,
there have been no releases of Hazardous Material in, on, under, adjacent to, or
affecting (or potentially affecting) such properties, except such as are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Subject Company. Prior to the period of (i) Subject Company's or any
of the Subject Company Subsidiaries' ownership or operation of any of their
respective current properties, (ii) Subject Company's or any of the Subject
Company Subsidiaries' participation in the management of any Participation
Facility, or (iii) Subject Company's or any of the Subject Company Subsidiaries'
holding of a security interest in an Operating Property, to the Knowledge of
Subject Company, there were no releases of Hazardous Material in, on,
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under, or affecting any such property, Participation Facility or Operating
Property, except such as are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Subject Company.
5.12 Compliance With Laws. Subject Company is duly registered as a bank
holding company under the BHC Act. Each of Subject Company and the Subject
Company Subsidiaries has in effect all Permits necessary for it to own, lease,
or operate its material Assets and to carry on its business as now conducted.
Neither Subject Company nor any of the Subject Company Subsidiaries:
(a) is in violation of any Laws, Orders, or Permits applicable to
its business or employees conducting its business; or
(b) has received any notification or communication from any agency
or department of federal, state, or local government or any Regulatory Authority
or the staff thereof (i) asserting that Subject Company or any of the Subject
Company Subsidiaries is in violation of any of the Laws or Orders which such
governmental authority or Regulatory Authority enforces (excluding violations
which would not be reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on Subject Company), (ii) threatening to revoke any
Permits, or (iii) requiring Subject Company or any of the Subject Company
Subsidiaries to enter into or consent to the issuance of a cease and desist
order, formal agreement, directive, commitment, or memorandum of understanding,
or to adopt any Board of Directors resolution or similar undertaking, which
restricts materially the conduct of its business, or in any manner relates to
its capital adequacy, its credit or reserve policies, its management, or the
payment of dividends.
5.13 Labor Relations. Neither Subject Company nor any of the Subject
Company Subsidiaries is the subject of any Litigation asserting that Subject
Company or any of the Subject Company Subsidiaries has committed an unfair labor
practice (within the meaning of the National Labor Relations Act or comparable
state Law) or seeking to compel Subject Company or any of the Subject Company
Subsidiaries to bargain with any labor organization as to wages or conditions of
employment, nor is there any strike or other labor dispute involving Subject
Company or any of the Subject Company Subsidiaries, pending or, to the Knowledge
of Subject Company, threatened, nor to the Knowledge of Subject Company, is
there any activity involving Subject Company's or any of the Subject Company
Subsidiaries' employees seeking to certify a collective bargaining unit or
engaging in any other collective bargaining organizational activity.
5.14 Employee Benefit Plans. (a) Subject Company has disclosed in
Section 5.14(a) of the Subject Company Disclosure Memorandum, and has delivered
or made available to Parent prior to the execution of this Agreement copies of
all pension, retirement, profit sharing, deferred compensation, stock option,
employee stock ownership, severance pay, vacation, bonus, or other material
incentive plans, all other written employee programs, arrangements, or
agreements, all medical, vision, dental, or other health plans, all life
insurance plans, and all other material employee benefit or fringe benefit
plans, including "employee benefit plans" as that term is defined in Section
3(3) of ERISA, currently adopted, maintained by, sponsored in whole or in part
by, or contributed to by Subject Company, the Subject Company Subsidiaries or
any ERISA Affiliate thereof for the benefit of employees, retirees, dependents,
spouses, directors, independent contractors, or other beneficiaries of Subject
Company or any Subject Company Subsidiary and under which employees, retirees,
dependents, spouses, directors, independent contractors, or other beneficiaries
of Subject Company or any Subject Company Subsidiary are eligible to participate
(collectively, the "Subject Company Benefit Plans"). Any of the Subject Company
Benefit Plans which is an "employee pension benefit plan," as that term is
defined in Section 3(2) of ERISA, is referred to herein as a "Subject Company
ERISA Plan." Neither Subject Company nor any Subject Company Subsidiary
maintains any "defined benefit plan" (as defined in Section 414(j) of the
Internal Revenue Code). No Subject Company ERISA Plan is or has been a
multiemployer plan within the meaning of Section 3(37) of ERISA.
(b) All Subject Company Benefit Plans are in compliance with
the applicable terms of ERISA, the Internal Revenue Code, and any other
applicable Laws the breach or violation of which are reasonably likely
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to have, individually or in the aggregate, a Material Adverse Effect on Subject
Company. Each Subject Company ERISA Plan that is intended to be qualified under
Section 401(a) of the Internal Revenue Code has received a favorable
determination letter from the Internal Revenue Service, and Subject Company is
not aware of any circumstances likely to result in revocation of any such
favorable determination letter. Neither Subject Company nor any of the Subject
Company Subsidiaries is subject to a Tax imposed by Section 4975 of the Internal
Revenue Code or a civil penalty imposed by Section 502(i) of ERISA.
(c) No "defined benefit plan" (as defined in Section 414(j) of
the Internal Revenue Code) or any "single-employer plan," within the meaning of
Section 4001(a)(15) of ERISA, formerly maintained by Subject Company or any of
the Subject Company Subsidiaries, or the single-employer plan of any entity
which is considered one employer with Subject Company under Section 4001 of
ERISA or Section 414 of the Internal Revenue Code or Section 302 of ERISA
(whether or not waived) (an "ERISA Affiliate") has an "accumulated funding
deficiency" within the meaning of Section 412 of the Internal Revenue Code or
Section 302 of ERISA. Neither Subject Company nor any of the Subject Company
Subsidiaries has provided, or, to Subject Company's knowledge, is required to
provide, security to 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 incurred by
Subject Company or any of the Subject Company Subsidiaries with respect to any
current, frozen, or terminated single-employer plan or the single-employer plan
of any ERISA Affiliate. Neither Subject Company nor any of the Subject Company
Subsidiaries has incurred any withdrawal Liability with respect to a
multiemployer plan under Subtitle E of Title IV of ERISA (regardless of whether
based on contributions of an ERISA Affiliate). No notice of a "reportable
event," within the meaning of Section 4043 of ERISA for which the 30 day
reporting requirement has not been waived, has been required to be filed for any
Subject Company Pension Plan or by any ERISA Affiliate within the 12 month
period ending on the date hereof.
(e) Neither Subject Company nor any of the Subject Company
Subsidiaries has any Liability for retiree health and life benefits under any of
the Subject Company Benefit Plans, and there are no restrictions on the rights
of Subject Company or any of the Subject Company Subsidiaries to amend or
terminate any such retiree health or benefit Plan without incurring Liability
thereunder.
(f) Except as set forth in Section 5.14(f) of the Subject
Company Disclosure Memorandum, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (i)
result in any payment (including severance, unemployment compensation or golden
parachute) becoming due to any director or any employee of Subject Company or
any of the Subject Company Subsidiaries from Subject Company or any of the
Subject Company Subsidiaries under any Subject Company Benefit Plan, (ii)
increase any benefits otherwise payable under any Subject Company Benefit Plan,
or (iii) result in any acceleration of the time of payment or vesting of any
such benefit.
(g) The actuarial present values of all accrued deferred
compensation entitlements (including entitlements under any executive
compensation, supplemental retirement, or employment agreement) of employees and
former employees of any Subject Company Subsidiary and their respective
beneficiaries, other than entitlements accrued pursuant to funded retirement
plans subject to the provisions of Section 412 of the Internal Revenue Code or
Section 302 of ERISA, have been fully reflected on the Subject Company Financial
Statements to the extent required by and in accordance with GAAP.
5.15 Material Contracts. Except as set forth in Section 5.15 of the
Subject Company Disclosure Memorandum, neither Subject Company, the Subject
Company Subsidiaries, nor any of their respective Assets, businesses or
operations is a party to, or is bound or affected by, or receives benefits
under, (i) any employment, severance, termination, consulting, or retirement
Contract, (ii) any Contract relating to the borrowing of money by Subject
Company or any of the Subject Company Subsidiaries or the guarantee by Subject
Company or any of the Subject Company Subsidiaries of any such obligation (other
than Contracts evidencing deposit liabilities, purchases
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of federal funds, fully-secured repurchase agreements, trade payables, and
Contracts relating to borrowings or guarantees made in the ordinary course of
business), (iii) any Contracts which prohibit or restrict Subject Company or any
of the Subject Company Subsidiaries from engaging in any business activities in
any geographic area, line of business, or otherwise in competition with any
other Person, (iv) any Contracts between or among Subject Company and the
Subject Company Subsidiaries, (v) any exchange-traded or over-the-counter swap,
forward, future, option, cap, floor, or collar financial Contract, or any other
interest rate or foreign currency protection Contract (not disclosed in the
Subject Company Financial Statements delivered prior to the date of this
Agreement) which is a financial derivative Contract (including various
combinations thereof), and (vi) any other Contract or amendment thereto that
would be required to be filed as an exhibit to a Subject Company SEC Document
which would have been filed by Subject Company prior to the date of this
Agreement if Subject Company was required to file SEC Documents (together with
all Contracts referred to in Sections 5.9 and 5.14(a) of this Agreement, the
"Subject Company Contracts"). With respect to each Subject Company Contract: (i)
the Contract is in full force and effect; (ii) neither Subject Company nor any
Subject Company Subsidiary is in Default thereunder; (iii) neither Subject
Company nor any Subject Company Subsidiary has repudiated or waived any material
provision of any such Contract; and (iv) no other party to any such Contract is,
to the Knowledge of Subject Company, in Default in any respect or has repudiated
or waived any material provision thereunder. Except as set forth in Section 5.15
of the Subject Company Disclosure Memorandum, all of the indebtedness of Subject
Company or any Subject Company Subsidiary for money borrowed is prepayable at
any time by Subject Company or the particular Subject Company Subsidiary without
penalty or premium.
5.16 Legal Proceedings. There is no Litigation instituted or pending,
or, to the Knowledge of Subject Company, threatened (or unasserted but
considered probable of assertion and which if asserted would have at least a
reasonable probability of an unfavorable outcome) against Subject Company or any
of the Subject Company Subsidiaries, or against any Asset, employee benefit
plan, interest, or right of any of them, that is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Subject Company,
nor are there any Orders of any Regulatory Authorities, other governmental
authorities, or arbitrators outstanding against Subject Company or any of the
Subject Company Subsidiaries. Section 5.16 of the Subject Company Disclosure
Memorandum includes a summary report of all material Litigation as of the date
of this Agreement to which Subject Company or any Subject Company Subsidiary is
a party and which names Subject Company or a Subject Company Subsidiary as a
defendant or cross-defendant.
5.17 Reports. Since January 1, 1995, or the applicable date of
organization if later, Subject Company and each Subject Company Subsidiary has
timely filed all reports and statements, together with any amendments required
to be made with respect thereto, that it was required to file with (i) the SEC,
including, but not limited to, Forms 10-K, Forms 10-Q, Forms 8-K, and proxy
statements, (ii) other Regulatory Authorities, and (iii) any applicable state
securities or banking authorities, except failures to file which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Subject Company. As of its respective date (or, if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing), each of such reports and documents, including the financial
statements, exhibits, and schedules thereto, complied in all material respects
with all applicable Laws. As of its respective date (or, if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing), no Subject Company document or report contained any untrue
statement of a material fact or omitted 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. None of the Subject
Company Subsidiaries is required to file any SEC Documents.
5.18 Statements True and Correct. None of the information supplied or
to be supplied by Subject Company expressly for inclusion in the Registration
Statement to be filed by Parent with the SEC will, when the Registration
Statement becomes effective, be false or misleading with respect to any material
fact, or omit to state any material fact necessary to make the statements
therein not misleading. None of the information supplied or to be supplied by
Subject Company for inclusion in the Subject Company Proxy Statement to be
mailed to Subject Company's shareholders in connection with the Subject Company
Shareholders' Meeting, and any other documents to be filed by Subject Company
with the SEC or any other Regulatory Authority in connection with the
transactions
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contemplated hereby, will, at the respective time such documents are filed, and
with respect to the Subject Company Proxy Statement, when first mailed to the
shareholders of Subject Company, be false or misleading with respect to any
material fact, or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or, in the case of the Subject Company Proxy Statement or any
amendment thereof or supplement thereto, at the time of the Subject Company
Shareholders' Meeting, be false or misleading with respect to any material fact,
or omit to state any material fact necessary to correct any statement made by
Subject Company in any earlier communication with respect to the solicitation of
any proxy for the Subject Company Shareholders' Meeting. All documents that
Subject Company or any Subject Company Subsidiary is responsible for filing with
any Regulatory Authority in connection with the transactions contemplated hereby
will comply as to form in all material respects with the provisions of
applicable Law.
5.19 Accounting, Tax, and Regulatory Matters. Neither Subject Company
nor any of the Subject Company Subsidiaries has taken any action or has any
Knowledge of any fact or circumstance relating to Subject Company that is
reasonably likely to (i) prevent the transactions contemplated hereby, including
the Merger, from qualifying for pooling-of-interests accounting treatment or as
a reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, or (ii) materially impede or delay receipt of any Consents of Regulatory
Authorities referred to in Section 9.1(b) of this Agreement.
5.20 Charter Provisions; Takeover Laws. Subject Company has taken all
action so that the entering into of this Agreement and the consummation of the
Merger and the other transactions contemplated by this Agreement do not and will
not result in the grant of any rights to any Person under the Charter, Bylaws or
other governing instruments of Subject Company or any Subject Company Subsidiary
or restrict or impair the ability of Parent or any of the Parent Subsidiaries to
vote, or otherwise to exercise the rights of a shareholder with respect to,
shares of Subject Company or any Subject Company Subsidiary. Subject Company has
taken all necessary action to exempt this Agreement and the Plan of Merger from,
and the transactions contemplated hereby and thereby are exempt from, any
"super-majority" voting requirements or the requirements of any "moratorium,"
"fair price," "business combination," "control share," or other anti-takeover
provisions under applicable Laws, or the Charter or Bylaws of the Subject
Company or any Subject Company Subsidiary (collectively, "Takeover Laws").
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent hereby represents and warrants to Subject Company,
except as set forth on Parent's Disclosure Memorandum, as follows:
6.1 Organization, Standing and Power. Parent is a corporation duly
organized, validly existing, and in good standing under the Laws of the State of
Tennessee, and has the corporate power and authority to carry on its business as
now conducted and to own, lease and operate its Assets. Parent is duly qualified
or licensed to transact business as a foreign corporation in good standing in
each of the States of the United States and in each foreign jurisdiction where
the character of its Assets or the nature or conduct of its business requires it
to be so qualified or licensed, except for such jurisdictions in which the
failure to be so qualified or licensed is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Parent.
6.2 Authority; No Breach by Agreement. (a) Subject to the adoption of
an amendment to the Restated Charter of Incorporation of Parent to increase the
number of authorized shares of Parent Common Stock, Parent and Merger Subsidiary
each have the corporate power and authority necessary to execute, deliver and
perform its respective 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 by
Parent and Merger Subsidiary and the consummation of the transactions
contemplated herein and therein, including the Merger, have been, or will have
been, duly and validly authorized by all necessary corporate action in respect
thereof on the part of Parent and Merger Subsidiary, subject to the adoption of
an amendment to the Restated Charter of Incorporation of Parent to increase the
number of authorized shares of Parent Common Stock.
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Subject to the receipt of all Consents required from Regulatory Authorities and
the expiration of all mandatory waiting periods, assuming the due authorization,
execution and delivery of this Agreement and the Plan of Merger by Subject
Company, this Agreement and the Plan of Merger each represents a legal, valid,
and binding obligation of each of Parent and Merger Subsidiary, enforceable
against each of them in accordance with its terms (except in all cases as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar Laws (including provisions of the U.S.,
Texas and Tennessee Constitutions) affecting the enforcement of creditors'
rights generally and except that the availability of equitable remedies 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 by Parent and/or Merger Subsidiary, nor the consummation by
Parent and Merger Subsidiary, of the transactions contemplated hereby or
thereby, nor compliance by Parent and Merger Subsidiary with any of the
provisions hereof or thereof will (i) conflict with or result in a breach of any
provision of Parent's Restated Charter of Incorporation or Bylaws (subject to
the amendment of the Parent's Restated Charter of Incorporation to increase the
number of authorized shares of Parent Common Stock) or of Merger Subsidiary's
Charter of Incorporation or Bylaws, or (ii) constitute or result in a Default
under, or require any Consent (excluding Consents required by Law or Order)
pursuant to, or result in the creation of any Lien on any material Asset of
Parent or any Parent Subsidiary under, any Contract or Permit of Parent or any
Parent Subsidiary, except for such Defaults and Liens which are not, and for
such Consents which, if not obtained, are not, reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Parent or Merger
Subsidiary, or (iii) subject to receipt of the requisite Consents referred to in
Section 9.1(b) of this Agreement, violate any Law or Order applicable to Parent
or any Parent Subsidiary or any of their respective material Assets.
(c) Other than in connection or compliance with the provisions
of the Securities Laws, applicable state corporate and securities Laws, and
rules of the NYSE, and other than Consents required from the FRB under Sections
3 and 4 of the BHC Act and from the Texas Banking Commissioner under Sections
38.001 and 38.006 of the Texas Finance Code, and other than Consents, filings,
or notifications which, if not obtained or made, are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on Parent, no
notice to, filing with, or Consent of, any public body or authority is necessary
for the consummation by Parent of the Merger and the other transactions
contemplated in this Agreement.
6.3 Capital Stock. The authorized capital stock of Parent consists
solely of (i) 100,000,000 shares of Parent Common Stock, of which 81,650,946
shares were issued and outstanding as of December 31, 1997, and (ii) 10,000,000
shares of Parent Preferred Stock, of which 2,188,358 shares of Parent Series E
Preferred Stock were issued and outstanding as of December 31, 1997. All of the
issued and outstanding shares of Parent Capital Stock are, and, subject to the
amendment of Parent's Restated Charter of Incorporation to increase the number
of authorized shares of Parent Common Stock, all of the shares of Parent Common
Stock to be issued in exchange for shares of Subject Company Common Stock upon
consummation of the Merger, when issued in exchange for shares of Subject
Company Common Stock upon consummation of the Merger and in accordance with the
terms of this Agreement, will be, duly and validly authorized, issued and
outstanding, and fully paid and nonassessable under the TBCA and Parent's
Restated Charter of Incorporation and Bylaws. None of the outstanding shares of
Parent Capital Stock has been, and none of the shares of Parent Common Stock to
be issued in exchange for shares of Subject Company Common Stock upon
consummation of the Merger will be, issued in violation of any preemptive rights
of any Person. As of the date hereof and as of the Closing Date, To the
Knowledge of Parent, none of the issued and outstanding shares of Parent Capital
Stock has been or will have been issued in violation of the Securities Laws or
any other applicable securities Laws. To the Knowledge of Parent, there are no
facts or circumstances that would preclude the Parent Common Stock to be issued
in the Merger from being approved for listing on the NYSE.
6.4 Parent Subsidiaries. Except as set forth in Section 6.4 of the
Parent Disclosure Memorandum, Parent owns all of the issued and outstanding
capital stock of Merger Subsidiary, and Parent or one of its wholly-owned
Subsidiaries owns all of the issued and outstanding shares of capital stock (or
other equity interests) of each of the other Parent Subsidiaries which would
qualify as a "Significant Subsidiary" (as such term is defined in Rule
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1.02(w) of Regulation S-X promulgated under the Securities Laws) of Parent. No
capital stock (or other equity interest) of any Parent Subsidiary which would
qualify as a Significant Subsidiary of Parent, is or may become required to be
issued (other than to another Parent Subsidiary) by reason of any Rights, and
there are no Contracts by which Parent or any of the Parent Subsidiaries which
is a Significant Subsidiary of Parent, is bound to issue (other than to Parent
or any of the Parent Subsidiaries) additional shares of its capital stock (or
other equity interests) or Rights or by which Parent or any of such signinficant
Parent Subsidiaries is or may be bound to transfer any shares of the capital
stock (or other equity interests) of any of Parent or any of the Parent
Subsidiaries (other than to Parent or any of the Parent Subsidiaries). There are
no Contracts relating to the rights of Parent or any Parent Subsidiary which
would qualify as a Significant Subsidiary of Parent, to vote or to dispose of
any shares of the capital stock (or other equity interests) of any of the Parent
Subsidiaries. All of the shares of capital stock (or other equity interests) of
each Parent Subsidiary which would qualify as a Significant Subsidiary of Parent
and held by Parent or any Parent Subsidiary have been duly and validly
authorized and issued and are fully paid and nonassessable (except pursuant to
12 U.S.C. Section 55 in the case of national banks and comparable, applicable
state Law, if any, in the case of state depository institutions) under the
applicable corporation or similar Law of the jurisdiction in which such
Subsidiary is incorporated or organized and are owned by Parent or a Parent
Subsidiary free and clear of any Liens. None of the issued and outstanding
shares of capital stock of Merger Subsidiary, and none of the issued and
outstanding stock of any other Parent Subsidiary which qualifies as a
Significant Subsidiary of Parent, has been issued in violation of any preemptive
rights of any Person. Each Parent Subsidiary is either a bank, federal savings
bank, or a savings association, partnership, limited liability company or a
corporation, and each such Parent Subsidiary which qualifies as a Significant
Subsidiary of Parent is duly organized, validly existing and (as to
corporations) in good standing under the Laws of the jurisdiction in which it is
incorporated or organized, and has the corporate power and authority necessary
for it to own, lease, and operate its Assets and to carry on its business as now
conducted. Each Parent Subsidiary which qualifies as a Significant Subsidiary of
Parent is duly qualified or licensed to transact business as a foreign
corporation in good standing in each of the States of the United States and in
each foreign jurisdiction where the character of its Assets or the nature or
conduct of its business requires it to be so qualified or licensed, except for
such jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Parent.
6.5 Financial Statements. Each of the Parent Financial Statements
(including, in each case, any related notes) contained in the Parent SEC
Documents, including any Parent SEC Document filed after the date of this
Agreement until the Effective Time, complied, or will comply, as to form in all
material respects with the applicable published rules and regulations of the SEC
with respect thereto, was prepared, or will be prepared, in accordance with GAAP
applied on a consistent basis throughout the periods involved (except as may be
indicated in the notes to such financial statements or, in the case of unaudited
interim statements, as permitted by Regulation S-X promulgated under the
Securities Laws), and fairly presented, or will fairly present, in all material
respects the consolidated financial position of Parent and the Parent
Subsidiaries as at the respective dates and the consolidated results of its
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal and recurring
year-end adjustments which were not or are not expected to be material in amount
or effect.
6.6 Absence of Undisclosed Liabilities. Neither Parent nor any of the
Parent Subsidiaries has any Liabilities that are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Parent, except
Liabilities which are accrued or reserved against in the consolidated balance
sheets of Parent as of December 31, 1997, included in the Parent Financial
Statements made available prior to the date of this Agreement, or reflected in
the notes thereto. Neither Parent nor any of the Parent Subsidiaries has
incurred or paid any Liability since December 31, 1997, except for such
Liabilities incurred or paid (i) which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Parent or (ii) in
connection with the transaction contemplated by this Agreement.
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6.7 Absence of Certain Changes or Events. Since December 31, 1997,
except as disclosed in the Parent SEC Documents made available prior to the date
of this Agreement, there have been no events, changes, or occurrences which have
had, or are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Parent.
6.8 Compliance With Laws. Parent is duly registered as a bank holding
company under the BHC Act. Each of Parent and the Parent Subsidiaries has in
effect all Permits necessary for it to own, lease, or operate its material
Assets and to carry on its business as now conducted, except where the failure
to hold such permits would not be reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Parent. Neither Parent nor any of
the Parent Subsidiaries:
(a) is in violation of any Laws, Orders, or Permits applicable
to its business or employees conducting its business, except for such violations
which would not be reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on Parent; or
(b) has received any notification or communication from any
agency or department of federal, state, or local government or any Regulatory
Authority or the staff thereof (i) asserting that Parent or any Parent
Subsidiary is in violation of with any of the Laws or Orders which such
governmental authority or Regulatory Authority enforces (excluding violations
which would not be reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on Parent), (ii) threatening to revoke any Permits, or
(iii) requiring Parent or any Parent Subsidiary to enter into or consent to the
issuance of a cease and desist order, formal agreement, directive, commitment or
memorandum of understanding, or to adopt any Board resolution or similar
undertaking, which restricts materially the conduct of its business, or in any
manner relates to its capital adequacy, its credit or reserve policies, its
management, or the payment of dividends.
6.9 Legal Proceedings. There is no Litigation instituted or pending,
or, to the Knowledge of Parent, threatened (or unasserted but considered
probable of assertion and which if asserted would have at least a reasonable
probability of an unfavorable outcome) against Parent or any Parent Subsidiary,
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 Parent, nor are there any Orders of any Regulatory
Authorities, other governmental authorities, or arbitrators outstanding against
Parent or any Parent Subsidiary.
6.10 Reports. Since January 1, 1994, or the applicable date of
organization if later, Parent and each Parent Subsidiary has filed all reports
and statements, together with any amendments required to be made with respect
thereto, that it was required to file with (i) the SEC, including, but not
limited to, Forms 10-K, Forms 10-Q, Forms 8-K, and proxy statements, (ii) other
Regulatory Authorities, and (iii) any applicable state securities or banking
authorities, except failures to file which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Parent. As of its
respective date (or, if amended or superseded by a filing prior to the date of
this Agreement, then on the date of such filing), each of such reports and
documents, including, the financial statements, exhibits, and schedules thereto
complied in all material respects with all applicable Laws. As of its respective
date, no Parent SEC Document contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances under which
they were made, not misleading. Except for Parent Subsidiaries that are
registered as a broker, dealer, or investment advisor, no Parent Subsidiary is
required to file any SEC Documents.
6.11 Statements True and Correct. None of the information supplied or
to be supplied by Parent expressly for inclusion in the Registration Statement
to be filed by Parent with the SEC, will, when the Registration Statement
becomes effective, be false or misleading with respect to any material fact, or
omit to state any material fact necessary to make the statements therein not
misleading. None of the information supplied or to be supplied by Parent
expressly for inclusion in the Subject Company Proxy Statement to be mailed to
Subject Company's shareholders in connection with the Subject Company
Shareholders' Meeting, and any other documents to be filed by Parent or any
Parent Subsidiary with the SEC or any other Regulatory Authority in connection
with the
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transactions contemplated hereby, will, at the respective time such documents
are filed, and with respect to the Subject Company Proxy Statement, when first
mailed to the shareholders of Subject Company, be false or misleading with
respect to any material fact, or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, or, in the case of the Subject Company Proxy Statement or
any amendment thereof or supplement thereto, at the time of the Subject Company
Shareholders' Meeting, be false or misleading with respect to any material fact,
or omit to state any material fact necessary to correct any statement made by
Parent in any earlier communication with respect to the solicitation of any
proxy for the Subject Company Shareholders' Meeting. All documents that Parent
or any Parent Subsidiary is responsible for filing with any Regulatory Authority
in connection with the transactions contemplated hereby will comply as to form
in all material respects with the provisions of applicable Law.
6.12 Accounting, Tax, and Regulatory Matters. Neither Parent nor any
Parent Subsidiary has taken any action or has any Knowledge of any fact or
circumstance relating to Parent that is reasonably likely to (i) prevent the
transactions contemplated hereby, including the Merger, from qualifying for
treatment as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code, or (ii) materially impede or delay receipt of any
Consents of Regulatory Authorities referred to in Section 9.1(b) of this
Agreement, or (iii) prevent the transactions contemplated hereby, including the
Merger, from qualifying for pooling-of-interests accounting treatment; provided,
however, that should Parent's shareholders fail to approve an amendment to
Parents Restated Charter of Incorporation to increase the number of authorized
shares of Parent Common Stock, then Parent may take actions which would prevent
the transactions contemplated hereby, including the Merger, from qualifying for
pooling-of-interest accounting treatment.
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 Affirmative Covenants of Subject Company. Unless the prior written
consent of Parent shall have been obtained, and except as otherwise expressly
contemplated herein or expressly provided for in the Subject Company Disclosure
Memorandum, from the date of this Agreement until the earlier of the Effective
Time or the termination of this Agreement, Subject Company shall and shall cause
each of the Subject Company Subsidiaries to (i) operate its business only in the
usual, regular, and ordinary course, (ii) use reasonable efforts to preserve
intact its business organization and Assets and maintain its rights and
franchises, and (iii) take no action which would (a) materially adversely affect
the ability of any Party to obtain any Consents required for the transactions
contemplated hereby or prevent the transactions contemplated hereby, including
the Merger, from qualifying for pooling-of-interests accounting treatment or as
a reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, or (b) materially adversely affect the ability of any Party to perform its
covenants and agreements under this Agreement.
7.2 Negative Covenants of Subject Company. Except as specifically
permitted by this Agreement or as and to the extent expressly disclosed or
provided for in the Subject Company Disclosure Memorandum, from the date of this
Agreement until the earlier of the Effective Time or the termination of this
Agreement, Subject Company covenants and agrees that it will not do or agree or
commit to do, or permit any of the Subject Company Subsidiaries to do or agree
or commit to do, any of the following without the prior written consent of the
chief executive officer, president, or chief financial officer of Parent, which
consent shall not be unreasonably withheld:
(a) amend the Charter, Bylaws, or other governing instruments
of Subject Company or any Subject Company Subsidiary; or
(b) incur any additional debt obligation for borrowed money
(other than indebtedness of Subject Company or the Subject Company Subsidiaries
to each other) in excess of an aggregate of $100,000 (for Subject Company and
the Subject Company Subsidiaries on a consolidated basis) except in the ordinary
course of the business of the Subject Company Subsidiaries consistent with past
practices (which shall include, for the Subject Company Subsidiaries that are
depository institutions, creation of deposit liabilities, purchases of federal
funds,
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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 Subject Company or any of the
Subject Company Subsidiaries of any Lien or permit any such Lien to exist (other
than in connection with deposits, repurchase agreements, bankers acceptances,
"treasury tax and loan" accounts established in the ordinary course of business
and the satisfaction of legal requirements in the exercise of trust powers and
Liens in effect as of the date hereof that are disclosed in the Subject Company
Disclosure Memorandum); or
(c) repurchase, redeem, or otherwise acquire or exchange
(other than exchanges in the ordinary course under employee benefit plans),
directly or indirectly, any shares, or any securities convertible into any
shares, of the capital stock of Subject Company or any of the Subject Company
Subsidiaries, or declare or pay any dividend or make any other distribution in
respect of Subject Company's capital stock, provided that Subject Company may
(to the extent legally and contractually permitted to do so), but shall not be
obligated to, declare and pay a cash dividend on the shares of Subject Company
Common Stock in an amount not in excess of the product of (i) 8.3 cents
multiplied by (ii) the whole number of calendar months elapsed since December
31, 1997 and prior to the date of the declaration of the dividend, provided,
that, notwithstanding the provisions of Section 1.3, the Parties shall cooperate
in selecting the Effective Time to ensure that, with respect to the quarterly
period in which the Effective Time occurs, the holders of Subject Company Common
Stock do not become entitled to receive both a dividend in respect of their
Subject Company Common Stock and a dividend in respect of Parent Common Stock or
fail to be entitled to receive any dividend; or
(d) except for 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 common stock or any other capital stock of
Subject Company or any Subject Company Subsidiary, or any stock appreciation
rights, or any option, warrant, conversion, or other Right to acquire any such
stock, or any security convertible into any such stock; or
(e) adjust, split, combine or reclassify any capital stock of
Subject Company or any of the Subject Company Subsidiaries or issue or authorize
the issuance of any other securities in respect of or in substitution for shares
of Subject Company Common Stock, or sell, lease, mortgage or otherwise dispose
of or otherwise encumber any shares of capital stock of any Subject Company
Subsidiary (unless any such shares of stock are sold or otherwise transferred to
another Subject Company Subsidiary) or any Asset having a book value in excess
of $50,000 other than in the ordinary course of business for reasonable and
adequate consideration; or
(f) except for purchases of investment securities acquired in
the ordinary course of business consistent with past practice, purchase any
securities or make any material investment, either by purchase of stock or
securities, contributions to capital, Asset transfers, or purchase of any
Assets, in any Person other than a wholly-owned Subsidiary of Subject Company,
or otherwise acquire direct or indirect control over any Person, other than in
connection with (i) foreclosures in the ordinary course of business, (ii)
acquisitions of control by a depository institution Subsidiary in its fiduciary
capacity, or (iii) the creation of new wholly-owned Subsidiaries organized to
conduct or continue activities otherwise permitted by this Agreement; or
(g) grant any increase in compensation or benefits to the
employees or officers of Subject Company or the Subject Company Subsidiaries,
except in the ordinary course of business consistent with past practice 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; enter into or amend any severance agreements with officers of Subject
Company or the Subject Company Subsidiaries; grant any material increase in fees
or other increases in compensation or other benefits to directors of Subject
Company or the Subject Company Subsidiaries; or voluntarily accelerate the
vesting of any stock options or other stock-based compensation or employee
benefits (other than the acceleration of vesting which occurs under a benefit
plan upon a change of control of Subject Company); or
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(h) enter into or amend any employment Contract between
Subject Company or any Subject Company Subsidiary and any Person (unless such
amendment is required by Law) that Subject Company does not have the
unconditional right to terminate without Liability (other than Liability for
services already rendered), at any time on or after the Effective Time; or
(i) adopt any new employee benefit plan of Subject Company or
the Subject Company Subsidiaries or terminate or withdraw from, or make any
material change in or to, any existing employee benefit plans of Subject Company
or any of the Subject Company Subsidiaries, other than any such change that is
required by Law or that, in the opinion of counsel, is necessary or advisable to
maintain the tax qualified status of any such plan, nor shall Subject Company or
any Subject Company Subsidiary make any distributions from such employee benefit
plans, except as required by Law, by the terms of such plans, or in a manner
consistent with past practices with respect to the applicable plan; or
(j) make any material change in any Tax or accounting methods
or systems of internal accounting controls, except as may be appropriate to
conform to changes in Tax Laws or regulatory accounting requirements or GAAP; or
(k) commence any Litigation other than in accordance with past
practice, settle any Litigation involving any Liability of Subject Company or
any Subject Company Subsidiary for material money damages or restrictions upon
the operations of Subject Company or any Subject Company Subsidiary; or
(l) except in the ordinary course consistent with past
practice, enter into, modify, amend, or terminate any material Contract
(excluding any loan Contract) or waive, release, compromise, or assign any
material rights or claims.
7.3 Covenants of Parent. From the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, Parent
covenants and agrees that it shall (i) continue to conduct its business and the
business of the Parent Subsidiaries in a manner designed in its reasonable
judgment to enhance the long-term value of the Parent Common Stock and the
business prospects of Parent and the Parent Subsidiaries, and (ii) take no
action which would (a) materially adversely affect the ability of any Party to
obtain any Consents required for the transactions contemplated hereby or prevent
the transactions contemplated hereby, including the Merger, from qualifying for
pooling-of-interests accounting treatment or as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code, (b) materially adversely
affect the ability of any Party to perform its covenants and agreements under
this Agreement; provided, however, should Parent's shareholders fail to approve
an amendment to Parent's Restated Charter of Incorporation to increase the
number of authorized shares of Parent Common Stock, then Parent may take such
actions as would prevent the transactions contemplated hereby, including the
Merger, from qualifying for pooling-of-interests accounting treatment.
7.4 Adverse Changes in Condition. Each Party agrees to give written
notice promptly to the other Party upon becoming aware of the occurrence or
impending occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on it or (ii) would cause or constitute a
material breach of any of its representations, warranties, or covenants
contained herein or which would prevent the satisfaction of the conditions
precedent set forth in Article 9 of this Agreement, and to use its reasonable
efforts to prevent or promptly to remedy the same.
7.5 Reports. Each Party and its Subsidiaries shall file all reports
required to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time and, to the extent permitted by Law, shall
deliver to the other Party copies of all such reports promptly after the same
are filed. If financial statements are contained in any such reports filed with
the SEC, such financial statements will fairly present the consolidated
financial position of the entity filing such statements as of the dates
indicated and the consolidated results of operations, changes in shareholders'
equity, and cash flows of such entity for the periods then ended in accordance
with GAAP (subject in the case of interim financial statements to normal
recurring year end adjustments
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that are not material). As of their respective dates, such reports filed with
the SEC will comply in all material respects with the Securities Laws and will
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Any financial statements contained in any other reports to another
Regulatory Authority shall be prepared in accordance with Laws applicable to
such reports.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 Registration Statement; Proxy Statement; Shareholder Approval. As
promptly as practicable after the execution of this Agreement, each of Parent
and Subject Company shall prepare and file the Registration Statement, of which
the Subject Company Proxy Statement shall form a part, with the SEC, and shall
use its reasonable efforts to cause the Registration Statement to become
effective under the 1933 Act and Parent shall take any action required to be
taken under the applicable state Blue Sky or securities Laws in connection with
the issuance of the shares of Parent Common Stock upon consummation of the
Merger. Subject Company shall furnish all information concerning it and the
holders of its capital stock as Parent may reasonably request in connection with
such action. Each of Parent and Subject Company shall use all reasonable efforts
to have or cause the Registration Statement to become effective as promptly as
practicable, and shall take any action required to be taken under any applicable
federal or state securities Laws in connection with the issuance of shares of
Parent Common Stock in the Merger. Parent shall use its commercially reasonable
best efforts to cause the Registration Statement to remain effective through the
Effective Time. No amendment or supplement to the Registration Statement shall
be made by Parent or Subject Company without the approval of the other party.
Parent and Subject Company each will advise the other, promptly after it
receives notice thereof, of the time when the Registration Statement has become
effective or any supplement or amendment has been filed, the issuance of any
stop order suspending the effectiveness of the Registration Statement, the
suspension of the qualification of the Parent Common Stock issuable in
connection with the Merger for offering or sale in any jurisdiction, any request
by the staff of the SEC for amendment of the Registration Statement or the
Subject Company Proxy Statement, the receipt from the staff of the SEC of
comments thereon or any request by the staff of the SEC for additional
information with respect thereto. All documents that Parent or Subject Company
are responsible for filing with the SEC in connection with the transactions
contemplated hereby shall as the time of filing comply as to form in all
material respects with the applicable requirements of the 1933 Act and the 1934
Act. Subject Company shall call the Subject Company Shareholders' Meeting, to be
held 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. Subject Company shall call
the Subject Company Shareholders' Meeting as soon thereafter as practicable
after the Registration Statement is declared effective by the SEC. In connection
with the Subject Company Shareholders' Meeting, (i) the Board of Directors of
Subject Company shall recommend (subject to compliance with its fiduciary duties
as advised by counsel) to its shareholders the approval of the Merger, and (ii)
the Board of Directors (subject to compliance with its fiduciary duties as
advised by counsel) and officers of Subject Company shall use their reasonable
efforts to obtain shareholder approval of the Merger.
8.2 Authorization of Shares; Exchange Listing. Parent shall submit to
its shareholders, at the Parent Shareholders' Meeting, a proposal to amend the
Restated Charter of Incorporation of Parent to increase the number of authorized
shares of Parent Common Stock by an amount determined by the Board of Directors
of Parent, in its discretion, but in no event less than the number of shares
sufficient to permit Parent to issue the number of shares of Parent Common Stock
issuable in connection with the Merger, and, subject to the approval of such
amendment by the shareholders of Parent, shall cause such amendment to become
effective and reserve for issuance a sufficient number of shares of Parent
Common Stock for the purpose of issuing shares of Parent Common Stock in
accordance with the provisions of Section 3.1 of this Agreement and the Plan of
Merger. Should Parent's shareholders fail to approve such amendment, then within
thirty (30) days after the date of the conclusion of the Parent Shareholders'
Meeting, Parent shall provide a written notice to Subject Company stating
whether or not Parent intends to proceed with the transactions contemplated by
this Agreement, including the Merger. Should Parent's shareholders approve such
amendment or should Parent determine to proceed with the Merger notwithstanding
its failure to obtain
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shareholder approval of such amendment, Parent shall use its reasonable efforts
to list, prior to the Effective Time, on the NYSE, subject to official notice of
issuance, the shares of Parent Common Stock to be issued to the holders of
Subject Company Common Stock pursuant to the Merger, and Parent shall give all
notices and make all filings with the NYSE required in connection with the
transactions contemplated herein.
8.3 Applications. Within forty five days after the date of this
Agreement, Parent shall prepare and file, and Subject Company shall cooperate in
the preparation and, where appropriate, filing of, applications with all
Regulatory Authorities having jurisdiction over the transactions contemplated by
this Agreement seeking the requisite Consents necessary to consummate the
transactions contemplated by this Agreement. At least two business days prior to
each filing, Parent shall provide Subject Company and its counsel with copies of
such applications. Each of the Parties shall deliver to each of the other
Parties copies of all filings, correspondence and orders sent by such Party to
and copies of all filings, correspondence and orders received by such Party from
all Regulatory Authorities in connection with the transactions contemplated
hereby as soon as practicable upon their becoming available.
8.4 Filings With State Offices. Upon the terms and subject to the
conditions of this Agreement, Parent, Merger Subsidiary and Subject Company each
agree to execute and file Articles of Merger with the Secretary of State of the
State of Tennessee and the Secretary of State of the State of Texas in
connection with the Closing.
8.5 Agreement as to Efforts to Consummate. Subject to the terms and
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper, or
advisable under applicable Laws to consummate and make effective, as soon as
practicable after the date of this Agreement, the transactions contemplated by
this Agreement, including using its reasonable efforts to lift or rescind any
Order adversely affecting its ability to consummate the transactions
contemplated herein and to cause to be satisfied the conditions referred to in
Article 9 of this Agreement. Each Party shall use, and shall cause each of its
Subsidiaries to use, its reasonable efforts to obtain all Consents necessary or
desirable for the consummation of the transactions contemplated by this
Agreement.
8.6 Investigation and Confidentiality. (a) Prior to the Effective Time,
each Party shall keep the other Parties advised of all material developments
relevant to its business and to consummation of the Merger and shall permit the
other Parties 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 any 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 Party
shall be required to provide access to or to disclose information where such
access or disclosure would violate or prejudice the rights of such Party's
customers, jeopardize any attorney-client privilege or contravene any Law, rule,
regulation, Order, judgment, decree, fiduciary duty or binding agreement entered
into prior to the date of this Agreement. The Parties will make appropriate
substitute disclosure arrangements under circumstances in which the restrictions
of the preceding sentence apply. No investigation by a Party shall affect the
representations and warranties of any other Party.
(b) Each Party will hold, and will cause its respective
Affiliates and their respective officers, directors, employees, agents,
consultants, and other representatives to hold, in strict confidence, unless
compelled to disclose by judicial or administrative process (including without
limitation in connection with obtaining the necessary Consents of Regulatory
Authorities) or by other requirements of Law, all confidential documents and
confidential or proprietary information concerning the other Parties gathered
from the other Parties, or their respective officers, directors, employees,
agents, consultants or Representatives, pursuant to this Agreement, except to
the extent that such documents or information can be shown to have been (a)
previously lawfully known by the Party receiving such documents or information,
(b) in the public domain through no fault of such receiving Party, or (c) later
acquired by the receiving party from other sources not themselves bound by, and
in breach of, a confidentiality agreement. Except as provided in Sections 8.1,
8.2 and 8.3 hereof, no Party will disclose or otherwise provide any such
confidential or proprietary documents or information to any other Person, except
to the Party's auditors, Representatives and other consultants and advisors who
need such documents or information in
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connection with this Agreement and the transactions contemplated hereby, and the
Parties agree to cause each of the foregoing to be subject to and bound by the
confidentiality provisions hereof.
8.7 Press Releases. Prior to the Effective Time, Subject Company and
Parent shall consult with each other as to the form and substance of any press
release or other public disclosure materially related to this Agreement or any
other transaction contemplated hereby; provided, that nothing in this Section
8.7 shall be deemed to prohibit any Party from making any disclosure which its
counsel deems necessary or advisable in order to satisfy such Party's disclosure
obligations imposed by Law. Parent and Subject Company agree to use their
reasonable best efforts to issue a press release announcing the execution and
delivery of this Agreement within five (5) days after the date of this
Agreement.
8.8 Certain Actions. (a) Except with respect to this Agreement and the
transactions contemplated hereby, after the date of this Agreement, neither
Subject Company, the Subject Company Subsidiaries nor any Representatives
thereof retained by Subject Company or the Subject Company Subsidiaries shall
directly or indirectly solicit any Acquisition Proposal by any Person. Except to
the extent necessary to comply with the fiduciary duties of Subject Company's
Board of Directors as advised by counsel, Subject Company, the Subject Company
Subsidiaries, or Representatives thereof shall not furnish any non-public
information that it is not legally obligated to furnish, negotiate with respect
to, or enter into any Contract with respect to, any Acquisition Proposal, but
Subject Company may communicate information about such an Acquisition Proposal
to its shareholders if and to the extent that it is required to do so in order
to comply with its legal obligations as advised by counsel. Subject Company
shall promptly notify Parent orally and in writing in the event that it receives
any Acquisition Proposal or inquiry related thereto. Subject Company shall (i)
immediately cease and cause to be terminated any existing activities,
discussions, or negotiations with any Persons conducted heretofore with respect
to any of the foregoing, and (ii) direct and use its reasonable efforts to cause
all of its Representatives not to engage in any of the foregoing.
(b) As a condition of and as an inducement to Parent's
entering into this Agreement, Subject Company covenants, acknowledges, and
agrees that it shall be a specific, absolute, and unconditionally binding
condition precedent to Subject Company's 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 Subject Company has
otherwise complied with the provisions of Section 8.8(a) hereof, that Subject
Company or such third party which is a party of the Acquisition Proposal shall
have paid Parent, as liquidated damages, the sum of One Million Two Hundred
Thousand Dollars ($1,200,000), which sum represents the (i) direct costs and
expenses (including, but not limited to, fees and expenses incurred by Parent's
financial or other consultants, printing costs, investment bankers, accountants,
and counsel) incurred by or on behalf of Parent in negotiating and undertaking
to carry out the transactions contemplated by this Agreement; and (ii) indirect
costs and expenses of Parent in connection with the transactions contemplated by
this Agreement, including Parent's management time devoted to negotiation and
preparation for the transactions contemplated by this Agreement; and (iii)
Parent's loss as a result of the transactions contemplated by this Agreement not
being consummated. Accordingly, Subject Company hereby stipulates and covenants
that prior to Subject Company's entering into a letter of intent, agreement in
principle, or definitive agreement, (whether binding or 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
Subject Company or such third party shall have paid to Parent the amount set
forth above in immediately available funds to satisfy the specific, absolute,
and unconditionally binding condition precedent imposed by this Section 8.8.
Notwithstanding anything to the contrary in this Section 8.8(b), in the event
such Acquisition Proposal should be the result of a hostile takeover of Subject
Company, any sums due Parent hereunder shall be paid only at the closing of the
transactions set forth in such Acquisition Proposal. Parent acknowledges that
under no circumstances shall any officer or director of Subject Company) (unless
such officer or director shall have an interest in a potential acquiring party
in any Acquisition Proposal) be held personally liable to Parent for any amount
of the foregoing payment. On payment of such amount to Parent, Parent shall have
no cause of action or claim (either in law or
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equity) whatsoever against Subject Company, or any officer of director of
Subject Company, with respect to or in connection with such Acquisition Proposal
or this Agreement.
(c) The requirements, conditions, and obligations imposed by
Section 8.8(b) shall continue in full force and effect from the date of this
Agreement until the earlier of (i) the Effective Time or (ii) June 30, 1999; or
(iii) the date on which this Agreement shall have been terminated (A) mutually
by the Parties pursuant to Section 10.1(a) of this Agreement; (B) by Subject
Company pursuant to Section 10.1(b) or 10.1(c) of this Agreement; (C) by Subject
Company pursuant to Section 10.1(e), unless the failure to consummate the
transactions contemplated by this Agreement by December 31, 1998, results from
or is related to pending or threatened Litigation arising out of or in
connection with the Merger or an Acquisition Proposal related to Subject Company
or any Subject Company Subsidiary, in which case the date shall be extended to
that date which is thirty (30) days after the final termination of such
Litigation or threatened Litigation; (D) by either Party pursuant to Section
10.1(d)(1)(i) of this Agreement; or (E) by Parent pursuant to Section 10.1(d)(2)
of this Agreement.
8.9 Accounting and Tax Treatment. Each of the Parties undertakes and
agrees to use its reasonable efforts to cause the Merger, and to take no action
which would cause the Merger not, to qualify for pooling-of-interests accounting
treatment and treatment as a "reorganization" within the meaning of Section
368(a) of the Internal Revenue Code for federal income tax purposes; provided,
however, that should Parent's shareholders fail to approve the amendment to
Parent's Restated Charter of Incorporation to increase its number of authorized
shares of Parent Common Stock, then Parent, in its sole and absolute discretion,
may take actions which would prevent the transactions contemplated by this
Agreement, including the Merger, from qualifying for pooling-of-interest
accounting treatment.
8.10 Agreement of Affiliates. Subject Company has disclosed in Section
8.10 of the Subject Company Disclosure Memorandum each Person whom it reasonably
believes is an "affiliate" of Subject Company as of the date of this Agreement
for purposes of Rule 145 under the 1933 Act. Subject Company shall use its
reasonable efforts to cause each such Person to deliver to Parent not later than
40 days prior to the Effective Time, a written agreement, substantially in the
form of Exhibit 2, providing that such Person will not sell, pledge, transfer,
or otherwise dispose of the shares of Subject Company Common Stock held by such
Person except as contemplated by such agreement or by this Agreement and will
not sell, pledge, transfer, or otherwise dispose of the shares of Parent Common
Stock to be received by such Person upon consummation of the Merger except in
compliance with applicable provisions of the 1933 Act and the rules and
regulations thereunder and until such time as financial results covering at
least 30 days of combined operations of Parent and Subject Company have been
published within the meaning of Section 201.01 of the SEC's Codification of
Financial Reporting Policies. If the Merger will qualify for
pooling-of-interests accounting treatment, shares of Parent Common Stock issued
to such affiliates of Subject Company in exchange for shares of Subject Company
Common Stock shall not be transferable until such time as financial results
covering at least 30 days of combined operations of Parent and Subject Company
have been published within the meaning of Section 201.01 of the SEC's
Codification of Financial Reporting Policies, regardless of whether each such
affiliate has provided the written agreement referred to in this Section 8.10
(and Parent shall be entitled to place restrictive legends upon certificates for
shares of Parent Common Stock issued to affiliates of Subject Company pursuant
to this Agreement to enforce the provisions of this Section 8.10). Parent shall
not be required to maintain the effectiveness of the Registration Statement
under the 1933 Act for the purposes of resale of Parent Common Stock by such
affiliates.
8.11 Employee Benefits and Contracts. Following the Effective Time,
Parent shall provide to officers and employees of the Subject Company and any
Subject Company Subsidiary, employee benefits under employee benefit and welfare
plans of Parent or the Parent Subsidiaries on terms and conditions which when
taken as a whole are substantially similar to those currently provided by Parent
or a Parent Subsidiary to their similarly situated officers and employees. For
purposes of participation, vesting, and benefit accrual under such employee
benefit plans, the service of the employees of the Subject Company and any
Subject Company Subsidiary prior to the Effective Time shall be treated as
service with Parent or a Parent Subsidiary participating in such employee
benefit plans.
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8.12 Indemnification. (a) After the Effective Time, Parent shall
indemnify, defend and hold harmless the present and former directors, officers,
employees, and agents of the Subject Company and any Subject Company Subsidiary
(each, an "Indemnified Party") (including any person who becomes a director,
officer, employee, or agent prior to the Effective Time) against all Liabilities
(including reasonable attorneys' fees, and expenses, judgments, fines and
amounts paid in settlement) arising out of actions or omissions occurring at or
prior to the Effective Time to the full extent permitted under any of Tennessee
Law, Subject Company's Charter and Bylaws as in effect on the date hereof.
Without limiting the foregoing, in any case in which approval by Parent is
required to effectuate any indemnification, Parent shall direct, at the election
of the Indemnified Party, that the determination of any such approval shall be
made by independent counsel mutually agreed upon between Parent and the
Indemnified Party.
(b) Parent shall use its reasonable efforts (and Subject
Company shall cooperate prior to the Effective Time in these efforts) to
maintain in effect for a period of four years after the Effective Time Subject
Company's existing directors' and officers' liability insurance policy (provided
that Parent may substitute therefor (i) policies of at least the same coverage
and amounts containing terms and conditions which are substantially no less
advantageous or (ii) with the consent of Subject Company given prior to the
Effective Time, any other policy) with respect to claims arising from facts or
events which occurred prior to the Effective Time, including consummation of the
Merger, and covering persons who are currently covered by such insurance;
provided, that the Surviving Corporation shall not be obligated to make
aggregate annual premium payments for such four-year period in respect of such
policy (or coverage replacing such policy) which exceed, for the portion related
to Subject Company's directors and officers, 150% of the annual premium payments
on Subject Company's current policy in effect as of the date of this Agreement
(the "Maximum Amount"). If the amount of the premiums necessary to maintain or
procure such insurance coverage exceeds the Maximum Amount, Parent shall use its
reasonable efforts to maintain the most advantageous policies of directors' and
officers' liability insurance obtainable for a premium equal to the Maximum
Amount.
(c) Any Indemnified Party wishing to claim indemnification
under paragraph (a) of this Section 8.12, upon learning of any such Liability or
Litigation, shall promptly notify Parent thereof, provided that the failure so
to notify shall not affect the obligations of Parent under this Section 8.12
unless and to the extent such failure materially increases Parent's Liability
under this Section 8.12. In the event of any such Litigation (whether arising
before or after the Effective Time), (i) Parent or the Surviving Corporation
shall have the right to assume the defense thereof and Parent shall not be
liable to such Indemnified Parties for any legal expenses of other counsel or
any other expenses subsequently incurred by such Indemnified Parties in
connection with the defense thereof, except that if Parent or the Surviving
Corporation elects not to assume such defense or counsel for the Indemnified
Parties advises that there are substantive issues which raise conflicts of
interest between Parent or the Surviving Corporation and the Indemnified Parties
or between the Indemnified Parties, the Indemnified Parties may retain counsel
satisfactory to them, and Parent or the Surviving Corporation shall pay all
reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received; provided, that Parent shall be
obligated pursuant to this paragraph (c) to pay for only two firms of counsel
for all Indemnified Parties in any jurisdiction, (ii) the Indemnified Parties
will cooperate in the defense of any such Litigation, and (iii) neither Parent
nor the Surviving Corporation shall be liable for any settlement effected
without its prior written consent or have any obligation hereunder to any
Indemnified Party when and if a court of competent jurisdiction shall determine,
and such determination shall have become final, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by applicable
Law.
(d) If either Parent or the Surviving Corporation or any of
their respective successors or assigns shall consolidate with or merge into any
other Person and shall not be the continuing or surviving Person of such
consolidation or merger or shall transfer all or substantially all of its Assets
to any Person, then and in each case, proper provision shall be made so that the
successors and assigns of Parent or the Surviving Corporation, as the case may
be, shall assume the obligations set forth in this Section 8.12.
(e) Parent shall pay all reasonable costs, including
attorneys' fees, that may be incurred by any Indemnified Party in enforcing the
indemnity and other obligations provided for in this Section 8.12.
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(f) The provisions of this Section 8.12 are intended to be for
the benefit of, and shall be enforceable by, each Indemnified Party and his or
her heirs and representatives.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
9.1 Conditions to Obligations of Each Party. The respective obligations
of each Party to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by both Parties pursuant to Section 11.6 of
this Agreement:
(a) Shareholder Approval. The shareholders of Subject Company
shall have approved this Agreement and the consummation of the transactions
contemplated hereby and thereby, including the Merger, as and to the extent
required by Law, or by the provisions of any governing instruments (without
regard to any shares which are voted pursuant to irrevocable proxies, the
validity of which has been contested by the underlying owner, unless the
underlying owner has given written instructions with respect to the voting of
such shares in connection with this Agreement).
(b) Regulatory Approvals. All Consents of, filings and
registrations with, and notifications to, all Regulatory Authorities required
for consummation of the Merger shall have been obtained or made and shall be in
full force and effect and all waiting periods required by Law shall have
expired. No Consent obtained from any Regulatory Authority which is necessary to
consummate the transactions contemplated hereby shall be conditioned or
restricted in any manner reasonably deemed to be material by Parent.
(c) Legal Proceedings. No court or governmental or regulatory
authority of competent jurisdiction shall have enacted, issued, promulgated,
enforced, or entered by Law or Order (whether temporary, preliminary, or
permanent) or taken any other action which prohibits, restricts, or makes
illegal consummation of the transactions contemplated by this Agreement.
(d) Registration Statement. The Registration Statement shall
be effective under the 1933 Act, no stop orders suspending the effectiveness of
the Registration Statement shall have been issued, no action, suit, proceeding,
or investigation by the SEC to suspend the effectiveness thereof shall have been
initiated and be continuing, and all necessary approvals under state securities
Laws or the 1933 Act or 1934 Act relating to the issuance or trading of the
shares of Parent Common Stock issuable pursuant to the Merger shall have been
received.
(e) Exchange Listing. The shares of Parent Common Stock
issuable pursuant to the Merger shall have been approved for listing on the
NYSE, subject to official notice of issuance.
(f) Tax Matters. Parent shall have received a written opinion
of counsel from Wyatt, Tarrant & Combs, and Subject Company shall have received
a written opinion of counsel from Winstead Sechrest & Minick P.C., in form and
substance reasonably satisfactory to Parent and Subject Company, respectively,
dated as of the Effective Time, in each case substantially to the effect that
(i) the Merger will constitute a reorganization within the meaning of Section
368(a) of the Internal Revenue Code, (ii) Parent, Merger Subsidiary and Subject
Company will each be "a party to a reorganization" within the meaning of Section
368(b) of the Internal Revenue Code; (iii) no gain or loss will be recognized by
the shareholders of Subject Company who exchange all of their Subject Company
Common Stock solely for Parent Common Stock pursuant to the Merger (except with
respect to cash received in lieu of a fractional share interest in Parent Common
Stock), (iv) the tax basis of the Parent Common Stock received by shareholders
of Subject Company who exchange Subject Company Common Stock solely for Parent
Common Stock in the Merger will be the same as the tax basis of the Subject
Company Common Stock surrendered in exchange therefor (reduced by any amount
allocable to a fractional share interest for which cash is received) (v) the
holding period of the Parent Common Stock received by shareholders of Subject
Company in the Merger will include the period during which the shares of Subject
Company Common Stock surrendered in exchange therefor were held, provided such
Subject Company Common Stock was held as a capital asset by the holder of such
Subject
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Company Common Stock at the Effective Time, and (vi) neither Subject Company nor
Parent will recognize gain or loss as a consequence of the Merger. In rendering
such Tax Opinion, such counsel shall require and be entitled to rely upon
representations and covenants of officers of Parent, Subject Company,
shareholders of Subject Company and others reasonably satisfactory in form and
substance to such counsel.
9.2 Conditions to Obligations of Parent. The obligations of Parent to
perform this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following conditions,
unless waived by Parent pursuant to Section 11.6(a) of this Agreement:
(a) Representations and Warranties. For purposes of this
Section 9.2(a), the accuracy of the representations and warranties of Subject
Company set forth in this Agreement shall be assessed as of the date of this
Agreement and as of the Effective Time with the same effect as though all such
representations and warranties had been made immediately prior to the Effective
Time (provided that representations and warranties which are confined to a
specific date shall speak only as of such date). The representations and
warranties of Subject Company set forth in Sections 5.1, 5.2, 5.3, 5.19 and 5.20
of this Agreement shall each be true and correct in all material respects. There
shall not exist inaccuracies in the representations and warranties of Subject
Company set forth in this Agreement (including the representations and
warranties set forth in Sections 5.1, 5.2, 5.3, 5.19 and 5.20) such that the
aggregate effect of such inaccuracies has, or is reasonably likely to have, a
Material Adverse Effect on Subject Company, provided that, for purposes of this
sentence only, those representations and warranties which are qualified by
references to "material" or "Material Adverse Effect" or "Knowledge" shall be
deemed not to include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of
the agreements and covenants of Subject Company to be performed and complied
with pursuant to this Agreement and the other agreements contemplated hereby
prior to the Effective Time shall have been duly performed and complied with in
all material respects.
(c) Certificates. Subject Company shall have delivered to
Parent (i) a certificate, dated as of the Effective Time and signed on its
behalf by its chief executive officer and its chief financial officer, to the
effect that the conditions of its obligations set forth in Sections 9.2(a) and
9.2(b) of this Agreement have been satisfied, and (ii) certified copies of
resolutions duly adopted by Subject Company's Board of Directors and
shareholders evidencing the taking of all corporate action necessary to
authorize the execution, delivery, and performance of this Agreement, and the
consummation of the transactions contemplated hereby, all in such reasonable
detail as Parent shall request.
(d) Parent Pooling Letter. Parent shall have received a copy
of a letter, dated as of the date of filing of the Registration Statement with
the SEC and as of the Effective Time, addressed to it and in a form reasonably
acceptable to it, from Price Waterhouse LLP to the effect that the Merger will
qualify for pooling-of-interests accounting treatment; provided, however, this
shall not be a condition precedent to Parent's obligation to perform this
Agreement and consummate the Merger and the other transactions contemplated
hereby if Parent takes actions which prevent the transactions contemplated by
this Agreement, including the Merger, from qualifying for such accounting
treatment.
(e) Amendment of Parent's Charter. The shareholders of Parent
shall have approved an amendment to Parent's Restated Charter of Incorporation
to increase the number of authorized shares of Parent Common Stock to a
sufficient number of authorized shares of Parent Common Stock to enable Parent
to issue authorized shares of Parent Common Stock in accordance with its
obligations under Article 3 of this Agreement and the Plan of Merger.
(f) Consents and Approvals. Subject Company shall have
obtained any and all Consents required for consummation of the Merger (other
than those set forth in Section 9.1(b) of this Agreement) or for the preventing
of any Default under any Contract or Permit of such Party which, if not obtained
or made, is reasonably likely to
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have, individually or in the aggregate, a Material Adverse Effect on Subject
Company or Parent.
9.3 Conditions to Obligations of Subject Company. The obligations of
Subject Company to perform this Agreement and consummate the Merger and the
other transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by Subject Company pursuant to Section
11.6(b) of this Agreement.
(a) Representations and Warranties. For purposes of this
Section 9.3(a), the accuracy of the representations and warranties of Parent set
forth in this Agreement shall be assessed as of the date of this Agreement and
as of the Effective Time with the same effect as though all such representations
and warranties had been made immediately prior to the Effective Time (provided
that representations and warranties which are confined to a specified date shall
speak only as of such date). The representations and warranties of Parent set
forth in Sections 6.1, 6.2 and 6.3 of this Agreement shall each be true and
correct in all material respects. There shall not exist inaccuracies in the
representations and warranties of Parent set forth in this Agreement (including
the representations and warranties set forth in Sections 6.1, 6.2 and 6.3) such
that the aggregate effect of such inaccuracies has, or is reasonably likely to
have, a Material Adverse Effect on Parent; provided that, for purposes of this
sentence only, those representations and warranties which are qualified by
references to "material" or "Material Adverse Effect" or "Knowledge" shall be
deemed not to include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of
the agreements and covenants of Parent and/or Merger Subsidiary to be performed
and complied with by Parent and/or Merger Subsidiary pursuant to this Agreement
and the other agreements contemplated hereby prior to the Effective Time shall
have been duly performed and complied with in all material respects.
(c) Certificates. Parent shall have delivered to Subject
Company (i) a certificate, dated as of the Effective Time and signed on its
behalf by its chief executive officer and its chief financial officer, to the
effect that the conditions of its obligations set forth in Sections 9.3(a) and
9.3(b) of this Agreement have been satisfied, (ii) certified copies of
resolutions duly adopted by Parent's or Merger Subsidiary's Boards of Directors
and Parent's Shareholders evidencing the taking of all corporate action
necessary to authorize the execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated hereby, all in
such reasonable detail as Subject Company shall request, and (iii) should
Parent's shareholders approve an amendment to Parent's Restated Charter of
Incorporation to increase the number of its authorized shares of Parent Common
Stock, a copy certified by the Secretary of State of the State of Tennessee,
evidencing the amendment of the Restated Charter of Incorporation of Parent so
as to permit Parent to issue the shares of Parent Common Stock to be issued
pursuant to the Merger.
(d) Consents and Approvals. Parent and/or Merger Subsidiary
shall have obtained any and all Consents required for consummation of the Merger
(other than those set forth in Section 9.1(b) of this Agreement) or for the
preventing of any Default under any Contract or Permit of such Party which, if
not obtained or made, is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Parent.
ARTICLE 10
TERMINATION
10.1 Termination. Notwithstanding any other provision of this
Agreement, and notwithstanding the approval of this Agreement by the
shareholders of Subject Company, this Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time:
(a) By mutual consent of the Board of Directors of Parent and
the Board of Directors of Subject Company; or
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(b) By the Board of Directors of Parent or the Board of
Directors of Subject Company (provided that the terminating Party is not then in
breach of any representation or warranty contained in this Agreement under the
applicable standard set forth in Section 9.2(a) of this Agreement in the case of
Subject Company and Section 9.3(a) in the case of Parent or in material breach
of any covenant or other agreement contained in this Agreement) in the event of
an inaccuracy of any representation or warranty of the other Party contained in
this Agreement which cannot be or has not been cured within 30 days after the
giving of written notice to the breaching Party of such inaccuracy and which
inaccuracy would provide the terminating Party the ability to refuse to
consummate the Merger under the applicable standard set forth in Section 9.2(a)
of this Agreement in the case of Subject Company and Section 9.3(a) of this
Agreement in the case of Parent; or
(c) By the Board of Directors of Parent or the Board of
Directors of Subject Company (provided that the terminating Party is not then in
breach of any representation or warranty contained in this Agreement under the
applicable standard set forth in Section 9.2(a) of this Agreement in the case of
Subject Company and Section 9.3(a) in the case of Parent or in material breach
of any covenant or other agreement contained in this Agreement) in the event of
a material breach by the other Party of any covenant or agreement contained in
this Agreement which cannot be or has not been cured within 30 days after the
giving of written notice to the breaching Party of such breach; or
(d)(1) By the Board of Directors of Parent or the Board of
Directors of Subject Company in the event (i) any Consent of any Regulatory
Authority required for consummation of the Merger and the other transactions
contemplated hereby shall have been denied by final non-appealable action of
such authority or if any action taken by such authority is not appealed within
the time limit for appeal, or (ii) the shareholders of Subject Company fail to
vote their approval of this Agreement and the transactions contemplated hereby
as required by the Texas BCA and this Agreement at the Subject Company
Shareholders' Meeting where the transactions were presented to such shareholders
for approval and voted upon, or (2) by Parent should the shareholders of Parent,
at the Parent Shareholders' Meeting, fail to vote their approval of an amendment
to the Restated Charter of Incorporation of Parent to increase the number of
authorized shares of Parent Common Stock, to the extent Parent would not have
sufficient authorized shares of Parent Common Stock available for issuance in
the Merger. Should Parent's shareholders fail to approve an amendment to
Parent's Restated Charter of Incorporation to increase the number of authorized
shares of Parent Common Stock, then should Parent fail to give the notice to
Subject Company called for under such circumstance in Section 8.2 of this
Agreement within the time period so provided, or should Parent's notice indicate
that Parent does not intend to proceed with the Merger, then Parent shall, in
such case, be deemed to have elected to terminate this Agreement under Section
10.1(d)(2). Should Parent's shareholders fail to approve such amendment to
increase the number of authorized shares of Parent Common Stock and should
Parent provide notice to Subject Company in accordance with Section 8.2 of this
Agreement that it intends to proceed with the Merger, provided (i) the
conditions precedent set forth in Section 9.1 shall have been satisfied (other
than conditions precedent which have not been satisfied as a result of the acts
or omissions of Parent or Merger Subsidiary) and (ii) Parent is not entitled to
terminate this Agreement pursuant to Section 10.1(a), (b), (c) or (d)(1), then
Subject Company shall have the right to declare that Parent has terminated this
Agreement pursuant to this Section 10.1(d)(2) should the Merger fail to become
effective by Deember 31, 1998; provided, however, nothing in this Section
10.1(d)(2) shall prevent Parent from terminating this Agreement, should it have
the right to do so, pursuant to any Section of this Article 10 other than
Section 10.1(d)(2); or
(e) By the Board of Directors of Parent or the Board of
Directors of Subject Company in the event that the Merger shall not have been
consummated by December 31, 1998, if the failure to consummate the transactions
contemplated hereby on or before such date is not caused by any willful breach
of this Agreement by the Party electing to terminate pursuant to this Section
10.1(e), and should Parent's shareholders fail to approve an amendment to
Parent's Restated Charter of Incorporation to increase the number of authorized
shares of Parent Common Stock to the extent Parent would not have sufficient
authorized shares of Parent Common Stock available for issuance in the Merger,
then Parent shall no longer have the right to terminate this Agreement pursuant
to this Section 10.1(e).
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10.2 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 10.1 of this Agreement, this
Agreement and the Plan of Merger shall become void and have no effect, except
that (i) the provisions of this Section 10.2, Section 8.6(b), Section 8.8,
Section 11.2 and Section 11.3 of this Agreement shall survive any such
termination and abandonment, and (ii) a termination pursuant to the terms of
this Agreement shall not relieve the breaching Party from Liability for an
uncured breach of a representation, warranty, covenant, or agreement.
10.3 Non-Survival of Representations and Covenants. The respective
representations, warranties, obligations, covenants, and agreements of the
Parties shall not survive the Effective Time except for those covenants and
agreements which by their terms apply in whole or in part after the Effective
Time.
ARTICLE 11
MISCELLANEOUS
11.1 Definitions. (a) Except as otherwise provided herein, the
capitalized terms set forth below shall have the following meanings:
"Acquisition Proposal" with respect to a Party shall mean any tender
offer or exchange offer or any proposal for a merger, acquisition of all of the
stock or assets of, or other business combination involving such Party or any of
its Subsidiaries or the acquisition of a substantial equity interest in, or a
substantial portion of the Assets of, such Party or any of its Subsidiaries.
"Affiliate" of a Person shall mean any other Person, directly or
indirectly through one or more intermediaries, controlling, controlled by, or
under common control with such Person.
"Agreement" shall mean this Agreement and the Exhibits delivered
pursuant hereto and incorporated herein by reference.
"Articles of Merger" shall mean the Articles of Merger to be executed
by Parent, Merger Subsidiary and Subject Company and filed with the Secretary of
State of the State of Tennessee and the Secretary of State of the State of Texas
relating to the Merger as contemplated by Section 1.1 of this Agreement.
"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, wherever located.
"Bank" shall mean Alvin State Bank, Alvin, Texas.
"BHC Act" shall mean the federal Bank Holding Company Act of 1956, as
amended.
"Closing Date" shall mean the date on which the Closing occurs.
"Consent" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order or Permit.
"Contract" shall mean any legally binding written or oral agreement,
arrangement, authorization, commitment, contract, indenture, instrument, lease,
obligation, plan, practice, restriction, understanding, or undertaking of any
kind or character, or other document to which any Person is a party or that is
binding on any Person or its capital stock, Assets or business.
"Default" shall mean (i) any breach or violation of or default under
any Contract, Order, or Permit, (ii) any occurrence of any event that with the
passage of time or the giving of notice or both would constitute a breach or
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violation of or default under any Contract, Order, or Permit, or (iii) any
occurrence of any event that with or without the passage of time or the giving
of notice would give rise to a right to terminate or revoke, change the current
terms of, or renegotiate, or to accelerate, increase or impose any Liability
under, any Contract, Order or Permit.
"Dissenting Shares" shall mean any shares of Subject Company Common
Stock with respect to which the record or beneficial holder has properly
perfected the holder's rights to dissent under Article 5.12 of the Texas BCA.
"Effective Time" shall have the meaning ascribed to such term in
Section 1.3 of this Agreement.
"Environmental Laws" shall mean all Laws relating to pollution or
protection of human health or the environment (including ambient air, surface
water, ground water, land surface or subsurface strata) and which are
administered, interpreted or enforced by the United States Environmental
Protection Agency and state and local agencies with jurisdiction over, and
including common law in respect of, pollution or protection of the environment,
including the Comprehensive Environmental Response Compensation and Liability
Act, as amended, 42 U.S.C. 9601 et seq. ("CERCLA"), the Resource Conservation
and Recovery Act, as amended, 42 U.S.C. 6901 et seq.("RCRA"), and other Laws
relating to emissions, discharges, releases, or threatened releases of any
Hazardous Material, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of any
Hazardous Material.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" shall mean any trade or business, whether or not
incorporated, that together with the entity under consideration would be deemed
a "single employer" within the meaning of section 4001(b) of ERISA.
"Exchange Agent" shall have the meaning ascribed to such term in
Section 4.1 of this Agreement.
"Exchange Ratio" shall have the meaning ascribed to such term in
Section 3.1(c) of this Agreement.
"Exhibits" shall mean the Exhibits so marked, copies of which are
attached to this Agreement. Such Exhibits are hereby incorporated by reference
herein and made a part hereof.
"FRB" shall mean the Board of Governors of the Federal Reserve System
or applicable Federal Reserve Bank.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"Hazardous Material" shall mean (i) any hazardous substance, hazardous
material, hazardous waste, regulated substance, or toxic substance (as those
terms are defined by any applicable Environmental Laws) and (ii) any chemicals,
pollutants, contaminants, petroleum, petroleum products, or oil (and
specifically shall include asbestos requiring abatement, removal, or
encapsulation pursuant to the requirements of governmental authorities and any
polychlorinated biphenyls).
"HSR Act" shall mean Section 7A of the Clayton Act, as added by Title
II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
the rules and regulations promulgated thereunder.
"Indemnified Party" shall have the meaning ascribed to such term in
Section 8.12 of this Agreement.
"Intellectual Property" shall mean copyrights, patents, trademarks,
service marks, service names, trade names, applications therefor, technology
rights and licenses, computer software (including any source or object codes
therefor or documentation relating thereto), trade secrets, franchises,
know-how, inventions, and other intellectual property rights.
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"Internal Revenue Code" shall mean the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder.
"Knowledge" as used with respect to a Person (including references to
such Person being aware of a particular matter) shall mean those facts that are
known by the Chairman, President, Chief Financial Officer, Chief Accounting
Officer, Chief Credit Officer, or General Counsel of such Person.
"Law" shall mean any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or statute applicable to a Person or its Assets,
Liabilities or business, including those promulgated, interpreted, or enforced
by any Regulatory Authority.
"Liability" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost, or expense (including costs
of investigation, collection, and defense), claim, deficiency, guaranty, or
endorsement of or by any Person (other than endorsements of notes, bills,
checks, and drafts presented for collection or deposit in the ordinary course of
business) of any type, whether accrued, absolute or contingent, liquidated or
unliquidated, matured or unmatured, or otherwise.
"Lien" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title retention,
or other security arrangement, or any adverse right or interest, charge, or
claim of any nature whatsoever of, on, or with respect to any property or
property interest, other than (i) Liens for current Taxes upon the assets or
properties of a Party or its Subsidiaries which are not yet delinquent, and (ii)
for depository institution Subsidiaries of a Party, pledges to secure deposits,
and other Liens incurred in the ordinary course of banking business.
"Litigation" shall mean any action, arbitration, cause of action,
claim, complaint, criminal prosecution, demand letter, governmental or other
examination or investigation, hearing, inquiry, administrative or other
proceeding, or notice (written or oral) by any Person alleging potential
Liability or requesting information relating to or affecting a Party, its
business, its Assets (including Contracts related to it), or the transactions
contemplated by this Agreement, but shall not include regular, periodic
examinations of depository institutions and their Affiliates by Regulatory
Authorities.
"Material Adverse Effect" on a Party shall mean an event, change, or
occurrence which, individually or together with any other event, change, or
occurrence, has a material adverse impact on (i) the financial condition,
business, or results of operations of such Party and its Subsidiaries, taken as
a whole, or (ii) the ability of such Party to perform its obligations under this
Agreement or to consummate the Merger or the other transactions contemplated by
this Agreement in accordance with applicable Law, provided that "Material
Adverse Effect" and "material adverse impact" shall not be deemed to include the
impact of (a) changes in banking and similar Laws of general applicability or
interpretations thereof by courts or governmental authorities, (b) changes in
GAAP or regulatory accounting principles generally applicable to banks and their
holding companies, (c) actions or omissions of a Party (or any of its
Subsidiaries) taken with the prior written consent of the other Party, (d)
changes in economic conditions or interest rates generally affecting financial
institutions, or (e) the direct effects of compliance with this Agreement
(including the expense associated with the vesting of benefits under the various
employee benefit plans of Subject Company as a result of the Merger constituting
a change of control) on the operating performance of the Parties, including
expenses incurred by the Parties in consummating the transactions contemplated
by the Agreement.
"Merger" shall mean the merger of Subject Company with and into Merger
Subsidiary.
"Merger Subsidiary" shall mean Union Planters Holding Corporation, a
wholly-owned subsidiary of Parent organized under the Laws of the State of
Tennessee.
"Merger Subsidiary Common Stock" shall mean the $1.00 par value common
stock of Merger Subsidiary.
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"NASD" shall mean the National Association of Securities Dealers, Inc.
"NYSE" shall mean the New York Stock Exchange, Inc.
"1933 Act" shall mean the Securities Act of 1933, as amended.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
"Operating Property" shall mean any property owned by the Party in
question or by any of its Subsidiaries or in which such Party or Subsidiary
holds a security interest, and, where required by the context, includes the
owner or operator of such property, but only with respect to such property.
"Order" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or writ
of any federal, state, local, or foreign or other court, arbitrator, mediator,
tribunal, administrative agency, or Regulatory Authority.
"Parent" shall mean Union Planters Corporation, a Tennessee
corporation.
"Parent Capital Stock" shall mean, collectively, the Parent Common
Stock, the Parent Preferred Stock and any other class or series of capital stock
of Parent.
"Parent Common Stock" shall mean the $5.00 par value common stock of
Parent.
"Parent Contracts" shall have the meaning ascribed to such term in
Section 6.11 of this Agreement.
"Parent Disclosure Memorandum" shall mean the written information
entitled "Parent Memorandum" delivered prior to the date of this Agreement to
Subject Company describing in reasonable detail the matters contained therein
and, with respect to each disclosure made therein, specifically referencing each
Section of this Agreement under which such disclosure is being made.
"Parent Financial Statements" shall mean (i) the consolidated balance
sheets (including related notes and schedules, if any) of Parent as of September
30, 1997, and as of December 31, 1996 and 1995, and the related statements of
earnings, changes in shareholders' equity, and cash flows (including related
notes and schedules, if any) for the nine months ended September 30, 1997 and
for each of the three years ended December 31, 1996, 1995 and 1994, as filed by
Parent in SEC Documents, and (ii) the consolidated balance sheets of Parent
(including related notes and schedules, if any) and related statements of
earnings, changes in shareholders' equity, and cash flows (including related
notes and schedules, if any) included in SEC Documents filed with respect to
periods ended subsequent to September 30, 1997.
"Parent Material Contracts" shall have the meaning ascribed to such
term in Section 6.11 of this Agreement.
"Parent Preferred Stock" shall mean the no par value preferred stock of
Parent and shall include the (i) Series A Preferred Stock and (ii) Series E 8%
Cumulative, Convertible Preferred Stock, of Parent ("Parent Series E Preferred
Stock").
"Parent Rights" shall mean the preferred stock purchase rights issued
pursuant to the Parent Rights Agreement.
"Parent Rights Agreement" shall mean that certain Rights Agreement,
dated January 19, 1989, between Parent and Union Planters Bank, National
Association, as Rights Agent.
"Parent Shareholders' Meeting" shall mean a meeting of the shareholders
of Parent called to consider and
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vote upon, among other things, a proposal to amend the Charter of Incorporation
of Parent to authorize the issuance of at least sufficient additional shares of
Parent Common Stock to permit Parent and Merger Subsidiary to consummate the
Merger upon the terms and conditions set forth in this Agreement.
"Parent Subsidiaries" shall mean the Subsidiaries of Parent and any
corporation, bank, or other organization acquired as a Subsidiary of Parent in
the future and owned by Parent at the Effective Time.
"Participation Facility" shall mean any facility or property in which
the Party in question or any of its Subsidiaries participates in the management
and, where required by the context, said term means the owner or operator of
such facility or property, but only with respect to such facility or property.
"Party" shall mean Subject Company, Merger Subsidiary or Parent, and
"Parties" shall mean, collectively, Subject Company, Merger Subsidiary and
Parent.
"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 of even date herewith
entered into by Parent, Merger Subsidiary and Subject Company, in the form of
Exhibit 1.
"Registration Statement" shall mean the Registration Statement on Form
S-4, or other appropriate form, including any pre-effective or post-effective
amendments or supplements thereto, filed with the SEC by Parent under the 1933
Act with respect to the shares of Parent Common Stock to be issued to the
shareholders of Subject Company in connection with the transactions contemplated
by this Agreement.
"Regulatory Authorities" shall mean, collectively, the FRB, the
Department of Financial Institutions of the State of Tennessee, the Texas
Department of Banking, all state regulatory agencies having jurisdiction over
any of the Parties or their respective Subsidiaries, the NYSE, the NASD, and the
SEC.
"Representative" shall mean any investment banker, financial advisor,
attorney, accountant, consultant, or other representative of a Person.
"Rights" shall mean all arrangements, calls, commitments, Contracts,
options, rights to subscribe to, scrip, warrants, or other binding obligations
of any character whatsoever by which a Person is or may be bound to issue
additional shares of its capital stock or other rights, or securities or rights
convertible into or exchangeable for, shares of the capital stock of a Person.
"SEC" shall mean the Securities and Exchange Commission.
"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 the SEC pursuant to the
Securities Laws.
"Securities Laws" shall mean the 1933 Act, the 1934 Act, the Investment
Company Act of 1940, as amended, the Investment Advisors Act of 1940, as
amended, the Trust Indenture Act of 1939, as amended, and the rules and
regulations of any Regulatory Authority promulgated thereunder.
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"Significant Subsidiary" shall have the meaning ascribed such to such
term in Rule 1-02(w) of Regulation S-X promulgated under the Securities Laws.
"Subject Company" shall mean Alvin Bancshares, Inc., a Texas
corporation.
"Subject Company Benefit Plans" shall have the meaning ascribed to such
term in Section 5.14(a) of this Agreement.
"Subject Company Common Stock" shall mean the common stock, $1.00 par
value per share, of Subject Company.
"Subject Company Contracts" shall have the meaning ascribed to such
term in Section 5.15 of this Agreement.
"Subject Company Disclosure Memorandum" shall mean the written
information entitled "Subject Company Disclosure Memorandum" delivered prior to
the date of this Agreement to Parent describing in reasonable detail the matters
contained therein and, with respect to each disclosure made therein,
specifically referencing each Section of this Agreement under which such
disclosure is being made.
"Subject Company ERISA Plan" shall have the meaning ascribed to such
term in Section 5.14(a) of this Agreement.
"Subject Company Financial Statements" shall have the meaning ascribed
thereto in Section 5.5 of this Agreement.
"Subject Company Proxy Statement" shall mean the proxy statement used
by Subject Company to solicit the approval of its shareholders of the
transactions contemplated by this Agreement, which shall include the prospectus
of Parent relating to the issuance of the Parent Common Stock to holders of
Subject Company Common Stock.
"Subject Company Shareholders' Meeting" shall mean the meeting of the
shareholders of Subject Company to be held pursuant to Section 8.1 of this
Agreement, including any adjournment or adjournments thereof.
"Subject Company Subsidiaries" shall mean the Subsidiaries of Subject
Company, which shall include Subject Company Subsidiaries described in Section
5.4 of this Agreement and any corporation, bank, or other organization acquired
as a Subsidiary of Subject Company in the future and owned by Subject Company at
the Effective Time.
"Subsidiaries" shall mean all those corporations, banks, associations,
or other entities of which the entity in question owns or controls 10% or more
of the outstanding equity securities either directly or through an unbroken
chain of entities as to each of which 10% or more of the outstanding equity
securities is owned directly or indirectly by its parent; provided, there shall
not be included any such entity acquired through foreclosure or any such equity
the equity securities of which are owned or controlled in a fiduciary capacity.
"Supplemental Letter" shall mean the supplemental letter of even date
herewith relating to certain understandings and agreements with respect to
certain employment matters following the Effective Time in addition to those
included in this Agreement.
"Surviving Corporation" shall mean Merger Subsidiary as the surviving
corporation resulting from the Merger.
"Takeover Laws" shall have the meaning ascribed to such term in Section
5.20 of this Agreement.
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"Tax" or "Taxes" shall mean all taxes, charges, fees, levies or other
assessments, including, without limitation, all net income, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits, license,
withholding, payroll, employment, excise, estimated, severance, stamp,
occupation, property or other taxes, customs duties, fees, assessments or
charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any taxing authority (domestic
or foreign).
"Tax Returns" shall mean all returns and reports of or with respect to
any Tax which are required to be filed by or with respect to the applicable
Party.
"TBCA" shall mean the Tennessee Business Corporation Act.
"Texas BCA" shall mean the Texas Business Corporation Act.
"Texas Banking Commissioner" shall mean the Commissioner of the Texas
Department of Banking.
(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."
11.2 Expenses. (a) Except as otherwise provided in this Section 11.2
and in Section 8.8, each of the Parties shall bear and pay all direct costs and
expenses incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including filing, registration and application fees,
printing fees, and fees and expenses of its own financial or other consultants,
investment bankers, accountants, and counsel, except that each of the Parties
shall bear and pay the filing fees payable in connection with the Registration
Statement and the Subject Company Proxy Statement and printing and mailing costs
incurred in connection with the printing and mailing of the Registration
Statement and the Subject Company Proxy Statement based on the relative Asset
sizes of the Parties at December 31, 1997.
(b) Nothing contained in this Section 11.2 shall constitute or
shall be deemed to constitute liquidated damages for the willful breach by a
Party of the terms of this Agreement or otherwise limit the rights of the
non-breaching Party.
11.3 Brokers and Finders. Each of the Parties represents and warrants
that neither it nor any of its officers, directors, employees, or Affiliates has
employed any broker or finder or incurred any Liability for any financial
advisory fees, investment bankers' fees, brokerage fees, commissions, or
finders' fees in connection with this Agreement or the transactions contemplated
hereby, except as disclosed in Section 11.3 of such Party's Disclosure
Memorandum. In the event of a claim by any broker or finder based upon his or
its representing or being retained by or allegedly representing or being
retained by Subject Company or Parent other than those disclosed in the previous
sentence, each of Subject Company and Parent, as the case may be, agrees to
indemnify and hold the other Party harmless of and from any Liability incurred
by such Party in respect of any such claim.
11.4 Entire Agreement. Except as otherwise expressly provided herein,
this Agreement (including the other documents and instruments referred to
herein, including, but not limited to, the Supplemental Letter) 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, between Parent and Subject Company.
Nothing in this Agreement expressed or implied is intended to confer upon any
Person, other than the Parties or their respective successors, any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
other than as provided in the Supplemental Letter and in Sections 8.11 and 8.12
of this Agreement.
11.5 Amendments. To the extent permitted by Law, this Agreement may be
amended by a subsequent writing signed by each of the Parties upon the approval
of the Boards of Directors of each of the Parties, whether before or after
shareholder approval of this Agreement has been obtained.
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11.6 Waivers. (a) Prior to or at the Effective Time, Parent, acting
through its Board of Directors, chief executive officer, or other authorized
officer, shall have the right to waive any Default in the performance of any
term of this Agreement by Subject Company, to waive or extend the time for the
compliance or fulfillment by Subject Company of any and all of its obligations
under this Agreement, and to waive any or all of the conditions precedent to the
obligations of Parent under this Agreement, except any condition which, if not
satisfied, would result in the violation of any Law. No such waiver shall be
effective unless in writing signed by a duly authorized officer of Parent.
(b) Prior to or at the Effective Time, Subject Company, acting
through its Board of Directors, chief executive officer, or other authorized
officer, shall have the right to waive any Default in the performance of any
term of this Agreement by Parent and/or Merger Subsidiary, to waive or extend
the time for the compliance or fulfillment by Parent and/or Merger Subsidiary of
any and all of its obligations under this Agreement, and to waive any or all of
the conditions precedent to the obligations of Subject Company under this
Agreement, except any condition which, if not satisfied, would result in the
violation of any Law. No such waiver shall be effective unless in writing signed
by a duly authorized officer of Subject Company.
(c) The failure of any Party at any time or times to require
performance of any provision hereof shall in no manner affect the right of such
Party at a later time to enforce the same or any other provision of this
Agreement. No waiver of any condition or of the breach of any term contained in
this Agreement in one or more instances shall be deemed to be or construed as a
further or continuing waiver of such condition or breach of a waiver of any
other condition or of the breach of any other term of this Agreement.
11.7 Assignment. Except in accordance with Section 1.4 of this
Agreement, neither this Agreement nor any of the rights, interests, or
obligations hereunder shall be assigned by any Party hereto (whether by
operation of Law or otherwise) without the prior written consent of the other
Party. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the Parties and their respective
successors and assigns.
11.8 Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, by registered or certified mail, postage prepaid, or by
courier or overnight carrier, to the person at the addresses set forth below (or
at such other address as may be provided hereunder), and shall be deemed to have
been delivered as of the date so delivered:
Subject Company: Alvin Bancshares, Inc.
221 S. Gordon (delivery)
Alvin, Texas 77511
or P. O. Box 232 (mail)
Alvin, Texas 77512-02322
Attention: James F. Eubank, II
Chairman
Telephone Number: (281) 331-6411
Telecopy Number: (281) 331-2329
Copy to Subject Company Counsel: Winstead Sechrest & Minick P.C.
Bank One Center
910 Travis Street, Suite 2400
Houston, Texas 77002-5895
Attention: Ross D. Margraves, Jr. Esq.
Telephone Number: (713) 650-2773
Telecopy Number: (713) 650-2400
Alvin Bancshares - Merger Agreement Page 36
<PAGE> 125
Parent: Union Planters Corporation
7130 Goodlett Farms Parkway
Memphis, Tennessee 38018
Attention: Jackson W. Moore
President and COO
Telephone Number: (901) 580-6093
Telecopy Number: (901) 580-2939
Copy to Parent Counsel: Union Planters Corporation
7130 Goodlett Farms Parkway
Memphis, Tennessee 38018
Attention: E. James House, Jr., Esq.
Manager, Legal Division
Telephone Number:
Telecopy Number: (901) 580-2939
and
Wyatt, Tarrant & Combs
6075 Poplar Avenue, Suite 650
Memphis, Tennessee 38017
Attention: R. Nash Neyland, Esq.
Telephone Number: (901)537-1023
Telecopy Number: (901) 537-1010
11.9 Governing Law. This Agreement shall be governed by and construed
in accordance with the Laws of the State of Tennessee, without regard to any
applicable conflicts of Laws.
11.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
11.11 Captions. The captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.
11.12 Interpretations. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against any Party, whether under
any rule of construction or otherwise. No Party to this Agreement shall be
considered the draftsman. The Parties acknowledge and agree that this Agreement
has been reviewed, negotiated, and accepted by all Parties and their attorneys
and shall be construed and interpreted according to the ordinary meaning of the
words used so as fairly to accomplish the purposes and intentions of all Parties
hereto.
11.13 Enforcement of Agreement. The Parties agree that time is of the
essence in the performance of their respective obligations under this Agreement.
The Parties hereto agree that irreparable damage would occur in the event that
any of the provisions of this Agreement was not performed in accordance with its
specific terms or was otherwise breached. It is accordingly agreed that the
Parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
11.14 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
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this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
IN WITNESS WHEREOF, each of the Parties has caused this
Agreement to be executed on its behalf and its corporate seal to be hereunto
affixed and attested by officers thereunto as of the day and year first above
written.
ATTEST: ALVIN BANCSHARES, INC.
By:/s/ Thomas Blakeney, Jr. By:/s/ James F. Eubank, II
------------------------------- -----------------------------
Thomas Blakeney, Jr., President James F. Eubank, II, Chairman
[CORPORATE SEAL]
ATTEST: UNION PLANTERS CORPORATION
By:/s/ By:/s/ Jackson W. Moore
-------------------------------- -----------------------------------
Jackson W. Moore
President & Chief Operating Officer
ATTEST: UNION PLANTERS HOLDING CORPORATION
By:/s/ By:/s/ Jackson W. Moore
--------------------------------- ----------------------------------
Jackson W. Moore
Chairman & Chief Operating Officer
[CORPORATE SEAL]
Alvin Bancshares - Merger Agreement Page 38
<PAGE> 127
APPENDIX B
PLAN OF MERGER
OF
ALVIN BANCSHARES, INC.
WITH AND INTO
UNION PLANTERS HOLDING CORPORATION
Pursuant to this Plan of Merger ("Plan of Merger"), Alvin Bancshares,
Inc. ("Subject Company"), a corporation organized and existing under the laws of
the State of Texas, shall be merged with and into Union Planters Holding
Corporation ("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 ("Parent").
Except as otherwise provided herein, the capitalized terms set forth
below shall have the meanings ascribed thereto in that certain merger agreement
dated as of March 18, 1998 between Parent, Merger Subsidiary and Subject Company
(the "Agreement"), of which this Plan of Merger is Exhibit 1.
ARTICLE 1
TERMS OF MERGER
1.1 Merger. Subject to the terms and conditions of the Agreement and
this Plan of Merger, at the Effective Time, Subject Company shall be merged with
and into Merger Subsidiary in accordance with the provisions of Section
48-21-109 of the TBCA and Article 5.01 of the Texas BCA, and with the effect
provided in Section 48-21-108 of the TBCA and Article 5.06 of the Texas BCA (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
Agreement and this Plan of Merger, which have been approved and adopted by the
respective Boards of Directors of Subject Company, Parent and Merger Subsidiary.
1.2 Time and Place of Closing. The Closing will take place at 9:00 A.M.
on the date on which the Effective Time is to occur (or the immediately
preceding day if the Effective Time is to be earlier than 9:00 A.M.), or at such
other time as the Parties, acting through their chief executive officers or
chief financial officers, may mutually agree. The Closing shall be held at such
place as may be mutually agreed upon by the Parties.
1.3 Effective Time. The Merger and other transactions contemplated by
the Agreement and this Plan of Merger shall become effective at the time the
Articles of Merger reflecting the Merger shall become effective with the
Secretary of State of the States of Tennessee and Texas (the "Effective Time").
1.4 Restructure of Transaction. Subject to the terms of the Agreement,
Parent shall, in its reasonable discretion, have the unilateral right to revise
the structure of the Merger contemplated by the Agreement and this Plan of
Merger in order to achieve tax benefits or for any other reason which Parent may
deem advisable.
ARTICLE 2
TERMS OF MERGER
2.1 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.
2.2 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.
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2.3 Directors and Officers. The directors of Merger Subsidiary in
office immediately prior to the Effective Time, together with such additional
persons as may thereafter be elected, shall serve as the directors of the
Surviving Corporation from and after the Effective Time in accordance with the
Bylaws of the Surviving Corporation. The officers of Merger Subsidiary in office
immediately prior to the Effective Time, together with such additional persons
as may thereafter be elected, shall serve as the officers of the Surviving
Corporation from the Effective Time in accordance with the Bylaws of the
Surviving Corporation.
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 Conversion of Shares. Subject to the provisions of this Article 3
(and Article 3 of the Agreement), at the Effective Time, by virtue of the Merger
and without any action on the part of Parent, Merger Subsidiary, Subject
Company, or the shareholders of any of the foregoing, the shares of the
constituent corporations shall be converted as follows:
(a) Each share of Parent Capital Stock, including any
associated Parent Rights, issued and outstanding immediately prior to the
Effective Time shall remain issued and outstanding from and after the Effective
Time.
(b) Each share of Merger Subsidiary Common Stock issued and
outstanding immediately prior to the Effective Time shall remain issued and
outstanding and shall represent one share of the Surviving Corporation from and
after the Effective Time.
(c) Except for Dissenting Shares, each share of Subject
Company Common Stock (excluding shares held by Subject Company, any Subject
Company Subsidiary, Parent or any Parent Subsidiary, in each case other than in
a fiduciary capacity or as a result of debts previously contracted) issued and
outstanding at the Effective Time shall cease to be outstanding and shall be
converted into and exchanged for the right to receive one (1) share of Parent
Common Stock (subject to possible adjustment as set forth in Section 3.2 of the
Agreement, the "Exchange Ratio"). Pursuant to the Parent Rights Agreement, each
share of Parent Common Stock issued in connection with the Merger upon
conversion of Subject Company Common Stock shall be accompanied by a Parent
Right.
(d) Dissenting Shares shall not be converted pursuant to
Section 3.1(c) in the Merger but, at and after the Effective Time, shall
represent only the right to receive payment in accordance with Article 5.12 of
the Texas BCA. If a holder of Dissenting Shares becomes ineligible for payment
under Article 5.12 of the Texas BCA, then such holder's Dissenting Shares shall
cease to be Dissenting Shares and shall be converted in the manner set forth in
Section 3.1(c) effective as of the Effective Time.
3.2 Anti-Dilution Provisions. In the event Parent changes the number of
shares of Parent Common Stock issued and outstanding after the date of this Plan
of Merger and prior to the Effective Time as a result of a stock split, stock
dividend, subdivision, reclassification, conversion or similar recapitalization
with respect to such stock and the record date therefor (in the case of a stock
dividend) or the effective date thereof (in the case of a stock split,
subdivision, reclassification, conversion or similar recapitalization for which
a record date is not established) shall be prior to the Effective Time, the
Exchange Ratio shall be proportionately adjusted.
3.3 Shares Held by Subject Company or Parent. Each of the shares of
Subject Company Common Stock held by Subject Company, any Subject Company
Subsidiary, Parent or any Parent Subsidiary, in each case other than in
fiduciary capacity or as a result of debts previously contracted, shall be
canceled and retired at the Effective Time and no consideration shall be issued
in exchange therefor.
3.4 Fractional Shares. Notwithstanding any other provision of this Plan
of Merger, each holder of shares of Subject Company Common Stock exchanged
pursuant to the Merger who would otherwise have been
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entitled to receive a fractional share of Parent Common Stock (after taking into
account all certificates delivered by such holder) shall receive, in lieu
thereof, cash (without interest) in an amount equal to such fractional share of
Parent Common Stock multiplied by the closing price of such common stock on the
NYSE-Composite Transactions List (as reported by The Wall Street Journal or, if
not reported thereby, any other authoritative source reasonably selected by
Parent) on the last trading day preceding the Effective Time. No such holder
will be entitled to dividends, voting rights, or any other rights as a
shareholder in respect of any fractional shares.
ARTICLE 4
EXCHANGE OF SHARES
4.1 Exchange Procedures. Promptly after the Effective Time, Parent and
Subject Company shall cause the exchange agent selected by Parent (the "Exchange
Agent") to mail to the former shareholders of Subject Company appropriate
transmittal materials (which shall specify that delivery shall be effected, and
risk of loss and title to the certificates theretofore representing shares of
Subject Company Common Stock shall pass, only upon proper delivery of such
certificates to the Exchange Agent). Subject Company shall have the right to
review and approve the transmittal materials. The Exchange Agent may establish
reasonable and customary rules and procedures in connection with its duties,
provided such rules and procedures do not have the effect of limiting or
eliminating the obligation of Parent and/or Merger Subsidiary to deliver the
consideration contemplated by Article 3 of this Plan of Merger. After the
Effective Time, each holder of shares of Subject Company Common Stock (other
than Dissenting Shares or shares to be canceled pursuant to Section 3.3 of this
Plan of Merger) issued and outstanding at the Effective Time shall surrender the
certificate or certificates representing such shares to the Exchange Agent and
shall promptly upon surrender thereof receive in exchange therefor the
consideration provided in Section 3.1(c) of this Plan of Merger, together with
all undelivered dividends and other distributions, if any, in respect of such
shares (without interest thereon) pursuant to Section 4.2 of this Plan of
Merger. To the extent required by Section 3.4 of this Plan of Merger, each
holder of shares of Subject Company Common Stock issued and outstanding at the
Effective Time also shall receive, upon surrender of the certificate or
certificates representing such shares, cash in lieu of any fractional share of
Parent Common Stock to which such holder may be otherwise entitled (without
interest). Parent shall not be obligated to deliver the consideration to which
any former holder of Subject Company Common Stock is entitled as a result of the
Merger until such holder surrenders such holder's certificate or certificates
representing the shares of Subject Company Common Stock for exchange as provided
in this Section 4.1 or in Section 4.2 hereof. The certificate or certificates of
Subject Company Common Stock so surrendered shall be duly endorsed as the
Exchange Agent may reasonably require. Any other provision of the Agreement or
this Plan of Merger notwithstanding, neither Parent, Merger Subsidiary nor the
Exchange Agent shall be liable to a holder of Subject Company Common Stock for
any amounts paid or property delivered in good faith to a public official
pursuant to any applicable abandoned property Law.
4.2 Rights of Former Subject Company Shareholders. At the Effective
Time, other than with respect to Dissenting Shares, the stock transfer books of
Subject Company shall be closed as to holders of Subject Company Common Stock
immediately prior to the Effective Time and no transfer of Subject Company
Common Stock by any such holder shall thereafter be made or recognized. Until
surrendered for exchange in accordance with the provisions of Section 4.1 of
this Plan of Merger, each certificate theretofore representing shares of Subject
Company Common Stock (other than Dissenting Shares or shares to be canceled
pursuant to Section 3.3 of this Plan of Merger) shall from and after the
Effective Time represent for all purposes only the right to receive the
consideration provided in Sections 3.1(c) and 3.4 of this Plan of Merger in
exchange therefor, subject, however, to the Surviving Corporation's obligations
to pay any dividends or make any other distributions with a record date prior to
the Effective Time which have been declared or made by Subject Company in
respect of such shares of Subject Company Common Stock in accordance with the
terms of this Plan of Merger and which remain unpaid at the Effective Time. In
addition, whenever a dividend or other distribution is declared by Parent on the
Parent Common Stock, the record date for which is at or after the Effective
Time, the declaration shall include dividends or other distributions on all
shares of Parent Common Stock issuable pursuant to this Plan of Merger, but no
dividend or other distribution payable to the holders of record of Parent Common
Stock as of any time subsequent to the Effective Time shall be delivered to the
holder of any certificate representing shares of Subject Company Common
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Stock issued and outstanding at the Effective Time until such holder surrenders
such certificate for exchange as provided in Section 4.1 of this Plan of Merger.
However, upon surrender of such Subject Company Common Stock certificate, both a
Parent Common Stock certificate and any undelivered dividends and other
distributions payable hereunder (without interest) shall be delivered and paid
with respect to each share represented by such certificate. In the event any
Subject Company Common Stock certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such certificate to be lost, stolen or destroyed and, if reasonably required by
Parent, the posting by such person of a bond in such amount as Parent may
reasonably direct as indemnity against any claim that may be made against it
with respect to such certificate, the Exchange Agent shall issue in exchange for
such lost, stolen or destroyed certificate the shares of Parent Common Stock and
cash in lieu of fractional shares and dividends and other distributions
deliverable in respect thereof pursuant to this Plan of Merger.
ARTICLE 5
MISCELLANEOUS
5.1 Conditions Precedent. Consummation of the Merger by Merger
Subsidiary shall be conditioned on the satisfaction of or waiver by Parent of
the conditions precedent to the Merger set forth in Sections 9.1 and 9.2 of the
Agreement. Consummation of the Merger by Subject Company shall be conditioned on
the satisfaction of, or waiver by Subject Company of, of the conditions
precedent to the Merger set forth in Sections 9.1 and 9.3 of the Agreement.
5.2 Termination. This Plan of Merger may be terminated at any time
prior to the Effective Time by the Parties hereto as provided in Article 10 of
the Agreement.
5.3 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 Agreement and this Plan of Merger has been
obtained; provided, that after any such approval by the holders of Subject
Company Common Stock, there shall be made no amendment that modifies in any
material respect the consideration to be received by the Subject Company
shareholders.
5.4 Assignment. Except as expressly contemplated hereby, neither this
Plan of Merger nor the Agreement, nor any of the rights, interests, or
obligations hereunder or thereunder shall be assigned by any Party hereto
(whether by operation of Law or otherwise) without the prior written consent of
the other Party. Subject to the preceding sentence, the Agreement and this Plan
of Merger will be binding upon, inure to the benefit of and be enforceable by
the Parties and their respective successors and assigns.
5.5 Governing Law. This Plan of Merger shall be governed by and
construed in accordance with the Laws of the State of Tennessee, without regard
to any applicable conflicts of Laws.
5.6 Counterparts. This Plan of Merger 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.
5.7 Captions. The captions contained in this Plan of Merger are for
reference purposes only and are not part of this Plan of Merger.
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IN WITNESS WHEREOF, each of the Parties hereto has duly
executed and delivered this Plan of Merger or has caused this Plan of Merger 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.
ATTEST: ALVIN BANCSHARES, INC.
By:/s/ Thomas Blakeney, Jr. By:/s/ James F. Eubank, II
------------------------------- -----------------------------
Thomas Blakeney, Jr., President James F. Eubank, II, Chairman
[CORPORATE SEAL]
ATTEST: UNION PLANTERS CORPORATION
By:/s/ By:/s/ Jackson W. Moore
-------------------------------- -----------------------------------
Jackson W. Moore
President & Chief Operating Officer
ATTEST: UNION PLANTERS HOLDING CORPORATION
By:/s/ By:/s/ Jackson W. Moore
-------------------------------- -----------------------------------
Jackson W. Moore
Chairman & Chief Operating Officer
[CORPORATE SEAL]
Alvin Bancshares - Plan of Merger Page 5
<PAGE> 132
Exhibit 2
AFFILIATE AGREEMENT
Union Planters Corporation
7130 Goodlett Farms Parkway
Memphis, Tennessee 38108
Attention: Jackson W. Moore, President
and Chief Operating Officer
Gentlemen:
The undersigned is a shareholder of Alvin Bancshares, Inc., ("Subject
Company") a corporation organized and existing under the laws of the State of
Texas, and will become a shareholder of Union Planters Corporation ("Parent")
pursuant to the transactions described in the Agreement and Plan of Merger,
dated as of March 18, 1998, (the "Agreement"), by and between Parent, Union
Planters Holding Corporation ("Merger Subsidiary"), and Subject Company. Under
the terms of the Agreement, Subject Company will be merged with and into Merger
Subsidiary (the "Merger"), and shares of the $1.00 par value common stock of
Subject Company ("Subject Company Common Stock") will be converted into and
exchanged for shares of the $5.00 par value common stock of Parent ("Parent
Common Stock"). This Affiliate Agreement represents an agreement between the
undersigned and Parent regarding rights and obligations of the undersigned in
connection with the shares of Parent Common Stock to be received by the
undersigned as a result of the Merger. Except as otherwise provided herein,
capitalized terms set forth below shall have the meanings ascribed thereto in
the Agreement.
In consideration of the Merger and the mutual covenants contained
herein, the undersigned and Parent hereby agree as follows:
1. Affiliate Status. The undersigned understands and agrees that as to
Subject Company the undersigned is an "affiliate" under Rule 145(c) as defined
in Rule 405 of the Rules and Regulations of the Securities and Exchange
Commission ("SEC") under the Securities Act of 1933, as amended ("1933 Act"),
and the undersigned anticipates that the undersigned will be such an "affiliate"
at the time of the Merger.
2. Initial Restriction on Disposition. The undersigned agrees that the
undersigned will not sell, transfer, or otherwise dispose of the undersigned's
interest in, or reduce the under-signed's risk relative to, any of the shares of
Parent Common Stock into which the undersigned's shares of Subject Company
Common Stock are converted upon consummation of the Merger until such time as
the requirements of SEC Accounting Series Release Nos. 130 and 135 ("ASR 130 and
135") have been met. The undersigned understands that ASR 130 and 135 relate to
publication of financial results of post-Merger combined operations of Parent
and Subject Company. Parent agrees that it will publish such results within 45
days after the end of the first fiscal quarter of Parent containing the required
period of post-Merger combined operations and that it will notify the
undersigned promptly following such publication.
3. Covenants and Warranties of Undersigned. The undersigned represents,
warrants, and agrees that:
(a) During the 30 days immediately preceding the Effective Time of the
Merger, the undersigned will not sell, transfer or otherwise dispose of the
undersigned's interest in, or reduce the undersigned's risk relative to, any of
the shares of Subject Company Common Stock beneficially owned by the undersigned
as of the date of the Subject Company Shareholders' Meeting held to approve the
Merger.
(b) The Parent Common Stock received by the undersigned as a result of
the Merger will be taken
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for the undersigned's own account and not for others, directly or indirectly, in
whole or in part.
(c) Parent has informed the undersigned that any distribution by the
undersigned of Parent Common Stock has not been registered under the 1933 Act
and that shares of Parent Common Stock received pursuant to the Merger can only
be sold by the undersigned (1) following registration under the 1933 Act, or (2)
in conformity with the volume and other requirements of Rule 145(d) promulgated
by the SEC as the same now exists or may hereafter be amended, or (3) to the
extent some other exemption from registration under the 1933 Act might be
available. The undersigned understands that Parent is under no obligation to
file a registration statement with the SEC covering the disposition of the
undersigned's shares of Parent Common Stock or to take any other action
necessary to make compliance with an exemption from such registration available.
(d) The undersigned will register, and will cause each of the other
parties whose shares are deemed to be beneficially owned by the undersigned
pursuant to Section 8 hereof to have all shares of Subject Company Common Stock
beneficially owned by the undersigned registered in the name of the undersigned
or such parties, as applicable, prior to the Effective Date of the Merger and
not in the name of any bank, broker-dealer, nominee, or clearinghouse.
(e) The undersigned is aware that Parent intends to treat the Merger as
a tax-free reorganization under Section 368 of the Internal Revenue Code
("Code") for federal income tax purposes. The undersigned agrees to treat the
transaction in the same manner as Parent for federal income tax purposes. The
undersigned acknowledges that Section 1.368-1(b) of the Income Tax Regulations
requires "continuity of interest" in order for the Merger to be treated as
tax-free under Section 368 of the Code. This requirement is satisfied if, taking
into account those Subject Company shareholders who receive cash in exchange for
their stock, who receive cash in lieu of fractional shares, or who dissent from
the Merger, there is no plan, or intention on the part of the Subject Company
shareholders to sell or otherwise dispose of the Parent Common Stock to be
received in the Merger.
4. Restrictions on Transfer. The undersigned understands and agrees
that stop order instructions with respect to the shares of Parent Common Stock
received by the undersigned pursuant to the Merger will be given to Parent's
transfer agent and that there will be placed on the certificates for such
shares, or shares issued in substitution thereof, a legend stating in substance:
"The shares represented by this certificate were issued pursuant to a
business combination which is accounted for as a "pooling-of-interests"
and may not be sold, nor may the owner thereof reduce his risks
relative thereto in any way, until such time as Union Planters
Corporation ("Parent") has published the financial results covering at
least 30 days of combined operations after the effective date of the
merger through which the business combination was effected. In
addition, the shares represented by this certificate may not be sold,
transferred, or otherwise disposed of except or unless (1) covered by
an effective registration statement under the Securities Act of 1933,
as amended, (2) in accordance with (i) Rule 145(d) (in the case of
shares issued to an individual who is not an affiliate of Parent) or
(ii) Rule 144 (in the case of shares issued to an individual who is an
affiliate of Parent) of the Rules and Regulations of such Act, or (3)
in accordance with a legal opinion satisfactory to counsel for Parent
that such sale or offer is otherwise exempt from the registration
requirements of such Act."
Such legend will also be placed on any certificate representing Parent
securities issued subsequent to the original issuance of the Parent Common Stock
pursuant to the Merger as a result of any offer of such shares or any stock
dividend, stock split, or other recapitalization as long as the Parent Common
Stock issued to the undersigned pursuant to the Merger has not been transferred
in such manner to justify the removal of the legend therefrom. Upon the request
of the undersigned, Parent shall cause the certificates representing the shares
of Parent Common Stock issued to the undersigned in connection with the Merger
to be reissued free of any legend relating to restrictions on transfer by virtue
of ASR 130 and 135 as soon as practicable after the requirements of ASR 130 and
135 have been met. In addition, if the provisions of Rules 144 and 145 are
amended to delete restrictions applicable
Alvin Bancshares - Affiliate Agreement Page 2
<PAGE> 134
to the Parent Common Stock received by the undersigned pursuant to the Merger,
or at the expiration of the restrictive period set forth in Rule 145(d), Parent,
upon the request of the undersigned, will cause the certificates representing
the shares of Parent Common Stock issued to the undersigned in connection with
the Merger to be reissued free of any legend relating to the restrictions set
forth in Rules 144 and 145(d) upon receipt by Parent of an opinion of its
counsel to the effect that such legend may be removed.
5. Understanding of Restrictions on Dispositions. The undersigned has
carefully read the Agreement and this Affiliate Agreement and discussed their
requirements and impact upon his ability to sell, transfer, or otherwise dispose
of the shares of Parent Common Stock received by the undersigned, to the extent
he believes necessary, with his counsel or counsel for Subject Company.
6. Filing of Reports by Parent. Parent agrees, for a period of three
years after the Effective Time of the Merger, to file on a timely basis all
reports required to be filed by it pursuant to Section 13 of the Securities
Exchange Act of 1934, as amended, so that the public information provisions of
Rule 145(d) promulgated by the SEC as the same are presently in effect will be
available to the undersigned in the event the undersigned desires to transfer
any shares of Parent Common Stock issued to the undersigned pursuant to the
Merger.
7. Transfer Under Rule 145(d). If the undersigned desires to sell or
otherwise transfer the shares of Parent Common Stock received by him in
connection with the Merger at any time during the restrictive period set forth
in Rule 145(d), the undersigned will provide the necessary representation letter
to the transfer agent for Parent Common Stock together with such additional
information as the transfer agent for Parent Common Stock may reasonably
request. If Parent's counsel concludes that such proposed sale or transfer
complies with the requirements of Rule 145(d), Parent shall cause such counsel
to provide such opinions as may be necessary to Parent's transfer agent so that
the undersigned may complete the proposed sale or transfer.
8. Acknowledgments. The undersigned recognizes and agrees that the
foregoing provisions also apply to all shares of the capital stock of Subject
Company and Parent that are deemed to be beneficially owned by the undersigned
pursuant to applicable federal securities laws, which the undersigned agrees may
include, without limitation, shares owned or held in the name of (i) the
undersigned's spouse, (ii) any relative of the undersigned or of the
undersigned's spouse who has the same home as the undersigned, (iii) any trust
or estate in which the undersigned, the undersigned's spouse, and any such
relative collectively own at least a 10% beneficial interest or of which any of
the foregoing serves as trustee, executor, or in any similar capacity, and (iv)
any corporation or other organization in which the undersigned, the
undersigned's spouse and any such relative collectively own at least 10% of any
class of equity securities or of the equity interest. The undersigned further
recognizes that, in the event that the undersigned is a director or officer of
Parent or becomes a director or officer of Parent upon consummation of the
Merger, among other things, any sale of Parent Common Stock by the undersigned
within a period of less than six months following the Effective Time of the
Merger may subject the undersigned to liability pursuant to Section 16(b) of the
Securities Exchange Act of 1934, as amended.
9. Miscellaneous. This Affiliate Agreement is the complete agreement
between Parent and the undersigned concerning the subject matter hereof. Any
notice required to be sent to any party hereunder shall be sent by registered or
certified mail, return receipt requested, using the addresses set forth herein
or such other address as shall be furnished in writing by the parties. This
Affiliate Agreement shall be governed by the laws of the State of Tennessee.
Alvin Bancshares - Affiliate Agreement Page 3
<PAGE> 135
This Affiliate Agreement is executed as of the __ day of
_____________, 199_.
Very truly yours,
------------------------------
Affiliate Signature
------------------------------
Printed Name
-------------------------------------
-------------------------------------
Address
Add below the signatures of all registered owners of shares
deemed to be beneficially owned by the Affiliate.
------------------------------
Name:
-------------------------
------------------------------
Name:
------------------------------
Name:
------------------------------
AGREED TO AND ACCEPTED as of ______________________, 1998.
UNION PLANTERS CORPORATION
By:
-----------------------------------
Jackson W. Moore
President & Chief Operating Officer
Alvin Bancshares - Affiliate Agreement Page 4
<PAGE> 136
APPENDIX C
ALVIN BANCSHARES, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
<S> <C>
INDEPENDENT AUDITORS' REPORT F-2
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets, December 31, 1997 and 1996 (audited) and
March 31, 1998 (unaudited) F-3
Consolidated Statements of Income for the Years Ended December 31, 1997, 1996 and 1995
(audited) and the Three Months Ended March 31, 1998 and 1997 (unaudited) F-4
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1997,
1996 and 1995 (audited) and the Three Months Ended March 31, 1998 (unaudited) F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 1997, 1996 and
1995 (audited) and the Three Months Ended March 31, 1998 and 1997 (unaudited) F-6
Notes to Consolidated Financial Statements F-8
</TABLE>
F-1
<PAGE> 137
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Alvin Bancshares, Inc.
Alvin, Texas
We have audited the accompanying consolidated balance sheets of Alvin
Bancshares, Inc. and subsidiaries ("ABI") as of December 31, 1997 and 1996, and
the related consolidated statements of income, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of ABI's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Alvin Bancshares, Inc. and
subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Houston, Texas
January 30, 1998
(except for Note 18 as to which
the date is February 13, 1998)
F-2
<PAGE> 138
ALVIN BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (In Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31, December 31,
1998 -----------------------
ASSETS (Unaudited) 1997 1996
<S> <C> <C> <C>
Cash and due from banks (Note 2) $ 7,782 $ 17,319 $ 7,400
Federal funds sold 6,600 9,950 4,950
-------- -------- ---------
Total cash and cash equivalents 14,382 27,269 12,350
-------- -------- ---------
Interest-bearing deposits in financial institutions 392
Investment securities available-for-sale, at fair value (amortized cost of $12,448,
$17,376 and $8,497, respectively) (Note 3) 12,480 17,387 8,486
Investment securities held-to-maturity, at amortized cost (fair value of $32,170,
$30,086 and $27,226, respectively) (Note 3) 31,891 29,841 27,191
Loans (Notes 4 and 5) 58,283 61,039 57,650
Less allowance for credit losses (Note 6) 513 536 559
-------- -------- ---------
Loans, net 57,770 60,503 57,091
-------- -------- ---------
Accrued interest receivable 1,057 1,096 964
Real estate acquired by foreclosure 85 317
Bank premises and equipment, net (Note 7) 2,488 2,544 2,475
Other assets 217 489 137
Goodwill, net of accumulated amortization of $2,871, $2,820 and
$2,615, respectively 666 717 922
TOTAL $120,951 $139,931 $ 110,325
======== ======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits (Note 8):
Noninterest-bearing $ 24,548 $ 23,545 $ 20,508
Interest-bearing 82,205 102,070 76,454
-------- -------- ---------
Total deposits 106,753 125,615 96,962
-------- -------- ---------
Accrued interest payable and other liabilities 253 732 710
-------- -------- ---------
Total liabilities 107,006 126,347 97,672
-------- -------- ---------
COMMITMENTS AND CONTINGENCIES (Notes 11 and 13)
STOCKHOLDERS' EQUITY (Notes 10 and 15):
Common stock, $1 par value; 1,000,000 shares authorized and 793,867 shares
issued and outstanding 794 794 794
Capital surplus 8,767 8,767 8,767
Accumulated earnings 4,363 4,016 3,099
Unrealized gain (loss) on available-for-sale securities, net of tax 21 7 (7)
-------- -------- ---------
Total stockholders' equity 13,945 13,584 12,653
-------- -------- ---------
TOTAL $120,951 $139,931 $ 110,325
======== ======== =========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 139
ALVIN BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (In Thousands)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Three Months For the Year Ended
Ended March 31, December 31,
------------------ ------------------------------
1998 1997 1997 1996 1995
(Unaudited)
<S> <C> <C> <C> <C> <C>
INTEREST INCOME:
Loans, including fees $1,563 $1,489 $6,267 $5,509 $5,429
Investment securities 672 507 2,153 2,275 1,993
Federal funds sold 80 77 379 279 343
Deposits in financial institutions 6 15 24 24
------ ------ ------ ------ ------
Total interest income 2,315 2,079 8,814 8,087 7,789
------ ------ ------ ------ ------
INTEREST EXPENSE - Deposits 870 685 3,150 2,708 2,622
------ ------ ------ ------ ------
NET INTEREST INCOME 1,445 1,394 5,664 5,379 5,167
------ ------ ------ ------ ------
PROVISION FOR CREDIT LOSSES (Note 6) 291 70 120
------ ------ ------ ------ ------
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 1,445 1,394 5,373 5,309 5,047
------ ------ ------ ------ ------
NONINTEREST INCOME:
Customer service fees 314 325 1,278 1,272 1,192
Trust income (Note 14) 18 24 96 79 106
Other 22 9 111 36 60
------ ------ ------ ------ ------
Total noninterest income 354 358 1,485 1,387 1,358
------ ------ ------ ------ ------
NONINTEREST EXPENSE:
Salaries and employee benefits 589 530 2,372 2,289 2,043
Data processing fees and expenses 79 74 282 275 285
Net occupancy expense 95 87 356 375 350
Amortization of goodwill 51 51 205 205 205
Losses and carrying costs of real estate acquired by foreclosure 2 2 17 30 126
Federal Deposit Insurance Corporation assessment 1 2 10 6 93
Professional fees 179 30 118 98 65
Other 278 230 927 965 909
------ ------ ------ ------ ------
Total noninterest expense 1,274 1,006 4,287 4,243 4,076
------ ------ ------ ------ ------
INCOME BEFORE INCOME TAXES 525 746 2,571 2,453 2,329
PROVISION FOR INCOME TAXES (Note 9) 178 253 860 820 760
------ ------ ------ ------ ------
NET INCOME $ 347 $ 493 $1,711 $1,633 $1,569
====== ====== ====== ====== ======
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 140
ALVIN BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (In Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Accumulated
Common Stock Other Total
----------------- Capital Accumulated Comprehensive Comprehensive Stockholders'
Shares Amount Surplus Earnings Income Income Equity
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1995 794 $ 794 $ 8,767 $1,485 $ (75) $10,971
Net income 1,569 $ 1,569 1,569
Net change in unrealized gain (loss) on
available-for-sale investment securities,
net of tax 73 73 73
-------
Comprehensive income $ 1,642
=======
Cash dividends paid, at $1 per share (794) (794)
--- ------- ------- ------ ------- -------
BALANCE AT DECEMBER 31, 1995 794 794 8,767 2,260 (2) 11,819
Net income 1,633 $ 1,633 1,633
Net change in unrealized gain (loss) on
available-for-sale investment securities,
net of tax (5) (5) (5)
-------
Comprehensive income $ 1,628
=======
Cash dividends paid, at $1 per share (794) (794)
--- ------- ------- ------ ------- -------
BALANCE AT DECEMBER 31, 1996 794 794 8,767 3,099 (7) 12,653
Net income 1,711 $ 1,711 1,711
Net change in unrealized gain (loss)
on available-for-sale investment securities,
net of tax 14 14 14
-------
Comprehensive income $ 1,725
=======
Cash dividends paid, at $1 per share (794) (794)
--- ------- ------- ------ ------- -------
BALANCE AT DECEMBER 31, 1997 794 794 8,767 4,016 7 13,584
Net income (unaudited) 347 $ 347 347
Charge in unrealized gain (loss) on
available-for-sale investment securities,
net of tax (unaudited) 14 14 14
-------
Comprehensive income (unaudited) $ 361
=======
BALANCE AT MARCH 31, 1998
--- ------- ------- ------ ------- -------
(UNAUDITED) 794 $ 794 $ 8,767 $4,363 $ 21 $13,945
=== ======= ======= ====== ======= =======
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 141
ALVIN BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Three Months For the Years Ended
Ended March 31, December 31,
-------------------- ------------------------------
1998 1997 1997 1996 1995
(Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 347 $ 493 $ 1,711 $ 1,633 $ 1,569
Adjustments to reconcile net earnings to net cash
provided by operating activities: 413
Depreciation and amortization 102 103 391 418 16
Amortization (accretion) of premiums/discounts on investments (133) (7) (32) 9 120
Provision for credit losses 291 70 11
Loss (gain) on sale of real estate acquired by foreclosure (69) 15
Write-down of real estate acquired by foreclosure 107
Decrease (increase) in accrued interest receivable 39 23 (132) 43 106
Decrease (increase) in other assets 272 (1) (317) 19 16
Increase (decrease) in accrued interest payable and other liabilities (479) (593) 21 110 (310)
-------- -------- -------- -------- --------
Total adjustments (199) (475) 153 684 266
-------- -------- -------- -------- --------
Net cash provided by operating activities 148 18 1,864 2,317 1,835
-------- -------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposal of interest-bearing deposits
in financial institutions 392
Proceeds from maturities and principal paydowns of
available-for-sale investment securities 8,000 2,004 6,004 3,000 4,000
Proceeds from maturities and principal paydowns of
held-to-maturity investment securities 1,843 1,598 3,727 7,930 150
Purchases of available-for-sale investment securities (2,951) (2,004) (14,863) (2,486) (4,020)
Purchases of held-to-maturity investments securities (3,880) (6,367) (6,441) (3,433)
Net decrease (increase) in loans 2,733 (880) (3,720) (9,516) 1,708
Proceeds from sale of real estate acquired by foreclosure 85 312 60 152
Proceeds from disposal of bank premises and equipment 151 38
Purchase of bank premises and equipment (154) (40) (288) (193) (724)
-------- -------- -------- -------- --------
Net cash provided by (used in) investing activities 5,827 678 (15) (7,645) (2,129)
-------- -------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of cash dividends (794) (794) (794)
Net increase (decrease) in noninterest-bearing deposits 1,003 573 3,037 (6,355) 8,975
Net increase (decrease) in interest-bearing deposits (19,865) (1,184) 25,616 10,103 2,516
-------- -------- -------- -------- --------
Net cash provided by (used in) financing activities 18,862 (611) 27,859 2,954 10,697
-------- -------- -------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (12,887) 85 14,919 (2,375) 10,403
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 27,269 12,350 12,350 14,724 4,321
-------- -------- -------- -------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 14,382 $ 12,435 $ 27,269 $ 12,350 $ 14,724
======== ======== ======== ======== ========
INCOME TAXES PAID $ 131 $ 165 $ 931 $ 676 $ 765
======== ======== ======== ======== ========
INTEREST PAID $ 882 $ 674 $ 3,131 $ 2,373 $ 2,559
======== ======== ======== ======== ========
(Continued)
</TABLE>
F-6
<PAGE> 142
ALVIN BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands)
- --------------------------------------------------------------------------------
NONCASH INVESTING ACTIVITIES:
ABI acquired certain real estate through foreclosure of collateral on loans
totaling $38,362 and $56,000 during the years ended December 31, 1997 and
1996, respectively. There were no such foreclosures during the year ended
December 31, 1995.
No loans were made by ABI to facilitate the sale of real estate in 1997. ABI
made loans to facilitate the sale of real estate acquired through foreclosure
of approximately $78,000 and $132,000 during the years ended December 31,
1996 and 1995, respectively.
NONCASH FINANCING ACTIVITIES - On December 18, 1997, ABI declared a cash
dividend of $1 per share, or $793,867, to be distributed on January 2, 1998
to stockholders of record as of December 18, 1997.
See notes to consolidated financial statements. (Concluded)
F-7
<PAGE> 143
ALVIN BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
NATURE OF OPERATIONS - Alvin Bancshares, Inc. ("ABI") is a bank holding
company headquartered in Alvin, Texas, that provides consumer and
commercial banking services through its wholly owned subsidiary, Alvin
State Bank (the "Bank"). ABI also has another wholly owned subsidiary,
Alvin Bancshares Delaware, Inc. ("Delaware"). The Bank provides a broad
line of financial products and services to small and medium-sized
businesses and consumers through its two community banking offices in
Alvin and Friendswood, Texas.
SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES - The accounting
and reporting policies of ABI and its subsidiaries conform to generally
accepted accounting principles ("GAAP") and the prevailing practices
within the banking industry. A summary of significant accounting and
reporting policies is as follows:
BASIS OF PRESENTATION - The consolidated financial statements include the
accounts of Alvin Bancshares, Inc. and its wholly owned subsidiary,
Delaware, and its wholly owned subsidiary, the Bank, hereafter
collectively referred to as ABI. All material intercompany transactions
have been eliminated in consolidation.
USE OF ESTIMATES - The preparation of financial statements in conformity
with GAAP 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 these estimates.
The accompanying consolidated financial statements and information as of
March 31, 1998 and for the three months ended March 31, 1998 and 1997 are
unaudited, and include all adjustments (consisting of only normal
recurring adjustments), that are necessary, in the opinion of management,
for a fair presentation. The results from operations for the periods ended
March 31, 1998 and 1997 are not necessarily reflective of the annual
results.
INVESTMENT SECURITIES - Investment securities held-to-maturity are carried
at cost, adjusted for the amortization of premiums and the accretion of
discounts. Management has the positive intent and the Bank has the ability
to hold these assets as long-term investments until their estimated
maturities. Under certain circumstances (including the deterioration of
the issuer's creditworthiness or a change in tax law or statutory or
regulatory requirements), securities held-to-maturity may be sold or
transferred to another portfolio.
Investment securities available-for-sale are carried at fair value.
Unrealized gains and losses are excluded from earnings and reported net of
tax as a separate component of stockholders' equity until realized.
Securities within the available-for-sale portfolio may be used as part of
the Bank's asset/liability strategy and may be sold in response to changes
in interest rate risk, prepayment risk or other similar economic factors.
F-8
<PAGE> 144
Premiums and discounts are amortized and accreted to operations using the
straight-line method of accounting, adjusted for prepayments as
applicable. The specific identification method of accounting is used to
compute gains or losses on sales of these assets.
LOANS - Loans are stated at the principal amounts outstanding, net of
unearned discount. Unearned discount relates principally to consumer
installment loans. The related interest income for installment loans is
recognized principally using the "sum of the months digits" method, which
records the interest in proportion to the declining outstanding balances
of the loans; for single-payment loans, such income is recognized using
the straight-line method. Both methods approximate the interest method.
Restructured loans are those loans on which concessions in terms have been
granted because of a borrower's financial difficulty. Interest is
generally accrued on such loans in accordance with the new terms.
NONPERFORMING, PAST-DUE AND RESTRUCTURED LOANS - Included in the
nonperforming loan category are loans that have been categorized by
management as nonaccrual because collection of interest is doubtful and
loans which have been restructured to provide a reduction in the interest
rate or a deferral of interest or principal payments.
When the payment of principal or interest on a loan is delinquent for 90
days, or earlier in some cases, the loan is placed on nonaccrual status
unless the loan is in the process of collection and the underlying
collateral fully supports the carrying value of the loan. If the decision
is made to continue accruing interest on the loan, periodic reviews are
made to confirm the accruing status of the loan. When a loan is placed on
nonaccrual status, interest accrued during the current year prior to the
judgment of uncollectibility is charged to operations. Interest accrued
during prior periods is charged to the allowance for credit losses.
Generally, any payments received on nonaccrual loans are applied first to
outstanding loan amounts and next to the recovery of charged-off loan
amounts. Any excess is treated as recovery of lost interest.
ALLOWANCE FOR CREDIT LOSSES - The allowance for credit losses is a
valuation allowance available for losses incurred on loans. All losses are
charged to the allowance for credit losses when the loss actually occurs
or when a determination is made that a loss is likely to occur. Recoveries
are credited to the allowance at the time of recovery.
Throughout the year, management estimates the likely level of future
losses to determine whether the allowance for credit losses is adequate to
absorb anticipated losses in the existing portfolio. Based on these
estimates, an amount is charged to the provision for credit losses and
credited to the allowance for credit losses in order to adjust the
allowance to a level determined to be adequate to absorb losses.
Management's judgment as to the level of losses on existing loans involves
the consideration of current and anticipated economic conditions and their
potential effects on specific borrowers; an evaluation of the existing
relationships among loans, potential credit losses and the present level
of the allowance; results of examinations of the loan portfolio by
regulatory agencies; and management's internal review of the loan
portfolio. In determining the collectibility of certain loans, management
also considers the fair value of any underlying collateral. The amounts
ultimately realized may differ from the carrying value of these assets
because of economic, operating or other conditions beyond the Bank's
control.
It should be understood that estimates of credit losses involve an
exercise of judgment. While it is possible that in particular periods the
Bank may sustain losses that are substantial relative to the allowance for
credit losses, it is the judgment of management that the allowance for
credit losses
F-9
<PAGE> 145
reflected in the consolidated balance sheets is adequate to absorb
estimated losses that exist in the current loan portfolio.
BANK PREMISES AND EQUIPMENT - Bank premises and equipment are carried at
cost less accumulated depreciation. Depreciation expense is computed
principally using the straight-line method over the estimated useful lives
of the assets.
REAL ESTATE ACQUIRED BY FORECLOSURe - The Bank records real estate
acquired by foreclosure at fair value, less estimated costs to sell, at
the time of foreclosure. Adjustments are made to reflect declines in value
subsequent to acquisition, if any, below the recorded amounts. Required
developmental costs associated with foreclosed property under construction
are capitalized and considered in determining the fair value of the
property. Operating expenses of such properties, net of related income,
and gains and losses on their disposition are included in other
noninterest expense.
AMORTIZATION OF GOODWILL - Goodwill is amortized using the straight-line
method over a period of 17 years.
FEDERAL INCOME TAXES - ABI files a consolidated federal income tax return.
Delaware and the Bank compute federal income taxes as if they filed a
separate return and remit to, or are reimbursed by, ABI based on the
portion of taxes currently due or refundable.
Deferred income taxes are accounted for by applying statutory tax rates in
effect at the balance sheet date to differences between the book basis and
the tax basis of assets and liabilities. The resulting deferred tax assets
and liabilities are adjusted to reflect changes in enacted tax laws or
rates.
Realization of net deferred tax assets is dependent on generating
sufficient future taxable income. Although realization is not assured,
management believes it is more likely than not that all of the net
deferred tax assets will be realized. The amount of the net deferred tax
asset considered realizable, however, could be reduced in the near term if
estimates of future taxable income are reduced.
STATEMENTS OF CASH FLOWS - For purposes of the consolidated statements of
cash flows, cash and cash equivalents are defined as cash and due from
banks as well as federal funds sold that mature in three days or less.
RECLASSIFICATIONS - Certain reclassifications have been made to prior year
balances to conform to the current presentation. All reclassifications
have been applied consistently to the periods presented.
RECENTLY ISSUED ACCOUNTING STANDARDS - Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income" requires that
all components of comprehensive income and total comprehensive income be
reported. Comprehensive income is comprised of net income and all changes
to stockholders' equity, except those due to investments by owners
(changes in paid-in capital) and distributions to owners (dividends). This
statement is effective for the Bank during its fiscal year ending December
31, 1998. The implementation of SFAS No. 130 in the accompanying
consolidated financial statements had no material impact on the
consolidated financial statements.
2. CASH AND DUE FROM BANKS
The Bank is required by the Federal Reserve Bank to maintain average
reserve balances. "Cash and due from banks" in the consolidated balance
sheets includes amounts so restricted of approximately $3,129,000 and
$1,209,000 at December 31, 1997 and 1996, respectively.
F-10
<PAGE> 146
3. INVESTMENT SECURITIES
The amortized cost and fair value of investments in debt securities were
as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1997
--------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR CARRYING
AVAILABLE FOR SALE COST GAINS LOSSES VALUE VALUE
<S> <C> <C> <C> <C> <C>
U.S. Treasury securities $12,399 $ 20 $ 12 $12,407 $12,407
U.S. government agencies and
corporations 4,977 8 5 4,980 4,980
------- ---- ------ ------- -------
Total $17,376 $ 28 $ 17 $17,387 $17,387
======= ==== ====== ======= =======
HELD TO MATURITY
U.S. Treasury securities $15,856 $157 $ 27 $15,986 $15,856
U.S. government agencies and
corporations 5,603 39 8 5,634 5,603
State and political subdivisions 3,453 77 3,530 3,453
Mortgage-backed securities and
collateralized mortgage obligations 2,128 3 2,126 2,128
Other 2,801 15 5 2,810 2,801
------- ---- ------ ------- -------
Total $29,841 $288 $ 43 $30,086 $29,841
======= ==== ====== ======= =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
--------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR CARRYING
AVAILABLE FOR SALE COST GAINS LOSSES VALUE VALUE
<S> <C> <C> <C> <C> <C>
U.S. Treasury securities $ 6,496 $ 9 $ 15 $ 6,490 $ 6,490
U.S. government agencies and
corporations 2,001 2 7 1,996 1,996
------- ---- ------ ------- -------
Total $ 8,497 $ 11 $ 22 $ 8,486 $ 8,486
======= ==== ====== ======= =======
HELD TO MATURITY
U.S. Treasury securities $13,036 $ 63 $ 76 $13,023 $13,036
U.S. government agencies and
corporations 7,113 39 25 7,127 7,113
State and political subdivisions 3,671 38 3,709 3,671
Mortgage-backed securities and
collateralized mortgage obligations 570 5 2 573 570
Other 2,801 12 19 2,794 2,801
------- ---- ------ ------- -------
Total $27,191 $157 $ 122 $27,226 $27,191
======= ==== ====== ======= =======
</TABLE>
F-11
<PAGE> 147
The amortized cost and fair value of debt securities at December 31, 1997,
by contractual maturity, are shown below (in thousands). Expected
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
<TABLE>
<CAPTION>
AMORTIZED FAIR
AVAILABLE FOR SALE COST VALUE
<S> <C> <C>
Due in one year or less $14,874 $14,857
Due after one year through five years 2,502 2,530
------- -------
Total $17,376 $17,387
======= =======
HELD TO MATURITY
Due in one year or less $ 5,925 $ 5,933
Due after one year through five years 21,446 21,643
Due after five years through ten years 342 384
------- -------
Subtotal 27,713 27,960
Mortgage-backed securities and collateralized mortgage obligations 2,128 2,126
------- -------
Total $29,841 $30,086
======= =======
</TABLE>
There were no sales of held-to-maturity and available-for-sale investments
during 1997 or 1996.
The Bank does not own any investment securities of any one issuer the
aggregate-adjusted cost of which exceeded 10% of the consolidated
stockholders' equity at December 31, 1997. Investment securities with an
amortized cost of $40,657,819 and $26,755,982 and a fair value of
$40,840,096 and $26,750,731 at December 31, 1997 and 1996, respectively,
were pledged to secure public deposits and for other purposes required or
permitted by law.
F-12
<PAGE> 148
4. LOANS
The loan portfolio consists of various types of loans made principally to
borrowers located in Brazoria County, Texas, and is classified by major
type as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
<S> <C> <C>
Commercial, financial and industrial $20,177 $17,350
Real estate - mortgage 21,676 22,450
Real estate - construction 10,862 7,364
Installment 8,734 11,184
Lease financing 298 323
Other 255 203
------- -------
62,002 58,874
Less unearned discount 963 1,224
------- -------
Total $61,039 $57,650
======= =======
</TABLE>
The recorded investment in impaired loans under SFAS No. 114, "Accounting
by Creditors for Impairment of a Loan" is $772,000 and $1,588,000, for
which an SFAS No. 114 allowance for credit losses of $63,000 and $150,000
is required at December 31, 1997 and 1996, respectively.
The average recorded investment in impaired loans was $863,000 and
$1,282,000 for the years ended December 31, 1997 and 1996, respectively.
The Bank recognized interest revenue on these impaired loans of
approximately $28,000 and $11,000 in 1997 and 1996, respectively.
Loan maturities and rate sensitivity of the loan portfolio, excluding
installment loans, lease financing and other loans before unearned
discount, are as follows (in thousands):
<TABLE>
<CAPTION>
WITHIN ONE - AFTER
ONE YEAR FIVE YEARS FIVE YEARS TOTAL
<S> <C> <C> <C> <C>
Commercial, financial and industrial $ 14,780 $ 5,076 $ 321 $20,177
Real estate 22,799 7,534 2,205 32,538
-------- ------- ------ -------
Total $ 37,579 $12,610 $2,526 $52,715
======== ======= ====== =======
At fixed interest rates $10,271 $2,526
At variable interest rates 2,339
------- ------
Total $12,610 $2,526
======= ======
</TABLE>
As of December 31, 1997 and 1996, loans outstanding to directors, officers
and their affiliates were approximately $990,000 and $1,106,000,
respectively. In the opinion of management, all transactions entered into
between ABI and such related parties have been and are, in the ordinary
course of business, made on the same terms and conditions as similar
transactions with unaffiliated persons. An analysis of activity with
respect to these related-party loans is as follows (in thousands):
F-13
<PAGE> 149
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------------
1997 1996
<S> <C> <C>
Balance at beginning of year $ 1,106 $ 1,632
New loans made 962 759
Repayments (1,078) (1,285)
------- -------
Balance at end of year $ 990 $ 1,106
======= =======
</TABLE>
5. NONPERFORMING AND PAST-DUE LOANS
The following table presents information relating to nonperforming and
past-due loans (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1997 1996
<S> <C> <C>
Nonaccrual loans $322 $698
90 days or more past-due loans, not on nonaccrual 658 253
---- ----
Total $980 $951
==== ====
</TABLE>
With respect to the above nonperforming loans, the following table
presents approximate interest income actually earned and approximate
additional interest income that would have been earned under the original
terms of the loans (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------
1997 1996
<S> <C> <C>
Nonaccrual loans:
Income earned $28 $ 8
Forgone income 50 40
</TABLE>
6. ALLOWANCE FOR CREDIT LOSSES
An analysis of activity in the allowance for credit losses is as follows
(in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------------------
1997 1996 1995
<S> <C> <C> <C>
Balance at beginning of year $ 559 $ 562 $ 569
Loans charged off (406) (178) (189)
Loan recoveries 92 105 62
Provision 291 70 120
----- ----- -----
Balance at end of year $ 536 $ 559 $ 562
===== ===== =====
</TABLE>
7. BANK PREMISES AND EQUIPMENT
Bank premises and equipment are summarized as follows (in thousands):
F-14
<PAGE> 150
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1996
<S> <C> <C>
Land $ 668 $ 668
Buildings 2,012 2,009
Furniture, fixtures and equipment 1,620 1,555
Construction-in-progress 316 143
------ ------
4,616 4,375
Less accumulated depreciation 2,072 1,900
------ ------
Total $2,544 $2,475
====== ======
</TABLE>
8. DEPOSITS
Included in interest-bearing deposits are time deposits in amounts of
$100,000 or more. These time deposits and their remaining maturities were
as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1996
<S> <C> <C>
Three months or less $2,020 $1,527
Four through six months 1,309 700
Seven through twelve months 1,233 1,647
Thereafter 345 2,819
------ ------
Total $4,907 $6,693
====== ======
</TABLE>
Interest expense for such interest-bearing deposits was approximately
$235,000 and $165,000 for the years ended December 31, 1997 and 1996,
respectively.
9. INCOME TAXES
The provision for federal income taxes differs from the amount computed by
applying the federal income tax statutory rate on operations as follows
(in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------------------
1997 1996 1995
<S> <C> <C> <C>
Taxes calculated at statutory rate $ 862 $ 834 $ 792
Increase (decrease) resulting from:
Tax-exempt interest income (73) (85) (97)
Goodwill amortization 70 70 70
Other, net 1 1 (5)
----- ----- -----
Federal income tax expense $ 860 $ 820 $ 760
===== ===== =====
</TABLE>
The components of the provision for income taxes are as follows (in
thousands):
F-15
<PAGE> 151
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------------------
1997 1996 1995
<S> <C> <C> <C>
Current $770 $799 $ 1,026
Deferred 90 21 (266)
---- ---- -------
Total $860 $820 $ 760
==== ==== =======
</TABLE>
Temporary differences exist between taxable and book income amounts; the
most significant temporary differences involve bank premises and
equipment, real estate acquired for foreclosure, and the allowance for
loan losses.
At December 31, 1997 and 1996, ABI had deferred tax assets of
approximately $612,000 and $594,000, respectively, and deferred tax
liabilities of $218,000 and $110,000, respectively. No valuation allowance
was provided for the net deferred tax asset at December 31, 1997 or 1996.
At December 31, 1997, tax loss carryforwards of approximately $902,000
were available to offset future taxable income. Certain tax carryforward
amounts may be limited in their utilization. The tax loss carryforwards
expire at various times in years 2002 and 2003.
10. DIVIDEND RESTRICTIONS
Dividends paid by ABI and by the Bank to ABI are subject to restrictions
by certain regulatory agencies. There was an aggregate of approximately
$2,531,000 and $3,095,000, respectively, available for payment of
dividends at December 31, 1997 under these restrictions.
11. COMMITMENTS AND CONTINGENCIES
ABI has been named as a defendant in various legal actions arising in the
normal course of business. In the opinion of management, after reviewing
such claims with outside counsel, resolution of such matters will not have
a materially adverse effect on the consolidated financial statements of
ABI.
12. INTEREST RATE RISK
The Bank is principally engaged in providing short-term commercial loans,
with interest rates that fluctuate with various market indices, and
long-term, fixed-rate real estate loans. These loans are primarily funded
through short-term demand deposits and longer-term certificates of deposit
with variable and fixed rates. The real estate loans are more sensitive to
interest rate risk than the commercial loans because of their fixed rates
and longer maturities.
F-16
<PAGE> 152
13. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Bank is a party to various financial instruments with
off-balance-sheet risk in the normal course of business to meet the
financial needs of its customers and to reduce its own exposure to
fluctuations in interest rates. These financial instruments include
commitments to extend credit and standby letters of credit. Such
instruments involve, to varying degrees, elements of credit and interest
rate risk in excess of the amounts recognized in the consolidated balance
sheets. The contract amounts of these instruments reflect the extent of
the Bank's involvement in particular classes of financial instruments. The
Bank's exposure to credit loss in the event of nonperformance by the other
party to the financial instruments for commitments to extend credit and
standby letters of credit is represented by the contractual notional
amount of these instruments. The Bank uses the same credit policies in
making these commitments and conditional obligations as it does for
on-balance-sheet instruments.
The following is a summary of the various financial instruments entered
into by the Bank (in thousands):
<TABLE>
<CAPTION>
December 31,
------------------
1997 1996
<S> <C> <C>
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit $3,972 $6,588
Standby letters of credit 298 286
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since many of the commitments
are expected to expire without being fully drawn upon, the total
commitment amounts disclosed above do not necessarily represent future
cash requirements.
The Bank evaluates each customer's creditworthiness on a case-by-case
basis. The amount of collateral obtained, if considered necessary by the
Bank upon extension of credit, is based on management's credit evaluation
of the customer.
Standby letters of credit are conditional commitments issued by the Bank
to guarantee the performance of a customer to a third party. The credit
risk involved in issuing letters of credit is essentially the same as that
involved in extending loan facilities to its customers.
14. TRUST ASSETS (Unaudited)
At December 31, 1997 and 1996, the Trust Department of the Bank held
approximately $9,173,000 and $8,702,000, respectively, in fiduciary
assets. These assets are held for the following types of accounts (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1996
<S> <C> <C>
Estates $ 216
Personal trusts 7,314 $6,680
Employee benefit trusts including Keogh plans 1,643 2,022
------ ------
Total $9,173 $8,702
====== ======
</TABLE>
F-17
<PAGE> 153
Inasmuch as these assets are not beneficially owned by the Bank, they are
not included in the accompanying consolidated balance sheets.
Other noninterest income included Trust Department income of $96,000 and
approximately $79,000 in 1997 and 1996, respectively.
15. REGULATORY INFORMATION
ABI and the Bank are subject to various regulatory capital requirements
administered by the federal banking agencies. Any institution that fails
to meet its minimum capital requirements is subject to actions by
regulators that could have a direct material effect on ABI's and the
Bank's financial statements. Under the capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet
specific capital requirements based on the Bank's assets, liabilities and
certain off-balance-sheet items as calculated under regulatory accounting
practices. ABI's and the Bank's capital amounts and the Bank's
classification under the regulatory framework for prompt corrective action
are also subject to qualitative judgments by the regulators regarding the
components, risk weightings and other factors.
To meet the capital adequacy requirements, ABI and the Bank must maintain
minimum amounts and ratios as defined in the regulations. Management
believes that as of December 31, 1997, ABI and the Bank met all capital
adequacy requirements.
F-18
<PAGE> 154
As of December 31, 1997, the most recent notification from the Federal
Deposit Insurance Corporation categorized the Bank as well-capitalized
under the regulatory framework for prompt corrective action. To be
categorized as well-capitalized, the Bank must maintain minimum total
risk-based, Tier I risk-based and Tier I leverage ratios as set forth in
the table below. There have been no conditions or events since that
notification which management believes have changed the Bank's category.
The following is a summary of ABI's and the Bank's capital ratios at
December 31, 1997 and 1996:
<TABLE>
<CAPTION>
TO BE WELL
CAPITALIZED UNDER
FOR CAPITAL PROMPT CORRECTIVE
ACTUAL ADEQUACY PURPOSES ACTION PROVISIONS
-------------------- ------------------ -----------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ABI :
As of December 31, 1997:
Total Capital (to Risk-Weighted Assets) $13,585 19.05% $5,703 8.0% N/A N/A
Tier I Capital (to Risk-Weighted Assets) 12,826 17.98% 2,853 4.0% N/A N/A
Tier I Capital (to Total Assets) 12,826 9.17% 4,198 3.0% N/A N/A
As of December 31, 1996:
Total Capital (to Risk-Weighted Assets) $12,653 19.26% $5,257 8.0% N/A N/A
Tier I Capital (to Risk-Weighted Assets) 11,738 17.86% 2,628 4.0% N/A N/A
Tier I Capital (to Total Assets) 11,738 10.73% 3,282 3.0% N/A N/A
BANK ONLY:
As of December 31, 1997:
Total Capital (to Risk-Weighted Assets) $12,809 18.15% $5,645 8.0% 7,057 10.0 %
Tier I Capital (to Risk-Weighted Assets) 12,802 18.14% 2,823 4.0% 4,234 6.0 %
Tier I Capital (to Total Assets) 12,802 9.20% 4,175 3.0% 6,959 5.0 %
As of December 31, 1996:
Total Capital (to Risk-Weighted Assets) $11,712 18.08% $5,183 8.0% 6,478 10.0 %
Tier I Capital (to Risk-Weighted Assets) 11,720 18.09% 2,592 4.0% 3,887 6.0 %
Tier I Capital (to Total Assets) 11,720 10.71% 3,282 3.0% 5,470 5.0 %
</TABLE>
16. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INFORMATION
The following disclosure of the estimated fair value of financial
instruments is made in accordance with SFAS No. 107, "Disclosures About
Fair Value of Financial Instruments." The estimated fair value amounts
have been determined by ABI using available market information and
appropriate valuation methodologies. However, considerable judgment is
necessarily required to interpret market data to develop the estimates of
fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts ABI could realize in a current
market exchange. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value
amounts.
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to
estimate that value:
CASH AND CASH EQUIVALENTS - For such short-term instruments, the carrying
amount is a reasonable estimate of fair value.
INVESTMENT SECURITIES - For securities held as investments, fair value
equals market price, if available.
F-19
<PAGE> 155
If a quoted market pace is not available, fair value is estimated using
quoted market prices for similar securities.
LOAN RECEIVABLES - The fair value of loans is estimated by discounting the
future cash flows using the current rates at which similar loans would be
made to borrowers with similar credit ratings and for the same remaining
maturities.
DEPOSIT LIABILITIES - The fair value of demand deposits, savings accounts
and certain money market deposits is the amount payable on demand at the
reporting date. The fair value of fixed-maturity certificates of deposit
is estimated using the rates currently offered for deposits of similar
remaining maturities.
The estimated fair values of ABI's financial instruments are as follows
(in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------------
1997 1996
------------------------- -------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $ 27,269 $ 27,269 $ 12,350 $ 12,350
Interest-bearing deposits 392 392
Investment securities available for sale 17,387 17,387 8,486 8,486
Investment securities held to maturity 29,841 30,086 27,191 27,226
Loans 61,039 60,963 57,650 57,066
Less allowance for credit losses (536) (536) (559) (559)
--------- --------- --------- ---------
Total $ 135,000 $ 135,169 $ 105,510 $ 104,961
========= ========= ========= =========
Financial liabilities - deposits $ 125,615 $ 126,453 $ 96,962 $ 96,937
--------- --------- --------- ---------
Total $ 125,615 $ 126,453 $ 96,962 $ 96,937
========= ========= ========= =========
</TABLE>
The fair value estimates presented herein are based on pertinent
information available to management as of December 31, 1997 and 1996.
Although management is not aware of any factors that would significantly
affect the estimated fair value amounts, such amounts have not been
comprehensively revalued for purposes of these financial statements since
that date and, therefore, current estimates of fair value may differ
significantly from the amounts presented herein.
F-20
<PAGE> 156
17. PARENT-COMPANY-ONLY FINANCIAL STATEMENTS
The following are parent-company-only condensed balance sheets as of
December 31, 1997 and 1996 and condensed statements of income and cash
flows for the years then ended:
ALVIN BANCSHARES, INC. (PARENT COMPANY ONLY)
BALANCE SHEETS,
DECEMBER 31, 1997 AND 1996 (IN THOUSANDS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS 1997 1996
<S> <C> <C>
Cash deposited with subsidiary $ 837 $ 831
Investment in subsidiary 12,809 11,713
Goodwill, net 751 922
------- --------
TOTAL $14,397 $ 13,466
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Dividends payable $ 794 $ 794
Other liabilities 19 19
------- --------
Total liabilities 813 813
------- --------
STOCKHOLDERS' EQUITY:
Common stock 794 794
Capital surplus 8,767 8,767
Accumulated earnings 4,016 3,099
Unrealized loss on available-for-sale securities, net of tax 7 (7)
------- --------
Total stockholders' equity 13,584 12,653
------- --------
TOTAL $14,397 $ 13,466
======= ========
</TABLE>
F-21
<PAGE> 157
ALVIN BANCSHARES, INC. (PARENT COMPANY ONLY)
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1996 (IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
REVENUES - Dividends received from subsidiary $ 800 $ 800 $ 800
OPERATING EXPENSES:
Amortization of goodwill 171 205 205
Other 1
------ ------ ------
Total operating expenses 171 206 205
------ ------ ------
INCOME BEFORE EQUITY IN UNDISTRIBUTED
EARNINGS OF SUBSIDIARY 629 594 595
EQUITY IN UNDISTRIBUTED EARNINGS
OF SUBSIDIARY 1,082 1,039 974
------ ------ ------
NET INCOME $1,711 $1,633 $1,569
====== ====== ======
</TABLE>
F-22
<PAGE> 158
ALVIN BANCSHARES, INC. (PARENT COMPANY ONLY)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,711 $ 1,633 $ 1,569
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in earnings of subsidiary (1,882) (1,839) (1,774)
Dividend received from subsidiary 800 800 800
Amortization of goodwill 171 205 205
Increase in other liabilities 0
------- ------- -------
Net cash provided by operating activities 800 799 800
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES -
Payment of cash dividends (794) (794) (794)
------- ------- -------
Net cash used in financing activities (794) (794) (794)
------- ------- -------
NET INCREASE IN CASH AND CASH
EQUIVALENTS 6 5 6
CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR 831 826 820
------- ------- -------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 837 $ 831 $ 826
======= ======= =======
</TABLE>
18. SUBSEQUENT EVENT
On February 13, 1998 ABI entered into a letter of intent with another bank
holding company to exchange all of the outstanding common stock of ABI for
common stock of the bank holding company. The letter of intent does not
constitute a binding agreement and is subject to due diligence
investigations, completion of a merger agreement, regulatory approval and
approval from the bank holding company's and ABI's board of directors and
stockholders.
******
F-23
<PAGE> 159
APPENDIX D
ART. 5.11. RIGHTS OF DISSENTING SHAREHOLDERS IN THE EVENT OF CERTAIN
CORPORATE ACTIONS.
A. Any shareholder of a domestic corporation shall have the right
to dissent from any of the following corporate actions:
(1) Any plan of merger to which the corporation is a party if
shareholder approval is required by Article 5.03 or 5.16 of this Act and the
shareholder holds shares of a class or series that was entitled to vote thereon
as a class or otherwise;
(2) Any sale, leases, exchange or other disposition (not including
any pledge, mortgage, deed of trust or trust indenture unless otherwise provided
in the articles of incorporation) of all, or substantially all, the property and
assets, with or without good will, of a corporation if special authorization of
the shareholders is required by this Act and the shareholders hold shares of a
class or series that was entitled to vote thereon as a class or otherwise;
(3) Any plan of exchange pursuant to Article 5.02 of this Act in
which the shares of the corporation of the class or series held by the
shareholder are to be acquired.
B. Notwithstanding the provisions of Section A of this Article, a
shareholder shall not have the right to dissent from any plan of merger in which
there is a single surviving or new domestic or foreign corporation, or from any
plan of exchange, if:
(1) The shares held by the shareholder are part of a class or
series, shares of which are on the record date fixed to determine the
shareholders entitled to vote on the plan of merger or plan of exchange;
(a) listed on a national securities exchange
(b) listed on the Nasdaq Stock Market (or successor quotation
system) or designated as a national market security on an interdealer quotation
system by the National Association of Securities Dealers, Inc., or successor
entity; or
(c) held of record by not less than 2,000 holders;
(2) the shareholder is not required by the terms of the plan of
merger or plan of exchange to accept for the shareholder's shares any
consideration that is different than the consideration (other than cash in lieu
of fractional shares that the shareholder would otherwise be entitled to
receive) to be provided to any other holder of shares of the same class or
series of shares held by such shareholder; and
(3) the shareholder is not required by the terms of the plan of
merger or the plan of exchange to accept for the shareholder's shares any
consideration other than:
(a) shares of a domestic or foreign corporation that,
immediately after the effective time of the merger or exchange, will be part of
a class or series, shares of which are:
(i) listed, or authorized for listing upon official
notice of issuance, on a national securities exchange;
(ii) approved for quotation as a national market
security on an interdealer quotation system by the National Association of
Securities Dealers, Inc., or successor entity; or
<PAGE> 160
(iii) held of record by not less than 2,000 holders;
(b) cash in lieu of fractional shares otherwise entitled to be
received; or
(c) any combination of the securities and cash described in
Subdivisions (a) and (b) of this subsection.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1957, 55th Leg., p. 111 ch. 54, ss. 10; Acts 1973, 63rd Leg., p. 1508, ch.
545, ss. 36, eff. Aug. 27, 1973; Acts 1989, 71st Leg., ch. 801, ss. 34, eff. Aug
28, 1989; Acts 1991, 72nd Leg., ch. 901, ss. 32, eff. Aug. 26, 1991; Acts 1997,
75th Leg., ch. 375, ss. 29, eff. Sept. 1, 1997.
ART. 5.12. PROCEDURE FOR DISSENT BY SHAREHOLDERS AS TO SAID CORPORATE ACTIONS
A. Any shareholder of any domestic corporation who has the right to
dissent from any of the corporate actions referred to in Article 5.11 of this
Act may exercise that right to dissent only by complying with the following
procedures:
(1) (a) With respect to proposed corporate action that is
submitted to a vote of shareholders at a meeting, the shareholder shall file
with the corporation, prior to the meeting, a written objection to the action,
setting out that the shareholder's right to dissent will be exercised if the
action is effective and giving the shareholder's address, to which notice
thereof shall be delivered or mailed in that event. If the action is effected
and the shareholder shall not have voted in favor of the action, the
corporation, in the case of action other than a merger, or the surviving or new
corporation (foreign or domestic) or other entity that is liable to discharge
the shareholder's right of dissent, in the case of a merger, shall, within ten
(10) days after the action is effected, deliver or mail to the shareholder
written notice that the action has been effected, and the shareholder may,
within ten (10) days from the delivery or mailing of the notice, make written
demand on the existing, surviving, or new corporation (foreign or domestic) or
other entity, as the case may be, for payment of the fair value of the
shareholder's shares. The fair value of the shares shall be the value thereof as
of the day immediately preceding the meeting, excluding any appreciation or
depreciation in anticipation of the proposed action. The demand shall state the
number and class of the shares owned by the shareholder and the fair value of
the shares as estimated by the shareholder. Any shareholder failing to make
demand within the ten (10) day period shall be bound by the action.
(b) With respect to proposed corporate action that is approved
pursuant to Section A of Article 9.10 of this Act, the corporation, in the case
of action other than a merger, and the surviving or new corporation (foreign or
domestic) or other entity that is liable to discharge the shareholder's right of
dissent, in the case of a merger, shall, within ten (10) days after the date the
action is effected, mail to each shareholder of record as of the effective date
of the action notice of the fact and date of the action and that the shareholder
may exercise the shareholder's right to dissent from the action. The notice
shall be accompanied by a copy of this Article and any articles or documents
filed by the corporation with the Secretary of State to effect the action. If
the shareholder shall not have consented to the taking of the action, the
shareholder may, within twenty (20) days after the mailing of the notice, make
written demand on the existing, surviving, or new corporation (foreign or
domestic) or other entity, as the case may be, for payment of the fair value of
the shareholder's shares. The fair value of the shares shall be the value
thereof as of the date the written consent authorizing the action was delivered
to the corporation pursuant to Section A of Article 9.10 of this Act, excluding
any appreciation or depreciation in anticipation of the action. The demand shall
state the number and class of shares owned by the dissenting shareholder and the
fair value of the shares as estimated by the shareholder. Any shareholder
failing to make demand within the twenty (20) day period shall be bound by the
action.
<PAGE> 161
(2) Within twenty (20) days after receipt by the existing,
surviving, or new corporation (foreign or domestic) or other entity, as the case
may be, of a demand for payment made by a dissenting shareholder in accordance
with Subsection (1) of this Section, the corporation (foreign or domestic) or
other entity shall deliver or mail to the shareholder a written notice that
shall either set out that the corporation (foreign or domestic) or other entity
accepts the amount claimed in the demand and agrees to pay that amount within
ninety (90) days after the date on which the action was effected, and, in the
case of shares represented by certificates, upon the surrender of the
certificates duly endorsed, or shall contain an estimate by the corporation
(foreign or domestic) or other entity of the fair value of the shares, together
with an offer to pay the amount of that estimate within ninety (90) days after
the date on which the action was effected, upon receipt of notice within sixty
(60) days after that date from the shareholder that the shareholder agrees to
accept that amount and, in the case of shares represented by certificates, upon
the surrender of the certificates duly endorsed.
(3) If, within sixty (60) days after the date on which the
corporate action was effected, the value of the shares is agreed upon between
the shareholder and the existing, surviving, or new corporation (foreign or
domestic) or other entity, as the case may be, payment for the shares shall be
made within ninety (90) days after the date on which the action was effected
and, in the case of shares represented by certificates, upon surrender of the
certificates duly endorsed. Upon payment of the agreed value, the shareholder
shall cease to have any interest in the shares or in the corporation.
B. If, within the period of sixty (60) days after the date on which the
corporate action was effected, the shareholder and the existing, surviving, or
new corporation (foreign or domestic) or other entity, as the case may be, do
not so agree, then the shareholder or the corporation (foreign or domestic) or
other entity may, within sixty (60) days after the expiration of the sixty (60)
day period, file a petition in any court of competent jurisdiction in the county
in which the principal office of the domestic corporation is located, asking for
a finding and determination of the fair value of the shareholder's shares. Upon
the filing of any such petition by the shareholder, service of a copy thereof
shall be made upon the corporation (foreign or domestic) or other entity. If the
petition shall be filed by the corporation (foreign or domestic) or other
entity, the petition shall be accompanied by such a list. The clerk of the court
shall give notice of the time and place fixed for the hearing of the petition by
registered mail to the corporation (foreign or domestic) or other entity and to
the shareholders named on the list at the addressees therein stated. The forms
of the notices by mail shall be approved by the court. All shareholders thus
notified and the corporation (foreign or domestic) or other entity shall
thereafter be bound by the final judgement of the court.
C. After the hearing of the petition, the court shall determine the
shareholders who have complied with the provisions of this Article and have
become entitled to the valuation of and payment for their shares, and shall
appoint one or more qualified appraisers to determine that value. The appraisers
shall have the power to examine any of the books and records of the corporation
the shares of which they are charged with the duty of valuing, and they shall
make a determination of the fair value of the shares upon such investigation as
to them may seem proper. The appraisers shall also afford a reasonable
opportunity to the parties interested to submit to them pertinent evidence as to
the value of the shares. The appraisers shall also have such power and authority
as may be conferred on Masters in Chancery by the Rules of Civil Procedure or by
the order of their appointment.
D. The appraisers shall determine the fair value of the shares of the
shareholders adjudged by the court to be entitled to payment for their shares
and shall file their report of that value in the office of the clerk of the
court. Notice of the filing of the report shall be given by the clerk to the
parties in interest. The report shall be subject to exceptions to be heard
before the court both upon the law and the facts. The court shall by its
judgement determine the fair value of the shares of the shareholders entitled to
payment for their shares and shall direct the payment of that value by the
existing, surviving, or new corporation (foreign or domestic) or other entity,
together with interest thereon, beginning 91 days after the date on which the
applicable corporate action from which the shareholder elected to dissent was
effected to the date of such judgement, to the shareholders entitled to payment.
The judgement shall be payable to the holders of uncertificated shares
immediately but to the holders of shares represented by certificates
<PAGE> 162
only upon, and simultaneously with, the surrender to the existing, surviving, or
new corporation (foreign or domestic) or other entity, as the case may be, of
duly endorsed certificates for those shares. Upon payment of the judgement, the
dissenting shareholders shall cease to have any interest in those shares or in
the corporation. The court shall allow the appraisers a reasonable fee as court
costs, and all court costs shall be allotted between the parties in the manner
that the court determines to be fair and equitable.
E. Shares acquired by the existing, surviving, or new corporation
(foreign or domestic) or other entity, as the case may be, pursuant to the
payment of the agreed value of the shares or pursuant to payment of the judgment
entered for the value of the shares, as in this Article provided, shall, in the
case of a merger, be treated as provided in the plan of merger and, in all other
cases, may be held and disposed of by the corporation as in the case of other
treasury shares.
F. The provisions of this Article shall not apply to a merger if,
on the date of the filing of the articles of merger, the surviving corporation
is the owner of all the outstanding shares of the other corporations, domestic
or' foreign, that are parties to the merger.
G. In the absence of fraud in the transaction, the remedy provided
by this Article to a shareholder objecting to any corporate action referred to
in Article 5.11 of this Act is the exclusive remedy for the recovery of the
value of his shares or money damages to the shareholder with respect to the
action. If the existing, surviving, or new corporation (foreign or domestic) or
other entity, as the case may be, complies with the requirements of this
Article, any shareholder who fails to comply with the requirements of this
Article shall not be entitled to bring suit for the recovery of the value of his
shares or money damages to the shareholder with respect to the action.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1967,
60th Leg., p. 1721, ch. 657, ss. 12, eff. June 17, 1967; Acts 1983, 68th Leg.,
p. 2570, ch. 442, ss. 9, eff. Sept. 1, 1983; Acts 1987, 70th Leg., ch. 93, ss.
27, eff. Aug. 31, 1987; Acts 1989, 71st Leg., ch. 801, ss. 35, eff. Aug. 28,
1989; Acts 1993, 73rd Leg., ch. 215, ss. 2.16, eff. Sept. 1, 1993.
ART. 5.13. PROVISIONS AFFECTING REMEDIES OF DISSENTING SHAREHOLDERS
A. Any shareholder who has demanded payment for his shares in
accordance with either Article 5.12 or 5.16 of this Act shall not thereafter be
entitled to vote or exercise any other rights of a shareholder except the right
to receive payment for his shares pursuant to the provisions of those articles
and the right to maintain an appropriate action to obtain relief on the ground
that the corporate action would be or was fraudulent, and the respective shares
for which payment has been demanded shall not thereafter be considered
outstanding for the purposes of any subsequent vote of shareholders.
B. Upon receiving a demand for payment from any dissenting
shareholder, the corporation shall make an appropriate notation thereof in its
shareholder records. Within twenty (20) days after demanding payment for his
shares in accordance with either Article 5.12 or 5.16 of this Act, each holder
of certificates representing shares so demanding payment shall submit such
certificates to the corporation for notation thereon that such demand has been
made. The failure of holders of certificated shares to do so shall, at the
option of the corporation, terminate such shareholder's rights under Articles
5.12 and 5.16 of this Act unless a court of competent jurisdiction for good and
sufficient cause shown shall otherwise direct. If uncertificated shares for
which payment has been demanded or shares represented by a certificate on which
notation has been so made shall be transferred, any new certificate issued
therefor shall bear similar notation together with the name of the original
dissenting holder of such shares and a transferee of such shares shall acquire
by such transfer no rights in the corporation other than those which the
original dissenting shareholder had after making demand for payment of the fair
value thereof.
<PAGE> 163
C. Any shareholder who has demanded payment for his shares in
accordance with either Article 5.12 or 5.16 of this Act may withdraw such demand
at any time before payment for his shares or before any petition has
been filed pursuant to Article 5.12 or 5.16 of this Act asking for a finding and
determination of the fair value of such shares, but no such demand may be
withdrawn after such payment has been made or, unless the corporation shall
consent thereto, after any such petition has been filed. If, however, such
demand shall be withdrawn as hereinbefore provided, or if pursuant to Section B
of this Article the corporation shall terminate the shareholder's rights under
Article 5.12 or 5.16 of this Act, as the case may be, or if no petition asking
for a finding and determination of fair value of such shares by a court shall
have been filed within the time provided in Article 5.12 or 5.16 of this Act, as
the case may be, or if after the hearing of a petition filed pursuant to Article
5.12 or 5.16, the court shall determine that such shareholder is not entitled to
the relief provided by those articles, then, in any such case, such shareholder
and all persons claiming under him shall be conclusively presumed to have
approved and ratified the corporate action from which he dissented and shall be
bound thereby, the right of such shareholder to be paid the fair value of his
shares shall cease, and his status as a shareholder shall be restored without
prejudice to any corporate proceedings which may have been taken during the
interim, and such shareholder shall be entitled to receive any dividends or
other distributions made to shareholders in the interim.
Acts 1955, 54th Leg., P. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1967,
60th Leg., p. 1723, ch. 657, ss. 13, eff. June 17, 1967; Acts 1983, 68th Leg.,
P. 2573, ch. 442, ss. 10, eff. Sept. 1, 1983; Acts 1993, 73rd Leg., ch. 215, ss.
2.17, eff. Sept. 1, 1993.
<PAGE> 164
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Restated Charter of the Registrant provides as follows:
TWELFTH: INDEMNIFICATION OF CERTAIN PERSONS:
To the fullest extent permitted by Tennessee law, the Corporation may
indemnify or purchase and maintain insurance to indemnify any of its
directors, officers, employees or agents and any persons who may serve at the
request of the Corporation as directors, officers, employees, trustees or
agents of any other corporation, firm, association, national banking
association, state-chartered bank, trust company, business trust, organization
or any other type of entity whether or not the Corporation shall have any
ownership interest in such entity. Such indemnification(s) may be provided for
in the Bylaws, or by resolution of the Board of Directors or by appropriate
contract with the person involved.
Article V, INDEMNIFICATION, of the Registrant's Amended and Restated Bylaws
provides as follows:
The Corporation does hereby indemnify its directors and officers to the
fullest extent permitted by the laws of the State of Tennessee and by ARTICLE
TWELFTH of its Charter. The Corporation may indemnify any other person to the
extent permitted by the Charter and by applicable law.
Indemnification of corporate directors and officers is governed by
Sections 48-18-501 through 48-18-509 of the Tennessee Business Corporation Act
(the "Act"). Under the Act, a person may be indemnified by a corporation
against judgments, fines, amounts paid in settlement and reasonable expenses
(including attorneys' fees) actually and necessarily incurred by him in
connection with any threatened or pending suit or proceeding or any appeal
thereof (other than an action by or in the right of the corporation), whether
civil or criminal, by reason of the fact that he is or was a director or
officer of the corporation or is or was serving at the request of the
corporation as a director or officer, employee or agent of another corporation
of any type or kind, domestic or foreign, if such director or officer acted in
good faith for a purpose which he reasonably believed to be in the best
interest of the corporation and, in criminal actions or proceedings only, in
addition, had no reasonable cause to believe that his conduct was unlawful. A
Tennessee corporation may indemnify a director or officer thereof in a suit by
or in the right of the corporation against amounts paid in settlement and
reasonable expenses, including attorneys' fees, actually and necessarily
incurred as a result of such suit unless such director or officer did not act
in good faith or with the degree of diligence, care and skill which ordinarily
prudent men exercise under similar circumstances and in like positions.
A person who has been wholly successful, on the merits or otherwise, in
the defense of any of the foregoing types of suits or proceedings is entitled
to indemnification for the foregoing amounts. A person who has not been wholly
successful in any such suit or proceeding may be indemnified only upon the
order of a court or a finding that the director or officer met the required
statutory standard of conduct by (i) a majority vote of a disinterested quorum
of the Board of Directors, (ii) the Board of Directors based upon the written
opinion of independent legal counsel to such effect, or (iii) a vote of the
shareholders.
1
<PAGE> 165
ITEM 21. EXHIBITS.
The following exhibits are filed herein or have been, as noted,
previously filed:
<TABLE>
<CAPTION>
Exhibit No. Description
- ---------------- ----------------------------------------------------------------------------
<S> <C>
2.1 Agreement and Plan of Merger, dated as of March 18, 1998, by and
between Union Planters Corporation, Union Planters Holding
Corporation and Alvin Bancshares, Inc. (Included as Appendix A to the
Proxy Statement included as part of this Registration Statement.)
2.2 Plan of Merger of Alvin Bancshares, Inc. into and with Union Planters
Holding Corporation. (Included as Appendix B to the Proxy Statement
included as part of this Registration Statement.)
4.1 Restated Charter of Union Planters Corporation. (Incorporated by
reference to Exhibit 3(a) to the Annual Report on Form 10-Q of UPC
for the fiscal quarter ended March 31, 1998.)
4.2 Amended and Restated Bylaws of Union Planters Corporation.
(Incorporated by reference to exhibit 3(d) to the Annual Report on Form
10-K of UPC for the fiscal year ended December 31, 1996 (File
No. 0-6919).)
5.1 Opinion of E. James House, Jr., Secretary and Manager of the Legal
Department of Union Planters Corporation, as to the validity of the
shares of UPC Common Stock.
8.1 Opinion of Wyatt, Tarrant & Combs as to federal income tax
consequences.
8.2 Opinion of Winstead Sechrest & Minick P.C. as to federal income tax
consequences.
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Deloitte & Touche LLP, independent auditors for Alvin
Bancshares, Inc.
23.3 Consent of E. James House, Jr., Secretary and Manager of
the Legal Department of Union Planters Corporation
(included in Exhibit 5.1).
23.4 Consent of Wyatt Tarrant & Combs (included in Exhibit 8.1).
23.5 Consent of Winstead Sechrest & Minick P.C. (included in Exhibit 8.2).
24.1 Power of Attorney (contained on the signature page hereof).
99.1 Form of proxy of Alvin Bancshares, Inc.
</TABLE>
2
<PAGE> 166
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report pursuant
to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(2) That for purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(3) That for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(5) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form
S-4, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means. This
includes information contained in documents filed subsequent to the effective
date of the registration statement through the date of responding to the
request.
(6) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the registration statement when it became
effective.
(7) That prior to any public reoffering of the securities registered
hereunder through the use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus
will contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other items of the applicable form.
(8) That every prospectus: (i) that is filed pursuant to Paragraph (7)
immediately preceding, or (ii) that purports to meet the requirements of Section
10(a)(3) of the Act and is used in connection with an offering of securities
subject to Rule 415, will be filed as a part of an amendment to the registration
statement and will not be used until such amendment is effective, and that, for
purposes of determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
3
<PAGE> 167
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Memphis,
State of Tennessee on this the 19th day of February, 1998.
REGISTRANT
UNION PLANTERS CORPORATION
By: /s/ Benjamin W. Rawlins, Jr.
------------------------------------
Benjamin W. Rawlins, Jr.
Chairman of the Board and Chief Executive Officer
We, the undersigned directors and officers of Union Planters
Corporation do hereby constitute and appoint E. James House, Jr. and M. Kirk
Walters, and each of them, our true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for us and in our name,
place and stead, in any and all capacities, to sign any and all amendments to
this Registration Statement and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and we do hereby ratify and confirm all that said attorneys-in-fact
and agents, or their substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed below by the following persons in
the capacities and at the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ Benjamin W. Rawlins, Jr. Chairman of the Board, Chief Executive February 19, 1998
- ------------------------------------ Officer, Director (Principal
Benjamin W. Rawlins, Jr. Executive Officer)
/s/ Jackson W. Moore President, Chief Operating Officer, February 19, 1998
- ------------------------------------ Director
Jackson W. Moore
/s/ John W. Parker Executive Vice President and February 19, 1998
- ------------------------------------ Chief Financial Officer
John W. Parker (Principal Financial Officer)
/s/ M. Kirk Walters Senior Vice President, Treasurer, February 19, 1998
- ------------------------------------ and Chief Accounting Officer
M. Kirk Walters
/s/ Edgar H. Bailey Vice Chairman of the Board February 19, 1998
- ------------------------------------ and Director
Edgar H. Bailey
/s/ Albert M. Austin Director February 19, 1998
- ------------------------------------
Albert M. Austin
</TABLE>
4
<PAGE> 168
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ---------- ----- ----
<S> <C> <C>
/s/ Marvin E. Bruce Director February 19, 1998
- ------------------------------------
Marvin E. Bruce
/s/ George W. Bryan Director February 19, 1998
- ------------------------------------
George W. Bryan
/s/ James E. Harwood Director February 19, 1998
- ------------------------------------
James E. Harwood
/s/ Parnell S. Lewis, Jr. Director February 19, 1998
- ------------------------------------
Parnell S. Lewis, Jr.
/s/ C.J. Lowrance, III Director February 19, 1998
- ------------------------------------
C.J. Lowrance, III
/s/ Stanley D. Overton Director February 19, 1998
- ------------------------------------
Stanley D. Overton
/s/ Dr. V. Lane Rawlins Director February 19, 1998
- ------------------------------------
Dr. V. Lane Rawlins
/s/ Donald F. Schuppe Director February 19, 1998
- ------------------------------------
Donald F. Schuppe
/s/ Mike P. Sturdivant Director February 19, 1998
- ------------------------------------
Mike P. Sturdivant
/s/ David M. Thomas Director February 19, 1998
- ------------------------------------
David M. Thomas
Director
- ------------------------------------
Richard A. Trippeer, Jr.
Director
- ------------------------------------
Spence L. Wilson
</TABLE>
5
<PAGE> 169
EXHIBIT INDEX
The following exhibits are filed herein or have been, as
noted, previously filed:
<TABLE>
<CAPTION>
Exhibit No. Description
- ---------------- ------------------------------------------------------------------------------------------------
<S> <C>
2.1 Agreement and Plan of Merger, dated as of March 18, 1998, by and between Union
Planters Corporation, Union Planters Holding Corporation and Alvin Bancshares, Inc.
(Included as Appendix A to the Proxy Statement included as part of this Registration
Statement.)
2.2 Plan of Merger of Alvin Bancshares, Inc. into and with Union Planters Holding
Corporation. (Included as Appendix B to the Proxy Statement included as part of this
Registration Statement.)
4.1 Restated Charter of Union Planters Corporation.
(Incorporated by reference to Exhibit 3(a) to the Annual
Report on Form 10-K of UPC for the fiscal year ended
December 31, 1996.)
4.2 Amended and Restated Bylaws of Union Planters Corporation. (Incorporated by reference
to exhibit 3(d) to the Annual Report on Form 10-Q of UPC for the quarter ended March 31,
1998 (File No. 0-6919).
5.1 Opinion of E. James House, Jr., Secretary and Manager of
the Legal Department of Union Planters Corporation, as to
the validity of the shares of UPC Common Stock.
8.1 Opinion of Wyatt, Tarrant & Combs as to federal income tax consequences.
8.2 Opinion of Winstead Sechrest & Minick P.C. as to federal income tax consequences.
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Deloitte & Touche LLP, independent auditors for Alvin Bancshares, Inc.
23.3 Consent of E. James House, Jr., Secretary and Manager of the Legal Department of
Union Planters Corporation (included in Exhibit 5.1).
23.4 Consent of Wyatt Tarrant & Combs (included in Exhibit 8.1).
23.5 Consent of Winstead Sechrest & Minick P.C. (included in Exhibit 8.2).
24.1 Power of Attorney (contained on the signature page hereof).
99.1 Form of proxy of Alvin Bancshares, Inc.
</TABLE>
<PAGE> 1
EXHIBIT 5.1
OPINION OF E. JAMES HOUSE, JR.
AS TO VALIDITY OF SHARES
June 16, 1998
Union Planters Corporation
7130 Goodlett Farms Parkway
Memphis, Tennessee 38018
Re: 423,925 Shares of the Common Stock, $5.00 Par Value Per Share
of Union Planters Corporation, a Tennessee Corporation ("UPC")
Gentlemen:
The undersigned has participated in the preparation of a registration
statement on Form S-4 (the "Registration Statement") for filing with the
Securities and Exchange Commission in respect to not more than 423,925 shares of
UPC's common stock, $5.00 par value per share ("UPC Common Stock") which may be
issued by UPC pursuant to an Agreement and Plan of Merger dated as of March 18,
1998, by and among UPC, Union Planters Holding Corporation ("UP Holding") and
Alvin Bancshares, Inc. ("ABI") (the "Agreement").
For purposes of rendering the opinion expressed herein, the undersigned
has examined UPC's corporate charter and all amendments thereto; UPC's bylaws
and amendments thereto; the Agreement and such of UPC's corporate records as the
undersigned has deemed necessary and material to rendering the undersigned's
opinion. The undersigned has relied upon certificates of public officials and
representations of UPC officials, and has assumed that all documents examined by
the undersigned as originals are authentic, that all documents submitted to the
undersigned as photocopies are exact duplicates of original documents, and that
all signatures on all documents are genuine.
Further, the undersigned is familiar with and has supervised all
corporate action taken in connection with the authorization of the issuance and
offering of the subject securities.
Based upon and subject to the foregoing and subsequent assumptions,
qualifications and exceptions, it is the undersigned's opinion that:
1. UPC is a duly organized and validly existing corporation in
good standing under the laws of the State of Tennessee and has all
requisite power and authority to issue, sell and deliver the subject
securities, and to carry on its business and own its property; and
<PAGE> 2
2. The shares of UPC Common Stock to be issued by UPC pursuant
to the Merger have been duly authorized and when issued by UPC in
accordance therewith, such shares of UPC Common Stock will be fully
paid and nonassessable.
The opinion expressed above is limited by the following assumptions,
qualifications and exceptions.
(a) The undersigned is licensed to practice law only in the
State of Tennessee and expresses no opinion with respect to the effect
of any laws other than those of the State of Tennessee and of the
United States of America.
(b) The opinion stated herein is based upon statutes,
regulations, rules, court decisions and other authorities existing and
effective as of the date of this opinion, and the undersigned
undertakes no responsibility to update or supplement said opinion in
the event of or in response to any subsequent changes in the law or
said authorities, or upon the occurrence after the date hereof of
events or circumstances that, if occurring prior to the date hereof,
might have resulted in a different opinion.
(c) This opinion is limited to the legal matters expressly set
forth herein, and no opinion is to be implied or inferred beyond the
legal matters expressly so addressed.
The undersigned hereby consents to the undersigned being named as a
party rendering a legal opinion under the caption "Opinions" in the Prospectus
constituting part of the Registration Statement and to the filing of this
opinion with the Securities and Exchange Commission as well as all state
regulatory bodies and jurisdictions where qualification is sought for the sale
of the subject securities.
The undersigned is an officer of, and receives compensation from UPC
and therefore is not independent from UPC.
Very truly yours,
UNION PLANTERS CORPORATION
By: /s/ E. James House, Jr.
--------------------------------------
E. James House, Jr.
<PAGE> 1
EXHIBIT 8.1
502 562-7278
June 16, 1998
Board of Directors
Union Planters Corporation
7130 Goodlett Farms Parkway
Memphis, Tennessee 38018
Gentlemen:
We have acted as counsel to Union Planters Corporation, a Tennessee
corporation ("UPC"), in connection with (i) the proposed merger (the "Merger")
of Alvin Bancshares, Inc., a Texas corporation ("ABI"), with and into Union
Planters Holding Corporation, a Tennessee corporation and a wholly-owned
subsidiary of UPC ("UP Holdings"), pursuant to the terms of the Agreement and
Plan of Merger by and between UPC, UP Holdings and ABI dated March 18, 1998 (the
"Merger Agreement") and related Plan of Merger between UPC, UP Holdings and ABI
(collectively, the "Plan of Reorganization"), and (ii) the filing of the
registration statement by UPC on Form S-4 (together with all amendments and
exhibits thereto through the date hereof, the "Registration Statement"), under
the Securities Act of 1933, as amended (the "Act"), covering the shares of UPC
Common Stock to be issued pursuant to the Plan of Reorganization. Capitalized
terms used but not defined herein shall have the meanings assigned to them in
the Registration Statement.
In rendering this opinion we have examined such documents as we have
deemed relevant or necessary, including without limitation, the Plan of
Reorganization and the Registration Statement. In our examination, we have
assumed the genuineness of all signatures, the due execution and delivery of all
documents, the legal capacity of all natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified, conformed or copies, and the
authenticity of the originals of such copies.
As to factual matters, in rendering this opinion, we have relied solely
on and have assumed the present and continuing truth and accuracy of (i) the
description of the facts relating to the Merger contained in the Plan of
Reorganization and Registration Statement, (ii) the factual representations and
warranties contained in the Plan of Reorganization and Registration Statement
and related documents and agreements, and (iii) the factual matters addressed by
representations from certain executive officers of UPC, UP Holdings and ABI
contained in letters to us each dated June 16, 1998 (the "Representation
<PAGE> 2
Board of Directors
Union Planters Corporation
June 13, 1998
Page 2.
Letters"). The Representation Letters address various factual matters relevant
to the qualification of the Merger as a tax-deferred reorganization under
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code").
The initial and continuing truth and accuracy of all such factual matters
constitutes an integral basis for, and a material condition to, this opinion.
The scope of this opinion is limited strictly to the matters set forth
below and no other opinion may be implied or inferred beyond such matters.
Without limiting the foregoing sentence, we express no opinion as to (i) any of
the local, state, foreign or other federal tax consequences resulting from the
Merger, (ii) the federal income tax consequences to shareholders of ABI subject
to special rules under the Code, such as foreign persons, tax-exempt
organizations, insurance companies, financial institutions, dealers in stocks
and securities, and persons who do not own such stock as a capital asset, (iii)
the federal income tax consequences affecting shares of ABI Common Stock
acquired upon exercise of stock options, stock purchase plan rights or otherwise
as compensation; (iv) the tax consequences to holders of warrants, options or
other rights to acquire shares of ABI Common Stock; (v) the tax consequences of
the parties to the Merger Agreement of the inclusion in income of the amount of
the bad-debt reserve maintained by ABI and/or Alvin State Bank and any other
amounts resulting from any required change in accounting methods; and (vi) the
tax consequences of the parties to the Merger Agreement of any income and
deferred gain recognized pursuant to Treasury Regulations issued under Section
1502 of the Code.
Subject to the qualifications, assumptions and conditions provided
herein, we are of the opinion that:
1. The acquisition by UP Holdings of substantially all of the assets of
ABI in exchange for shares of UPC Common Stock and the assumption of liabilities
of ABI pursuant to the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code.
2. ABI, UPC and UP Holdings 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 ABI as a result of the Merger.
4. No gain or loss will be recognized by UP Holdings or UPC as a result
of the Merger.
5. No gain or loss will be recognized by the shareholders of ABI as a
result of the exchange of ABI 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 ABI Common Stock is a capital
asset in the hands of the respective ABI 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 ABI Common Stock allocable to the
fractional share.
6. The tax basis of UPC Common Stock to be received by the shareholders
of ABI will be the same as the tax basis of the ABI Common Stock surrendered in
exchange therefor (reduced by any amount allocable to a fractional share
interest for which cash is received).
<PAGE> 3
Board of Directors
Union Planters Corporation
June 13, 1998
Page 3.
7. The holding period of the UPC Common Stock to be received by
shareholders of ABI will include the holding period of the ABI Common Stock
surrendered in exchange therefor, provided the ABI shares were held as a capital
asset by the shareholders of ABI on the date of the exchange.
8. A shareholder of ABI who perfects his dissenter's rights and who
receives payment of the fair market value of his shares of ABI 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.
This opinion is based on the Code, the Treasury Regulations promulgated
thereunder, judicial decisions and administrative pronouncements of the Internal
Revenue Service ("IRS"), all existing and in effect on the date of this opinion
and all of which are subject to change at any time, possibly retroactively. Any
such change could materially alter the conclusions reached in this opinion. We
undertake no obligation to you or any other person to give notice of any such
change. As noted above, this opinion is limited strictly to the matters
expressly stated herein and no other opinion may be implied or inferred beyond
such matters. You should realize that this opinion is not binding on the IRS or
the courts.
This opinion is provided to you solely for purposes of complying with
the requirements of Item 21(a) of Form S-4 under the Act and Section 9.1(f) of
the Merger Agreement. We hereby consent to the use of this opinion as an exhibit
to the Registration Statement, to the disclosure and summarization of the
opinion in the Registration Statement, including in the proxy
statement/prospectus included therein, and to the reference to this Firm in the
Registration Statement under the caption "Legal Matters." In giving this consent
we do not thereby admit that we come within the category of persons whose
consent is required under Section 7 of the Act or the rules and regulations of
the Securities and Exchange Commission promulgated thereunder.
Very truly yours,
/s/ WYATT, TARRANT & COMBS
WYATT, TARRANT & COMBS
<PAGE> 1
EXHIBIT 8.2
[WINSTEAD SECHREST & MINICK LETTERHEAD]
June 16, 1998
Alvin Bancshares, Inc.
P.O. Box 1906
Alvin, Texas 77512-1906
Re: Merger of Alvin Bancshares, Inc., a Texas corporation ("ABI"),
with and into Union Planters Holding Corporation, a Tennessee
corporation ("UP Holding")
Dear Sirs:
You have requested our opinion concerning certain issues relating to
the federal income taxation of the proposed merger (the "Merger") of ABI with
and into UP Holding, a wholly owned subsidiary of Union Planters Corporation, a
Tennessee corporation ("UPC"), pursuant to that certain Agreement and Plan of
Merger dated as of March 18, 1998 by and among ABI, UPC, and UP Holding (the
"Agreement"). Capitalized terms not otherwise defined herein have the meanings
as defined in the Agreement.
BASIS OF OPINION
Our opinion is based upon (1) the assumptions listed below, and (2) our
review of the following documents:
1. the Agreement;
2. a form of a Certificate of Officer of Alvin Bancshares,
Inc. attached as Exhibit A;
3. a form of a Certificate of Officer of Union Planters
Corporation attached as Exhibit B; and
4. such other documents relating to the Merger as we have
deemed necessary or appropriate.
<PAGE> 2
Alvin Bancshares, Inc.
June 16, 1998
Page 2
Except for the review of such documents, we have not undertaken any independent
investigation of any matters material to the opinion expressed herein, the truth
or completeness of any warranty or representation contained in any of the
documents listed above, or the validity of any of the assumptions listed below.
In rendering our opinion, we have assumed (1) that the Certificate of
Officer of Alvin Bancshares, Inc. and the Certificate of Officer of Union
Planters Corporation will be executed and delivered to us on behalf of ABI and
UPC, respectively, in substantially the forms as attached hereto, at or prior to
the Effective Time of the Merger, (2) that each of the warranties,
representations, and statements made in each of the documents referred to above
are complete and accurate and will be complete and accurate as of the Effective
Time of the Merger, (3) that the Agreement correctly and completely embodies the
terms of the Merger and that the Merger will be effected as provided in the
Agreement, (4) the authenticity of all documents submitted to us as originals,
(5) the conformity to the originals of all documents submitted to us as
photostatic, certified, or conformed copies, and (6) the due authorization,
execution, and delivery of all of the documents referred to above.
The opinion expressed herein is rendered as of the date hereof and is
based upon the existing Internal Revenue Code of 1986, as amended (the "Code"),
existing final and proposed Treasury regulations promulgated pursuant thereto
("Regulations"), existing published Revenue Rulings, Revenue Procedures, and
other announcements issued by the Internal Revenue Service, and existing
judicial and administrative decisions and rulings, all of which are subject to
change.
OPINION
Based on and subject to the documents, assumptions, qualifications, and
limitations set forth herein, it is our opinion that:
1. the Merger will be treated as a tax-free reorganization
within the meaning of Section 368(a) of the Code;
2. ABI, UPC and UP Holding 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 the ABI shareholders
who exchange all of their common stock of ABI ("ABI Common Stock")
solely for shares of UPC common stock, together with associated
"Preferred Share Rights" ("UPC Common Stock") pursuant to the Merger
(except with respect to cash received in lieu of a fractional share
interest in the UPC Common Stock);
4. the aggregate tax basis of the UPC Common Stock received by
ABI shareholders who exchange all of their ABI Common Stock solely for
UPC Common Stock
<PAGE> 3
Alvin Bancshares, Inc.
June 16, 1998
Page 3
pursuant to the Merger (including any fractional shares for which cash
is received) will be the same as the aggregate tax basis of the ABI
Common Stock surrendered in exchange therefor;
5. the holding period of UPC Common Stock received by ABI
shareholders in the Merger (including any fractional shares for which
cash is received) will include the period during which the shares of
ABI Common Stock surrendered in exchange therefor were held, provided
that the ABI Common Stock was held as a capital asset by the holder at
the Effective Time; and
6. neither ABI, UPC nor UP Holding will recognize gain or loss
as a consequence of the Merger.
LIMITATIONS ON OPINION
Our opinion is limited to that expressly stated herein. The opinion
expressed herein represents only our legal judgment, and has no binding effect
or official status of any kind. No assurance can be given that the Internal
Revenue Service would concur in the conclusion reached in this opinion or that
the conclusion reached in this opinion would be sustained by a court if
contested by the Internal Revenue Service. Any contest or challenge to a tax
position taken by a participant in the Merger could have material adverse tax
consequences to such participant.
Our opinion is limited to that expressly set forth above. No opinion is
expressed as to any transaction other than the Merger, including any transaction
undertaken in connection with the Merger. In addition, we express no opinion as
to any estate, gift, excise, state, local, or foreign tax consequences of the
Merger. In particular, we express no opinion regarding: (1) the amount,
existence, or availability after the Merger of any of the federal income tax
attributes of UPC, UP Holding or ABI (including, without limitation, net
operating loss carryovers, if any, of UPC, UP Holding or ABI); (2) the tax
consequences of any disposition of stock of UPC; or (3) the tax treatment of any
disposition of any stock of ABI in any transaction other than in exchange for
UPC stock pursuant to the Merger.
EFFECT OF CHANGES
The opinion expressed herein is based upon the documents,
representations, decisions, rulings, Code, Regulations, and Internal Revenue
Service publications referred to above, all as of the date of this letter. No
opinion can be expressed at this time as to the likelihood of any change,
amendment, modification, or repeal of, or addition to, any such decisions,
rulings, Code, Regulations, or Internal Revenue Service publications, or as to
the possible impact on the tax treatment of the Merger or the participants in
the Merger of any such change or any change in the
<PAGE> 4
Alvin Bancshares, Inc.
June 16, 1998
Page 4
documents or representations or facts underlying the assumptions referred to
above. Any such change could adversely affect the tax treatment of the Merger
and the participants in the Merger, and could have retroactive effect. We
undertake no responsibility to advise you of any changes to any such documents,
representations, decisions, rulings, Code, Regulations, Internal Revenue Service
publications, or facts, or as to the impact, if any, of any such change on the
tax treatment of the Merger or the participants in the Merger.
REGISTRATION STATEMENT
In addition to your request for our opinion on the specific issues of
federal income tax law addressed above, you have asked us to review the
discussion of federal income tax issues contained in the Registration Statement
on Form S-4 to be filed with the Securities and Exchange Commission by UPC in
connection with the Merger on or about June 16, 1998 (the "Registration
Statement"). We have reviewed the discussion entitled "Material Federal Income
Tax Consequences of the Merger" contained in the Registration Statement and
believe, based on and subject to the documents, assumptions, qualifications, and
limitations set forth herein, that such information fairly presents the current
federal income tax law applicable to the Merger, and the material tax
consequences to ABI and its shareholders as a result of the Merger. We hereby
consent to the use of our name in the Registration Statement and to the filing
of this opinion as an exhibit to the Registration Statement.
Very truly yours,
/s/ Winstead Sechrest & Minick P.C.
WINSTEAD SECHREST & MINICK P.C.
lsd
<PAGE> 5
EXHIBIT "A"
CERTIFICATE OF OFFICER OF
ALVIN BANCSHARES, INC.
The undersigned officer of ALVIN BANCSHARES, INC. ("ABI"), in the
undersigned's capacity as an officer of ABI, hereby represents to Winstead
Sechrest & Minick P.C. on behalf of ABI in connection with the proposed merger
of ABI with and into Union Planters Holding Corporation ("UP Holding"), a
Tennessee corporation and a wholly owned subsidiary of Union Planters
Corporation, a Tennessee corporation ("UPC"), pursuant to that certain Agreement
and Plan of Merger dated as of March 18, 1998 among ABI, UPC, and UP Holding
(the "Merger"), that the following statements are true as of the date of this
Certificate and will be true as of the effective time of the Merger unless the
undersigned provides a written statement to Winstead Sechrest & Minick P.C. to
the contrary prior to the effective time of the Merger:
1. The Merger will be effected for bona fide business purposes.
2. The persons who held shares of ABI prior to any sale, exchange, or
other disposition (a "Transfer") of ABI stock in connection with or in
contemplation of the Merger (the "Historic ABI Shareholders") (1) prior to the
Merger will not have Transferred a number of shares of ABI stock, and (2) have
no plan or intention to Transfer a number of shares of UPC stock received in the
Merger, that singly or in the aggregate would cause the Historic ABI
Shareholders to own a number of shares of UPC stock having a value, as of the
date of the Merger, of less than 50% of the value, as of the date of the Merger,
of the stock of ABI held by the Historic ABI Shareholders prior to any Transfer
of ABI stock prior to the Merger in connection with or in contemplation of the
Merger.
3. ABI will pay its own expenses incurred in connection with the
Merger.
4. There is no intercorporate indebtedness existing between UPC and ABI
or between UP Holding and ABI that was issued, acquired, or will be settled at a
discount.
5. ABI is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Internal Revenue Code of 1986, as amended.
6. The fair market value of the UPC stock received by each ABI
shareholder will be approximately equal to the fair market value of the ABI
stock surrendered in exchange therefor.
7. UP Holding will acquire at least 90% of the fair market value of the
net assets and at least 70% of the fair market value of the gross assets held by
ABI immediately prior to the Merger, taking into account amounts paid for Merger
expenses by ABI as assets of ABI immediately prior to the Merger.
8. On the date of the Merger, the fair market value of the assets of
ABI transferred to UP Holding will equal or exceed the sum of its liabilities
assumed by UP Holding, plus the amount of liabilities, if any, to which the
transferred assets are subject.
<PAGE> 6
9. ABI is not under the jurisdiction of a court in a title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Internal Revenue
Code of 1986, as amended.
10. The Merger will be the product of bona fide arm's length
negotiations.
11. The liabilities of ABI assumed by UP Holding and the liabilities to
which the transferred assets of ABI are subject were incurred by ABI in the
ordinary course of its business.
[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
<PAGE> 7
The undersigned acknowledges that Winstead Sechrest & Minick P.C. will
rely upon the foregoing representations in evaluating the federal income tax
consequences of the Merger and in rendering its opinion relating to certain
federal income tax consequences of the Merger.
DATED: June , 1998.
----
------------------------------------------
JAMES F. EUBANK, II, Chairman of the Board
and President of Alvin Bancshares, Inc.
[SIGNATURE PAGE TO CERTIFICATE OF OFFICER]
<PAGE> 8
EXHIBIT "B"
CERTIFICATE OF OFFICER OF
UNION PLANTERS CORPORATION
The undersigned officer of UNION PLANTERS CORPORATION ("UPC"), in the
undersigned's capacity as an officer of UPC, hereby represents to Winstead
Sechrest & Minick P.C. on behalf of UPC in connection with the proposed merger
of Alvin Bancshares, Inc., a Texas corporation ("ABI"), with and into Union
Planters Holding Corporation, a Tennessee corporation and a wholly owned
subsidiary of UPC ("UP Holding"), pursuant to that certain Agreement and Plan of
Merger dated as of March 18, 1998 among ABI, UPC, and UP Holding (the "Merger"),
that the following statements are true as of the date of this Certificate and
will be true as of the effective time of the Merger unless the undersigned
provides a written statement to Winstead Sechrest & Minick P.C. to the contrary
prior to the effective time of the Merger:
1. The Merger will be effected for bona fide business purposes.
2. Prior to the Merger, UPC will own stock of UP Holding possessing at
least 80% of the total combined voting power of all classes of stock entitled to
vote and at least 80% of the total number of shares of all other classes of
stock of UP Holding.
3. Following the Merger, UP Holding will not issue additional shares of
its stock that will result in UPC failing to own stock of UP Holding possessing
at least 80% of the total combined voting power of all classes of stock entitled
to vote and at least 80% of the total number of shares of all other classes of
stock of UP Holding.
4. UPC has no plan or intention to reacquire any of its stock issued in
the Merger.
5. UPC has no plan or intention to: (1) liquidate UP Holding; (2) merge
UP Holding with or into another corporation; (3) sell or otherwise dispose of
the stock of UP Holding except for transfers of stock to corporations controlled
by UPC; or (4) cause UP Holding to sell or otherwise dispose of any of its
assets or any of the assets acquired from UP Holding, except for dispositions
made in the ordinary course of business or transfers of assets to a corporation
controlled by UP Holding.
6. Following the Merger, UP Holding will continue the historic business
of ABI or use a significant portion of ABI's business assets in a business.
7. UPC and UP Holding will each pay its own expenses incurred in
connection with the Merger. Neither UPC nor UP Holding will pay any expenses
incurred in connection with the Merger by ABI or any shareholder of ABI.
8. There is no intercorporate indebtedness existing between UPC and ABI
or between UP Holding and ABI that was issued, acquired, or will be settled at a
discount.
<PAGE> 9
9. Neither UPC nor UP Holding is an investment company as defined in
Section 368(a)(2)(F)(iii) and (iv) of the Internal Revenue Code of 1986, as
amended (the "Code").
10. The fair market value of the UPC stock received by each ABI
shareholder will be approximately equal to the fair market value of the ABI
stock surrendered in exchange therefor.
11. Following the Merger, UP Holding will acquire at least 90% of the
fair market value of the net assets and at least 70% of the fair market value of
the gross assets held by ABI immediately prior to the Merger, taking into
account amounts paid for Merger expenses by ABI as assets of ABI immediately
prior to the Merger.
12. The Merger will be the product of bona fide arm's length
negotiations.
13. No stock of UP Holding will be issued in the Merger.
[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
<PAGE> 10
The undersigned acknowledges that Winstead Sechrest & Minick P.C. will
rely upon the foregoing representations in evaluating the federal income tax
consequences of the Merger and in rendering its opinion relating to certain
federal income tax consequences of the Merger.
DATED: , 1998.
---------------------
---------------------------,
---------------------------
of
---------------------------
Union Planters Corporation
[SIGNATURE PAGE TO CERTIFICATE OF OFFICER]
<PAGE> 1
EXHIBIT 23.1
[CONSENT OF INDEPENDENT ACCOUNTANTS
FOR UNION PLANTERS CORPORATION]
We hereby consent to the incorporation by reference in the Proxy
Statement/Prospectus constituting part of this Registration Statement on Form
S-4 of Union Planters Corporation of our report dated January 15, 1998, except
as to Note 2 which is as of March 3, 1998, which appears on page 41 of Union
Planters Corporation's 1997 Annual Report to Shareholders, which is incorporated
by reference in its Annual Report on Form 10-K for the year ended December 31,
1997. We also consent to the reference to us under the heading "EXPERTS" in such
Proxy Statement/Prospectus.
PRICE WATERHOUSE, LLP
/s/ PRICE WATERHOUSE LLP
- -------------------------
Memphis, Tennessee
June 16, 1998
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Union Planters
Corporation on Form S-4 of our report dated January 30, 1998 (except for Note 18
as to which the date is February 13, 1998) on the consolidated financial
statements of Alvin Bancshares, Inc., appearing in the Proxy Statement/
Prospectus, which is part of this Registration Statement. We also consent to the
reference to us under the heading "Experts" in such Proxy Statement/Prospectus.
Deloitte & Touche LLP
Houston, Texas
June 16, 1998
<PAGE> 1
EXHIBIT 99.1
ALVIN BANCSHARES, INC.
The undersigned hereby constitutes and appoints _______________ and
_________________, or either of them, as proxies, each with full power of
substitution, to vote the number of shares of common stock of Alvin Bancshares,
Inc. ("ABI") which the undersigned would be entitled to vote if personally
present at the Special Meeting of ABI Shareholders to be held at 221 S. Gordon
Street, Alvin, Texas 77511, at _:__ _.m., local time, on ________, 1998, and at
any adjournment or postponement thereof (the "Special Meeting") upon the
proposals described in the Proxy Statement/Prospectus and the Notice of Special
Meeting of Shareholders, both dated ________, 1998, the receipt of which is
acknowledged in the manner specified below.
1. MERGER. To consider and vote upon a proposal to approve an Agreement
and Plan of Merger, dated as of March 18, 1998 (the "Agreement"), by and between
ABI, Union Planters Corporation, a Tennessee corporation ("UPC"), and Union
Planters Holding Corporation ("UPHC"), a wholly-owned subsidiary or UPC, and the
related Plan of Merger (the "Plan of Merger"), by and between ABI and UPHC,
pursuant to which (i) ABI will merge (the "Merger") with and into UPHC, with the
effect that UPHC shall be the corporation surviving from the Merger, and (ii)
each share of the $1.00 par value common stock of ABI ("ABI Common Stock")
issued and outstanding at the effective time of the Merger will be converted
into .5340 of a share of the $5.00 par value common stock of UPC and the
associated "Preferred Share Rights" (as defined in the accompanying Proxy
Statement/Prospectus), and cash in lieu of any fractional share, all as more
fully described in the accompanying Proxy Statement/Prospectus.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Special Meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSAL 1 ABOVE.
Please sign exactly as name appears below. When shares are held jointly, both
should sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. If a corporation, please sign in full
corporate name by President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
DATED: , 1998
---------------------
---------------------------------
Signature
----------------------------------
Signature if held jointly
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF
ALVIN BANCSHARES, INC.
AND MAY BE REVOKED PRIOR TO ITS EXERCISE.
