<PAGE> 1
As filed with the Securities and Exchange Commission on June _____ , 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:
ROBERT WALKER, ESQ. VIRGINIA B. WILSON, ESQ.
Baker, Donelson, Bearman & Wyatt, Tarrant & Combs
Caldwell, P.C. 6075 Poplar Avenue
165 Madison Avenue, Suite 650
Suite 2000 Memphis, Tennessee 38119
Memphis, Tennessee 38103 (901) 537-2164
(901) 577-2219
-----------------------------
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 125,824 shares $78.79 $3,682,000 $1,086.19
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 First Community
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 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE> 3
FIRST COMMUNITY BANCSHARES, INC.
101 N. MAIN STREET
MIDDLETON, TENNESSEE 38052
JUNE __, 1998
TO THE SHAREHOLDERS OF FIRST COMMUNITY BANCSHARES, INC.
You are cordially invited to attend a special meeting of the shareholders
(the "Special Meeting") of First Community Bancshares, Inc. ("FCB") to be held
at the main office of FCB, located at 101 North Main Street, Middleton,
Tennessee, 38052 at 4:00 p.m., local time, on August 4, 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 Reorganization (the "Agreement")
and a related Plan of Merger (the "Plan of Merger") by and between FCB, Union
Planters Corporation, a Tennessee corporation ("UPC"), and Union Planters
Holding Corporation ("UP Holding"), a Tennessee corporation which is a
wholly-owned subsidiary of UPC. Pursuant to the Agreement and the Plan of
Merger, FCB will merge (the "Merger") with and into UP Holding, with the effect
that UP Holding will be the surviving corporation resulting from the Merger.
Upon consummation of the Merger, each share of FCB common stock issued and
outstanding (excluding shares held by FCB 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
2.6924 shares (the "Exchange Ratio") of $5.00 par value UPC common stock and the
associated Preferred Share Rights (as defined in the accompanying Proxy
Statement/Prospectus), subject to possible adjustment as described in the
accompanying Proxy Statement/Prospectus, with cash being paid in lieu of issuing
fractional shares.
Under certain circumstances, FCB has the right to terminate the agreement
if, as of the date of the Special Meeting, the average closing price (as defined
in the accompanying Proxy Statement/Prospectus) per share of UPC Common Stock
should have declined to less than $47.35 per share. In the event that FCB elects
to exercise such termination right, UPC has the option to increase the exchange
ratio based on contractual limits. If UPC elects to increase the exchange ratio
then the merger will proceed at the adjusted exchange ratio without
resolicitation of the FCB shareholders.
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 FCB to
exercise statutory dissenters' rights, the conditions to consummation of the
Merger and the effects of the Merger on the rights of FCB shareholders. Please
read these materials carefully and consider thoughtfully the information set
forth in them.
THE BOARD OF DIRECTORS OF FCB 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 at least a majority of the issued and
outstanding shares of FCB Common Stock entitled to be voted at the Special
Meeting. As of the Record Date, the Estate of James S. Simpson owned
approximately 51% of FCB Common Stock. Charles M. Cary, who has been designated
under Mr. Simpson's will as attorney in fact to vote the FCB Common Stock held
by Mr. Simpson's estate (the "Estate's Attorney"), has indicated that he intends
to vote all of these shares in favor of the Merger, which is sufficient to
approve the Merger. 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
FCB 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" ITEM
ONE.
I look forward to seeing you at the Special Meeting.
Sincerely,
Mike Bodiford,
President and Chief Executive Officer
<PAGE> 4
FIRST COMMUNITY BANCSHARES, INC.
101 N. MAIN STREET
MIDDLETON, TENNESSEE 38052
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD AT 4:00 P.M. ON AUGUST 4, 1998
NOTICE IS HEREBY GIVEN that a Special Meeting of the shareholders (the
"Special Meeting") of First Community Bancshares, Inc. ("FCB") will be held at
the main office of FCB, located at 101 North Main Street, Middleton, Tennessee,
38052 on August 4, 1998, at 4:00 p.m., local time, for the following purposes:
1. MERGER. To consider and vote upon a proposal to approve the
Agreement and Plan of Reorganization, dated as of November 10, 1997 and amended
as of May 12, 1998 (the "Agreement"), and the related Plan of Merger (the "Plan
of Merger"), by and between FCB, Union Planters Corporation, a Tennessee
corporation ("UPC"), and Union Planters Holding Corporation, a Tennessee
corporation which is a wholly-owned subsidiary of UPC ("UP Holding"), pursuant
to which (i) FCB will merge (the "Merger") with and into UP Holding, with the
effect that UP Holding will be the surviving corporation resulting from the
Merger, and (ii) each share of the $1.00 par value common stock of FCB ("FCB
Common Stock") issued and outstanding at the effective time of the Merger
(excluding shares held by FCB 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 2.6924 shares of the
$5.00 par value common stock of UPC, and the associated Preferred Share Rights
(as defined in the accompanying Proxy Statement/Prospectus), subject to possible
adjustment, and cash in lieu of issuing any fractional 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 June 22, 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 A MAJORITY OF THE ISSUED
AND OUTSTANDING SHARES OF FCB COMMON STOCK ENTITLED TO BE VOTED AT THE SPECIAL
MEETING.
FCB shareholders have the right to dissent from the Merger and to
receive the "fair value" of their shares of FCB 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 Tennessee statutes
governing statutory dissenters' rights is attached thereto as Appendix D. FCB
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 FCB UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS
VOTE FOR APPROVAL OF THE AGREEMENT AND THE PLAN OF MERGER.
BY ORDER OF THE BOARD OF DIRECTORS
Richard Wetherbee
Secretary to the Board, First Community Bancshares, Inc.
Middleton, Tennessee
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.
<PAGE> 5
PROSPECTUS
COMMON STOCK, $5.00 PAR VALUE
UNION PLANTERS CORPORATION
PROXY STATEMENT
FOR SPECIAL MEETING OF SHAREHOLDERS OF
FIRST COMMUNITY 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 125,824 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 First Community Bancshares, Inc., a
corporation organized and existing under the laws of the State of Tennessee
("FCB"), upon consummation of the proposed merger (the "Merger") of FCB with and
into Union Planters Holding Corporation, ("UP Holding") a corporation organized
under the laws of the State of Tennessee, which is a wholly-owned subsidiary of
UPC, with the effect that UP Holding will be the surviving corporation of the
Merger. The Merger will be consummated pursuant to the terms of the Agreement
and Plan of Reorganization, dated as of November 10, 1997 and amended as of May
12, 1998 (the "Agreement"), and the related Plan of Merger (the "Plan of
Merger"), by and between UPC, FCB and UP Holding. 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 FCB ("FCB
Common Stock") will be converted into and exchanged for the right to receive
2.6924 shares of UPC Common Stock, subject to certain possible adjustments
described herein (the "Exchange Ratio"). Cash (without interest) will be paid in
lieu of the issuance of any fractional shares of UPC Common Stock.
The Exchange Ratio is adjustable upward only if certain conditions are
met concerning the quoted price of UPC Common Stock. The Board of Directors of
FCB (the "FCB Board") would likely invoke the adjustment mechanism in the
Agreement, if the conditions permitted, by giving notice of its election to
terminate, in which case UPC would determine whether to proceed with the Merger
at a higher Exchange Ratio and avoid termination. In making this determination,
the principal factors UPC will consider include the projected effect of the
Merger on UPC's pro forma earnings per share and whether UPC's assessment of
FCB's earning potential as part of UPC justifies the issuance of an increased
number of shares of UPC Common Stock. If UPC declines to adjust the Exchange
Ratio, FCB may elect to proceed without the adjustment by withdrawing its
election to terminate, although it has no intention to so elect without
resoliciting the approval of FCB's shareholders. In making such a determination,
the FCB Board would consider whether the Merger remains in the best interest of
FCB and its shareholders, despite a decline in the price of UPC Common Stock,
and whether the consideration to be received by the holders of FCB Common Stock
is fair from a financial point of view. See "THE MERGER" - Possible Adjustment
of Exchange Ratio."
This Prospectus also serves as the Proxy Statement of FCB, and is being
furnished to the shareholders of FCB in connection with the solicitation of
proxies by the FCB Board for use at a Special Meeting of shareholders (including
any adjournment or postponement thereof, the "Special Meeting"), to be held on
August 4, 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 FCB on or about June 29, 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 _____, 1998.
<PAGE> 6
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
FCB 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, FCB 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 FCB was supplied by FCB.
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 FCB 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
AND FCB, AND 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
i
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FAVORABLE THAN EXPECTED, RESULTING IN, AMONG OTHER THINGS, A DETERIORATION IN
CREDIT QUALITY; (VII) CHANGES OCCUR IN THE REGULATORY ENVIRONMENT; (VIII)
CHANGES OCCUR IN BUSINESS CONDITIONS AND INFLATION; (IX) CHANGES OCCUR IN THE
SECURITIES MARKETS; AND (X) DISRUPTIONS OF THE OPERATIONS OF FCB, 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 FCB, 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, February
23, 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 Annual 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 July 15,
1998.
ii
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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.............................................................. 7
Historical and Pro Forma Comparative Per Share Data.................................................... 7
SELECTED FINANCIAL DATA......................................................................................... 10
SPECIAL MEETING OF FCB SHAREHOLDERS............................................................................. 14
Date, Place, Time, and Purpose......................................................................... 14
Record Date, Voting Rights, Required Vote, and Revocability of Proxies................................. 14
Solicitation of Proxies................................................................................ 15
Dissenters' Rights..................................................................................... 15
Recommendation......................................................................................... 16
DESCRIPTION OF TRANSACTION...................................................................................... 17
General .............................................................................................. 17
Possible Adjustment of Exchange Ratio.................................................................. 17
Background of the Merger............................................................................... 19
Recommendation of the FCB Board; FCB's Reasons for the Merger.......................................... 20
UPC's Reasons for the Merger........................................................................... 22
Effective Time of the Merger........................................................................... 22
Dissenters' Rights..................................................................................... 22
Distribution of UPC Stock Certificates................................................................. 24
Limitation on Negotiations............................................................................. 25
Conditions to Consummation of the Merger............................................................... 25
Regulatory Approval.................................................................................... 26
Waiver, Amendment, and Termination..................................................................... 27
Conduct of Business Pending the Merger................................................................. 28
Management and Operations After the Merger............................................................. 29
Interests of Certain Persons in the Merger............................................................. 30
Material Federal Income Tax Consequences of the Merger................................................. 31
Accounting Treatment................................................................................... 32
Expenses and Fees...................................................................................... 33
Resales of UPC Common Stock............................................................................ 33
EFFECT OF THE MERGER ON RIGHTS OF SHAREHOLDERS.................................................................. 34
Anti-takeover Provisions Generally..................................................................... 34
Authorized Capital Stock............................................................................... 35
Preemptive Rights...................................................................................... 36
Amendment of Charter and Bylaws........................................................................ 36
Classified Board of Directors and Absence of Cumulative Voting......................................... 37
Director Removal and Vacancies......................................................................... 37
Limitations on Director Liability...................................................................... 38
Indemnification........................................................................................ 38
Annual Meeting of Shareholders......................................................................... 38
Actions by Shareholders Without a Meeting.............................................................. 39
Shareholder Nominations and Proposals.................................................................. 39
Business Combinations ................................................................................. 39
Limitations on Ability to Vote Stock................................................................... 41
Dissenters' Rights of Appraisal........................................................................ 41
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Shareholders' Rights to Examine Books and Records...................................................... 41
Dividends.............................................................................................. 41
COMPARATIVE MARKET PRICES AND DIVIDENDS......................................................................... 42
BUSINESS OF FCB................................................................................................. 43
General .............................................................................................. 43
Employees.............................................................................................. 43
Customers.............................................................................................. 43
Properties............................................................................................. 44
Legal Proceedings...................................................................................... 44
Competition............................................................................................ 44
Supervision and Regulation............................................................................. 44
Effect of Governmental Policies........................................................................ 44
Investment Activities.................................................................................. 44
Liability and Asset Management......................................................................... 45
Lending Activities..................................................................................... 45
Credit Risk Management and Allowance for Loan Losses................................................... 46
Capital Resources/Liquidity............................................................................ 46
Capital Adequacy....................................................................................... 47
Beneficial Ownership of FCB Common Stock............................................................... 47
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF FCB.................... 48
Overview .............................................................................................. 49
Results of Operations for the Years Ended December 31, 1997, 1996 and 1995............................. 49
Results of Operations - Three Months Ended March 31, 1998 and 1997..................................... 51
Financial Condition.................................................................................... 52
Liquidity and Asset/Liability Management............................................................... 54
Sources and Uses of Funds.............................................................................. 55
Regulatory Assessments................................................................................. 56
Effects of Inflation................................................................................... 56
BUSINESS OF UPC................................................................................................. 61
General .............................................................................................. 61
Recent Developments.................................................................................... 62
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION.......................................................... 62
CERTAIN REGULATORY CONSIDERATIONS............................................................................... 69
General .............................................................................................. 69
Payment of Dividends................................................................................... 70
Capital Adequacy....................................................................................... 71
Support of Subsidiary Institutions..................................................................... 72
Prompt Corrective Action............................................................................... 73
DESCRIPTION OF UPC CAPITAL STOCK................................................................................ 74
UPC Common Stock....................................................................................... 74
UPC Preferred Stock.................................................................................... 75
OTHER MATTERS................................................................................................... 75
</TABLE>
iv
<PAGE> 10
<TABLE>
<S> <C> <C>
SHAREHOLDER PROPOSALS........................................................................................... 76
EXPERTS ....................................................................................................... 76
OPINIONS ....................................................................................................... 76
APPENDICES:
Appendix A --- Agreement and Plan of Merger, dated as of November 10, 1997, and as amended May 12, 1998
by and between Union Planters Corporation, Union Planters Holding Corporation and First
Community Bancshares, Inc.
Appendix B --- Plan of Merger of First Community Bancshares, Inc. with and into Union Planters Holding
Corporation
Appendix C --- Financials of First Community Banchares, Inc.
Appendix D --- Copy of Chapter 23 of the Tennessee Business Corporation Act regarding Dissenters' Rights
</TABLE>
v
<PAGE> 11
SUMMARY
The following is a summary of certain information contained in this
Proxy Statement and the documents incorporated herein by reference. This summary
is not intended to be a complete description of the matters covered in this
Proxy Statement and is qualified in its entirety by the more detailed
information appearing elsewhere or incorporated by reference in this Proxy
Statement. Shareholders are urged to read carefully the entire Proxy Statement,
including the Appendices. As used in this Proxy Statement, the terms "UPC" and
"FCB" refer to Union Planters Corporation and First Community Bancshares, Inc.,
respectively, and, where the context requires, to those entities and their
respective subsidiaries.
THE PARTIES
FCB. FCB, a Tennessee corporation, is a one-bank holding company
registered with the Board of Governors of the Federal Reserve System (the
"Federal Reserve") under the Bank Holding Company Act of 1956, as amended (the
"BHC Act"). As of March 31, 1998, FCB had total consolidated assets of
approximately $41 million, total consolidated loans of approximately $31
million, total consolidated deposits of approximately $33 million, and total
consolidated shareholders' equity of approximately $4 million.
FCB conducts its business activities through its wholly-owned bank
subsidiary, The Bank of Middleton ("Middleton"), which was organized in 1905 as
a commercial bank chartered under the laws of the State of Tennessee. FCB
operates from its main office in Middleton, Tennessee. The principal executive
offices of FCB are located at 101 N. Main Street, Middleton, Tennessee 38052 and
its telephone number at such address is (901) 376-8441. Additional information
with respect to FCB and its subsidiary is included elsewhere herein.
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 the expansion of UPC's business strategy. UPC completed 13
acquisitions in 1994, three in 1995, seven in 1996, and six in 1997, and has
recently completed two in 1998 adding approximately $3.8 billion in total assets
in 1994, $1.3 billion in 1995, $4.2 billion in 1996, $3.6 billion in 1997, and
$520 million in 1998 (the "Recently Completed Acquisitions"). As of May 31,
1998, UPC is a party to definitive agreements to acquire ten financial
institutions, in addition to FCB, 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
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<PAGE> 12
had aggregate total assets of approximately $13.1 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."
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.
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.
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."
UP HOLDING. UP Holding, a Tennessee corporation, is a wholly-owned
subsidiary of UPC. UP Holding is a bank holding company itself which owns all of
the common stock of UPB. Certain of the directors and officers of UP Holding are
executive officers of UPC.
MEETING OF SHAREHOLDERS
This Proxy Statement is being furnished to the holders of FCB Common
Stock in connection with the solicitation of proxies by the FCB Board for use at
a Special Meeting at which FCB shareholders will be asked to vote upon, (i) a
proposal to approve the Agreement and the Plan of Merger and (ii) such other
business as may properly come before the Special Meeting. The Special Meeting
will be held at the main office of FCB, located at 101 N. Main Street,
Middleton, Tennessee 38052, at 4:00 p.m., local time, on August 4, 1998. See
"Special Meeting of FCB Shareholders -- Date, Place, Time, and Purpose."
The FCB Board has fixed the close of business on June 22, 1998, as the
record date (the "FCB 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 FCB Common Stock on the FCB Record Date will be entitled to notice
of and to vote at the Special Meeting. Each share of FCB Common Stock validly
issued and outstanding on the FCB Record Date is entitled to one vote on each
matter submitted to FCB shareholders for a vote. On the FCB Record Date, there
were
2
<PAGE> 13
46,733 shares of FCB Common Stock outstanding. In order for the Special Meeting
to be held, a quorum must be achieved. A quorum would be achieved if a majority
of the outstanding shares of FCB Common Stock are represented at the Special
Meeting in person or by proxy. Each vote is important and all FCB shareholders
are encouraged to vote their shares, in person or by proxy, at the Special
Meeting. See "SPECIAL MEETING OF FCB 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 a majority
of the issued and outstanding shares of FCB Common Stock entitled to be voted at
the Special Meeting. As of the Record Date, the Estate of James S. Simpson owned
approximately 51% of FCB Common Stock. The Estate's Attorney has indicated that
he intends to vote all of these shares in favor of the Merger, which is
sufficient to approve the Merger. The directors and executive officers of FCB
(including immediate family members and affiliated entities) owned, as of the
FCB Record Date, 4,477 shares or approximately 11.0% of the outstanding shares
of FCB Common Stock.
The directors and executive officers of UPC owned or controlled, as of
the FCB Record Date, no shares of FCB Common Stock. As of the FCB Record Date,
UPC held no shares of FCB Common Stock in a fiduciary capacity for others, or as
a result of debts previously contracted, and FCB held no shares of FCB Common
Stock in a fiduciary capacity for others. The members of FCB's management have
indicated that they intend to vote "for" adoption of the Agreement and Plan of
Merger. See "Special Meeting of FCB Shareholders -- Record Date, Voting Rights,
Required Vote, and Revocability of Proxies," "DESCRIPTION OF THE TRANSACTION"
and "BUSINESS OF FCB".
For additional information with respect to the number and percentage of
shares of FCB Common Stock beneficially owned by directors and executive
officers of FCB and with respect to the beneficial owners of 5.0% or more of the
outstanding shares of FCB Common Stock, see "SPECIAL MEETING OF FCB
SHAREHOLDERS" and "BUSINESS OF FCB -- Beneficial Ownership of FCB Common Stock."
THE MERGER
GENERAL. The Agreement provides for the acquisition of FCB by UPC
pursuant to the merger of FCB with and into UP Holding, a wholly-owned
subsidiary of UPC, with the effect that UP Holding will be the surviving
corporation resulting from the Merger. At the Effective Time, each share of FCB
Common Stock then issued and outstanding (excluding shares held by FCB, 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 2.6924 shares of UPC Common Stock, subject to possible
adjustment as described below (the "Exchange Ratio").
In the event both of the following conditions are satisfied, (i) the
"Average Closing Price" (defined in the Agreement as the average of the daily
last sale prices of UPC Common Stock quoted on the NYSE Composite Transactions
(as reported by The Wall Street Journal or, if not reported thereby, another
authoritative source as chosen by UPC) for the 20 consecutive full trading days
on which such shares are traded on the NYSE ending at the close of trading on
the later of the date of the Special Meeting of the date on which the waiver of
the Federal Reserve which is required for the Merger shall be received (without
regard to whether any required waiting periods shall have expired (the
"Determination Date")) is less than $47.35 and (ii) (1) the quotient obtained by
dividing the Average Closing Price by $59.19 (the "UPC Ratio") is less than (2)
the quotient obtained by dividing the weighted average of the closing prices
(the "Index Price") of 15 bank holding companies designated in the Agreement
(the "Index Group") on the Determination Date by the Index Price on November 14,
1997, and subtracting 0.15 (the "Index Ratio"), then FCB will have the right to
terminate the Agreement unless UPC elects to adjust the Exchange Ratio in the
manner described under "THE MERGER ---- Possible Adjustment of Exchange Ratio."
Under no circumstances would the Exchange Ratio be less than 2.6924 shares of
UPC Common Stock for each share of FCB Common Stock. The possible upward
adjustment of the Exchange Ratio depends on the factors mentioned above
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<PAGE> 14
and is not subject to a contractual limit. See "DESCRIPTION OF THE TRANSACTION-
- -- Possible Adjustment of Exchange Ratio."
No fractional shares of UPC Common Stock will be issued. Rather, cash
(without interest) will be paid in lieu of any fractional share interest to
which any FCB 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."
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
FCB. The FCB Board believes that the Agreement, the Plan of Merger and the
Merger are in the best interests of FCB and its shareholders. If the Merger is
consummated, the shareholders of FCB 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 FCB Common Stock. The
FCB Board believes that the Merger will result in a company with expanded
opportunities for profitable growth and that the combined resources of FCB and
UPC will provide an enhanced ability to compete in the changing and competitive
financial services industry. THE FCB BOARD UNANIMOUSLY RECOMMENDS THAT FCB
SHAREHOLDERS VOTE FOR APPROVAL OF THE AGREEMENT AND THE PLAN OF MERGER. See
"DESCRIPTION OF THE TRANSACTION -- Recommendation of the FCB Board; Reasons for
the Merger."
In unanimously approving the Agreement and the Plan of Merger, the FCB
Board considered, among other things, FCB's and UPC's financial condition, the
financial terms and income tax consequences of the Merger, the likelihood of the
Merger being approved by regulatory authorities without undue conditions or
delay. See "DESCRIPTION OF THE TRANSACTION -- Recommendation of the FCB 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 Secretary of
State of the State of Tennessee. Subject to the terms and conditions of the
Agreement, unless otherwise agreed upon by FCB and UPC, the parties will use
their reasonable efforts to cause the Effective Time to occur on such date as
may be designated by UPC within 30 days following the last to occur of (i) the
effective date of the last consent of any regulatory authority having authority
over and approving or exempting the Merger (taking into account any requisite
waiting period in respect thereof), (ii) the date on which the shareholders of
FCB 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).
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. FCB 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 5, 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 FCB Common Stock, a letter of
transmittal and instructions for use in effecting the surrender and
4
<PAGE> 15
cancellation of the Certificates in exchange for certificates representing
shares of UPC Common Stock. Cash will be paid to the holders of FCB 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 FCB, UPC, or the
Exchange Agent be liable to any holder of FCB 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 Federal Reserve has been
requested to waive application requirements for prior approval of the Merger.
Since it is contemplated that Middleton will be merged with and into Selmer Bank
& Trust Company, a wholly-owned subsidiary of UPC and a Tennessee state
chartered Bank, (such merger hereinafter referred to as the "Bank Merger"), the
Bank Merger Act applies and the prior approval of the Federal Deposit Insurance
Corporation and the Tennessee Department of Financial Institutions ("TDFI") is
required for the consummation of the Bank Merger. It is anticipated that the
waiver of the Federal Reserve approval if obtained, would, in such case, be
conditioned upon the receipt of the prior approval of the FDIC and TDFI for the
Bank Merger. Applications have been filed with each of these regulatory
authorities for the requisite approvals or waivers. By letter dated May 6, 1998
the Federal Reserve notified UPC that it had waived prior notice of the Merger
because the transaction is subject to review and approval by the FDIC and TDFI.
THERE CAN BE NO ASSURANCE THAT ADDITIONAL REGULATORY APPROVALS WILL BE OBTAINED
OR AS TO THE TIMING OF ANY SUCH APPROVALS.
Consummation of the Merger is subject to various other conditions,
including receipt of the required approval of the FCB 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 accountants to the effect that the Merger will
qualify for pooling-of-interests accounting treatment, and certain other
conditions. 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 FCB 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, (i) if the Merger is not consummated by September
30, 1998 unless the failure to consummate by such date is due to a willful
breach of the Agreement by the party seeking to terminate and (ii) by the FCB
Board, in certain circumstances, if an adjustment is not made to the Exchange
Ratio. To the extent permitted by law, the Agreement may be amended upon the
written agreement of UPC and FCB without approval of the holders of FCB Common
Stock, whether before or after approval of the Agreement and the Plan of Merger
by the FCB shareholders; See "DESCRIPTION OF THE TRANSACTION -- Possible
Adjustment of Exchange Ratio" and "-- Waiver, Amendment, and Termination."
DISSENTERS' RIGHTS. Holders of FCB Common Stock have the right under
Chapter 23 of the Tennessee Business Corporation Act ("TBCA") to dissent to the
Merger and, upon consummation of the Merger and such holders' further compliance
with Chapter 23 of the TBCA, to be paid the "fair value" of their shares of FCB
Common Stock in cash. See "DESCRIPTION OF THE TRANSACTION -- Dissenters'
Rights", and Appendix D hereto, which is a copy of Chapter 23 of the TBCA.
INTERESTS OF CERTAIN PERSONS IN THE MERGER. Certain members of FCB's
management and the FCB Board have interests in the Merger in addition to their
interests as shareholders of FCB generally. These interests relate to; (i) the
continued indemnification by UPC of the former directors, officers, employees,
and agents of FCB and its subsidiaries following consummation of the Merger;
(ii) the payment of certain deferred compensation to the estate of James S.
Simpson, former President and CEO of FCB; and (iii) the payment of special
bonuses to certain officers of FCB for their efforts in connection with the
Merger. See "DESCRIPTION OF THE TRANSACTION --Interests of Certain Persons in
the Merger" and "DESCRIPTION OF THE TRANSACTION - Remuneration of Directors and
Officers - Special Compensation."
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<PAGE> 16
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 FCB shareholder upon the exchange of all of such shareholder's shares of
FCB 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 and FCB of an opinion of Wyatt,
Tarrant & Combs dated the date of the Effective Time, substantially to this
effect. The condition relating to the receipt of the tax opinion may be waived
by FCB and UPC. Neither UPC nor FCB currently intends to waive the condition
relating to the receipt of the tax opinion. If the conditions relating to the
receipt of the Tax Opinion were waived and the material federal income tax
consequences of the Merger were materially different from those described in
this Proxy Statement, FCB would resolicit the approval of its shareholders prior
to consummating the Merger. A dissenting holder of FCB Common Stock who perfects
dissenters' rights will recognize gain or loss measured by the difference
between the value received by such shareholder for shares of FCB Common Stock
and the shareholder's tax basis in such stock. TAX CONSEQUENCES OF THE MERGER
FOR INDIVIDUAL TAXPAYERS CAN VARY, HOWEVER, AND ALL FCB 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 opinion 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 will not consummate the Merger if such accounting
treatment is not available. See "DESCRIPTION OF THE TRANSACTION -- Accounting
Treatment."
CERTAIN DIFFERENCES IN SHAREHOLDERS' RIGHTS. At the Effective Time, FCB
shareholders, whose rights are governed by FCB's Charter of Incorporation, (the
"Charter"), and Bylaws (the "Bylaws") and by the TBCA, will automatically become
UPC shareholders, and their rights as UPC shareholders will be governed by UPC's
Restated Charter (the "Charter") and Bylaws and the TBCA. The rights of UPC
shareholders differ from the rights of FCB 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 7.3 of the Agreement,
FCB 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 FCB). As protection
against possible violation of this limitation, FCB has agreed, so under certain
circumstances, to pay to UPC the sum of $750,000 in immediately available funds
in the event and at the time that FCB 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 "THE MERGER - 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, FCB has agreed not to
take certain actions relating to the operation of FCB 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
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<PAGE> 17
adopting any employee benefit plans, including any employment contract. See "THE
MERGER -- 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 FCB 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 FCB Common Stock on (i) November 7, 1998,
the last trading day preceding the public announcement of the execution of the
Agreement, and (ii) June 17, 1998, the latest practicable date prior to the
mailing of this Proxy Statement:
<TABLE>
<CAPTION>
UPC Equivalent Price
Common Stock Per FCB Share (1)
------------ -----------------
<S> <C> <C>
November 7, 1997 $61.06 $164.40
June 17, 1998 $55.50 $149.43
</TABLE>
(1) The equivalent price per share of FCB 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 2.6924. See
"COMPARATIVE MARKET PRICES AND DIVIDENDS."
THERE CAN BE NO ASSURANCE AS TO WHAT THE MARKET PRICE OF THE UPC COMMON
STOCK WILL BE IF AND WHEN THE MERGER IS CONSUMMATED, 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 FCB; (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 FCB Common
Stock, giving effect to UPC only; and (iv) an equivalent pro forma basis per
share of FCB Common Stock, giving effect to the Merger and the Other
Acquisitions. The UPC pro forma combined information and the FCB equivalent pro
forma information give effect to the Merger and the Other Acquisitions and
reflect an Exchange Ratio of 2.6924 shares of UPC Common Stock for each
outstanding share of FCB Common Stock. The Merger and each of the Other Pending
Acquisitions (with the exception 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 FCB 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 Bancshares, Inc. ("Merchants") because 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 periods presented has been excluded due
to the lack of information available for operation of the branches on a
historical basis. See "BUSINESS OF UPC - Recent Developments" and "Pro Forma
Condensed Consolidated Financial Information." 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
7
<PAGE> 18
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 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 FCB, including the respective notes thereto. See "DOCUMENTS
INCORPORATED BY REFERENCE," "-- Selected Financial Data," "BUSINESS OF UPC--
Recent Developments," and "PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
INFORMATION" and Appendix C hereto, which contains the 1997 unaudited financial
statements of FCB.
8
<PAGE> 19
UNION PLANTERS CORPORATION AND FCB, INC.
HISTORICAL AND PRO FORMA COMPARATIVE PER SHARE DATA
<TABLE>
<CAPTION>
Three Months
Ended Years Ended December 31,(1)
March 31, ------------------------------------
1998 1997 1996 1995
------------ ------------------------------------
<S> <C> <C> <C> <C>
EARNINGS BEFORE EXTRAORDINARY ITEMS
AND ACCOUNTING CHANGES
UPC
Basic $ 0.89 $ 2.54 $2.13 $2.79
Diluted 0.86 2.45 2.05 2.66
FCB
Basic 2.75 6.37 11.64 9.29
Diluted 2.75 6.28 11.48 9.13
UPC pro forma (all Other Acquisitions,
including FCB)
Basic 0.80 2.52 2.24 2.56
Diluted 0.78 2.45 2.17 2.46
FCB equivalent pro forma (UPC only) (1)
Basic 2.40 6.84 5.73 7.51
Diluted 2.32 6.60 5.52 7.16
FCB equivalent pro forma (all Other Acquisitions,
including FCB) (1)
Basic 2.15 6.78 6.03 6.89
Diluted 2.10 6.60 5.84 6.62
CASH DIVIDENDS PER SHARE
UPC 0.50 1.495 1.08 0.98
FCB -- 1.25 1.00 0.90
FCB equivalent pro forma (1) 1.35 4.03 2.91 2.64
</TABLE>
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------- ------------
<S> <C> <C>
BOOK VALUE PER COMMON SHARE
UPC $21.13 $20.72
FCB 78.78 75.97
UPC pro forma (all Other Pending Acquisitions,
including FCB) 20.82 21.73
FCB equivalent pro forma (UPC only) (1) 56.89 55.79
FCB equivalent pro forma (all Other Acquisitions,
including FCB) (1) 56.06 58.51
</TABLE>
- --------------------------
(1) The equivalent pro forma per share data for FCB are computed by multiplying
UPC's pro forma information by 2.6924, the Exchange Ratio.
9
<PAGE> 20
SELECTED FINANCIAL DATA
The following tables present selected consolidated financial data for UPC and
FCB for the three months 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 UPC's 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
FCB has been derived from the consolidated financial statements of FCB,
including the unaudited consolidated financial statements of FCB and the audited
consolidated financial statements of FCB (the "FCB Financials") included as
Appendix C to this Proxy Statement 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
management's of UPC and FCB, 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 FCB, respectively, have been included. With respect to UPC and FCB, results
for the three months ended March 31, 1998 are not necessarily indicative of
results which may be expected for any other period or for the year as a whole.
See "BUSINESS OF UPC -- Recent Developments" and "PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION" for information concerning UPC's Other
Acquisitions.
10
<PAGE> 21
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)
11
<PAGE> 22
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.
12
<PAGE> 23
FIRST COMMUNITY BANCSHARES, INC. AND SUBSIDIARY
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
Three Months Ended
March 31, (1) Years Ended December 31,
-------------------- ------------------------
1998 1997 1997 1996
-------- -------- -------- --------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net interest income $ 490 $ 423 $ 1,774 $ 1,722
Provision for losses on loans 45 10 354 11
Investment securities gains (losses) -- -- -- --
Other noninterest income 25 37 151 149
Noninterest expense 272 245 1,136 1,003
-------- -------- -------- --------
Earnings before income taxes 198 205 435 857
Applicable income taxes 69 68 142 293
-------- -------- -------- --------
Net earnings $ 129 $ 137 $ 293 $ 564
======== ======== ======== ========
PER COMMON SHARE DATA
Basic-net earnings $ 2.75 $ 3.01 $ 6.37 $ 11.64
Diluted-net earnings 2.75 3.01 6.28 11.48
Cash dividends -- -- 1.25 1.00
Book value 78.78 73.58 75.97 72.04
BALANCE SHEET DATA (AT PERIOD END)
Total assets $ 40,672 $ 40,735 $ 40,650 $ 38,998
Loans, net of unearned income 30,592 29,897 30,183 29,653
Allowance for losses on loans 331 463 229 472
Investment securities 6,185 7,089 6,691 6,808
Total deposits 33,304 33,731 33,375 32,152
Short-term borrowings -- -- -- --
Long-term debt
Parent company 167 200 167 200
Subsidiary bank 3,299 3,161 3,362 3,166
Total shareholders' equity 3,682 3,358 3,550 3,242
Average total assets 40,661 39,867 39,824 37,975
Average shareholders' equity 3,616 3,300 3,396 3,089
Average shares outstanding
Basic 46,733 45,644 45,978 48,426
Diluted 46,733 45,644 46,584 49,130
PROFITABILITY AND CAPITAL RATIOS
Return on average assets 1.27% 1.37% 0.74% 1.49%
Return on average common equity 14.27% 16.61% 8.63% 18.26%
Net interest income (taxable equivalent)/ average
earning assets 5.24% 4.70% 4.89% 5.00%
Loan/deposits 91.86% 88.63% 90.44% 92.23%
Common dividend payout ratio 0.00% 0.00% 19.63% 8.59%
Equity/assets (period end) 9.05% 8.24% 8.73% 8.31%
Average shareholders' equity/average total assets 8.89% 8.28% 8.53% 8.13%
Leverage ratio 9.05% 8.49% 8.54% 8.34%
Tier 1 capital to risk-weighted assets 13.41% 12.63% 12.97% 11.67%
Total capital to risk-weighted assets 14.62% 14.37% 13.81% 12.92%
CREDIT QUALITY RATIOS
Allowance/period end loans 1.08% 1.55% 0.76% 1.59%
Nonperforming loans/total loans 2.62% 4.22% 5.61% 2.01%
Allowance/nonperforming loans 41.22% 36.72% 13.53% 79.19%
Nonperforming assets/loans and foreclosed properties 3.11% 4.95% 6.10% 2.76%
Provision/average loans 0.15% 0.03% 1.18% 0.04%
Net charge-offs/average loans (0.19)% 0.07% 2.00% 0.18%
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
INCOME STATEMENT DATA
Net interest income $ 1,550 $ 1,473 $ 1,474
Provision for losses on loans 45 170 180
Investment securities gains (losses) 2 1 3
Other noninterest income 130 120 125
Noninterest expense 986 949 946
-------- -------- --------
Earnings before income taxes 651 475 476
Applicable income taxes 208 132 139
-------- -------- --------
Net earnings $ 443 $ 343 $ 337
======== ======== ========
PER COMMON SHARE DATA
Basic-net earnings $ 9.29 $ 7.25 $ 7.30
Diluted-net earnings 9.13 7.11 7.18
Cash dividends 0.90 0.50 0.20
Book value 60.62 47.91 45.94
BALANCE SHEET DATA (AT PERIOD END)
Total assets $ 36,951 $ 33,956 $ 32,224
Loans, net of unearned income 26,256 24,535 20,895
Allowance for losses on loans 511 528 372
Investment securities 7,482 7,940 8,449
Total deposits 30,625 27,962 27,074
Short-term borrowings -- 100 --
Long-term debt
Parent company 80 230 320
Subsidiary bank 3,101 3,195 2,472
Total shareholders' equity 2,936 2,301 2,157
Average total assets 35,454 33,090 30,176
Average shareholders' equity 2,619 2,229 1,975
Average shares outstanding
Basic 47,696 47,268 46,179
Diluted 48,543 48,229 46,942
PROFITABILITY AND CAPITAL RATIOS
Return on average assets 1.25% 1.04% 1.12%
Return on average common equity 16.92% 15.39% 17.06%
Net interest income (taxable equivalent)/ average
earning assets 4.84% 4.98% 5.44%
Loan/deposits 85.73% 87.74% 77.18%
Common dividend payout ratio 9.69% 6.89% 2.74%
Equity/assets (period end) 7.95% 6.78% 6.69%
Average shareholders' equity/average total assets 7.39% 6.74% 6.54%
Leverage ratio 7.92% 7.41% 6.69%
Tier 1 capital to risk-weighted assets 11.55% 10.42% 9.97%
Total capital to risk-weighted assets 12.82% 11.68% 11.22%
CREDIT QUALITY RATIOS
Allowance/period end loans 1.95% 2.15% 1.78%
Nonperforming loans/total loans 1.52% 1.92% 1.29%
Allowance/nonperforming loans 127.75% 112.34% 137.78%
Nonperforming assets/loans and foreclosed properties 1.90% 1.92% 1.29%
Provision/average loans 0.18% 0.75% 0.89%
Net charge-offs/average loans 0.24% 0.06% 0.34%
</TABLE>
-----------------------------------------------------------
(1) Annualized for three months ended March 31, 1998 and 1997
13
<PAGE> 24
SPECIAL MEETING OF FCB SHAREHOLDERS
DATE, PLACE, TIME, AND PURPOSE
This Proxy Statement is being furnished to the holders of FCB Common
Stock in connection with the solicitation of proxies by the FCB Board for use at
the Special Meeting and at any adjournments or postponements thereof at which
FCB 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
FCB, located at 101 North Main Street, Middleton, Tennessee 38052 at 4:00 p.m.,
local time, on August 4, 1998. See "DESCRIPTION OF TRANSACTION."
RECORD DATE, VOTING RIGHTS, REQUIRED VOTE, AND REVOCABILITY OF PROXIES
The close of business on June 22, 1998, has been fixed as the FCB
Record Date for determining holders of outstanding shares of FCB Common Stock
entitled to notice of and to vote at the Special Meeting. Only holders of FCB
Common Stock of record on the books of FCB at the close of business on the FCB
Record Date are entitled to notice of and to vote at the Special Meeting. As of
the FCB Record Date, there were 46,733 shares of FCB Common Stock issued and
outstanding held by approximately 74 holders of record.
Each holder of record of shares of FCB Common Stock on the FCB 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 FCB 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 FCB Common Stock entitled to vote at the Special Meeting
is necessary to constitute a quorum at the Special Meeting.
FCB intends to count shares of FCB Common Stock present in person at
the Special Meeting but not voting, and shares of FCB 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 a majority of the issued and outstanding shares of FCB Common Stock
entitled to vote at the Special Meeting. Brokers who hold shares in street name
for customers who are the beneficial owners of such shares are prohibited from
giving a proxy to vote shares held for such customers on the approval of the
Agreement and the Plan of Merger without specific instructions from such
customers. Given that the approval of the Agreement and the Plan of Merger
requires the affirmative vote of the holders of a majority of the outstanding
shares of FCB Common Stock entitled to vote thereon, any abstention, non-voting
share or "broker non-vote" with respect to such shares of FCB Common Stock will
have the same effect as a vote AGAINST the approval of the Agreement and the
Plan of Merger.
Shares of FCB 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.
14
<PAGE> 25
A FCB shareholder who has given a proxy solicited by the FCB 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 Corporate Secretary of FCB, (ii)
properly submitting to FCB 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: First Community Bancshares, Inc., 101 N. Main Street,
Middleton, Tennessee 38052; Attention: Mike Bodiford, President and Chief
Executive Officer.
The directors and executive officers of FCB (including immediate family
members and affiliated entities) owned, as of the FCB Record Date, 4,477 shares,
or approximately 11.0% of the outstanding shares of FCB Common Stock. The
directors and executive officers of FCB have indicated their intent to vote for
approval of the Agreement and Plan of Merger. As of the Record Date, the Estate
of James S. Simpson owned 23,936 shares, or approximately 51% of FCB Common
Stock. The Estate's Attorney has indicated that he intends to vote all of these
shares in favor of the Merger, which is sufficient to approve the Merger.
The directors and executive officers of UPC owned, as of the FCB Record
Date, no shares of FCB Common Stock. As of the FCB Record Date, UPC held no
shares of FCB Common Stock in a fiduciary capacity for others, or as a result of
debts previously contracted, and FCB held no shares of FCB Common Stock in a
fiduciary capacity for others.
For additional information with respect to beneficial owners of 5% or
more of the outstanding shares of FCB Common Stock, and information with respect
to the number and percentage of outstanding shares of FCB Common Stock
beneficially owned by the directors and executive officers of FCB, see "BUSINESS
OF FCB --Beneficial Ownership of FCB Common Stock."
SOLICITATION OF PROXIES
Proxies may be solicited by the directors, officers, and employees of
FCB by mail, in person, or by telephone or telegraph. Such persons will receive
no additional compensation for such services. FCB may make arrangements with
brokerage firms and other custodians, nominees, and fiduciaries, if any, for the
forwarding of solicitation materials to the beneficial owners of FCB Common
Stock held of record by such persons. Any such brokers, custodians, nominees,
and fiduciaries will be reimbursed for the reasonable out-of-pocket expenses
incurred by them for such services. All expenses associated with the
solicitation of proxies, other expenses associated with the Special Meeting and
expenses related to the printing and mailing of this Proxy Statement will be
shared by UPC and FCB as provided in the Agreement. See "DESCRIPTION OF
TRANSACTION - Expenses and Fees."
DISSENTERS' RIGHTS
HOLDERS OF FCB 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 FCB COMMON STOCK. IN ORDER TO BE
ENTITLED TO FULLY EXERCISE DISSENTERS' RIGHTS, A FCB 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 FCB COMMON STOCK AND TAKE
CERTAIN OTHER PROCEDURAL STEPS TO "PERFECT" SUCH DISSENTING SHAREHOLDER'S RIGHTS
UNDER CHAPTER 23 OF THE TBCA. SEE "THE MERGER -DISSENTERS' RIGHTS" AND APPENDIX
D HERETO, WHICH IS A COPY OF CHAPTER 23 OF THE TBCA GOVERNING STATUTORY
DISSENTERS' RIGHTS.
It is not necessary for a FCB 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. 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. Therefore, a FCB shareholder who desires to dissent from
approval of the
15
<PAGE> 26
Merger should not submit a proxy which does not specify how such proxy is to be
voted. A FCB 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 FCB Common Stock.
RECOMMENDATION
THE FCB 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 FCB AND
ITS SHAREHOLDERS, AND RECOMMENDS THAT THE FCB SHAREHOLDERS VOTE FOR APPROVAL OF
THE AGREEMENT AND THE PLAN OF MERGER.
16
<PAGE> 27
DESCRIPTION OF TRANSACTION
The following information describes material aspects of the Merger.
This description does not purport to be complete and is qualified in its
entirety by reference to the Appendices hereto, including the Agreement and the
Plan of Merger, which are attached as Appendices A and B, respectively, to this
Proxy Statement and incorporated herein by reference. All shareholders are urged
to read the Appendices in their entirety.
GENERAL
The Agreement provides for the acquisition of FCB by UPC pursuant to
the merger of FCB with and into UP Holding, a wholly-owned subsidiary of UPC
organized under the laws of the State of Tennessee, with the effect that UP
Holding will be the surviving corporation resulting from the Merger. At the
Effective Time, each share of FCB Common Stock then issued and outstanding
(excluding shares held by FCB, 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 2.6924 shares of UPC
Common Stock, subject to possible adjustment as described below (the "Exchange
Ratio").
No fractional shares of UPC Common Stock will be issued. Rather, cash
(without interest) will be paid in lieu of any fractional share to which any FCB
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 FCB Record Date, FCB had 46,733 shares of FCB Common Stock
outstanding. Based upon the Exchange Ratio and assuming there are no Dissenting
Shareholders, upon consummation of the Merger, UPC will issue approximately
125,824 shares of UPC Common Stock. Accordingly, UPC would then have outstanding
approximately 83,991,006 shares of UPC Common Stock, based on the number of
shares of UPC Common Stock outstanding on March 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.)
POSSIBLE ADJUSTMENT OF EXCHANGE RATIO
Under certain circumstances described below, the Exchange Ratio could
be adjusted pursuant to certain provisions of the Agreement. UNDER NO
CIRCUMSTANCES WOULD THE EXCHANGE RATIO BE LESS THAN 2.6924 SHARES OF UPC COMMON
STOCK FOR EACH SHARE OF FCB COMMON STOCK. An upward adjustment could occur if
the FCB Board elects to terminate the Agreement pursuant to the provisions of
the Agreement described below, and if UPC then elects to avoid termination of
the Agreement by increasing the Exchange Ratio.
FCB is not obligated to consummate the Merger with UPC if both:
(a) the average of the last daily sale price (the "Average Closing
Price") of UPC Common Stock (as reported on the NYSE Composite
Transactions List) for each of the 10 consecutive full trading
days in which the UPC Common Stock is traded on the NYSE, ending
2 days after (the later) of the date on which the Annual Meeting
is held (or the date on which the consent of the Federal Reserve
is received), (without regard to whether all required waiting
periods have expired) (the "Determination Date") is less than
$47.35, which represents a 20% decline from $59.19 (the "Starting
Price"), the price per share of UPC Common Stock at the close of
business on November 14, 1997, the fourth full trading day after
the announcement by press release of the Merger (the "Starting
Date"); and
(b) (i) the number (the "UPC Ratio") obtained by dividing the
Average Closing Price by $59.19, the Starting Price, is less than
(ii) the number (the "Index Ratio") obtained by dividing the
weighted
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average of the closing prices of the common stock of the 15 bank
holding companies defined as the "Index Group" in the Agreement
(the "Index Price") on the Determination Date by the Index Price
on November 14, 1997, the Starting Date, and subtracting 0.15.
In such case, FCB has the right to terminate the Agreement during the
ten-day period commencing two days after the Determination Date by giving UPC
prompt written notice of that decision. FCB may withdraw its termination notice
at any time during that ten-day period. During the five-day period after receipt
of such notice, UPC has the option to increase the consideration payable to FCB
shareholders by adjusting the Exchange Ratio in the manner described below. UPC
IS UNDER NO OBLIGATION TO ADJUST THE EXCHANGE RATIO. Should UPC elect to adjust
the Exchange Ratio, it must give FCB prompt written notice of that election and
of the adjusted Exchange Ratio, in which case no termination shall have occurred
pursuant to FCB's right of termination.
These conditions reflect the parties' agreement that FCB's shareholders
will benefit from any appreciation in UPC Common Stock and will assume the risk
of declines in the value of UPC Common Stock to $47.35 under circumstances where
the Average Closing Price of UPC Common Stock lags behind the relative
performance of the common stocks of the Index Group by more than 15%. However,
it is possible that the FCB Board would not elect to exercise its termination
right even if the average closing price is below $47.35.
If the Average Closing Price is less than $47.35 per share and the UPC
Ratio is less than the Index Ratio, the FCB Board will likely terminate the
Agreement so as to require UPC to consider increasing the Exchange Ratio. If the
FCB Board were to elect to terminate the Agreement, UPC would then determine
whether to proceed with the Merger at the higher Exchange Ratio. In making this
determination, the principal factors UPC would consider include the projected
effect of the Merger on UPC's pro forma earnings per share and whether UPC's
assessment of FCB's earning potential as part of UPC would justify the issuance
of an increased number of shares of UPC Common Stock. In making its
determination of whether to terminate the Agreement based upon a decline in the
Average Closing Price of UPC Common Stock, the FCB Board would take into
account, consistent with its fiduciary duties, all relevant facts and
circumstances that exist at such time, including, without limitation,
information concerning the business, financial condition, results of operations,
and prospects of UPC (including the recent performance of UPC Common Stock, the
historical financial data of UPC, customary statistical measurements of UPC's
financial performance, and the future prospects for UPC Common Stock following
the Merger), and the advice of its financial advisor and legal counsel. UPC IS
UNDER NO OBLIGATION TO ADJUST THE EXCHANGE RATIO.
The operation of the adjustment mechanism can be illustrated by three
scenarios. (For purposes of the scenarios, note that the initial Exchange Ratio
is 2.6924, and the Starting Price of UPC Common Stock is $59.19, and it has been
assumed that the Index Price, as of the Starting Date, is $100.)
(1) The first scenario occurs if the Average Closing Price is not less
than $47.35. Under this scenario, regardless of any comparison between
the UPC Ratio and the Index Ratio, there would be no possible
adjustment to the Exchange Ratio, even though the value of the
consideration to be received by FCB shareholders could have fallen
from a pro forma $59.19 per share, as of the Starting Date, to as low
as $47.35 per share, as of the Determination Date.
(2) The second scenario occurs if the Average Closing Price is less than
$47.35, but does not represent a decline from the Starting Price of
significantly more (i.e. more than 20%) than the decline of the common
stock prices of the Index Group. Under this scenario, there also would
be no possible adjustment to the Exchange Ratio, even though the value
of the consideration to be received by FCB shareholders would have
fallen from a pro forma $59.19 per share, as of the Starting Date,
because the Common Stock prices of the Index Group would have also
fallen and the decline in the UPC Common Stock market price would not
have exceeded such fall by more than 15%.
(3) The third scenario occurs if the Average Closing Price declines below
$47.35 and the UPC Ratio is below the Index Ratio (i.e., UPC's stock
price has declined by more than 15% relative to the price of shares of
the Index Group). Under this scenario the adjustment in the Exchange
Ratio is designed to ensure that the FCB shareholders receive shares
of UPC Common Stock having a value (based upon the
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Average Closing Price) that corresponds to at least $47.35 or a 15%
decline from the stock price performance reflected by the Index Group,
whichever is less.
For example, if the Average Closing Price were $41.43, and the ending
Index Price, as of the Determination Date, were $90 (yielding an Index
Ratio of $90 / $100 or 90 - .15), the UPC Ratio (.70) would be below
the Index Ratio of (.75); after receipt from FCB of notice of intent
to terminate, FCB could terminate the Agreement unless UPC elected
within five days to increase the Exchange Ratio to equal 2.8858, which
represents the lesser of (a) 3.0749 [the result of dividing $127.35
(the product of $47.30 and 2.6924, the Exchange Ratio) by the Average
Closing Price ($41.43), rounded to the nearest thousandth] and (b)
2.8857 [the result of dividing the Index Ratio (.75) times 2.6924 by
the UPC Ratio (.70), rounded to the nearest thousandth]. Based upon
the assumed $41.43 Average Closing Price, the new Exchange Ratio would
represent a value to the FCB shareholders of $119.51 per share.
If the Average Closing Price were $41.43, and the ending Index Price,
as of the Determination Date, were $100, the UPC Ratio (.70) would be
below the Index Ratio (.85, or 1.00 minus .85), after receipt from FCB
of notice of intent to terminate, FCB could terminate the Agreement
unless UPC elected within five days to increase the Exchange Ratio to
equal 3.0741, which represents the lesser of (a) 3.0741 [the result of
dividing $127.35 (the product of $47.30 and 2.6924, the Exchange
Ratio) by the Average Closing Price ($41.43), rounded to the nearest
thousandth] and (b) 3.2693 [the result of dividing the Index Ratio
(.85) times 2.6924 by the UPC Ratio (.70), rounded to the nearest
thousandth]. Based upon the assumed $41.43 Average Closing Price, the
new Exchange Ratio would represent a value to the FCB shareholders of
$127.36 per share.
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 FCB Common Stock and at any
time thereafter, may be more or less than the Average Closing Price. FCB
shareholders are urged to obtain current market quotations for UPC Common Stock.
See "COMPARATIVE MARKET PRICES AND DIVIDENDS."
BACKGROUND OF THE MERGER
During the past several years substantial and rapid change has occurred
in the banking industry as smaller institutions have been acquired by larger
bank holding companies with greater access to capital and greater capability to
realize economies of scale in the delivery of banking service.
Historically, the ownership of FCB has been concentrated in the hands
of one family holding over 50% of the outstanding shares of FCB Common Stock.
James S. Simpson, CEO, director, and majority shareholder of FCB up until his
death in January 1998, consulted with legal counsel in June 1997 regarding the
possible sale of his interest in FCB. In July 1997, Mr. Simpson informed the
Board of his decision to retire from FCB at the end of 1997, and that he was
interested in selling his interest in FCB. Upon counsel's advice, a preliminary
analysis of FCB's value was obtained from Mercer Capital.
On July 29, 1997, Mr. Simpson met with Mercer Capital to discuss its
preliminary valuation analysis of FCB dated July 29, 1997 ("Mercer Report"). At
that time, Mercer Capital reported that FCB would be an attractive acquisition
candidate for a community bank located in FCB's area, and that larger financial
institutions located within the region may also be interested in acquiring FCB.
The Mercer Report indicated that as the banking industry consolidates, there
would be fewer buyers for small community banks, particularly community banks
located in rural areas such as FCB, resulting in lower prices paid to acquire
such institutions. The Mercer Report indicated that an acquiror would pay
between $6 million and $8 million for FCB, with a larger bank being capable of
paying a higher price than a community bank. This valuation indicated a premium
over FCB's June 30, 1997 book value in the range of 170% to 220%.
Mr. Simpson discussed the Mercer Report with the FCB directors in
August 1998. Based upon these discussions, the Board agreed to investigate the
level of interest potential bidders would have in acquiring FCB in a merger
transaction.
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During August 1997, legal counsel, on behalf of FCB, sent letters to
seven prospective bidders that FCB's Board believed might be interested in
making a proposal to purchase FCB. These prospective purchasers were three
community banks in the local area, three larger regional banks, and an
individual the Board believed was interested in purchasing FCB. The letters
requested that the prospective purchasers respond by August 15, 1997, indicating
their level of interest by suggesting a proposed purchase price. Four of the
seven prospective purchasers made proposals. The highest expression of interest
received from these four parties was from the Bank of Bolivar, which indicated
interest in the range of $6.5 million.
During the time that interest was being solicited from the prospective
bidders, UPC contacted FCB, and expressed an interest in making a bid for FCB.
On September 4, 1997, UPC submitted a term sheet with a proposed purchase price
of $7.9 million, payable in UPC stock in a tax-free transaction. The Board
reviewed UPC's proposal, along with the other responses received, at a meeting
on September 8, 1997. At this meeting, FCB's Board decided to pursue
negotiations with UPC, given that UPC's bid was significantly higher than any
interest received from the other prospective purchasers, and was also at the
high end of the range of value indicated by the Mercer Report.
On September 8, 1997, UPC and FCB executed a letter of intent and a
confidentiality agreement. On September 10, 1997, UPC began its due diligence
review of FCB. During the following two months, the parties exchanged
information and negotiated the terms of the Agreement and Plan of Merger. On
November 10, 1997, FCB's Board unanimously approved the Agreement and the Plan
of Merger and recommended its approval by FCB's shareholders.
In December 1997, FCB's Board approved provision expenses totaling
$100,000 to be placed in the allowance for loan losses. In January 1998, after
consultation with FCB's external auditor and legal counsel, FCB's Board voted to
transfer an additional $200,000 to the loan loss reserve account which was
allocated to the 1997 tax year. The Board also voted to increase the monthly
expense for loan loss provisions from $5,000 to 20,000 for February and March
1998. Mr. Simpson died on January 29, 1998. In February 1998, the Board voted to
charge off $455,375 in loans that had been identified to have some weaknesses.
Section 10.1 of the Agreement provides that UPC may terminate the Agreement if
any of the representations made by FCB are inaccurate. One of the
representations made by FCB was that no material adverse changes or events would
occur with respect to FCB prior to the Effective Time. The extraordinary
provision expenses and loan losses experienced by FCB from December 1997 to
February 1998 could have been construed as a material adverse change, and thus
have potentially extinguished UPC's obligation to proceed with the Merger. In
consideration of UPC agreeing to waive FCB's possible noncompliance with its
representation, FCB agreed to reduce the Exchange Ratio from 2.7896 to 2.6924,
which price adjustment was consented to by the Estate's Attorney. Based on the
price of UPC Common Stock as of the date the Agreement was originally executed,
the reduction in the Exchange Ratio resulted in a reduction of the purchase
price of FCB by approximately $275,000. On May 12, 1998, FCB's Board approved an
amendment to the Agreement and to the Plan of Merger which reflected this
reduction in the Exchange Ratio. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations of FCB" for a discussion of FCB's
financial condition.
RECOMMENDATION OF THE FCB BOARD; FCB'S REASONS FOR THE MERGER.
The FCB Board believes that the Merger is fair to, and in the best
interests of, FCB and its shareholders. If the Merger is consummated, the
shareholders of FCB 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 FCB Common Stock. ACCORDINGLY,
THE FCB BOARD HAS UNANIMOUSLY APPROVED THE AGREEMENT AND THE PLAN OF MERGER AND
RECOMMENDS THAT THE HOLDERS OF FCB 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 FCB and UPC. In reaching
its unanimous decision to approve the Agreement, the FCB Board consulted with
its legal advisors regarding the terms of the transaction, with its financial
advisor regarding the financial aspects of the proposed transaction and the
fairness of the Exchange Ratio based on information contained in the Merger
report, and with management of FCB. Without assigning any relative or specific
weights, the FCB
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board considered a number of factors that it deemed material from a short-term
and long-term perspective, specifically the following:
(a) the FCB Board's familiarity with and review of FCB'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 FCB 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 FCB;
(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 FCB Common Stock pursuant to
the Agreement in relation to the historical trading prices of FCB Common Stock;
(e) the lack of an established trading market for shares of FCB Common
Stock;
(f) the significantly higher dividend rate of UPC compared with FCB;
(g) the financial and other significant terms of the proposed Merger
with UPC, and the review by FCB with its legal and financial advisors of the
provisions of the Agreement;
(h) comparison of the value to be received by holders of FCB Common
Stock pursuant to the Agreement in relation to expressions of interest from
other prospective acquirors;
(i) the value to be received by holders of FCB Common Stock pursuant to
the Agreement in light of the preliminary valuation analysis conducted by Mercer
Captial;
(j) the FCB Board's belief that the receipt of UPC Common Stock in the
Merger generally will permit holders of FCB 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
(k) the alternative strategic courses available to FCB, including
remaining independent and exploring other potential business combination
transactions, including, in particular, the potential values that could be
derived therefrom.
The foregoing discussion is not intended to be exhaustive, but includes
all of the material factors considered by the FCB board in determining to
approve the agreement and recommend its adoption by the shareholders.
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UPC'S REASONS FOR THE MERGER
The terms of the Merger, including the Exchange Ratio, are the result
of arms-length negotiations between representatives of UPC and FCB.
In adopting the Agreement, the Plan of Merger, and the Merger, the UPC
Board considered a number of factors concerning the benefits of the Merger.
Without assigning any relative or specific weights to the factors, the UPC Board
considered the following 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 FCB 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
FCB 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; (iii) the results of UPC's due diligence
review of FCB; (iv) the financial terms of the Merger, including the
relationship of the value of the consideration issued pursuant to the Merger to
the tangible book value and earnings per share of FCB Common Stock; (v) the
likelihood of the Merger being approved by applicable regulatory authorities
without undue conditions or delay; (vi) the nonfinancial terms of the Merger,
including the treatment of the Merger as a tax-free exchange of FCB Common Stock
for UPC Common Stock for federal income tax purposes; and (vii) the
compatibility of the franchise of FCB and the community bank orientation of the
operations of FCB to that of UPC; 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
Tennessee served by FCB.
The foregoing discussion is not intended to be exhaustive but includes
all of the material factors considered by the UPC Board in determining to
approve the issuance of shares of UPC Common Stock pursuant to the Agreement and
the Plan of Merger. The UPC Board did not quantify or otherwise attempt to
assign relative or specific weights to the factors considered in reaching
determination.
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 Secretary of
State of the State of Tennessee. Subject to the terms and conditions of the
Agreement, unless otherwise agreed upon in writing by UPC and FCB, 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 FCB 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).
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. FCB 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 FCB or UPC generally may terminate the
Agreement and the Plan of Merger if the Merger is not consummated by September
30, 1998, unless the failure to consummate the transactions contemplated by the
Agreement on or before such date is caused by any willful breach of the
Agreement by the party seeking termination or certain other specific conditions
exist. See "-- Conditions to Consummation of the Merger" and "-- Waiver,
Amendment, and Termination."
DISSENTERS' RIGHTS
Any holder of FCB Common Stock has the right to dissent from the Merger
by complying with the 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
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summary is qualified in its entirety by reference to Chapter 23 of the TBCA,
which is reproduced in full as Appendix D to this Proxy Statement.
Under the TBCA, any holder of FCB Common Stock has the right to object
to the Merger and demand payment of the fair value of his or her shares upon
compliance with Sections 48-23-202 and 48-23-204 of the TBCA. A shareholder may
not dissent as to less than all of the shares that he or she holds at the close
of business on the record date. A nominee or fiduciary may not dissent on behalf
of a beneficial owner as to less than all of the shares of such beneficial owner
held of record by such nominee or fiduciary. A beneficial owner asserting
dissenters' rights to shares held on his or her behalf must notify FCB in
writing of the name and address of the record holder of the shares, if known to
him or her.
Any FCB shareholder intending to enforce his or her dissenters' rights
may not vote in favor of the Agreement and the Plan of Merger (either personally
or by proxy) and must deliver to FCB before the time of the vote a written
notice of intent to demand payment for his or her shares (the "Objection
Notice"). The Objection Notice must state that the shareholder intends to demand
payment for his or her shares of FCB Common Stock if the Merger should be
effected. A vote against approval of the Agreement and the Plan of Merger will
not, in and of itself, constitute an Objection Notice satisfying the
requirements of Section 48-23-202 of the TBCA.
If the Agreement and the Plan of Merger are approved by FCB's
shareholders at the Special Meeting, each FCB shareholder who has filed an
Objection Notice will be notified by FCB of such approval no later than ten days
after the FCB Special Meeting (the "Dissenter's Notice"). The Dissenter's Notice
will (i) state where the payment demand must be sent and where and when
certificates for certificated shares of FCB Common Stock (the "Certificates")
must be deposited, (ii) inform holders of uncertificated shares (if any) to what
extent transfer of the shares will be restricted after the payment demand is
received, (iii) supply a form for demanding payment that includes the date of
the first announcement to news media or to shareholders of the principal terms
of the proposed corporate action and requires that the person asserting the
dissenters' rights certify whether or not he or she acquired beneficial
ownership of the shares before that date, (iv) set a date by which FCB must
receive the payment demand, which date may not be fewer than one nor more than
two months after the date the Dissenter's Notice was delivered, and (v) be
accompanied by a copy of Chapter 23 of Title 48 of the TBCA. Within the time
prescribed in the Dissenter's Notice, a FCB shareholder electing to dissent must
make a demand for payment (the "Payment Demand"), certify whether he (or the
beneficial shareholder on whose behalf he is asserting dissenters' rights)
acquired beneficial ownership of the shares of FCB Common Stock before November
10, 1997 (the date of the first public announcement of the terms of the
Agreement and the Plan of Merger), and deposit all Certificates in accordance
with the terms of the Dissenter's Notice. Upon delivering the Payment Demand and
depositing the Certificates in accordance with the Dissenter's Notice, the
Dissenting Shareholder will retain all other rights of a FCB shareholder until
these rights are cancelled or modified by consummation of the Merger. Failure to
comply substantially with these procedures will cause the Dissenting Shareholder
to lose his or her dissenters' rights to payment for the shares. Consequently,
any FCB shareholder who desires to exercise his or her rights to payment for his
or her shares is urged to consult his or her legal advisor before attempting to
exercise such rights.
As soon as the Merger is consummated, or upon later receipt of a timely
Payment Demand, FCB shall, pursuant to Section 48-23-206 of the TBCA, pay to
each Dissenting Shareholder who has complied with the requirements of Section
48-23-204 of the TBCA the amount which FCB estimates to be the fair value of the
shares of FCB Common Stock, plus accrued interest. Such payment must be
accompanied by (i) certain of FCB's financial statements, (ii) a statement of
FCB's estimate of the fair value of the shares, (iii) an explanation of how the
interest was calculated, (iv) a statement of the Dissenting Shareholder's right
to demand payment under Section 48-23-209 of the TBCA, and (v) a copy of
Sections 48-23-101 through 48-23-302 of the TBCA if not previously furnished. As
authorized by Section 48-23-208 of the TBCA, FCB intends to delay any payments
with respect to any shares (the "after-acquired shares") held by a Dissenting
Shareholder which were not held by such shareholder on November 10, 1997, the
date of the first public announcement of the terms of the Agreement. To the
extent FCB should elect to withhold payment, after effecting the Merger, UP
Holding as the surviving corporation in the Merger must estimate the fair value
of the shares, plus accrued interest, and pay such amount to each Dissenting
Shareholder
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who agrees to accept it in full satisfaction of this demand. UP Holding shall
send with such payment a statement of its estimate of the fair value of the
shares, an explanation of how the interest was calculated and a statement of the
Dissenting Shareholder's right to demand additional payment under Section
48-23-209 of the TBCA.
If (i) a Dissenting Shareholder believes that the amount paid with
respect to his or her shares or offered under Section 48-23-208 of the TBCA is
less than the fair value of his or her shares or that the interest due is
incorrectly calculated, (ii) UP Holding fails to make payment under Section
48-23-206 within two months after the date set for demanding payment, or (iii)
FCB, having failed to effect the Merger, does not return the deposited
Certificates or release the transfer restrictions imposed on uncertificated
shares within two months after the date set for demanding payment, the
Dissenting Shareholder may notify FCB (or its successor in the Merger) in
writing (which notice is invalid if not delivered to FCB within one month after
FCB made or offered payment for such shareholders' shares) of his or her own
estimate of the fair value of the shares and the amount of interest due and may
demand payment of the difference between his or her estimate of the fair value
and the amount of any payment in respect to such shares already received by the
shareholder, or, in the alternative, if no payment has yet been made by FCB,
reject FCB's offer under Section 48-23-208 of the TBCA and demand payment of the
fair value of his or her shares and interest due.
If UP Holding (as the surviving corporation) cannot agree with such
Dissenting Shareholder on a fair value within two months after UP Holding
receives the Payment Demand, UP Holding will institute judicial proceedings in
either the Chancery or Circuit Court of Hardeman County, Tennessee (the
"Court"), naming all Dissenting Shareholders (whether or not Tennessee
residents) whose demands remain unsettled as parties to the proceeding and
serving such parties with a copy of the petition. The Court will then undertake
to establish the fair value of the shares immediately before the consummation of
the Merger, excluding any appreciation or depreciation in anticipation of the
Merger, and will determine the interest owing on the disputed amount. The fair
value of a Dissenting Shareholder's shares of FCB Common Stock may be more than,
less than or the same as the consideration provided in the Agreement. The Court
may, in its discretion, appoint one or more persons as appraisers to receive
evidence and render a decision on the question of fair value. Each Dissenting
Shareholder made a party to the proceeding is entitled to judgement for the
amount (if any) by which the court finds the fair value of his or her shares,
plus accrued interest, exceeds the amount paid by FCB or the fair value, plus
accrued interest, of his or her after-acquired shares for which FCB elected to
withhold payment under Section 48-23-208 of the TBCA.
The Court shall assess costs and expenses of such proceeding (including
reasonable compensation for and expenses of the appraiser but excluding fees and
expenses of counsel and experts) against FCB (or its successor in the Merger),
except that the court may assess such costs and expenses as it deems appropriate
against any or all of the Dissenting Shareholders if it finds that their demand
for additional payment was arbitrary, vexatious or not in good faith. The Court
may award fees and expenses of counsel and experts in amounts the Court finds
equitable: (i) against FCB, if the Court finds that FCB did not comply
substantially with the relevant requirements of the TBCA or (ii) against FCB or
any Dissenting Shareholder, if the Court finds that the party against whom the
fees and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith.
The foregoing summary of the applicable provisions of Chapter 23 of
Title 48 of the TBCA is not intended to be a complete statement of such
provisions, and is qualified in its entirety by reference to such Chapter, a
copy of which is attached hereto as Appendix D.
For a discussion of certain federal income tax consequences in
connection with exercising dissenters' rights, see 'The Merger -- Material
Federal Income Tax Consequences."
DISTRIBUTION OF UPC STOCK CERTIFICATES
Promptly after the Effective Time, UPC and FCB will cause UPB, acting
in its capacity as Exchange Agent, to mail to the former shareholders of FCB a
letter of transmittal, together with instructions for the exchange of the
Certificates representing shares of FCB Common Stock for certificates
representing shares of UPC Common Stock.
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FCB 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 FCB Common
Stock, together with a properly completed letter of transmittal, there will be
issued and mailed to each holder of FCB 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 FCB Common Stock is entitled as a
result of the Merger until the holder surrenders such holder's Certificates
representing the shares of FCB 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 FCB Common Stock Certificate until the holder
duly surrenders such Certificate. Upon surrender of such FCB Common Stock
Certificate, however, both the UPC Common Stock certificate, together with all
undelivered FCB 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 FCB 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
FCB Common Stock who dissent from the Merger pursuant to Chapter 23 of Title 48
of the TBCA, the stock transfer books of FCB will be closed to holders of FCB
Common Stock and no transfer of shares of FCB Common Stock by any such holder
will thereafter be made or recognized. If Certificates representing shares of
FCB 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 7.3 of the Agreement provides that FCB 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 FCB Board, as
advised by legal counsel, FCB 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. FCB must promptly notify UPC immediately following receipt of any
Acquisition Proposal. As protection against possible violation of this
limitation, FCB has agreed, under certain circumstances, to pay to UPC the sum
of $750,000 in immediately available funds in the event and at the time that FCB
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 Merger Agreement in certain circumstances. This provision may have, or
may have had, the effect of discouraging competing offers to acquire or merge
with FCB.
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 FCB 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,
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(iii) receipt by UPC and FCB of a written opinion of counsel from Wyatt, Tarrant
& Combs 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 FCB and UPC as set
forth in the Agreement, (vii) the performance of all agreements and the
compliance with all covenants of FCB 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 FCB or UPC, (ix) receipt by UPC 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 FCB, and
(xii) satisfaction of certain other conditions, including the receipt of certain
legal opinions and various certificates from the officers of FCB 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 September 30, 1998, the Agreement may be terminated
and the Merger abandoned by the Board of Directors of either FCB or UPC. See "--
Waiver, Amendment, and Termination."
REGULATORY APPROVAL
THE MERGER MAY NOT PROCEED IN THE ABSENCE OF RECEIPT OF THE REQUISITE
REGULATORY APPROVAL. THERE CAN BE NO ASSURANCE THAT SUCH REGULATORY APPROVAL
WILL BE OBTAINED OR AS TO THE TIMING OF SUCH APPROVAL. APPLICATIONS FOR THE
APPROVAL DESCRIBED BELOW HAVE BEEN SUBMITTED TO THE APPROPRIATE REGULATORY
AUTHORITIES.
It is a condition to the consummation of the Merger that UPC and FCB
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 FCB 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 Bank Merger is subject to the prior approval of the FDIC and the
TDFI, as primarily regulators of SBT. The Merger is subject to receipt of a
waiver by the Federal Reserve of prior notice requirements, pursuant to Section
3 of the BHC Act. In evaluating the Bank Merger, the FDIC & TDFI 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 FDIC 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 FDIC 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 FDIC may reduce to 15 days) following the date of
the Federal Reserve approval, during which time the United States Department of
Justice would be afforded the opportunity to challenge the transaction on
antitrust grounds. The commencement of any antitrust action would stay the
effectiveness of the approval of the agencies, unless a court of competent
jurisdiction should specifically order otherwise. Since it is contemplated that
Middleton will be merged with and into SBT in the Bank Merger immediately after
the consummation of the Merger, UPC has submitted a notice to the Federal
Reserve of
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its intent to acquire FCB, and UPC and UPB have submitted an application to the
FDIC & TDFI for its prior approval of the Bank Merger. By letter dated May 6,
1998, the Federal Reserve notified UPC that it had waived prior notice because
the transaction is subject to review and approval by the FDIC under the Bank
Merger Act. As of the date hereof, neither the FDIC nor the TDFI have notified
UPC as to whether or not either will approve the Bank 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 FCB Common Stock, except
as contemplated by the Agreement, no amendment shall be made that modifies in
any material respect the consideration to be received by FCB shareholders
without the further approval of such shareholders. In addition, prior to or at
the Effective Time, either FCB 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
FCB 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 FCB and UPC; (ii) by the FCB 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 FCB fail to vote their approval of the Agreement and the
transactions contemplated thereby as required by the TBCA and the Agreement at
the Special Meeting, or (d) if the Merger is not consummated by September 30,
1998, provided that the failure to consummate is not caused by any willful
breach of the Agreement by the party electing to terminate, or certain other
events arise which prevent consummation by such date, such as litigation arising
in connection with an Acquisition Proposal by a third party; or (iii) by the FCB
Board pursuant to the relevant provisions of the Agreement described in " --
Possible Adjustment of Exchange Ratio."
If the Merger is terminated as described above, the Agreement and the
Plan of Merger will become void and have no effect, except that certain
provisions of the Agreement, including those relating to the obligations to
share certain expenses, maintain the confidentiality of certain information
obtained, and return all documents obtained from the other party under the
Agreement, will survive. The obligation of FCB to pay the $750,000 termination
fee in the event FCB 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) March 1, 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 $750,000 termination fee, will not
relieve any breaching party from liability for any
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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, FCB has agreed that unless the prior written
consent of UPC has been obtained, and except as otherwise expressly contemplated
in the Agreement, each of FCB 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, FCB 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, FCB 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 its
subsidiary to agree or commit to do, any of the following: (i) amend the
Charter, Bylaws, or other governing instruments of FCB or the FCB subsidiary
(each a "FCB company" and together, the "FCB companies"); (ii) incur any
additional debt obligation for borrowed money (other than indebtedness of an FCB
company to another FCB company) in excess of an aggregate of $50,000 (for the
FCB companies on a consolidated basis) except in the ordinary course of business
of the FCB subsidiaries consistent with past practices (which shall include, for
Middleton, 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
FCB 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
FCB); (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 FCB company, or declare or pay any dividend or make any
other distribution in respect of any FCB Common Stock, provided that FCB may (to
the extent legally and contractually permitted to do so), but shall not be
obligated to, declare and pay regular annual cash dividends on the shares of FCB
Common Stock at a rate not in excess of $1.25 per share with usual and regular
record and payment dates in accordance with past practice, provided that,
notwithstanding the provisions of the Agreement, the parties shall cooperate in
selecting the Effective Time to ensure that, with respect to the quarterly
period in which the Effective Time occurs, the holders of FCB Common Stock do
not become entitled to receive both a dividend in respect of their FCB 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 FCB 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 FCB
company or issue or authorize the issuance of any other securities in respect of
or in substitution for shares of FCB Common Stock, or sell, lease, mortgage, or
otherwise dispose of or otherwise encumber any shares of capital stock of any
FCB company (unless any such shares of stock are sold or otherwise transferred
to another FCB company) or any assets having a book value in excess of $5,000
other than in the ordinary course of business for reasonable and adequate
consideration; (vi) except for purchases of investment securities acquired in
the ordinary course of business consistent with past practices, purchase any
securities or make any material investment, either by purchase of stock or
securities, contributions to capital, asset transfers, or purchase of any
assets, in any person other than a wholly-owned FCB subsidiary, or otherwise
acquire direct or indirect
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control over any person, with certain exceptions; (vii) grant any increase in
compensation or benefits to the employees or officers of any FCB company, except
in the ordinary course of business consistent with past practices as previously
disclosed to UPC by FCB 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 FCB;
enter into or amend any severance agreements with officers of any FCB company;
grant any material increase in fees or other increases in compensation or other
benefits to directors of any FCB 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 FCB); (viii) enter into or amend any employment contract
between any FCB company and any person (unless such amendment is required by
law) that the FCB 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 FCB company or terminate or withdraw from, or make any material change in or
to, any existing employee benefit plans of any FCB 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 FCB company for
material money damages or restrictions upon the operations of any FCB 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.
FCB has also agreed that, except with respect to the Agreement, the
Plan of Merger, and the transactions contemplated thereby, no FCB 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 FCB 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 FCB 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"), or (b) materially adversely affect the
ability of any party to perform its covenants and agreements under the
Agreement;
MANAGEMENT AND OPERATIONS AFTER THE MERGER
Consummation of the Merger will not alter the present Board of
Directors or management team of UPC or UP Holding immediately after the Merger
is consummated. It is anticipated that immediately after the consummation of the
Merger, Middleton would be merged with and into Selmer Bank & Trust, a
wholly-owned subsidiary of UPC in the Bank Merger, with the effect that SBT
would be the surviving Bank and the main office of Middleton would become a
branch of SBT. Certain officers of Middleton would become community officers of
SBT. 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."
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UP Holding 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
GENERAL. Certain members of FCB's management and the FCB Board may be
deemed to have interests in the Merger that are in addition to their interests
as shareholders of FCB generally. The FCB Board was aware of these interests and
considered them, among other matters, in approving the Agreement and the
transactions contemplated thereby.
PAYMENTS TO THE BENEFICIARIES OF JAMES S. SIMPSON. James S. Simpson was
the CEO, a director, and the majority shareholder of FCB until his death in
January 1998. One of the terms of the Agreement was that Mr. Simpson would enter
into a Noncompetition Agreement with UPC at the Effective Time (the
"Noncompetition Agreement"). The Noncompetition Agreement was to provide that
Mr. Simpson would not compete in any county in which FCB, UP Holding, or any of
their bank subsidiaries has a principal office or branch, or any county
contiguous to such offices, for a period of two years. In addition, Mr. Simpson
was to grant UPC and UP Holding a release from any obligation to pay for medical
insurance coverage. In consideration of the release, UPC was to pay Mr. Simpson
$5,200 on the Effective Date. In consideration of the covenant not to compete,
UPC was to pay Mr. Simpson a total of approximately $340,000 over a period of
three years. UPC and UP Holding have agreed with the beneficiaries of Mr.
Simpson's Estate to make a payment of $340,000 to the beneficiaries of Mr.
Simpson's estate at the Effective Time in consideration for the beneficiaries
entering into a Noncompetition Agreement similar to Mr. Simpson's Noncompetition
Agreement.
EMPLOYMENT AGREEMENT. Pursuant to the terms of the Agreement, Mike
Bodiford, President and Chief Executive Officer of FCB, will enter into an
employment agreement with UPC (the "Employment Contract"). It was the intent of
the parties for the Employment Contract to bring Mr. Bodiford's employment terms
in line with the corporate policies and practices of UPC, and with other UPC
contracts with similarly situated employees.
Under the Employment Contract, Mr. Bodiford will serve as City Manager
of the Middleton, Tennessee office. The Employment Contract will provide for a
salary and term in keeping with the salary and term of contracts with other city
managers in similar locations and operating under similar circumstances. The
Employment Contract contains a covenant not to complete for the term of the
Employment Contract. Mr. Bodiford will be entitled to participate in any benefit
program or plan provided to similarly situated officers of UPC. The Employment
Contract also contains provisions regarding non-solicitation, maintenance of
trade secrets, and non-disclosure of confidential information.
BONUSES. Special bonuses will be paid by FCB, before consummation of
the Merger, to certain FCB and/or Middleton officers. These "Retention Bonuses",
in the amount of $166,000 each, will be paid to Mike Bodiford and Richard
Wetherbee, and represent the discounted present value of the cash flow that each
would have received had each received his allocated shares of FCB Common Stock
pursuant to FCB's existing stock bonus plan.
INDEMNIFICATION; DIRECTORS AND OFFICERS INSURANCE. The Agreement
provides that UPC will, subject to the conditions set forth therein, indemnify
the present and former directors, officers, employees, and agents of FCB 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, FCB's Charter and Bylaws, and any indemnity
agreements previously entered into by FCB or any of its subsidiaries and any
director, officer, employee, or agent of FCB or any of its subsidiaries. This
provision of the Agreement is consistently included in UPC's standard form
merger agreement and is not intended to broaden in any manner the scope of
indemnification to which the present and former directors, officers, employees,
and agents of FCB and its subsidiaries are entitled, but serves to ratify the
legal obligations of FCB and its subsidiaries (to be assumed by UP Holding upon
consummation of the Merger) to provide indemnification in
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accordance with Tennessee law, FCB's Charter and Bylaws, and any indemnification
agreements to which FCB 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.
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 FCB shareholders who hold their FCB 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/Prospectus. 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 FCB. 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 FCB. In particular, and without limiting the
foregoing, this summary does not address the federal income tax consequences of
the Merger to FCB 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 FCB Common
Stock pursuant to the exercise of an employee stock option or right or otherwise
as compensation, and holders who hold FCB 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 FCB 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. FCB SHAREHOLDERS, THEREFORE,
ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES
TO THEM OF THE MERGER, INCLUDING TAX RETURN REPORTING REQUIREMENTS, THE
APPLICATION AND EFFECT OF FEDERAL, FOREIGN, STATE, LOCAL, AND OTHER TAX LAWS,
AND THE IMPLICATIONS OF ANY PROPOSED CHANGES IN THE TAX LAWS.
Each party's obligation to consummate the Merger is conditioned upon
the receipt by UPC and FCB of the opinion of Wyatt, Tarrant & Combs ("WTC"),
counsel to UPC, (the "Tax Opinion"), dated the Effective Time, in form and
substance reasonably satisfactory to the parties on the basis of facts,
representations and assumptions set forth or referred to in the Tax Opinion
which are consistent with the state of facts existing at the Effective Time,
substantially to the effect that in WTC's opinion:
(a) The Merger will be treated as a reorganization within the
meaning of Section 368 of the Code;
(b) FCB, UPC, and UP Holdings 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 FCB shareholders
who exchange all of their FCB 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 FCB shareholders who exchange all of their FCB 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 FCB Common
Stock surrendered in exchange therefor;
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(e) The holding period of UPC Common Stock received by FCB
shareholders in the Merger (including any fractional shares for which cash is
received) will include the period during which the shares of FCB Common Stock
surrendered in exchange therefor were held, provided that the FCB Common Stock
was held as a capital asset by the holder at the Effective Time; and
(f) Neither FCB, UPC nor UP Holding will recognize gain or
loss as a consequence of the Merger.
The condition relating to the receipt of the Tax Opinion may be waived
by both UPC and FCB. Neither UPC nor FCB currently intends to waive the
condition relating to the receipt of the Tax Opinion. If the condition relating
to the receipt of the Tax Opinion is waived and the material federal income tax
consequences of the Merger are different from those summarized above, FCB would
resolicit approval of its shareholders prior to consummating the Merger.
In rendering the Tax Opinion, WTC shall require and be entitled to rely
upon representations and covenants contained in certificates of officers of FCB,
UPC, and UP Holding. The Tax Opinion does not address any state, local, or other
tax consequences of the Merger. In addition, the Tax Opinion does 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 FCB 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 FCB Common Stock allocable to such fractional share
interest. Such gain or loss will constitute capital gain or loss if the FCB
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 stock 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 stock. 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 FCB 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 FCB 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 FCB 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 a letter to UPC
to the effect the Merger will qualify for pooling-of-interests accounting
treatment. UPC will not consummate the Merger if pooling-of-interests accounting
treatments is not available.
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For information concerning certain conditions to be imposed on the
exchange of FCB Common Stock for UPC Common Stock in the Merger by affiliates of
FCB and certain restrictions to be imposed on the transferability of the UPC
Common Stock received by those affiliates in the Merger in order, among other
things, to ensure the availability of pooling-of-interests accounting treatment,
see "--Resales of UPC Common Stock."
EXPENSES AND FEES
The Agreement provides that each of the parties will bear and pay its
own expenses in connection with the transactions contemplated by the Agreement,
including fees and expenses of its own financial or other consultants,
investment bankers, accountants, and counsel, except that UPC will bear and pay
the filing fees payable in connection with the Registration Statement and this
Proxy Statement and the printing costs in connection with the Registration
Statement and this Proxy Statement.
RESALES OF UPC COMMON STOCK
UPC Common Stock to be issued to shareholders of FCB in connection with
the Merger will be registered under the Securities Act. All shares of UPC Common
Stock received by holders of FCB 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 FCB not
deemed to be "Affiliates" of FCB or UPC. "Affiliates" generally are defined as
persons or entities who control, are controlled by, or are under common control
with FCB 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 FCB 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 FCB 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 FCB or UPC.
FCB has agreed to use its reasonable efforts to cause each person who
may be deemed to be an Affiliate of FCB 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 FCB 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 FCB have
been published. If the Merger qualifies for pooling-of-interests accounting
treatment, shares of UPC Common Stock issued to such Affiliates of FCB in
exchange for shares of FCB Common Stock will not be transferable until such time
as financial results covering at least 30 days of combined operations of UPC and
FCB 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 FCB).
Certificates representing shares of FCB Common Stock surrendered for exchange by
any person who is an Affiliate of FCB 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
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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."
EFFECT OF THE MERGER ON RIGHTS OF SHAREHOLDERS
As a result of the Merger, holders of FCB Common Stock will be
exchanging their shares of a Tennessee corporation governed by the TBCA and
FCB'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 FCB 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 TBCA as well as to UPC's Charter and Bylaws and FCB'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," "-- Annual 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. Accordingly, UPC has sufficient authorized shares of UPC Common Stock to
consummate the Merger and all Other Pending Acquisitions.
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 FCB 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
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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.
FCB. FCB's Amended and Restated Charter ("FCB's Charter") authorizes
the issuance of up to 100,000 shares of FCB Common Stock, of which 46,733 shares
were issued and outstanding as of the FCB Record Date. The FCB Board generally
may authorize the issuance of additional previously authorized shares of FCB
Capital Stock without further action by FCB'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
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.
UPC. The UPC Charter denies preemptive rights to its shareholders.
FCB. The FCB Charter denies preemptive rights to 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.
FCB. FCB's Charter does not address amending either FCB's Charter or
Bylaws. FCB's Bylaws provide that its Bylaws may be amended by a majority vote
of the directors present at a board meeting or at any meeting of the
shareholders if the votes cast favoring the amendment exceed the votes cast
opposing the amendment.
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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.
FCB. Neither the Charter nor Bylaws of FCB divide the Board into
classes. FCB's Bylaws provide that each director shall serve until the next
annual meeting of FCB's shareholders. FCB's Bylaws provide that each shareholder
is entitled to one vote per each share of Common Stock held, and does not
provide for cumulative voting.
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.
FCB. FCB's Bylaws provide that any director may be removed without
cause by a majority vote of the shareholders. A director may be removed for
cause by a majority of the entire Board of Directors. FCB's Bylaws define
"cause" as the final conviction of a felony, declaration of unsound mind by
court order, adjudication of bankruptcy, nonacceptance of office or conduct
prejudicial to the interest of the corporation. A director may be removed by the
shareholders or directors only at a meeting called for the purpose of removing
him and the meeting notice must state that the purpose, or one of the purposes,
of the meeting is the removal of a director or directors.
FCB's Bylaws provide that any vacancy occurring in the Board of
Directors, including vacancies by virtue of removal for cause, may be filled by
the vote of a majority of the directors then serving as directors.
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LIMITATIONS ON DIRECTOR LIABILITY
UPC. UPC's Charter does not address the issue of director liability to
the corporation.
FCB. FCB's Charter does not address the issue of director liability to
the corporation.
INDEMNIFICATION
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.
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.
UPC. UPC's Charter and Bylaws provide for the indemnification of its
directors and officers, to the fullest extent permitted by Tennessee law.
FCB. FCB's Bylaws provide for the indemnification of its directors and
officers, to the fullest extent permitted by Tennessee law.
ANNUAL MEETING OF SHAREHOLDERS
UPC. UPC's Bylaws provide that Annual Meetings of shareholders shall be
held on the third Thursday in April of each year if not a legal holiday, and if
a legal holiday, at such time as shall be designated by the Board.
FCB. FCB's Bylaws provide that an annual shareholders' meeting be held
on the second Tuesday of each March, unless such day is a legal holiday, in
which case the meeting will be held at the same time on the next
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succeeding day not a holiday. Special meetings may be held at such places and
times as determined by a majority of the Board of Directors, or whenever one or
more shareholders who are entitled to vote and who hold at least 10% of FCB's
Common Stock makes a written application of FCB's secretary stating the time,
place and purpose of the meeting to be called.
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.
FCB. FCB's Bylaws provide that any action required to be taken at a
shareholders' meeting may be taken without a meeting by the unanimous written
consent of all shareholders entitled to vote on the action.
SHAREHOLDER NOMINATIONS AND PROPOSALS
UPC. UPC's Charter and Bylaws do not address whether a shareholder may
nominate members of the Board of Directors.
FCB. FCB's Charter and Bylaws do not address whether a shareholder may
nominate members of the Board of Directors.
BUSINESS COMBINATIONS
GENERAL. As Tennessee corporations, UPC and FCB are 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 a corporation 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 a
corporation'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 corporation's board before the interested shareholder became
such, and the business combination satisfies any other applicable requirements
imposed by law or by the corporation's charter or bylaws. The TBCA also severely
limits the extent to which a corporation or any of its officers or directors
could be held liable for resisting any business combination.
The Tennessee Control Share Acquisition Act (the "Tennessee CSAA")
generally provides that any person or group of persons that acquires the power
to vote more than specified levels (one-fifth, one-third, or a majority) of the
shares of certain Tennessee corporations will not have the right to vote such
shares unless granted voting rights by the holders of a majority of the votes
entitled to be cast, excluding "interested shares." Interested shares are those
shares held by the acquiring person, officers of the corporation, and employees
of the corporation who are also directors of the corporation. If approval of
voting power for the shares is obtained at one of the specified levels,
additional shareholder approval is required when a shareholder seeks to acquire
the power to vote shares at the next level. In the absence of such approval, the
additional shares acquired by the shareholder may not be voted until they are
transferred to another person in a transaction other than a control share
acquisition. The Tennessee CSAA applies only to those Tennessee corporations
whose charters or bylaws contain an express declaration that control share
acquisitions in respect of the shares of such corporations are governed by and
subject to the provisions of such act.
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<PAGE> 50
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.
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. UPC's Charter and
Bylaws do not currently contain an express declaration with respect to the
Tennessee CSAA.
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
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<PAGE> 51
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.
FCB. FCB's Charter and Bylaws do not contain any provisions regarding
business combinations.
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.
FBC. FCB's Charter and Bylaws do not contain any provisions restricting
a shareholder's ability to vote shares of FCB Common Stock.
DISSENTERS' RIGHTS OF APPRAISAL
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. UPC's Charter and Bylaws do not provide for any such additional
dissenters' rights.
FCB. FCB's Charter and Bylaws also do not provide for any additional
dissenters' rights. See Appendix D hereto which is a copy of Chapter 23 of the
TBCA which governs dissenters' rights.
SHAREHOLDERS' RIGHTS TO EXAMINE BOOKS AND RECORDS
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.
FCB. FCB's Charter and Bylaws do not contain any provisions addressing
shareholders' rights to examine FCB books and records.
DIVIDENDS
UPC AND FCB. UPC's and FCB'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
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<PAGE> 52
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 FCB's banking subsidiaries to pay dividends to UPC and
FCB, as applicable. See "CERTAIN REGULATORY CONSIDERATIONS -- Payment of
Dividends."
COMPARATIVE MARKET PRICES AND DIVIDENDS
UPC Common Stock is traded on the NYSE under the symbol "UPC." 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 for the indicated periods. The
stock prices do not include retail mark-ups, mark-downs or commissions.
FCB Common Stock is not traded on any exchange or quoted on any market
system, and the FCB Common Stock has only traded in isolated transactions
between individuals. In 1996, FCB had two transactions involving the FCB Common
Stock. These transactions took place in the third and fourth quarters of 1996,
and the issuance price of the shares were $51.00 and $70.00 per share,
respectively. The transaction in the third quarter of 1996 involved the issuance
of stock granted to certain executive officers pursuant to FCB's stock bonus
plan. In the third quarter of 1997 shares of FCB Common Stock were issued
pursuant to the stock bonus plan at a price of $60.00 per share. The prices for
FCB Common Stock are based upon transaction prices reported to management of FCB
and may not be representative of all transactions during the periods. See
"INTERESTS OF CERTAIN PERSONS IN THE MERGER."
<TABLE>
<CAPTION>
UPC
---------------------------------------
Price Range Cash
Dividends
----------------------- Declared
Per
High Low Share
--------- -------- ---------
<S> <C> <C> <C>
1998
----------------------
First Quarter $ 67.31 $ 58.38 $ .50
Second Quarter
(through 6/17/98) 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>
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<PAGE> 53
On June 15, 1998, the last sale price of UPC Common Stock as reported
on the NYSE was $55.69 per share. On November 7, 1997 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 $61.06.
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 FCB may not declare and pay
cash dividends, other than regular annual cash dividends, on the shares of FCB
Common Stock, in an amount not to exceed $1.25 per share prior to the Effective
Time or the termination of the Agreement. There is no assurance that FCB will
pay any dividends at any time, or if it does, the amount of dividends it would
declare.
UPC and FCB 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
FCB'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 FCB
GENERAL
FCB, a Tennessee corporation, is a bank holding company registered with
the Federal Reserve under the BHC Act. As of December 31, 1997, FCB had total
consolidated assets of approximately $41 million, total consolidated loans of
approximately $31 million, total consolidated deposits of approximately $33
million, and total consolidated shareholders' equity of approximately $4
million.
FCB conducts its business activities through its wholly-owned bank
subsidiary, Middleton, which was organized in 1905 as a commercial bank
chartered under the laws of the State of Tennessee. Middleton operates from its
main office in Middleton, Tennessee. 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. Middleton provides long-term financing for owner-occupied
residential real estate.
The principal executive offices of FCB are located at 101 N. Main
Street, Middleton, Tennessee and its telephone number at such address is (901)
376-8441. Additional information with respect to FCB and its subsidiaries is
included elsewhere herein.
EMPLOYEES
As of April 30, 1998, Middleton had approximately 19 full-time
employees. The employees are not represented by a collective bargaining unit.
Middleton believes its relationship with its employees to be good.
CUSTOMERS
It is the opinion of management that there is no single customer or
affiliated group of customers whose deposits, if withdrawn, would have a
materially adverse effect on the business of Middleton.
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<PAGE> 54
PROPERTIES
FCB and Middleton have their principal offices at 101 N. Main Street,
Middleton, Tennessee 38052. The property is owned by Middleton. Middleton does
not operate from any branch locations. Middleton also owns a vacant parcel of
land located at the intersection of highway 125 and highway 57 in Middleton.
LEGAL PROCEEDINGS
To the knowledge of FCB's management, there are no legal proceedings
currently pending or threatened to which FCB or Middleton is a party or to which
any of their properties are subject.
COMPETITION
All phases of Middleton's banking activities are highly competitive.
Middleton competes actively with five commercial banks in its service area, as
well as finance companies, credit unions and other financial institutions
located in its service area, which is defined as Hardeman County, Tennessee.
SUPERVISION AND REGULATION
FCB is a bank holding company within the meaning of the BHC Act, and is
registered with Federal Reserve. FCB is required to file with the Federal
Reserve annual reports and such additional information as the Federal Reserve
may require pursuant to the Act. The Federal Reserve may also make examinations
of FCB and its subsidiary. The BHC Act and a description of other bank
regulatory acts affecting FCB and Middleton are further described in "CERTAIN
REGULATORY CONSIDERATIONS," herein.
EFFECT OF GOVERNMENTAL POLICIES
FCB and Middleton are affected by the policies of regulatory
authorities, including the Federal Reserve. An important function of the Federal
Reserve is to regulate the national money supply. Among the instruments of
monetary policy used by the Federal Reserve are: purchases and sales of U.S.
Government securities in the marketplace; changes in the discount rate, which is
the rate any depository institution must pay to borrow from the Federal Reserve;
and changes in the reserve requirement of depository institutions. These
instruments are effective in influencing economic and monetary growth, interest
rate levels and inflation.
The monetary policies of the Federal Reserve and other governmental
policies have had a significant effect on the operating results of commercial
banks in the past and are expected to continue to do so in the future. Because
of changing conditions in the national economy and in the money market, as well
as the result of actions by monetary and fiscal authorities, it is not possible
to predict with certainty future changes in interest rates, deposit levels, loan
demand or the business and earnings of FCB or Middleton or whether the changing
economic conditions will have a positive or negative effect on operations and
earnings.
INVESTMENT ACTIVITIES
Middleton has classified all investment securities as either available
for sale or held to maturity depending upon whether Middleton has the intent and
ability to hold the investment securities to maturity. The classification of
certain investment securities as available for sale is consistent with
Middleton's investment philosophy of maintaining flexibility to manage the
portfolio.
The objective of Middleton's investment policy is to invest funds not
otherwise needed to meet the loan demand of Middleton's market area to earn the
maximum return, yet still maintain sufficient liquidity to meet fluctuations in
loan demand and deposit structure. In doing so, Middleton balances the market
and credit risk against the potential investment return, makes investments
compatible with the pledge requirements of deposits of
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<PAGE> 55
public funds, maintains compliance with regulatory investment requirements, and
assists the various public entities with their financing needs. The president is
authorized to execute security transactions for the investment portfolio and to
make decisions on purchases and sales of securities. All the investment
transactions occurring since the previous board of directors' meeting are
reviewed by the board at its next monthly meeting. The investment policy allows
portfolio holdings to include short-term securities purchased to provide
Middleton's needed liquidity, and longer term securities purchased to generate
stable income for Middleton during periods of interest rate fluctuations.
LIABILITY AND ASSET MANAGEMENT
The matching of assets and liabilities may be analyzed by examining the
extent to which such assets and liabilities are "interest rate sensitive" and by
monitoring an institution's interest rate sensitivity "gap." An asset or
liability is said to be interest rate sensitive within a specific time period if
it will mature or reprice within that time period. The interest rate sensitivity
gap is defined as the difference between the amount of interest-bearing
liabilities maturing or repricing within that time period. A gap is considered
positive when the amount of interest rate sensitive assets exceeds the amount of
interest rate sensitive liabilities. A gap is considered negative when the
amount of interest rate sensitive liabilities exceeds the amount of interest
rate sensitive assets. During a period of rising interest rates, a negative gap
would tend to adversely affect falling interest income while a positive gap
would tend to result in an increase in net interest income. During a period of
falling interest rates, a negative gap would tend to result in an increase in
net interest income while a positive gap would tend to adversely affect net
interest income.
The asset/liability committee, which consists of the president and
chief executive officer, executive vice president and cashier, is charged with
monitoring the liquidity and funds position of Middleton. The committee
regularly reviews (a) the rate sensitivity position on a three-month, six-month,
and one-year time horizon; (b) loans to deposit ratios; and (c) average maturity
for certain categories of liabilities.
LENDING ACTIVITIES
All lending activities of Middleton are under the direct supervision
and control of FCB's Board with secondary authority vested in the Loan
Committee. The Loan Committee, which consists of the president, one outside
director and one senior lending officer, enforces loan authorizations for each
officer, decides on loans exceeding such limits, services all requests for
officer credits to the extent allowable under current laws and regulations,
administers all problem credits, and determines the allocation of funds for each
lending division. The loan portfolio consists primarily of real estate,
commercial, small business, residential construction and consumer installment
loans. Maturity of term loans is normally limited to 15 years. Conventional real
estate loans may be made for up to 80% of the appraised value or purchase cost
of the real estate for no more than a 20-year term. Installment loans are based
on the earning capacity and vocational stability of the borrower.
FCB's Board at its regularly scheduled meetings reviews all new loans
made the preceding month. Loans which are 30 days or more past due are reviewed
monthly.
The Loan Committee of Middleton periodically reviews the loan
portfolio, particularly nonaccrual and renegotiated loans. Each loan officer is
responsible for monitoring and collecting his or her own loan portfolio. Loan
Committee review may result in a determination that a loan should be placed on a
nonaccrual status for income recognition, subject to FCB Board approval. In
addition, to the extent that management identifies potential losses in the loan
portfolio and reduces the book value of such loans through charge-offs, to their
estimated collectible value, Middleton's policy is to classify as nonaccrual any
loan on which payment of principal or interest is 90 days or more past due,
where there is adequate collateral to cover principal and accrued interest and
the loan is in the process of collection. No concessions are granted and late
fees are collected. In addition, a loan will be classified as nonaccrual if, in
the opinion of the Loan Committee, based upon a review of the borrower's or
guarantor's financial condition, collateral value or other factors, payment is
questionable, even though payments are not 90 days or more past due.
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<PAGE> 56
When a loan is classified as nonaccrual, any unpaid interest is
reversed against current income. Interest is included in income thereafter only
to the extent received in cash. The loan remains in a nonaccrual classification
until such time as the loan is brought current, when it may be returned to
accrual classification. When principal or interest on a nonaccrual loan is
brought current, if in management's opinion future payments are questionable,
the loan would remain classified as nonaccrual. After a nonaccrual or
renegotiated loan is charged off, any subsequent payments of either interest or
principal are applied first to any remaining balance outstanding, then to
recoveries and lastly to income.
The large number of consumer installment loans and the relatively small
dollar amount of each makes an individual review impracticable. It is
Middleton's policy to charge off any consumer installment loan which is past due
90 days or more, unless there are extenuating circumstances in which management
believes a particular loan is collectible.
In addition, mortgage loans secured by real estate are placed on
nonaccrual status when the mortgagor is in bankruptcy, or foreclosure
proceedings are instituted. Any accrued interest receivable remains in interest
income as an obligation of the borrower.
CREDIT RISK MANAGEMENT AND ALLOWANCE FOR LOAN LOSSES
Credit risk and exposure to loss are inherent parts of the banking
business. Management seeks to manage and minimize these risks through its loan
and investment policies and loan review procedures. Management establishes and
continually reviews lending and investment criteria and approval procedures that
it believes reflect the risk sensitive nature of Middleton. The loan review
procedures are set to monitor adherence to the established criteria and to
ensure that on a continuing basis such standards are enforced and maintained.
The loan portfolio is regularly reviewed and management determines the
amount of loans to be charged-off. In addition, such factors as Middleton's
previous loan loss experience, prevailing and anticipated economic conditions,
industry concentrations and the overall quality of the loan portfolio are
considered. While management uses available information to recognize losses on
loans and real estate owned, future additions to the allowance may be necessary
based on changes in economic conditions. In addition, various regulatory
agencies, as an integral part of their examination process, periodically review
the allowances for losses on loans and real estate owned. Such agencies may
require Middleton to recognize additions to the allowances based on their
judgments about information available at the time of their examinations. In
addition, any loan or portion thereof which is classified as a "loss" by
regulatory examiners is charged-off.
The allowance for loan losses is increased by provisions charged to
operating expense. The allowance is reduced by charging off loans or portions of
loans at the time they are deemed by management to be uncollectible, and
increased when loans previously charged off are recovered. The resulting
allowance for loan losses is viewed by management as a single, unallocated
allowance available for all loans and, in management's opinion, is adequate to
provide for reasonably foreseeable potential loan losses. The risk associated
with loans varies with the creditworthiness of the borrower, the type of loan
(consumer, commercial or real estate) and its maturity. Cash flows adequate to
support a repayment schedule is an element considered for all types of loans.
Real estate loans are impacted by market conditions regarding the value of the
underlying property used as collateral. Commercial loans are also impacted by
the management of the business as well as economic conditions.
CAPITAL RESOURCES/LIQUIDITY
Liquidity. Of primary importance to depositors, creditors and
regulators is the ability to have readily available funds sufficient to repay
fully maturing liabilities. Middleton's liquidity, represented by cash due from
banks, is a result of its operating, investing and financing activities. In
order to ensure funds are available at all times, Middleton devotes resources to
projecting on a monthly basis the amount of funds which will be required
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<PAGE> 57
and maintains relationships with a diversified customer base so funds are
accessible. Liquidity requirements can also be met through short-term borrowings
or the disposition of short-term assets which are generally matched to
correspond to the maturity of liabilities.
Middleton has a formal liquidity policy, and in the opinion of
management, its liquidity levels are considered adequate. Neither FCB nor
Middleton is subject to any specific regulation liquidity requirements imposed
by regulatory authorities. Middleton is subject to general FDIC guidelines,
which do not require a minimum level of liquidity. Management believes its
liquidity ratios meet or exceed these general guidelines. Management does not
know of any trends or demands which are reasonably likely to result in liquidity
increasing or in any material manner.
CAPITAL ADEQUACY
Capital adequacy refers to the level of capital required to sustain
asset growth over time and to absorb losses. The objective of FCB's management
is to maintain a level of capitalization that is sufficient to take advantage of
profitable growth opportunities while meeting regulatory requirements. This is
achieved by improving profitability through effectively allocating resources to
more profitable businesses, improving asset quality, strengthening service
quality, and streamlining costs. The primary measures used by management to
monitor the results of these efforts are the ratios of average equity to average
assets, average tangible equity to average tangible assets, and average equity
to net loans. The Federal Reserve has adopted capital guidelines governing the
activities of bank holding companies. These guidelines require the maintenance
of an amount of capital based on risk-adjusted assets so that categories of
assets with potentially higher credit risk will require more capital backing
than assets with lower risk. In addition, banks and bank holding companies are
required to maintain capital to support, on a risk-adjusted basis, certain
off-balance sheet activities such as loan commitments. On March 31, 1998, FCB
and Middleton exceeded the regulatory minimums and qualified as well-capitalized
institutions under the regulations. See "Capital Adequacy" for additional
information regarding regulatory requirements for capital.
BENEFICIAL OWNERSHIP OF FCB COMMON STOCK
Security ownership information with respect to all persons known to FCB
to be the beneficial owners of five percent (5%) or more of the outstanding
shares of FCB Common Stock and all directors and executive officers of FCB is
shown on the following table.
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<PAGE> 58
<TABLE>
<CAPTION>
Amount and Nature of
Percentage of Beneficial
Name and Address Ownership Percentage of Class(1)
---------------- --------- ----------------------
<S> <C> <C>
Charles M. Cary (1) 23,936 51.26%
118 Warren Street
Bolivar, TN 38008
Mike Bodiford 607 1.3%
101 N. Main Street
Middleton, TN 38052
WJ Cornelius 250 ____
101 N. Main Street
Middleton, TN 38052
Jack C. Daniel 500 1.1%
101 N. Main Street
Middleton, TN 38052
Vernon J. McBride 250 ____
101 N. Main Street
Middleton, TN 38052
James Harry Shelly 750 1.6%
101 N. Main Street
Middleton, TN 38052
Francis L. Simpson, Jr. 500 1.1%
101 N. Main Street
Middleton, TN 38052
Richard Wetherbee 2,346 5.0%
101 N. Main Street
Middleton, TN 38052
Directors and officers as a group (7 persons) 5,203 11.1%
</TABLE>
(1) Charles M. Cary has been designated under Mr. Simpson's Last Will and
Testament as attorney in fact to vote the FCB Common Stock held by Mr. Simpson's
Estate.
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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF FCB
The following narrative discussion and tabular data provide an analysis
of major factors and trends regarding the consolidated financial condition of
FCB as of March 31, 1998 and as of December 31, 1997 and 1996, and the
consolidated results of operations of FCB for the three months ended March 31,
1998 and 1997 and for each of the years ended December 31, 1997, 1996 and 1995.
The discussion should be read in conjunction with the audited consolidated
financial statements of FCB, and the notes thereto, as of and for the year ended
December 31,
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<PAGE> 59
1997, and the unaudited consolidated financial statements and the notes thereto
as of and for the years ended December 1996 and 1995 and for the three months
ended March 31, 1998 as presented in Appendix C of this Prospectus/Proxy
Statement.
Certain of the information included in this discussion contains
forward-looking statements and information that are based on management's belief
as well as certain assumptions made by, and information currently available to,
management. When used in this discussion, the words "anticipate", "project",
"expect", and similar expressions are intended to identify forward-looking
statements. Although management of FCB believes that the expectations in such
forward-looking statements are reasonable, it can give no assurance that such
expectations and projections will prove to have been correct. Such
forward-looking statements are subject to certain risks, uncertainties, and
assumptions. Should one or more of these risks materialize, or should any such
underlying assumptions prove to be incorrect, actual results may very materially
from those anticipated, estimated, projected or expected. Among key factors that
may have a direct bearing on FCB's operating results are fluctuations in the
economy; the actions taken by the Federal Reserve for the purpose of influencing
the economy; the continued growth of the markets in which FCB operates
consistent with recent historical experience; and the enactment of federal
legislation impacting the operations of FCB.
OVERVIEW
For a summary of selected consolidated financial data as of and for the
years ended December 31, 1993 through 1997, and as of the three months ended
March 31, 1998 and 1997, see page 13 of this Prospectus/Proxy Statement. Since
December 31, 1997, total assets have grown from $40.65 million to $40.67 million
at March 31, 1998.
FCB's net earnings for the year ended December 31, 1996 were $564,000,
representing the highest level of annual earnings for the five year period ended
December 31, 1997. Net earnings were $293,000 for 1997, which represent the
lowest annual earnings for the same five year period. The results for 1997 were
impacted by significant provisions for loan losses in the amount of $354,000,
which management does not expect to continue.
Management expects modest growth to continue in both assets and
earnings; however, such growth is dependent upon the economy of the market
served by FCB, its relative competitiveness in its local market (Middleton,
Tennessee and Hardeman and contiguous counties) and other factors which are
discussed below.
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
NET EARNINGS. Net earnings for 1997 were $293,000, a decrease of
$271,000 compared to 1996 net earnings of $564,000. Net earnings for 1996
increased $121,000 as compared to 1995. Basic earnings per share were $6.37 in
1997, compared to $11.64 in 1996 and $9.29 in 1995. A more detailed analysis of
net earnings and the changes in such components is included under the
appropriate captions below.
The return on average assets for the year ended December 31, 1997 was
.74% compared to 1.49% for 1996 and 1.25% for 1995. The return on average
stockholders' equity for 1997 was 8.63% compared to 18.26% for the year ended
December 31, 1996 and 16.92% for the year ended December 31, 1995. FCB's
efficiency ratio was 59.01% during 1997, as compared to 53.59% for 1996 and
58.64% for 1995. FCB declared and paid dividends to stockholders of $1.25, $1.00
and $.90 per share for each of the years ended December 31, 1997, 1996 and 1995,
respectively.
NET INTEREST INCOME. Net interest income, the major component of FCB's
income, is the amount by which interest and fees generated by earning assets
exceeds the total interest cost of funds used to carry them. Net interest income
is affected by a number of factors including the level, pricing, mix and
maturity of earning assets and liabilities; interest rate fluctuations; and
asset quality. Net interest income was $1.77 million for the year ended
49
<PAGE> 60
December 31, 1997 compared to $1.72 million for the year ended December 31, 1996
and $1.55 million for the year ended December 31, 1995. The improvement in 1997
as compared to 1996 is attributable to loan growth, higher yields from loans and
investment securities, offset by a decrease in the net interest margin from
5.00% in 1996 to 4.89% in 1997. The increase in 1996 as compared to 1995 is a
result of higher yields on loans and investment securities and an increase in
the net interest margin from 4.84% in 1995 to 5.00% in 1996.
PROVISION FOR LOSSES ON LOANS. The allowance for losses on loans has
been, in the opinion of management, maintained at a level sufficient to provide
for losses inherent in the loan portfolio. The level of provision for losses on
loans is based on past loan loss experience, growth and composition of the loan
portfolio, as well as current economic conditions. FCB recorded provisions for
losses on loans in the amount of $354,000 for the year ended December 31, 1997,
as compared to $11,000 and $45,000 for the years ended December 31, 1996 and
1995, respectively. The 1997 provision is a result of deterioration of several
specific credits, failure to maintain consistent collection efforts, overall
deterioration in consumer credit, and overall growth in the loan portfolio. The
1997 provision is not an indication of an overall deterioration in FCB's asset
quality or underwriting standards and is not expected to continue. Provisions
consistent with 1993 through 1996 are expected in the near future. FCB
experienced net charge-offs of $597,000, $50,000 and $62,000 for the years ended
December 31, 1997, 1996 and 1995, respectively. During the period 1993 through
1996, FCB recovered approximately 43% of loans charged off. It is anticipated
that a significant portion of the 1997 loan charge-offs will be recovered. See
"Allowance for Loan Losses" for additional information regarding the provision
for losses on loans.
Table 2, which follows this discussion, presents a Summary of Loan Loss
Experience for the three months ended March 31, 1998 and 1997 and for the years
ended December 31, 1993 through 1997 while Table 1 presents Nonperforming Assets
for the same periods. The amount of nonperforming assets has increased
constantly over the last five years as the loan portfolio has continued to grow.
A significant increase occurred in 1997 due to the deterioration of several
specific credits. However, management expects no continued significant
increases. The loan-to-deposit ratio increased from 77.18% in 1993 to 92.23% in
1996 before decreasing slightly to 90.44% in 1997 as the demand for quality
loans increased. Management expects future loan demand to remain fairly constant
at current levels. Future provisions for losses on loans are dependent upon
various factors, including the economy, loan growth and composition, levels of
nonperforming assets and loan loss experience. The amounts of nonperforming
loans represent risks in the loan portfolio; however, a major portion of such
loans are collateralized to various degrees and should not be interpreted as
losses.
NONINTEREST INCOME. Noninterest income is primarily related to service
charges on deposits and other fees for services as well as net investment
securities gains and losses. Total noninterest income for 1997 was $151,000, a
$2,000 increase from the $149,000 reported for 1996. The increase was
attributable to service charges on deposits and other fees. The 1996 noninterest
income represented a $17,000 increase from $132,000 during 1995. The increase
was attributable to an $19,000 increase in service charges on deposits and a
decrease of $2,000 in net investment securities gains. Other changes in
noninterest income from 1995 to 1997 were not attributable to any significant
individual items.
Management continues to seek new sources of noninterest income;
however, no significant growth or the maintenance of current levels of
noninterest income can be assured.
NONINTEREST EXPENSE. Total noninterest expense for 1997 was $1.14
million or $134,000 more than the $1.00 million reported for 1996. Included in
1997 was a loss on the disposition of other real estate of $38,000. Noninterest
expense for 1996 represents a $16,000 increase from $986,000 in 1995. The
increases are not attributable to any significant individual items.
Salaries, wages and benefits totaled $648,000 for the year ended
December 31, 1997 compared to $586,000 and $559,000 for the year ended December
31, 1996 and 1995, respectively. Management does not project any significant
changes in the amounts of these expenses.
50
<PAGE> 61
Occupancy and equipment expenses totaled $155,000 for the year ended
December 31, 1997 compared to $133,000 and $123,000 for the year ended December
31, 1996 and 1995, respectively. The increases are not attributable to any
significant individual items. Management does not expect any other significant
increases for capital expenditures in the near future.
Management continues to monitor the level of noninterest expense to
identify cost reductions where applicable; however, no significant reductions
are expected.
INCOME TAXES. Income tax expense totaled $142,000, $293,000 and
$208,000 for the years ended December 31, 1997, 1996 and 1995, respectively.
These amounts represent effective tax rates of 32.71%, 34.22%, and 31.91% for
the years ended December 31, 1997, 1996, and 1995, respectively. The increase in
the effective rate from 1995 to 1996 is a result of decreased levels of
investment securities which generate tax-exempt income. The decrease in the
effective rate from 1996 to 1997 is a result of lower net earnings in 1997 as
discussed above. Management expects that future effective tax rates will remain
at levels commensurate with those during the period 1995 through 1997.
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1998 AND 1997
NET EARNINGS. Net earnings for the three months ended March 31, 1998
were $129,000, a decrease of $8,000 from net earnings of $137,000 reported for
the same period in 1997. The decrease in net earnings is primarily attributable
to increases in provision for losses on loans and noninterest expense, offset
partially by an improvement in net interest income. A more detailed analysis of
the components of net earning is included below.
The annualized return on average assets for the three months ended
March 31, 1998 was 1.27% versus 1.37% for the same period in 1997 and .74% for
the year ended December 31, 1997. The annualized return on average stockholders'
equity for the three months ended March 31, 1998 was 14.27% compared to 16.61%
for the same period in 1997 and 8.63% for the year ended December 31, 1997.
NET INTEREST INCOME. Net interest income was $490,000 and $423,000 for
the three months ended March 31, 1998 and 1997, respectively. Total interest
income increased to $940,000 for the three months ended March 31, 1998 from
$866,000 for the same period in 1997. Total interest expense increased to
$451,000 for the three months ended March 31, 1998 from $443,000 for the same
period in 1997. The increase in total interest income is attributable to
increases in the volume of interest-bearing assets (primarily loans), and the
increase in total interest expense is due to increases in volumes of
interest-bearing liabilities.
PROVISION FOR LOSSES ON LOANS. The provision for losses on loans was
$45,000 and $10,000 for the three months ended March 31, 1998 and 1997,
respectively. The allowance for losses on loans, which was $331,000 at March 31,
1998 has been, in management's opinion, sufficient to absorb any losses inherent
in the loan portfolio. Future provisions for losses on loans, if any, will be
based upon past loan loss experience, growth and composition of the loan
portfolio, as well as the current and anticipated future economic conditions.
The allowance for losses on loans at March 31, 1998 represented 1.08% of loans,
net of unearned income, as of that date.
A summary of the activity in the allowance for losses on loans for the
three months ended March 31, 1998 and 1997 is set forth as follows (000's
omitted):
<TABLE>
<CAPTION>
March 31,
1998 1997
---- ----
<S> <C> <C>
Balance At January 1 $ 229 $ 472
Provision for losses on loans 45 11
Net loans recovered (charged-off) 57 (20)
----- -----
Balance at March 31 $ 331 $ 463
===== =====
</TABLE>
51
<PAGE> 62
Loans past due 90 days or more and still accruing interest were $7,000
and $15,000 at March 31, 1998 and December 31, 1997, respectively. At March 31,
1998, FCB had $803,000 in loans on nonaccrual status, as compared to nonaccrual
loans of $1,693,000 at December 31, 1997. Loans are placed on nonaccrual status
when they become past due 90 days or more as to principal or interest, and in
the opinion of management, are not in the process of collection or otherwise
well-secured.
Management has reviewed in detail all loans outstanding as of March 31,
1998 and believes there are no loans outstanding which are not past due or on
nonaccrual status as of March 31, 1998, which would cause management to have
serious doubts as to the ability of such borrowers to comply with the present
loan repayment terms.
FCB's renewal policy consists of an item-by-item review of maturing
loans. Each maturing loan is evaluated to determine if such loan will be renewed
and if so, at what amount, rate, and maturity. Generally, FCB's loan maturities
are of a short duration for the purpose of interest rate risk management.
NONINTEREST INCOME. The primary sources of noninterest income are
service charges on deposits and various other service fees. Noninterest income
for the three months ended March 31, 1998 was $25,000, a decrease of $12,000
from $37,000 for the same period in 1997.
NONINTEREST EXPENSE. The primary components of noninterest expense are
salaries and wages, occupancy and equipment expense, and other miscellaneous
operating expenses. Total noninterest expense for the three months ended March
31, 1998 was $272,000, a $27,000 increase from the $245,000 reported for the
same period in 1997. The increase is primarily a result of legal fees incurred
due to the merger transaction discussed in note 10 to the audited consolidated
financial statements at December 31, 1997 presented as Appendix C.
FINANCIAL CONDITION
Total assets have grown only slightly from $40.65 million at December
31, 1997 to $40.67 million at March 31, 1998. Deposits have decreased $71,000 to
$33.30 million at March 31, 1998 from $33.38 million at December 31, 1997. Total
assets were $39.00 million at December 31, 1996.
LOANS. Total loans, net of unearned income, at March 31, 1998 were
$30.59 million, an increase of $408,000 as compared to $30.18 million at
December 31, 1997. This increase is attributable to fluctuations in the overall
loan demand for mortgage loans and commercial loans. Total loans, net of
unearned income, at December 31, 1996 were $29.65 million. The composition of
the loan portfolio continues to be focused on single-family mortgage loans and
consumer loans. Table 4 -Composition of Loan Portfolio details the types of
loans in the loan portfolio as of March 31, 1998 and 1997 and for each of the
years ended December 31, 1993 through 1997. Management expects loan growth to
increase at moderate levels.
Table 1 - Nonperforming Assets sets forth information on the
nonperforming loans within the loan portfolio as of March 31, 1998 and 1997 and
for the years ended December 31, 1993 through 1997. Although the amounts shown
represent risks in the loan portfolio, the major portion of the loans are
collateralized to various degrees and should not be interpreted as losses.
All potential problem loans have been disclosed in Table 1. Potential
problem loans are those loans for which management has obtained information of
possible credit problems of the borrower, resulting in serious doubts as to the
ability of the borrower to comply with the present loan repayment terms.
ALLOWANCE FOR LOSSES ON LOANS. In determining the amount of the
provisions for losses on loans and allowance for losses on loans, management
considers past loan charge-offs, the level of past due and nonaccrual loans, the
size and composition of the portfolio, loan growth trends, adverse
classifications at recent regulatory
52
<PAGE> 63
examinations, general economic conditions in the market area, and a review of
individual loans to identify potential credit problems. The allowance for losses
on loans is maintained at a level considered adequate by management to provide
for potential losses in the existing loan portfolio. In evaluating the adequacy
of the allowance, management makes certain estimates and assumptions which are
susceptible to change in the near term. While management uses available
information to recognize losses on loans, future additions to the allowance may
be necessary based upon changes in economic conditions. Management believes the
level of the allowance for losses on loans is adequate in relation to the size,
composition and quality of the loan portfolio at March 31, 1998.
Table 3 - Allocation of the Allowance for Losses on Loans sets forth
the breakdown of the allowance for losses on loans by loan category as of March
31, 1998 and 1997 and for each of the years ended December 31, 1993 through
1997. Management believes that the allowance can be allocated by category only
on an approximate basis. The allocation of the allowance to each category is not
necessarily indicative of future losses and does not restrict the use of the
allowance to absorb losses in any category.
During 1995, FCB adopted the provisions of Statement of Financial
Accounting Standards (SFAS) No. 114, Accounting by Creditors for Impairment of a
Loan (effective for fiscal years beginning after December 15, 1994), as amended
by SFAS No. 118, Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosures. This standard prescribes a valuation methodology
for impaired loans as defined by the standard. Generally, a loan is considered
impaired if management believes that it is probable that all amounts due will
not be collected according to the contractual terms stipulated in the loan
agreement. An impaired loan must be valued using the present value of expected
cash flows discounted at the loan's effective interest rate, the loans'
observable market price or fair value of the loan's underlying collateral. FCB
adopted the provisions of SFAS No.114 prospectively in 1995. The adoption of
SFAS No. 114 did not have a material effect on FCB's financial condition,
results of operations or liquidity.
INVESTMENT SECURITIES. Investment securities totaled $6.19 million at
March 31, 1998 compared to $6.69 million and $6.81 million at December 31, 1997
and 1996, respectively. Investments in securities are generally made as an
alternative deployment of available funds. Accordingly, the level of investment
securities in the future and their classification as available for sale or held
to maturity will depend on various factors, including loan demand and
management's ability to attract loans and deposits. The contractual maturities
and amortized cost and fair value by investment category of the investment
securities are presented in note 2 to the audited consolidated financial
statements as of December 31, 1997 and the unaudited consolidated financial
statements as of December 31, 1996, which are presented in Appendix C.
Investment securities classified as available for sale are carried at
fair value, and held to maturity securities are carried at amortized cost. As of
March 31, 1998, the fair value of total investment securities exceeded the
amortized cost by $39,000, or .63%.
MONEY MARKET ASSETS. Federal funds sold totaled $1.73 million at March
31, 1998, compared to $1.30 million at December 31, 1997, an increase of
$425,000. Federal funds sold totaled $350,000 at December 31, 1996. The level of
federal funds sold is a function of FCB's liquidity position and the overall
level of loan demand.
FORECLOSED ASSETS. Foreclosed assets at March 31, 1998 totaled
$153,000, as compared to $157,000 at December 31, 1997 and $230,000 at December
31, 1996.
DEPOSITS. Customer deposits totaled $33.30 million at March 31, 1998, a
$71,000 decrease compared total deposits of $33.38 million at December 31, 1997.
Total deposits at December 31, 1996 were $32.15 million. While the level of
deposits fluctuates daily, management expects the level of deposits to continue
to increase at moderate levels.
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<PAGE> 64
Included in deposits are $7.69 million of time deposits greater than or
equal to $100,000 at March 31, 1998 and $7.72 million and $6.27 million at
December 31, 1997 and 1996, respectively. At March 31, 1998, FCB's loan to
deposit ratio was 91.86%, compared to 90.44% and 92.23% at December 31, 1997 and
1996, respectively.
CAPITAL. Total stockholders' equity as of March 31, 1998 was $3.68
million, compared to $3.55 million at December 31, 1997 and $3.24 million at
December 31, 1996. The 1998 net increase is due to net earnings of $129,000 and
a $3,000 increase in the unrealized gains on available for sale securities. The
1997 net increase is due to net earnings of $293,000 in 1997, an $8,000 increase
in the unrealized gains on available for sale securities, and an increase of
$65,000 from issuance of common stock to employees, offset by dividends
declared and paid to shareholders during 1997 of $58,000.
A key to the continued growth and profitability of FCB is to maintain
adequate levels of capital. The capital adequacy of a bank is determined based
upon the level of capital as well as asset quality, liquidity, asset mix,
earnings history, and economic conditions. Management's goal is to maintain FCB
in the "well-capitalized" category for regulatory capital. At March 31, 1998,
FCB was in this category.
The regulatory capital guidelines divide capital into two tiers: Tier 1
capital and Tier 2 capital. Tier 1 capital of FCB consists of stockholders'
equity, excluding the unrealized gains on available for sale securities. Tier 2
capital includes the allowance for losses on loans, with certain limitations. In
determining the risk-based capital requirements, assets are assigned risk
weights of 0% to 100%, depending upon the regulatory assigned levels of credit
risk associated with such assets. Off-balance sheet items are included in the
calculation of risk-adjusted assets through conversion factors established by
regulatory agencies. FCB's off-balance-sheet items include unused loan
commitments, credit card lines, and standby letters of credit.
FCB's Tier 1 and total capital to risk-weighted assets ratios were
13.41% and14.62%, respectively, at March 31, 1998. At December 31, 1997, FCB's
Tier 1 and total capital to risk-weighted assets ratios were 12.97% and 13.81%
respectively, compared to 11.67% and 12.92%, respectively, at December 31, 1996.
The regulatory agencies require "well-capitalized" institutions to have Tier 1
and total capital to risk-weighted assets ratios of 6% and 10%, respectively.
In addition to the risk-based capital requirements, the regulatory
agencies have established leverage capital requirements. This ratio is computed
by dividing Tier 1 capital by unadjusted (not risk-weighted) average total
assets. FCB's leverage ratio at March 31, 1998 was 9.05%, compared to 8.54% and
8.34% at December 31, 1997 and 1996, respectively, and compared to the
regulatory guideline of 5% for "well-capitalized" institutions.
LIQUIDITY AND ASSET/LIABILITY MANAGEMENT
FCB views liquidity and asset/liability management as the ability to
assure that funds are available to support bank requirements; that is, the
ability to allow depositors ready access to their moneys and credit customers
available funds to meet their credit needs. It is also the process by which FCB
monitors and attempts to control the mix and maturities of its assets and
liabilities in order to maximize net interest income. Management maintains
balances of federal funds sold and available for sale securities in amounts it
believes necessary to meet FCB's daily cash needs. With the available for sale
investment securities portfolio, management can, at its discretion, manage the
liquidity and interest rate risk of FCB. Management does not foresee any
particular matters which might immediately threaten its ability to remain
liquid.
For the three months ended March 31, 1998, FCB generated cash flows
from operating activities of $144,000, compared to $577,000 for the year ended
December 31, 1997 and $602,000 for the year ended December 31, 1996. Management
expects future operating cash flows to be sufficient to allow FCB to meet its
obligations.
54
<PAGE> 65
FCB does not expect to pay any dividends to shareholders in 1998.
During the years ended December 31, 1997, 1996 and 1995, FCB paid cash dividends
to its shareholders totaling $1.25, $1.00 and $.90 per share, respectively.
SOURCES AND USES OF FUNDS
FCB's primary source of funds has historically been the taking of
deposits from customers, both individual and business. FCB's deposit acquisition
strategy is to rely on a core deposit base of demand deposits, as well as
savings and time deposits under $100,000. Next, FCB utilizes time deposits
$100,000 and over and public deposits for additional sources of funds. At March
31, 1998, the percentage of time deposits $100,000 and over to total deposits
was 23.01%. At December 31, 1997 the percentage of time deposits $100,000 and
over to total deposits was 23.13%, compared to 19.50% at December 31, 1996. The
acquisition of deposits are from customers, individuals and businesses within
FCB's market area. The net decrease in deposits was $71,000 for the three months
ended March 31, 1998, and net increases in deposits were $1.22 million in 1997
and $1.53 million in 1996. Management believes that the rates offered for
deposits are competitive with other financial institutions in FCB's market area.
FCB does not gather deposits through any brokered means.
At March 31, 1998, FCB had advances from the Federal Home Loan Bank of
Cincinnati of $3.22 million, compared to $3.27 million at December 31, 1997 and
$3.08 million at December 31, 1996. The borrowings have been used to fund loan
growth.
FCB also derives funds from maturities, prepayments and calls of
investments securities, which totaled $517,000 for the three months ended March
31, 1998, and $2.47 million and $2.51 million during 1997 and 1996,
respectively.
FCB's primary use of funds is the making of loans to customers. The
loan to deposit ratio was 91.86% at March 31, 1998 as compared to 90.44% at
December 31, 1997. The loan to deposit ratio was 92.23% at December 31, 1996.
The table of FCB Selected Consolidated Financial Data on page 13 indicates that
FCB's overall relative loan portfolio size has tended to increase, as evidenced
by the trend of increases in the loan to deposit ratio. FCB's loan portfolio is
comprised of loans to individuals and businesses secured by various collateral,
and in certain circumstances, the loans are extended on an unsecured basis. The
composition of the loan portfolio at December 31, 1997 is presented in note 3 to
the audited consolidated financial statements, which are presented in Appendix
C.
A secondary use of funds is the purchasing of debt securities for
investment purposes. At March 31, 1998, the investment portfolio represented 16%
of total earning assets. During 1997, the investment portfolio averaged 18% of
total earning assets compared to 20% in 1996. The composition of the investment
securities portfolio is presented in note 2 to the FCB audited consolidated
financial statements at December 31, 1997, presented in Appendix C, and in note
2 to the unaudited consolidated financial statements at December 31, 1996,
presented in Appendix C. The portfolio is comprised of U.S. Treasury securities,
obligations of U.S. Government agencies and obligations of states and local
governments. While FCB may continue to upgrade or reposition the portfolio,
management has not in the past or does it intend to in the future, trade
securities for profit or to depend upon securities gains as a regular source of
income. At March 31, 1998, the fair value of the investment portfolio exceeded
the amortized cost by approximately $39,000. In comparison, the fair value
exceeded the amortized cost by approximately $33,000 at December 31, 1997 and
$15,000 at December 31, 1996.
Effective January 1, 1994, FCB adopted SFAS No. 115, Accounting for
Certain Investments in Debt and Equity Securities. This standard addresses the
accounting for investments in equity securities that have readily determinable
fair values and for all investments in debt securities. The investment
securities covered by this standard are to be classified in one of three
categories: (i) debt securities for which the institution has a positive intent
and ability to hold to maturity are classified as "held to maturity" and
reported at amortized cost; (ii) debt and equity securities that are bought and
held principally for the purpose of selling them in the near term are
55
<PAGE> 66
classified as "trading" and reported at fair value, with the unrealized gains
and losses included in earnings; and (iii) debt and equity securities not
classified as either held to maturity securities or trading securities are
classified as "available for sale" and reported at fair value, with unrealized
gains and losses excluded from earnings and reported net of deferred taxes as a
separate component of stockholders' equity.
REGULATORY ASSESSMENTS
FCB is required to pay certain fees to the Federal Deposit Insurance
Corporation (FDIC) and the Tennessee Department of Financial Institutions. The
FDIC monitors risk-based capital requirements and requires weaker institutions
to pay higher deposit insurance premiums, while allowing well capitalized
institutions to pay less. The deposit insurance assessments currently range from
zero for well-capitalized institutions to 23 cents per $100 of deposits for the
weakest institutions. These premiums were reduced for Bank Insurance Fund
institutions during 1995 and 1996, and certain institutions received refunds
during 1995. FCB received a refund of approximately $15,000 during 1995.
FDIC deposit insurance and regulatory assessments totaled approximately
$13,000 and $10,000 for the years ended December 31, 1997 and 1996,
respectively.
EFFECTS OF INFLATION
A bank's asset and liability structure is primarily monetary in nature;
that is, fixed in terms of monetary amounts. Consequently, the impact of
inflation on a bank differs significantly from an industrial company. Factors
such as interest rates have a more significant impact on a bank's performance
than does general inflation. Interest rates do not necessarily move in the same
direction, or at the same magnitude, as the prices of other goods and services.
56
<PAGE> 67
TABLE 1
NONPERFORMING ASSETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
March 31, December 31,
-------------- --------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ------ ------ ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Nonaccrual loans $803 $1,261 $1,693 $596 $400 $470 $270
Other real estate owned and foreclosed assets 153 229 157 230 100 -- --
---- ------ ------ ---- ---- ---- ----
Total nonperforming assets $956 $1,490 $1,850 $826 $500 $470 $270
==== ====== ====== ==== ==== ==== ====
Loans past due 90 days or more and still accruing
interest $ 7 $ 29 $ 15 $ 6 $ 18 $ 20 $ 39
==== ====== ====== ==== ==== ==== ====
</TABLE>
TABLE 2
SUMMARY OF LOAN LOSS EXPERIENCE
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
March 31, Years Ended December 31,
-------------- --------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ------ ------ ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Beginning balance $229 $472 $472 $511 $528 $372 $261
Provision for loan losses 45 11 354 11 45 170 180
Loans charged off (6) (26) (627) (105) (81) (49) (109)
Recoveries 63 6 30 55 19 35 40
---- ------ ------ ---- ---- ---- ----
Net recoveries (charge-offs) 57 (20) (597) (50) (62) (14) (69)
---- ------ ------ ---- ---- ---- ----
Ending balance $331 $463 $229 $472 $511 $528 $372
==== ====== ====== ==== ==== ==== ====
Loans, net of unearned income:
Period end 30,592 29,897 30,184 29,653 26,256 24,535 20,895
Average during year 30,388 29,775 29,919 27,955 25,396 22,715 10,448
Allowance for losses on loans to period end loans,
net of unearned interest 1.08% 1.55% 0.76% 1.59% 1.95% 2.15% 1.78%
Allowance for losses on loans to average loans,
net of unearned interest 1.09% 1.55% 0.77% 1.69% 2.01% 2.32% 3.56%
Net charge-offs (recoveries) to average loans,
net of unearned interest (0.19)% 0.07% 2.00% 0.18% 0.24% 0.06% 0.66%
</TABLE>
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<PAGE> 68
TABLE 3
ALLOCATION OF THE ALLOWANCE FOR LOSSES ON LOANS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
March 31, December 31,
-------------------------------- --------------------------------
1998 1997 1997 1996
-------------- -------------- -------------- --------------
Amount % Amount % Amount % Amount %
------ ---- ------ ---- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial, financial and agricultural $ 99 30% $ 194 42% $ 71 31% $ 203 43%
Real estate
Secured by single-family residential
properties 52 16% 61 13% 37 16% 57 12%
Construction, land development
and other commercial 34 10% 49 11% 23 10% 56 12%
Consumer 146 44% 159 34% 98 43% 156 33%
----- --- ----- --- ----- --- ----- ---
Total $ 331 100% $ 463 100% $ 229 100% $ 472 100%
===== === ===== === ===== === ===== ===
<CAPTION>
December 31,
--------------------------------------------------
1995 1994 1993
-------------- -------------- --------------
Amount % Amount % Amount %
------ ---- ------- ---- ------ ----
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial and agricultural $ 245 48% $ 259 49% $ 201 54%
Real estate
Secured by single-family residential
properties 46 9% 42 8% 27 7%
Construction, land development
and other commercial 21 4% 27 5% 14 4%
Consumer 199 39% 200 38% 130 35%
----- --- ----- --- ----- ---
Total $ 511 100% $ 528 100% $ 372 100%
===== === ===== === ===== ===
</TABLE>
TABLE 4
COMPOSITION OF LOAN PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
March 31, December 31,
--------------------- ------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Commercial $ 3,518 $ 3,835 $ 3,745 $ 4,537 $ 4,649 $ 3,310 $ 2,114
Real estate -
Construction
and Other 966 819 907 905 495 769 868
Real estate -
Mortgages 9,704 9,271 19,248 18,348 16,451 16,376 14,143
Consumer 6,419 6,001 6,308 5,903 4,702 4,139 3,903
-------- -------- -------- -------- -------- -------- --------
$ 30,607 $ 29,926 $ 30,208 $ 29,693 $ 26,297 $ 24,594 $ 21,028
Unearned int (15) (29) (24) (40) (41) (59) (133)
-------- -------- -------- -------- -------- -------- --------
Net loans $ 30,592 $ 29,897 $ 30,184 $ 29,653 $ 26,256 $ 24,535 $ 20,895
======== ======== ======== ======== ======== ======== ========
</TABLE>
58
<PAGE> 69
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 three
acquisitions in 1995, seven in 1996, seven in 1997, and two in 1998, adding
approximately $1.3 billion in total assets in 1995, $4.2 billion in 1996 and
$3.6 billion in 1997 and $520 million in 1998. As of May 31, 1998, UPC is
currently a party to definitive agreements to acquire ten financial
institutions, in addition to FCB, and to purchase certain branch locations, and
assume deposit liabilities of California Federal Bank in Florida ("CalFed Branch
Purchase") (collectively the "Other Pending Acquisitions"). The Other Pending
Acquisitions had aggregate total assets of approximately $13.1 billion at March
31, 1998. Collectively, the Recently Completed Acquisitions and Other Pending
Acquisitions are referred to herein as "Other Acquisitions." The largest of the
Other Pending Acquisitions is UPC's proposed acquisition of Magna Group, Inc.
("MGR"), St. Louis, Missouri, which had total assets of approximately $7.3
billion at March 31, 1998. On May 1, 1998, MGR acquired Charter Financial, Inc.
and its subsidiary, Charter Bank, S.B. (the "Charter Acquisition") in a
transaction accounted for as a purchase. Located in Sparta, Illinois, Charter
Financial, Inc. 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. For purposes of this Proxy
Statement, including the historical and equivalent pro forma data, the term
"Other Acquisitions" and "Other Pending Acquisitions" includes the Charter
Acquisition. For information with respect to these acquisitions, see "-- Recent
Developments." For a discussion of UPC's acquisition program, see the caption
"Acquisitions" (pages 10, 11 and 12) in UPC's Special 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 Special
Report to Shareholders. UPC's Special 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
59
<PAGE> 70
have a dilutive effect on the earnings or book value per share of UPC Common
Stock. Moreover, significant charges against earnings are sometimes required
incidental to acquisitions. For a 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 Special 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 Special Report to Shareholders.
UPC's Special 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."
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 1,153,459
Bank, f.s.b. shares of UPC
Common Stock
Security Bancshares, Inc., Des Arc, 146 Approximately
Arkansas, and its subsidiaries, Farmers & 490,858 shares
Merchants Bank, Des Arc, Arkansas, and of UPC
Merchants and Farmers Bank, West Helena, Common Stock
Arkansas
----
TOTAL $520
====
</TABLE>
OTHER PENDING ACQUISITIONS. UPC has entered into definitive agreements
to acquire the following financial institutions in addition to FCB
(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. The
largest of the Other Pending Acquisitions is UPC's proposed acquisition of MGR.
MGR acquired Charter Financial, Inc. and its subsidiary Charter Bank, S.B. on
May 1, 1998 (the "Charter Acquisition"). Charter is located in Sparta, Illinois
and at the time of acquisition had total assets of approximately $406 million.
For the purpose of this Proxy Statement, including the pro forma financial
information included herein, the term "Other Pending Acquisitions" includes the
Charter Acquisition.
<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, $ 7,657 Approximately 3rd Quarter
and its subsidiaries, including Magna 35,446,000 shares of 1998
Bank, St. Louis, Missouri ("MGR")(3) UPC Common Stock
</TABLE>
60
<PAGE> 71
<TABLE>
<CAPTION>
Institution Asset Size Type of Projected
(In Millions)(1) Consideration(2) Closing Date
- ------------------------------------------ ---------------- -------------------- ----------------
<S> <C> <C> <C>
Peoples First Corporation, Paducah, 1,493 Approximately 3rd Quarter
Kentucky and its subsidiaries, include 6,338,000 shares of 1998
Peoples First National Bank, Paducah, UPC Common Stock
Kentucky ("Peoples")
Purchase of 24 branches and assumption 1,465 $110 million deposit 3rd Quarter
of $1.5 billion of deposits of California premium in cash 1998
Federal Bank in Florida ("CalFed Branch
Purchase")
AMBANC Corporation, Vincennes, 734 Approximately 3rd Quarter
Indiana, and its subsidiaries, AMBANC 3,398,000 shares of 1998
Illinois, N.A. and AMBANC Indiana UPC Common Stock
("AMBANC")
Merchants Bancshares, Inc., Houston, 552 Approximately 3rd Quarter
Texas, and its subsidiary, Merchants 2,000,000 shares of 1998
Bank, Houston, Texas ("Merchants") UPC Common Stock
TransFlorida Bank, Boca Raton, Florida 318 Approximately 4th Quarter
1,655,000 shares of 1998
UPC Common Stock
CB&T, Inc. McMinnville, Tennessee, and 271 Approximately 3rd Quarter
its subsidiaries, including City Bank & 1,449,000 shares of 1999
Trust, McMinnville, Tennessee UPC Common Stock
Capital Savings Bancorp, Inc. and 232 Approximately 801,338 3rd Quarter
subsidiaries Capital Savings Bank, FSB, shares of UPC Common 1998
and Capital Savings Financial Services, Stock
Inc., Jefferson City, Missouri
First National Bancshares of Wetumpka, 217 Approximately 836,000 3rd Quarter
Inc., Wetumpka, Alabama, and its shares of UPC Common 1998
subsidiary, First National Bank, Stock
Wetumpka, Alabama
Alvin Bancshares, Inc., Alvin, Texas and 121 Approximately 425,000 3rd Quarter
its subsidiary Alvin State Bank, Alvin, shares of UPC Common 1998
Texas Stock
Duck Hill Bank, Duck Hill, Mississippi 20 Approximately 42,000 3rd Quarter
-------- shares of UPC Common 1998
Stock
TOTALS $ 13,080
========
</TABLE>
- --------------------
(1) Approximate total assets at March 31, 1998.
61
<PAGE> 72
(2) Assumes no adjustment to shares pursuant to exchange ratio adjustment
mechanisms.
(3) Includes the pro forma 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 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; (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 Special 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 Special
Report to Shareholders. UPC's Special 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 the
Charter Acquisition which was, and Duck Hill Bank and the CalFed Branch
Purchase, which are expected to be accounted for as purchases), are expected to
be accounted for as poolings of interests. UPC currently estimates incurring
aggregate pre-tax charges in the range of $100 million to $115 million
(approximately $91 million related to MGR) 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 reflected 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 FCB'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 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, FCB and the Other Acquisitions
62
<PAGE> 73
(including MGR) as of and for the three months ended March 31, 1998 and 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.")
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 FCB
and the Other Acquisitions as of January 1, 1997. The pro forma information for
the years ended December 31, 1996 and 1995, reflect only the acquisition of MGR,
Peoples, AMBANC, and Merchants because FCB 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 three years 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 Special 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 Special Report
to Shareholders. UPC's 1997 Special 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."
63
<PAGE> 74
UNION PLANTERS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1998
<TABLE>
<CAPTION>
UPC,
MGR, FNB
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."
64
<PAGE> 75
UNION PLANTERS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
UPC, MGR, FNB
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>
65
<PAGE> 76
UNION PLANTERS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
UPC, MGR, FNB
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>
66
<PAGE> 77
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>
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<PAGE> 78
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>
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<PAGE> 79
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 FCB. A more complete
discussion is included in the UPC's 1997 Form 10-K. Information relating to FCB
is included herein and in the FCB Financial Statements attached hereto as
Appendix C. See "AVAILABLE INFORMATION" and "DOCUMENTS INCORPORATED BY
REFERENCE."
GENERAL
UPC and FCB are bank holding companies registered with the Federal
Reserve under the BHC Act. As such, UPC and FCB, and their respective 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 had
the ability either to "opt in" and accelerate the date after which interstate
branching could be permissible or "opt out" and prohibit interstate branching
altogether. None of the states in which the banking subsidiaries of UPC are
currently located either moved up the date after which interstate branching
would 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. FCB owns only one bank
subsidiary, Middleton. Middleton has no branch offices.
The BHC Act generally prohibits UPC or FCB 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
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<PAGE> 80
related to banking or managing or controlling banks as to be a proper incident
thereto. In determining whether a particular activity is permissible, the
Federal Reserve must consider whether the performance of such an activity
reasonably can be expected to produce benefits to the public, such as greater
convenience, increased competition, or gains in efficiency, that outweigh
possible adverse effects, such as undue concentration of resources, decreased or
unfair competition, conflicts of interest, or unsound banking practices. For
example, factoring accounts receivable, acquiring or servicing loans, leasing
personal property, conducting discount securities brokerage activities,
performing certain data processing services, acting as agent or broker in
selling credit life insurance and certain other types of insurance in connection
with credit transactions, and performing certain insurance underwriting
activities all have been determined by the Federal Reserve to be permissible
activities of bank holding companies. The BHC Act does not place territorial
limitations on permissible 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 and Middleton are member of the
Federal Deposit Insurance Corporation ("FDIC"), and as such, their deposits are
insured by the FDIC to the extent provided by law. Each of the UPC subsidiaries,
as well as Middleton, is also subject to numerous state and federal statutes and
regulations that affect is business, activities, and operations, and each is
supervised and examined by one or more state or federal bank regulatory
agencies.
The regulatory agencies having supervisory jurisdiction over the
respective subsidiary institutions of UPC and FCB (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 and FCB are each a legal entity separate and distinct from their
banking, thrift, and other subsidiaries. The principal sources of cash flow of
UPC and FCB, including cash flow to pay dividends to their shareholders, are
dividends from their subsidiary depository institutions. There are statutory and
regulatory limitations on the payment of dividends by these subsidiary
depository institutions to UPC and FCB, as well as by UPC and FCB to their
shareholders.
As to the payment of dividends, each of UPC's state-chartered banking
subsidiaries and Middleton 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
70
<PAGE> 81
already is undercapitalized. See "-- Prompt Corrective Action." Moreover, the
federal agencies have issued policy statements that provide that bank holding
companies and insured banks should generally only pay dividends out of current
operating earnings.
At March 31, 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 or FCB
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, as well as FCB and Middleton, are
required to comply with the capital adequacy standards established by the
Federal Reserve in the case of UPC and FCB, and the appropriate federal banking
regulator in the case of each of the UPC Banking Subsidiaries and Middleton.
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 FCB's Total Capital Ratio and Tier 1 Capital Ratio
were 14.62% and 13.41%, 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 FCB's Leverage Ratio at
March 31, 1998 was 9.05%. 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.
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<PAGE> 82
Each of the UPC Banking Subsidiaries and Middleton 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 and
Middleton were in compliance with applicable minimum capital requirements as of
March 31, 1998. Neither UPC, FCB, Middleton nor any of the UPC Banking
Subsidiaries has been advised by any federal banking agency of any specific
minimum capital ratio requirement applicable to it.
Failure to meet capital guidelines could subject a bank or thrift to a
variety of enforcement remedies, including issuance of a capital directive, the
termination of deposit insurance by the FDIC, a prohibition on the taking of
brokered deposits, and certain other restrictions on its business. As described
below, substantial additional restrictions can be imposed upon FDIC-insured
depository institutions that fail to meet applicable capital requirements. See
"-- Prompt Corrective Action."
The federal bank regulators continue to indicate their desire to raise
capital requirements applicable to banking organizations beyond their current
levels. In this regard, the Federal Reserve, the FDIC, and the OCC have,
pursuant to FDICIA, proposed an amendment to the risk-based capital standards
that would calculate the change in an institution's net economic value
attributable to increases and decreases in market interest rates and 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. Likewise, FCB is required to act as a source of financial
strength for Middleton. This support may be required at times when, absent such
Federal Reserve policy, UPC or FCB 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.
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<PAGE> 83
PROMPT CORRECTIVE ACTION
FDICIA establishes a system of prompt corrective action to resolve the
problems of undercapitalized institutions. Under this system, which became
effective in December 1992, the federal banking regulators are required to
establish five capital categories (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, and critically
undercapitalized) and to take certain mandatory supervisory actions, and are
authorized to take other discretionary actions, with respect to institutions in
the three undercapitalized categories, the severity of which will depend upon
the capital category in which the institution is placed. Generally, subject to a
narrow exception, FDICIA requires the banking regulator to appoint a receiver or
conservator for an institution that is critically undercapitalized. The federal
banking agencies have specified by regulation the relevant capital level for
each category.
Under the final agency rules implementing the prompt corrective action
provisions, an institution that (i) has a Total Capital Ratio of 10% or greater,
a Tier 1 Capital Ratio of 6.0% or greater, and a Leverage Ratio of 5.0% or
greater and (ii) is not subject to any written agreement, order, capital
directive, or prompt corrective action directive issued by the appropriate
federal banking agency is deemed to be well capitalized. An institution with a
Total Capital Ratio of 8.0% or greater, a Tier 1 Capital Ratio of 4.0% or
greater, and a Leverage Ratio of 4.0% or greater is considered to be adequately
capitalized. A depository institution that has a Total Capital Ratio of less
than 8.0%, a Tier 1 Capital Ratio of less than 4.0%, or a Leverage Ratio of less
than 4.0% is considered to be undercapitalized. A depository institution that
has a Total Capital Ratio of less than 6.0%, a Tier 1 Capital Ratio of less than
3.0%, or a Leverage Ratio of less than 3.0% is considered to be significantly
undercapitalized, and an institution that has a tangible equity capital to
assets ratio equal to or less than 2.0% is deemed to be critically
undercapitalized. For purposes of the regulation, the term "tangible equity"
includes core capital elements counted as Tier 1 Capital for purposes of the
risk-based capital standards, plus the amount of outstanding cumulative
perpetual preferred stock (including related surplus), minus all intangible
assets with certain exceptions. A 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
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<PAGE> 84
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 and Middleton
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.
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
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<PAGE> 85
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.
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 as of March 31, 1998. 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 FCB 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,
75
<PAGE> 86
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 FCB will
hold another annual meeting unless the Merger should not be consummated.
EXPERTS
The consolidated financial statements of UPC and subsidiaries
incorporated in this Prospectus/Proxy Statement by reference to UPC's 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 FCB have been audited by
Reynolds, Bone & Griesbeck, P.L.C. Memphis, Tennessee independent auditors, as
stated in its report, which is incorporated herein by reference, and have been
so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
OPINIONS
The legality of the shares of UPC Common Stock to be issued in the
Merger will be passed upon by E. James House, Jr., Secretary and Manager of the
Legal Department of UPC. E. James House, Jr. is an officer of, and receives
compensation from, UPC.
Certain tax consequences of the transaction have been passed upon by
Wyatt, Tarrant & Combs, Memphis, Tennessee for UPC.
76
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APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
BY AND BETWEEN
FIRST COMMUNITY BANCSHARES, INC.,
UNION PLANTERS HOLDING CORPORATION,
AND
UNION PLANTERS CORPORATION
DATED AS OF NOVEMBER 10, 1997
<PAGE> 88
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
PREAMBLE ....................................................................................................... 1
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER................................................................................ 1
1.1 MERGER............................................................................................ 1
1.2 TIME AND PLACE OF CLOSING......................................................................... 1
1.3 EFFECTIVE TIME.................................................................................... 1
1.4 RESTRUCTURE OF TRANSACTION........................................................................ 2
ARTICLE 2
TERMS OF MERGER................................................................................................. 2
2.1 CHARTER........................................................................................... 2
2.2 BY-LAWS........................................................................................... 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 COMMUNITY OR UPC................................................................... 3
3.4 FRACTIONAL SHARES................................................................................. 3
3.5 DISSENTER'S RIGHTS................................................................................ 3
ARTICLE 4
EXCHANGE OF SHARES.............................................................................................. 3
4.1 EXCHANGE PROCEDURES............................................................................... 3
4.2 RIGHTS OF FORMER COMMUNITY SHAREHOLDERS........................................................... 4
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF COMMUNITY..................................................................... 4
5.1 ORGANIZATION, STANDING, AND POWER................................................................. 4
5.2 AUTHORITY; NO BREACH BY AGREEMENT................................................................. 4
5.3 CAPITAL STOCK..................................................................................... 5
5.4 COMMUNITY SUBSIDIARIES............................................................................ 5
5.5 COMMUNITY 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 ALLOWANCE FOR POSSIBLE LOAN LOSSES................................................................ 8
5.10 ASSETS........................................................................................... 8
5.11 INTELLECTUAL PROPERTY............................................................................ 8
5.12 ENVIRONMENTAL MATTERS............................................................................ 9
</TABLE>
<PAGE> 89
<TABLE>
<S> <C> <C>
5.13 COMPLIANCE WITH LAWS............................................................................. 9
5.14 LABOR RELATIONS.................................................................................. 9
5.15 EMPLOYEE BENEFIT PLANS........................................................................... 10
5.16 MATERIAL CONTRACTS............................................................................... 11
5.17 LEGAL PROCEEDINGS................................................................................ 11
5.18 REPORTS.......................................................................................... 12
5.19 STATEMENTS TRUE AND CORRECT...................................................................... 12
5.20 TAX AND REGULATORY MATTERS....................................................................... 12
5.21 STATE TAKEOVER LAWS.............................................................................. 12
5.22 CHARTER PROVISIONS............................................................................... 13
5.23 CORPORATE DOCUMENTS.............................................................................. 13
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF UPC........................................................................... 13
6.1 ORGANIZATION, STANDING, AND POWER................................................................. 13
6.2 AUTHORITY; NO BREACH BY AGREEMENT................................................................. 13
6.3 CAPITAL STOCK..................................................................................... 14
6.4 UPC SUBSIDIARIES.................................................................................. 14
6.5 SEC FILINGS; FINANCIAL STATEMENTS................................................................. 14
6.6 ABSENCE OF UNDISCLOSED LIABILITIES................................................................ 15
6.7 ABSENCE OF CERTAIN CHANGES OR EVENTS.............................................................. 15
6.8 TAX MATTERS....................................................................................... 15
6.9 ENVIRONMENTAL MATTERS............................................................................. 15
6.10 COMPLIANCE WITH LAWS............................................................................. 16
6.11 LEGAL PROCEEDINGS................................................................................ 16
6.12 REPORTS.......................................................................................... 16
6.13 STATEMENTS TRUE AND CORRECT...................................................................... 17
6.14 TAX AND REGULATORY MATTERS....................................................................... 17
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION........................................................................ 17
7.1 AFFIRMATIVE COVENANTS OF COMMUNITY................................................................ 17
7.2 NEGATIVE COVENANTS OF COMMUNITY................................................................... 17
7.3 CERTAIN ACTIONS................................................................................... 19
7.4 COVENANTS OF UPC.................................................................................. 20
7.5 ADVERSE CHANGES IN CONDITION...................................................................... 20
7.6 REPORTS........................................................................................... 20
ARTICLE 8
ADDITIONAL AGREEMENTS........................................................................................... 21
8.1 REGISTRATION STATEMENT; PROXY STATEMENT; SHAREHOLDER APPROVAL..................................... 21
8.2 EXCHANGE LISTING.................................................................................. 21
8.3 APPLICATIONS...................................................................................... 21
8.4 FILINGS WITH STATE OFFICES........................................................................ 21
</TABLE>
<PAGE> 90
<TABLE>
<S> <C> <C>
8.5 AGREEMENT AS TO EFFORTS TO CONSUMMATE............................................................. 21
8.6 INVESTIGATION AND CONFIDENTIALITY................................................................. 21
8.7 PRESS RELEASES.................................................................................... 22
8.8 TAX TREATMENT..................................................................................... 22
8.9 STATE TAKEOVER LAWS............................................................................... 22
8.10 CHARTER PROVISIONS............................................................................... 22
8.11 AGREEMENTS OF AFFILIATES......................................................................... 22
8.12 EMPLOYEE BENEFITS AND CONTRACTS.................................................................. 22
8.13 INDEMNIFICATION.................................................................................. 23
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE............................................................... 24
9.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY........................................................... 24
(A) SHAREHOLDER APPROVAL................................................................. 24
(B) REGULATORY APPROVALS................................................................. 24
(C) CONSENTS AND APPROVALS............................................................... 24
(D) LEGAL PROCEEDINGS.................................................................... 24
(E) REGISTRATION STATEMENT............................................................... 24
(F) EXCHANGE LISTING..................................................................... 24
(G) TAX MATTERS.......................................................................... 24
9.2 CONDITIONS TO OBLIGATIONS OF UPC.................................................................. 25
(A) REPRESENTATIONS AND WARRANTIES....................................................... 25
(B) PERFORMANCE OF AGREEMENTS AND COVENANTS.............................................. 25
(C) CERTIFICATES......................................................................... 25
(D) AFFILIATES AGREEMENTS................................................................ 25
(E) MAINTENANCE OF CERTAIN COVENANTS, ETC................................................ 25
(F) LEGAL OPINION........................................................................ 25
(G) EMPLOYMENT AGREEMENT................................................................. 26
9.3 CONDITIONS TO OBLIGATIONS OF COMMUNITY............................................................ 26
(A) REPRESENTATIONS AND WARRANTIES....................................................... 26
(B) PERFORMANCE OF AGREEMENTS AND COVENANTS.............................................. 26
(C) CERTIFICATES......................................................................... 26
(D) LEGAL OPINION........................................................................ 26
(E) EMPLOYMENT AGREEMENT................................................................. 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
</TABLE>
<PAGE> 91
<TABLE>
<S> <C>
11.2 EXPENSES......................................................................................... 35
11.3 BROKERS AND FINDERS.............................................................................. 35
11.4 ENTIRE AGREEMENT................................................................................. 35
11.5 AMENDMENTS....................................................................................... 35
11.6 WAIVERS.......................................................................................... 35
11.7 ASSIGNMENT....................................................................................... 36
11.8 NOTICES.......................................................................................... 36
11.9 GOVERNING LAW.................................................................................... 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> 92
LIST OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
-------
<S> <C>
1. Plan of Merger
2. Employment Agreement
3. Form of Opinion of Coun el (Tax)
4. Supplemental Agreement
5. Affiliates Agreement
</TABLE>
<PAGE> 93
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made and
entered into as of November 10, 1997, by and between FIRST COMMUNITY
BANCSHARES, INC. ("Community"), a Tennessee corporation having its principal
office located in Middleton, Tennessee; UNION PLANTERS CORPORATION ("UPC"), a
Tennessee corporation having its principal office located in Memphis,
Tennessee; and UNION PLANTERS HOLDING CORPORATION ("Holding" or "Surviving
Corporation" as the context may require), a Tennessee corporation having its
principal office located in Memphis, Tennessee.
Preamble
The Boards of Directors of Community and UPC are of the opinion that the
transactions described herein are in the best interests of the parties and
their respective shareholders. This Agreement provides for the acquisition of
Community by UPC pursuant to the merger of Community with and into Holding. At
the effective time of such merger, the outstanding shares of the common stock
of Community shall be converted into the right to receive shares of the common
stock of UPC (except as provided in Sections 3.3 and 3.4 of this Agreement). As
a result, shareholders of Community shall become shareholders of UPC; and
Holding, as the Surviving Corporation, shall conduct Community's business and
operations as a wholly-owned subsidiary of UPC. The transactions described in
this Agreement are subject to the approvals of the shareholders of Community,
the Federal Reserve System, and other applicable federal and state regulatory
authorities, and the satisfaction of certain other conditions described in this
Agreement. It is the intention of the parties to this Agreement that the Merger
for federal income tax purposes shall qualify as a "reorganization" within the
meaning of Section 368(a) of the Internal Revenue Code.
Certain terms used in this Agreement are defined in Section 11.1 of this
Agreement.
NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants, and agreements set forth herein, the parties agree
as follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
1.1 MERGER. Subject to the terms and conditions of this Agreement, at the
Effective Time, Community shall be merged with and into Holding in accordance
with the provisions of Section 48-21-102 of The Tennessee Business Corporation
Act ("TBCA") and with the effect provided in Section 48-21-108 of the Act (the
"Merger"). Holding shall be the Surviving Corporation resulting from the Merger
and shall continue to be governed by the Laws of the State of Tennessee. The
Merger shall be consummated pursuant to the terms of this Agreement, which has
been approved and adopted by the respective Boards of Directors of Community
and UPC and the Plan of Merger, in substantially the form of Exhibit 1, which
has been approved and adopted by the Board of Directors of Community and will
be approved and adopted by the Board of Directors of Holding and UPC (in its
capacity as sole shareholder of Holding).
1.2 TIME AND PLACE OF CLOSING. The Closing will take place at 9:00 A.M. on
the date that the Effective Time occurs (or the immediately preceding day if
the Effective Time is earlier than 9:00 A.M.), or at such other time as the
Parties, acting through their chief executive officers or chief financial
officers, may mutually agree. The Closing shall be held at such place as may be
mutually agreed upon by the Parties.
1.3 EFFECTIVE TIME. The Merger and other transactions contemplated by this
Agreement shall become effective on the date and at the time the Certificate of
Merger reflecting the Merger shall become effective with the Secretary of State
of the State of Tennessee (the "Effective Time"). Subject to the terms and
conditions hereof, unless otherwise mutually agreed upon in writing by the
chief executive officers or chief financial officers of each Party, the Parties
<PAGE> 94
shall use their reasonable efforts to cause the Effective Time to occur on such
date as may be designated by UPC within 30 days following the last to occur of
(i) the effective date (including expiration of any applicable waiting period)
of the last required Consent of any Regulatory Authority having authority over
and approving or exempting the Merger, (ii) the date on which the shareholders
of Community approve this Agreement and the Plan of Merger as required by
applicable Law, and (iii) the date on which all other conditions precedent to
each Party's obligations hereunder shall have been satisfied or waived (to the
extent waivable by such Party).
1.4 RESTRUCTURE OF TRANSACTION. UPC 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
UPC may deem advisable; provided, however, that UPC shall not have the right,
without the approval of the Board of Directors of Community, to make any
revision to the structure of the Merger which: (i) changes the amount of the
consideration which the holders of shares of Community 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 UPC or
the holders of shares of Community Common Stock; (iii) would permit UPC to pay
the consideration other than by delivery of UPC 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 Community or holders of shares of
Community Common Stock; (v) would unreasonably impede or delay consummation of
the Merger; or (vi) would affect any of the provisions in Sections 8.12 or 8.13
of this Agreement. UPC may exercise this right of revision by giving reasonable
prior written notice to Community in the manner provided in Section 11.8 of
this Agreement which notice shall be in the form of an amendment to this
Agreement or in the form of an Amended and Restated Agreement and Plan of
Merger.
ARTICLE 2
TERMS OF MERGER
2.1 CHARTER. The Charter of Holding in effect immediately prior to the
Effective Time shall be the Charter of the Surviving Corporation until
otherwise amended or repealed.
2.2 BY-LAWS. The By-laws of Holding in effect immediately prior to the
Effective Time shall be the By-laws of the Surviving Corporation until
otherwise amended or repealed.
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 CONVERSION OF SHARES. Subject to the provisions of this Article 3, at
the Effective Time, by virtue of the Merger and without any action on the part
of UPC, Holding, Community, or the shareholders of any of the foregoing, the
shares of the constituent corporations shall be converted as follows:
(a) Each share of UPC Capital Stock, including any associated UPC Rights,
issued and outstanding immediately prior to the Effective Time shall remain
issued and outstanding from and after the Effective Time.
(b) Each share of Holding Common Stock issued and outstanding immediately
prior to the Effective Time shall remain issued and outstanding after the
Effective Time and shall represent all of the issued and outstanding capital
stock of Holding as the Surviving Corporation.
(c) Each share of Community Common Stock (excluding shares held by any
Community Company or any UPC Company, in each case other than in a fiduciary
capacity or as a result of debts previously contracted) issued and outstanding
at the Effective Time shall cease to be outstanding and shall represent only
the right to be exchanged for UPC Common Stock. The number of shares of UPC
Common Stock to be exchanged for each share of Community Common Stock shall be
2.7896 ("the Exchange Ratio") the computation of which is based upon a
2
<PAGE> 95
fraction, the numerator of which is $169.05 and the denominator of which is
$60.60, being the average of the Current Market Price Per Share of UPC Common
Stock for the ten (10) trading days prior to execution of this Agreement (the
"Average Market Price") (as subject to possible adjustment as set forth in
Section 10.1(g) of this Agreement). Pursuant to the UPC Rights Agreement, each
share of UPC Common Stock issued in connection with the Merger upon conversion
of Community Common Stock shall be accompanied by a UPC Right.
3.2 ANTI-DILUTION PROVISIONS. In the event UPC changes the number of shares
of UPC Common Stock issued and outstanding prior to the Effective Time as a
result of a stock split, stock dividend, or similar recapitalization with
respect to such stock and the record date therefor (in the case of a stock
dividend) or the effective date thereof (in the case of a stock split or
similar recapitalization for which a record date is not established) shall be
prior to the Effective Time, the Exchange Ratio shall be proportionately
adjusted.
3.3 SHARES HELD BY COMMUNITY OR UPC. Each of the shares of Community Common
Stock held by any Community Company or by any UPC Company, in each case other
than in a fiduciary capacity or as a result of debts previously contracted,
shall be canceled and retired at the Effective Time and no consideration shall
be issued in exchange therefor.
3.4 FRACTIONAL SHARES. Notwithstanding any other provision of this
Agreement, each holder of shares of Community Common Stock exchanged pursuant
to the Merger who would otherwise have been entitled to receive a fraction of a
share of UPC Common Stock (after taking into account all certificates delivered
by such holder) shall receive, in lieu thereof, cash (without interest) in an
amount equal to such fractional part of a share of UPC Common Stock multiplied
by the market value of one share of UPC Common Stock at the Effective Time. The
market value of one share of UPC Common Stock at the Effective Time shall be
the closing price of such common stock on the NYSE-Composite Transactions List
(as reported by The Wall Street Journal or, if not reported thereby, any other
authoritative source selected by UPC) on the last trading day preceding the
Effective Time. No such holder will be entitled to dividends, voting rights, or
any other rights as a shareholder in respect of any fractional shares.
3.5 DISSENTER'S RIGHTS. Any holder of record of of any of the issued and
outstanding shares of Community Common Stock immediately prior to the Effective
Tims, who shall comply strictly with the provisions of the TBCA regarding
dissenter's rights ("Community Dissenting Shareholders"), shall be entitled to
dissent from the Merger and to seek those appraisal remedies afforded by the
TBCA.
ARTICLE 4
EXCHANGE OF SHARES
4.1 EXCHANGE PROCEDURES. Promptly after the Effective Time, UPC and
Community shall cause the exchange agent selected by UPC, which shall be Union
Planters National Bank Trust Department (the "Exchange Agent") to mail to the
former shareholders of Community appropriate transmittal materials (which shall
specify that delivery shall be effected, and risk of loss and title to the
certificates theretofore representing shares of Community Common Stock shall
pass, only upon proper delivery of such certificates to the Exchange Agent).
The Exchange Agent may establish reasonable and customary rules and procedures
in connection with its duties. After the Effective Time, each holder of shares
of Community Common Stock (other than shares to be canceled pursuant to Section
3.3 of this Agreement) issued and outstanding at the Effective Time shall
surrender the certificate or certificates representing such shares to the
Exchange Agent and shall promptly upon surrender thereof receive in exchange
therefor the consideration provided in Section 3.1 of this Agreement, together
with all undelivered dividends or distributions in respect of such shares
(without interest thereon) pursuant to Section 4.2 of this Agreement. To the
extent required by Section 3.4 of this Agreement, each holder of shares of
Community Common Stock issued and outstanding at the Effective Time also shall
receive, upon surrender of the certificate or certificates representing such
shares, cash in lieu of any fractional share of UPC Common Stock to which such
holder may be otherwise entitled (without interest). UPC shall not be obligated
to deliver the consideration to which any former holder of Community Common
3
<PAGE> 96
Stock is entitled as a result of the Merger until such holder surrenders such
holder's certificate or certificates representing the shares of Community
Common Stock for exchange as provided in this Section 4.1. The certificate or
certificates of Community Common Stock so surrendered shall be duly endorsed as
the Exchange Agent may require. Any other provision of this Agreement
notwithstanding, neither UPC nor the Exchange Agent shall be liable to a holder
of Community 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 Community shall constitute
ratification of the appointment of the Exchange Agent.
4.2 RIGHTS OF FORMER COMMUNITY SHAREHOLDERS. At the Effective Time, the
stock transfer books of Community shall be closed as to holders of Community
Common Stock immediately prior to the Effective Time and no transfer of
Community 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 Community Common Stock (other than shares to be canceled pursuant to Section
3.3 of this Agreement) shall from and after the Effective Time represent for
all purposes only the right to receive the consideration provided in Sections
3.1 and 3.4 of this Agreement in exchange therefor, subject, however, to the
Surviving Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Time which have been
declared or made by Community in respect of such shares of Community Common
Stock in accordance with the terms of this Agreement and which remain unpaid at
the Effective Time. Whenever a dividend or other distribution is declared by
UPC on the UPC Common Stock, the record date for which is at or after the
Effective Time, the declaration shall include dividends or other distributions
on all shares of UPC Common Stock issuable pursuant to this Agreement, but
after the Effective Time no dividend or other distribution payable to the
holders of record of UPC Common Stock as of any time subsequent to the
Effective Time shall be delivered to the holder of any certificate representing
shares of Community 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 Community Common
Stock certificate, both the UPC Common Stock certificate (together with all
such undelivered dividends or other distributions without interest) and any
undelivered dividends and cash payments payable hereunder (without interest)
shall be delivered and paid with respect to each share represented by such
certificate.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF COMMUNITY
Community hereby represents and warrants to UPC as follows:
5.1 ORGANIZATION, STANDING, AND POWER. Community 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. Community
is duly qualified or licensed to transact business as a foreign corporation in
good standing in the States of the United States and foreign jurisdictions
where the character of its Assets or the nature or conduct of its business
requires it to be so qualified or licensed, except for such jurisdictions in
which the failure to be so qualified or licensed is not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on Community.
5.2 AUTHORITY; NO BREACH BY AGREEMENT.
(a) Community has the corporate power and authority necessary to execute,
deliver, and perform its obligations under this Agreement and the Plan of
Merger and to consummate the transactions contemplated hereby and thereby. The
execution, delivery, and performance of this Agreement and the Plan of Merger,
as appropriate, and the consummation of the transactions contemplated herein
and therein, including the Merger, have been duly and validly authorized by all
necessary corporate action in respect thereof on the part of Community, subject
to the approval of this Agreement and the Plan of Merger by the holders of a
majority of the outstanding shares of Community Common Stock, which is the only
shareholder vote required for approval of this Agreement and the Plan of Merger
4
<PAGE> 97
and consummation of the Merger by Community. Subject to such requisite
shareholder approval, this Agreement and the Plan of Merger represent legal,
valid, and binding obligations of Community, enforceable against Community in
accordance with their respective terms (except in all cases as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, receivership, conservatorship, moratorium, or similar Laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding
may be brought).
(b) Except as set forth in Section 5.2 of the Community Disclosure
Memorandum, neither the execution and delivery of this Agreement or the Plan of
Merger, as appropriate, by Community, nor the consummation by Community of the
transactions contemplated hereby or thereby, nor compliance by Community with
any of the provisions hereof or thereof, will (i) conflict with or result in a
breach of any provision of Community's Charter or By-laws, or (ii) constitute
or result in a Default under, or require any Consent pursuant to, or result in
the creation of any Lien on any material Asset of any Community Company under,
any Contract or Permit of any Community Company, other than Defaults that are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Community, 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 any Community Company or any of their respective material
Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and other than
Consents required from Regulatory Authorities, and other than notices to or
filings with the Internal Revenue Service or the Pension Benefit Guaranty
Corporation with respect to any employee benefit plans, or under the HSR Act,
and other than Consents, filings, or notifications which, if not obtained or
made, are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Community, no notice to, filing with, or Consent of,
any public body or authority is necessary for the consummation by Community of
the Merger and the other transactions contemplated in this Agreement and the
Plan of Merger.
5.3 CAPITAL STOCK.
(a) The authorized capital stock of Community consists of (i) 100,000
shares of Community Common Stock, of which 95,300 shares are issued and 46,733
shares are outstanding as of the date of this Agreement and not more than
46,733 shares will be issued and outstanding at the Effective Time. All of the
issued and outstanding shares of capital stock of Community are duly and
validly issued and outstanding and are fully paid and nonassessable under the
Act. None of the outstanding shares of capital stock of Community has been
issued in violation of any preemptive rights of the current or past
shareholders of Community.
(b) Except as set forth in Section 5.3(a) of this Agreement, there are no
shares of capital stock or other equity securities of Community outstanding and
no outstanding Rights relating to the capital stock of Community.
5.4 COMMUNITY SUBSIDIARIES. Community has disclosed in Section 5.4 of the
Community Disclosure Memorandum all of the Community Subsidiaries that are
corporations (identifying its jurisdiction of incorporation, each jurisdiction
in which character of its Assets or the nature or conduct of its business
requires it to be qualified and/or licensed to transact business, and the
number of shares owned and percentage ownership interest represented by such
share ownership) and all of the Community Subsidiaries that are general or
limited partnerships or other non-corporate entities (identifying the Law under
which such entity is organized, each jurisdiction in which character of its
Assets or the nature or conduct of its business requires it to be qualified
and/or licensed to transact business, and the amount and nature of the
ownership interest therein of all Community Companies). Community or one of its
wholly-owned Subsidiaries owns all of the issued and outstanding shares of
capital stock (or other equity interests) of each Community Subsidiary. No
capital stock (or other equity interest) of any Community Subsidiary are or may
become required to be issued (other than to another Community Company) by
reason of any Rights, and there are no Contracts by which any Community
Subsidiary is bound to issue (other than to another Community Company)
additional shares of its capital stock (or other equity interests) or Rights or
by which any Community Company is
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or may be bound to transfer any shares of the capital stock (or other equity
interests) of any Community Subsidiary (other than to another Community
Company). There are no Contracts relating to the rights of any Community
Company to vote or to dispose of any shares of the capital stock (or other
equity interests) of any Community Subsidiary. All of the shares of capital
stock (or other equity interests) of each Community Subsidiary held by a
Community Company are fully paid and nonassessable under the applicable
corporation or similar Law of the jurisdiction in which such Subsidiary is
incorporated or organized and are owned by the Community Company free and clear
of any Lien. Each Community Subsidiary is either a bank, a savings association,
partnership, limited liability corporation, or a corporation, and each such
Subsidiary is duly organized, validly existing, and (as to corporations) in
good standing under the Laws of the jurisdiction in which it is incorporated or
organized, and has the corporate power and authority necessary for it to own,
lease, and operate its Assets and to carry on its business as now conducted.
Each Community Subsidiary is duly qualified or licensed to transact business as
a foreign corporation in good standing in the States of the United States and
foreign jurisdictions where the character of its Assets or the nature or
conduct of its business requires it to be so qualified or licensed, except for
such jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Community. The only Community Subsidiary that is a depository
institution is The Bank of Middleton. The Bank of Middleton is an "insured
institution" as defined in the Federal Deposit Insurance Act and applicable
regulations thereunder, and the deposits in which are insured by the Bank
Insurance Fund. The minute book and other organizational documents for each
Community Subsidiary have been made available to UPC for its review, and are
true and complete as in effect as of the date of this Agreement and accurately
reflect all amendments thereto and all proceedings of the Board of Directors
and shareholders thereof.
5.5 COMMUNITY FINANCIAL STATEMENTS.
(a) As disclosed in Section 5.5 of the Community Disclosure Memorandum,
Community has delivered to UPC (or will deliver, when available, with respect
to periods ended after the date of this Agreement) true, correct and complete
copies of (i) the consolidated statements of financial position (including
related notes and schedules, if any) of Community as of September 30, 1997, and
as of December 31, 1996, and December 31, 1995, and the related statements of
operations, stockholders' equity, cash flows (including related notes and
schedules, if any) for the nine months ended September 30, 1997, and for each
of the three fiscal years ended December 31, 1996, 1995, and 1994, (ii) the
consolidated statements of financial position of Community (including related
notes and schedules, if any) and related statements of operations,
stockholders' equity, and cash flows (including related notes and schedules, if
any) with respect to any period ending subsequent to September 30, 1997, and
prior to the closing date, and (iii) all Call Reports including any amendments
thereto filed with any Regulatory Authorities by Community and each of the Bank
Subsidiaries for the years ended December 31, 1996, 1995, 1994 and 1993,
together with any correspondence with the SEC or any other Regulatory
Authorities concerning any of the aforesaid financial statements and Reports
(the "Community Financial Statements"). Such Community Financial Statements (i)
were (or will be) prepared from the records of Community or each Community
Subsidiary; (ii) were (or will be) prepared in accordance with GAAP (or, where
applicable, regulatory accounting principles) consistently applied; (iii)
accurately present (or, when prepared, will present) Community's and each
Community Subsidiary's financial condition and the results of its operation,
changes in stockholders' equity and cash flows at the relevant dates thereof
and for the periods covered thereby, except that the unaudited interim
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 an accurate presentation of Community's and each
Community Subsidiary's financial condition and the results of Community's and
each Community Subsidiary operations and cash flows for the periods covered by
such Financial Statements; and (v) do contain and reflect (or, when prepared,
will contain and reflect) adequate provisions or Allowances for Loan Losses,
for all ORE reserves and for all reasonably anticipated liabilities and taxes,
with respect to the periods then ended.
(b) Each of the Community Financial Statements (including, in each case,
any related notes) was prepared in accordance with GAAP applied on a consistent
basis throughout the periods involved (except as may be indicated in the notes
to such financial statements) and fairly presented in all material respects the
consolidated financial position of Community and its Subsidiaries as at the
respective dates and the consolidated results of its operations
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and cash flows for the periods indicated, except that the unaudited interim
financial statements were or are subject to normal and recurring year-end
adjustments which were not or are not expected to be material in amount or
effect.
5.6 ABSENCE OF UNDISCLOSED LIABILITIES. No Community Company has any
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Community, except Liabilities which are
accrued or reserved against in the consolidated balance sheets of Community as
of September 30, 1997, included in the Community Financial Statements made
available prior to the date of this Agreement or reflected in the notes
thereto. No Community Company has incurred or paid any Liability since
September 30, 1997, except for such Liabilities incurred or paid (i) in the
ordinary course of business consistent with past business practice and which
are not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Community or (ii) in connection with the transactions
contemplated by this Agreement.
5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since September 30, 1997, except
as disclosed in the Community Financial Statements made available prior to the
date of this Agreement or contemplated by pending federal legislation
applicable to financial institutions generally, (i) there have been no events,
changes, or occurrences which have had, or are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Community, and
(ii) the Community Companies have not taken any action, or failed to take any
action, prior to the date of this Agreement, which action or failure, if taken
after the date of this Agreement, would represent or result in a material
breach or violation of any of the covenants and agreements of Community
contained in this Agreement.
5.8 TAX MATTERS.
(a) All Tax Returns required to be filed by or on behalf of any of the
Community Companies have been timely filed or requests for extensions have been
timely filed, granted, and have not expired for periods ended on or before
December 31, 1996, and on or before the date of the most recent fiscal year end
immediately preceding the Effective Time, and, to the Knowledge of Community,
all Tax Returns filed are complete and accurate. All Taxes shown on filed Tax
Returns have been paid. There is no audit, examination, deficiency, or refund
Litigation with respect to any Taxes, except as reserved against in the
Community Financial Statements made available prior to the date of this
Agreement and except for certain routine state tax matters which, in the
aggregate, do not exceed $5,000. All Taxes and other Liabilities due with
respect to completed and settled examinations or concluded Litigation have been
paid. There are no Liens with respect to Taxes upon any of the Assets of the
Community Companies.
(b) None of the Community Companies has executed an extension or waiver of
any statute of limitations on the assessment or collection of any Tax due
(excluding such statutes that relate to years currently under examination by
the Internal Revenue Service or other applicable taxing authorities) that is
currently in effect.
(c) Adequate provision for any Taxes due or to become due for any of the
Community Companies for the period or periods through and including the date of
the respective Community Financial Statements has been made and is reflected on
such Community Financial Statements.
(d) Deferred Taxes of the Community Companies have been provided for in
accordance with GAAP.
(e) To the Knowledge of Community, each of the Community Companies is in
compliance with, and its records contain all information and documents
(including properly completed IRS Forms W-9) necessary to comply with, all
applicable information reporting and Tax withholding requirements under
federal, state, and local Tax Laws, and such records identify with specificity
all accounts subject to backup withholding under Section 3406 of the Internal
Revenue Code.
(f) Except as set forth in Section 5.8 of the Community Disclosure
Memorandum, none of the Community Companies has made any payments, is obligated
to make any payments, or is a party to any Contract that could obligate it to
make any payments that would be disallowed as a deduction under Section 280G or
162(m) of the Internal Revenue Code.
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(g) There has not been an ownership change, as defined in Internal Revenue
Code Section 382(g), of the Community Companies that occurred during or after
any Taxable Period in which the Companies incurred a net operating loss that
carries over to any Taxable Period ending after December 31, 1996.
(h) Except as set forth in Section 5.8 of the Community Disclosure
Memorandum, none of the Community Companies is a party to any tax allocation or
sharing agreement and none of the Community Companies has been a member of an
affiliated group filing a consolidated federal income tax return (other than a
group the common parent of which was Community), or has any Liability for taxes
of any Person (other than Community and its Subsidiaries) under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local, or
foreign law) as a transferee or successor or by Contract or otherwise.
5.9 ALLOWANCE FOR POSSIBLE LOAN LOSSES. The allowance for possible loan or
credit losses (the "Allowance") shown on the consolidated balance sheets of
Community included in the most recent Community Financial Statements dated
prior to the date of this Agreement was, and the Allowance shown on the
consolidated balance sheets of Community included in the Community Financial
Statements as of dates subsequent to the execution of this Agreement will be,
as of the dates thereof, in the reasonable opinion of management of Community
adequate (within the meaning of GAAP and applicable regulatory requirements or
guidelines) to provide for all known and reasonably anticipated losses relating
to or inherent in the loan and lease portfolios (including accrued interest
receivables) of the Community Companies and other extensions of credit
(including letters of credit and commitments to make loans or extend credit) by
the Community Companies as of the dates thereof.
5.10 ASSETS. Except as set forth in Section 5.10 of the Community
Disclosure Memorandum or as disclosed or reserved against in the Community
Financial Statements made available prior to the date of this Agreement, the
Community Companies have good and marketable title, free and clear of all
material Liens, to all of their respective Assets. All tangible properties used
in the businesses of the Community Companies are in good condition, reasonable
wear and tear excepted, and are usable in the ordinary course of business
consistent with Community's past practices. All Assets which are material to
Community's business on a consolidated basis, held under leases or subleases by
any of the Community Companies, are held under valid Contracts enforceable in
accordance with their respective terms (except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium, or other Laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceedings
may be brought), and each such Contract is in full force and effect. To the
Knowledge of Community, the Community Companies currently maintain insurance
similar in amounts, scope, and coverage to that maintained by other peer
banking organizations. None of the Community Companies has received notice from
any insurance carrier that (i) such insurance will be canceled or that coverage
thereunder will be reduced or eliminated, or (ii) premium costs with respect to
such policies of insurance will be substantially increased. There are presently
no claims pending under any such policies of insurance and no notices have been
given by any Community Company under such policies, except for routine claims,
none of which is material.
5.11 INTELLECTUAL PROPERTY. All of the Intellectual Property rights of the
Community Companies are in full force and effect and constitute legal, valid,
and binding obligations of the respective parties thereto, and there have not
been, and, to the Knowledge of Community, there currently are not, any Defaults
thereunder by Community. A Community Company owns or is the valid licensee of
all such Intellectual Property rights free and clear of all Liens or claims of
infringement. None of the Community Companies or, to the Knowledge of
Community, their respective predecessors has misused the Intellectual Property
rights of others and, to the Knowledge of Community, none of the Intellectual
Property rights as used in the business conducted by any such Community Company
infringes upon or otherwise violates the rights of any Person, nor has any
Person asserted a claim of such infringement. To the Knowledge of Community, no
Community Company is obligated to pay any royalties to any Person with respect
to any such Intellectual Property. To the Knowledge of Community, each
Community Company owns or has the valid right to use all of the Intellectual
Property rights which it is presently using, or in connection with performance
of any material Contract to which it is a party. Except as disclosed in
Schedule 5.11, no officer, director, or employee of any Community Company is
party to any Contract which requires such officer, director or employee to
assign any
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interest in any Intellectual Property or keep confidential any trade secrets,
proprietary data, customer information, or other business information, which
restricts or prohibits such officer, director, or employee from engaging in
activities competitive with any Person, including any Community Company.
5.12 ENVIRONMENTAL MATTERS.
(a) To the Knowledge of Community, each Community Company, its
Participation Facilities, and its Operating Properties are, and have been, in
compliance with all Environmental Laws, except for violations which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Community.
(b) To the Knowledge of Community, there is no Litigation pending or
threatened before any court, governmental agency, or authority or other forum
in which any Community Company or any of its Operating Properties or
Participation Facilities (or Community in respect of such Operating Property or
Participation Facility) has been or, with respect to threatened Litigation, may
be named as a defendant (i) for alleged noncompliance (including by any
predecessor) with any Environmental Law or (ii) relating to the release into
the environment of any Hazardous Material, whether or not occurring at, on,
under, adjacent to, or affecting (or potentially affecting) a site owned,
leased, or operated by any Community Company or any of its Operating Properties
or Participation Facilities, except for such Litigation pending or threatened
that is not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Community, nor is there any reasonable basis for any
Litigation of a type described in this sentence.
(c) During the period of (i) any Community Company's ownership or operation
of any of their respective current properties, (ii) any Community Company's
participation in the management of any Participation Facility, or (iii) any
Community Company's holding of a security interest in a Operating Property, to
the Knowledge of Community, 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 Community. Prior to the period
of (i) any Community Company's ownership or operation of any of their
respective current properties, (ii) any Community Company's participation in
the management of any Participation Facility, or (iii) any Community Company's
holding of a security interest in a Operating Property, to the Knowledge of
Community, there were no releases of Hazardous Material in, on, under, or
affecting any such property, Participation Facility or Operating Property,
except such as are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Community.
5.13 COMPLIANCE WITH LAWS. Community is duly registered as a bank holding
company under the Bank Holding Company Act. Each Community Company has in
effect all Permits necessary for it to own, lease, or operate its material
Assets and to carry on its business as now conducted, and there has occurred no
Default under any such Permit. None of the Community Companies:
(a) to the Knowledge of Community, is in violation of any material Laws,
Orders, or Permits applicable to its business or employees conducting its
business; and
(b) has received any notification or communication from any agency or
department of federal, state, or local government or any Regulatory Authority
or the staff thereof (i) asserting that any Community Company is not in
compliance with any of the Laws or Orders which such governmental authority or
Regulatory Authority enforces, (ii) threatening to revoke any Permits, or (iii)
requiring any Community Company to enter into or consent to the issuance of a
cease and desist order, formal agreement, directive, commitment, or memorandum
of understanding, or to adopt any Board resolution or similar undertaking,
which restricts materially the conduct of its business, or in any manner
relates to its capital adequacy, its credit or reserve policies, its
management, or the payment of dividends.
5.14 LABOR RELATIONS. No Community Company is the subject of any Litigation
asserting that it or any other Community Company has committed an unfair labor
practice (within the meaning of the National Labor Relations Act or comparable
state law) or seeking to compel it or any other Community Company to bargain
with any labor
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organization as to wages or conditions of employment, nor is there any strike
or other labor dispute involving any Community Company, pending or threatened,
or to the Knowledge of Community, is there any activity involving any Community
Company's employees seeking to certify a collective bargaining unit or engaging
in any other organization activity.
5.15 EMPLOYEE BENEFIT PLANS.
(a) Community has disclosed in Section 5.15 of the Community Disclosure
Memorandum, and has delivered or made available to UPC prior to the execution
of this Agreement copies in each case of, all pension, retirement,
profit-sharing, deferred compensation, stock option, employee stock ownership,
severance pay, vacation, bonus, or other incentive plan, all other written
employee programs, arrangements, or agreements, all medical, vision, dental, or
other health plans, all life insurance plans, and all other employee benefit
plans or fringe benefit plans, including "employee benefit plans" as that term
is defined in Section 3(3) of ERISA, currently adopted, maintained by,
sponsored in whole or in part by, or contributed to by any Community Company or
ERISA Affiliate thereof for the benefit of employees, retirees, dependents,
spouses, directors, independent contractors, or other beneficiaries and under
which employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries are eligible to participate (collectively,
the "Community Benefit Plans"). Any of the Community 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 "Community ERISA Plan." There is no Community
ERISA Plan which is also a "defined benefit plan" (as defined in Section 414(j)
of the Internal Revenue Code) is referred to herein as a "Community Pension
Plan." Except for the Financial Institutions Retirement Fund plan, no Community
Pension Plan is or has been a multiemployer plan within the meaning of Section
3(37) of ERISA.
(b) All Community Benefit Plans are in substantial compliance with the
applicable terms of ERISA, the Internal Revenue Code, and any other applicable
Laws the breach or violation of which are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Community. Each
Community ERISA Plan which is intended to be qualified under Section 401(a) of
the Internal Revenue Code has received a favorable determination letter from
the Internal Revenue Service, and Community is not aware of any circumstances
likely to result in revocation of any such favorable determination letter, that
may not be corrected without material adverse effect on community.. No
Community Company has engaged in a transaction with respect to any Community
Benefit Plan that, assuming the taxable period of such transaction expired as
of the date hereof, would subject any Community Company to a Tax imposed by
either Section 4975 of the Internal Revenue Code or Section 502(i) of ERISA.
(c) No Community Company provides for retiree health and life benefits
except as may be required by ERISA or the Internal Revenue Code under any of
the Community Benefit Plans and there are no restrictions on the rights of such
Community Company to amend or terminate any such retiree health or benefit Plan
without incurring Liability thereunder.
(d) Except as disclosed in Section 5.15 of the Community Disclosure
Memorandum, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, or
otherwise) becoming due to any director or any employee of any Community
Company from any Community Company under any Community Benefit Plan or
otherwise, (ii) increase any benefits otherwise payable under any Community
Benefit Plan, or (iii) result in any acceleration of the time of payment or
vesting of any such benefit.
(e) 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 Community Company and their respective beneficiaries, other
than entitlements accrued pursuant to funded retirement plans subject to the
provisions of Section 412 of the Internal Revenue Code or Section 302 of ERISA,
have been fully reflected on the Community Financial Statements to the extent
required by and in accordance with GAAP.
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5.16 MATERIAL CONTRACTS. Except as disclosed in the Community SEC Reports
or as disclosed in Section 5.16 of the Community Disclosure Memorandum, none of
the Community Companies, nor any of their respective Assets, businesses, or
operations, is a party to, or is bound or affected by, or receives benefits
under, (i) any employment, severance, termination, consulting, or retirement
Contract providing for aggregate payments to any Person in any calendar year in
excess of $50,000, (ii) any Contract relating to the borrowing of money by any
Community Company or the guarantee by any Community Company of any such
obligation (other than Contracts evidencing deposit liabilities, purchases of
federal funds, fully-secured repurchase agreements, and Federal Home Loan Bank
advances of depository institution Subsidiaries, trade payables, and Contracts
relating to borrowings or guarantees made in the ordinary course of business),
(iii) any Contracts which prohibit or restrict any Community Company from
engaging in any business activities in any geographic area, line of business,
or otherwise in competition with any other Person, (iv) any Contracts between
or among Community Companies, (v) any exchange-traded or over-the-counter swap,
forward, future, option, cap, floor, or collar financial Contract, or any other
interest rate or foreign currency protection Contract (not disclosed in the
Community 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 Community SEC Report (whether or not
Community is subject to the filing requirements of the SEC) filed (or which
would have been filed if Community were subject to the SEC reporting
requirements) by Community with the SEC prior to the date of this Agreement
(together with all Contracts referred to in Sections 5.10 and 5.15(a) of this
Agreement the "Community Contracts"). With respect to each Community Contract:
(i) the Contract is in full force and effect; (ii) no Community Company is in
Default thereunder; (iii) no Community Company has repudiated or waived any
material provision of any such Contract; and (iv) no other party to any such
Contract is, to the Knowledge of Community, in Default in any respect or has
repudiated or waived any material provision thereunder. Except as set forth in
Section 5.16 of the Community Disclosure Memorandum, all of the indebtedness of
any Community Company for money borrowed is prepayable at any time by such
Community Company without penalty or premium.
5.17 LEGAL PROCEEDINGS. There is no Litigation instituted or pending, or,
to the Knowledge of Community, threatened (or unasserted but considered
probable of assertion and which if asserted would have at least a reasonable
probability of an unfavorable outcome) against any Community Company, or
against any Asset, employee benefit plan, interest, or right of any of them,
that is reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Community, nor are there any Orders of any Regulatory
Authorities, other governmental authorities, or arbitrators outstanding against
any Community Company. Section 5.17 of the Community Disclosure Memorandum
includes a summary report of all material Litigation as of the date of this
Agreement to which any Community Company is a party and which names a Community
Company as a defendant or cross-defendant.
5.18 REPORTS. Since January 1, 1994, or the date of organization if later,
each Community Company has timely filed all reports and statements, together
with any amendments required to be made with respect thereto, that it was
required to file with any Regulatory Authorities and any applicable state
securities or banking authorities (except, in the case of state securities
authorities, failures to file which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Community). As
of their respective dates, or as subsequently amended for minor corrections,
each of such reports and documents, including the financial statements,
exhibits, and schedules thereto, complied in all material respects with all
applicable Laws. As of its respective date, each such report and document did
not, in all material respects, contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances under which
they were made, not misleading.
5.19 STATEMENTS TRUE AND CORRECT. No statement, certificate, instrument, or
other writing furnished or to be furnished by any Community Company to UPC
pursuant to this Agreement or any other document, agreement, or instrument
referred to herein contains or will contain any untrue statement of material
fact or will omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. None of the information supplied or to be supplied by any Community
Company for inclusion in the Registration Statement to be filed by UPC with the
SEC will, when the Registration Statement becomes effective, be false or
misleading with respect to any material fact, or omit to state any material
fact necessary to make the
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statements therein not misleading. None of the information supplied or to be
supplied by any Community Company or for inclusion in the Proxy Statement to be
mailed to Community's shareholders in connection with the Shareholders'
Meeting, and any other documents to be filed by a Community Company with the
SEC or any other Regulatory Authority in connection with the transactions
contemplated hereby, will, at the respective time such documents are filed, and
with respect to the Proxy Statement, when first mailed to the shareholders of
Community, be false or misleading with respect to any material fact, or omit to
state any material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, or, in the case
of the Proxy Statement or any amendment thereof or supplement thereto, at the
time of the Shareholders' Meeting, be false or misleading with respect to any
material fact, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of any
proxy for the Shareholders' Meeting. All documents that any Community Company
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. No statement, certificate,
instrument, or other writing furnished or to be furnished by any affiliate of
any Community Company in connection with this Agreement, any SEC filings, Proxy
Statement, or Documents provided to UPC contains or will contain any untrue
statement of material fact or will omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading.
5.20 TAX AND REGULATORY MATTERS. No Community Company or any Affiliate
thereof has taken any action or has any Knowledge of any fact or circumstance
relating to Community that is reasonably likely to (i) prevent the transactions
contemplated hereby, including the Merger, from qualifying as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code, or (ii)
materially impede or delay receipt of any Consents of Regulatory Authorities
referred to in Section 9.1(b) of this Agreement or result in the imposition of
a condition or restriction of the type referred to in the last sentence of such
section.
5.21 STATE TAKEOVER LAWS. Each Community Company has taken all necessary
action to exempt the transactions contemplated by this Agreement and the Plan
of Merger from, or if necessary challenge the validity or applicability of, any
applicable "moratorium," "fair price," "business combination," "control share,"
or other anti-takeover Laws (collectively, "Takeover Laws"), including
applicable sections of the TBCA.
5.22 CHARTER PROVISIONS. Except as set forth in Section 5.22 of the
Community Disclosure Memorandum, each Community Company has taken all action so
that the entering into of this Agreement and the Plan of Merger and the
consummation of the Merger and the other transactions contemplated by this
Agreement and the Plan of Merger do not and will not result in the grant of any
rights to any Person under the Charter, By-laws or other governing instruments
of any Community Company or restrict or impair the ability of UPC or any of its
Subsidiaries to vote, or otherwise to exercise the rights of a shareholder with
respect to, shares of any Community Company that may be directly or indirectly
acquired or controlled by it.
5.23 CORPORATE DOCUMENTS. Community has previously provided UPC true and
correct copies of the Articles of Incorporation and Bylaws of Community and the
Articles of Incorporation or Articles of Association or Articles of Agreement
and Bylaws of each Community Company, as amended to date, and each are in full
force and effect.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF UPC
Except as disclosed in the UPC Disclosure Memorandum, UPC hereby represents
and warrants to Community as follows:
6.1 ORGANIZATION, STANDING, AND POWER. UPC is a corporation duly organized,
validly existing, and in good standing under the Laws of the State of
Tennessee, and has the corporate power and authority to carry on its business
as now conducted and to own, lease and operate its material Assets. UPC is duly
qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where
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the character of its Assets or the nature or conduct of its business requires
it to be so qualified or licensed, except for such jurisdictions in which the
failure to be so qualified or licensed is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on UPC.
6.2 AUTHORITY; NO BREACH BY AGREEMENT.
(a) UPC has the corporate power and authority necessary to execute, deliver
and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated herein,
including the Merger, have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of UPC. This Agreement
represents a legal, valid, and binding obligation of UPC, enforceable against
UPC in accordance with its terms (except in all cases as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, or similar Laws affecting the enforcement of creditors' rights
generally and except that the availability of the equitable remedy of specific
performance or injunctive relief is subject to the discretion of the court
before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by UPC, nor the
consummation by UPC of the transactions contemplated hereby, nor compliance by
UPC with any of the provisions hereof, will (i) conflict with or result in a
breach of any provision of UPC's Restated Charter of Incorporation or By-laws,
or (ii) constitute or result in a Default under, or require any Consent
pursuant to, or result in the creation of any Lien on any Asset of any UPC
Company under, any Contract or Permit of any UPC Company, or (iii) subject to
receipt of the requisite approvals referred to in Section 9.1(b) of this
Agreement, violate any Law or Order applicable to any UPC Company or any of
their respective material Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules of
the NYSE, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit
plans, or under the HSR Act, and other than Consents, filings, or notifications
which, if not obtained or made, are not reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on UPC, no notice to, filing
with, or Consent of, any public body or authority is necessary for the
consummation by UPC or UPC Merger Subsidiary of the Merger and the other
transactions contemplated in this Agreement and the Plan of Merger.
6.3 CAPITAL STOCK. The authorized capital stock of UPC consists of (i)
100,000,000 shares of UPC Common Stock, of which 66,928,481 shares were issued
and outstanding as of September 30, 1997 (exclusive of treasury shares), and
(ii) 10,000,000 shares of UPC Preferred Stock, of which no shares of UPC Series
A Preferred Stock, and 2,412,578 shares of UPC Series E Preferred Stock, are
issued and outstanding. All of the issued and outstanding shares of UPC Capital
Stock are, and all of the shares of UPC Common Stock to be issued in exchange
for shares of Community Common Stock upon consummation of the Merger, when
issued in accordance with the terms of this Agreement, will be, duly and
validly issued and outstanding and fully paid and nonassessable under the
Tennessee Business Corporation Act. None of the outstanding shares of UPC
Capital Stock has been, and none of the shares of UPC Common Stock to be issued
in exchange for shares of Community Common Stock upon consummation of the
Merger will be, issued in violation of any preemptive rights of the current or
past shareholders of UPC. UPC has reserved for issuance a sufficient number of
shares of UPC Common Stock for the purpose of issuing shares of UPC Common
Stock in accordance with the provisions of Sections 3.1 and 3.5 of this
Agreement.
6.4 UPC SUBSIDIARIES. UPC or one of its Subsidiaries owns all of the issued
and outstanding shares of capital stock of each UPC Subsidiary. No equity
securities of any UPC Subsidiary are or may become required to be issued (other
than to another UPC Company) by reason of any Rights, and there are no
Contracts by which any UPC Subsidiary is bound to issue (other than to another
UPC Company) additional shares of its capital stock or Rights or by which any
UPC Company is or may be bound to transfer any shares of the capital stock of
any UPC Subsidiary (other than to another UPC Company). There are no Contracts
relating to the rights of any UPC Company to vote
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or to dispose of any shares of the capital stock of any UPC Subsidiary. All of
the shares of capital stock of each UPC Subsidiary held by a UPC Company are
fully paid and nonassessable (except pursuant to 12 USC 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 Law of the
jurisdiction in which such Subsidiary is incorporated or organized and are
owned by the UPC Company free and clear of any Lien. Each UPC Subsidiary is
either a bank or a corporation, and 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 UPC Subsidiary is duly qualified or
licensed to transact business as a foreign corporation in good standing in the
States of the United States and foreign jurisdictions where the character of
its Assets or the nature or conduct of its business requires it to be so
qualified or licensed, except for such jurisdictions in which the failure to be
so qualified or licensed is not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on UPC. Each UPC Subsidiary that is a
depository institution is an "insured institution" as defined in the Federal
Deposit Insurance Act and applicable regulations thereunder, and the deposits
in which are insured by the Bank Insurance Fund or Savings Association
Insurance Fund.
6.5 SEC FILINGS; FINANCIAL STATEMENTS.
(a) UPC has filed and made available to Community all SEC Documents
required to be filed by UPC since December 31, 1993 (the "UPC SEC Reports").
The UPC SEC Reports (i) at the time filed, complied in all material respects
with the applicable requirements of the Securities Laws and (ii) did not, at
the time they were filed (or, if amended or superseded by a filing prior to the
date of this Agreement, then on the date of such filing) contain any untrue
statement of a material fact or omit to state a material fact required to be
stated in such UPC SEC Reports or necessary in order to make the statements in
such UPC SEC Reports, in light of the circumstances under which they were made,
not misleading. Except for UPC Subsidiaries that are registered as a broker,
dealer, or investment advisor, none of UPC's Subsidiaries is required to file
any SEC Documents.
(b) Each of the UPC Financial Statements (including, in each case, any
related notes) contained in the UPC SEC Reports, including any UPC SEC Reports
filed after the date of this Agreement until the Effective Time, complied as to
form in all material respects with the applicable published rules and
regulations of the SEC with respect thereto, was prepared in accordance with
GAAP applied on a consistent basis throughout the periods involved (except as
may be indicated in the notes to such financial statements or, in the case of
unaudited interim statements, as permitted by Form 10-Q of the SEC), and fairly
presented in all material respects the consolidated financial position of UPC
and its Subsidiaries as at the respective dates and the consolidated results of
its operations and cash flows for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be
material in amount or effect.
6.6 ABSENCE OF UNDISCLOSED LIABILITIES. No UPC Company has any Liabilities
that are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on UPC, except Liabilities which are accrued or
reserved against in the consolidated balance sheets of UPC as of September 30,
1997, included in the UPC Financial Statements made available prior to the date
of this Agreement or reflected in the notes thereto. No UPC Company has
incurred or paid any Liability since September 30, 1997, except for such
Liabilities incurred or paid (i) in the ordinary course of business consistent
with past business practice and which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on UPC or (ii) in
connection with the transactions contemplated by this Agreement.
6.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since September 30, 1997, except
as disclosed in the UPC Financial Statements made available prior to the date
of this Agreement or contemplated by pending federal legislation applicable to
financial institutions generally, (i) there have been no events, changes, or
occurrences which have had, or are reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on UPC, and (ii) the UPC Companies
have not taken any action, or failed to take any action, prior to the date of
this Agreement,
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which action or failure, if taken after the date of this Agreement, would
represent or result in a material breach or violation of any of the covenants
and agreements of UPC contained in this Agreement.
6.8 TAX MATTERS.
(a) All Tax Returns required to be filed by or on behalf of any of the UPC
Companies have been timely filed or requests for extensions have been timely
filed, granted, and have not expired for periods ended on or before December
31, 1996, and on or before the date of the most recent fiscal year end
immediately preceding the Effective Time, and, to the Knowledge of UPC, all Tax
Returns filed are complete and accurate. All Taxes shown on filed Tax Returns
have been paid. There is no audit examination, deficiency, or refund Litigation
with respect to any Taxes, except as reserved against in the UPC Financial
Statements delivered prior to the date of this Agreement. All Taxes and other
Liabilities due with respect to completed and settled examinations or concluded
Litigation have been paid. There are no Liens with respect to Taxes upon any of
the Assets of the UPC Companies.
(b) Adequate provision for any Taxes due or to become due for any of the
UPC Companies for the period or periods through and including the date of the
respective UPC Financial Statements has been made and is reflected on such UPC
Financial Statements.
(c) Deferred Taxes of the UPC Companies have been provided for in
accordance with GAAP.
6.9 ENVIRONMENTAL MATTERS.
(a) To the Knowledge of UPC, each UPC Company, its Participation
Facilities, and its Operating Properties are, and have been, in compliance with
all Environmental Laws, except for violations which are not reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on UPC.
(b) To the Knowledge of UPC, there is no Litigation pending or threatened
before any court, governmental agency, or authority or other forum in which any
UPC Company or any of its Operating Properties or Participation Facilities (or
UPC in respect of such Operating Property or Participation Facility) has been
or, with respect to threatened Litigation, may be named as a defendant (i) for
alleged noncompliance (including by any predecessor) with any Environmental Law
or (ii) relating to the release into the environment of any Hazardous Material,
whether or not occurring at, on, under, adjacent to, or affecting (or
potentially affecting) a site owned, leased, or operated by any UPC Company or
any of its Operating Properties or Participation Facilities, except for such
Litigation pending or threatened that is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on UPC, nor is
there any reasonable basis for any Litigation of a type described in this
sentence.
(c) During the period of (i) any UPC Company's ownership or operation of
any of their respective current properties, (ii) any UPC Company's
participation in the management of any Participation Facility, or (iii) any UPC
Company's holding of a security interest in a Operating Property, to the
Knowledge of UPC, there have been no releases of Hazardous Material in, on,
under, adjacent to, or affecting (or potentially affecting) such properties,
except such as are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on UPC. Prior to the period of (i) any UPC
Company's ownership or operation of any of their respective current properties,
(ii) any UPC Company's participation in the management of any Participation
Facility, or (iii) any UPC Company's holding of a security interest in a
Operating Property, to the Knowledge of UPC, there were no releases of
Hazardous Material in, on, under, or affecting any such property, Participation
Facility or Operating Property, except such as are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on UPC.
6.10 COMPLIANCE WITH LAWS. UPC is duly registered as a bank holding company
under the BHC Act and as a savings and loan holding company under the HOLA.
Each UPC Company has in effect all Permits necessary for it to own, lease, or
operate its material Assets and to carry on its business as now conducted, and
there has occurred no Default under any such Permit. No UPC Company:
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(a) to the Knowledge of UPC, is in violation of any material Laws, Orders,
or Permits applicable to its business or employees conducting its business; and
(b) has received any notification or communication from any agency or
department of federal, state, or local government or any Regulatory Authority
or the staff thereof (i) asserting that any UPC Company is not in compliance
with any of the Laws or Orders which such governmental authority or Regulatory
Authority enforces, (ii) threatening to revoke any Permits, or (iii) requiring
any UPC Company to enter into or consent to the issuance of a cease and desist
order, formal agreement, directive, commitment or memorandum of understanding,
or to adopt any Board resolution or similar undertaking, which restricts
materially the conduct of its business, or in any manner relates to its capital
adequacy, its credit or reserve policies, its management, or the payment of
dividends.
6.11 LEGAL PROCEEDINGS. There is no Litigation instituted or pending, or,
to the Knowledge of UPC, threatened (or unasserted but considered probable of
assertion and which if asserted would have at least a reasonable probability of
an unfavorable outcome) against any UPC Company, or against any Asset, 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 UPC, nor
are there any Orders of any Regulatory Authorities, other governmental
authorities, or arbitrators outstanding against any UPC Company.
6.12 REPORTS. Since January 1, 1994, or the date of organization if later,
each UPC Company has filed all reports and statements, together with any
amendments required to be made with respect thereto, that it was required to
file with (i) the SEC, including, but not limited to, Forms 10-K, Forms 10-Q,
Forms 8-K, and proxy statements, (ii) other Regulatory Authorities, and (iii)
any applicable state securities or banking authorities (except, in the case of
state securities authorities, failures to file which are not reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on UPC).
As of their respective dates, each of such reports and documents, including the
financial statements, exhibits, and schedules thereto, complied in all material
respects with all applicable Laws. As of its respective date, each such report
and document did not, in all material respects, contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
6.13 STATEMENTS TRUE AND CORRECT. No statement, certificate, instrument or
other writing furnished or to be furnished by any UPC Company or any Affiliate
thereof to Community pursuant to this Agreement or any other document,
agreement, or instrument referred to herein contains or will contain any untrue
statement of material fact or will omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading. None of the information supplied or to be supplied
by any UPC Company or any Affiliate thereof for inclusion in the Registration
Statement to be filed by UPC with the SEC, will, when the Registration
Statement becomes effective, be false or misleading with respect to any
material fact, or omit to state any material fact necessary to make the
statements therein not misleading. None of the information supplied or to be
supplied by any UPC Company or any Affiliate thereof for inclusion in the Proxy
Statement to be mailed to Community's shareholders in connection with the
Shareholders' Meeting, and any other documents to be filed by any UPC Company
or any Affiliate thereof with the SEC or any other Regulatory Authority in
connection with the transactions contemplated hereby, will, at the respective
time such documents are filed, and with respect to the Proxy Statement, when
first mailed to the shareholders of Community, be false or misleading with
respect to any material fact, or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading, or, in the case of the Proxy Statement or any
amendment thereof or supplement thereto, at the time of the Shareholders'
Meeting, be false or misleading with respect to any material fact, or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of any proxy for the
Shareholders' Meeting. All documents that any UPC Company or any Affiliate
thereof is responsible for filing with any Regulatory Authority in connection
with the transactions contemplated hereby will comply as to form in all
material respects with the provisions of applicable Law.
6.14 TAX AND REGULATORY MATTERS. No UPC Company or any Affiliate thereof
has taken any action or has any Knowledge of any fact or circumstance relating
to UPC that is reasonably likely to (i) prevent the transactions
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contemplated hereby, including the Merger, from qualifying as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code, or (ii)
materially impede or delay receipt of any Consents of Regulatory Authorities
referred to in Section 9.1(b) of this Agreement or result in the imposition of
a condition or restriction of the type referred to in the last sentence of such
Section. To the extent that UPC is aware of any material fact or circumstance
to the contrary,such has been disclosed to Community.
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 AFFIRMATIVE COVENANTS OF COMMUNITY. Unless the prior written consent of
UPC shall have been obtained, and except as otherwise expressly contemplated
herein or as set forth in Section 7.1 of the Community Disclosure Memorandum,
Community shall and shall cause each of its Subsidiaries to (i) operate its
business only in the usual, regular, and ordinary course, (ii) preserve intact
its business organization and Assets and maintain its rights and franchises,
and (iii) take no action which would (a) materially adversely affect the
ability of any Party to obtain any Consents required for the transactions
contemplated hereby without imposition of a condition or restriction of the
type referred to in the last sentence of Section 9.1(b) of this Agreement or
prevent the transactions contemplated hereby, including the Merger, from
qualifying 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 COMMUNITY. Except as specifically contemplated by
this Agreement or other documents or instruments executed in connection with
this Agreement, from the date of this Agreement until the earlier of the
Effective Time or the termination of this Agreement, Community covenants and
agrees that it will not do or agree or commit to do, or permit any of its
Subsidiaries to do or agree or commit to do, any of the following without the
prior written consent of the chief executive officer, president, or chief
financial officer of UPC, which consent shall not be unreasonably withheld:
(a) amend the Charter, By-laws, or other governing instruments of any
Community Company; or
(b) incur any additional debt obligation or other obligation for borrowed
money (other than indebtedness of a Community Company to another Community
Company) in excess of an aggregate of $50,000 (for the Community Companies on a
consolidated basis) except in the ordinary course of the business of Community
Subsidiaries consistent with past practices (which shall include, for Community
Subsidiaries that are depository institutions, creation of deposit liabilities,
purchases of federal funds, advances from the Federal Reserve Bank or Federal
Home Loan Bank, and entry into repurchase agreements fully secured by U.S.
government or agency securities), or impose, or suffer the imposition, on any
Asset of any Community Company of any Lien or permit any such Lien to exist
(other than in connection with deposits, repurchase agreements, bankers
acceptances, advances from the Federal Reserve Board or Federal Home Loan Bank,
"treasury tax and loan" accounts established in the ordinary course of
business, the satisfaction of legal requirements in the exercise of trust
powers, and Liens in effect as of the date hereof that are disclosed in the
Community Disclosure Memorandum); or
(c) repurchase, redeem, or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans), directly or
indirectly, any shares, or any securities convertible into any shares, of the
capital stock of any Community Company, or declare or pay any dividend or make
any other distribution in respect of Community's capital stock, provided that
Community may (to the extent legally and contractually permitted to do so), but
shall not be obligated to, declare and pay regular cash dividends on shares of
Community Common Stock at a rate not in excess of One and 25/100 Dollars
($1.25) per share payable on January 1, 1998; or
(d) except for this Agreement, or pursuant to the issuance of shares to
satisfy stock rights outstanding as of the date hereof, plus dividend and
accumulation rights, if any, 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
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outstanding, any additional shares of Community Common Stock or any other
capital stock of any Community Company, or any stock appreciation rights, or
any option, warrant, conversion, or other right to acquire any such stock, or
any security convertible into any such stock; or
(e) adjust, split, combine or reclassify any capital stock of any Community
Company or issue or authorize the issuance of any other securities in respect
of or in substitution for shares of Community Common Stock, or sell, lease,
mortgage or otherwise dispose of or otherwise encumber any shares of capital
stock of any Community Subsidiary (unless any such shares of stock are sold or
otherwise transferred to another Community Company) or any Asset having a book
value in excess of $5,000 other than in the ordinary course of business for
reasonable and adequate consideration; or
(f) except for purchases of U.S. Treasury securities, U.S. Government
agency securities, municipal bonds, local tax exempt securities, or other
securities which in any case have maturities of five years or less, which
purchases are consistent with past practices, or Federal Home Loan Bank Stock,
purchase any securities or make any material investment, either by purchase of
stock of securities, contributions to capital, Asset transfers, or purchase of
any Assets, in any Person other than a wholly-owned Community Subsidiary, or
otherwise acquire direct or indirect control over any Person, other than in
connection with (i) foreclosures in the ordinary course of business, (ii)
acquisitions of control by a depository institution Subsidiary in its fiduciary
capacity, or (iii) the creation of new wholly-owned Subsidiaries organized to
conduct or continue activities otherwise permitted by this Agreement; or
(g) grant any increase in compensation or benefits to the employees or
officers of any Community Company, except in accordance with past practice
disclosed in Section 7.2(g) of the Community Disclosure Memorandum or as
required by Law; pay any severance or termination pay or any bonus other than
pursuant to past practice or written policies or written Contracts in effect on
the date of this Agreement and disclosed in Section 7.2(g) of the Community
Disclosure Memorandum; and enter into or amend any severance agreements with
officers of any Community Company; grant any material increase in fees or other
increases in compensation or other benefits to directors of any Community
Company except in accordance with past practice disclosed in Section 7.2(g) of
the Community Disclosure Memorandum; or, except as disclosed in Section 7.2(g)
of the Community Disclosure Memorandum, 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 Community); or
(h) enter into or amend any employment Contract between any Community
Company and any Person (unless such amendment is required by Law) that the
Community 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) except as disclosed in Section 7.2(i) of the Community Disclosure
Memorandum or in the Supplemental Letter, adopt any new employee benefit plan
of any Community Company or terminate or withdraw from, or make any material
change in or to, any existing employee benefit plans of any Community Company
other than any such change that is required by Law or that, in the opinion of
counsel, is necessary or advisable to maintain the tax qualified status of any
such plan, or make any distributions from such employee benefit plans, except
as required by Law, the terms of such plans or consistent with past practice;
or
(j) make any significant change in any Tax or accounting methods or systems
of internal accounting controls, except as may be appropriate to conform to
changes in Tax Laws or regulatory accounting requirements or GAAP; or
(k) commence any Litigation other than in accordance with past practice,
settle any Litigation involving any Liability of any Community Company for
money damages in excess of $25,000 or restrictions upon the operations of any
Community Company; or
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(l) other than in the ordinary course of business consistent with past
practice or as otherwise disclosed in Section 7.2(l) of the Community
Disclosure Memorandum, 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 CERTAIN ACTIONS. Except to the extent necessary to consummate the
transaction specifically contemplated by this Agreement:
(a) Community shall not and shall use its best efforts to ensure that its
respective directors, officers, employees, and advisors do not, directly or
indirectly, institute, solicit, or knowingly encourage (including by way of
furnishing any information not legally required to be furnished) any inquiry,
discussion, or proposal, or participate in any discussions or negotiations with,
or provide any confidential or non public information to, any corporation,
partnership, person or other entity or group (other than to UPC or any UPC
subsidiary) concerning any "Acquisition Proposal" as defined in Section 11.1
hereof, except for actions reasonably considered by the Board of Directors of
Community, based upon the advice of outside legal counsel, to be required in
order to fulfill its fiduciary obligations. Community shall notify UPC
immediately if any Acquisition Proposal has been or should hereafter be received
by Community, such notice to contain, at a minimum, the identity of such
persons, and, subject to disclosure being consistent with the fiduciary
obligations of Community's Board of Directors, a copy of any written inquiry,
the terms of any proposal or inquiry, any information requested or discussions
thought to be initiated, and the status of any reports, negotiations or
expressions of interest.
(b) As a condition of and as an inducement to UPC's entering into this
Agreement, Community covenants, acknowledges, and agrees that it shall be a
specific, absolute, and unconditionally binding condition precedent to
Community's entering into a letter of intent, agreement in principle, 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 Community has otherwise complied with the provisions of
Section 7.3 (a) hereof, that Community or such third party which is a party of
the Acquisition Proposal shall have paid UPC, as liquidated damages, the sum of
Seven Hundred Fifty Thousand Dollars ($750,000.00) at the time of acceptance of
the Acquisition Proposal in writing. This sum represents the (i) direct cost of
expenses (including, but not limited to, fees and expenses incurred by UPC's
financial or other consultants, printing costs, investment bankers, accountants,
and counsel) incurred by or on behalf of UPC in negotiating and undertaking to
carry out the transactions contemplated by this Agreement; and (ii) indirect
costs and expenses of UPC in connection with the transaction contemplated by
this Agreement, including UPC's management time devoted to negotiation and
preparation for the transactions contemplated by this Agreement; and (iii) UPC's
loss as a result of the transactions contemplated by this Agreement not being
consummated. Accordingly, Community hereby stipulates and covenants that prior
to Community'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
Community or such third party shall have paid to UPC the amount set forth above
in immediately available funds to satisfy the specific, absolute and
unconditionally binding condition precedent imposed by this Section 7.3.
Notwithstanding anything to the contrary in this Section 7.3 (b), in the event
such Acquisition Proposal should be the result of a hostile takeover of
Community, any sums due UPC hereunder shall be paid only at the closing of the
transaction set forth in such Acquisition Proposal. UPC acknowledges that under
no circumstances shall any officer or director of Community (unless such officer
or director shall have an interest in a potential acquiring party in any
Acquisition Proposal) be held personally liable to UPC for any amount of the
foregoing payment. On payment of such amount to UPC, UPC shall have no cause of
action or claim (either in law or in equity) whatsoever against Community, or
any officer or director of Community, with respect to or in connection with such
Acquisition Proposal or this Agreement.
(c) The requirements, conditions, and obligations imposed by Section 7.3(b)
shall continue in effect from the date of this Agreement until March 1, 1999, if
(i) the merger fails to receive the requisite shareholder approval by the
Community Shareholder's; or (ii) Community willfully or recklessly (a) violates
any of its representations or warranties set forth herein; (b) breaches any of
its covenants set forth herein; (c) fails to deliver or cause to be
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delivered, the certificates, agreements and other documents; or (d) otherwise
fails to meet the conditions to UPC's obligation to close set forth herein.
After the occurrence of any such events, the provisions of this Section 7.3
would terminate the earlier of the Effective Time or the termination of this
Agreement pursuant to the terms of Article 9.
7.4 COVENANTS OF UPC. From the date of this Agreement until the earlier of
the Effective Time or the termination of this Agreement, UPC covenants and
agrees that it shall (i) continue to conduct its business and the business of
its Subsidiaries in a manner designed in its reasonable judgment, to enhance
the long-term value of the UPC Common Stock and the business prospects of the
UPC Companies, and (ii) take no action which would (a) materially adversely
affect the ability of any Party to obtain any Consents required for the
transactions contemplated hereby without imposition of a condition or
restriction of the type referred to in the last sentence of Section 9.1(b) of
this Agreement or prevent the transactions contemplated hereby, including the
Merger, from qualifying 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.
7.5 ADVERSE CHANGES IN CONDITION. Each Party agrees to give written notice
promptly to the other Party upon becoming aware of the occurrence or impending
occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on it or (ii) would cause or constitute a
material breach of any of its representations, warranties, or covenants
contained herein, and to use its reasonable efforts to prevent or promptly to
remedy the same.
7.6 REPORTS. Each Party and its Subsidiaries shall file all reports
required to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time and shall deliver to the other Party copies of
all such reports promptly after the same are filed. If financial statements are
contained in any such reports filed with the SEC, such financial statements
will fairly present the consolidated financial position of the entity filing
such statements as of the dates indicated and the consolidated results of
operations, changes in shareholders' equity, and cash flows for the periods
then ended in accordance with GAAP (subject in the case of interim financial
statements to normal recurring year-end adjustments that are not material). As
of their respective dates, such reports filed with the SEC will comply in all
material respects with the Securities Laws and will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. Any financial
statements contained in any other reports to another Regulatory Authority shall
be prepared in accordance with Laws applicable to such reports.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 REGISTRATION STATEMENT; PROXY STATEMENT; SHAREHOLDER APPROVAL. UPC
shall file the Registration Statement with the SEC, and shall use its
reasonable efforts to cause the Registration Statement to become effective
under the 1933 Act and take any action required to be taken under the
applicable state Blue Sky or securities Laws in connection with the issuance of
the shares of UPC Common Stock upon consummation of the Merger. Community shall
furnish all information concerning it and the holders of its capital stock as
UPC may reasonably request in connection with such action. Community shall call
a Shareholders' Meeting, to be held as soon as reasonably practicable after the
Registration Statement is declared effective by the SEC, for the purpose of
voting upon approval of this Agreement and the Plan of Merger and such other
related matters as it deems appropriate. In connection with the Shareholders'
Meeting, (i) Community shall prepare and file with the SEC a Proxy Statement
and mail such Proxy Statement to its shareholders, (ii) the Parties shall
furnish to each other all information concerning them that they may reasonably
request in connection with such Proxy Statement, (iii) the Board of Directors
of Community shall recommend (subject to compliance with their fiduciary duties
as advised by counsel) to its shareholders the approval of the matters
submitted for approval, and (iv) the Board of Directors and officers of
Community shall (subject to compliance with their fiduciary duties as advised
by counsel) use their reasonable efforts to obtain such shareholders'
approvals.
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8.2 EXCHANGE LISTING. UPC shall use its reasonable efforts to list, prior
to the Effective Time, on the NYSE, subject to official notice of issuance, the
shares of UPC Common Stock to be issued to the holders of Community Common
Stock pursuant to the Merger, and UPC shall give all notices and make all
filings with the NYSE required in connection with the transactions contemplated
herein.
8.3 APPLICATIONS. UPC shall prepare and file, and Community shall cooperate
in the preparation and, where appropriate, filing of, applications with all
Regulatory Authorities having jurisdiction over the transactions contemplated
by this Agreement seeking the requisite Consents necessary to consummate the
transactions contemplated by this Agreement. At least three business days prior
to filing, UPC shall provide Community and its counsel with copies of such
applications. The Parties shall deliver to each other copies of all filings,
correspondence and orders to and from all Regulatory Authorities in connection
with the transactions contemplated hereby as soon as practicable upon their
becoming available.
8.4 FILINGS WITH STATE OFFICES. Upon the terms and subject to the
conditions of this Agreement, UPC Merger Subsidiary and Community shall execute
and file the Certificate of Merger with the Secretary of State of the State of
Tennessee in connection with the Closing.
8.5 AGREEMENT AS TO EFFORTS TO CONSUMMATE. Subject to the terms and
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper, or
advisable under applicable Laws to consummate and make effective, as soon as
practicable after the date of this Agreement, the transactions contemplated by
this Agreement, including using its reasonable efforts to lift or rescind any
Order adversely affecting its ability to consummate the transactions
contemplated herein and to cause to be satisfied the conditions referred to in
Article 9 of this Agreement; provided, that nothing herein shall preclude
either Party from exercising its rights under this Agreement. Each Party shall
use, and shall cause each of its Subsidiaries to use, its reasonable efforts to
obtain all Consents necessary or desirable for the consummation of the
transactions contemplated by this Agreement.
8.6 INVESTIGATION AND CONFIDENTIALITY.
(a) Prior to the Effective Time, each Party shall keep the other Party
advised of all material developments relevant to its business and to
consummation of the Merger and shall permit the other Party to make or cause to
be made such investigation of the business and properties of it and its
Subsidiaries and of their respective financial and legal conditions as the
other Party reasonably requests, provided that such investigation shall be
reasonably related to the transactions contemplated hereby and shall not
interfere unnecessarily with normal operations. No investigation by a Party
shall affect the representations and warranties of the other Party.
(b) Each Party shall, and shall cause its advisers and agents to, maintain
the confidentiality of all confidential information furnished to it by the
other Party concerning its and its Subsidiaries' businesses, operations, and
financial positions and shall not use such information for any purpose except
in furtherance of the transactions contemplated by this Agreement. If this
Agreement is terminated prior to the Effective Time, each Party shall promptly
return or certify the destruction of all documents and copies thereof, and all
work papers containing confidential information received from the other Party.
(c) Community shall use its reasonable efforts to exercise its rights under
confidentiality agreements entered into with Persons which were considering an
Acquisition Transaction with Community to preserve the confidentiality of the
information relating to Community provided to such Persons and their Affiliates
and Representatives.
8.7 PRESS RELEASES. Prior to the Effective Time, Community and UPC shall
consult with each other as to the form and substance of any press release or
other public disclosure materially related to this Agreement or any other
transaction contemplated hereby; provided, that nothing in this Section 8.7
shall be deemed to prohibit any Party from making any disclosure which its
counsel deems necessary or advisable in order to satisfy such Party's
disclosure obligations imposed by Law.
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8.8 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 as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code for federal income tax purposes.
8.9 STATE TAKEOVER LAWS. Each Community Company shall take all necessary
steps to exempt the transactions contemplated by this Agreement from, or if
necessary challenge the validity or applicability of, any applicable Takeover
Law.
8.10 CHARTER PROVISIONS. Each Community Company shall take all necessary
action to ensure that the entering into of this Agreement and the Plan of
Merger and the consummation of the Merger and the other transactions
contemplated hereby and thereby do not and will not result in the grant of any
rights to any Person under the Charter, By-laws, or other governing instruments
of any Community Company or restrict or impair the ability of UPC or any of its
Subsidiaries to vote, or otherwise to exercise the rights of a shareholder with
respect to, shares of any Community Company that may be directly or indirectly
acquired or controlled by it.
8.11 AGREEMENTS OF AFFILIATES. Community has disclosed in Section 8.11 of
the Community Disclosure Memorandum all Persons whom it reasonably believes is
an "affiliate" of Community for purposes of Rule 145 under the 1933 Act.
Community shall use its reasonable efforts to cause each such Person to deliver
to UPC not later than 30 days prior to the Effective Time, a written agreement,
substantially in the form of Exhibit 5, providing that such Person will not
sell, pledge, transfer, or otherwise dispose of the shares of Community Common
Stock held by such Person except as contemplated by such agreement or by this
Agreement and will not sell, pledge, transfer, or otherwise dispose of the
shares of UPC Common Stock to be received by such Person upon consummation of
the Merger except in compliance with applicable provisions of the 1933 Act and
the rules and regulations thereunder. UPC shall not be required to maintain the
effectiveness of the Registration Statement under the 1933 Act for the purposes
of resale of UPC Common Stock by such affiliates.
8.12 EMPLOYEE BENEFITS AND CONTRACTS. Subject to the terms of the
Supplemental Letter, following the Effective Time, UPC shall provide to
officers and employees of the Community Companies employee benefits under
employee benefit and welfare plans, on terms and conditions which when taken as
a whole are substantially similar to those currently provided by the UPC
Companies to their similarly situated officers and employees. For purposes of
participation, vesting, and (except in the case of retirement plans) benefit
accrual under such employee benefit plans, the service of the employees of the
Community Companies prior to the Effective Time shall be treated as service
with a UPC Company participating in such employee benefit plans.
8.13 INDEMNIFICATION.
(a) After the Effective Time, UPC shall indemnify, defend and hold harmless
the present and former directors, officers, employees, and agents of the
Community Companies (each, an "Indemnified Party") (including any person who
becomes a director, officer, employee, or agent prior to the Effective Time)
against all Liabilities (including reasonable attorneys' fees, and expenses,
judgments, fines and amounts paid in settlement) arising out of actions or
omissions occurring at or prior to the Effective Time (including the
transactions contemplated by this Agreement and the Stock Option Agreement) to
the full extent permitted under Tennessee Law and by Community's Charter and
By-laws as in effect on the date hereof, including provisions relating to
advances of expenses incurred in the defense of any Litigation. Without
limiting the foregoing, in any case in which approval by UPC is required to
effectuate any indemnification, UPC shall direct, at the election of the
Indemnified Party, that the determination of any such approval shall be made by
independent counsel mutually agreed upon between UPC and the Indemnified Party.
(b) Any Indemnified Party wishing to claim indemnification under paragraph
(a) of this Section 8.13, upon learning of any such Liability or Litigation,
shall promptly notify UPC thereof, provided that the failure so to notify shall
not affect the obligations of UPC under this Section 8.13 unless and to the
extent such failure materially increases UPC's liability under this Section
8.13. In the event of any such Litigation (whether arising before or after the
Effective Time), (i) UPC or the Surviving Corporation shall have the right to
assume the defense thereof and
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UPC shall not be liable to such Indemnified Parties for any legal expenses of
other counsel or any other expenses subsequently incurred by such Indemnified
Parties in connection with the defense thereof, except that if UPC or the
Surviving Corporation elects not to assume such defense, or counsel for the
Indemnified Parties advises that there are substantive issues which raise
conflicts of interest between UPC or the Surviving Corporation and the
Indemnified Parties, the Indemnified Parties may retain counsel satisfactory to
them, and UPC or the Surviving Corporation shall pay all reasonable fees and
expenses of such counsel for the Indemnified Parties promptly as statements
therefor are received; provided, that UPC shall be obligated pursuant to this
paragraph (b) to pay for only one firm of counsel for all Indemnified Parties
in any jurisdiction, (ii) the Indemnified Parties will cooperate in the defense
of any such Litigation, and (iii) UPC shall not be liable for any settlement
effected without its prior written consent; and provided further that the
Surviving Corporation shall not have any obligation hereunder to any
Indemnified Party when and if a court of competent jurisdiction shall
determine, and such determination shall have become final, that the
indemnification of such Indemnified Party in the manner contemplated hereby is
prohibited by applicable Law.
(c) The Surviving Corporation shall not be liable for any settlement
effected without its prior written consent which shall not be unreasonably
withheld. The Surviving Corporation shall not have any obligation 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 the Surviving Corporation or any of its successors or assigns shall
consolidate with or merge into any other Person and shall not be the continuing
or surviving Person of such consolidation or merger or shall transfer all or
substantially all of its assets to any Person, then and in each case, proper
provision shall be made so that the successors and assigns of the Surviving
Corporation shall assume the obligations set forth in this Section 8.13.
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 Community shall have approved
this Agreement and the Plan of Merger, and the consummation of the transactions
contemplated hereby and thereby, including the Merger, as and to the extent
required by Law, or by the provisions of any governing instruments.
(b) Regulatory Approvals. All Consents of, filings and registrations with,
and notifications to, all Regulatory Authorities required for consummation of
the Merger shall have been obtained or made and shall be in full force and
effect and all waiting periods required by Law shall have expired. No Consent
obtained from any Regulatory Authority which is necessary to consummate the
transactions contemplated hereby shall be conditioned or restricted in a manner
(other than matters relating to the raising of additional capital or the
disposition of Assets (including, but not limited to, any divestiture or
restrictions on the insurance activities of any Community Companies) or deposit
Liabilities and associated branches) which in the reasonable judgment of the
Board of Directors of UPC would so materially adversely impact the financial or
economic benefits of the transactions contemplated by this Agreement that, had
such condition or requirement been known, UPC would not, in its reasonable
judgment, have entered into this Agreement.
(c) Consents and Approvals. Each Party shall have obtained any and all
Consents required for consummation of the Merger (other than those referred to
in Section 9.1(b) of this Agreement) or for the preventing of any Default under
any Contract or Permit of such Party which, if not obtained or made, is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on such Party.
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(d) Legal Proceedings. No court or governmental or regulatory authority of
competent jurisdiction shall have enacted, issued, promulgated, enforced, or
entered any Law or Order (whether temporary, preliminary, or permanent) or
taken any other action which prohibits, restricts, or makes illegal
consummation of the transactions contemplated by this Agreement and the Plan of
Merger.
(e) Registration Statement. The Registration Statement shall be effective
under the 1933 Act, no stop orders suspending the effectiveness of the
Registration Statement shall have been issued, no action, suit, proceeding, or
investigation by the SEC to suspend the effectiveness thereof shall have been
initiated and be continuing, and all necessary approvals under state securities
Laws or the 1933 Act or 1934 Act relating to the issuance or trading of the
shares of UPC Common Stock issuable pursuant to the Merger shall have been
received.
(f) Exchange Listing. The shares of UPC Common Stock issuable pursuant to
the Merger shall have been approved for listing on the NYSE, subject to
official notice of issuance.
(g) Tax Matters. Each Party shall have received a written opinion of
counsel from Wyatt, Tarrant & Combs, in form reasonably satisfactory to such
Parties (the "Tax Opinion"), to the effect that (i) the Merger will constitute
a reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, (ii) the exchange in the Merger of Community Common Stock for UPC Common
Stock will not give rise to gain or loss to the shareholders of Community with
respect to such exchange (except to the extent of any cash received), and (iii)
none of Community or UPC will recognize gain or loss as a consequence of the
Merger. In rendering such Tax Opinion, such counsel shall be entitled to rely
upon representations of officers of Community and UPC reasonably satisfactory
in form and substance to such counsel.
9.2 CONDITIONS TO OBLIGATIONS OF UPC. The obligations of UPC to perform
this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following
conditions, unless waived by UPC pursuant to Section 11.6(a) of this Agreement:
(a) Representations and Warranties. For purposes of this Section 9.2(a),
the accuracy of the representations and warranties of Community set forth in
this Agreement shall be assessed as of the date of this Agreement and as of the
Effective Time with the same effect as though all such representations and
warranties had been made on and as of the Effective Time (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date). The representations and warranties of Community
set forth in Section 5.3 of this Agreement shall be true and correct (except
for inaccuracies which are de minimus in amount). The representations and
warranties of Community set forth in Sections 5.20, 5.21, and 5.22 of this
Agreement shall be true and correct in all material respects. There shall not
exist inaccuracies in the representations and warranties of Community set forth
in this Agreement (including the representations and warranties set forth in
Sections 5.3, 5.20, 5.21, and 5.22) such that the aggregate effect of such
inaccuracies has, or is reasonably likely to have, a Material Adverse Effect on
Community; provided that, for purposes of this sentence only, those
representations and warranties which are qualified by references to "material"
or "Material Adverse Effect" shall be deemed not to include such
qualifications.
(b) Performance of Agreements and Covenants. Each and all of the agreements
and covenants of Community 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. Community shall have delivered to UPC (i) a certificate,
dated as of the Effective Time and signed on its behalf by its chief executive
officer and its chief financial officer, to the effect that the conditions of
its obligations set forth in Section 9.2(a) and 9.2(b) of this Agreement have
been satisfied, and (ii) certified copies of resolutions duly adopted by
Community's Board of Directors and shareholders evidencing the taking of all
corporate action necessary to authorize the execution, delivery, and
performance of this Agreement and the Plan of Merger, and the consummation of
the transactions contemplated hereby and thereby, all in such reasonable detail
as UPC and its counsel shall request.
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(d) Affiliates Agreements. UPC shall have received from each affiliate of
Community the affiliates letter referred to in Section 8.11 of this Agreement.
(e) Maintenance of Certain Covenants, Etc. At the time of Closing, (i) the
total consolidated stockholders equity of Community shall have been not less
than $3,591,000 at June 30, 1997, and shall have increased since that date
through normal earnings growth; (ii) the tangible equity capital of Community
shall be not less than its reported level as of June 30, 1997, and shall have
increased since that time through normal earnings growth (less approved
dividends); (iii) Community shall own, free and clear of any Liens, all of the
outstanding capital stock of Subsidiaries; (iv) from June 30, 1997, there shall
have been no extraordinary sale of assets, nor any material investment
portfolio restructuring by any Community Company; (v) there shall have been no
special dividend declaration by the Community Companies since June 30, 1997;
and (vi) the acquisition can be accounted for on a pooling of interest basis.
The financial criteria and calculations set forth above shall be determined in
accordance with GAAP assuming that Community and each other Community Company
shall have been operated consistently in the normal course of their respective
businesses; provided however, that the effects of any balance sheet expansion
through abnormal, unusual, nonrecurring or out-of-the-ordinary borrowings or by
the realization of extraordinary or nonrecurring gains otherwise than in the
ordinary course of business or other income from the disposition of assets or
liabilities or through similar transactions shall be eliminated from the
calculations;
(f) Legal Opinion. Community shall have delivered to UPC an opinion of
counsel, dated as of the Closing Date, addressed to and in form and substance
satisfactory to UPC, to the effect that:
(i) Community is a Tennessee corporation duly organized, validly
existing, and in good standing under the laws of the State of Tennessee.
(ii) This Agreement has been duly and validly authorized, executed, and
delivered on behalf of Community by a duly authorized officer or representative
of Community, and (assuming this Agreement is a binding obligation of UPC)
constitutes a valid and binding obligation of Community enforceable in
accordance with its terms, subject as to enforceability to applicable
bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting
the enforcement of creditors' rights generally and subject to the application
of equitable principles and judicial discretion;
(iii) The execution, delivery and performance of this Agreement, and
the Plan of Merger, as appropriate, and the consummation of the transactions
contemplated herein and therein, including the Merger, have been duly and
validly authorized by all necessary corporate and shareholder action in respect
thereof on the part of Community.
(g) Employment Agreement. UPC and/or Holding shall have received an
executed Employment Agreement,in form and substance satisfactory to UPC and
which shall include a non-competition clause, from Mike Bodiford to serve as
city manager in Middleton, Tennessee.
9.3 CONDITIONS TO OBLIGATIONS OF COMMUNITY. The obligations of Community to
perform this Agreement and the Plan of Merger and consummate the Merger and the
other transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by Community pursuant to Section 11.6(b) of
this Agreement:
(a) Representations and Warranties. For purposes of this Section 9.3(a),
the accuracy of the representations and warranties of UPC set forth in this
Agreement shall be assessed as of the date of this Agreement and as of the
Effective Time with the same effect as though all such representations and
warranties had been made on and as of the Effective Time (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date). The representations and warranties of UPC set
forth in Section 6.3 of this Agreement shall be true and correct (except for
inaccuracies which are de minimus in amount). The representations and
warranties of UPC set forth in Section 6.14 of this Agreement shall be true and
correct in all material respects. There shall not exist inaccuracies in the
representations and warranties of UPC set forth in this Agreement (including
the representations and warranties set forth in Sections 6.3 and 6.14) such
that the aggregate effect of such inaccuracies has, or is reasonably likely to
have, a Material Adverse Effect on UPC; provided that, for purposes of this
sentence
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only, those representations and warranties which are qualified by references to
"material" or "Material Adverse Effect" shall be deemed not to include such
qualifications.
(b) Performance of Agreements and Covenants. Each and all of the agreements
and covenants of UPC to be performed and complied with pursuant to this
Agreement and the other agreements contemplated hereby prior to the Effective
Time shall have been duly performed and complied with in all material respects.
(c) Certificates. UPC shall have delivered to Community (i) a certificate,
dated as of the Effective Time and signed on its behalf by its chief executive
officer and its chief financial officer, to the effect that the conditions of
its obligations set forth in Section 9.3(a) and 9.3(b) of this Agreement have
been satisfied, and (ii) certified copies of resolutions duly adopted by UPC's
Board of Directors evidencing the taking of all corporate action necessary to
authorize the execution, delivery and performance of this Agreement, and the
consummation of the transactions contemplated hereby, all in such reasonable
detail as Community and its counsel shall request.
(d) Legal Opinion. UPC shall have delivered to Community an opinion of
counsel, which may be in-house counsel of UPC, dated as of the Closing Date,
addressed to and in form and substance satisfactory to Community, to the effect
that:
(i) UPC and Holding are Tennessee corporations duly organized, validly
existing, and in good standing under the laws of the State of Tennessee;
(ii) This Agreement and Plan of Merger has been duly and validly
authorized, executed, and delivered on behalf of UPC and Holding by a duly
authorized officer or representative thereof, and (assuming this Agreement is a
binding obligation of Community) constitutes a valid and binding obligation of
UPC and Holding enforceable in accordance with its terms, subject as to
enforceability to applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforcement of creditor's rights generally and
subject to the application of equitable principles and judicial discretion.
(iii) The execution, delivery and performance of this Agreement and the
Plan of Merger, as appropriate, and the consummation of the transactions
contemplated herein and therein, including the Merger, have been duly and
validly authorized by all necessary corporate and shareholder action in respect
thereof on the part of UPC and Holding.
(e) Employment Agreement. Mike Bodiford shall have been offered an
Employment Agreement with UPC and/or Holding, in form and substance
satisfactory to Community to serve as city manager in Middleton, Tennessee, and
such offer shall not have been withdrawn or materially amended by UPC and/or
Holding prior to Closing.
ARTICLE 10
TERMINATION
10.1 TERMINATION. Notwithstanding any other provision of this Agreement,
and notwithstanding the approval of this Agreement by the shareholders of
Community, this Agreement and the Plan of Merger may be terminated and the
Merger abandoned at any time prior to the Effective Time:
(a) By mutual consent of the Board of Directors of UPC and the Board of
Directors of Community; or
(b) By the Board of Directors of either Party (provided that the
terminating Party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in Section
9.2(a) of this Agreement in the case of Community and Section 9.3(a) in the
case of UPC or in material breach of any covenant or other agreement contained
in this Agreement) in the event of an inaccuracy of any representation or
warranty of the other Party contained in this Agreement which cannot be or has
not been cured within 30 days after
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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 Community and Section 9.3(a) of this Agreement
in the case of UPC; or
(c) By the Board of Directors of either Party (provided that the
terminating Party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in Section
9.2(a) of this Agreement in the case of Community and Section 9.3(a) in the
case of UPC or in material breach of any covenant or other agreement contained
in this Agreement) in the event of a material breach by the other Party of any
covenant or agreement contained in this Agreement which cannot be or has not
been cured within 30 days after the giving of written notice to the breaching
Party of such breach; or
(d) By the Board of Directors of either Party in the event (i) any Consent
of any Regulatory Authority required for consummation of the Merger and the
other transactions contemplated hereby shall have been denied by final
nonappealable action of such authority or if any action taken by such authority
is not appealed within the time limit for appeal, or (ii) the shareholders of
Community fail to vote their approval of this Agreement and the transactions
contemplated hereby as required by the TBCA at the Shareholders' Meeting where
the transactions were presented to such shareholders for approval and voted
upon; or
(e) By the Board of Directors of either Party in the event that the Merger
shall not have been consummated by June 30, 1998, if the failure to consummate
the transactions contemplated hereby on or before such date is not caused by
any willful breach of this Agreement by the Party electing to terminate
pursuant to this Section 10.1(e); or
(f) By the Board of Directors of either Party (provided that the
terminating Party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in Section
9.2(a) of this Agreement in the case of Community and Section 9.3(a) in the
case of UPC or in material breach of any covenant or other agreement contained
in this Agreement) in the event that any of the conditions precedent to the
obligations of such Party to consummate the Merger cannot be satisfied or
fulfilled by the date specified in Section 10.1(e) of this Agreement; or
(g) By the Board of Directors of Community, if it determines by a vote of a
majority of the members of its entire Board, at any time during the ten-day
period commencing two days after the Determination Date, if both of the
following conditions are satisfied:
(1) the Average Closing Price shall be less than the product of (i)
0.80 and (ii) the Starting Price; and
(2) (i) the quotient obtained by dividing the Average Closing Price by
the Starting Price (such number being referred to herein as the "UPC
Ratio") shall be less than (ii) the quotient obtained by dividing the Index
Price on the Determination Date by the Index Price on the Starting Date and
subtracting 0.15 from the quotient in this clause (2)(ii) (such number
being referred to herein as the "Index Ratio");
subject, however, to the following three sentences. If Community refuses to
consummate the Merger pursuant to this Section 10.1(g), it shall give prompt
written notice thereof to UPC; provided, that such notice of election to
terminate may be withdrawn at any time within the aforementioned ten-day
period. During the five-day period commencing with its receipt of such notice,
UPC shall have the option to elect to increase the Exchange Ratio to equal the
lesser of (i) the quotient obtained by dividing (1) the product of 0.80, the
Starting Price, and the Exchange Ratio (as then in effect) by (2) the Average
Closing Price, and (ii) the quotient obtained by dividing (1) the product of
the Index Ratio and the Exchange Ratio (as then in effect) by (2) the UPC
Ratio. If UPC makes an election contemplated by the preceding sentence, within
such five-day period, it shall give prompt written notice to Community of such
election and the revised Exchange Ratio, whereupon no termination shall have
occurred pursuant to this Section 10.1(g) and this Agreement shall remain in
effect in accordance with its terms (except as the Exchange Ratio shall
27
<PAGE> 120
have been so modified), and any references in this Agreement to "Exchange
Ratio" shall thereafter be deemed to refer to the Exchange Ratio as adjusted
pursuant to this Section 10.1(g).
For purposes of this Section 10.1(g), the following terms shall have the
meanings indicated:
"Average Closing Price" shall mean the average of the daily last sales
prices of UPC Common Stock as reported on the NYSE (as reported by The Wall
Street Journal or, if not reported thereby, another authoritative source as
chosen by UPC) for the 20 consecutive full trading days in which such shares
are traded on the NYSE ending at the close of trading on the Determination
Date.
"Determination Date" shall mean the later of the date (i) of the
Shareholders' Meeting or (ii) on which the last consent of the Federal Reserve
System shall be received.
"Index Group" shall mean the 17 bank holding companies listed below, the
common stocks of all of which shall be publicly traded and as to which there
shall not have been, since the Starting Date and before the Determination Date,
any public announcement of a proposal for such company to be acquired or for
such company to acquire another company or companies in transactions with a
value exceeding 25% of the acquiror's market capitalization. In the event that
any such company or companies are removed from the Index Group, the weights
(which shall be determined based upon the number of outstanding shares of
common stock) shall be redistributed proportionately for purposes of
determining the Index Price. The 17 bank holding companies and the weights
attributed to them are as follows:
<TABLE>
<CAPTION>
BANK HOLDING COMPANIES WEIGHTING
---------------------------------- ---------
<S> <C>
AmSouth Bancorporation.......... 5.75%
BB&T Corporation................... 7.55
Crestar Financial Corporation... 7.75
First American Corporation...... 4.12
First of America Bank Corporation.. 6.18
First Security Corporation......... 8.12
First Tennessee National Corporation 4.49
Firstar Corporation............. 10.12
Huntington Bancshares, Inc...... 11.16
Marshall & Ilsley.................. 6.22
Mercantile Bancorporation, Inc.. 5.19
National Commerce Bancorp....... 3.44
Old Kent Financial Corporation..... 3.34
Regions Financial Corporation... 9.58
SouthTrust Corporation.......... 6.99
------
Total........................... 100.00%
======
</TABLE>
"Index Price" on a given date shall mean the weighted average (weighted in
accordance with the factors listed above) of the closing prices of the
companies composing the Index Group.
"Starting Date" shall mean the fourth full trading day after the
announcement by press release of the Merger.
"Starting Price" shall mean the closing price per share of UPC Common Stock
as reported on the NYSE (as reported by The Wall Street Journal or, if not
reported thereby, another authoritative source as chosen by UPC) on the
Starting Date.
If any company belonging to the Index Group or UPC declares or effects a
stock dividend, reclassification, recapitalization, split-up, combination,
exchange of shares, or similar transaction between the date of this Agreement
and the Determination Date, the prices for the common stock of such company or
UPC shall be appropriately adjusted for the purposes of applying this Section
10.1(g).
10.2 EFFECT OF TERMINATION. In the event of the termination and abandonment
of this Agreement pursuant to Section 10.1 of this Agreement, this Agreement,
the Plan of Merger, and the Supplemental Letter shall become void and have no
effect, except that (i)
28
<PAGE> 121
the provisions of this Section 10.2 and Article 11 and Section 8.6(b) of this
Agreement shall survive any such termination and abandonment, and (ii) a
termination pursuant to Sections 10.1(b), 10.1(c), or 10.1(f) of this Agreement
shall not relieve the breaching Party from Liability for an uncured willful
breach of a representation, warranty, covenant, or agreement giving rise to
such termination.
10.3 NON-SURVIVAL OF REPRESENTATIONS AND COVENANTS. The respective
representations, warranties, obligations, covenants, and agreements of the
Parties shall not survive the Effective Time except this Section 10.3 and
Articles 2, 3, 4 and 11 and Sections 8.11, 8.12 and 8.13 of this Agreement, the
provisions of the Supplemental Letter and any other such provisions 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: (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by, or
under common control with such Person; (ii) any officer, director, partner,
employer, or direct or indirect beneficial owner of any 10% or greater equity
or voting interest of such Person; or (iii) any other Person for which a Person
described in clause (ii) acts in any such capacity.
"AGREEMENT" shall mean this Agreement and Plan of Reorganization, including
the Exhibits delivered pursuant hereto and incorporated herein by reference.
"ASSETS" of a Person shall mean all of the assets, properties, businesses,
and rights of such Person of every kind, nature, character and description,
whether real, personal or mixed, tangible or intangible, accrued or contingent,
or otherwise relating to or utilized in such Person's business, directly or
indirectly, in whole or in part, whether or not carried on the books and
records of such Person, and whether or not owned in the name of such Person or
any Affiliate of such Person and wherever located.
"BHC ACT" shall mean the federal Bank Holding Company Act of 1956, as
amended.
"CERTIFICATE OF MERGER" shall mean the Certificate of Merger to be executed
by Community and filed with the Secretary of State of the State of Tennessee
relating to the Merger as contemplated by Section 1.1 of this Agreement.
"CLOSING DATE" shall mean the date on which the Closing occurs.
"COMMUNITY COMMON STOCK" shall mean the $1.00 par value common stock of
Community.
"COMMUNITY COMPANIES" shall mean, collectively, Community and all Community
Subsidiaries.
"COMMUNITY DISCLOSURE MEMORANDUM" shall mean the written information
entitled "First Community Bancshares Inc. Disclosure Memorandum" delivered
prior to the date of this Agreement to UPC describing in reasonable detail the
matters contained therein and, with respect to each disclosure made therein,
specifically referencing each Section of this Agreement under which such
disclosure is being made. Information disclosed with respect to one Section
shall not be deemed to be disclosed for purposes of any other Section not
specifically referenced with respect thereto.
29
<PAGE> 122
"COMMUNITY FINANCIAL STATEMENTS" shall mean (i) the consolidated balance
sheets (including related notes and schedules, if any) of Community as of
September 30, 1997, and December 31, 1996, 1995 and 1994, and the related
statements of earnings, changes in shareholders' equity, and cash flows
(including related notes and schedules, if any) for the nine months ended
September 30, 1997, and for each of the three years ended December 31, 1996,
1995 and 1994, and (ii) the consolidated balance sheets of Community (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) with respect to periods ended subsequent to September 30,
1997.
"COMMUNITY SUBSIDIARIES" shall mean the Subsidiaries of Community, which
shall include the Community Subsidiaries described in Section 5.4 of the
Community Disclosure Memorandum and any corporation, bank, savings association,
or other organization acquired as a Subsidiary of Community in the future and
owned by Community at the Effective Time.
"CONSENT" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
"CONTRACT" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease, obligation,
plan, practice, restriction, understanding, or undertaking of any kind or
character, or other document to which any Person is a party or that is binding
on any Person or its capital stock, Assets, or business.
"DEFAULT" shall mean (i) any breach or violation of or default under any
Contract, Order, or Permit, (ii) any occurrence of any event that with the
passage of time or the giving of notice or both would constitute a breach or
violation of or default under any Contract, Order, or Permit, or (iii) any
occurrence of any event that with or without the passage of time or the giving
of notice would give rise to a right to terminate or revoke, change the current
terms of, or renegotiate, or to accelerate, increase, or impose any Liability
under, any Contract, Order or Permit.
"ENVIRONMENTAL LAWS" shall mean all Laws relating to pollution or
protection of human health or the environment (including ambient air, surface
water, ground water, land surface or subsurface strata) and which are
administered, interpreted or enforced by the United States Environmental
Protection Agency and state and local agencies with jurisdiction over, and
including common law in respect of, pollution or protection of the environment,
including the Comprehensive Environmental Response Compensation and Liability
Act, as amended, 42 U.S.C. 9601 et seq. ("CERCLA"), the Resource Conservation
and Recovery Act, as amended, 42 U.S.C. 6901 et seq. ("RCRA"), and other Laws
relating to emissions, discharges, releases, or threatened releases of any
Hazardous Material, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of any
Hazardous Material.
"ERISA" shall mean the Employee Retirement Income Community Act of 1974, as
amended.
"EXHIBITS" 1 through 4, inclusive, shall mean the Exhibits so marked,
copies of which are attached to this Agreement. Such Exhibits are hereby
incorporated by reference herein and made a part hereof, and may be referred to
in this Agreement and any other related instrument or document without being
attached hereto.
"GAAP" shall mean generally accepted accounting principles, consistently
applied during the periods involved.
"HAZARDOUS MATERIAL" shall mean (i) any hazardous substance, hazardous
material, hazardous waste, regulated substance, or toxic substance (as those
terms are defined by any applicable Environmental Laws) and (ii) any chemicals,
pollutants, contaminants, petroleum, petroleum products, or oil (and
specifically shall include asbestos requiring abatement, removal, or
encapsulation pursuant to the requirements of governmental authorities and any
polychlorinated biphenyls).
"HOLDING COMMON STOCK" shall mean the $1.00 par value common stock of
Holding.
"HOLA" shall mean the Home Owners' Loan Act of 1933, as amended.
"HSR ACT" shall mean Section 7A of the Clayton Act, as added by Title II of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
rules and regulations promulgated thereunder.
30
<PAGE> 123
"INTELLECTUAL PROPERTY" shall mean copyrights, patents, trademarks, service
marks, service names, trade names, applications therefor, technology rights and
licenses, computer software (including any source or object codes therefor or
documentation relating thereto), trade secrets, franchises, know-how,
inventions, and other intellectual property rights.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder.
"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 property Taxes not yet due
and payable, and (ii) for depository institution Subsidiaries of a Party,
pledges to secure deposits and other Liens incurred in the ordinary course of
the banking business.
"LITIGATION" shall mean any action, arbitration, cause of action, claim,
complaint, criminal prosecution, demand letter, governmental or other
examination or investigation, hearing, inquiry, administrative or other
proceeding, or notice (written or oral) by any Person alleging potential
Liability or requesting information relating to or affecting a Party, its
business, its Assets (including Contracts related to it), or the transactions
contemplated by this Agreement, but shall not include regular, periodic
examinations of depository institutions and their Affiliates by Regulatory
Authorities.
"MATERIAL" for purposes of this Agreement shall be determined in light of
the facts and circumstances of the matter in question; provided that any
specific monetary amount stated in this Agreement shall determine materiality
in that instance.
"MATERIAL ADVERSE EFFECT" on a Party shall mean an event, change, or
occurrence which, individually or together with any other event, change, or
occurrence, has a material adverse impact on (i) the financial position,
business, or results of operations of such Party and its Subsidiaries, taken as
a whole, or (ii) the ability of such Party to perform its obligations under
this Agreement or to consummate the Merger or the other transactions
contemplated by this Agreement, provided that "Material Adverse Effect" and
"material adverse impact" shall not be deemed to include the impact of (a)
changes in banking and similar Laws of general applicability or interpretations
thereof by courts or governmental authorities, (b) changes in GAAP or
regulatory accounting principles generally applicable to banks, savings
associations, and their holding companies, (c) actions and omissions of a Party
(or any of its Subsidiaries) taken with the prior informed written consent of
the other Party in contemplation of the transaction contemplated hereby, and
(d) the direct effects of compliance with this Agreement (including the expense
associated with the vesting of benefits under the various employee benefit
plans of Community 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.
"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.
31
<PAGE> 124
"OPERATING PROPERTY" shall mean any property owned by the Party in question
or by any of its Subsidiaries or in which such Party or Subsidiary holds a
security interest, and, where required by the context, includes the owner or
operator of such property, but only with respect to such property.
"ORDER" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or writ
of any federal, state, local, or foreign or other court, arbitrator, mediator,
tribunal, administrative agency, or Regulatory Authority.
"PARTICIPATION FACILITY" shall mean any facility or property in which the
Party in question or any of its Subsidiaries participates in the management
and, where required by the context, said term means the owner or operator of
such facility or property, but only with respect to such facility or property.
"PARTY" shall mean either Community or UPC, and "PARTIES" shall mean both
Community and UPC.
"PERMIT" shall mean any federal, state, local, and foreign governmental
approval, authorization, certificate, easement, filing, franchise, license,
notice, permit, or right to which any Person is a party or that is or may be
binding upon or inure to the benefit of any Person or its securities, Assets or
business.
"PLAN OF MERGER" shall mean the plan of merger providing for the Merger, in
substantially the form of Exhibit 1.
"PERSON" shall mean a natural person or any legal, commercial, or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting in a
representative capacity.
"PROXY STATEMENT" shall mean the proxy statement used by Community to
solicit the approval of its shareholders of the transactions contemplated by
this Agreement and the Plan of Merger, which shall include the prospectus of
UPC relating to the issuance of the UPC Common Stock to holders of Community
Common Stock.
"REGISTRATION STATEMENT" shall mean the Registration Statement on Form S-4,
or other appropriate form, including any pre-effective or post-effective
amendments or supplements thereto, filed with the SEC by UPC under the 1933 Act
with respect to the shares of UPC Common Stock to be issued to the shareholders
of Community in connection with the transactions contemplated by this
Agreement.
"REGULATORY AUTHORITIES" shall mean, collectively, the Federal Trade
Commission, the United States Department of Justice, the Board of the Governors
of the Federal Reserve System, the Office of Thrift Supervision (including its
predecessor, the Federal Home Loan Bank Board), the Office of the Comptroller
of the Currency, the Federal Deposit Insurance Corporation, all state
regulatory agencies having jurisdiction over the Parties and their respective
Subsidiaries, the NYSE, the NASD, and the SEC.
"REPRESENTATIVE" shall mean any investment banker, financial advisor,
attorney, accountant, consultant, or other representative of a Person.
"RIGHTS" shall mean all arrangements, calls, commitments, Contracts,
options, rights to subscribe to, scrip, understandings, warrants, or other
binding obligations of any character whatsoever relating to, or securities or
rights convertible into or exchangeable for, shares of the capital stock of a
Person or by which a Person is or may be bound to issue additional shares of
its capital stock or other Rights.
"SEC DOCUMENTS" shall mean all forms, proxy statements, registration
statements, reports, schedules, and other documents filed, or required to be
filed, by a Party or any of its Subsidiaries with any Regulatory Authority
pursuant to the Securities Laws.
"SECURITIES LAWS" shall mean the 1933 Act, the 1934 Act, the Investment
Company Act of 1940, as amended, the Investment Advisors Act of 1940, as
amended, the Trust Indenture Act of 1939, as amended, and the rules and
regulations of any Regulatory Authority promulgated thereunder.
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<PAGE> 125
"SHAREHOLDERS' MEETING" shall mean the meeting of the shareholders of
Community to be held pursuant to Section 8.1 of this Agreement, including any
adjournment or postponements thereof.
"SUBSIDIARIES" shall mean all those corporations, banks, associations, or
other entities of which the entity in question owns or controls 10% or more of
the outstanding equity securities either directly or through an unbroken chain
of entities as to each of which 10% or more of the outstanding equity
securities is owned directly or indirectly by its parent; provided, there shall
not be included any such entity acquired through foreclosure or any such entity
the equity securities of which are owned or controlled in a fiduciary capacity.
"SUPPLEMENTAL LETTER" shall mean the supplemental letter of even date
herewith relating to certain understandings and agreements in addition to those
included in this Agreement, substantially in the form of Exhibit 4.
"SURVIVING CORPORATION" shall mean Holding as the surviving corporation
resulting from the Merger.
"TAX" or "TAXES" shall mean any federal, state, county, local, or foreign
income, profits, franchise, gross receipts, payroll, sales, employment, use,
property, withholding, excise, occupancy, and other taxes, assessments,
charges, fares, or impositions, including interest, penalties, and additions
imposed thereon or with respect thereto.
"UPC CAPITAL STOCK" shall mean, collectively, the UPC Common Stock, the UPC
Preferred Stock and any other class or series of capital stock of UPC.
"UPC COMMON STOCK" shall mean the $5.00 par value common stock of UPC.
"UPC COMPANIES" shall mean, collectively, UPC and all UPC Subsidiaries.
"UPC DISCLOSURE MEMORANDUM" shall mean the written information entitled
"Union Planters Corporation Disclosure Memorandum" delivered prior to the date
of this Agreement to Community describing in reasonable detail the matters
contained therein and, with respect to each disclosure made therein,
specifically referencing each Section of this Agreement under which such
disclosure is being made. Information disclosed with respect to one Section
shall be deemed to be disclosed for purposes of any other Section not
specifically referenced with respect thereto.
"UPC FINANCIAL STATEMENTS" shall mean (i) the consolidated balance sheets
(including related notes and schedules, if any) of UPC as of September 30,
1997, and December 31, 1996, 1995 and 1994, and the related statements of
earnings, changes in shareholders' equity, and cash flows (including related
notes and schedules, if any) for the nine months ended September 30, 1997, and
for each of the three years ended December 31, 1996, 1995 and 1994, as filed by
UPC in SEC Documents, and (ii) the consolidated balance sheets of UPC
(including related notes and schedules, if any) and related statements of
earnings, changes in shareholders' equity, and cash flows (including related
notes and schedules, if any) included in SEC Documents filed with respect to
periods ended subsequent to September 30, 1997.
"UPC PREFERRED STOCK" shall mean the no par value preferred stock of UPC
and shall include the (i) Series A Preferred Stock and (ii) Series E, 8%
Cumulative, Convertible Preferred Stock, of UPC ("UPC Series E Preferred
Stock").
"UPC RIGHTS" shall mean the preferred stock purchase rights issued pursuant
to the UPC Rights Agreement.
"UPC RIGHTS AGREEMENT" shall mean that certain Rights Agreement, dated
January 19, 1989, between UPC and UPNB, as Rights Agent.
33
<PAGE> 126
"UPC SUBSIDIARIES" shall mean the Subsidiaries of UPC and any corporation,
bank, savings association, or other organization acquired as a Subsidiary of
UPC in the future and owned by UPC at the Effective Time.
(b) The terms set forth below shall have the meanings ascribed thereto in
the referenced sections:
<TABLE>
<S> <C>
Allowance Section 5.9
Average Closing Price Section 10.1(g)
Closing Section 1.2
Determination Date Section 10.1(g)
Effective Time Section 1.3
ERISA Affiliate Section 5.15(c)
Exchange Agent Section 4.1
Exchange Ratio Section 3.1(c)
Indemnified Party Section 8.14(a)
Index Group Section 10.1(g)
Index Price Section 10.1(g)
Index Ratio Section 10.1(g)
Merger Section 1.1
Community Benefit Plans Section 5.15(a)
Community Contracts Section 5.16
Community ERISA Plan Section 5.15(a)
Community Pension Plan Section 5.15(a)
Community SEC Reports Section 5.5(a)
Starting Date Section 10.1(g)
Starting Price Section 10.1(g)
Takeover Laws Section 5.21
Tax Opinion Section 9.1(h)
UPC Ratio Section 10.1(g)
UPC SEC Reports Section 6.4(a)
</TABLE>
(c) Any singular term in this Agreement shall be deemed to include the
plural, and any plural term the singular. Whenever the words "include,"
"includes," or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation."
11.2 EXPENSES.
(a) Except as otherwise provided in this Section 11.2, each of the Parties
shall bear and pay all direct costs and expenses incurred by it or on its
behalf in connection with the transactions contemplated hereunder, including
filing, registration and application fees, printing fees, and fees and expenses
of its own financial or other consultants, investment bankers, accountants, and
counsel, except that UPC shall bear and pay the filing fees payable in
connection with the Registration Statement and the Proxy Statement and the
printing costs incurred in connection with the printing of the Registration
Statement and the Proxy Statement.
(b) Nothing contained in this Section 11.2 shall constitute or shall be
deemed to constitute liquidated damages for the willful breach by a Party of
the terms of this Agreement or otherwise limit the rights of the nonbreaching
Party.
11.3 BROKERS AND FINDERS. Each of the Parties represents and warrants that
neither it nor any of its officers, directors, employees, or Affiliates has
employed any broker or finder or incurred any Liability for any financial
advisory fees, investment bankers' fees, brokerage fees, commissions, or
finders' fees in connection with this Agreement or the transactions
contemplated hereby. In the event of a claim by any broker or finder based upon
his or its representing or being retained by or allegedly representing or being
retained by Community or UPC, each of Community and UPC, as the case may be,
agrees to indemnify and hold the other Party harmless of and from any Liability
in respect of any such claim.
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<PAGE> 127
11.4 ENTIRE AGREEMENT. Except as otherwise expressly provided herein, this
Agreement (including the other documents and instruments referred to herein or
executed in connection with this Agreement) constitutes the entire agreement
between the Parties with respect to the transactions contemplated hereunder and
supersedes all prior arrangements or understandings with respect thereto,
written or oral. Nothing in this Agreement expressed or implied, is intended to
confer upon any Person, other than the Parties or their respective successors,
any rights, remedies, obligations, or liabilities under or by reason of this
Agreement, other than as provided in Sections 8.12 and 8.14 of this Agreement.
11.5 AMENDMENTS. To the extent permitted by Law, this Agreement may be
amended by a subsequent writing signed by each of the Parties upon the approval
of the Boards of Directors of each of the Parties, whether before or after
shareholder approval of this Agreement and the Plan of Merger has been
obtained; provided, that after any such approval by the holders of Community
Common Stock, there shall be made no amendment that modifies in any material
respect the consideration to be received by the holders of Community Common
Stock without the further approval of such shareholders.
11.6 WAIVERS.
(a) Prior to or at the Effective Time, UPC, acting through its Board of
Directors, chief executive officer, or other authorized officer, shall have the
right to waive any Default in the performance of any term of this Agreement by
Community, to waive or extend the time for the compliance or fulfillment by
Community of any and all of its obligations under this Agreement, and to waive
any or all of the conditions precedent to the obligations of UPC under this
Agreement, except any condition which, if not satisfied, would result in the
violation of any Law. No such waiver shall be effective unless in writing
signed by a duly authorized officer of UPC.
(b) Prior to or at the Effective Time, Community, acting through its Board
of Directors, chief executive officer, or other authorized officer, shall have
the right to waive any Default in the performance of any term of this Agreement
by UPC, to waive or extend the time for the compliance or fulfillment by UPC of
any and all of its obligations under this Agreement, and to waive any or all of
the conditions precedent to the obligations of Community 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 Community.
(c) The failure of any Party at any time or times to require performance of
any provision hereof shall in no manner affect the right of such Party at a
later time to enforce the same or any other provision of this Agreement. No
waiver of any condition or of the breach of any term contained in this
Agreement in one or more instances shall be deemed to be or construed as a
further or continuing waiver of such condition or breach or a waiver of any
other condition or of the breach of any other term of this Agreement.
11.7 ASSIGNMENT. Except as expressly contemplated hereby, neither this
Agreement nor any of the rights, interests, or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise) without
the prior written consent of the other Party. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the Parties and their respective successors and assigns.
11.8 NOTICES. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, by registered or certified mail, postage pre-paid, or
by courier or overnight carrier, to the persons at the addresses set forth
below (or at such other address as may be provided hereunder), and shall be
deemed to have been delivered as of the date so delivered:
<TABLE>
<S> <C>
Community: First Community Bancshares, Inc.
101 N. Main Street
Middleton, Tennessee 38052
Telecopy Number: (901) 376-8441
Attention: James S. Simpson
Chief Executive Officer
</TABLE>
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<PAGE> 128
<TABLE>
<S> <C>
Copy to Counsel: Baker, Donelson, Bearman & Caldwell, P.C.
165 Madison Avenue, Suite 2000
Memphis, Tennessee 38103
Telecopy Number: (577) 2303
Attention: Robert Walker
UPC: Union Planters Corporation
7130 Goodlett Farms Parkway
Memphis, Tennessee 38018
Telecopy Number: (901) 580-2877
Attention: Jackson W. Moore
President
Copy to Counsel: Union Planters Corporation
7130 Goodlett Farms Parkway
Memphis, Tennessee 38018
Telecopy Number: (901) 580-2939
Attention: E. James House, Jr.
Manager, Legal Division
Wyatt, Tarrant & Combs
6075 Poplar Avenue
Suite 650
Memphis, Tennessee 38119
Telecopy Number: (901) 587-1010
Attention: Virginia B. Wilson
</TABLE>
11.9 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the Laws of the State of Tennessee, without regard to any
applicable conflicts of Laws.
11.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
11.11 CAPTIONS. The captions contained in this Agreement are for reference
purposes only and are not part of this Agreement.
11.12 INTERPRETATIONS. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against any party, whether
under any rule of construction or otherwise. No party to this Agreement shall
be considered the draftsman. The Parties acknowledge and agree that this
Agreement has been reviewed, negotiated, and accepted by all Parties and their
attorneys and shall be construed and interpreted according to the ordinary
meaning of the words used so as fairly to accomplish the purposes and
intentions of all parties hereto.
11.13 ENFORCEMENT OF AGREEMENT. The Parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
was not performed in accordance with its specific terms or was otherwise
breached. It is accordingly agreed that the Parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
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, Signatures each of the Parties has caused this
Agreement to be executed on its behalf and its corporate seal to be hereunto
affixed and attested by officers thereunto as of the day and year first above
written.
<TABLE>
<S> <C>
ATTEST: FIRST COMMUNITY BANCSHARES, INC.
By:/s/ Richard B. Weatherbee By:/s/ James S. Simpson
------------------------------- -------------------------------
Richard B. Weatherbee James S. Simpson
Secretary President and CEO
[CORPORATE SEAL]
ATTEST: UNION PLANTERS CORPORATION
By:/s/ E. James House, Jr. By:/s/ Jackson W. Moore
------------------------------- -------------------------------
E. James House, Jr. Jackson W. Moore
Secretary President
[CORPORATE SEAL]
ATTEST: UNION PLANTERS HOLDING CORPORATION, INC.
By:/s/ Lynn L. Lanigan By:/s/ Jackson W. Moore
------------------------------- -------------------------------
Lynn L. Lanigan Jackson W. Moore
Secretary President
[CORPORATE SEAL]
</TABLE>
37
<PAGE> 130
EXHIBIT 2
EMPLOYMENT AGREEMENT
This Employment Agreement, made and entered into this ___ day of,
19___, between Union Planters Corporation ("UPC"); and Mike Bodiford
("Executive").
In consideration of the mutual covenants, promises and agreements
herein made, and Ten Dollars ($10.00) in hand paid by each party hereto to the
other, the receipt and sufficiency of which is hereby acknowledged, the parties
agree as follows:
1. Employment. UPC hereby employs Executive's full-time services as
City Manager for a period of time commencing on the Effective Date, as defined
in that certain Agreement and Plan of Reorganization by and between Union
Planters Corporation, Union Planters Holding Corporation, and First Community
Bancshares, Inc., dated November 10, 1997 and ending three (3) years from said
Effective Date. Executive hereby accepts such employment, shall diligently
perform the duties customarily performed by such officer, subject to the
authority of the management of UPC and shall hold and perform all of the
responsibilities and duties prescribed by the management of UPC.
2. Base Salary. As compensation for services to UPC, UPC agrees to pay
to Executive the sum of Sixty Eight Thousand Dollars ($68,000) per annum
payable in twenty-four (24) as equal as possible payments, one such payment
being made twice each month. Such compensation may be increased annually by UPC
subject to an annual review by UPC of the Executive's performance.
3. Benefits. UPC agrees to provide Executive the following benefits,
commencing with the date hereof or as soon hereafter as practicable, (all of
which shall vest as of the date hereof or at such date or dates as provided in
the plan documents establishing such benefits) and continuing for so long as
Executive is employed under this Agreement or any extension thereof.
(a) The fringe benefit package presently offered or to be
offered in the future to the employees of UPC.
(b) An annual paid vacation in accordance with UPC's
Personnel Policy. At least two (2) weeks of such vacation shall be
taken consecutively.
(c) Any other benefits generally provided to UPC employees as
the Board of Directors may, from time to time, approve.
4. Expenses. Executive is authorized to incur necessary and customary
expenses in connection with the business of UPC. UPC will pay or reimburse
Executive for
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such expenses upon presentation by Executive of the appropriate records which
verify such expenses in accordance with expense policies.
5. Termination. This Agreement shall terminate upon the first to occur
of the following:
(a) The expiration of the term provided for in Paragraph 1;
(b) The death of the Executive;
(c) The permanent disability of Executive, as defined in
Paragraph 7;
(d) Termination by Executive or UPC "for cause," as defined in
Paragraph 8;
(e) Termination by UPC without cause or by Executive with
Good Reason as defined in Paragraph 9, provided that in either of such
events UPC shall pay to Executive an amount which is equal to the
greater of (i) the Base Salary then in effect for the remaining term
of this Agreement, or (ii) six months' Base Salary then in effect;
(f) Termination by Executive without Good Reason as defined in
Paragraph 9, provided that Executive shall give at least ninety (90)
days written prior notice of termination. UPC reserves the right to
accelerate Executive's termination under this provision; provided that
in such instance, UPC shall pay to Executive an amount equal to one
month's Base Salary and all other vested benefits of Executive;
The only event which will justify termination of Executive without
payment of severance and other benefits by UPC is termination by UPC "for
cause," as specified in this Paragraph 5(d). In the event of Executive's death,
nothing contained in this Paragraph 5 shall be construed to abrogate the
obligations of UPC to Executive's personal representative or heirs, as the case
may be, with respect to all rights which shall have accrued prior to
termination.
6. Noncompetition. During the term specified in Paragraph 1 hereof,
the Executive covenants and agrees that: (a) the Executive shall not
communicate or disclose to any unauthorized person or use for the Executive's
own benefit, without the prior written consent of the Corporation, confidential
information concerning the business, methods of operation or affairs of the
Company; and (b) the Executive shall not, directly or indirectly, on his or her
own behalf, or as an employee, representative, or agent of a third party, by
ownership of any type of interest in any business enterprise or by any other
means whatsoever, engage in any business or activities which are similar to or
competitive with the Corporation's business (a "Competitor's Business") or
become associated with or render
2
<PAGE> 132
services to a Competitor's Business. For the purposes of this paragraph, the
term "Competitor's Business" shall apply only to such businesses or activities
conducted by a competitor of the Corporation in Hardeman County, Tennessee; and
(c) the Executive shall not, directly or indirectly, call upon or solicit any
customers of the Company or any presently existing or future Affiliate which
operates within Hardeman County, Tennessee for any purpose or business that is
competitive with the Company's business.
The covenants and agreements contained in Paragraphs 6(b) and 6(c)
hereof shall survive an event of termination as described in Paragraph 5(e) for
the period of time during which Base Salary continues to be paid pursuant to
the terms of said Paragraphs.
7. Disability. As used in Paragraph 5(c), "permanent disability" shall
mean six (6) months of substantially continuous disability. Disability shall be
deemed "substantially continuous" if, as a practical matter, Executive, by
reason of mental or physical health, is unable to sustain reasonably long
periods of substantial performance of duties. Frequently long illnesses, though
different from the preceding illness and though separated by relatively short
periods of performance, shall be deemed to be "substantially continuous." The
determination of Executive's disability to perform the duties of the position
shall be made in good faith after appropriate consultation with physicians who
are familiar with Executive's health. In this regard, Executive hereby consents
to medical examinations by such physicians and medical consultants as UPC shall
from time to time require. Thirty (30) days notice of termination for permanent
disability shall be given in writing, stating bases upon which such termination
is made.
8. Termination for Cause. As used in Paragraph 5(d), termination "for
cause" shall be deemed to have occurred if either party has breached this
Agreement and the non-breaching party gives notice in writing, delivered to the
breaching party and providing ten (10) calendar days, from the date of delivery
of the notice, within which the breaching party has the opportunity to cure, if
possible, the breach. In addition, cause for termination shall exist if
Executive engages in a conflict of interest which shall exclusively mean
engaging in any of the following conduct while an employee of UPC: (1) willful
and knowing dishonesty in communication of any kind on any material subject for
any purpose either to UPC or to any person or entity for or on behalf of UPC;
(2) obtaining from any person or entity, other than from UPC, anything of value
in return for or because of rendering service or advice which, under the
circumstances, might reasonably be construed as part of the duties expected of
an employee of UPC; (3) use of more than an insubstantial and quantitatively
small amount of time during normal business hours of UPC for activities not
calculated and reasonably designed to produce profit for UPC; (4) theft,
embezzlement, false entries on records, misapplication of funds or property,
misappropriation of any asset, any conduct resulting in conversion of any kind,
or any actual or constructive fraud; (5) at any time during or after employment
at UPC, imparting Confidential Information, whether proprietary or
non-proprietary, to any person other than (i) an authorized employee of UPC; or
(ii) as required by law, or (iii) as part of a privileged communication to an
attorney; (6) gross neglect of duty, including, but not limited to, refusal to
attend to the duties of employment at
3
<PAGE> 133
UPC; (7) participating in any conduct involving moral turpitude or which
results in public disgrace including, but not limited to, conduct for which
there is probable cause to believe that, if criminally prosecuted, such conduct
would be adjudged felonious; (8) counseling, advising, assisting, procuring or
aiding any employee of UPC in any above-recited conflict of interest; (9)
knowing, believing or having reason to know or believe that an employee of UPC
has, is, or is about to engage in any above-recited conflict of interest and
not revealing said knowledge or belief and the reason for it to UPC; (10)
receiving, during the term of this Agreement, compensation, income, any thing
of value, or a future interest in or future entitlement to compensation, income
or a thing of value, from any person or entity who or which is engaged in the
same or substantially the same business as UPC in the same product, service or
geographical market, except stock dividends and/or capital gains from passive
investments in financial institutions by Executive made in the ordinary course
of business and as part of Executive's investment portfolio. However, a
conflict of interest shall not be deemed to exist merely because of a
difference of opinion between Executive and UPC, or any employees, directors or
officers of either, as to philosophy of management or other personal beliefs.
9. Termination for Good Reason. Executive shall be entitled to
terminate employment hereunder for Good Reason. The term "Good Reason" shall
mean (i) a requirement that Executive be based at any location not within
Hardeman County, Tennessee, or a substantial increase in Executive's travel for
business purposes, (ii) the assignment to Executive of any duties materially
inconsistent with Executive's position, authority, duties or responsibilities
as contemplated by Paragraph 1 of this Agreement, excluding for this purpose an
isolated, insubstantial and inadvertent action not taken in bad faith and which
is remedied by UPC promptly after receipt of notice thereof by Executive, or
(iii) a material reduction in Executive's benefits, perquisites, or contingent
benefits except as part of an overall program applied uniformly and with
equitable effect among all members of senior management of affiliate banks or
subsidiaries of UPC. Executive's right to terminate employment under this
Section 9 shall not be affected by Executive's incapacity due to physical or
mental illness. Executive's continued employment hereunder shall not constitute
consent to or waiver of rights with respect to any circumstance constituting
Good Reason hereunder.
10. Definition of Confidential Information and Authorized Employee.
Confidential information means any information not disseminated by UPC to the
general public (including identity of customers, clients, business contacts,
suppliers of goods and/or services, and any transaction by or between such
person or entities and UPC) and which Executive used or knew of because of his
employment at UPC; PROVIDED: excluding specific information about methods not
generally employed in the industry at large and which are used or known to be
contemplated for use in the future by UPC for the purpose of gaining
proprietary advantage over competitors; general knowledge of skills and
techniques acquired or improved as a result of the employment experience at UPC
shall not constitute confidential information. Authorized employee means the
members of the Board of Directors; the Chief Executive Officers; the
Presidents; Executive Vice Presidents; immediate supervisors; a fellow employee
on a need-to-know basis only; and any UPC employee on
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<PAGE> 134
instruction from immediate supervisors. Employee shall be entitled at all times
to disclose confidential information to his personal attorney in the context of
attorney-client privilege as may otherwise be required by law.
11. Non-Disclosure. For a period of five (5) years after the date of
any termination or expiration of this Agreement, Executive will not disclose
any information deemed Confidential Information, except as provided in
Paragraph 8 above. If Executive shall attempt to use, dispose of or disclose
the Confidential Information or any part or parts thereof in a manner contrary
to the terms of this Agreement, UPC shall have the right, in addition to other
remedies which may be available to it, to injunctive relief enjoining such acts
or attempts, it being acknowledged that legal remedies are inadequate. This
provision shall survive termination of this Agreement for the five (5) year
period above provided.
12. Assignment. The rights and obligations of UPC and Executive
(except Executive's obligation to perform services) under this Agreement shall
inure to the benefit of and shall be binding upon their respective successors,
if any.
13. Execution of Agreement. The execution of this Agreement by UPC is
subject to authorization and ratification by the UPC Board of Directors at the
next scheduled meeting.
14. Entire Agreement. This Agreement contains the entire agreement
between the parties and supersedes all prior discussions, understandings and
commitments, if any, whether oral or written. This Agreement cannot be amended
or modified except by subsequent written agreement signed by all of the
parties. In agreeing that this Agreement may not be changed in any way except
by a written and executed document, the parties knowingly waive and give up any
constitutional right which they may otherwise have to amend or modify this
Agreement by some means other than in writing. Finally, any agreement between
UPC and Executive which concerns any subject dealt with by this Agreement shall
be considered an amendment or modification of this Agreement and not an
agreement separate from this Agreement.
15. Attorneys' Fees and Costs. If action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and necessary
disbursements in addition to any other relief to which he may be entitled.
16. Director and Officers Liability. In any action at law or in
equity, or in any administrative proceeding arising during the term hereof, or
for a period of five years hereafter, which is brought against Executive in his
representative capacity as an officer of UPC, or against him in his personal
capacity but related to his employment hereunder and there is no finding of
culpability or misfeasance against the Executive, UPC shall be responsible for
the payment of all reasonable attorneys' fees of Executive in taking such
defensive actions as he deems necessary or appropriate. UPC represents there
are no state or
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federal banking violations, investigations pending, or otherwise, of which UPC
is aware that might give rise to any claim against the Executive.
17. Controlling Law. This Agreement and the rights and obligations
hereunder shall be governed by and construed in accordance with the federal law
of the United States of America, and in the absence of controlling federal law,
in accordance with the laws of the State of Tennessee.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
UNION PLANTERS CORPORATION EXECUTIVE
By:
----------------------- -------------------------------
6
<PAGE> 136
EXHIBIT 3
502 562-7278
_________, 1997
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 First Community Bancshares, Inc., a Tennessee corporation ("FCB"), with and
into Union Planters Holding Corporation, a Tennessee corporation and a
wholly-owned subsidiary of UPC ("Holdings"), pursuant to the terms of the
Agreement and Plan of Reorganization by and among UPC, Holdings and FCB dated
____________, 1997 (the "Merger Agreement") and related Plan of Merger between
UPC, Holdings and FCB (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, Holdings and FCB
contained in letters to us dated _________, 1997, copies of which are attached
as Exhibit A and Exhibit B to this opinion (the "Representation 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 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
<PAGE> 137
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 FCB 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 FCB 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 FCB 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 FCB and/or The Bank of Middleton 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:
The acquisition by Holdings of substantially all of the assets of
FCB in exchange for shares of UPC Common Stock and the assumption of
liabilities of FCB pursuant to the Merger will constitute a reorganization
within the meaning of Section 368(a) of the Code.
FCB, UPC and Holdings will each be "a party to a reorganization"
within the meaning of Section 368(b) of the Code.
No gain or loss will be recognized by FCB as a result of the Merger.
No gain or loss will be recognized by Holdings or UPC as a result
of the Merger.
The tax basis of the assets received by Holdings will be the same
as the tax basis of such assets of FCB immediately prior to the Merger.
The holding period of the assets of FCB received by Holdings will
in each instance include the period for which such assets were held by FCB.
No gain or loss will be recognized by the shareholders of FCB as a
result of the exchange of FCB 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 FCB Common Stock is a
capital asset in the hands of the respective FCB 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 FCB Common Stock
allocable to the fractional share.
The tax basis of UPC Common Stock to be received by the
shareholders of FCB will be the same as the tax basis of the FCB common Stock
surrendered in exchange therefor (reduced by any amount allocable to a
fractional share interest for which cash is received).
The holding period of the UPC Common Stock to be received by
shareholders of FCB will include the holding period of the FCB Common Stock
surrendered in exchange therefor, provided the FCB shares were held as a
capital asset by the shareholders of FCB on the date of the exchange.
A shareholder of FCB who perfects his dissenter's rights and who
receives payment of the fair market value of his shares of FCB Common Stock
will be treated as having received such payment in redemption of such stock.
Such redemption will be subject to the conditions and limitations of Section
302 of the Code.
The 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
<PAGE> 138
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(g) of the
Merger Agreement. We hereby consent to the use of this opinion as an exhibit
to the Registration Statement 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.
Without our prior written consent, this opinion may not otherwise be quoted or
referred to in whole or in part in any report or document or furnished to any
other person or entity other than your counsel, your accountants or your
employees, except in response to a valid subpoena or other lawful process.
Very truly yours,
WYATT, TARRANT & COMBS
<PAGE> 139
[UNION PLANTERS LETTERHEAD]
EXHIBIT 4
October 17, 1997
Board of Directors
First Community Bancshares, Inc.
101 N. Main Street
Middleton, Tennessee 38052
Attention: James S. Simpson
Chairman and Chief Executive Officer
RE: Social and Employment Issues Related to Acquisition of
Community Bancshares, Inc. by Union Planters Corporation
Ladies and Gentlemen:
We have, today, entered into an Agreement and Plan of Merger (the
"Agreement") between Union Planters Corporation ("UPC"), Union Planters Holding
Corporation ("Holding"), a wholly-owned subsidiary of UPC, and First Community
Bancshares, Inc. ("Community") pursuant to which Community would be merged with
and into Holding. As a result thereof, the Bank of Middleton which is currently
a wholly-owned subsidiary of Community, would become an indirect subsidiary of
UPC. This Supplemental Letter is being supplied to address certain employment,
structural and similar issues related to the Merger not separately addressed in
the Agreement, and UPC and Community each agrees that this Supplemental Letter
is an integral part of the Agreement. All terms used herein without definition
have the same meaning as ascribed to such terms in the Agreement. Selmer Bank
and Trust ("Selmer" or "Surviving Bank"), a wholly-owned subsidiary of UPC, and
Bank of Middleton, a wholly-owned subsidiary of Community join in this
Supplemental Letter for the purpose of making certain representations and
covenants.
Accordingly, in consideration of the Parties having entered into the
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, it is further agreed that:
A. MERGER OF BANK OF MIDDLETON INTO SELMER BANK AND TRUST
Community, Bank of Middleton, UPC, and Surviving Bank agree to take
such steps as are necessary to provide for the merger of Middleton with and
into Selmer, which shall survive the merger as the Surviving Bank (the "Bank
Merger"). The Bank Merger shall be an integral step in the Merger and shall be
consummated simultaneously with the consummation of the Merger. UPC may waive
this provision in its sole discretion.
<PAGE> 140
First Community Bancshares, Inc.
October 17, 1997
Page 2
B. BENEFIT PLANS
401(K) PLAN. Notwithstanding anything to the contrary in the
Agreement, after the Effective Time of the Merger, all contributions under
Community's 401(k) Plan as in effect on the date of the Agreement (the "401(k)
Plan") shall cease and employees of Community and the Community Subsidiaries
who continue their employment with Community or Community Subsidiaries (or
their successors) after the Effective Time of the Merger shall be entitled to
participate in UPC's 401(k) Plan to the same extent as other employees of UPC
as of immediately after the Effective Time. Such employees shall receive past
service credit for their service with Community and the Community Subsidiaries
for purposes of eligibility, participation, and vesting in UPC's 401(k) Plan.
Community, in coordination with UPC's Human Resources Department, shall take
such steps as are necessary to merge Community's 401(k) Plan with and into
UPC's 401(k) Plan as of the Effective Time of the Merger or as soon as
reasonably practicable after the Effective Time of the Merger, but any delay in
effectuating such merger shall not delay Community's employees' right to
participate in UPC's 401(k) Plan as of the Effective Time of the Merger. Prior
to the Effective Time of the Merger, Community shall fully reserve for all
anticipated costs and expenses related to its 401(k) Plan and the merger
thereof into UPC's 401(k) Plan. Community, in coordination with UPC's Human
Resources Department, shall obtain such regulatory determinations regarding the
merger of its 401(k) Plan into the UPC 401(k) Plan as may be appropriate to
ensure the qualified status of such plans and trusts under the Internal Revenue
Code.
C. OTHER MATTERS
1. EMPLOYMENT AGREEMENTS. Neither UPC nor any of its
direct or indirect subsidiaries shall have any responsibility to offer an
employment contract to any person affiliated with Community or any of its
subsidiaries as a result of the Merger, other than Mr. Mike Bodiford as
provided in the Agreement.
2. OFFICER'S NON-COMPETE AGREEMENT. On or before the
date of the Closing, James S. Simpson, Sr., shall execute and enter into a
Noncompetition Agreement with UPC in such form as shall be agreeable to the
parties. Mr. Simpson shall receive, in consideration for his entering such
Noncompetition Agreement a payment of $113,363 annually for three (3)
consecutive years from the Effective Date.
3. STAY ON BONUSES. After the date hereof and prior to
the Effective Date of the Merger, Community shall be entitled to reserve for
and pay bonuses to Mike Bodiford and Richard Weatherbee, each in the amount of
$166,000, which amount represents the discounted present value of the cash flow
that would have been received by Messrs. Bodiford and Weatherbee had each
received his allocated shares of Community stock pursuant to the existing stock
bonus plan, and converting such shares to a comparable number of UPC shares
based upon the exchange ratio, valued at the current market price of $61.24.
4. 1997 BONUSES. After the date hereof and prior to the
Effective Date of the
<PAGE> 141
First Community Bancshares, Inc.
October 17, 1997
Page 3
Merger, Community shall be entitled to reserve for and pay bonuses to its
employees or employees of any of its Subsidiaries; provided, however, the
aggregate amount of such bonuses shall not exceed $40,000, and the full amount
of any bonuses paid shall be fully accrued on the books and records of
Community prior to Closing.
5. ACCRUED VACATION AND SICK LEAVE. Community shall pay
employees for their accrued vacation and/or sick leave time prior to the
Effective Date. Following the Effective Date, employees of Community and
Community's Subsidiaries shall participate in all employee benefit plans
provided to other employees of UPC holding comparable positions. Such employees
shall receive past service credit for their service with Community and the
Community Subsidiaries for purposes of determining eligibility for vacation,
sick leave, and participation in UPC's welfare benefit plans.
D. GENERAL CONCERNS.
Notwithstanding anything in this Supplemental Letter to the
contrary, the rights granted by UPC and the Surviving Bank to employees of
Community or any Community Subsidiary in connection with the Merger shall not
in and of themselves be construed in any way to be an employment contract with,
or right to employment by, Community, UPC, or any other subsidiary of UPC or
Community after the Effective Date of the Merger. In addition, to the extent
that any of the contemplated agreements set forth in this Supplemental Letter
would cause the Merger not to be accounted for as a pooling of interests, then
neither UPC nor the Surviving Bank shall be obligated to effect the Merger and
the Parties agree to negotiate, in good faith, to restructure the agreements
contemplated by this Supplemental Letter in a manner that would permit the
Merger to be accounted for as a pooling of interests and provide substantially
the same economic value to the recipient of the benefit.
E. TIMING.
Notwithstanding anything in this Supplemental Letter or in
the Agreement to the contrary, Community may take such actions on or before the
Effective Time of the Merger as are necessary or appropriate to effectuate the
purposes of this Supplemental Letter, including, but not limited to (1) the
adoption and execution of agreements and amendments relating to the plans,
programs, and agreements referenced herein, and (ii) the adoption and execution
of any amendment required by applicable Law.
[CONTINUED ON FOLLOWING PAGE]
<PAGE> 142
First Community Bancshares, Inc.
October 17, 1997
Page 4
IN WITNESS WHEREOF, the parties hereto intending to be legally bound
have caused this Supplemental Letter to be executed and delivered.
<TABLE>
<CAPTION>
UNION PLANTERS CORPORATION SELMER BANK AND TRUST
<S> <C>
/s/ Jackson W. Moore /s/ Richard Rankin
- ------------------------------------- --------------------------------------
Jackson W. Moore.
President and Chief Operating Officer Chairman and Chief Executive Officer
FIRST COMMUNITY BANCSHARES, INC. BANK OF MIDDLETON
/s/ James S. Simpson /s/ James S. Simpson
- ------------------------------------- --------------------------------------
James S. Simpson James S. Simpson
Chairman and Chief Executive Officer Chairman and Chief Executive Officer
</TABLE>
<PAGE> 143
FIRST AMENDMENT
TO
AGREEMENT AND PLAN OF REORGANIZATION
BY AND BETWEEN
FIRST COMMUNITY BANCSHARES, INC.,
UNION PLANTERS HOLDING CORPORATION,
AND
UNION PLANTERS CORPORATION
THIS AMENDMENT to that certain Agreement and Plan of Reorganization by
and between FIRST COMMUNITY BANCSHARES, INC. ("Community"), UNION PLANTERS
CORPORATION ("UPC"), and UNION PLANTERS HOLDING CORPORATION ("Holding"), dated
November 10, 1997 (the "AGREEMENT") is made and entered into as of May 12,
1998, by Community, UPC, and HOLDING, hereafter collectively referenced as the
"Parties".
WHEREAS, the Parties desire to amend the AGREEMENT to reflect a
mutually agreed upon change in the Exchange Ratio, as defined in Article 3,
Section 3.1(c) of the AGREEMENT; and
WHEREAS, the Parties desire to amend Article 10, Section 10.1(e) of the
AGREEMENT to reflect a mutually agreed upon change in the latest permissible
date for consummation of the merger transaction contemplated by the AGREEMENT;
and
WHEREAS, the Parties desire that all terms, representations,
warranties, covenants, and conditions contained within the AGREEMENT remain in
full force and effect except as expressly amended herein.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Parties agree that the AGREEMENT shall be amended as follows:
AMENDMENT
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 CONVERSION OF SHARES.
(c) Each share of Community Common Stock (excluding shares held by any
Community Company or any UPC Company, in each case other than in a fiduciary
capacity or as a result of debts previously contracted) issued and outstanding
at the Effective Time shall cease to be outstanding and shall represent only the
right to be exchanged for UPC Common Stock. The number of shares of UPC Common
Stock to be exchanged for each share of Community Common Stock shall be 2.6924
("the Exchange Ratio") (as subject to possible adjustment as set forth in
Section 10.1(g) of this Agreement). Pursuant to the UPC Rights Agreement, each
share of UPC Common Stock issued in connection with the Merger upon conversion
of Community Common Stock shall be accompanied by a UPC Right.
<PAGE> 144
ARTICLE 10
TERMINATION
10.1 TERMINATION.
(e) By the Board of Directors of either Party in the event that the
Merger shall not have been consummated by September 30, 1998, if the failure to
consummate the transactions contemplated hereby on or before such date is not
caused by any willful breach of this Agreement by the Party electing to
terminate pursuant to this Section 10.1(e); or
FURTHER AGREED, that the Parties do hereby authorize and direct that an
AMENDED AND RESTATED PLAN OF MERGER, in the form attached hereto as Exhibit A,
reflecting the Amendment to Article 3, Section 3.1(c) be duly executed by the
Parties.
FURTHER AGREED, that except as expressly amended herein, all terms,
representations, warranties, covenants, and conditions contained within the
AGREEMENT do and shall remain in full force and effect.
IN WITNESS WHEREOF, each of the Parties have caused this Amendment 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: FIRST COMMUNITY BANCSHARES, INC.
By: /s/ RICHARD S. WETHERBEE By: /s/ MIKE R. BODIFORD
----------------------------- ----------------------------------
Richard S. Wetherbee Mike R. Bodiford
Secretary President
[CORPORATE SEAL]
ATTEST: UNION PLANTERS CORPORATION
By: /s/ E. JAMES HOUSE, JR. By: /s/ JACKSON W. MOORE
----------------------------- ----------------------------------
E. James House, Jr. Jackson W. Moore
Secretary President
[CORPORATE SEAL]
ATTEST: UNION PLANTERS
HOLDING CORPORATION, INC.
By: /s/ E. JAMES HOUSE, JR. By: /s/ JACKSON W. MOORE
----------------------------- ----------------------------------
E. James House, Jr. Jackson W. Moore
Secretary President
[CORPORATE SEAL]
<PAGE> 145
APPENDIX B
PLAN OF MERGER
OF
COMMUNITY BANCSHARES, INC
INTO AND WITH
UNION PLANTERS HOLDING CORPORATION, INC.
Pursuant to this Plan of Merger ("Plan of Merger"), COMMUNITY BANCSHARES,
INC., a corporation organized and existing under the laws of the State of
Tennessee ("Community"), shall be merged with and into UNION PLANTERS HOLDING
CORPORATION, INC. ("Holding"), a corporation organized and existing under the
laws of the State of Tennessee and a wholly-owned subsidiary of UNION PLANTERS
CORPORATION, a corporation organized and existing under the laws of the State
of Tennessee ("UPC").
ARTICLE 1
DEFINITIONS
Except as otherwise provided herein, the capitalized terms set forth below
shall have the following meanings:
1.1 "CERTIFICATE OF MERGER" shall mean the Certificate of Merger to be
execute by Holding and Community and filed with the Secretary of State of the
State of Tennessee relating to the Merger as contemplated by Section 2.1 of
this Plan of Merger.
1.2 "COMMUNITY COMMON STOCK" shall mean the $1.00 par value common stock of
Community.
1.3 "COMMUNITY COMPANIES" shall mean, collectively, Community and all
Community Subsidiaries. "Community Subsidiaries" shall mean the Bank of
Middleton, a Tennessee banking corporation located in Middleton, Tennessee.
1.4 "EFFECTIVE TIME" shall mean the date and time on which the Merger
becomes effective pursuant to the Laws of the State of Tennessee as defined in
Section 2.2 of this Plan of Merger.
1.5 "EXCHANGE AGENT" shall mean the exchange agent selected by UPC.
1.6 "HOLDING COMMON STOCK" shall mean the $1.00 par value common stock of
Holding.
1.7 "INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder.
1.8 "LAW" shall mean any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or sta ute applicable to a person or its assets,
liabilities, or business, including those promulgated, interpreted, or enforced
by any federal or state regulatory agencies having jurisdiction over a person
or its Subsidiaries
1.9 "MERGER" shall mean the merger of Community into and with Holding as
provided in Section 2.1 of this Plan of Merger.
<PAGE> 146
1.10 "MERGER AGREEMENT" shall mean the Agreement and Plan of
Reorganization, dated as of November 10, 1997 by and between UPC, Holding, and
Community.
1.11 "SUBSIDIARIES" shall mean all those corporations, banks, associations,
or other entities of which the entity in question owns or controls 50% or more
of the outstanding equity securities either directly or through an unbroken
chain of entities as to each of which 50% or more of the outstanding equity
securities is owned directly or indirectly by its parent; provided, there shall
not be included any such entity acquired through foreclosure or any such entity
the equity securities of which are owned or controlled in a fiduciary capacity.
1.12 "SURVIVING CORPORATION" shall refer to Holding as the surviving
corporation resulting from the Merg r.
1.13 "TBCA" shall mean the Tennessee Business Corporation Act, as in effect
at the Effective Time.
1.14 "UPC COMMON STOCK" shall mean the $5.00 par value common stock of UPC.
1.15 "UPC COMPANIES" shall mean, collectively, UPC and all UPC
Subsidiaries.
1 16 "UPC CAPITAL STOCK" shall mean, collectively, the UPC Common Stock,
the UPC Preferred Stock, and any other class or series of capital stock of UPC.
1.17 "UPC PREFERRED STOCK" shall mean the no par value preferred stock of
UPC and shall include the (i) Series A Preferred Stock and (ii) Series E, 8%
Cumulative, Convertible Preferred Stock, of UPC.
1.18 "UPC RIGHTS" shall mean the preferred stock purchase rights issued
pursuant to the UPC Rights Agreement.
1.19 "UPC RIGHTS AGREEMENT" shall mean that certain Rights Agreement, dated
January 19, 1989, between UPC and UPNB, as Rights Agent.
ARTICLE 2
TERMS OF MERGER
2.1 MERGER. Subject to the terms and conditions set forth in this Plan of
Merger, at the Effective Time, Community shall be merged into and with Holding
in accordance with the provisions of Section 48-21-102 of the Tennessee
Business Corporation Act ("TBCA") and with the effect provided in Section
48-21-108 of the TBCA. Holding shall be the Surviving Corporation of the Merger
and shall continue to be governed by the Laws of the State of Tennessee.
2.2 EFFECTIVE TIME. The Merger shall become effective on the date and at
the time the Certificate of Merger reflecting the Merger shall become effective
with the Secretary of State of the State of Tennessee.
2.3 CHARTER. The Charter of Holding, as in effect immediately prior to the
Effective Time, shall remain in full force and effect following the Effective
Ti e as the Charter of the Surviving Corporation until otherwise amended or
repealed as provided by Law or by such Charter.
2.4 BYLAWS. The Bylaws of Holding, as in effect immediately prior to the
Effective Time, shall continue in full force and effect as the Bylaws of the
Surviving Corporation until otherwise amended or repealed as provided by Law or
by such Bylaws.
2.5 DIRECTORS AND OFFICERS. The directors of Holding in office immediately
prior to the Effective Time, together with such additional persons as may
thereafter be elected, shall serve as the directors of the Surviving Corporation
<PAGE> 147
from and after the Effective Time in accordance with the By-laws of the
Surviving Corporation. The officers of Holding in office immediately prior to
the Effective Time, together with such additional persons as may thereafter be
elected, shall serve as the officers of the Surviving Corporation from and
after the Effective Time in accordance with the By-laws of the Surviving
Corporation.
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 CONVERSION OF SHARES. Subject to the provisions of this Article , at
the Effective Time, by virtue of the Merger and without any action on the part
of UPC, Holding, Community, or the shareholders of either of the foregoing, the
shares of the constituent corporations shall be converted as follows:
(a) Each share of UPC Capital Stock, including any associated UPC
Rights, issued and outstanding immediately prior to the Effective Time shall
remain issued and outstanding from and after the Effective Time.
(b) Each share of Holding Common Stock issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding
after the Effective Time and shall represent all the issued and outstanding
Capital Stock of Holding as the Surviving Corporation.
(c) Each share of Community Common Stock (excluding shares held by any
Community Company or any UPC Company, in each case other than in a fiduciary
capacity or as a result of debts previously contracted) issued and outstanding
at the Effective Time shall cease to be outstanding and the number of shares of
UPC Common Stock to be exchanged for each share of Community Common Stock shall
be 2.6924 (the "Exchange Ratio") (as subject to possible adjustment as set forth
in Section 10.1 (g) of the Merger Agreement. Pursuant to the UPC Rights
Agreement, each share of UPC Common Stock issued in connection with the Merger
upon conversion of Community Common Stock shall be accompanied by a UPC Right.
3.2 ANTI-DILUTION PROVISIONS. In the event UPC changes the number of shares
of UPC Common Stock issued and outstanding prior to the Effective Time as a
result of a stock split, stock dividend, or similar recapitalization with
respect to such stock and the record date therefor (in the case of a stock
dividend) or the effective date thereof (in the case of a stock split or
similar recapitalization for which a record date is not established) shall be
prior to the Effective Time, the Exchange Ratio shall be proportionately
adjusted.
3.3 SHARES HELD BY COMMUNITY OR UPC. Each of the shares of Community Common
Stock held by any Community Company or by any UPC Company, in each case other
than in a fiduciary capacity or as a result of debts previously contracted,
shall be canceled and retired at the Effective Time and no consideration shall
be issued in exchange therefor.
3.4 FRACTIONAL SHARES. Notwithstanding any other provision of this
Agreement, each holder of shares of Community Common Stock exchanged pursuant
to the Merger who would otherwise have been entitled to receive a fraction of a
share of UPC Common Stock (after taking into account all certificates delivered
by such holder) shall receive, in lieu thereof, cash (without interest) in an
amount equal to such fractional part of a share of UPC Common Stock multiplied
by the market value of one share of UPC Common Stock at the Effective Time. The
market value of one share of UPC Common Stock at the Effective Time shall be
the closing price of such common stock on the NYSE-Composite Transactions List
(as reported by The Wall Street Journal or, if not reported thereby, any other
authoritative source selected by UPC) on the last trading day preceding the
Effective Time. No such holder will be entitled to dividends, voting rights, or
any other rights as a shareholder in respect of any fractional shares.
<PAGE> 148
3.5 DISSENTER'S RIGHTS. Any holder of record of any of the issued and
outstanding s ares of Community Common Stock immediately prior to the Effective
Time, who shall comply strictly with the provisions of the TBCA regarding
dissenter's rights (Community Dissenting Shareholders"), shall be entitled to
dissent from the Merger and to seek those appraisal remedies afforded by the
TBCA.
ARTICLE 4
DELIVERY OF CONSIDERATION
4.1 EXCHANGE PROCEDURES. Promptly after the Effective Time, UPC and
Community shall cause the Exchange Agent to mail to the former shareholders of
Community appropriate transmittal materials (which shall specify that delivery
shall be effected, and risk of loss and title to the certificates theretofore
representing shares of Community Common Stock shall pass, only upon proper deli
ery of such certificates to the Exchange Agent). After the Effective Time, each
holder of shares of Community Common Stock (other than shares to be canceled
pursuant to Section 3.3 of this Plan of Merger) issued and outstanding at the
Effective Time shall surrender the certificate or certificates representing
such shares to the Exchange Agent and shall promptly upon surrender thereof
receive in exchange therefor the consideration provided in Section 3.1 of this
Plan of Merger, together with all undelivered dividends or distributions in
respect of such shares (without interest thereon) pursuant to Section 4.2 of
this Plan of Merger. To the extent required by Section 3.4 of this Plan of
Merger, each holder of shares of Community Common Stock issued and outstanding
at the Effective Time also shall receive, upon surrender of the certificate or
certificates representing such shares, cash in lieu of any fractional share of
UPC Common Stock to which such holder may be otherwise entitled (without
interest). UPC shall not be obligated to deliver the consideration to which any
former holder of Community Common Stock is entitled as a result of the Merger
until such holder surrenders such holder's certificate or certificates
representing the shares of Community Common Stock for exchange as provided in
this Section 4.1. The certificate or certificates of Community Common Stock so
surrendered shall be duly endorsed as the Exchange Agent may require. Any other
provision of this Plan of Merger notwithstanding, neither the Surviving
Corporation nor the Exchange Agent shall be liable to a holder of Community
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 COMMUNITY SHAREHOLDERS. At the Effective Time, the
stock transfer books of Community shall be closed as to holders of Community
Common Stock immediately prior to the Effective Time and no transfer of
Community 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 Community Common Stock (other than shares to be canceled pursuant to
Section 3.3 of this Plan of Merger) shall from and after the Effective Time
represent for all purposes only the right to receive the consideration provided
in Sections 3.1 and 3.4 of this Plan of Merger in exchange therefor, subject,
however, to the Surviving Corporation's obligation to pay any dividends or make
any other distributions with a record date prior to the Effective Time which
have been declared or made by Community in respect of such shares of Community
Common Stock in accordance with the terms of this Plan of Merger and which
remain unpaid at the Effective Time. To the extent permitted by Law, former
shareholders of record of Community shall be entitled to vote after the
Effective Time at any meeting of UPC shareholders the number of whole shares of
UPC Common Stock into which their respective shares of Community Common Stock
are converted, regardless of whether such holders have exchanged their
certificates representing Community Common Stock for certificates representing
UPC Common Stock in accordance with the provisions of this Plan of Merger.
Whenever a dividend or other distribution is declared by UPC on the UPC Common
Stock, the record date for which is at or after the Effective Time, the
declaration shall include dividends or other distributions on all shares
issuable pursuant to this Plan of Merger, but beginning 30 days after the
Effective Time no dividend or other distribution payable to the holders of
record of UPC Common Stock as of any time subsequent to the Effective Time
shall be delivered to the holder of any certificate representing shares of
Community Common Stock issued and outstanding at the Effective Time until such
holder surrenders such certificate for exchange as provided in Section 4.1 of
this Plan of Merger. However, upon surrender of such Community Common Stock
certificate, both the UPC Common Stock certificate (together with all such
undelivered
<PAGE> 149
dividends or other distributions without interest) and any undelivered
dividends and cash payments to be paid for fractional share interests (without
interest) shall be delivered and paid with respect to each share represented by
such certificate.
ARTICLE 5
MISCELLANEOUS
5.1 CONDITIONS PRECEDENT. Consummation of the Merger by Holding shall be
conditioned on the satisfaction of, or waiver by UPC of the conditions
precedent to the Merger set forth in Sections 9.1 and 9.2 of the Merger
Agreement. Consummation of the Merger by Community shall be conditioned on the
satisfaction of, or waiver by Community of, of the conditions precedent to the
Merger set forth in Sections 9.1 and 9.3 of the Merger Agreement.
5.2 TERMINATION. This Plan of Merger may be terminated at any time prior to
the Effective Ti e by the parties hereto as provided in Article 10 of the
Merger Agreement.
<TABLE>
<S> <C>
ATTEST: FIRST COMMUNITY BANCSHARES, INC.
By:/s/ Richard S. Wetherbee By:/s/ James S. Simpson
----------------------------- --------------------------------
Richard S. Wetherbee James S. Simpson
Secretary President and CEO
[CORPORATE SEAL]
ATTEST: UNION PLANTERS CORPORATION
By:/s/ E. James House, Jr. By:/s/ Jackson W. Moore
----------------------------- --------------------------------
E. James House, Jr. Jackson W. Moore
Secretary President
[CORPORATE SEAL]
ATTEST: UNION PLANTERS HOLDING CORPORATION, INC.
By:/s/ Lynn L. Lanigan By:/s/ Jackson W. Moore
----------------------------- --------------------------------
Lynn L. Lanigan Jackson W. Moore
Secretary President
[CORPORATE SEAL]
</TABLE>
<PAGE> 150
APPENDIX C
FIRST COMMUNITY BANCSHARES, INC.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
<PAGE> 151
TABLE OF CONTENTS
First Community Bancshares, Inc. and Subsidiary
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditor's Report F-2
Financial Statements
Consolidated Balance Sheet F-3
Consolidated Statement of Income F-4
Consolidated Statement of Changes in Stockholders' Equity F-5
Consolidated Statement of Cash Flows F-6
Notes to Consolidated Financial Statements F-8
</TABLE>
<PAGE> 152
INDEPENDENT AUDITOR'S REPORT
The Board of Directors and Stockholders
First Community Bancshares, Inc.
Middleton, Tennessee
We have audited the accompanying consolidated balance sheet of First Community
Bancshares, Inc. and Subsidiary as of December 31, 1997, and the related
consolidated statements of income, changes in stockholders' equity, and cash
flows for the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of First Community
Bancshares, Inc. and Subsidiary at December 31, 1997, and the results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
Reynolds Bone & Griesbeck, P.L.C.
February 23, 1998
F-2
<PAGE> 153
CONSOLIDATED BALANCE SHEET
First Community Bancshares, Inc. and Subsidiary
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Cash and due from banks $ 1,190,829
Interest-bearing deposits with banks 171,761
Federal funds sold 1,300,000
Investment securities held to maturity 2,723,272
Investment securities available for sale 3,968,071
Loans, less allowance for loan losses 29,954,045
Premises and equipment, net 300,621
Accrued interest receivable 573,826
Other real estate 157,320
Other assets 310,237
-----------
Total assets $40,649,982
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing $ 2,751,945
Certificates of deposit of $100,000 and over 7,719,866
Other interest-bearing, including NOW accounts of $4,287,513 22,903,267
-----------
Total deposits 33,375,078
Notes payable 192,747
Federal Home Loan Bank advances 3,270,705
Other long-term debt 66,028
Accrued interest payable 122,959
Deferred income taxes 41,501
Other liabilities 30,643
-----------
Total liabilities 37,099,661
Commitments and contingencies --
Stockholders' equity
Common stock, $1 par value, 100,000 shares
authorized, 95,300 shares issued 95,300
Surplus 1,269,371
Retained earnings 3,360,336
Net unrealized securities gains 20,288
Treasury stock, at cost, 48,567 shares (1,194,974)
-----------
Total stockholders' equity 3,550,321
-----------
Total liabilities and stockholders' equity $40,649,982
===========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 154
CONSOLIDATED STATEMENT OF INCOME
First Community Bancshares, Inc. and Subsidiary
Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Interest income
Loans, including fees $3,140,052
Investment securities
Taxable 286,739
Nontaxable 94,821
Federal funds sold 60,127
Other 38,918
----------
Total interest income 3,620,657
Interest expense
Deposits 1,614,398
Other borrowed funds 232,773
----------
Total interest expense 1,847,171
----------
Net interest income 1,773,486
Provision for loan losses 354,000
----------
Net interest income after provision
for loan losses 1,419,486
Noninterest income
Service charges on deposit accounts 128,235
Other fees and commissions 22,965
Investment securities gains 210
----------
151,410
Noninterest expense
Salaries and employee benefits 647,587
Occupancy and equipment, net 155,014
Other 333,274
----------
1,135,875
----------
Income before income taxes 435,021
Income taxes 142,314
----------
Net income $ 292,707
==========
Earnings per share:
Basic $ 6.37
==========
Diluted $ 6.28
==========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 155
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
First Community Bancshares, Inc. and Subsidiary
Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net
Unrealized
Common Retained Securities Treasury
Stock Surplus Earnings Gains (Losses) Stock Total
------- ---------- ---------- -------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $95,300 $1,269,371 $3,126,045 $11,953 $(1,260,314) $3,242,355
Net income -- -- 292,707 -- -- 292,707
Cash dividends paid ($1.25 per share) -- -- (58,416) -- -- (58,416)
Change in net unrealized securities gains
(losses), net of taxes -- -- -- 8,335 -- 8,335
Cancellation of 1,089 shares of treasury
stock and reissuance to employees -- -- -- -- 65,340 65,340
------- ---------- ---------- ------- ----------- ----------
Balance at December 31, 1997 $95,300 $1,269,371 $3,360,336 $20,288 $(1,194,974) $3,550,321
======= ========== ========== ======= =========== ==========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 156
CONSOLIDATED STATEMENT OF CASH FLOWS
First Community Bancshares, Inc. and Subsidiary
Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Cash flows from operating activities
Net income $ 292,707
Noncash adjustments
Deferred income taxes 133,070
Premium amortization 4,858
Discount accretion (7,588)
Federal Home Loan Bank stock dividends (26,500)
Depreciation and amortization 69,379
Provision for loan losses 354,000
Investment securities gains (210)
Loss on other real estate 38,768
Common stock issued to employees 65,340
Changes in other assets and liabilities
Accrued interest receivable (34,291)
Other assets (248,097)
Accrued interest payable (10,928)
Other liabilities (73,804)
-----------
Net cash provided by operating
activities 556,704
Cash flows from investing activities
Net increase in interest-bearing deposits with banks (83,972)
Net increase in federal funds sold (950,000)
Proceeds from sales of securities available
for sale 657,891
Proceeds from maturities of securities
held to maturity 903,404
Proceeds from maturities of securities
available for sale 1,571,624
Purchase of securities held to maturity (1,869,504)
Purchase of securities available for sale (1,104,305)
Net increase in loans (1,155,294)
Purchase of premises and equipment (32,719)
Disposition of other real estate 62,491
-----------
Net cash used for investing activities (2,000,384)
</TABLE>
Continued
F-6
<PAGE> 157
CONSOLIDATED STATEMENT OF CASH FLOWS
First Community Bancshares, Inc. and Subsidiary
Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Cash flows from financing activities
Net increase in deposits $1,223,208
Repayment of notes payable (37,253)
Proceeds from other borrowed funds 392,530
Repayment of other borrowed funds (235,632)
Dividends paid (58,416)
----------
Net cash provided by financing
activities 1,284,437
----------
Net decrease in cash and due from banks (159,243)
Cash and due from banks at beginning of year 1,350,072
----------
Cash and due from banks at end of year $1,190,829
==========
Supplemental disclosures:
Interest paid $1,858,099
Income taxes paid 347,785
Change in net unrealized securities
gains (losses), net of taxes 8,335
Equipment acquired under capital lease 44,261
Real estate acquired by foreclosure 28,366
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE> 158
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Community Bancshares, Inc. and Subsidiary
December 31, 1997
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
First Community Bancshares, Inc. (the Company), a one-bank holding
company, and its wholly owned subsidiary, Bank of Middleton (the Bank),
are engaged in the business of banking and provide a full range of banking
services to individual and corporate customers principally in Middleton,
Tennessee and Hardeman and contiguous counties.
Basis of Presentation
The consolidated financial statements include the accounts of the Company
and the Bank. All significant intercompany accounts and transactions have
been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Material estimates that are particularly susceptible to significant change
relate to the determination of the allowance for losses on loans and the
valuation of real estate acquired in connection with foreclosures or in
satisfaction of loans. In connection with the determination of the
allowances for losses on loans and foreclosed real estate, management
generally obtains independent appraisals for significant properties.
While management uses available information to recognize losses on loans
and foreclosed real estate, future additions to the allowances may be
necessary based on changes in local economic conditions. In addition,
regulatory agencies, as an integral part of their examination process,
periodically review the Bank's allowances for losses on loans and
foreclosed real estate. Such agencies may require the Bank to recognize
additions to the allowances based on their judgments about information
available to them at the time of their examination. Because of these
factors, it is reasonably possible that the allowances for losses on loans
and foreclosed real estate may change materially in the near term.
Continued
F-8
<PAGE> 159
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Community Bancshares, Inc. and Subsidiary
December 31, 1997
- --------------------------------------------------------------------------------
Securities Held to Maturity
Investment securities classified as held to maturity are stated at cost,
adjusted for amortization of premiums and accretion of discounts, which
are recognized in interest income using the interest method over the
period to maturity. The Company has the positive intent and ability to
hold such securities to maturity.
Securities Available For Sale
Investment securities, including marketable equity securities, classified
as available for sale are stated at fair value. Fair values are determined
by reference to current market quotations. Unrealized holding gains and
losses, net of income tax effects, on available for sale securities are
reported as a separate component of stockholders' equity until realized.
Gains and losses on the sale of available for sale securities are
determined using the specific identification method. Premiums and
discounts are recognized in interest income using the interest method over
the period to maturity.
Loans
Loans are stated at the principal amount outstanding, reduced by unearned
interest and an allowance for loan losses. Unearned interest on
installment loans is recognized as income using a method that approximates
the interest method. Interest on other loans is recognized as income using
the simple interest method on daily balances of the principal amount
outstanding.
Loans on which the accrual of interest has been discontinued are
designated as nonaccrual loans. Generally, accrual of interest is
discontinued on loans past due 90 days or more. Also, a loan may be placed
on nonaccrual status prior to becoming past due 90 days if management
believes, after considering economic and business conditions and
collection efforts, that the borrower's financial condition is such that
collection of principal or interest is doubtful.
Fees on loans and costs incurred in origination of loans are recognized at
the time the loan is recorded. Because loan fees and costs are not
significant, the results of operations are not materially different than
the results which would be obtained by accounting for loan fees and costs
in accordance with generally accepted accounting principles.
Continued
F-9
<PAGE> 160
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Community Bancshares, Inc. and Subsidiary
December 31, 1997
- --------------------------------------------------------------------------------
Allowance for Loan Losses
The allowance for loan losses is established through a provision for loan
losses charged to expense. Loans are charged against the allowance for
loan losses when management believes that the collectibility of principal
is unlikely. Recoveries of amounts previously charged off are credited to
the allowance.
The allowance for loan losses is maintained at a level that management
considers adequate to absorb possible losses on outstanding loans that may
become uncollectible. Factors considered in management's evaluation of the
adequacy of the allowance are current and anticipated economic conditions,
previous loan loss experience, changes in the nature, volume and
composition of the loan portfolio, industry or other concentrations of
credit, review of specific problem loans, the level of classified and
nonperforming loans, the results of regulatory examinations, the fair
value of underlying collateral and overall quality of the loan portfolio.
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation
and amortization. Depreciation and amortization are computed principally
by the straight-line method over the estimated useful lives of the assets
(building and improvements - 10 to 30 years; equipment, furniture and
fixtures - 4 to 10 years). Costs of additions, replacements or
improvements are capitalized, while expenditures for maintenance and
repairs are charged to expense as incurred.
Other Real Estate
Other real estate acquired by foreclosure is carried at the lower of cost
or fair value. Cost includes loan principal, accrued but unpaid interest
not previously charged off and expenditures for subsequent improvements.
Fair value is the amount the Bank could reasonably expect to receive in a
current sale of the subject property to a willing buyer in other than a
forced or liquidation sale. The excess of cost over fair value at the time
of foreclosure is charged to the allowance for loan losses. Subsequent
declines in fair value are recognized and charged to noninterest expense,
as are net operating expenses of such properties.
Income Taxes
The Company and the Bank file consolidated income tax returns. Income
taxes are provided for the tax effects of transactions reported in the
consolidated financial statements and consist of taxes currently due plus
deferred taxes related to differences between the financial and income tax
bases of assets and liabilities. The deferred tax assets and liabilities
represent the future tax return consequences of those differences, which
will either be taxable or deductible when the assets and liabilities are
recovered or settled. Deferred taxes are also recognized for tax credits
that are available to reduce future federal income taxes.
Continued
F-10
<PAGE> 161
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Community Bancshares, Inc. and Subsidiary
December 31, 1997
- --------------------------------------------------------------------------------
Fair Value of Financial Instruments
Statement of Financial Accounting Standards (SFAS) No. 126, Exemption from
Certain Required Disclosures about Financial Instruments for Certain
Nonpublic Entities, provides exemption for certain entities from the
requirements of SFAS No. 107, Disclosures About Fair Value of Financial
Instruments. The Company meets the criteria for this exemption and has
elected not to present such information.
Earnings Per Share
In 1997, the Financial Accounting Standards Board (FASB) issued SFAS No.
128, Earnings Per Share, which establishes standards for computing and
presenting earnings per share (EPS). The previous presentation of primary
EPS is replaced with a presentation of basis EPS. Dual presentation of
basic and diluted EPS is required on the face of the income statement as
well as a reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS
computation. Basic EPS excludes dilution and is computed by dividing
income available to common stockholders by the weighted-average number of
common shares outstanding for the period. Diluted EPS is computed
similarly to fully diluted EPS pursuant to APB Opinion No. 15. The Company
adopted SFAS No. 128 for the year ended December 31, 1997, and prior
periods were restated.
Recent Accounting Pronouncement
In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive
Income, which establishes new rules for the reporting and display of
comprehensive income and its components; however, adoption in 1998 will
have no impact on the Company's net income or stockholders' equity. SFAS
No. 130 requires unrealized gains or losses on the Company's available for
sale securities, which currently are reported in stockholders' equity, to
be included in other comprehensive income and the disclosure of total
comprehensive income. The Company does not believe that the adoption of
this statement will have a material effect on its consolidated financial
condition or results of operations.
Continued
F-11
<PAGE> 162
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Community Bancshares, Inc. and Subsidiary
December 31, 1997
- --------------------------------------------------------------------------------
2. INVESTMENT SECURITIES
The amortized cost and approximate fair values of investment securities
follow:
<TABLE>
<CAPTION>
Held to Maturity
------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury $ 608,869 $4,951 $ 290 $ 613,530
U.S. Government
agencies and
corporations 1,594,341 3,844 2,338 1,595,847
States and political
subdivisions
520,062 354 4,232 516,184
---------- ------ ------ ----------
$2,723,272 $9,149 $6,860 $2,725,561
========== ====== ====== ==========
</TABLE>
<TABLE>
<CAPTION>
Available for Sale
------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury $ 856,017 $13,092 $ -- $ 869,109
U.S. Government
agencies and
corporations 1,396,213 472 3,890 1,392,795
States and political
subdivisions
1,198,320 23,586 113 1,221,793
Mortgage-backed
securities 96,281 -- 2,407 93,874
Equity securities 390,500 -- -- 390,500
---------- ------- ------ ----------
$3,937,331 $37,150 $6,410 $3,968,071
========== ======= ====== ==========
</TABLE>
Continued
F-12
<PAGE> 163
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Community Bancshares, Inc. and Subsidiary
December 31, 1997
- --------------------------------------------------------------------------------
The amortized cost and approximate fair values of debt securities at
December 31, 1997 by contractual maturity, are as follows. Mortgage-backed
and other securities are distributed according to their stated final
maturity. However, expected maturities will differ from contractual
maturities because borrowers may have the right to call or prepay
obligations, in whole or in part, with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
Held to Maturity Available for Sale
-------------------------- --------------------------
Amortized Amortized
Cost Fair Value Cost Fair Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Due in one year or less $ 747,912 $ 747,824 $1,309,205 $1,308,645
Due in one to five years 1,409,012 1,414,720 1,972,020 2,002,690
Due in five to ten years 566,348 563,017 265,606 266,236
Due after ten years -- -- -- --
---------- ---------- ---------- ----------
$2,723,272 $2,725,561 $3,546,831 $3,577,571
========== ========== ========== ==========
</TABLE>
Proceeds from sales of securities available for sale, gross realized gains
and gross realized losses on such sales in 1997 were as follows:
<TABLE>
<S> <C>
Proceeds from sales $ 657,891
=========
Gross realized gains $ 1,283
Gross realized losses (2,578)
---------
Net realized gains (losses) $ (1,295)
=========
</TABLE>
Investment securities with aggregate carrying value of approximately
$2,600,000 at December 31, 1997, were pledged to secure public deposits
and for other purposes required or permitted by law.
Continued
F-13
<PAGE> 164
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Community Bancshares, Inc. and Subsidiary
December 31, 1997
- --------------------------------------------------------------------------------
3. LOANS
Loans outstanding at December 31, 1997 by major lending classification are
as follows:
<TABLE>
<S> <C>
Commercial, financial and agricultural $ 3,712,404
Real estate - construction 907,075
Real estate - mortgage 19,247,105
Consumer 6,294,834
Other 45,326
-----------
30,206,744
Less: Unearned interest and fees 23,840
Allowance for loan losses 228,859
-----------
$29,954,045
===========
</TABLE>
Direct and indirect loans to executive officers and directors of the
Company, and their related interests, totaled approximately $27,000 at
December 31, 1997. Related party loans are made on substantially the same
terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with unrelated borrowers and do not
involve more than normal risk of collectibility.
The Company evaluates the credit risk of each customer on an individual
basis and when deemed appropriate, collateral is obtained. Collateral
varies by individual loan customer, but may include accounts receivable,
inventory, real estate, equipment, deposits, agricultural crops and
livestock, personal guarantees and general security agreements. Access to
collateral is dependent upon the type of collateral obtained. On a regular
basis, the Company monitors its collateral position relative to the loan
balance outstanding and takes the appropriate action, as necessary.
The Company primarily grants loans to customers within its defined market
area, Middleton, Tennessee and Hardeman and contiguous counties, all of
which are affected by the general economic conditions of the area.
Although the Company reviews the diversification of the loan portfolio on
a regular basis to avoid concentrations of credit risk, the overall
quality of the loan portfolio and the borrowers' ability to repay the
loans are, to some extent, affected by the health of the local economy
taken as a whole. As of December 31, 1997, there were no significant
concentrations of loans to customers engaged in similar activities and
having similar economic characteristics, other than geographic
concentration.
Loans totaling approximately $597,000 at December 31, 1997 were classified
as impaired. The allowance for loan losses related to impaired loans
totaled approximately $90,000 at December 31, 1997. Average impaired loans
for 1997 approximated $250,000.
Continued
F-14
<PAGE> 165
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Community Bancshares, Inc. and Subsidiary
December 31, 1997
- --------------------------------------------------------------------------------
Changes in the allowance for loan losses during 1997 were as follows:
<TABLE>
<S> <C>
Balance at beginning of year $ 472,061
Provision for loan losses 354,000
Loans charged-off (627,102)
Recoveries 29,900
---------
Balance at end of year $ 228,859
=========
</TABLE>
In addition, at December 31, 1997, other loans on which the accrual of
interest has been discontinued approximated $1,090,000 for which
impairment had not been recognized. Interest income that would have been
earned if nonaccrual loans had performed in accordance with their original
terms totaled approximately $110,000 for 1997. Loans past due 90 days or
more and still accruing interest totaled approximately $15,000 at December
31, 1997. There were no material commitments to loan additional funds to
the borrowers of impaired or nonaccrual loans.
4. PREMISES AND EQUIPMENT
Components of premises and equipment are as follows:
<TABLE>
<S> <C>
Land $ 94,625
Building and improvements 241,883
Equipment, furniture and fixtures 625,225
Vehicles 34,947
--------
996,680
Less accumulated depreciation and amortization 696,059
--------
$300,621
========
</TABLE>
Included above is capitalized lease asset cost of $106,801 and accumulated
amortization of $22,791.
Continued
F-15
<PAGE> 166
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Community Bancshares, Inc. and Subsidiary
December 31, 1997
- --------------------------------------------------------------------------------
At December 31, 1997, the Company was obligated under capital leases
related to equipment and computer software. Future minimum lease payments
under the leases are as follows:
<TABLE>
<CAPTION>
Year
-------------
<S> <C>
1998 $40,370
1999 28,568
2000 2,794
-------
Total minimum lease payments 71,732
Less amount representing interest 5,704
-------
$66,028
=======
</TABLE>
5. DEPOSITS
At December 31,1997, scheduled maturities of certificates of deposit are
as follows:
<TABLE>
<S> <C>
1998 $19,552,294
1999 - 2000 3,763,465
-----------
$23,315,759
===========
</TABLE>
6. NOTES PAYABLE
A note payable of the Company of $166,747 matures December 4, 2001 and
bears interest at the lender's prime rate (8.50% at December 31, 1997).
The loan is secured by all of the outstanding common stock of the Bank.
A note payable of the Bank of $26,000 matures April 1, 2000 and bears
interest at 6%. The loan is secured by land.
Continued
F-16
<PAGE> 167
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Community Bancshares, Inc. and Subsidiary
December 31, 1997
- --------------------------------------------------------------------------------
7. FEDERAL HOME LOAN BANK ADVANCES
Advances payable to the Federal Home Loan Bank of $3,270,705 bear interest
at fixed rates ranging from 5.25% to 7.8%. Principal and interest are
payable monthly through 2018. The obligations are secured by one-to-four
family residential mortgages held by the Bank.
Principal payments for each of the next five years are as follows:
<TABLE>
<S> <C>
1998 $221,141
1999 344,570
2000 243,477
2001 259,866
2002 269,865
</TABLE>
8. INCOME TAXES
Income tax expense consists of the following:
<TABLE>
<S> <C>
Current
Federal $ 3,422
State 5,822
--------
9,244
Deferred
Federal 112,370
State 20,700
--------
133,070
--------
$142,314
========
</TABLE>
The reasons for the differences between income taxes on income before
income taxes and amounts computed using the statutory federal income tax
rate are as follows:
<TABLE>
<S> <C>
Tax expense at statutory rate $147,907
Increase (decrease) resulting from:
Tax exempt income (32,239)
State taxes, net of federal benefits 17,226
Interest and other nondeductible expenses 6,898
Other, net 2,522
--------
$142,314
========
</TABLE>
Continued
F-17
<PAGE> 168
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Community Bancshares, Inc. and Subsidiary
December 31, 1997
- --------------------------------------------------------------------------------
The components of the net deferred income tax liability in the
accompanying consolidated balance sheet consist of:
<TABLE>
<S> <C>
Deferred tax assets:
Allowance for loan losses $ 14,000
Minimum tax credit carryover 3,450
--------
17,450
Deferred tax liabilities:
Depreciation (12,000)
Deferred income (36,500)
Net unrealized securities gains (10,451)
--------
(58,951)
--------
Net deferred tax liability $(41,501)
========
</TABLE>
9. EMPLOYEE BENEFIT PLAN
The Company sponsors a 40l(k) retirement plan which covers substantially
all employees. Employees may defer a portion of their compensation by
contributing such amount to the plan. In addition, the Company may make
discretionary contributions to the plan each year as determined by the
Board of Directors. During 1997, the Company contributed approximately
$8,500 to the plan.
10. OTHER NONINTEREST EXPENSE
A summary of other noninterest expense follows:
<TABLE>
<S> <C>
Stationery, supplies and postage $ 60,911
Professional fees 42,281
Directors fees 34,400
Insurance 13,866
Loss on other real estate 38,768
Other 143,048
--------
$333,274
========
</TABLE>
Continued
F-18
<PAGE> 169
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Community Bancshares, Inc. and Subsidiary
December 31, 1997
- --------------------------------------------------------------------------------
11. COMMITMENTS AND CONTINGENCIES
Financial Instruments With Off-Balance-Sheet Risk
The Company is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend
credit and letters of credit. These instruments involve, to varying
degrees, elements of credit risk, interest rate risk and liquidity risk,
which are not recognized in the consolidated balance sheets. The contract
amounts of those instruments reflect the extent of involvement the Company
has in particular classes of financial instruments.
The Company's exposure to credit loss in the event of nonperformance by
the other party to the financial instrument for commitments to extend
credit and letters of credit is represented by the contractual amount of
those instruments. The Company uses the same credit policy to make such
commitments as it uses for on-balance-sheet items.
Financial instruments whose contract amounts represent credit risk at
December 31, 1997 are as follows:
<TABLE>
<S> <C>
Commitments to extend credit $3,830,000
Letters of credit 57,000
</TABLE>
For commitments to extend credit and letters of credit, the nature and
amount of collateral obtained by the Company varies based on management's
credit evaluation of the counterparty. Some of the commitments to extend
credit and most of the letters of credit are expected to expire without
being drawn upon. Accordingly, the face amounts of these off-balance-sheet
instruments do not necessarily represent future cash requirements of the
Company.
Stock Bonus Agreement
A stock bonus and noncompetition agreement was executed between the
Company and three executive officers in September of 1990. The agreement
called for the issuance of 363 shares of common stock to each of the three
executive officers of the Company annually for eight years beginning in
1993. The total shares of common stock to be issued over the term of the
agreement is 8,712 shares. In 1997, 1,089 shares of common stock were
issued. As of December 31, 1997, there were 3,267 shares remaining to be
issued over a three year period. Subsequent to December 31, 1997, one of
the officers died thereby eliminating the Company's obligation under the
agreement with respect to this individual.
Continued
F-19
<PAGE> 170
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Community Bancshares, Inc. and Subsidiary
December 31, 1997
- --------------------------------------------------------------------------------
If the merger transaction described below is approved, the Company intends
to satisfy its obligation to issue additional shares under the agreement
by paying cash to the remaining two officers in the aggregate amount of
approximately $330,000. The amount paid, if any, will be expensed upon
payment.
Other
The Company is subject to claims and lawsuits which arise primarily in the
ordinary course of business. Based on information presently available and
advice received from legal counsel representing the Company in connection
with such claims and lawsuits, it is the opinion of management that the
ultimate disposition of such claims and lawsuits will not have a material
adverse effect on the financial position of the Company.
In November 1997, the Board of Directors of the Company executed a merger
agreement with a multi-state bank holding company whereby the parties
intend to merge the Company with and into the other bank holding company.
The merger is dependent upon the approval of the shareholders of the
Company and various regulatory agencies.
12. RESTRICTIONS ON RETAINED EARNINGS
The ability of the Company to pay dividends will be limited by the amount
of dividends it receives from the Bank. Banking laws and regulations limit
the payment of dividends by the Company without prior regulatory approval.
The Bank's primary federal regulator, Federal Deposit Insurance
Corporation, imposes no restriction on the amount of dividends state
chartered banks may pay. However, both federal and state banking laws and
regulations require maintenance of minimum capital levels.
Furthermore, other considerations may affect management's decision
regarding the declaration and payment of dividends. At December 31, 1997,
approximately $1,150,000 of the Company's retained earnings was available
for future payment of dividends without regulatory approval. During 1997,
the Bank paid dividends to the Company of $100,000.
13. REGULATORY MATTERS
The Company and the Bank are subject to various regulatory capital
requirements administered by federal and state banking agencies. Failure
to meet minimum capital requirements can initiate certain mandatory and
possibly additional discretionary actions by regulators that, if
undertaken, could have a direct material effect on the consolidated
financial statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, specific capital guidelines must
be met that involve quantitative measures of assets, liabilities, and
certain off-balance-sheet items as calculated under regulatory accounting
practices. Capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk weightings,
and other factors.
Continued
F-20
<PAGE> 171
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Community Bancshares, Inc. and Subsidiary
December 31, 1997
- --------------------------------------------------------------------------------
Quantitative measures established by regulation to ensure capital adequacy
require the Company and the Bank to maintain minimum amounts and ratios
(set forth in the table below) of total and Tier I capital (as defined in
the regulations) to risk-weighted assets (as defined), and of Tier I
capital (as defined) to average assets (as defined). Management believes,
as of December 31, 1997, that the Company and Bank meet all capital
adequacy requirements to which they are subject.
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 are no conditions and events since the latest
notification that management believes have changed the Bank's category.
Actual capital amounts and ratios at December 31, 1997 are presented in
the table below. No amount was deducted from capital for interest-rate
risk.
<TABLE>
<CAPTION>
Minimum For Minimum To
Actual Capital Adequacy Be Well Capitalized
----------------- ----------------- -------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Total Capital (to Risk Weighted Assets):
Consolidated $3,759 13.81% $2,177 >8.0% $ N/A N/A
Bank 3,892 14.30% 2,177 >8.0% 2,721 >10.0%
Tier I Capital (to Risk Weighted Assets):
Consolidated 3,530 12.97% 1,089 >4.0% N/A N/A
Bank 3,663 13.46% 1,088 >4.0% 1,633 >6.0%
Tier I Capital (to Average Assets):
Consolidated 3,530 8.54% 1,653 >4.0% N/A N/A
Bank 3,663 8.87% 1,652 >4.0% 2,066 >5.0%
</TABLE>
14. EARNINGS PER SHARE
The computation of earnings per share is as follows:
<TABLE>
<S> <C>
Net income $292,707
========
Average common shares outstanding 45,978
Effect of dilutive stock bonus shares 606
--------
Average diluted common shares 46,584
========
Basic earnings per share $ 6.37
========
Diluted earnings per share $ 6.28
========
</TABLE>
Continued
F-21
<PAGE> 172
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Community Bancshares, Inc. and Subsidiary
December 31, 1997
- --------------------------------------------------------------------------------
15. FIRST COMMUNITY BANCSHARES, INC. (PARENT COMPANY ONLY) FINANCIAL
INFORMATION
Condensed Balance Sheet
<TABLE>
<CAPTION>
December 31,
1997
------------
<S> <C>
Assets
Cash and due from banks $ 48,191
Investment securities available for sale 2,500
Investment in Bank of Middleton 3,683,558
----------
Total assets $3,734,249
==========
Liabilities and stockholders' equity
Note payable $ 166,747
Other liabilities 17,181
Stockholders' equity 3,550,321
----------
Total liabilities and stockholders' equity $3,734,249
==========
</TABLE>
Condensed Statement of Income
<TABLE>
<CAPTION>
Year 1997
---------
<S> <C>
Dividends from Bank $100,000
Other interest income 1,621
--------
Total income 101,621
Interest expense 16,754
Salaries and employee benefits 72,397
Other noninterest expense 54
--------
Total expenses 89,205
Income before income taxes and equity in
undistributed income of Bank 12,416
Income taxes (credit) (33,862)
--------
Income before equity in undistributed income
of Bank 46,278
Equity in undistributed income of Bank 246,429
--------
Net income $292,707
========
</TABLE>
Continued
F-22
<PAGE> 173
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Community Bancshares, Inc. and Subsidiary
December 31, 1997
- --------------------------------------------------------------------------------
Condensed Statement of Cash Flows
<TABLE>
<CAPTION>
Year 1997
---------
<S> <C>
Cash flows from operating activities:
Net income $ 292,707
Noncash adjustments
Equity in undistributed income of Bank (246,429)
Increase in other liabilities 1,335
Common stock issued to employees 65,340
---------
Net cash provided by operating activities 112,953
Cash flows from financing activities:
Repayment of notes payable (33,253)
Dividends paid (58,416)
---------
Net cash used for financing activities (91,669)
---------
Net increase in cash and due from banks 21,284
Cash and due from banks at beginning of year 26,907
---------
Cash and due from banks at end of year $ 48,191
=========
Supplemental disclosures:
Income taxes paid (refunded) $ (33,862)
Interest paid 17,174
Change in net unrealized securities gains (losses),
net of taxes 8,335
</TABLE>
F-23
<PAGE> 174
CONSOLIDATED BALANCE SHEET
First Community Bancshares, Inc. and Subsidiary
March 31, 1998 and December 31, 1997
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
----------- -----------
<S> <C> <C>
ASSETS
Cash and due from banks $ 1,049,708 $ 1,190,829
Interest-bearing deposits with banks 65,318 171,761
Federal funds sold 1,725,000 1,300,000
Investment securities held to maturity 2,472,775 2,723,272
Investment securities available for sale 3,712,596 3,968,071
Loans, less allowance for loan losses of $330,591 and $228,859
at March 31, 1998 and December 31, 1997, respectively 30,261,029 29,954,045
Premises and equipment, net 286,727 300,621
Accrued interest receivable 690,153 573,826
Other real estate 152,875 157,320
Other assets 255,678 310,237
----------- -----------
Total assets $40,671,859 $40,649,982
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing $ 2,939,645 $ 2,751,945
Certificates of deposit of $100,000 and over 7,692,991 7,719,866
Other interest-bearing 22,671,379 22,903,267
----------- -----------
Total deposits 33,304,015 33,375,078
Notes payable 192,747 192,747
Federal Home Loan Bank advances 3,216,064 3,270,705
Other long-term debt 57,298 66,028
Accrued interest payable 116,453 122,959
Other liabilities 103,679 72,144
----------- -----------
Total liabilities 36,990,256 37,099,661
Commitments and contingencies -- --
Stockholders' equity
Common stock, $1 par value, 100,000 shares
authorized, 95,300 shares issued 95,300 95,300
Surplus 1,269,371 1,269,371
Retained earnings 3,488,908 3,360,336
Net unrealized securities gains 22,998 20,288
Treasury stock, at cost, 48,567 shares (1,194,974) (1,194,974)
----------- -----------
Total stockholders' equity 3,681,603 3,550,321
----------- -----------
Total liabilities and stockholders' equity $40,671,859 $40,649,982
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F-24
<PAGE> 175
CONSOLIDATED STATEMENT OF INCOME
First Community Bancshares, Inc. and Subsidiary
Three Months Ended March 31, 1998 and 1997
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Interest income
Loans, including fees $827,372 $761,654
Investment securities
Taxable 66,987 60,368
Nontaxable 19,996 30,579
Federal funds sold 15,753 9,352
Other 10,024 3,946
-------- --------
Total interest income 940,132 865,899
Interest expense
Deposits 391,770 388,639
Other borrowed funds 58,792 53,979
-------- --------
Total interest expense 450,562 442,618
-------- --------
Net interest income 489,570 423,281
Provision for loan losses 45,000 10,500
-------- --------
Net interest income after provision
for loan losses 444,570 412,781
Noninterest income
Service charges on deposit accounts 22,203 32,029
Other fees and commissions 3,045 5,383
Other -- 34
-------- --------
25,248 37,446
Noninterest expense
Salaries and employee benefits 136,593 143,690
Occupancy and equipment, net 33,905 27,987
Other 101,249 73,045
-------- --------
271,747 244,722
-------- --------
Income before income taxes 198,071 205,505
Income taxes 69,499 68,110
-------- --------
Net income $128,572 $137,395
======== ========
Earnings per share:
Basic $ 2.75 $ 3.01
======== ========
Diluted $ 2.75 $ 3.01
======== ========
</TABLE>
See notes to consolidated financial statements.
F-25
<PAGE> 176
CONSOLIDATED STATEMENT OF CASH FLOWS
First Community Bancshares, Inc. and Subsidiary
Three Months Ended March 31, 1998 and 1997
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
--------- -----------
<S> <C> <C>
Cash flows from operating activities
Net income $ 128,572 $ 137,395
Noncash adjustments
Deferred income taxes -- (11,296)
Premium amortization 2,341 (4,852)
Discount accretion (1,951) (86)
Federal Home Loan Bank stock dividends (6,900) --
Depreciation and amortization 15,479 11,425
Provision for loan losses 45,000 10,500
Loss on other real estate -- 1,260
Changes in other assets and liabilities
Accrued interest receivable (116,327) (67,843)
Other assets 54,559 (2,724)
Accrued interest payable (6,506) 16,934
Other liabilities 30,139 1,800
--------- -----------
Net cash provided by operating
activities 144,406 92,513
Cash flows from investing activities
Net decrease in interest-bearing deposits 106,443 2,606
Net increase in federal funds sold (425,000) (1,300,000)
Proceeds from sales of securities available
for sale -- 657,680
Proceeds from maturities of securities
held to maturity 250,000 164,405
Proceeds from maturities of securities
available for sale 266,588 425,451
Purchase of securities held to maturity -- (450,000)
Purchase of securities available for sale -- (1,104,305)
Net increase in loans (351,984) (263,306)
Purchase of premises and equipment (1,585) (17,995)
Disposition of other real estate 4,445 --
--------- -----------
Net cash used for investing activities (151,093) (1,885,464)
</TABLE>
Continued
F-26
<PAGE> 177
CONSOLIDATED STATEMENT OF CASH FLOWS
First Community Bancshares, Inc. and Subsidiary
Three Months Ended March 31, 1998 and 1997
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Cash flows from financing activities
Net increase (decrease) in deposits $ (71,063) $1,577,546
Proceeds from other borrowed funds -- 62,550
Repayment of other borrowed funds (63,371) (37,277)
---------- ----------
Net cash provided by (used for)
financing activities (134,434) 1,602,819
---------- ----------
Net decrease in cash and due from banks (141,121) (190,132)
Cash and due from banks at January 1 1,190,829 1,350,072
---------- ----------
Cash and due from banks at March 31 $1,049,708 $1,159,940
========== ==========
Supplemental cash flow information:
Interest paid $ 457,068 $ 425,684
Income taxes paid 11,900 88,085
Change in net unrealized securities
gains (losses), net of taxes 2,710 (21,465)
</TABLE>
See notes to consolidated financial statements.
F-27
<PAGE> 178
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Community Bancshares, Inc. and Subsidiary
March 31, 1998 and December 31, 1997
(Unaudited)
- --------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements reflect all
adjustments (consisting only of normally recurring accruals) which are, in
the opinion of management, necessary to a fair statement of the results for
the interim periods presented. The statements should be read in conjunction
with the summary of significant accounting policies and notes to
consolidated financial statements included in the Company's consolidated
financial statements for the year ended December 31, 1997. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted in accordance with the rules of the Securities
and Exchange Commission.
2. ACCOUNTING POLICIES
Reference is made to the accounting policies of the Company described in
the notes to the Company's consolidated financial statements for the year
ended December 31, 1997. The Company has consistently followed those
policies in preparing this report.
3. INCOME TAXES
Income taxes are provided on taxable income. Tax-exempt interest income on
state, county and municipal bonds owned by the Company's subsidiary are
excluded from taxable income.
4. PROPOSED MERGER
The Company executed a merger agreement dated November 10, 1997 with Union
Planters Corporation. Consummation of the merger is dependent upon the
approval of the Company's shareholders and various regulatory agencies.
5. INTERIM FINANCIAL RESULTS
Interim results for the three months ended March 31, 1998 are not
necessarily indicative of results for the full year 1998.
F-28
<PAGE> 179
FIRST COMMUNITY BANCSHARES, INC.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
(UNAUDITED)
F-29
<PAGE> 180
CONSOLIDATED BALANCE SHEET
First Community Bancshares, Inc. and Subsidiary
December 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Cash and due from banks $ 1,350,072
Interest-bearing deposits with banks 87,789
Federal funds sold 350,000
Investment securities held to maturity 1,759,006
Investment securities available for sale 5,049,310
Loans, less allowance for loan losses 29,181,117
Premises and equipment, net 293,020
Accrued interest receivable 539,535
Other real estate 230,213
Deferred income taxes 95,885
Other assets 62,140
-----------
Total assets $38,998,087
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing $ 2,603,111
Certificates of deposit of $100,000 and over 6,270,622
Other interest-bearing, including NOW accounts of $4,225,912 23,278,137
-----------
Total deposits 32,151,870
Notes payable 230,000
Federal Home Loan Bank advances 3,082,793
Other long-term debt 52,781
Accrued interest payable 133,887
Other liabilities 104,401
-----------
Total liabilities 35,755,732
Commitments and contingencies --
Stockholders' equity
Common stock, $1 par value, 100,000 shares
authorized, 95,300 shares issued 95,300
Surplus 1,269,371
Retained earnings 3,126,045
Net unrealized securities gains 11,953
Treasury stock, at cost, 49,656 shares (1,260,314)
-----------
Total stockholders' equity 3,242,355
-----------
Total liabilities and stockholders' equity $38,998,087
===========
</TABLE>
See notes to consolidated financial statements.
F-30
<PAGE> 181
CONSOLIDATED STATEMENT OF INCOME
First Community Bancshares, Inc. and Subsidiary
Years Ended December 31, 1996 and 1995
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Interest income
Loans, including fees $2,978,556 $2,686,841
Investment securities
Taxable 271,541 258,765
Nontaxable 110,562 138,710
Federal funds sold 40,337 47,783
Other 27,961 27,101
---------- ----------
Total interest income 3,428,957 3,159,200
Interest expense
Deposits 1,498,195 1,384,070
Other borrowed funds 208,924 224,717
---------- ----------
Total interest expense 1,707,119 1,608,787
---------- ----------
Net interest income 1,721,838 1,550,413
Provision for loan losses 11,000 45,000
---------- ----------
Net interest income after provision
for loan losses 1,710,838 1,505,413
Noninterest income
Service charges on deposit accounts 121,953 102,625
Other fees and commissions 26,894 26,818
Investment securities gains (losses) (138) 2,319
---------- ----------
148,709 131,762
Noninterest expense
Salaries and employee benefits 585,518 559,295
Occupancy and equipment, net 132,620 123,478
Other 284,196 303,608
---------- ----------
1,002,334 986,381
---------- ----------
Income before income taxes 857,213 650,794
Income taxes 293,340 207,699
---------- ----------
Net income $ 563,873 $ 443,095
========== ==========
Earnings per share:
Basic $ 11.64 $ 9.29
========== ==========
Diluted $ 11.48 $ 9.13
========== ==========
</TABLE>
See notes to consolidated financial statements.
F-31
<PAGE> 182
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
First Community Bancshares, Inc. and Subsidiary
Years Ended December 31, 1996 and 1995
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net
Unrealized
Common Retained Securities Treasury
Stock Surplus Earnings Gains (Losses) Stock Total
------- ---------- ---------- -------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 $95,300 $1,269,371 $2,208,305 $(215,468) $(1,056,056) $2,301,452
Net income -- -- 443,095 -- -- 443,095
Cash dividends paid ($.90 per share) -- -- (43,584) -- -- (43,584)
Change in net unrealized securities gains
(losses), net of taxes -- -- -- 223,563 -- 223,563
Acquisition of 700 shares of treasury stock -- -- -- -- (36,673) (36,673)
Cancellation of 1,089 shares of treasury
stock and reissuance to employees -- -- -- -- 47,916 47,916
------- ---------- ---------- --------- ----------- ----------
Balance at December 31, 1995 95,300 1,269,371 2,607,816 8,095 (1,044,813) 2,935,769
Net income -- -- 563,873 -- -- 563,873
Cash dividends paid ($1.00 per share) -- -- (45,644) -- -- (45,644)
Change in net unrealized securities gains
(losses), net of taxes -- -- -- 3,858 -- 3,858
Acquisition of 5,500 shares of treasury stock -- -- -- -- (385,000) (385,000)
Sale of 1,628 shares of treasury stock -- -- -- -- 113,960 113,960
Cancellation of 1,089 shares of treasury
stock and reissuance to employees -- -- -- -- 55,539 55,539
------- ---------- ---------- --------- ----------- ----------
Balance at December 31, 1996 $95,300 $1,269,371 $3,126,045 $ 11,953 $(1,260,314) $3,242,355
======= ========== ========== ========= =========== ==========
</TABLE>
See notes to consolidated financial statements.
F-32
<PAGE> 183
CONSOLIDATED STATEMENT OF CASH FLOWS
First Community Bancshares, Inc. and Subsidiary
Years Ended December 31, 1996 and 1995
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities
Net income $ 563,873 $ 443,095
Noncash adjustments
Deferred income taxes 29,299 8,160
Premium amortization 5,801 10,651
Discount accretion (33,258) (45,010)
Federal Home Loan Bank stock dividends (23,500) (21,000)
Depreciation and amortization 51,576 59,818
Provision for loan losses 11,000 45,000
Investment securities (gains) losses 138 (2,319)
Common stock issued to employees 55,539 47,916
Changes in other assets and liabilities
Accrued interest receivable (52,742) (85,675)
Other assets (35,334) 26,844
Accrued interest payable (27,335) 57,223
Other liabilities 56,797 (16,260)
----------- -----------
Net cash provided by operating
activities 601,854 528,443
Cash flows from investing activities
Net decrease in interest-bearing deposits 29,411 90,368
Net (increase) decrease in federal funds sold 1,050,000 (1,400,000)
Proceeds from maturities of securities
held to maturity 349,825 99,031
Proceeds from maturities of securities
available for sale 2,162,130 1,383,615
Purchase of securities held to maturity (1,365,231) (646,875)
Purchase of securities available for sale (416,286) (6,700)
Net increase in loans (3,644,119) (1,885,235)
Purchase of premises and equipment (28,044) (120,042)
Disposition of other real estate 67,064 --
----------- -----------
Net cash used for investing activities (1,795,250) (2,485,838)
</TABLE>
Continued
F-33
<PAGE> 184
CONSOLIDATED STATEMENT OF CASH FLOWS
First Community Bancshares, Inc. and Subsidiary
Years Ended December 31, 1996 and 1995
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Cash flows from financing activities
Net increase in deposits $1,526,523 $2,663,684
Decrease in federal funds purchased -- (100,000)
Proceeds of note payable 200,000 55,000
Repayment of note payable (105,000) (150,000)
Proceeds from other borrowed funds 243,000 --
Repayment of other borrowed funds (215,754) (149,178)
Dividends paid (45,644) (43,584)
Sale of treasury stock 113,960 --
Acquisition of treasury stock (385,000) (36,673)
---------- ----------
Net cash provided by financing
activities 1,332,085 2,239,249
---------- ----------
Net increase in cash and due from banks 138,689 281,854
Cash and due from banks at beginning of year 1,211,383 929,529
---------- ----------
Cash and due from banks at end of year $1,350,072 $1,211,383
========== ==========
Supplemental cash flow information:
Interest paid $1,734,454 $1,555,025
Income taxes paid 220,030 201,169
Change in net unrealized securities
gains (losses), net of taxes 3,858 223,563
Equipment acquired under capital lease 62,540 --
Real estate acquired by foreclosure 197,277 100,000
</TABLE>
See notes to consolidated financial statements.
F-34
<PAGE> 185
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Community Bancshares, Inc. and Subsidiary
December 31, 1996 and 1995
(Unaudited)
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
First Community Bancshares, Inc. (the Company), a one-bank holding
company, and its wholly owned subsidiary, Bank of Middleton (the Bank),
are engaged in the business of banking and provide a full range of banking
services to individual and corporate customers principally in Middleton,
Tennessee and Hardeman and contiguous counties.
Basis of Presentation
The consolidated financial statements include the accounts of the Company
and the Bank. All significant intercompany accounts and transactions have
been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Material estimates that are particularly susceptible to significant change
relate to the determination of the allowance for losses on loans and the
valuation of real estate acquired in connection with foreclosures or in
satisfaction of loans. In connection with the determination of the
allowances for losses on loans and foreclosed real estate, management
obtains independent appraisals for significant properties.
While management uses available information to recognize losses on loans
and foreclosed real estate, future additions to the allowances may be
necessary based on changes in local economic conditions. In addition,
regulatory agencies, as an integral part of their examination process,
periodically review the Bank's allowances for losses on loans and
foreclosed real estate. Such agencies may require the Bank to recognize
additions to the allowances based on their judgments about information
available to them at the time of their examination. Because of these
factors, it is reasonably possible that the allowances for losses on loans
and foreclosed real estate may change materially in the near term.
Continued
F-35
<PAGE> 186
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Community Bancshares, Inc. and Subsidiary
December 31, 1996 and 1995
(Unaudited)
- --------------------------------------------------------------------------------
Securities Held to Maturity
Investment securities classified as held to maturity are stated at cost,
adjusted for amortization of premiums and accretion of discounts, which
are recognized in interest income using the interest method over the
period to maturity. The Company has the positive intent and ability to
hold such securities to maturity.
Securities Available For Sale
Investment securities, including marketable equity securities, classified
as available for sale are stated at fair value. Fair values are determined
by reference to current market quotations. Unrealized holding gains and
losses, net of income tax effects, on available for sale securities are
reported as a separate component of stockholders' equity until realized.
Gains and losses on the sale of available for sale securities are
determined using the specific identification method. Premiums and
discounts are recognized in interest income using the interest method over
the period to maturity.
Loans
Loans are stated at the principal amount outstanding, reduced by unearned
interest and an allowance for loan losses. Unearned interest on
installment loans is recognized as income using a method that approximates
the interest method. Interest on other loans is recognized as income using
the simple interest method on daily balances of the principal amount
outstanding.
Loans on which the accrual of interest has been discontinued are
designated as nonaccrual loans. Generally, accrual of interest is
discontinued on loans past due 90 days or more. Also, a loan may be placed
on nonaccrual status prior to becoming past due 90 days if management
believes, after considering economic and business conditions and
collection efforts, that the borrower's financial condition is such that
collection of principal or interest is doubtful. The amount of impaired
loans and related disclosures at December 31, 1996 and 1995 are not
considered material.
Fees on loans and costs incurred in origination of loans are recognized at
the time the loan is recorded. Because loan fees and costs are not
significant, the results of operations are not materially different than
the results which would be obtained by accounting for loan fees and costs
in accordance with generally accepted accounting principles.
Continued
F-36
<PAGE> 187
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Community Bancshares, Inc. and Subsidiary
December 31, 1996 and 1995
(Unaudited)
- --------------------------------------------------------------------------------
Allowance for Loan Losses
The allowance for loan losses is established through a provision for loan
losses charged to expense. Loans are charged against the allowance for
loan losses when management believes that the collectibility of principal
is unlikely. Recoveries of amounts previously charged off are credited to
the allowance.
The allowance for loan losses is maintained at a level that management
considers adequate to absorb possible losses on outstanding loans that may
become uncollectible. Factors considered in management's evaluation of the
adequacy of the allowance are current and anticipated economic conditions,
previous loan loss experience, changes in the nature, volume and
composition of the loan portfolio, industry or other concentrations of
credit, review of specific problem loans, the level of classified and
nonperforming loans, the results of regulatory examinations, the fair
value of underlying collateral and overall quality of the loan portfolio.
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation
and amortization. Depreciation and amortization are computed principally
by the straight-line method over the estimated useful lives of the assets
(building and improvements - 10 to 30 years; equipment, furniture and
fixtures - 4 to 10 years). Costs of additions, replacements or
improvements are capitalized, while expenditures for maintenance and
repairs are charged to expense as incurred.
Other Real Estate
Other real estate acquired by foreclosure is carried at the lower of cost
or fair value. Cost includes loan principal, accrued but unpaid interest
not previously charged off and expenditures for subsequent improvements.
Fair value is the amount the Bank could reasonably expect to receive in a
current sale of the subject property to a willing buyer in other than a
forced or liquidation sale. The excess of cost over fair value at the time
of foreclosure is charged to the allowance for loan losses. Subsequent
declines in fair value are recognized and charged to noninterest expense,
as are net operating expenses of such properties.
Income Taxes
The Company and the Bank file consolidated income tax returns. Income
taxes are provided for the tax effects of transactions reported in the
consolidated financial statements and consist of taxes currently due plus
deferred taxes related to differences between the financial and income tax
bases of assets and liabilities. The deferred tax assets and liabilities
represent the future tax return consequences of those differences, which
will either be taxable or deductible when the assets and liabilities are
recovered or settled.
Continued
F-37
<PAGE> 188
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Community Bancshares, Inc. and Subsidiary
December 31, 1996 and 1995
(Unaudited)
- --------------------------------------------------------------------------------
Fair Value of Financial Instruments
Statement of Financial Accounting Standards (SFAS) No. 126, Exemption from
Certain Required Disclosures about Financial Instruments for Certain
Nonpublic Entities, provides exemption for certain entities from the
requirements of SFAS No. 107, Disclosures About Fair Value of Financial
Instruments. The Company meets the criteria for this exemption and has
elected not to present such information.
Earnings Per Share
In 1997, the Financial Accounting Standards Board (FASB) issued SFAS No.
128, Earnings Per Share, which establishes standards for computing and
presenting earnings per share (EPS). The previous presentation of primary
EPS is replaced with a presentation of basis EPS. Dual presentation of
basic and diluted EPS is required on the face of the income statement as
well as a reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS
computation. Basic EPS excludes dilution and is computed by dividing
income available to common stockholders by the weighted-average number of
common shares outstanding for the period. Diluted EPS is computed
similarly to fully diluted EPS pursuant to APB Opinion No. 15. The Company
adopted SFAS No. 128 for the year ended December 31, 1997, and prior
periods were restated.
2. INVESTMENT SECURITIES
The amortized cost and approximate fair values of investment securities at
December 31,1996 follow:
<TABLE>
<CAPTION>
Held to Maturity
------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury $ 711,848 $4,256 $ 828 $ 715,276
U.S. Government
agencies and
corporations 960,039 897 7,447 953,489
States and political
subdivisions
87,119 57 108 87,068
---------- ------ ---------- ----------
$1,759,006 $5,210 $ 8,383 $1,755,833
========== ====== ========== ==========
</TABLE>
Continued
F-38
<PAGE> 189
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Community Bancshares, Inc. and Subsidiary
December 31, 1996 and 1995
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Available for Sale
-------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury $ 653,120 $ 1,568 $ 1,233 $ 653,455
U.S. Government
agencies and
corporations 1,843,898 710 11,977 1,832,631
States and political
subdivisions
2,037,028 34,704 3,680 2,068,052
Mortgage-backed
securities 133,221 -- 2,049 131,172
Equity securities 364,000 -- -- 364,000
---------- ------- ---------- ----------
$5,031,267 $36,982 $ 18,939 $5,049,310
========== ======= ========== ==========
</TABLE>
The amortized cost and approximate fair values of debt securities at
December 31, 1996 by contractual maturity, are as follows. Mortgage-backed
and other securities are distributed according to their stated final
maturity. However, expected maturities will differ from contractual
maturities because borrowers may have the right to call or prepay
obligations, in whole or in part, with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
Held to Maturity Available for Sale
-------------------------- --------------------------
Amortized Amortized
Cost Fair Value Cost Fair Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Due in one year or
less $ 139,605 $ 140,755 $1,718,231 $1,722,142
Due in one to five
years 1,322,149 1,320,696 2,542,413 2,554,766
Due in five to ten
years 297,252 294,382 406,623 408,402
Due after ten years -- -- -- --
---------- ---------- ---------- ----------
$1,759,006 $1,755,833 $4,667,267 $4,685,310
========== ========== ========== ==========
</TABLE>
There were no sales of held to maturity securities or available for sale
securities prior to call or maturity in 1996 or 1995.
Investment securities with aggregate carrying value of approximately
$2,280,000 at December 31, 1996 were pledged to secure public deposits and
for other purposes required or permitted by law.
Continued
F-39
<PAGE> 190
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Community Bancshares, Inc. and Subsidiary
December 31, 1996 and 1995
(Unaudited)
- --------------------------------------------------------------------------------
3. LOANS
Loans outstanding at December 31, 1996 by major lending classification are
as follows:
<TABLE>
<S> <C>
Commercial, financial and agricultural $ 4,536,687
Real estate - construction 904,767
Real estate - mortgage 18,348,615
Consumer 5,814,653
Other 88,150
-----------
29,692,872
Less: Unearned interest and fees 39,694
Allowance for loan losses 472,061
-----------
$29,181,117
===========
</TABLE>
Direct and indirect loans to executive officers and directors of the
Company, and their related interests, totaled approximately $9,000 at
December 31, 1996. Related party loans are made on substantially the same
terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with unrelated borrowers and do not
involve more than normal risk of collectibility.
The Company evaluates the credit risk of each customer on an individual
basis and when deemed appropriate, collateral is obtained. Collateral
varies by individual loan customer, but may include accounts receivable,
inventory, real estate, equipment, deposits, agricultural crops and
livestock, personal guarantees and general security agreements. Access to
collateral is dependent upon the type of collateral obtained. On a regular
basis, the Company monitors its collateral position relative to the loan
balance outstanding and takes the appropriate action, as necessary.
The Company primarily grants loans to customers within its defined market
area, Middleton, Tennessee and Hardeman and contiguous counties, all of
which are affected by the general economic conditions of the area.
Although the Company reviews the diversification of the loan portfolio on
a regular basis to avoid concentrations of credit risk, the overall
quality of the loan portfolio and the borrowers' ability to repay the
loans are, to some extent, affected by the health of the local economy
taken as a whole. As of December 31, 1996, there were no significant
concentrations of loans to customers engaged in similar activities and
having similar economic characteristics, other than geographic
concentration.
Continued
F-40
<PAGE> 191
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Community Bancshares, Inc. and Subsidiary
December 31, 1996 and 1995
(Unaudited)
- --------------------------------------------------------------------------------
Changes in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
1996 1995
--------- --------
<S> <C> <C>
Balance at beginning of year $ 510,690 $527,592
Provision for loan losses 11,000 45,000
Loans charged-off (104,574) (80,731)
Recoveries 54,945 18,829
--------- --------
Balance at end of year $ 472,061 $510,690
========= ========
</TABLE>
Loans on which the accrual of interest has been discontinued approximated
$600,000 at December 31, 1996. Interest income that would have been earned
if nonaccrual loans had performed in accordance with their original terms
totaled approximately $50,000 for 1996 and $40,000 for 1995. Loans past
due 90 days or more and still accruing interest totaled approximately
$6,000 at December 31, 1996. There were no commitments to loan additional
funds to the borrowers of impaired or nonaccrual loans at December 31,
1996.
4. PREMISES AND EQUIPMENT
Components of premises and equipment at December 31, 1996 are as follows:
<TABLE>
<S> <C>
Land $ 94,625
Buildings and improvements 241,883
Equipment, furniture and fixtures 666,639
Vehicles 34,947
----------
1,038,094
Less accumulated depreciation and amortization 745,074
----------
$ 293,020
==========
</TABLE>
Included above is capitalized lease asset cost of $62,540 and accumulated
amortization of $6,515.
Continued
F-41
<PAGE> 192
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Community Bancshares, Inc. and Subsidiary
December 31, 1996 and 1995
(Unaudited)
- --------------------------------------------------------------------------------
At December 31, 1996, the Company was obligated under capital leases
related to equipment and computer software. Future minimum lease payments
under the leases are as follows:
<TABLE>
<CAPTION>
Year
-------------
<S> <C>
1997 $23,604
1998 23,604
1999 11,802
-------
Total minimum lease payments 59,010
Less amount representing interest 6,229
-------
$52,781
=======
</TABLE>
5. DEPOSITS
At December 31, 1996, scheduled maturities of certificates of deposit are
as follows:
<TABLE>
<S> <C>
1997 $18,981,092
1998 - 1999 3,387,821
-----------
$22,368,913
===========
</TABLE>
6. NOTES PAYABLE
A note payable of the Company of $200,000 matures December 4, 2001 and
bears interest at the lender's prime rate. The loan is secured by all of
the outstanding common stock of the Bank.
A note payable of the Bank of $30,000 matures April 1, 2000 and bears
interest at 6%. The loan is secured by land.
Continued
F-42
<PAGE> 193
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Community Bancshares, Inc. and Subsidiary
December 31, 1996 and 1995
(Unaudited)
- --------------------------------------------------------------------------------
7. FEDERAL HOME LOAN BANK ADVANCES
Advances payable to the Federal Home Loan Bank of $3,082,793 bear interest
at fixed rates ranging from 5.25% to 7.8%. Principal and interest are
payable monthly through 2016. The obligations are secured by one-to-four
family residential mortgages held by the Bank.
Principal payments for each of the next five years are as follows:
<TABLE>
<S> <C>
1997 $200,053
1998 213,568
1999 336,426
2000 234,689
2001 250,448
</TABLE>
8. INCOME TAXES
Income tax expense consists of the following:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Current
Federal $217,983 $161,192
State 46,058 38,347
-------- --------
264,041 199,539
Deferred
Federal 24,549 7,160
State 4,750 1,000
-------- --------
29,299 8,160
-------- --------
$293,340 $207,699
======== ========
</TABLE>
Continued
F-43
<PAGE> 194
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Community Bancshares, Inc. and Subsidiary
December 31, 1996 and 1995
(Unaudited)
- --------------------------------------------------------------------------------
The reasons for the differences between income taxes on income before
income taxes and amounts computed using the statutory federal income tax
rate are as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Tax expense at statutory rate $291,452 $221,270
Increase (decrease) resulting from:
Tax exempt income (37,591) (47,161)
State taxes, net of federal benefit 33,946 25,772
Interest and other nondeductible expenses 7,836 9,088
Other, net (2,303) (1,270)
-------- --------
$293,340 $207,699
======== ========
</TABLE>
The components of the net deferred income tax asset in the accompanying
consolidated balance sheet consist of:
<TABLE>
<S> <C>
Deferred tax assets:
Allowance for loan losses $145,500
Deferred tax liabilities:
Depreciation (15,230)
Deferred income (28,250)
Net unrealized securities gains (6,135)
--------
(49,615)
--------
Net deferred tax asset $ 95,885
========
</TABLE>
9. EMPLOYEE BENEFIT PLAN
The Company sponsors a 40l(k) retirement plan which covers substantially
all employees. Employees may defer a portion of their compensation by
contributing such amount to the plan. In addition, the Company may make
discretionary contributions to the plan each year as determined by the
Board of Directors. During 1996 and 1995, the Company contributed
approximately $6,600 and $5,500, respectively, to the plan.
Continued
F-44
<PAGE> 195
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Community Bancshares, Inc. and Subsidiary
December 31, 1996 and 1995
(Unaudited)
- --------------------------------------------------------------------------------
10. OTHER NONINTEREST EXPENSE
A summary of other noninterest expense follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Stationery, supplies and postage $ 52,566 $ 47,805
Professional fees 38,513 24,447
Directors fees 26,250 30,750
Insurance 24,576 16,752
Noncompete agreement -- 40,375
Other 142,291 143,479
-------- --------
$284,196 $303,608
======== ========
</TABLE>
11. COMMITMENTS AND CONTINGENCIES
Financial Instruments With Off-Balance-Sheet Risk
The Company is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend
credit and letters of credit. These instruments involve, to varying
degrees, elements of credit risk, interest rate risk and liquidity risk,
which are not recognized in the consolidated balance sheets. The contract
amounts of those instruments reflect the extent of involvement the Company
has in particular classes of financial instruments.
The Company's exposure to credit loss in the event of nonperformance by
the other party to the financial instrument for commitments to extend
credit and letters of credit is represented by the contractual amount of
those instruments. The Company uses the same credit policy to make such
commitments as it uses for on-balance-sheet items. Financial instruments
whose contract amounts represent credit risk at December 31, 1996 are as
follows:
<TABLE>
<S> <C>
Commitments to extend credit $3,578,000
Letters of credit 40,000
</TABLE>
For commitments to extend credit and letters of credit, the nature and
amount of collateral obtained by the Company varies based on management's
credit evaluation of the counterparty. Some of the commitments to extend
credit and most of the letters of credit are expected to expire without
being drawn upon. Accordingly, the face amounts of these off-balance-sheet
instruments do not necessarily represent future cash requirements of the
Company.
Continued
F-45
<PAGE> 196
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Community Bancshares, Inc. and Subsidiary
December 31, 1996 and 1995
(Unaudited)
- --------------------------------------------------------------------------------
Stock Bonus Agreement
A stock bonus and noncompetition agreement was executed between the
Company and three executive officers in September of 1990. The agreement
called for the issuance of 363 shares of common stock to each of the three
executive officers of the Company annually for eight years beginning in
1993. The total shares of common stock to be issued over the term of the
agreement is 8,712 shares. In both 1996 and 1995, 1,089 shares of common
stock were issued. As of December 31, 1996, there were 4,356 shares
remaining to be issued over a four year period.
Other
The Company is subject to claims and lawsuits which arise primarily in the
ordinary course of business. Based on information presently available and
advice received from legal counsel representing the Company in connection
with such claims and lawsuits, it is the opinion of management that the
ultimate disposition of such claims and lawsuits will not have a material
adverse effect on the financial position of the Company.
12. RESTRICTIONS ON RETAINED EARNINGS
The ability of the Company to pay dividends will be limited by the amount
of dividends it receives from the Bank. Banking laws and regulations limit
the payment of dividends by the Company without prior regulatory approval.
The Bank's primary federal regulator, Federal Deposit Insurance
Corporation, imposes no restriction on the amount of dividends state
chartered banks may pay. However, both federal and state banking laws and
regulations require maintenance of minimum capital levels.
Furthermore, other considerations may affect management's decision
regarding the declaration and payment of dividends. At December 31, 1996 ,
approximately $1,235,000 of the Company's retained earnings was available
for future payment of dividends without regulatory approval. During 1996,
the Bank paid dividends to the Company of $196,685.
Continued
F-46
<PAGE> 197
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Community Bancshares, Inc. and Subsidiary
December 31, 1996 and 1995
(Unaudited)
- --------------------------------------------------------------------------------
13. REGULATORY MATTERS
The Company and the Bank are subject to various regulatory capital
requirements administered by federal and state banking agencies. Failure
to meet minimum capital requirements can initiate certain mandatory and
possibly additional discretionary actions by regulators that, if
undertaken, could have a direct material effect on the consolidated
financial statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, specific capital guidelines must
be met that involve quantitative measures of assets, liabilities, and
certain off-balance-sheet items as calculated under regulatory accounting
practices. Capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk weightings,
and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Company and the Bank to maintain minimum amounts and ratios
(set forth in the table below) of total and Tier I capital (as defined in
the regulations) to risk-weighted assets (as defined), and of Tier I
capital (as defined) to average assets (as defined). Management believes,
as of December 31, 1996, that the Company and Bank meet all capital
adequacy requirements to which they are subject.
As of December 31, 1996, 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 are no conditions and events since the latest
notification that management believes have changed the Bank's category.
Continued
F-47
<PAGE> 198
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Community Bancshares, Inc. and Subsidiary
December 31, 1996 and 1995
(Unaudited)
- --------------------------------------------------------------------------------
Actual capital amounts and ratios at December 31, 1996 are presented in
the table below. No amount was deducted from capital for interest-rate
risk.
<TABLE>
<CAPTION>
Minimum For Minimum To
Actual Capital Adequacy Be Well Capitalized
------------------ ----------------- -------------------
Amount Ratio Amount Ratio Amount Ratio
------ ------ ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Total Capital (to Risk Weighted Assets):
Consolidated $3,578 12.92% $2,215 >8.0% $ N/A N/A
Bank 3,766 13.60% 2,215 >8.0% 2,768 >10.0%
Tier I Capital (to Risk Weighted Assets):
Consolidated 3,230 11.67% 1,107 >4.0% N/A N/A
Bank 3,417 12.34% 1,107 >4.0% 1,661 >6.0%
Tier I Capital (to Average Assets):
Consolidated 3,230 8.34% 1,550 >4.0% N/A N/A
Bank 3,417 8.82% 1,550 >4.0% 1,937 >5.0%
</TABLE>
14. EARNINGS PER SHARE
The computation of eanings per share is as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Net income $563,873 $443,095
======== ========
Average common shares outstanding 48,426 47,696
Effect of dilutive stock bonus shares 704 847
-------- --------
Average diluted common shares 49,130 48,543
======== ========
Basic earnings per share $ 11.64 $ 9.29
======== ========
Diluted earnings per share $ 11.48 $ 9.13
======== ========
</TABLE>
F-48
<PAGE> 199
APPENDIX D
CHAPTER 23
DISSENTERS' RIGHTS
<TABLE>
<CAPTION>
SECTION
<S> <C>
PART 1--RIGHT TO DISSENT AND
OBTAIN PAYMENT FOR SHARES
48-23-101. Definitions.
48-23-102. Right to dissent.
48-23-103. Dissent by nominees and beneficial
owners.
PART 2--PROCEDURE FOR EXERCISE OF
DISSENTERS' RIGHTS
48-23-201. Notice of dissenters' rights.
48-23-202. Notice of intent to demand
payment.
48-23-203. Dissenters' notice.
48-23-204. Duty to demand payment.
48-23-205. Share restrictions.
48-23-206. Payment.
48-23-207. Failure to take action.
48-23-208. After-acquired shares.
48-23-209. Procedure if shareholder dissatisfied
with payment or offer.
PART 3--JUDICIAL APPRAISAL OF SHARES
48-23-301. Court action.
48-23-302. Court costs and counsel fees.
</TABLE>
PART 1--RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
48-23-101. DEFINITIONS--As used in this chapter, unless the context otherwise
requires:
(1) "Beneficial shareholder" means the person who is a beneficial owner of
shares held by a nominee as the record shareholder;
(2) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer;
(3) "Dissenter" means a shareholder who is entitled to dissent from corporate
action under ss. 48-23-102 and who exercises that right when and in the manner
required by Part 2 of this chapter;
(4) "Fair value", with respect to a dissenter's shares, means the value of the
shares immediately before the effectuation of the corporate action to which the
dissenter objects, excluding any appreciation or depreciation in anticipation of
the corporate action;
(5) "Interest" means interest from the effective date of the corporate action
that give rise to the shareholder's right to dissent until the date of payment,
at the average auction rate paid on United States treasury bills with a maturity
of six (6) months (or the closest maturity thereto) as of the auction date for
such treasury bills closest to such effective date;
(6) "Record shareholder" means the person in whose name shares are registered
in the records of a corporation or the beneficial owner of shares to the extent
of the rights granted by a nominee certificate on file with a corporation; and
(7) "Shareholder" means the record shareholder or the beneficial shareholder.
[Acts 1986, ch. 887, ss. 13.01]
48-23-102. RIGHT TO DISSENT.--(a) A shareholder is entitled to dissent from,
and obtain payment of the fair value of the shareholder's shares in the event
of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a party:
(A) If shareholder approval is required for the merger by ss. 48-21-104
or the charter and the shareholder is entitled to vote on the merger; or
<PAGE> 200
(B) If the corporation is a subsidiary that is merged with its parent
under ss. 48-21-105;
(2) Consummation of a plan of share exchange to which the corporation is a
party as the corporation whose shares will be acquired, if the shareholder is
entitled to vote on the plan;
(3) Consummation of a sale or exchange of all, or substantially all, of the
property of the corporation other than in the usual and regular course of
business, if the shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution, but not including a sale pursuant to court
order or a sale for cash pursuant to a plan by which all or substantially all of
the net proceeds of the sale will be distributed to the shareholders within one
(1) year after the date of sale;
(4) An amendment of the charter that materially and adversely 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,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the shares
to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any matter,
or to cumulate votes, other than a limitation by dilution through issuance of
shares or other securities with similar voting rights; or
(E) Reduces the number of shares owned by the shareholder to a fraction
of a share, if the fractional share is to be acquired for cash under ss.
48-16-104; or
(5) Any corporate action taken pursuant to a shareholder vote to the extent
the charter, bylaws, or a resolution of the board of directors provides that
voting or nonvoting shareholders are entitled to dissent and obtain payment for
their shares.
(b) A shareholder entitled to dissent and obtain payment for the shareholder's
shares under this chapter may not challenge the corporate action creating the
shareholder's entitlement unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
(c) Notwithstanding the provisions of subsection (a), no shareholder may
dissent as to any shares of a security which, as of the date of the effectuation
of the transaction which would otherwise give rise to dissenters' rights, is
listed on an exchange registered under ss. 6 of the Securities Exchange Act of
1934, as amended, or is a "national market system security," as defined in rules
promulgated pursuant to the Securities Exchange Act of 1934, as amended. [Acts
1986, ch. 887, ss. 13.02.]
48-23-103. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.--(a) A record
shareholder may assert dissenters' rights as to fewer than all the shares
registered in the record shareholder's name only if the record shareholder
dissents with respect to all shares beneficially owned by any one (1) person and
notifies the corporation in writing of the name and address of each person on
whose behalf the record shareholder asserts dissenters' rights. The rights of a
partial dissenter under this subsection are determined as if the shares as to
which the partial dissenter dissents and the partial dissenter's other shares
were registered in the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares of any
one (1) or more classes held on the beneficial shareholder's behalf only if the
beneficial shareholder:
(1) Submits to the corporation the record shareholder's written consent to the
dissent not later than the time the beneficial shareholder asserts dissenters'
rights; and
(2) Does so with respect to all shares of the same class of which the person
is the beneficial shareholder or over which the person has power to direct the
vote. [Acts 1986, ch. 887, ss. 13.03.]
PART 2--PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
48-23-201. NOTICE OF DISSENTERS' RIGHTS.--(a) If proposed corporate action
creating dissenters' rights under ss. 48-23- 102 is submitted to a vote at a
shareholders' meeting, the meeting notice must state that shareholders are or
may be entitled to assert dissenters' rights under this chapter and be
accompanied by a copy of this chapter.
(b) If corporate action creating dissenters' rights under ss. 48-23-102 is
taken without a vote of shareholders, the corporation shall notify in writing
all shareholders entitled to assert dissenters' rights that the action was taken
and send them the dissenters' notice described in ss. 48-23-203.
<PAGE> 201
(c) A corporation's failure to give notice pursuant to this section will not
invalidate the corporate action. [Acts 1986, ch. 887, ss. 13.20.]
48-23-202. NOTICE OF INTENT TO DEMAND PAYMENT.--(a) If proposed corporate
action creating dissenters' rights under ss. 48-23-102 is submitted to a vote at
a shareholders' meeting, a shareholder who wishes to assert dissenters' rights
must:
(1) Deliver to the corporation, before the vote is taken, written notice of
the shareholder's intent to demand payment for the shareholder's shares if the
proposed action is effectuated; and
(2) Not vote the shareholder's shares in favor of the proposed action. No such
written notice of intent to demand payment is required of any shareholder to
whom the corporation failed to provide the notice required by ss. 48-23- 201.
(b) A shareholder who does not satisfy the requirements of subsection (a) is
not entitled to payment for the shareholder's shares under this chapter. [Acts
1986, ch. 887, ss. 13.21.]
48-23-203. DISSENTERS' NOTICE.--(a) If proposed corporate action creating
dissenters' rights under ss. 48-23-102 is authorized at a shareholders' meeting,
the corporation shall deliver a written dissenters' notice to all shareholders
who satisfied the requirements of ss. 48-23-202.
(b) The dissenters' notice must be sent no later than ten (10) days after the
corporate action was authorized by the shareholders or effectuated, whichever is
the first to occur, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment that includes the date of the first
announcement to news media or to shareholders of the principal terms of the
proposed corporate action and requires that the person asserting dissenters'
rights certify whether or not the person asserting dissenters' rights acquired
beneficial ownership of the shares before that date;
(4) Set a date by which the corporation must receive the payment demand, which
date may not be fewer than one (1) nor more than two (2) months after the date
the subsection (a) notice is delivered; and
(5) Be accompanied by a copy of this chapter if the corporation has not
previously sent a copy of this chapter to the shareholder pursuant to ss.
48-23-201. [Acts 1986, ch. 887 ss. 13.22.]
48-23-204. DUTY TO DEMAND PAYMENT.--(a) A shareholder sent a dissenters'
notice described in ss. 48-23-203 must demand payment, certify whether the
shareholder acquired beneficial ownership of the shares before the date required
to be set forth in the dissenters' notice pursuant to ss. 48-23-203 (b)(3), and
deposit the shareholder's certificates in accordance with the terms of the
notice.
(b) The shareholder who demands payment and deposits the shareholder's share
certificates under subsection (a) retains all other rights of a shareholder
until these rights are cancelled or modified by the effectuation of the proposed
corporate action.
(c) A shareholder who does not demand payment or deposit the shareholder's
share certificates where required, each by the date set in the dissenters'
notice, is not entitled to payment for the shareholder's shares under this
chapter.
(d) A demand for payment filed by a shareholder may not be withdrawn unless
the corporation with which it was filed, or the surviving corporation, consents
thereto. [Acts 1986, ch. 887 ss. 13.23.]
48-23-205. SHARE RESTRICTIONS.--(a) The corporation may restrict the transfer
of uncertificated shares from the date the demand for their payment is received
until the proposed corporate action is effectuated or the restrictions released
under ss. 48-23-207.
(b) The person for whom dissenters' rights are asserted as to uncertificated
shares retains all other rights of a shareholder until these rights are
cancelled or modified by the effectuation of the proposed corporate action.
[Acts 1986, ch. 887 , ss. 13.24.]
<PAGE> 202
48-23-206. PAYMENT.--(a) Except as provided in ss. 48-23-208, as soon as the
proposed corporate action is effectuated, or upon receipt of a payment demand,
whichever is later, the corporation shall pay each dissenter who complied with
ss. 48-23-204 the amount the corporation estimates to be the fair value of each
dissenter's shares, plus accrued interest.
(b) The payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year ending not
more than sixteen (16) months before the date of payment, an income statement
for that year, a statement of changes in shareholders' equity for that year, and
the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under ss.
48-23-209; and
(5) A copy of this chapter if the corporation has not previously sent a copy
of this chapter to the shareholder pursuant to ss. 48-23-201 or ss. 48-23-203.
[Acts 1986, ch. 887, ss. 13.25.]
48-23-207. FAILURE TO TAKE ACTION.--(a) If the corporation does not effectuate
the proposed action that gave rise to the dissenters' rights within two (2)
months after the date set for demanding payment and depositing share
certificates, the corporation shall return the deposited certificates and
release the transfer restrictions imposed on uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation effectuates the proposed action, it must send a
new dissenters' notice under ss. 48-23-203 and repeat the payment demand
procedure. [Acts 1986, ch. 887, ss. 13.26.]
48-23-208. AFTER-ACQUIRED SHARES.--(a) A corporation may elect to withhold
payment required by ss. 48-23-206 from a dissenter unless the dissenter was the
beneficial owner of the shares before the date set forth in the dissenters'
notice as the date of the first announcement to news media or to shareholders of
the principal terms of the proposed corporate action.
(b) To the extent the corporation elects to withhold payment under subsection
(a), after effectuating the proposed corporate action, it shall estimate the
fair value of the shares, plus accrued interest, and shall pay this amount to
each dissenter who agrees to accept it in full satisfaction of the dissenter's
demand. The corporation shall send with its offer a statement of its estimate of
the fair value of the shares, an explanation of how the interest was calculated,
and a statement of the dissenter's right to demand payment under ss. 48-23-209.
[Acts 1986, ch. 887, ss. 13.27.]
48-23-209. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.--(a)
A dissenter may notify the corporation in writing of the dissenter's own
estimate of the fair value of his the dissenter's shares and amount of interest
due, and demand payment of the dissenter's estimate (less any payment under ss.
48-23-206), or reject the corporation's offer under ss. 48-23-208 and demand
payment of the fair value of the dissenter's shares and interest due, if:
(1) The dissenter believes that the amount paid under ss. 48-23-206 or offered
under ss. 48-23-208 is less than the fair value of the dissenter's shares or
that the interest due is incorrectly calculated;
(2) The corporation fails to make payment under ss. 48-23-206 within two (2)
months after the date set for demanding payment; or
(3) The corporation, having failed to effectuate the proposed action, does not
return the deposited certificates or release the transfer restrictions imposed
on uncertificated shares within two (2) months after the date set for demanding
payment.
(b) A dissenter waives the dissenter's right to demand payment under this
section unless the dissenter notifies the corporation of the dissenter's demand
in writing under subsection (a) within one (1) month after the corporation made
or offered payment for the dissenter's shares. [Acts 1986, ch. 887, ss. 13.28.]
PART 3--JUDICIAL APPRAISAL OF SHARES
48-23-301. COURT ACTION.--(a) If a demand for payment under ss. 48-23-209
remains unsettled, the corporation shall commence a proceeding within two (2)
months after receiving the payment demand and petition the court to
<PAGE> 203
determine the fair value of the shares and accrued interest. If the corporation
does not commence the proceeding within the two-month period, it shall pay each
dissenter whose demand remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding in a court of record having
equity jurisdiction in the county where the corporation's principal office (or,
if none in this state, its registered office) is located. If the corporation is
a foreign corporation without a registered office in this state, it shall
commence the proceeding in the county in this state where the registered office
of the domestic corporation merged with or whose shares were acquired by the
foreign corporation was located.
(c) The corporation shall make all dissenters (whether or not residents of
this state) whose demands remain unsettled, parties to the proceeding as in an
action against their shares and all parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
(d) The jurisdiction of the court in which the proceeding is commenced under
subsection (b) is plenary and exclusive. The court may appoint one (1) or more
persons as appraisers to receive evidence and recommend decision on the question
of fair value. The appraisers have the powers described in the order appointing
them, or in any amendment to it. The dissenters are entitled to the same
discovery rights as parties in other civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled to judgment:
(1) For the amount, if any, by which the court finds the fair value of the
dissenter's shares, plus accrued interest, exceeds the amount paid by the
corporation; or
(2) For the fair value, plus accrued interest, of the dissenter's
after-acquired shares for which the corporation elected to withhold payment
under ss. 48-23-208. [Acts 1986, ch. 887, ss. 13.30.]
48-23-302. COURT COSTS AND COUNSEL FEES.--(a) The court in an appraisal
proceeding commenced under ss. 48-23- 301 shall determine all costs of the
proceeding, including the reasonable compensation and expenses of appraisers
appointed by the court. The court shall assess the costs against the
corporation, except that the court may assess costs against all or some of the
dissenters, in amounts the court finds equitable, to the extent the court finds
the dissenters acted arbitrarily, vexatiously, or not in good faith in demanding
payment under ss. 48-23-209.
(b) The court may also assess the fees and expenses of counsel and experts for
the respective parties, in amounts the court finds equitable against:
(1) The corporation and in favor of any or all dissenters if the court finds
the corporation did not substantially comply with the requirements of Part 2 of
this chapter; or
(2) Either the corporation or a dissenter, in favor of any other party, if the
court finds that the party against whom the fees and expenses are assessed acted
arbitrarily, vexatiously, or not in good faith with respect to the rights
provided by this chapter.
(c) If the court finds that the services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded to
the dissenters who were benefited.
[Acts 1986, ch. 887, 13.31.]
<PAGE> 204
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> 205
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 November
10, 1997, by and between Union Planters Corporation,
Union Planters Holding Corporation and First
Community Bancshares, Inc. and Supplemental Letter
Agreement dated as of November 10, 1997, as amended
on May 12, 1997 (Included as Appendix A to the Proxy
Statement included as part of this Registration
Statement.)
2.2 Plan of Merger of First Community 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
Special Report on Form 10-Q of UPC for the quarter
ended March 31, 1998.)
4.2 Amended and Restated Bylaws of Union Planters
Corporation. (Incorporated by reference to exhibit
3(d) to the Special 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.
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Reynolds, Bone & Griesbeck, P.L.C.,
independent auditors for First Community 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).
24.1 Power of Attorney (contained on the signature page
hereof).
99.1 Form of proxy of First Community Bancshares, Inc.
</TABLE>
2
<PAGE> 206
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
3
<PAGE> 207
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.
4
<PAGE> 208
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.[DATE CORRECTION]
<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/ Albert M. Austin Director February 19, 1998
- ------------------------------------
Albert M. Austin
</TABLE>
5
<PAGE> 209
<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/ David M. Thomas Director February 19, 1998
- ------------------------------------
David M. Thomas
Director _______________
- ------------------------------------
Richard A. Trippeer, Jr.
Director _______________
- ------------------------------------
Spence L. Wilson
</TABLE>
6
<PAGE> 210
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 Reorganization, dated as of November 10,
1997, by and between Union Planters Corporation, Union
Planters Holding Corporation and First Community Bancshares,
Inc. and Supplemental Letter Agreement dated as of November
10, 1997, as amended on May 12, 1998 (Included as Appendix A
to the Proxy Statement included as part of this Registration
Statement.)
2.2 Plan of Merger of First Community 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 Special Report on Form
10-K of UPC for the fiscal year ended December 31, 1996.), and
the 1998 Charter Amendment (Incorporated by Reference to
Exhibit 3A to the Special Report on Form 10-Q for the quarter
ended March 31, 1998 of UPC)
4.2 Amended and Restated Bylaws of Union Planters Corporation.
(Incorporated by reference to exhibit 3(d) to the Special
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.
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Reynolds, Bone, & Griesbeck, P.L.C., independent
auditors for First Community 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).
24.1 Power of Attorney (contained on the signature page hereof).
99.1 Form of proxy of First Community Bancshares, Inc.
</TABLE>
7
<PAGE> 1
[LETTERHEAD OF UNION PLANTERS CORPORATION]
EXHIBIT 5.1
June 17, 1998
Union Planters Corporation
7130 Goodlett Farms Parkway
Memphis, Tennessee 38018
Re: 125,824 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 125,824 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 Reorganization dated as of
November 10, 1997, as amended on May 12, 1998 by and among UPC, Union Planters
Holding Corporation ("UP Holding") and First Community Bancshares, Inc.
("FCB") (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
Union Planters Corporation
May 12, 1998
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
[WYATT, TARRANT & COMBS LETTERHEAD]
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 First Community Bancshares, Inc., a Tennessee corporation ("FCB"), 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 Reorganization by and between UPC, UP Holdings, and FCB
dated November 10, 1997 and as amended May 12, 1998 (the "Merger Agreement") and
related Amended and Restated Plan of Merger between UPC, UP Holdings and FCB
(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
<PAGE> 2
Board of Directors
Union Planters Corporation
June 16, 1998 Page 2.
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 FCB
contained in letters to us dated ______, 1998 and _______, 1998 (the
"Representation 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 FCB 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 FCB 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 FCB 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 FCB and/or The Bank of Middleton 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
FCB in exchange for shares of UPC Common Stock and
<PAGE> 3
Board of Directors
Union Planters Corporation
June 16, 1998
Page 3.
the assumption of liabilities of FCB pursuant to the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code.
2. FCB, 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 FCB 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 FCB as a
result of the exchange of FCB 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 FCB Common Stock is a capital
asset in the hands of the respective FCB 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 FCB Common Stock allocable to the
fractional share.
6. The tax basis of UPC Common Stock to be received by the shareholders
of FCB will be the same as the tax basis of the FCB Common Stock surrendered in
exchange therefor (reduced by any amount allocable to a fractional share
interest for which cash is received).
7. The holding period of the UPC Common Stock to be received by
shareholders of FCB will include the holding period of the FCB Common Stock
surrendered in exchange therefor, provided the FCB shares were held as a capital
asset by the shareholders of FCB on the date of the exchange.
8. A shareholder of FCB who perfects his dissenter's rights and who
receives payment of the fair market value of his shares of FCB 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
<PAGE> 4
Board of Directors
Union Planters Corporation
June 16, 1998 Page 4.
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(g) 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,
WYATT, TARRANT & COMBS
<PAGE> 1
[PRICE WATERHOUSE, LLP LETTERHEAD]
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
[LETTERHEAD OF REYNOLDS, BONE & GRIESBECK, P.L.C.]
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We have issued our report dated February 23, 1998, accompanying the
consolidated financial statements of First Community Bancshares, Inc. contained
in the Registration Statement of Union Planters Corporation on Form S-4. We
consent to the use of the aforementioned report in the Registration Statement on
Form S-4 and to the use of our name as it appears under the caption "Experts".
/s/ REYNOLDS, BONE & GRIESBECK, P.L.C.
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June 18, 1998
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EXHIBIT 99.1
FIRST COMMUNITY BANCSHARES, INC.
The undersigned hereby constitutes and appoints Mike Bodiford and
Richard Wetherbee, or either of them, as proxies, each with full power of
substitution, to vote the number of shares of common stock of First Community
Bancshares, Inc. ("FCB") which the undersigned would be entitled to vote if
personally present at the Special Meeting of FCB Shareholders to be held at 101
North Main Street, Middleton, Tennessee 38052, at 4:00 p.m., local time, on
August 4, 1998, and at any adjournment or postponement thereos (the "Annual
Meeting") upon the proposals described in the Proxy Statement/Prospectus and the
Notice of Special Meeting of Shareholders, both dated June ___, 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 November 10, 1997 and as amended May 12, 1998
(the "Agreement"), by and between FCB, Union Planters Corporation, a Tennessee
corporation ("UPC"), and Union Planters Holding Corporation ("UP Holding"), a
wholly-owned subsidiary of UPC, and the related Amended and Restated Plan of
Merger (the "Plan of Merger"), by and between FCB, UPC and UP Holding pursuant
to which: (i) FCB will merge (the "merger") with and into UP Holding, with the
effect that UP Holding shall be the corporation surviving from the Merger, and
(ii) each share of the $1.00 par value common stock of FCB ("FCB Common Stock")
issued and outstanding at the effective time of the Merger will be converted
into 2.6924 shares of the $5.00 par value common stock of UPC and the associated
"Preferred Share Rights" (as defined in the accompanying Proxy
Statement/Prospectus), subject to possible adjustment, and cash in lieu of any
fractional share, all as more fully described in the acompanying 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.
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Dated: , 1998
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Signature
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Signature if held jointly
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF FCB, INC.
AND MAY BE REVOKED PRIOR TO ITS EXERCISE
