<PAGE> 1
Pursuant to Rule 424(b)(4)
Registration No. 333-53843
CB&T, INC.
101 E. MAIN STREET
MCMINNVILLE, TENNESSEE 37110
JUNE 8, 1998
TO THE SHAREHOLDERS OF CB&T, INC.
You are cordially invited to attend the Annual Meeting of the shareholders
(the "Annual Meeting") of CB&T, Inc. ("CB&T") to be held at the main office of
CB&T, located at 101 East Main Street, McMinnville, Tennessee, 37110 at 2:30
p.m., local time, on July 6, 1998, notice of which is enclosed.
At the Annual Meeting, you will be asked to consider and vote on a proposal
to approve the Agreement and Plan of Merger (the "Agreement") and a related Plan
of Merger (the "Plan of Merger") by and between CB&T, 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, CB&T 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 CB&T common stock issued and outstanding (excluding
shares held by CB&T 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 5.488 shares (the
"Exchange Ratio") of UPC common stock and the associated Preferred Share Rights
(as defined in the accompanying Proxy Statement/Prospectus), subject to possible
adjustment as described in the accompanying Proxy Statement/Prospectus, with
cash being paid in lieu of issuing fractional shares.
Under certain circumstances, CB&T has the right to terminate the Agreement
if, as of the date of the Annual 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 $48.80 per share. In the event that CB&T
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 CB&T shareholders.
Enclosed are the (i) Notice of Annual Meeting, (ii) Proxy
Statement/Prospectus, (iii) proxy card for the Annual 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 CB&T to
exercise statutory dissenters' rights, the conditions to consummation of the
Merger and the effects of the Merger on the rights of CB&T shareholders. Please
read these materials carefully and consider thoughtfully the information set
forth in them.
<PAGE> 2
Alex Sheshunoff & Co. Investment Banking, CB&T's financial advisor, has
issued its opinion to your Board of Directors regarding the fairness, from a
financial point of view, of the consideration to be paid by UPC pursuant to the
Agreement. A copy of the opinion is attached as Appendix D to the Proxy
Statement/Prospectus.
THE BOARD OF DIRECTORS OF CB&T 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 CB&T Common Stock entitled to be voted at the Annual
Meeting. Whether or not you plan to attend the Annual Meeting, you are urged to
complete, sign, and return promptly the enclosed proxy card. If you attend the
Annual Meeting, you may vote in person even if you previously returned your
proxy card. The proposed Merger with UPC is a significant step for CB&T and your
vote on this matter is of great importance.
ON BEHALF OF THE BOARD OF DIRECTORS, I URGE YOU TO VOTE FOR THE SLATE OF
NOMINEES PROPOSED FOR THE BOARD OF DIRECTORS AND FOR ADOPTION OF THE AGREEMENT
AND THE PLAN OF MERGER BY MARKING THE ENCLOSED PROXY CARD "FOR" ITEMS ONE AND
TWO.
I look forward to seeing you at the Annual Meeting.
Sincerely,
/s/ Jeffrey A. Golden
Jeffrey A. Golden,
Chairman of the Board, President and
Chief Executive Officer
<PAGE> 3
CB&T, INC.
101 E. MAIN STREET
MCMINNVILLE, TENNESSEE 37110
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AT 2:30 P.M. ON JULY 6, 1998
NOTICE IS HEREBY GIVEN that the Annual Meeting of the shareholders (the
"Annual Meeting") of CB&T, Inc. ("CB&T") will be held at the main office of
CB&T, located at 101 East Main Street, McMinnville, Tennessee, 37110 on July 6,
1998, at 2:30 p.m., local time, for the following purposes:
1. ELECTION OF DIRECTORS. To consider the election of a Board of
Directors of eleven (11) Directors to serve until the next Annual Meeting of
Shareholders and until their successors have been elected and qualified; and
2. MERGER. To consider and vote upon a proposal to approve the
Agreement and Plan of Merger, dated as of January 6, 1998 (the "Agreement"), and
the related Plan of Merger (the "Plan of Merger"), by and between CB&T, 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) CB&T 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 $2.50 par
value common stock of CB&T ("CB&T Common Stock") issued and outstanding at the
effective time of the Merger (excluding shares held by CB&T 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 5.488 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
3. OTHER BUSINESS. To transact such other business as may properly come
before the Annual Meeting or any adjournments or postponements of the Annual
Meeting.
Only shareholders of record at the close of business on May 15, 1998
will be entitled to receive notice of and to vote at the Annual Meeting or any
adjournment or postponement thereof. APPROVAL OF THE AGREEMENT AND THE PLAN OF
MERGER REQUIRES THE AFFIRMATIVE VOTE OF THE HOLDERS OF AT LEAST A MAJORITY OF
THE ISSUED AND OUTSTANDING SHARES OF CB&T COMMON STOCK ENTITLED TO BE VOTED AT
THE ANNUAL MEETING.
CB&T shareholders have the right to dissent from the Merger and to
receive the "fair value" of their shares of CB&T 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 E. CB&T
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 CB&T UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE FOR THE SLATE OF NOMINEES PROPOSED AND FOR APPROVAL OF THE
AGREEMENT AND THE PLAN OF MERGER.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Edith Ann Martin
Edith Ann Martin
Secretary to the Board, CB&T, Inc.
McMinnville, Tennessee
June 8, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL 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 ANNUAL MEETING.
<PAGE> 4
PROSPECTUS
COMMON STOCK, $5.00 PAR VALUE
UNION PLANTERS CORPORATION
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS OF
CB&T, 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 1,449,452 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 CB&T, Inc., a corporation
organized and existing under the laws of the State of Tennessee ("CB&T"), upon
consummation of the proposed merger (the "Merger") of CB&T 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
Merger, dated as of January 6, 1998 (the "Agreement"), and the related Plan of
Merger (the "Plan of Merger"), by and between UPC, CB&T 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 $2.50 per share, of
CB&T ("CB&T Common Stock") will be converted into and exchanged for the right to
receive 5.488 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
CB&T (the "CB&T 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 in order to 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 CB&T'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, CB&T 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 CB&T's shareholders. In making such a
determination, the CB&T Board would consider whether the Merger remains in the
best interest of CB&T and its shareholders, despite a decline in the price of
UPC Common Stock, and whether the consideration to be received by the holders of
CB&T Common Stock remains fair from a financial point of view. See "THE MERGER"
- - Possible Adjustment of Exchange Ratio."
This Prospectus also serves as the Proxy Statement of CB&T, and is
being furnished to the shareholders of CB&T in connection with the solicitation
of proxies by the CB&T Board for use at its Annual Meeting of shareholders
(including any adjournment or postponement thereof, the "Annual Meeting"), to be
held on July 6, 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 CB&T on or about June 8, 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 8, 1998.
<PAGE> 5
AVAILABLE INFORMATION
Each of UPC and CB&T 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 CB&T 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, CB&T 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 CB&T was supplied by CB&T.
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 CB&T 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 CB&T, 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
<PAGE> 6
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 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 CB&T, NOR HAVE SUCH ACCOUNTANTS APPLIED ANY PROCEDURES
THERETO. ACCORDINGLY, SUCH ACCOUNTANTS DO NOT EXPRESS AN OPINION OR ANY OTHER
FORM OF ASSURANCE ON THEM. FURTHER INFORMATION ON OTHER FACTORS THAT COULD
AFFECT THE FINANCIAL RESULTS OF UPC AFTER THE MERGER AND THE OTHER ACQUISITIONS
IS INCLUDED IN THE SEC FILINGS INCORPORATED BY REFERENCE HEREIN.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents previously filed with the SEC by UPC pursuant
to the Exchange Act are hereby incorporated by reference herein (SEC File No.
1-10160):
(a) UPC's Annual Report on Form 10-K for the year ended December
31, 1997 (provided that any information included or
incorporated by reference in response to Items 402(a)(8), (i),
(k), or (1) of Regulation S-K of the SEC shall not be deemed
to be incorporated herein and is not part of the Registration
Statement) (the "UPC 1997 Form 10-K");
(b) UPC's Quarterly Report on Form 10-Q for the three months ended
March 31, 1998 and its amendment to such form on Form 10-Q/A
(the "UPC March 31, 1998 Form 10-Q");
(c) UPC's Current Reports on Form 8-K dated January 15, 1998,
February 23, 1998 and April 16, 1998.
(d) The description of the current management and Board of
Directors of UPC contained in the Proxy Statement of UPC filed
pursuant to Section 14(a) of the Exchange Act with respect to
UPC's Annual Meeting of Shareholders to be 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.
The following documents previously filed with the SEC by CB&T pursuant
to the Exchange Act are hereby incorporated by reference herein (SEC File No.
0-10669):
(a) CB&T's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, and its amendment to such form on Form
10-K/A (Amendment No. 1) (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 "CB&T 1997 Form 10-K");
(b) CB&T's Quarterly Report on Form 10-Q for the three months
ended March 31, 1998 (the "CB&T March 31, 1998 Form 10-Q");
and
(c) CB&T's Current Report on Form 8-K dated January 19, 1998.
ii
<PAGE> 7
Copies of the CB&T 1997 Form 10-K and the CB&T March 31, 1998 Form 10-Q
accompany this Proxy Statement as Appendix C.
All documents filed by UPC and/or CB&T 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 Annual 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). CB&T 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 CB&T
that has been incorporated by reference in the Registration Statement of which
this Proxy Statement is a part. Such requests should be directed to Jeffrey A.
Golden, Chairman of the Board, President and Chief Executive Officer, 101 E.
Main Street, McMinnville, Tennessee 37110 (telephone (931) 473-2147). In order
to ensure timely delivery of the documents, any request should be made by
June 26, 1998.
iii
<PAGE> 8
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
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.................................................... 8
Selected Financial Data................................................................................ 9
ANNUAL MEETING OF CB&T SHAREHOLDERS............................................................................. 15
Date, Place, Time, and Purpose......................................................................... 15
Record Date, Voting Rights, Required Vote, and Revocability of Proxies................................. 15
Solicitation of Proxies................................................................................ 16
Dissenters' Rights..................................................................................... 16
Recommendation......................................................................................... 17
PROPOSAL I - ELECTION OF DIRECTORS.............................................................................. 17
Committees of The Board................................................................................ 20
Compensation of Directors and Officers................................................................. 21
Personnel/Nominating Committee Report on Executive Compensation........................................ 21
Remuneration of Directors and Officers................................................................. 23
Shareholder Return..................................................................................... 24
PROPOSAL II - THE MERGER........................................................................................ 25
General .............................................................................................. 25
Possible Adjustment of Exchange Ratio.................................................................. 25
Background of the Merger............................................................................... 27
Recommendation of the CB&T Board; Reasons for the Merger............................................... 28
UPC's Reasons for the Merger........................................................................... 29
Opinion of CB&T's Financial Advisor.................................................................... 30
Effective Time of the Merger........................................................................... 33
Dissenters' Rights..................................................................................... 33
Distribution of UPC Stock Certificates................................................................. 35
Limitation on Negotiations............................................................................. 36
Conditions to Consummation of the Merger............................................................... 37
Regulatory Approval.................................................................................... 37
Waiver, Amendment, and Termination..................................................................... 38
Conduct of Business Pending the Merger................................................................. 39
Management and Operations After the Merger............................................................. 41
Interests of Certain Persons in the Merger............................................................. 41
Material Federal Income Tax Consequences of the Merger................................................. 43
Accounting Treatment................................................................................... 44
Expenses and Fees...................................................................................... 45
Resales of UPC Common Stock............................................................................ 45
EFFECT OF THE MERGER ON RIGHTS OF SHAREHOLDERS.................................................................. 46
Anti-takeover Provisions Generally..................................................................... 46
Authorized Capital Stock............................................................................... 46
Preemptive Rights...................................................................................... 47
Amendment of Charter and Bylaws........................................................................ 48
</TABLE>
iv
<PAGE> 9
<TABLE>
<S> <C>
Classified Board of Directors and Absence of Cumulative Voting......................................... 49
Director Removal and Vacancies......................................................................... 49
Limitations on Director Liability...................................................................... 49
Indemnification........................................................................................ 50
Annual Meeting of Shareholders......................................................................... 50
Actions by Shareholders Without a Meeting.............................................................. 51
Shareholder Nominations and Proposals.................................................................. 51
Business Combinations ................................................................................. 51
Limitations on Ability to Vote Stock................................................................... 53
Dissenters' Rights of Appraisal........................................................................ 53
Shareholders' Rights to Examine Books and Records...................................................... 53
Dividends.............................................................................................. 53
COMPARATIVE MARKET PRICES AND DIVIDENDS......................................................................... 54
BUSINESS OF CB&T................................................................................................ 55
General .............................................................................................. 55
Beneficial Ownership of CB&T Common Stock.............................................................. 55
BUSINESS OF UPC................................................................................................. 56
General .............................................................................................. 56
Recent Developments.................................................................................... 57
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION.......................................................... 59
CERTAIN REGULATORY CONSIDERATIONS............................................................................... 66
General .............................................................................................. 66
Payment of Dividends................................................................................... 67
Capital Adequacy....................................................................................... 68
Support of Subsidiary Institutions..................................................................... 69
Prompt Corrective Action............................................................................... 69
DESCRIPTION OF UPC CAPITAL STOCK................................................................................ 71
UPC Common Stock....................................................................................... 71
UPC Preferred Stock.................................................................................... 72
OTHER MATTERS................................................................................................... 72
SHAREHOLDER PROPOSALS........................................................................................... 72
EXPERTS ....................................................................................................... 73
OPINIONS ....................................................................................................... 73
</TABLE>
<TABLE>
APPENDICES:
<S> <C>
Appendix A --- Agreement and Plan of Merger, dated as of January 6,
1998, by and between Union Planters Corporation, Union
Planters Holding Corporation and CB&T, Inc.
Appendix B --- Plan of Merger of CB&T, Inc. with and into Union Planters Holding
Corporation
Appendix C --- CB&T's Quarterly Report on Form 10-Q for the three months ended
March 31, 1998 and CB&T's Annual Report on Form 10-K for the fiscal
year ended December 31, 1997 and its Amendment on Form 10-K/A
Appendix D --- Fairness Opinion of Alex Sheshunoff & Co. Investment Banking
Appendix E --- Copy of Chapter 23 of the Tennessee Business Corporation Act
regarding Dissenters' Rights
</TABLE>
v
<PAGE> 10
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
"CB&T" refer to Union Planters Corporation and CB&T, Inc., respectively, and,
where the context requires, to those entities and their respective subsidiaries.
THE PARTIES
CB&T. CB&T, 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, CB&T had total consolidated assets of
approximately $272 million, total consolidated loans of approximately $146
million, total consolidated deposits of approximately $225 million, and total
consolidated shareholders' equity of approximately $34.4 million.
CB&T conducts its business activities through its wholly-owned bank
subsidiary, City Bank & Trust Company ("City Bank"), which was organized in 1912
as a commercial bank chartered under the laws of the State of Tennessee. CB&T
operates from its main office in McMinnville, Tennessee and at branch offices
located in the Tennessee Counties of Warren and Dekalb. In addition to City
Bank, CB&T is the 100% owner of CBT Insurance Company, which is engaged in
insurance sales, and of CBT Realty, Inc., which was established to liquidate
foreclosed real estate. The operations of CBT Insurance Company and CBT Realty,
Inc. have an immaterial impact on the financial results of CB&T and City Bank.
It is anticipated that CBT Realty, Inc. will be dissolved prior to consummation
of the Merger.
The principal executive offices of CB&T are located at 101 E. Main
Street, McMinnville, Tennessee 37110 and its telephone number at such address is
(931) 473-2147. Additional information with respect to CB&T 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 CB&T" and the CB&T 1997 Form 10-K, a copy of which
is attached hereto as Appendix C.
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.
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<PAGE> 11
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, adding
approximately $3.8 billion in total assets in 1994, $1.3 billion in 1995, $4.2
billion in 1996 and $3.6 billion in 1997. In 1998, UPC has completed the
acquisition of two institutions with approximately $520 million in total assets
(the "Recently Completed Acquisitions"). As of the date of this Proxy Statement,
UPC is a party to definitive agreements to acquire ten financial institutions,
in addition to CB&T, and to purchase certain branch locations and assume deposit
liabilities of California Federal Bank in Florida (the "CalFed Branch Purchase")
(collectively referred to as the "Other Pending Acquisitions"). The Other
Pending Acquisitions had aggregate total assets of approximately $12.9 billion
at March 31, 1998. For purposes of this Proxy Statement, the Recently Completed
Acquisitions and the Other Pending Acquisitions are collectively referred to as
the "Other Acquisitions". The largest of the Other Pending Acquisitions is UPC's
proposed acquisition of Magna Group, Inc. ("MGR"), in St. Louis, Missouri, which
had total consolidated assets of approximately $7.3 billion at March 31, 1998.
On May 1, 1998, MGR consummated the acquisition of Charter Financial, Inc., and
its subsidiary, Charter Bank, S.B. (the "Charter Acquisition"). Charter is
located in Sparta, Illinois and had at the time of consummation total assets of
approximately $406 million, total deposits of approximately $309 million, and
total shareholders' equity of approximately $67 million. The Charter Acquisition
was accounted for as a purchase. For purposes of this Proxy Statement, including
the historical and equivalent pro forma data, the terms "Other Acquisitions" and
"Other Pending Acquisitions" include the completed Charter Acquisition. For a
description of the Other Acquisitions in addition to the Merger, see "BUSINESS
OF UPC -- Recent Developments" and "PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
INFORMATION." For a discussion of UPC's acquisition program, including a
discussion of the significant charges UPC has incurred incidental to
acquisitions in the past three fiscal years, see the caption "Acquisitions"
(pages 10, 11 and 12) in UPC's 1997 Annual Report to Shareholders and Note 2 to
UPC's audited consolidated financial statements for the years ended December 31,
1997, 1996, and 1995 (pages 49 and 50) in such Annual Report to Shareholders.
UPC's 1997 Annual Report to Shareholders is included as Exhibit 13 to the UPC
1997 Form 10-K and Exhibit 13 is incorporated by reference herein to the extent
indicated herein.
UPC expects to continue to take advantage of the consolidation of the
financial services industry by further developing its franchise through the
acquisition of financial institutions and other entities engaged in lines of
business permissible for banks and bank holding companies. Future acquisitions
may entail the payment by UPC of consideration in excess of the book value of
the underlying net assets acquired, may result in the issuance of additional
shares of UPC Common Stock or the incurring of additional indebtedness by UPC,
and could have a dilutive effect on the earnings or book value per share of UPC
Common Stock. Moreover, significant charges against earnings are sometimes
required incidental to acquisitions.
The principal executive offices of UPC are located at 7130 Goodlett
Farms Parkway, Memphis, Tennessee 38018, and its telephone number at such
address is (901) 580-6000. Additional information with respect to UPC and its
subsidiaries is included elsewhere herein and in documents incorporated by
reference in this Proxy Statement. See "AVAILABLE INFORMATION," "DOCUMENTS
INCORPORATED BY REFERENCE," and "BUSINESS OF UPC."
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 and other permissible investments. 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 CB&T Common
Stock in connection with the solicitation of proxies by the CB&T Board for use
at the Annual Meeting at which CB&T shareholders will be asked to vote upon (i)
the election of directors of CB&T for the ensuing year, (ii) a proposal to
approve the Agreement and the Plan of Merger and (iii) such other business as
may properly come before the Annual Meeting. The Annual Meeting will be held at
the main office of CB&T, located at 101 E. Main Street, McMinnville, Tennessee
37110,
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<PAGE> 12
at 2:30 p.m., local time, on July 6, 1998. See "ANNUAL MEETING OF CB&T
SHAREHOLDERS -- Date, Place, Time, and Purpose."
The CB&T Board has fixed the close of business on May 15, 1998, as the
record date (the "CB&T Record Date") for determination of the shareholders
entitled to notice of and to vote at the Annual Meeting. Only holders of record
of shares of CB&T Common Stock on the CB&T Record Date will be entitled to
notice of and to vote at the Annual Meeting. Each share of CB&T Common Stock is
entitled to one vote on each matter submitted to CB&T shareholders for a vote.
On the CB&T Record Date, there were 264,113 shares of CB&T Common Stock
outstanding. See "ANNUAL MEETING OF CB&T 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 CB&T Common Stock entitled to be voted
at the Annual Meeting. The directors and executive officers of CB&T (including
immediate family members and affiliated entities) owned, as of the CB&T Record
Date, 36,318 shares or approximately 13.75% of the outstanding shares of CB&T
Common Stock.
As of the CB&T Record Date, UPC held no shares of CB&T Common Stock in a
fiduciary capacity for others, or as a result of debts previously contracted,
and CB&T held 2,390 shares of CB&T Common Stock in a fiduciary capacity for
others. See "ELECTION OF DIRECTORS" and "ANNUAL MEETING OF CB&T SHAREHOLDERS --
Record Date, Voting Rights, Required Vote, and Revocability of Proxies."
For information with respect to the number and percentage of shares of
CB&T Common Stock beneficially owned by directors and executive officers of CB&T
and with respect to the beneficial owners of 5.0% or more of the outstanding
shares of CB&T Common Stock, see "ELECTION OF DIRECTORS" and "BUSINESS OF CB&T
- -- Beneficial Ownership of CB&T Common Stock."
THE MERGER
GENERAL. The Agreement provides for the acquisition of CB&T by UPC
pursuant to the merger of CB&T 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 CB&T
Common Stock then issued and outstanding (excluding shares held by CB&T, 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 5.488 shares of UPC Common Stock, subject to possible
adjustment as described below (the "Exchange Ratio").
In the event both (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 (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 Annual Meeting or 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 $48.80, and (ii) (1) the
quotient obtained by dividing the Average Closing Price by $61.00 (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 January 14, 1998, and subtracting .20 (the "Index Ratio"), then
CB&T 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 5.488 shares of UPC Common Stock for each share of CB&T Common
Stock. The possible upward adjustment of the Exchange Ratio is subject to a
contractual limit and if UPC elects to adjust the Exchange Ratio in accordance
with those limits, the merger will
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<PAGE> 13
proceed without resolicitation of the CB&T shareholders. For further
information regarding the limits and possible adjustments of the Exchange Ratio,
see "THE MERGER - -- 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 CB&T 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 "THE MERGER --
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 "THE MERGER - Right to Restructure the
Transaction."
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARD OF DIRECTORS OF
CB&T. The CB&T Board believes that the Agreement and the Merger are in the best
interests of CB&T and its shareholders. If the Merger is consummated, the
shareholders of CB&T 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 CB&T Common Stock. The CB&T
Board believes that the Merger will result in a company with expanded
opportunities for profitable growth and that the combined resources of CB&T and
UPC will provide an enhanced ability to compete in the changing and competitive
financial services industry. THE CB&T BOARD UNANIMOUSLY RECOMMENDS THAT CB&T
SHAREHOLDERS VOTE FOR APPROVAL OF THE AGREEMENT AND THE PLAN OF MERGER. See "THE
MERGER -- Recommendation of the CB&T Board; Reasons for the Merger."
In unanimously approving the Agreement and the Plan of Merger, the CB&T
Board considered, among other things, CB&T's and UPC's financial condition, the
financial terms and income tax consequences of the Merger, the likelihood of the
Merger being approved by regulatory authorities without undue conditions or
delay and the opinion of Alex Sheshunoff & Co. Investment Banking ("Sheshunoff")
as to the fairness of the Exchange Ratio, from a financial point of view, to the
shareholders of CB&T. See "THE MERGER -- Recommendation of the CB&T Board;
Reasons for the Merger."
OPINION OF FINANCIAL ADVISOR. Sheshunoff has rendered an opinion to the
CB&T Board that, based on and subject to the procedures, matters, and
limitations described in its opinion and such other matters as it considered
relevant, as of the date of its opinion, the consideration to be received by the
shareholders of CB&T is fair, from a financial point of view. The opinion of
Sheshunoff dated as of the date of this Proxy Statement is attached as Appendix
D to this Proxy Statement. CB&T shareholders are urged to read the Sheshunoff
opinion in its entirety for a description of the procedures followed, matters
considered, and limitations on the reviews undertaken in connection therewith.
See "THE MERGER -- Opinion of CB&T's Financial Advisor."
EFFECTIVE TIME. Subject to the conditions to the obligations of the
parties to effect the Merger, the Effective Time will occur on the date and at
the time that the 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 CB&T and UPC, the Agreement provides
that the parties will use their reasonable efforts to cause the Effective Time
to occur on such date as may be designated by UPC within 30 days following the
last to occur of (i) the effective date of the last consent of any regulatory
authority having authority over and approving or exempting the Merger (taking
into account any requisite waiting period in respect thereof), (ii) the date on
which the shareholders of CB&T approve the Agreement and the Plan of Merger, and
(iii) the date on which all other conditions precedent (other than those
conditions which relate to actions to be taken at the Closing) to each party's
obligations under the Agreement have been satisfied or waived (to the extent
waivable by such party). It is anticipated that the Effective Time will occur on
July 7, 1998, the day immediately following the date of the Annual Meeting. See
"THE MERGER -- Effective Time of the Merger," "-- Conditions to Consummation of
the Merger," and "-- Waiver, Amendment, and Termination."
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<PAGE> 14
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. CB&T 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 JULY 7, 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 CB&T Common Stock, a letter of
transmittal and instructions for use in effecting the surrender and cancellation
of the Certificates in exchange for certificates representing shares of UPC
Common Stock. Cash will be paid to the holders of CB&T 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 CB&T, UPC, or the Exchange Agent
be liable to any holder of CB&T 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 City Bank will be merged with and into UPB (such
merger hereinafter referred to as the "Bank Merger"), the Bank Merger act
applies and the prior approval of the Office of the Comptroller of the Currency
("OCC") 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 OCC for the
Bank Merger. Applications have been filed with each of these regulatory
authorities for the requisite approvals or waivers. By letter dated April 10,
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 OCC. By
letter dated May 18, 1998, the OCC notified UPC and UPB of its approval of the
Bank Merger. Receipt of the approvals by the Federal Reserve and the OCC are
subject to expiration of statutory waiting periods. The Bank Merger is also
subject to the approval of the Tennessee Department of Financial Institutions.
The Tennessee Department has notified UPC that upon compliance with certain
closing conditions, the Tennessee Department will file the Plan of Merger on
behalf of UPB and City Bank. 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 CB&T shareholders, receipt of
an opinion of counsel as to the tax-free nature of certain aspects of the Merger
and certain other conditions. See "THE MERGER -- 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 CB&T 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 August
31, 1998 unless the failure to consummate by such date is due to a willful
breach of the Agreement by the party seeking to terminate and (ii) by the CB&T
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 CB&T without approval of the holders of CB&T Common
Stock, whether before or after approval of the Agreement and the Plan of Merger
by the CB&T shareholders and the Merger may be abandoned notwithstanding
approval of the matters relating to the Agreement required to be approved by
the CB&T shareholders. See "THE MERGER -- Possible Adjustment of Exchange
Ratio" and "-- Waiver, Amendment, and Termination."
DISSENTERS' RIGHTS. Holders of CB&T 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
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<PAGE> 15
holders' further compliance with Chapter 23 of the TBCA, to be paid the "fair
value" of their shares of CB&T Common Stock in cash. See "THE MERGER --
Dissenters' Rights", and Appendix E hereto, which is a copy of Chapter 23 of
the TBCA.
INTERESTS OF CERTAIN PERSONS IN THE MERGER. Certain members of CB&T's
management and the CB&T Board have interests in the Merger in addition to their
interests as shareholders of CB&T generally. These interests relate to: (i) the
receipt by Mr. Jeffrey A. Golden, Chairman of the Board, President and CEO of
CB&T, of approximately $435,000, plus an amount to offset the net effect of any
excise tax imposed under applicable Federal tax law resulting from such receipt,
upon the termination of his existing Severance Agreement with CB&T; (ii) the
receipt by certain executive officers of CB&T of restricted stock grants under
UPC's 1992 Stock Incentive Plan; (iii) the continued indemnification by UPC of
the former directors, officers, employees, and agents of CB&T and its
subsidiaries following consummation of the Merger; and (iv) the payment of
retention bonuses to certain officers of CB&T for their efforts in connection
with the Merger. See "THE MERGER -- Interests of Certain Persons in the Merger"
and "THE MERGER - Remuneration of Directors and Officers - Special
Compensation."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER. It is intended
that the Merger will be treated as a reorganization within the meaning of
Section 368 of the Internal Revenue Code of 1986, as amended (the "Code").
Accordingly, for federal income tax purposes, no gain or loss will be recognized
by a CB&T shareholder upon the exchange of all of such shareholder's shares of
CB&T Common Stock solely for shares of UPC Common Stock (except with respect to
cash received in lieu of a fractional share of UPC Common Stock). Consummation
of the Merger is conditioned upon receipt by UPC of an opinion of Wyatt, Tarrant
& Combs and upon receipt by CB&T of an opinion of Jenkens & Gilchrist, a
Professional Corporation, in each case dated the date of the Effective Time,
substantially to this effect. The conditions relating to the receipt of the tax
opinions may be waived by both UPC and CB&T. Neither UPC nor CB&T currently
intends to waive conditions relating to the receipt of the tax opinions. If the
conditions relating to receipt of the tax opinions were waived and the material
federal income tax consequences of the Merger were materially different from
those described in this Proxy Statement, CB&T would resolicit the approval of
its shareholders prior to consummating the Merger. A dissenting holder of CB&T
Common Stock who perfects his or her dissenters' rights will recognize gain or
loss measured by the difference between the value received by such shareholder
for his or her shares of CB&T Common Stock and his or her tax basis in such
stock. TAX CONSEQUENCES OF THE MERGER FOR INDIVIDUAL TAXPAYERS CAN VARY,
HOWEVER, AND ALL CB&T SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS
TO DETERMINE THE EFFECT OF THE MERGER ON THEM UNDER FEDERAL, STATE, LOCAL, AND
FOREIGN TAX LAWS. For a further discussion of the federal income tax
consequences of the Merger including a description of the tax opinions issued as
of the date of the Proxy Statement, see "THE MERGER -- Certain Federal Income
Tax Consequences of the Merger."
ACCOUNTING TREATMENT. It is currently intended that the Merger will be
accounted for as a pooling of interests transaction for accounting and financial
reporting purposes and UPC's obligations to consummate the Merger are
conditioned upon the availability of such accounting treatment. UPC will not
consummate the Merger if such accounting treatment is not available. See "THE
MERGER -- Accounting Treatment."
CERTAIN DIFFERENCES IN SHAREHOLDERS' RIGHTS. At the Effective Time,
CB&T shareholders, whose rights are governed by CB&T's Charter of Incorporation,
(the "Charter"), and Amended and Restated 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 by the
TBCA. The rights of UPC shareholders differ from the rights of CB&T shareholders
in certain important respects, including with respect to certain anti-takeover
provisions provided for in UPC's Charter and Bylaws. See "EFFECT OF THE MERGER
ON RIGHTS OF SHAREHOLDERS."
LIMITATION ON NEGOTIATIONS. Pursuant to Section 8.8 of the Agreement,
CB&T 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 CB&T). As protection
against possible violation of this limitation, CB&T has agreed,under
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<PAGE> 16
certain circumstances, to pay to UPC the sum of $4,850,000 in immediately
available funds in the event and at the time that CB&T 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, CB&T has agreed not
to take certain actions relating to the operation of CB&T pending consummation
of the Merger without the prior written consent of UPC, except as otherwise
permitted by the Agreement, including, among other things: (i) becoming
responsible for any obligation for borrowed money in excess of an aggregate of
$100,000, except in the ordinary course of business consistent with past
practices; (ii) paying any dividends, except as permitted by the Agreement in
accordance with past practices, or, exchanging any shares of its capital stock,
issuing any additional shares of its capital stock, or giving any person the
right to acquire any such shares; (iii) acquiring control over any other entity;
(iv) subject to certain exceptions, granting any increase in compensation or
benefits, or paying any bonus, to any of its directors, officers, or employees;
or (v) except as previously disclosed to UPC or permitted by the Agreement,
modifying or adopting any employee benefit plans, including any employment
contract. See "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 CB&T 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 CB&T Common Stock on (i) January 7, 1998,
the last trading day preceding the public announcement of the execution of the
Agreement, and (ii) June 4, 1998, the latest practicable date prior to the
mailing of this Proxy Statement:
<TABLE>
<CAPTION>
UPC Equivalent Price
Common Stock Per CB&T Share (1)
------------ ------------------
<S> <C> <C>
January 7, 1998 $63.50 $348.49
June 4, 1998 56.69 311.11
</TABLE>
(1) The equivalent price per share of CB&T 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 5.488. 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.
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<PAGE> 17
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 CB&T; (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 CB&T Common
Stock, giving effect to UPC only; and (iv) an equivalent pro forma basis per
share of CB&T Common Stock, giving effect to the Merger and the Other
Acquisitions. The UPC pro forma combined information and the CB&T equivalent pro
forma information give effect to the Merger and the Other Acquisitions and
reflect an Exchange Ratio of 5.488 shares of UPC Common Stock for each
outstanding share of CB&T Common Stock.
The Merger and each of the Other Pending Acquisitions (excluding the
acquisitions of Duck Hill Bank, the Charter Acquisition and the CalFed Branch
Purchase) are expected to be, and the Recently Completed Acquisition of Security
Bancshares, Inc. was, accounted for using the pooling of interests method of
accounting. The Recently Completed Acquisitions of Sho-Me Financial Corp. were,
and the Other Pending Acquisitions of Duck Hill Bank, the Charter Acquisition
and the CalFed Branch Purchase are expected to be accounted for using the
purchase method of accounting. The pro forma information for the three months
ended March 31, 1998 and for 1997 reflects the acquisition of CB&T 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
Merger and the Other Acquisitions (other than MGR, Peoples, AMBANC and
Merchants) are not, individually or in the aggregate, considered material to UPC
from a financial statement presentation standpoint. Furthermore, the pro forma
impact of the CalFed Branch Purchase on the pro forma statement of earnings for
each of the three years 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 necessarily indicative of future results of operations or combined
financial position. The pro forma book value per share data reflects preliminary
estimates by UPC of acquisition-related charges to be incurred in connection
with consummation of the Merger and the Other Acquisitions; however, the
earnings per share amounts do not reflect the estimated acquisition-related
charges. For additional information with respect to the estimated charges UPC
anticipates it would incur in connection with the Merger and the Other
Acquisitions, see "BUSINESS OF UPC -- Recent Developments." For a discussion of
UPC's acquisition program, including a discussion of the significant charges UPC
has incurred incidental to acquisitions over the past three fiscal years, see
the caption "Acquisitions" (pages 10, 11 and 12) in UPC's 1997 Annual Report to
Shareholders and Note 2 to UPC's audited consolidated financial statements for
the years ended December 31, 1997, 1996, and 1995 (pages 49 and 50) contained in
UPC's 1997 Annual Report to Shareholders. UPC's 1997 Annual Report to
Shareholders is included as Exhibit 13 to UPC's 1997 Form 10-K and Exhibit 13 is
incorporated by reference herein to the extent indicated herein. See "DOCUMENTS
INCORPORATED BY REFERENCE."
8
<PAGE> 18
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 CB&T, including the respective notes thereto. See "DOCUMENTS
INCORPORATED BY REFERENCE," "-- Selected Financial Data," "PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION," "BUSINESS OF UPC -- Recent Developments"
and Appendix C hereto, which includes copies of the CB&T 1997 Form 10-K and the
CB&T March 31, 1998 Form 10-Q.
UNION PLANTERS CORPORATION AND CB&T, INC.
HISTORICAL AND PRO FORMA COMPARATIVE PER SHARE DATA
<TABLE>
<CAPTION>
Years Ended December 31, (1)
Three Months Ended ----------------------------------
EARNINGS BEFORE EXTRAORDINARY ITEMS March 31, 1998 1997 1996 1995
AND ACCOUNTING CHANGES ------------------ ------- ------- -------
UPC
<S> <C> <C> <C> <C>
Basic................................................... $ .89 $ 2.54 $ 2.13 $ 2.79
Diluted................................................. .86 2.45 2.05 2.66
UPC pro forma (all Other Acquisitions and CB&T)
Basic................................................... .80 2.52 2.24 2.56
Diluted................................................. .78 2.45 2.17 2.46
CB&T
Basic................................................... 3.61 16.16 15.37 15.00
Diluted................................................. 3.61 16.16 15.37 15.00
CB&T equivalent pro forma (UPC only) (1)
Basic 4.88 13.94 11.69 15.31
Diluted 4.72 13.45 11.25 14.60
CB&T equivalent pro forma (all Other
Acquisitions and CB&T)(1)
Basic................................................... 4.39 13.83 12.29 14.05
Diluted................................................. 4.28 13.45 11.91 13.50
CASH DIVIDENDS PER SHARE
UPC...................................................... .50 1.495 1.08 .98
CB&T..................................................... 5.00 7.50 6.50 4.50
CB&T equivalent pro forma (1)............................ 2.74 8.20 5.93 5.38
</TABLE>
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997
-------------- -----------------
BOOK VALUE PER COMMON SHARE
<S> <C> <C>
UPC................................................... $ 21.13 $ 20.72
UPC pro forma (all Other Acquisitions and CB&T) 20.82 21.73
CB&T.................................................. 130.37 132.09
CB&T equivalent proforma (UPC only) (1)............... 115.96 113.71
CB&T equivalent pro forma (all Other Acquisitions
and CB&T) (1)......................................... 114.26 119.25
</TABLE>
- ---------------------
(1) The equivalent pro forma per share data for CB&T is computed by
multiplying UPC's pro forma information by 5.488, the Exchange Ratio.
SELECTED FINANCIAL DATA
The following tables present selected consolidated financial data for UPC
and CB&T 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 the UPC March 31, 1998 Form 10-Q, and the audited
consolidated financial statements of UPC incorporated in this Proxy Statement by
reference to the UPC 1997 Form 10-K, and should be read in conjunction therewith
and with the notes thereto. See "DOCUMENTS INCORPORATED BY REFERENCE." The
information for CB&T has been derived from the consolidated financial statements
of CB&T including the unaudited consolidated financial statements of CB&T
incorporated in this Proxy Statement by reference to the CB&T March 31, 1998
Form 10-Q, and the audited consolidated financial statements of CB&T
incorporated in this Proxy Statement by reference to the CB&T 1997 Form 10-K,
copies of which are
9
<PAGE> 19
attached hereto as Appendix C, and should be read in conjunction therewith and
with the notes thereto. See "DOCUMENTS INCORPORATED BY REFERENCE." Historical
results are not necessarily indicative of results to be expected for any future
period. In the opinion of the respective managements of UPC and CB&T, 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 CB&T, respectively, have been
included. With respect to UPC and CB&T, results for the three months ended March
31, 1998 are not necessarily indicative of results which may be expected for any
other interim period or for the year as a whole. For information concerning
UPC's Other Acquisitions, see "BUSINESS OF UPC -- Recent Developments" and "PRO
FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION."
10
<PAGE> 20
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> 21
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> 22
CB&T, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Three Months Ended
March 31, (1) Years Ended December 31,
--------------------- ----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
--------- --------- --------- --------- --------- --------- ---------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data
Net interest income...................... $ 2,799 $ 2,767 $ 11,267 $ 11,215 $ 10,736 $ 11,321 $ 11,578
Provision for losses on loans............ 102 140 413 628 376 330 431
Investment securities gains (losses)..... 29 12 36 (22) (14) (308) 93
Other noninterest income................. 428 433 2,086 2080 1,830 1,648 1,640
Noninterest expense...................... 1,796 1,507 6,951 6,672 6,321 6,127 5,755
--------- --------- --------- --------- --------- --------- ---------
Earnings before income taxes............. 1,358 1,565 6,025 5,973 5,855 6,204 7,125
Applicable income taxes.................. 403 486 1,754 1,856 1,788 1,944 2,159
--------- --------- --------- --------- --------- --------- ---------
Net earnings............................. $ 955 $ 1,079 $ 4,271 $ 4,117 $ 4,067 $ 4,260 $ 4,966
========= ========= ========= ========= ========= ========= =========
Per Common Share Data
Basic Net Earnings....................... $ 3.61 $ 4.08 $ 16.16 $ 15.37 $ 15.00 $ 14.37 $ 15.58
Cash Dividends........................... 5.00 5.00 7.50 6.50 4.50 4.10 3.95
Book value............................... 130.37 119.73 132.09 121.85 113.92 97.61 89.60
Balance Sheet Data (at period end)
Total assets............................. $ 271,793 $ 265,427 $ 268,486 $ 261,459 $ 255,882 $ 254,973 $ 247,524
Loans, net of unearned income............ 145,819 146,059 147,248 144,027 138,403 127,870 115,965
Allowance for losses on loans............ 1,903 2,037 1,913 1,931 1,864 1,733 1,601
Investment Securities.................... 104,066 98,873 105,404 102,070 97,543 110,319 114,870
Deposits................................. 224,940 221,269 219,143 217,557 213,257 212,821 209,399
Short-term borrowings.................... 2,408 2,120 4,273 1,362 -- 5,700 --
Long-term debt........................... 6,585 7,384 6,787 7,203 9,226 7,821 7,729
Total shareholders' equity............... 34,432 31,669 34,886 32,240 30,721 26,597 28,565
Average assets........................... 268,644 260,717 267,351 257,350 248,329 254,033 244,183
Average shareholders' equity............. 34,355 31,016 32,039 29,927 28,311 28,171 26,419
Average shares outstanding
Primary............................... 264,113 264,507 264,288 267,865 271,150 296,456 318,833
Fully diluted......................... 264,113 264,507 264,288 267,865 271,150 296,456 318,833
</TABLE>
- ---------------------------------
(continued on the following page)
13
<PAGE> 23
CB&T, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA (CONTINUED)
<TABLE>
<CAPTION>
Three Months Ended
March 31, (1) Years Ended December 31,
-------------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------- ------- ------- ------- ------- ------- -------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
PROFITABILITY AND CAPITAL RATIOS
Return on average assets............................ 1.42% 1.66% 1.60% 1.60% 1.64% 1.68% 2.03%
Return on average common equity..................... 11.12 13.92 13.33 13.76 14.37 15.12 18.80
Net interest income (taxable equivalent)/average
earning assets 4.76 4.80 4.85 4.93 4.87 5.07 5.43
Loans/deposits...................................... 64.83 66.01 67.19 66.20 64.90 60.08 55.38
Common dividend payout ratio........................ 34.63 30.64 46.41 42.29 30.00 28.53 25.35
Equity/assets (period end).......................... 12.67 11.93 12.99 12.33 12.01 10.43 11.54
Average shareholders' equity/average total assets... 12.79 11.90 11.98 11.63 11.40 11.09 10.82
Leverage ratio...................................... 12.46 12.02 12.50 12.20 11.90 10.60 11.47
Tier 1 Capital.risk-weighted assets................. 22.62 20.76 22.53 21.40 21.00 21.80 24.71
Total Capital/risk-weighed assets................... 23.87 21.95 23.80 22.70 22.30 23.10 25.96
CREDIT QUALITY RATIOS
Allowance/period-end loans (2)...................... 1.31% 1.39% 1.30% 1.34% 1.35% 1.36% 1.38%
Nonperforming loans/total loans (3)................. .99 .42 .95 1.20 .29 1.43 1.78
Allowance/nonperforming loans....................... 132.00 333.00 136.00 111.00 468.00 95.00 78.00
Nonperforming assets/loans and foreclosed
properties........................................ .99 .42 .98 1.27 .40 1.47 1.81
Provision/average loans............................. .07 .10 .29 .45 .29 .28 .39
Net charge-offs/average loans....................... .08 .02 .30 .41 .19 .17 .26
</TABLE>
-------------------------
(1) Interim period ratios have been annualized where applicable.
(2) Allowance divided by loans, net of unearned income.
(3) Nonperforming loans divided by loans, net of unearned income.
14
<PAGE> 24
ANNUAL MEETING OF CB&T SHAREHOLDERS
DATE, PLACE, TIME, AND PURPOSE
This Proxy Statement is being furnished to the holders of CB&T Common
Stock in connection with the solicitation of proxies by the CB&T Board for use
at the Annual Meeting and at any adjournments or postponements thereof at which
CB&T shareholders will be asked to vote upon a proposal to approve the Agreement
and the Plan of Merger. The Annual Meeting will be held at the main office of
CB&T, located at 101 East Main Street, McMinnville, Tennessee 37110 at 2:30
p.m., local time, on July 6, 1998. See "THE MERGER."
RECORD DATE, VOTING RIGHTS, REQUIRED VOTE, AND REVOCABILITY OF PROXIES
The close of business on May 15, 1998, has been fixed as the CB&T
Record Date for determining holders of outstanding shares of CB&T Common Stock
entitled to notice of and to vote at the Annual Meeting. Only holders of CB&T
Common Stock of record on the books of CB&T at the close of business on the CB&T
Record Date are entitled to notice of and to vote at the Annual Meeting. As of
the CB&T Record Date, there were 264,113 shares of CB&T Common Stock issued and
outstanding held by approximately 654 holders of record.
Each holder of record of shares of CB&T Common Stock on the CB&T 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 CB&T shareholders at the Annual Meeting. The presence, either in
person or by properly executed proxy, of the holders of a majority of the
outstanding shares of CB&T Common Stock entitled to vote at the Annual Meeting
is necessary to constitute a quorum at the Annual Meeting.
CB&T intends to count shares of CB&T Common Stock present in person at
the Annual Meeting but not voting, and shares of CB&T 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 Annual 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 CB&T Common Stock
entitled to vote at the Annual 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 CB&T Common Stock entitled to vote thereon, any abstention, non-voting
share or "broker non-vote" with respect to such shares of CB&T Common Stock will
have the same effect as a vote AGAINST the approval of the Agreement and the
Plan of Merger.
Shares of CB&T Common Stock represented by properly executed proxies,
if such proxies are received prior to or at the Annual 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 slate of
nominees proposed for the CB&T Board and 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 Annual Meeting. If
necessary, the proxyholder may vote in favor of a proposal to adjourn the Annual
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
Annual 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
Annual Meeting.
A CB&T shareholder who has given a proxy solicited by the CB&T Board
may revoke it at any time prior to its exercise at the Annual Meeting by either
(i) giving written notice of revocation to the Corporate Secretary of CB&T, (ii)
properly submitting to CB&T a duly executed proxy bearing a later date, or (iii)
attending the Annual
15
<PAGE> 25
Meeting and voting in person. All written notices of revocation and other
communications with respect to revocation of proxies should be addressed as
follows: CB&T, Inc., 101 E. Main Street, McMinnville, Tennessee 37110;
Attention: Jeffrey A. Golden, Chairman of the Board, President and Chief
Executive Officer.
The directors and executive officers of CB&T (including immediate
family members and affiliated entities) owned, as of the CB&T Record Date,
36,318 shares, or approximately 13.75% of the outstanding shares of CB&T Common
Stock. The directors and executive officers of CB&T have indicated their intent
to vote for approval of the Agreement and Plan of Merger. Assuming that occurs
then 95,739 (42.03%) of the remaining 227,795 outstanding shares of CB&T Common
Stock must be voted FOR the Agreement and the Plan of Merger in order to obtain
the requisite shareholder approval.
The directors and executive officers of UPC owned, as of the CB&T
Record Date, no shares of CB&T Common Stock. As of the CB&T Record Date, UPC
held no shares of CB&T Common Stock in a fiduciary capacity for others, or as a
result of debts previously contracted, and CB&T held 2,390 shares of CB&T Common
Stock in a fiduciary capacity for others.
For information with respect to beneficial owners of 5% or more of the
outstanding shares of CB&T Common Stock, and information with respect to the
number and percentage of outstanding shares of CB&T Common Stock beneficially
owned by the directors and executive officers of CB&T, see "BUSINESS OF CB&T --
Beneficial Ownership of CB&T Common Stock."
SOLICITATION OF PROXIES
Proxies may be solicited by the directors, officers, and employees of
CB&T by mail, in person, or by telephone or telegraph. Such persons will receive
no additional compensation for such services. CB&T 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 CB&T 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 Annual Meeting and
expenses related to the printing and mailing of this Proxy Statement will be
shared by UPC and CB&T as provided in the Agreement. See "THE MERGER - Expenses
and Fees."
DISSENTERS' RIGHTS
HOLDERS OF CB&T 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 CB&T COMMON STOCK. IN ORDER TO BE
ENTITLED TO FULLY EXERCISE DISSENTERS' RIGHTS, A CB&T 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 CB&T 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
E HERETO, WHICH IS A COPY OF CHAPTER 23 OF THE TBCA GOVERNING STATUTORY
DISSENTERS' RIGHTS.
It is not necessary for a CB&T shareholder to vote against consummation
of the Merger in order to perfect his or her right to dissent and demand
appraisal. However, no such shareholder may vote for approval and adoption of
the Agreement and the Plan of Merger and thereafter demand his or her appraisal
rights. Because all proxies submitted which do not specify how such proxy is to
be voted will be voted in favor of the adoption and approval of the Agreement
and the Plan of Merger, a CB&T shareholder who desires to dissent from approval
of the Merger should not submit such a proxy. A CB&T 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
16
<PAGE> 26
that a Dissenting Shareholder give notice of his or her intention to dissent and
make demand for payment for his or her shares of CB&T Common Stock.
RECOMMENDATION
THE CB&T 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 CB&T
AND ITS SHAREHOLDERS, AND RECOMMENDS THAT THE CB&T SHAREHOLDERS VOTE FOR
APPROVAL OF THE AGREEMENT AND THE PLAN OF MERGER.
PROPOSAL I - ELECTION OF DIRECTORS
At the Annual Meeting, eleven (11) nominees will be proposed for
election as Directors to serve until the next Annual Meeting of Shareholders or
until their successors are elected and qualified. The Amended and Restated
Bylaws of CB&T ("CB&T's Bylaws") provide in Article II, Section 2, that the
number of Directors shall be determined from time to time by the shareholders or
a majority of the entire CB&T Board. The CB&T Board believes it advisable that
there be eleven (11) Directors of CB&T at this time. Proxies cannot be voted for
a greater number than eleven (11) nominees.
The CB&T Board proposes the election of the nominees listed below to
serve until the next Annual Meeting or until their successors are duly elected
and qualified. These eleven (11) nominees are presently serving as Directors.
Unless contrary instructions are received, it is intended that the shares
represented by proxies solicited by the CB&T Board will be voted in favor of the
election as Directors of all of the nominees named below. If for any reason any
of such nominees is not available for election, the persons named in the form of
proxy have advised that they will vote for such substitute nominees as the CB&T
Board may propose. The CB&T Board has no reason to expect that any of these
nominees will fail to be candidates at the meeting, and, therefore, does not at
this time have any substitute nominees under consideration. The names and
certain information relating to the eleven (11) nominees set forth below has
been furnished to CB&T by the individuals named.1
The following information is furnished with respect to the nominees on
the next three pages:
- --------
(1) Please note that director James A. Dillon, Jr., will not be a candidate for
re-election, as he retired, effective April 14, 1998. Director Dillon has been a
director since 1981. His long standing service and dedication to the Corporation
is sincerely appreciated.
17
<PAGE> 27
<TABLE>
<CAPTION>
===================================================================================================================================
POSITION & OFFICE DIRECTOR Shares of CB&T
POSITION & OFFICE HELD WITH OF CB&T BUSINESS EXP. DURING Beneficially Owned Percent
NAME AGE HELD WITH CB&T CITY BANK SINCE LAST FIVE YEARS As of 3/2/98(1) Of Class
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert W. Boyd, Sr. 78 Director Director 1981 Retired Owner, Globe 1,900(2) .72
Nursery
McMinnville, TN
- -----------------------------------------------------------------------------------------------------------------------------------
Larry E. Brown 51 Director & Director & Executive 1990 Executive Vice President 1,419 .54
Executive V.P. V.P. of City Bank
- -----------------------------------------------------------------------------------------------------------------------------------
John R. Collier, Jr. 57 Director Director 1994 President, Pleasant Cove 2,088(3) .79
Nursery, Inc.
McMinnville, TN
- -----------------------------------------------------------------------------------------------------------------------------------
Jeffrey A. Golden 57 Director & Director & Chairman 1981 Chairman of the Board 2009(4) .76
Chairman of Board, of the Board, President & Chief
President & Chief President & Chief Executive Officer of City
Executive Officer Executive Officer Bank
- -----------------------------------------------------------------------------------------------------------------------------------
Charles D. Haston 62 Director Director 1981 Circuit Court Judge 31st 452(5) .17
Judicial District State of
Tennessee
- -----------------------------------------------------------------------------------------------------------------------------------
James H. Hillis 58 Director & Director & Senior 1990 Senior Vice President of 1,000(6) .38
Treasurer V.P. City Bank
- -----------------------------------------------------------------------------------------------------------------------------------
J. Paul Holder 68 Director Director 1981 Owner, Paul Holder 14,422(7) 5.46
Realty & Auction Co.
McMinnville, TN
- -----------------------------------------------------------------------------------------------------------------------------------
M. Thomas Mullican 76 Director & Vice Director & Vice 1981 Farmer and Investor 9,668(8) 3.66
Chairman of the Chairman of the
Board Board
- -----------------------------------------------------------------------------------------------------------------------------------
James A. Puckett 71 Director Director 1981 Investor 194 .07
- -----------------------------------------------------------------------------------------------------------------------------------
Leon B. Stribling 57 Director Director 1992 President, Stribling 2,401 .91
Chevrolet-GEO, Inc.
Smithville, TN
- -----------------------------------------------------------------------------------------------------------------------------------
James E. Walling 60 Director Director 1994 President, Tennessee 765 .29
Roasters Enterprise, Inc.
Owner, Vilco Supply Co.
===================================================================================================================================
</TABLE>
18
<PAGE> 28
FOOTNOTES
(1) Unless otherwise indicated, all shares are owned of record.
(2) 1,900 shares are registered to Robert W. Boyd, Sr. or Elinor Boyd (Mr.
Boyd, Sr.'s wife)
(3) 1,688 shares are registered to John R. Collier, Jr.
100 shares are registered to Suzanne E. Collier Reynolds (Mr. Collier,
Jr.'s daughter)
300 shares are registered to Pleasant Cove Nursery, Inc. (Mr. Collier,
Jr. is President of Pleasant Cove Nursery, Inc.)
(4) 1,404 shares are registered to Jeffrey A. Golden WROS Linda Golden
605 shares are registered to Linda Golden WROS Jeffrey A. Golden
(5) 360 shares are registered to Charles D. Haston
92 shares are registered to Charles D. haston, a general partnership
(6) 1,000 shares are registered to James H. or Carolyn Hillis (Mr. Hillis'
wife)
(7) 14,386 shares are registered to J. Paul Holder
36 shares are registered to Steven Thomas Holder, Trust UMGA (Mr.
Holder's grandson) and J. Paul Holder, Trustee
(8) 7,568 shares are registered to M. Thomas Mullican
2,100 shares are registered to Connie W. Mullican (Mr. Mullican's wife)
19
<PAGE> 29
COMMITTEES OF THE BOARD
There are three standing Committees of the CB&T Board and City Bank. The
Board of Directors of CB&T met eight (8) times during 1997.
The following are the standing Committees of the Board of Directors of CB&T
and City Bank:
- Personnel/Nominating Committee five (5) members
- Audit/Compliance four (4) members
- Executive Committee seven (7) members
PERSONNEL/NOMINATING COMMITTEE.
Function: The Committee, which was created in February of 1997 by combining
into one committee the previously existing separate Personnel and Nominating
committees, reviews and evaluates of the officers' compensation program and
makes recommendations to the Boards of CB&T and City Bank. The Committee also
considers nominees for election to the Board of Directors for both CB&T and City
Bank, who are recommended by shareholders, provided that any such recommendation
is submitted in writing and is accompanied by a description of the proposed
nominee's qualifications and other relevant biographical information and an
indication of the consent of the proposed nominee to serve. See Committee Report
on executive compensation on pages 9 and 10.
Number of 1997 meetings: four (4), (Note: prior to combining the Personnel
and the Nominating Committees on 2-11-97 into a single committee, the nominating
committee held 1 meeting.)
Membership: The Committee membership is presently made up of six (6)
Directors of which one (1) is an officer of CB&T and City Bank. They are James
A. Dillon, Jr., Charles D. Haston, James H. Hillis, J. Paul Holder, John
Collier, Jr. and Leon Stribling.
AUDIT/COMPLIANCE COMMITTEE.
Functions: The Committee recommends the certified public accounting firm to
be employed by CB&T and City Bank for audit purposes and recommends the areas of
responsibility of the CPA firm. The Committee also meets with the CPA firm to
receive the auditors' evaluation of the conditions of CB&T and City Bank, and
brings those reports to the Board of Directors for their consideration. The
Committee also meets with internal auditors for periodic review of the audit
program of CB&T and City Bank.
Number of 1997 meetings: four (4)
Membership: The Committee membership is presently made up of three (3)
Directors who are not officers of CB&T or City Bank and one (1) advisory
director. They are Charles D. Haston, Chairman, Robert W. Boyd, Sr., Leon B
Stribling, and Dr. J. Ray Troop, Jr. (advisory director).
EXECUTIVE COMMITTEE.
Functions: The Committee reviews and recommends to the Board of Directors
for its approval selected actions with regard to the general direction and
conduct of CB&T and City Bank.
Number of 1997 meetings: seven (7)
20
<PAGE> 30
Membership: The membership of the Committee is presently made up of seven
(7) Directors of which three are officers of CB&T and two are officers of City
Bank. They are Jeffrey A. Golden, Chairman, James A. Dillon, Jr., James A.
Puckett, M. Thomas Mullican, Larry E. Brown, J. Paul Holder and Charles D.
Haston.
During fiscal year 1997, there were eight (8) meetings of the CB&T Board and
twelve (12) meetings of the Board of Directors of City Bank. Each member of the
Boards attended at least 75% of the aggregate meetings of the Boards and
Committees of which they were members.
COMPENSATION OF DIRECTORS AND OFFICERS
CB&T pays no fees to Directors or Advisory Directors for service on the
Board or Committees of the Board. Each Director or Advisory Director of CB&T,
however, is also a Director or Advisory Director of City Bank and, as such,
receives $1,500.00 for each meeting of City Bank's Board of Directors attended.
In addition, City Bank pays all non-employee members of the standing committees
of City Bank $150.00 for each meeting attended that continues longer than one
hour. During the fiscal year 1997, City Bank paid total cash Directors' fees of
$163,275.00 and Directors' fees were deferred in the amount of $105,475.00 under
City Bank's Director's Deferred Benefit Plan.
City Bank's Director's Deferred Benefit Plan was amended and terminated as
of January 7, 1998. However, unlike a strict termination in the traditional
sense; the amendment stops all future deferrals, but continues the Deferred
Compensation Plan for amounts deferred prior to January 7, 1998. Hence, existing
distributions, funded by insurance policies owned by CB&T on the lives of its
Directors, will occur at the scheduled time, rather than being made in an
immediate payout to terminated participants who have not yet begun receiving
benefit payments. Furthermore, according to the terms of the Deferred
Compensation Plan, Directors are treated as if they terminated service on the
date of termination of the Deferred Compensation Plan. Therefore, death benefits
are removed and the projected benefits are reduced.
PERSONNEL/NOMINATING COMMITTEE REPORT ON EXECUTIVE COMPENSATION
INTRODUCTION. Decisions on compensation of City Bank's executives are made
by the six member Personnel/Nominating Committee of the Board. The
Personnel/Nominating Committee believes that the actions of each executive
officer have potential to impact the short-term and long-term profitability of
CB&T and City Bank. Consequently, the Personnel/Nominating Committee places
considerable importance on its task of designing and administering an executive
compensation program.
City Bank has an executive compensation program that is focused on CB&T
shareholder value and the overall performance of the CB&T and City Bank. The two
main components of the executive compensation program are base salary and bonus.
COMPENSATION. The Personnel/Nominating Committee's executive compensation
program is designed to provide competitive levels of compensation that are
integrated with CB&T's and City Bank's annual and long-term goals. Executive
compensation is reviewed by the Committee relative to peer group executive
compensation based on national and state survey information.
BASE SALARY. Base salary represents a fixed labor cost and is designed so
that senior management receives acceptable salaries, thereby helping CB&T and
City Bank keep the talent needed to meet the challenges in the financial service
industry. Many factors are included in determining base salaries, such as the
responsibilities borne by the executive officer, the scope of the position,
length of service with CB&T and City Bank and individual performance. Salaries
are reviewed annually.
21
<PAGE> 31
BONUS. The second component in the executive compensation program is the
bonus plan. The bonus is based on City Bank's return on assets as a percentage
of at least 1.00%. If the return on assets is at least 1.00%, the officer bonus
would be 3.75% of salary. If the return on assets is at least 2.00%, the officer
bonus would be 10.00%.
CHIEF EXECUTIVE OFFICER COMPENSATION. The executive compensation program
described above is applied in setting Mr. Golden's compensation. Mr. Golden
participates in the same executive compensation program available to the other
executive officers. The Personnel Committee reviews the executive compensation
program in relationship to the performance of CB&T's net income and stock value.
Net income for CB&T and City Bank totaled $4,271 for fiscal year 1997. Book
value increased from $121.85 per share at December 31, 1996 to $132.09 per share
at December 31, 1997 representing a $10.24 per share increase. The increase
represents a 8.4% annualized gain, plus a $7.50 per share cash dividend declared
in 1997. Based upon these and other factors the 1997 cash compensation of Mr.
Golden was $148,350.00. Mr. Golden had a base salary of $138,000. Mr. Golden
earned a bonus in the amount of $10,350 that was due to CB&T's excellent
financial results in 1997.
CONCLUSION. The Personnel/Nominating Committee believes that this mix of
market-based salaries and bonus represents a balance that will motivate the
management team to continue to produce strong returns. The Personnel Committee
further believes this program strikes an appropriate balance between the
interests and needs of CB&T and City Bank in operating its business.
Submitted by the Personnel/Nominating Committee of the CB&T Board.
J. Paul Holder
James A. Dillon, Jr.
Charles D. Haston
John R. Collier, Jr.
Leon Stribling
James H. Hillis
22
<PAGE> 32
REMUNERATION OF DIRECTORS AND OFFICERS
The following table sets forth the aggregate remuneration accrued or
paid by City Bank during the fiscal years ended December 31, 1997, 1996, and
1995 to the highest compensated officers or directors whose aggregate
remuneration exceeds $100,000.00.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Compensation
- ------------------------------------------------------------------------------------------------------------------------------------
Name of Individual All Other
and Principal Position Year Salary Bonus Compensation (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Jeffrey A. Golden 1997 $138,000.00 $10,350.00 $31,718.06
Chairman of the Board, President 1996 133,500.00 10,012.50 22,499.35
and Chief Executive Officer 1995 130,000.00 9,750.00 20,684.04
- ------------------------------------------------------------------------------------------------------------------------------------
Larry E. Brown 1997 $93,000.00 $6,975.00 $28,107.30
Director of Bank and 1996 90,000.00 6,750.00 21,147.71
Executive Vice President 1995 86,500.00 6,487.50 15,518.76
- ------------------------------------------------------------------------------------------------------------------------------------
James H. Hillis(2) 1997 $83,500.00 $6,262.50 $23,213.44
Director and Treasurer 1996
1995
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) ALL OTHER COMPENSATION FOR MR. GOLDEN AND MR. BROWN AND MR. HILLIS
INCLUDES DIRECTOR FEES FOR THE BANK BOTH CASH PAID AND DEFERRED FEES,
DEFERRED COMPENSATION PAID PURSUANT TO THE CORPORATION'S 401(K) PLAN, A
PREMIUM PAYMENT FOR LIFE INSURANCE, USE OF A BANK VEHICLE AND COUNTRY
CLUB DUES.
(2) THE AGGREGATE REMUNERATION ACCRUED OR PAID BY CITY BANK TO MR. HILLIS
DID NOT EXCEED $100,000 IN FISCAL YEARS 1995 OR 1996.
RETENTION COMPENSATION. A major strength of CB&T is its employees. When
the Board of Directors of CB&T concluded that a sale of CB&T was a viable
alternative, the Board also concluded that steps should be taken to enhance the
likelihood of retention of key employee service during negotiation with
potential acquirors in order to minimize any disruption to the service delivery
by CB&T's employees. Accordingly, at its September 5, 1997 meeting, the Board
directed the Special Acquisitions Committee (the "Committee") to review and make
a recommendation to the Board regarding appropriate plans to protect, retain or
terminate employees with as little as possible disruption to CB&T and City
Bank's operations.
The Committee met on September 8, 1997 and, at a meeting of the full
Board on September 9, 1997, recommended that a $170,000 amount be made available
for bonuses to be paid upon consummation of a sale or merger for the efforts of
key executive officers of CB&T and/or City Bank in connection with a sale or
merger of CB&T ("Retention Bonus Plan").
The Retention Bonus Plan was adopted by the Board, which directed the
Committee to approve any disbursements under the Retention Bonus Plan. At its
September 18, 1997 and January 2, 1998 meeting, the Committee approved cash
bonuses to be paid upon consummation of the Merger, in the aggregate, as
follows:
23
<PAGE> 33
<TABLE>
<CAPTION>
Officer CB&T/City Bank Amount
------- -------------- ------
<S> <C> <C>
Jeffrey Golden President, Chairman and $130,000
Chief Executive Officer*
Larry Brown Director, Executive Vice 12,500
President*
James Hillis Director, Treasurer, 10,000
Senior Vice President
Glyna Lee Compliance Officer 7,000
Jerry Brown Chief Financial Officer 5,000
Ken Smith Senior Vice President, Trusts 5,000
Investments
</TABLE>
- -----------------
* Position with each of CB&T and City Bank.
In addition, the Committee recommended that a severance policy plan be
adopted by the Board providing for certain payments to terminated employees. The
Board adopted these recommendations at its September 9, 1997 meeting and
instructed counsel to prepare a formal severance pay plan for review at its next
regular meeting. The CB&T, Inc. Employee Severance Pay Plan was adopted by the
Board, effective October 31, 1997. See the CB&T 1997 Form 10-K included in
"APPENDIX C" and "THE MERGER -- Interest of Certain Persons in the Merger".
The Committee also recommended and the Board approved a Severance
Agreement for the Chief Executive Officer as of November 12, 1997 providing
certain monetary protection for Mr. Golden as Chief Executive Officer of CB&T,
in the event of the termination of Mr. Golden without cause or relocation in
connection with a sale or merger of CB&T. See the CB&T 1997 Form 10-K included
in "APPENDIX C" and "THE MERGER -- Interest of Certain Persons in the Merger".
SHAREHOLDER RETURN.
Set forth below is a line graph comparing the yearly change in the cumulative
total shareholder return on CB&T Common Stock against the cumulative total
return of the S & P Composite-500 Stock Index and S & P Major Regional Bank
Composite Index for the period of five years commencing December 31, 1993 and
ended December 31, 1997.
[CHART]
Value of $100 invested on December 31, 1992:
<TABLE>
<CAPTION>
(In Dollars)
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
CB&T, Inc 100 151 260 315 344 358
Regional Banks 100 172 163 211 298 310
S&P 500 100 150 152 203 244 254
</TABLE>
* Assumes that the value of the investment in the Company
Common Stock and each index was $100 on December 31,
1993.
24
<PAGE> 34
PROPOSAL II - THE MERGER
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 CB&T by UPC pursuant to
the merger of CB&T 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 CB&T Common Stock then issued and outstanding
(excluding shares held by CB&T, 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 5.488 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
CB&T 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 CB&T Record Date, CB&T had 264,113 shares of CB&T Common
Stock outstanding. Based upon the Exchange Ratio and assuming there are no
Dissenting Shareholders, upon consummation of the Merger, UPC will issue
approximately 1,449,452 shares of UPC Common Stock. Accordingly, UPC would then
have outstanding approximately 86,420,351 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 5.488 SHARES OF UPC COMMON
STOCK FOR EACH SHARE OF CB&T COMMON STOCK. An upward adjustment could occur if
the CB&T 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.
CB&T is not obligated to consummate the Merger with UPC if both:
(a) the average of the daily last sales prices (the "Average
Closing Price") of UPC Common Stock (as reported on the NYSE
Composite Transactions List) for the 20 consecutive full
trading days in which the UPC Common Stock is traded on the
NYSE ending on 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 $48.80, which represents a 20% decline
from $61.00 (the "Starting Price"), the price per share of UPC
Common Stock at the close of business on January 14, 1998, 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 $61.00, the Starting Price, is less
than (ii) the number (the "Index Ratio") obtained by dividing
the weighted average of the closing prices of the common
stock of the 15 bank holding companies defined as the
25
<PAGE> 35
"Index Group" in the Agreement (the "Index Price") on the
Determination Date by the Index Price on January 14, 1998,
the Starting Date, and subtracting .20.
In such case, CB&T 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. CB&T 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 CB&T
shareholders by adjusting the Exchange Ratio upward to the lesser of the (i)
Exchange Ratio determined by dividing the product of .80, the Starting Price and
5.488 by the Average Closing Price, or (ii) the Exchange Ratio determined by
dividing the product of the Index Ratio and 5.488 by the UPC Ratio. UPC IS UNDER
NO OBLIGATION TO ADJUST THE EXCHANGE RATIO. Should UPC elect to adjust the
Exchange Ratio, it must give CB&T prompt written notice of that election and of
the adjusted Exchange Ratio, in which case no termination shall have occurred
pursuant to CB&T's right of termination.
These conditions reflect the parties' agreement that CB&T'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 $48.80 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
20%.
If the Average Closing Price is less than $48.80 per share and the UPC
Ratio is less than the Index Ratio, the CB&T Board will likely terminate the
Agreement so as to require UPC to consider increasing the Exchange Ratio.
If the CB&T 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 CB&T'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 CB&T 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 5.488, and the Starting Price of UPC Common Stock is $61.00, 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 $48.80. 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 CB&T
shareholders could have fallen from a pro forma $61.00 per
share, as of the Starting Date, to as low as $48.80 per share,
as of the Determination Date.
(2) The second scenario occurs if the Average Closing Price is
less than $48.80, 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 CB&T shareholders would have
fallen from a pro forma $61.00 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
20%.
(3) The third scenario occurs if the Average Closing Price
declines below $48.80 and the UPC Ratio is below the Index
Ratio (i.e., UPC's stock price has declined by more than 20%
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 CB&T shareholders receive shares of UPC
Common Stock having a value (based upon
26
<PAGE> 36
the Average Closing Price) that corresponds to at least $48.80 or a
20% decline from the stock price performance reflected by the Index
Group, whichever is less.
For example, if the Average Closing Price were $45.50, and the ending
Index Price, as of the Determination Date, were $95 (yielding an
Index Ratio of $95 / $100 or .95 - .20), the UPC Ratio (.7459) would
be below the Index Ratio of (.75), after receipt from CB&T of notice
of intent to terminate, CB&T could terminate the Agreement unless UPC
elected within five days to increase the Exchange Ratio to equal
5.518, which represents the lesser of (a) 5.886 [the result of
dividing $267.814 (the product of $48.80 and 5.488, the Exchange
Ratio) by the Average Closing Price ($45.50), rounded to the nearest
thousandth] and (b) 5.518 [the result of dividing the Index Ratio
(.75) times 5.488 by the UPC Ratio (.7459), rounded to the nearest
thousandth]. Based upon the assumed $45.50 Average Closing Price, the
new Exchange Ratio would represent a value to the CB&T shareholders
of $251.069 per share.
If the Average Closing Price were $45.50, and the ending Index Price,
as of the Determination Date, were $100, the UPC Ratio (.7459) would
be below the Index Ratio (.80, or 1.00 minus .20), after receipt from
CB&T of notice of intent to terminate, CB&T could terminate the
Agreement unless UPC elected within five days to increase the
Exchange Ratio to equal 5.886, which represents the lesser of (a)
5.886 [the result of dividing $267.815 (the product of $48.80 and
5.488, the Exchange Ratio) by the Average Closing Price ($45.50),
rounded to the nearest thousandth] and (b) 5.886 [the result of
dividing the Index Ratio (.80) times 5.488 by the UPC Ratio (.7459),
rounded to the nearest thousandth]. Based upon the assumed $45.50
Average Closing Price, the new Exchange Ratio would represent a value
to the CB&T shareholders of $267.815 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 CB&T Common Stock and at
any time thereafter, may be more or less than the Average Closing Price. CB&T
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.
During 1997, the Board of Directors of CB&T, in order to be better
informed regarding CB&T's options, consulted with each of the National Institute
for Community Banking, Dallas, Texas ("NICB") and Sheshunoff regarding the
potential benefits of remaining independent versus being acquired by a larger
entity. NICB presented an evaluation of the benefits to the CB&T shareholders of
remaining independent. This evaluation was based upon an estimate of the
earnings and growth CB&T could expect to achieve on an independent basis.
Sheshunoff presented a valuation of the current fair market value of CB&T based
upon historic ranges of trading multiples and acquisition multiples of earnings
and of tangible book value for financial institutions stocks. Based upon NICB's
and Sheshunoff's presentations, the Board of Directors concluded that a sale of
CB&T for a price (or an exchange ratio equivalent market value in the case of a
stock exchange transaction) in excess of $250.00 per share would likely be more
beneficial to CB&T shareholders than the alternative of remaining independent.
Accordingly, the CB&T Board decided to permit Sheshunoff to contact
selected larger banking companies that might have both an interest in and a
capacity to acquire CB&T.
CB&T established a special acquisition committee (the "Committee") of
its Board of Directors to advise management regarding any acquisition
discussions that might ensue. The Board of Directors of CB&T authorized
management and the Committee to consider acquisition proposals that might be
made. Analysis of such proposals, if any, would provide a context for the Board
and the Committee to consider remaining independent or being acquired by a
larger company and to choose between these alternatives.
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From September 5, 1997 to October 7, 1997, Sheshunoff contacted
nineteen potential acquirors that it believed might have an interest in and
capacity to acquire CB&T.
Detailed information concerning CB&T was assembled by Sheshunoff and
provided on a confidential basis to the selected financial institutions. The
five highest proposals were submitted by Sheshunoff to CB&T.
CB&T then invited two potential acquirors to increase their proposals
and communicated to each that it would have an opportunity to conduct due
diligence in connection with the negotiation of a merger agreement. A third
potential acquiror also increased its proposal and was permitted to conduct due
diligence.
During its deliberations the Committee reviewed information assembled
by representatives of Sheshunoff analyzing the terms of the three proposals,
comparing each proposal with other recent comparable transactions in terms of
the multiple of book value, multiple of earnings, deposit premium, the financial
history, prospects, performance, resources and capability of each potential
acquiror and other factors. Following consideration of these proposals, the
Committee advised management to continue negotiations with the three potential
acquirors and to give each of them an opportunity to increase their proposals.
Based upon the responses to CB&T's request for a final modification of
all offers, CB&T's management concluded that UPC's offer, primarily because of
the price offered by UPC and its commitment to actively pursue the acquisition
in further negotiations, was the most attractive for CB&T and its shareholders.
Thereafter, no further acquisition discussions were held with the other two
potential acquirors. Between December 11, 1997 and January 6, 1998, the date on
which the Merger Agreement was signed, CB&T and UPC negotiated the terms of the
Merger Agreement.
On January 6, 1998, the Board of Directors of CB&T met with its
financial and legal advisors present for the purpose of considering the proposed
merger agreement. Mr. Golden presented the background of the agreement and
reported on the history of the negotiations with the potential acquirors.
Counsel (Jenkens & Gilchrist, a Professional Corporation, Dallas, Texas)
presented a summary of the terms of the proposed merger agreement and Sheshunoff
presented a report of its analysis of the financial terms of the proposed
agreement and a comparison of the terms of the proposed agreement with other
comparable transactions in terms of price to book value and price to earnings
ratios, deposit premium and other measures. Sheshunoff also commented on the
financial strength and prospects of UPC, its stock price performance, dividend
history, likely effects of the proposed transaction on UPC's stock price, its
prospects for regulatory approval and other information regarding UPC.
Sheshunoff also reported to the Board its opinion that the proposed transaction
is fair from a financial point of view to CB&T and all of its stockholders.
Following discussion, the Board concluded that the proposed merger agreement was
in the best interests of CB&T and its stockholders. Accordingly, the Board of
Directors, by unanimous vote of the Directors, authorized CB&T to enter into the
Merger Agreement and to engage in the transactions contemplated thereby.
On the basis of the authorization of the Board of Directors of CB&T,
CB&T executed the Merger Agreement following the meeting on January 6, 1998. A
press release was issued on January 8, 1998.
RECOMMENDATION OF THE CB&T BOARD; REASONS FOR THE MERGER.
The CB&T Board believes that the Merger is fair to, and in the best
interests of, CB&T and its shareholders. If the Merger is consummated, the
shareholders of CB&T 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 CB&T Common Stock. ACCORDINGLY,
THE CB&T BOARD HAS UNANIMOUSLY APPROVED THE AGREEMENT AND THE PLAN OF MERGER AND
RECOMMENDS THAT THE HOLDERS OF CB&T COMMON STOCK VOTE FOR THE APPROVAL OF THE
AGREEMENT AND THE PLAN OF MERGER AND THE CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED THEREBY. See "-- Opinion of CB&T's Financial Advisor" below.
The terms of the Merger, including the Exchange Ratio, are the result
of arm's-length negotiations between representatives of CB&T and UPC. In
reaching its decision to approve the Agreement, the CB&T Board consulted with
its legal advisors regarding the terms of the transaction, with its financial
advisor regarding the financial aspects of the proposed transaction and the
fairness of the Exchange Ratio, and with management of CB&T, and, without
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assigning any relative or specific weights, considered a number of factors, both
from a short-term and long-term perspective, including, without limitation, the
following:
(a) the CB&T Board's familiarity with and review of CB&T'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 CB&T
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 CB&T;
(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 CB&T Common Stock
pursuant to the Agreement in relation to the historical trading prices
of CB&T Common Stock;
(e) the lack of an established trading market for shares of
CB&T Common Stock;
(f) the information presented by Sheshunoff to the CB&T Board
with respect to the Merger and the opinion of Sheshunoff that, as of
the date of such opinion, the Exchange Ratio was fair to the holders of
CB&T Common Stock from a financial point of view (see "-- Opinion of
CB&T's Financial Advisor");
(g) the financial and other significant terms of the proposed
Merger with UPC, and the review by CB&T with its legal and financial
advisors of the provisions of the Agreement;
(h) the CB&T Board's belief that the receipt of UPC Common
Stock in the Merger generally will permit holders of CB&T 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 "-- Certain
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
(i) the alternative strategic courses available to CB&T,
including remaining independent and exploring other potential business
combination transactions, including, in particular, the potential
values that could be derived therefrom.
UPC'S REASONS FOR THE MERGER
In adopting the Agreement and the Plan of Merger, the UPC Board
considered a number of additional factors concerning the benefits of the Merger.
Without assigning any relative or specific weights to the factors, the UPC Board
considered the following additional material factors:
(a) a review, based in part on a presentation by UPC's
management, of (i) the business, operations, earnings, and financial
condition, including the capital levels and asset quality, of CB&T 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 CB&T operates,
including existing competition, history of the market areas with
respect to financial institutions, and average demand for credit, on a
historical and prospective basis, and (iii) the results of UPC's due
diligence review of CB&T; and
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(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 CB&T.
OPINION OF CB&T'S FINANCIAL ADVISOR
GENERAL. CB&T retained Sheshunoff based upon its qualifications,
expertise and reputation to provide its opinion of fairness of the consideration
to be received by CB&T's shareholders in connection with the Merger and related
matters (the "Merger Consideration"). As part of its investment banking
business, Sheshunoff is regularly engaged in the valuation of securities in
connection with mergers and acquisitions and valuations for estate, corporate
and other purposes. CB&T's Board of Directors decided to retain Sheshunoff based
on its experience as a financial advisor in mergers and acquisitions of
financial institutions, and its knowledge of financial institutions. On January
6, 1998, Sheshunoff rendered its written opinion that, as of such date, the
consideration to be received in the Merger Agreement was fair, from a financial
point of view, to the holders of CB&T's common stock. Sheshunoff has confirmed
its January 6, 1998 opinion by delivery an updating letter to the CB&T Board
dated May 27, 1998 stating that, as of such date and based on the matters set
forth in its January 6 opinion as updated, the Exchange Ratio is fair to the
holders of CB&T Common Stock from a financial point of view.
The full text of Sheshunoff's opinion dated January 6, 1998, which sets
forth, among other things, assumptions made, procedures followed, matters
considered, and limitations on the review undertaken, and a copy of Sheshunoff's
May 27, 1998 updating letter are attached as Appendix D to this Proxy Statement.
CB&T's shareholders are urged to read the Sheshunoff opinion carefully and in
its entirety. Sheshunoff's opinion is addressed to CB&T's Board and does not
constitute a recommendation to any shareholder of CB&T as to how such
shareholder should vote at the CB&T Annual Meeting.
In connection with its opinion, Sheshunoff: (i) reviewed the Agreement;
(ii) reviewed certain publicly available financial statements and other
information of CB&T and UPC, respectively; (iii) reviewed certain internal
financial statements and other financial and operating data of CB&T provided to
Sheshunoff by CB&T's management; (iv) analyzed certain publicly available
financial analyses and projections of UPC provided by independent banking
securities analysts; (v) reviewed the reported prices and share trading activity
for UPC Common Stock; (vi) discussed the past and current operations, financial
condition, and future prospects of CB&T with its executive management; (vii)
compared CB&T and UPC from a financial point of view with certain other banking
companies that Sheshunoff deemed to be relevant; (viii) compared the financial
performance of UPC and the prices and trading activity of the UPC common stock
with that of certain other comparable publicly traded companies and their
securities; (ix) reviewed the financial terms, to the extent publicly available,
of certain comparable merger transactions nationally, in the Southeastern United
States and in Tennessee, and; (x) performed such other analyses and reviews as
Sheshunoff deemed appropriate.
In connection with its review, Sheshunoff relied upon and assumed the
accuracy and completeness of all of the foregoing information provided to it or
made publicly available, and Sheshunoff did not assume any responsibility for
independent verification of such information. With respect to the internal
confidential financial projections, Sheshunoff assumed that such projections
were reasonably prepared on the basis reflecting the best currently available
estimates and judgments of the future financial performance of CB&T and did not
independently verify the validity of such assumptions. Sheshunoff did not make
any independent evaluation or appraisal of the assets or liabilities of CB&T,
nor was Sheshunoff furnished with any such appraisals. Sheshunoff did not
examine any individual loan files of CB&T. Sheshunoff is not an expert in the
evaluation of loan portfolios for the purposes of assessing the adequacy of the
allowance for losses with respect thereto and has assumed that such allowance
for each of the companies is in the aggregate, adequate to cover such losses.
With respect to UPC, Sheshunoff relied solely upon publicly available
data regarding UPC's financial condition and performance. Sheshunoff did not
meet with or discuss this publicly available information with the management of
UPC. Sheshunoff did not conduct any independent evaluation or appraisal of the
assets, liabilities or business prospects of UPC, was not furnished with any
evaluations or appraisals, and did not review any individual credit files of
UPC.
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Sheshunoff's opinion is necessarily based on economic, market and other
conditions in effect on, and the information made available to Sheshunoff as of,
January 6, 1998.
In connection with rendering its opinion, Sheshunoff performed a
variety of financial analyses. The preparation of a fairness opinion involves
various determinations as to the most appropriate and relevant methods of
financial analysis and the application of those methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
partial analysis of summary description. Moreover, the evaluation of the
fairness, from a financial point of view, of the consideration to be received by
the shareholders of CB&T is to some extent a subjective one based on the
experience and judgment of Sheshunoff and not merely the result of mathematical
analysis of financial data. Accordingly, notwithstanding the separate factors
summarized below, Sheshunoff believes that its analyses must be considered as a
whole and that selecting portions of its analyses and of the factors considered
by it, without considering all analyses and factors, could create an incomplete
view of the evaluation process underlying its opinion. The ranges of valuations
resulting from any particular analysis described below should not be taken to be
Sheshunoff's view of the actual value of CB&T.
In performing its analyses, Sheshunoff made numerous assumptions with
respect to industry performance, business and economic conditions and other
matters, many of which are beyond the control of CB&T. The analyses performed by
Sheshunoff are not necessarily indicative of actual values or future results,
which may be significantly more or less favorable than suggested by such
analyses. The analyses do not purport to be appraisals or to reflect the prices
at which a company might actually be sold. In addition, Sheshunoff's analyses
should not be viewed as determinative of the CB&T Board's or CB&T's management's
opinion with respect to the value of CB&T.
The following is a summary of the analyses performed by Sheshunoff in
connection with its opinion dated as of January 6, 1998:
ANALYSIS OF SELECTED TRANSACTIONS. Sheshunoff performed an analysis of
premiums paid in selected pending or recently completed acquisitions of banking
organizations in Tennessee and in the southeastern United States, with
comparable characteristics to the Merger. Two sets of comparable transactions
were analyzed to ensure a thorough comparison.
The first set of comparable transactions (the "regional transactions")
was comprised to reflect the profitability, asset size and regional location of
CB&T. The regional transactions specifically consisted of eight (8) mergers and
acquisitions of banks located in Tennessee which sold for common stock between
January 1, 1996 and January 1, 1998. The analysis yielded multiples of the
regional transactions' purchase price relative to: (i) book value ranging from
1.52 times to 3.14 times with an average of 2.10 times and a median of 2.06
times (compared with the multiple implied in the Merger, based on the closing
price of the UPC Common Stock at January 2, 1998, of 2.81 times September 30,
1997 book value); (ii) last 12 months earnings ranging from 13.0 times to 33.0
times with an average of 19.8 times and a median of 17.6 times (compared with
the multiple implied in the Merger, based on the closing price of the UPC Common
Stock at January 2, 1998, of 25.5 times last 12 months earnings as of September
30, 1997); (iii) total assets ranging between 12.0% and 22.8% with an average of
16.6% and a median of 15.3% (compared with the multiple implied in the Merger,
based on the closing price of the UPC Common Stock at January 2, 1997, of 35.5%
of September 30, 1997 total assets); and (iv) total deposits ranging from 14.9%
to 32.0% with an average of 21.4% and a median of 18.7% (compared with the
multiple implied in the merger, based on the closing price of the UPC Common
Stock at January 2, 1998, of 42.9% of deposits as of September 30, 1997).
The second set of comparable transactions (the "Southeastern
Transactions") was comprised to reflect a more narrowly defined group of
comparable transactions based on the profitability, asset size and type of
consideration received. The southeastern transactions specifically consisted of
eight (8) mergers and acquisitions of banks in the southeastern United States
with total assets between $100 million and $500 million with a return on average
equity between 12% and 15% which sold for common stock between January 1, 1997
and January 2, 1998. The analysis yielded multiples of the transactions'
purchase price relative to: (i) book value ranging from 2.19 times to 3.00
times with an average of 2.56 times and a median of 2.43 times (compared with
the multiple implied in the Merger, based on the closing price of the UPC
Common Stock at January 2, 1998, of 2.81 times
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September 30, 1997 book value); (ii) last 12 months earnings ranging from 16.5
times to 25.9 times with an average of 21.3 times and a median of 21.4 times
(compared with the multiple implied in the Merger, based on the closing price
of the UPC Common Stock at January 2, 1998, of 25.5 times last 12 months
earnings as of September 30, 1997); (iii) total assets ranging between 21.5% and
30.2% with an average of 26.0% and a median of 25.5% (compared with the multiple
implied in the merger, based on the closing price of the UPC Common Stock at
January 2, 1997, of 35.5% of September 30, 1997 total assets); and (iv) total
deposits ranging from 24.2% to 35.1% with an average of 30.0% and a median of
29.8% (compared with the multiple implied in the Merger, based on the closing
price of the UPC Common Stock at January 2, 1998, of 42.9% of deposits as of
September 30, 1997).
DISCOUNTED CASH FLOW ANALYSIS. Using discounted cash flow analysis,
Sheshunoff estimated the present value of the future stream of after-tax cash
flow that CB&T could produce through the year 2002, under various circumstances,
assuming that CB&T performed in accordance with the earnings/return projections
of the CB&T Management. Sheshunoff estimated the terminal value for CB&T at the
end of the period by applying multiples of earnings ranging from 17 times to 20
times and then discounting the cash flow streams, dividends paid to the CB&T
shareholders (assuming all earnings in excess of that required to maintain a
tangible equity to tangible asset percentage of 6.0% are paid out in dividends)
and terminal value using discount rates ranging from 12% to 14% chosen to
reflect different assumptions regarding the required rates of return of CB&T and
the inherent risk surrounding the underlying projections. This discounted cash
flow analysis indicated a range of $288 per share to $340 per share based on
264,133 fully diluted shares outstanding. This compares favorably to the value
of the Merger Consideration for shares of CB&T Common Stock of $360 per share,
based on the closing price per share of the UPC Common Stock at January 2, 1998.
Sheshunoff also performed a cash flow analysis using an estimated
terminal value for CB&T at the end of the period by applying multiplies of book
value ranging from 3.00 times to 3.75 times and then discounting the cash flow
streams, dividends paid to the CB&T shareholders (assuming all earnings in
excess of that required to maintain a tangible equity to tangible asset
percentage of 6.0% are paid out in dividends) and terminal value using discount
rates ranging from 12% to 14% chosen to reflect different assumptions regarding
the required rates of return of CB&T and the inherent risk surrounding the
underlying projections. This discounted cash flow analysis indicated a range of
$236 per share to $283 per share. This compares favorably to the value of the
Merger Consideration for shares of CB&T Common Stock of $360 per share, based on
the closing price per share of the UPC Common Stock at January 2, 1998.
COMPARABLE COMPANY ANALYSIS. Sheshunoff compared selected balance sheet
data, asset quality, capitalization and profitability measures and market
statistics using financial data at or for the twelve months ended September 30,
1997 and market data as of January 2, 1998 for UPC to a group of selected
southeastern bank holding companies which Sheshunoff deemed to be relevant.
The group of selected southeastern bank holding companies (the
"Comparable Composite") included AmSouth Bancorp, Compass Bancshares, Inc.,
First American Corporation, First Tennessee National Corporation, First Virginia
Banks, Inc., Hibernia Corporation, Regions Financial Corporation, and Synovus
Financial Corporation. This comparison, among other things, showed that: (i)
UPC's equity to asset percentage of 10.01%, compared to an average of 8.75% and
a median of 8.42% for the Comparable Composite; (ii) for the last 12 months
ended September 30, 1997, UPC's return on average equity was 14.0%, compared to
an average of 16.5% and a median of 16.0% for the Comparable Composite; (iii)
for the last 12 months ended September 30, 1997, UPC's return on average assets
was 1.29%, compared to an average of 1.41% and a median of 1.39% for the
Comparable Composite; (iv) as of September 30, 1997, UPC's nonperforming loans
to total loans ratio was 0.58%, compared to an average of 0.42% and a median of
0.34% for the Comparable Composite; (v) as of January 2, 1998, UPC's price per
share to September 30, 1997 book value per share was 3.06 times, compared to an
average of 3.53 times and median of 3.06 times for the Comparable Composite; and
(vi) as of January 2, 1998, UPC's price per share to last 12 months earnings
per share as of September 30, 1997 was 24.1 times, compared to an average of
22.1 times and median of 20.0 times for the Comparable Composite.
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Sheshunoff also compared selected stock market results of UPC to the
publicly available corresponding data of other composites which Sheshunoff
deemed to be relevant, including SNL Securities, L.P.'s ("SNL") index of all
publicly traded banks, the aforementioned Comparable Composite and the S&P 500.
Results from indexing the S&P 500, SNL's index of all publicly traded banks, the
Comparable Composite and the UPC Common Stock from February 1, 1996 to December
31, 1997 revealed similar relationships in price movements of the UPC Common
Stock to the price movements of the Comparable Composite and the SNL's index of
all publicly traded banks. The analysis revealed that percentage price movements
of the UPC Common Stock were greater than the price movements of the S&P 500
Index.
No company or transaction used in the comparable company and comparable
transaction analyses is identical to CB&T or the Merger. Accordingly, an
analysis of the results of the foregoing necessarily involves complex
considerations and judgments concerning differences in financial and operating
characteristics of CB&T and other factors that could affect the public trading
value of the companies to which they are being compared. Mathematical analysis
(such as determining the average or median) is not in itself a meaningful method
of using comparable transaction data or comparable company data.
Pursuant to an engagement letter dated September 8, 1997, between CB&T
and Sheshunoff, CB&T agreed to pay Sheshunoff a retainer fee of $5,000 and a
transaction fee equal to 1% of the consideration paid to CB&T (which amount is
estimated to be $829,811 as of May 27, 1998). CB&T also agreed to indemnify and
hold harmless Sheshunoff and its officers and employees against certain
liabilities in connection with its services under the engagement letter, except
for liabilities resulting from the negligence of Sheshunoff.
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 CB&T, the
Agreement provides that the parties will use their reasonable efforts to cause
the Effective Time to occur on such date as may be designated by UPC within 30
days following the last to occur of (i) the effective date of the last required
consent of any regulatory authority having authority over and approving or
exempting the Merger. (ii) the date on which the shareholders of CB&T approve
the Agreement and the Plan of Merger, and (iii) the date on which all other
conditions precedent (other than those conditions which relate to actions to be
taken at the Closing) to each party's obligations under the Agreement have been
satisfied or waived (to the extent waivable by such party). It is anticipated
that the Effective Time will occur on the day immediately following the Meeting.
No assurance can be provided that the necessary shareholder and
regulatory approvals can be obtained or that other conditions precedent to the
Merger can or will be satisfied. CB&T and UPC anticipate that all conditions to
consummation of the Merger will be satisfied so that the Merger can be
consummated on or about July 1, 1998.
However, delays in the consummation of the Merger could occur.
The Board of Directors of either CB&T or UPC generally may terminate
the Agreement and the Plan of Merger if the Merger is not consummated by August
31, 1998, unless the failure to consummate the transactions contemplated by the
Agreement on or before such date is caused by any willful breach of the
Agreement by the party seeking termination or certain other specific conditions
exist. See "-- Conditions to Consummation of the Merger" and "-- Waiver,
Amendment, and Termination."
DISSENTERS' RIGHTS
Any holder of CB&T 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 E to this Proxy Statement.
Under the TBCA, any holder of CB&T 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 CB&T in
writing of the name and address of the record holder of the shares, if known to
him or her.
Any CB&T 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 CB&T 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 CB&T 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 CB&T's
shareholders at the Annual Meeting, each CB&T shareholder who has filed an
Objection Notice will be notified by CB&T of such approval no later than ten
days after the CB&T Annual 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 CB&T 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 CB&T 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 CB&T 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 CB&T Common Stock before January
8, 1998 (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 CB&T 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 CB&T 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, UP Holding (as the surviving corporation) 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
CB&T estimates to be the fair value of the shares of CB&T Common Stock, plus
accrued interest. Such payment must be accompanied by (i) certain of CB&T's
financial statements, (ii) a statement of CB&T'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, CB&T 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 January 8, 1998, the date of the first public announcement
of the terms of the Reorganization Agreement. To the extent CB&T 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 who agrees
to accept it in full satisfaction of this demand.
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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)
CB&T, 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 CB&T (or its successor in the Merger) in
writing (which notice is invalid if not delivered to CB&T within one month after
CB&T 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 CB&T,
reject CB&T'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 Warren 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 CB&T 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 CB&T or the fair value, plus accrued
interest, of his or her after-acquired shares for which CB&T elected to withhold
payment under Section 48-23-208 of the TBCA.
The Court shall access 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 CB&T (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 CB&T, if the Court finds that CB&T did not comply
substantially with the relevant requirements of the TBCA or (ii) against CB&T 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 E.
For a discussion of certain federal income tax consequences in
connection with exercising dissenters' rights, see 'THE MERGER -- Certain
Federal Income Tax Consequences."
DISTRIBUTION OF UPC STOCK CERTIFICATES
Promptly after the Effective Time, UPC and CB&T will cause UPB, acting
in its capacity as Exchange Agent, to mail to the former shareholders of CB&T a
letter of transmittal, together with instructions for the exchange
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of the Certificates representing shares of CB&T Common Stock for certificates
representing shares of UPC Common Stock.
CB&T 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 CB&T Common
Stock, together with a properly completed letter of transmittal, there will be
issued and mailed to each holder of CB&T 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 CB&T Common Stock is entitled as a
result of the Merger until the holder surrenders such holder's Certificates
representing the shares of CB&T 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 CB&T Common Stock Certificate until the
holder duly surrenders such Certificate. Upon surrender of such CB&T Common
Stock Certificate, however, both the UPC Common Stock certificate, together with
all undelivered CB&T 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 CB&T 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
CB&T Common Stock who dissent from the Merger pursuant to Chapter 23 of Title 48
of the TBCA, the stock transfer books of CB&T will be closed to holders of CB&T
Common Stock and no transfer of shares of CB&T Common Stock by any such holder
will thereafter be made or recognized. If Certificates representing shares of
CB&T Common Stock are presented for transfer after the Effective Time, they will
be canceled and exchanged for shares of UPC Common Stock and a check for the
amount due in lieu of fractional shares and undelivered dividends, if any,
deliverable in respect thereof.
LIMITATION ON NEGOTIATIONS
Section 8.8 of the Agreement provides that CB&T 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 CB&T Board,
as advised by legal counsel, CB&T 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. CB&T must promptly notify UPC immediately following receipt of any
Acquisition Proposal. As protection against possible violation of this
limitation, CB&T has agreed, under certain circumstances, to pay to UPC the sum
of $4,850,000 in immediately available funds in the event and at the time that
CB&T 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 CB&T.
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CONDITIONS TO CONSUMMATION OF THE MERGER
Consummation of the Merger is subject to various conditions, including
(i) receipt of the approval of the shareholders of CB&T of the Agreement and the
Plan of Merger, and the consummation of the transactions contemplated thereby,
including the Merger, as and to the extent required by the law or by the
provisions of any governing instrument (ii) receipt of certain regulatory
approvals required for consummation of the Merger, (iii) receipt by UPC of a
written opinion of counsel from Wyatt, Tarrant & Combs and by CB&T of a written
opinion of counsel from Jenkens & Gilchrist, a Professional Corporation 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 CB&T and UPC as set forth in the
Agreement, (vii) the performance of all agreements and the compliance with all
covenants of CB&T 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 CB&T or UPC, (ix) receipt by UPC, as of the Effective Time, of a
letter from Price Waterhouse LLP, its independent accountants, to the effect
that the Merger will qualify for pooling-of-interests accounting treatment, (x)
the absence of any law or order or any action taken by any court, governmental,
or regulatory authority of competent jurisdiction prohibiting, restricting, or
making illegal the consummation of the transactions contemplated by the
Agreement, (xi) receipt by UPC of agreements from each affiliate of CB&T, and
(xii) satisfaction of certain other conditions, including the receipt of certain
legal opinions and various certificates from the officers of CB&T 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 August 31, 1998, the Agreement may be terminated and
the Merger abandoned by the Board of Directors of either CB&T 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 CB&T
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 CB&T nor UPC are aware of any material governmental approvals
or actions that are required for consummation of the Merger, except as described
below. Should any other approval or action be required, it presently is
contemplated that such approval or action would be sought.
The Merger is subject to the prior approval of the Federal Reserve
pursuant to Section 3 of the BHC Act. The Federal Reserve may waive application
requirements for prior approval in certain transactions to which the Bank Merger
Act also applies. Since it is contemplated that City Bank will be merged with
and into UPB immediately following consummation of the Merger, the Bank Merger
Act applies and the Bank Merger is subject to the prior approval of the OCC, as
primary regulator of UPB. UPC has submitted a notice to the Federal Reserve of
its intent to acquire CB&T and UPB and UPC have submitted an application to the
OCC for its prior approval of the Bank Merger. By letter dated April 10, 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 OCC under the
Bank Merger Act. By letter dated May 18, 1998, the OCC notified UPC of its
approval of the Bank Merger. The Merger may not be
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consummated until the 15th day following the date of the OCC approval, during
which time the United States Department of Justice is 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.
The Bank Merger is also subject to the approval of the Tennessee
Department of Financial Institutions (the "Tennessee Department"). By letter
dated March 24, 1998, the Tennessee Department notified UPC that upon completion
of certain closing conditions, the Tennessee Department would file the Plan of
Merger on behalf of City Bank and UPB.
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 CB&T Common Stock,
except as contemplated by the Agreement, there shall be made no amendment that
has modified in any material respect the consideration to be received by CB&T
shareholders without the further approval of such shareholders. In addition,
prior to or at the Effective Time, either CB&T 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 CB&T 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 CB&T and UPC; (ii) by the CB&T 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 CB&T fail to vote their approval of the Agreement and the
transactions contemplated thereby as required by the TBCA and the Agreement at
the Annual Meeting, or (d) if the Merger is not consummated by August 31, 1998,
provided that the failure to consummate is not caused by any willful breach of
the Agreement by the party electing to terminate, or certain other events arise
which prevent consummation by such date, such as litigation arising in
connection with an Acquisition Proposal by a third party; or (iii) by the CB&T
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 CB&T to pay the $4,850,000 termination fee in the event CB&T enters into a
letter of intent or agreement with respect to an Acquisition Proposal
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will survive until the earlier of (i) the Effective Time, (ii) August 31, 1998
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 $4,850,000 termination fee, will not relieve any
breaching party from liability for any uncured willful breach of a
representation, warranty, covenant, or agreement giving rise to such
termination. See "-- Expenses and Fees."
CONDUCT OF BUSINESS PENDING THE MERGER
Pursuant to the Agreement, CB&T has agreed that unless the prior
written consent of UPC has been obtained, and except as otherwise expressly
contemplated in the Agreement, each of CB&T and its subsidiaries will (i)
operate its business only in the usual, regular, and ordinary course, (ii) use
reasonable efforts to preserve intact its business organization and assets and
maintain its rights and franchises, and (iii) take no action which would (a)
materially adversely affect the ability of any party to obtain any consents
required for the transactions contemplated by the Agreement or prevent the
transactions contemplated by the Agreement, including the Merger, from
qualifying for pooling-of-interests accounting treatment or as a reorganization
within the meaning of Section 368(a) of the Code (see "-- Certain Federal Income
Tax Consequences of the Merger"), or (b) materially adversely affect the ability
of any party to perform its covenants and agreements under the Agreement.
In addition, CB&T 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, CB&T will not, except with the prior written consent of the chief
executive officer, president, or chief financial officer of UPC (which consent
shall not be unreasonably withheld), agree or commit to do, or permit any of its
subsidiaries to agree or commit to do, any of the following: (i) amend the
Charter of Incorporation, Bylaws, or other governing instruments of CB&T or any
CB&T subsidiary (each a "CB&T company" and together, the "CB&T companies"); (ii)
incur any additional debt obligation for borrowed money (other than indebtedness
of a CB&T company to another CB&T company) in excess of an aggregate of $100,000
(for the CB&T companies on a consolidated basis) except in the ordinary course
of business of the CB&T subsidiaries consistent with past practices (which shall
include, for City Bank, the creation of deposit liabilities, purchases of
federal funds, advances from the Federal Reserve Bank or the Federal Home Loan
Bank, and entry into repurchase agreements fully secured by U.S. government or
agency securities), or impose, or suffer the imposition, on any material asset
of any CB&T 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
CB&T); (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 CB&T company, or declare or pay any dividend or make any
other distribution in respect of any CB&T Common Stock, provided that CB&T may
(to the extent legally and contractually permitted to do so), but shall not be
obligated to, declare and pay regular semi-annual cash dividends on the shares
of CB&T Common Stock at a rate not in excess of $2.50 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 CB&T Common
Stock do not become entitled to receive both a dividend in respect of their CB&T
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 CB&T 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 CB&T company or issue or authorize the issuance of any
other securities in respect of or in substitution for shares of CB&T Common
Stock, or sell, lease, mortgage, or otherwise dispose of or otherwise encumber
any shares of capital stock of any CB&T company (unless any such shares of
stock are sold or otherwise transferred to another CB&T company) or any assets
having a book value in excess of $50,000 other than in the ordinary course of
business for reasonable and adequate consideration; (vi) except for purchases
of investment securities acquired in the ordinary
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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 CB&T subsidiary, or otherwise acquire direct
or indirect control over any person, with certain exceptions; (vii) grant any
increase in compensation or benefits to the employees or officers of
any CB&T company, except in the ordinary course of business consistent with
past practices as previously disclosed to UPC by CB&T 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 CB&T; enter into or amend any severance
agreements with officers of any CB&T company; other than the termination of Mr.
Jeffrey Golden's severance agreement; grant any material increase in fees or
other increases in compensation or other benefits to directors of any CB&T
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 CB&T);
(viii) enter into or amend any employment contract between any CB&T company and
any person (unless such amendment is required by law) that the CB&T 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 CB&T company or
terminate or withdraw from, or make any material change in or to, any existing
employee benefit plans of any CB&T 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 CB&T company for material
money damages or restrictions upon the operations of any CB&T 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.
CB&T has also agreed that, except with respect to the Agreement, the
Plan of Merger, and the transactions contemplated thereby, no CB&T 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 CB&T 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 CB&T 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 "-- Certain Federal Income
Tax Consequences of the Merger"), (b) materially adversely affect the ability of
any party to perform its covenants and agreements under the Agreement, or (c)
result in UPC entering into an agreement with respect to an Acquisition Proposal
with a third party which could be reasonably expected to result in the Merger
not being consummated or an agreement with respect to an Acquisition Proposal
to be consummated prior to the closing date of the Merger which would effect a
change in the number or kind of shares of UPC Common Stock held by UPC
shareholders immediately prior to such consummation; provided, that the
foregoing shall not prevent UPC or any UPC subsidiary from acquiring any other
assets or businesses or from discontinuing or disposing of any of its assets or
business if such action is, in the reasonable judgment of UPC, desirable in the
conduct of the business of UPC and the UPC subsidiaries and would not, in the
reasonable judgment of UPC, likely delay the Effective Time to a date subsequent
to August 31, 1998.
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MANAGEMENT AND OPERATIONS AFTER THE MERGER
Consummation of the Merger will not alter the present Board of
Directors or management team of UPC or UP Holding immediately after the Merger
is consummated. It is anticipated that immediately after the consummation of the
Merger, City Bank would be merged with and into UPB in the Bank Merger, with the
effect that UPB would be the surviving association and the main office and
branches of City Bank would become branches of UPB and an advisory board would
be established comprised of certain current directors of CB&T. It is not
anticipated that the directors or executive officers of UPB would change as a
result of the Bank Merger. Officers of City Bank would become regional officers
of UPB. 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."
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 CB&T's management and the CB&T Board may be
deemed to have interests in the Merger that are in addition to their interests
as shareholders of CB&T generally. The CB&T Board was aware of these interests
and considered them, among other matters, in approving the Agreement and the
transactions contemplated thereby.
TERMINATION OF SEVERANCE AGREEMENT. CB&T entered into a Severance
Agreement for Chief Executive Officer as of November 12, 1997 with Mr. Jeffrey
A. Golden which provides, among other things, that in the event of a "Change of
Control", should Mr. Golden's employment be terminated "without good cause"
within thirty-six (36) months after such change of control, he would be entitled
to a lump sum payment equal to the "Severance Factor" multiplied by Mr. Golden's
Monthly Rate of Pay. The Severance Factor would be equal to the remainder after
subtracting from 36, the number of complete months elapsing after the effective
time of such Change of Control until the date that Mr. Golden's employment was
terminated. Mr. Golden would also be entitled to a "gross-up" payment for any
excise tax payable under Section 4999 of the Code. Due to inconsistencies
between Mr. Golden's Severance Agreement and severance benefits provided for
many similarly situated employees of UPB, UPC has required that Mr. Golden's
Severance Agreement be terminated as of the Effective Time and that payments
thereunder be made to Mr. Golden as if his employment had been terminated as of
the Effective Time. Therefore, if the Merger becomes effective, Mr. Golden will
be paid an amount approximately equal to $435,000 plus an amount to offset the
net effect of any excise tax imposed under applicable Federal tax law resulting
from such receipt, upon the termination of his Severance Agreement. It is
anticipated that Mr. Golden will be employed by UPB, with title and duties
substantially similar to those associated with his current employment by City
Bank.
RESTRICTED STOCK GRANTS. UPC has agreed to make restricted stock grants
under UPC's 1992 Stock Incentive Plan for 6,000 shares of restricted UPC Common
Stock to Mr. Jeffrey A. Golden, 1,500 shares to Mr. Larry Brown, 1,500 shares to
Mr. James H. Hillis and 1,000 shares to Mrs. Glyna F. Lee upon consummation of
the Merger. These UPC restricted stock grants would vest 25% on each of the
first four anniversary dates of the Effective Time of the Merger, provided the
recipient was still employed by UPC or one of its subsidiaries. The
restricted stock grants would fully vest in the event of a change of control of
UPC, should the recipient die, or should the recipient's employment be
terminated other than for cause. Pursuant to UPC's 1992 Incentive Stock Plan,
shares of UPC Common Stock may be granted to an employee, at no cost to the
employee, but they are subject to restrictions on the sale, transfer, exchange,
hypothecation, pledge or other encumbrance of such shares of restricted stock,
the right to vote such stock or the right to receive dividends on such stock.
However, the recipient would retain the right to receive dividends on the vested
portion of such stock and to vote the vested portion of such stock. The
recipient would also be entitled to other rights of shareholders of UPC Common
Stock (except as noted above) including the right to compensation for such
shares in the event UPC is acquired.
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RETENTION COMPENSATION. Retention bonuses will be paid by CB&T at
consummation of the Merger to certain CB&T and/or City Bank officers for their
efforts in connection with the Merger. Jeffrey A. Golden, Larry Brown, James
Hillis, Glyna Lee, Jerry Brown and Ken Smith will receive, in the aggregate,
$170,000, as approved by the Committee. See "ELECTION OF DIRECTORS Remuneration
of Directors and Officers - Retention Compensation".
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 CB&T 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, CB&T's Charter and Bylaws, and any
indemnity agreements previously entered into by CB&T or any of its subsidiaries
and any director, officer, employee, or agent of CB&T 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 CB&T and its subsidiaries are entitled, but serves to
ratify the legal obligations of CB&T and its subsidiaries (to be assumed by UP
Holding upon consummation of the Merger) to provide indemnification in
accordance with Tennessee law, CB&T's Charter and Bylaws, and any
indemnification agreements to which CB&T or its subsidiaries is a party with an
indemnified person. The indemnification provided under the provisions of such
instruments will be subject to the same standards that are currently applicable
for determining whether indemnified parties are entitled to indemnification
under such instruments.
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MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
THE FOLLOWING IS A SUMMARY OF THE MATERIAL ANTICIPATED FEDERAL INCOME
TAX CONSEQUENCES OF THE MERGER TO CB&T SHAREHOLDERS WHO HOLD THEIR CB&T COMMON
STOCK AS A CAPITAL ASSET (GENERALLY, PROPERTY HELD FOR INVESTMENT). THIS SUMMARY
IS BASED ON THE FEDERAL INCOME TAX LAWS AS NOW IN EFFECT AND AS CURRENTLY
INTERPRETED. NO ASSURANCE CAN BE GIVEN THAT FUTURE CHANGES IN SUCH LAWS OR
INTERPRETATIONS, INCLUDING AMENDMENTS TO APPLICABLE STATUTES OR REGULATIONS OR
CHANGES IN JUDICIAL OR ADMINISTRATIVE RULINGS, SOME OF WHICH MAY HAVE
RETROACTIVE EFFECT, WILL NOT AFFECT THE ACCURACY OF ANY STATEMENTS IN THIS PROXY
STATEMENT. THIS SUMMARY DOES NOT PURPORT TO ADDRESS ALL ASPECTS OF THE POSSIBLE
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER THAT MAY BE RELEVANT TO U.S.
SHAREHOLDERS OF CB&T. 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 CB&T. IN PARTICULAR, AND WITHOUT LIMITING THE FOREGOING, THIS
SUMMARY DOES NOT ADDRESS THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO
CB&T 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 CB&T COMMON
STOCK PURSUANT TO THE EXERCISE OF AN EMPLOYEE STOCK OPTION OR RIGHT OR OTHERWISE
AS COMPENSATION, AND HOLDERS WHO HOLD CB&T 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 MERGER AGREEMENT OF THE
INCLUSION IN INCOME OF THE AMOUNT OF THE BAD-DEBT RESERVE MAINTAINED BY CB&T
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. CB&T SHAREHOLDERS, THEREFORE,
ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES
TO THEM OF THE MERGER, INCLUDING TAX RETURN REPORTING REQUIREMENTS, THE
APPLICATION AND EFFECT OF FEDERAL, FOREIGN, STATE, LOCAL, AND OTHER TAX LAWS,
AND THE IMPLICATIONS OF ANY PROPOSED CHANGES IN THE TAX LAWS.
As of the Date of this Proxy Statement, Wyatt, Tarrant & Combs, counsel
for UPC, and Jenkens & Gilchrist, a Professional Corporation, counsel to CB&T,
have advised UPC & CB&T respectively, that in their opinions:
(a) The Merger will be treated as a tax-free reorganization
within the meaning of Section 368(a) of the Code.
(b) CB&T, UPC and UP Holding 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 CB&T
shareholders who exchange all of their CB&T 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 CB&T shareholders who exchange all of their CB&T 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 CB&T Common
Stock surrendered in exchange therefor;
(e) The holding period of UPC Common Stock received by CB&T
shareholders in the Merger (including any fractional shares for which cash is
received) will include the period during which the shares of CB&T Common Stock
surrendered in exchange therefor were held, provided that the CB&T Common Stock
was held as a capital asset by the holder at the Effective Time; and
(f) Neither CB&T, UPC nor UP Holding will recognize gain or
loss as a consequence of the Merger.
In addition, each party's obligation to consummate the Merger is
conditioned upon the receipt by UPC of the opinion of Wyatt, Tarrant & Combs,
counsel to UPC, and upon the receipt by CB&T of the opinion of Jenkens &
Gilchrist, a Professional Corporation, counsel to CB&T (collectively, the "Tax
Opinions"), each dated the
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Effective Time, substantially to the foregoing effect. The conditions
relating to the receipt of the tax opinions may be waived by both UPC and CB&T.
Neither UPC nor CB&T currently intends to waive the conditions relating to
receipt of the tax opinions. If the conditions relating to receipt of the tax
opinions were waived and the material federal income tax consequences of the
merger were materially different from those summarized above, CB&T would
resolicit the approval of its shareholders prior to consummating the merger.
The Tax Opinions summarized above are or will be based on facts,
representations and assumptions set forth or referred to in such opinions which
are consistent with the state of facts existing at the Effective Time. In
rendering the Tax Opinions, such counsel required and shall require and are
entitled to rely upon representations and covenants contained in certificates
of officers of CB&T, UPC, and UP Holding. The Tax Opinions do not address any
state, local, or other tax consequences of the Merger. In addition, the Tax
Opinions do not bind the Internal Revenue Service (the "IRS") nor preclude the
IRS from adopting a contrary position.
Based upon the current ruling position of the IRS, cash received by a
holder of CB&T 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 CB&T Common Stock allocable to such fractional
share interest. Such gain or loss will constitute capital gain or loss if the
CB&T Common Stock was held as a capital asset at the Effective Time, and will be
a long-term capital gain or loss if the holding period for such shares was
greater than one year at the Effective Time. Any capital gain recognized as a
result of the Merger will be taxed at rates applicable to capital gains. The tax
rate applicable to capital gains of an individual taxpayer varies depending on
the taxpayer's holding period for such shares. Pursuant to recently enacted
legislation, in the case of an individual, any such capital gain will be subject
to a maximum federal income tax rate of (A) 20% if the holder's holding period
in such stock was more than 18 months on the date of the Effective Time and (B)
28% if the holder's holding period was more than one year but not more than 18
months on the date of the Effective Time. The deductibility of capital losses is
subject to limitations for both individuals and corporations.
A Dissenting Shareholder who perfects his or her dissenters' rights
will recognize gain or loss measured by the difference between the value
received by such shareholder for his or her shares of CB&T 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 CB&T 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 CB&T Common Stock
must be exchanged for UPC Common Stock with substantially similar terms. There
are certain other criteria that must be satisfied in order for the Merger to
qualify as a pooling of interests, some of which criteria cannot be satisfied
until after the Effective Time. In addition, it is a condition to UPC's
obligation to close the Merger that Price Waterhouse LLP deliver, as of the
Effective Time, a letter to UPC to the effect the Merger will qualify for
pooling-of-interests accounting treatment. UPC will not consummate the Merger
if pooling-of-interests treatment is not available.
For information concerning certain conditions to be imposed on the
exchange of CB&T Common Stock for UPC Common Stock in the Merger by affiliates
of CB&T and certain restrictions to be imposed on the transferability of the UPC
Common Stock received by those affiliates in the Merger in order, among other
things, to ensure the availability of pooling-of-interests accounting treatment,
see "--Resales of UPC Common Stock."
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EXPENSES AND FEES
The Agreement provides that each of the parties will bear and pay its
own expenses in connection with the transactions contemplated by the Agreement,
including fees and expenses of its own financial or other consultants,
investment bankers, accountants, and counsel, except that each of UPC and CB&T
will bear and pay the filing fees payable in connection with the Registration
Statement and this Proxy Statement and the printing costs and certain other
third-party costs in connection with the Registration Statement and this Proxy
Statement based on the relative asset sizes of the parties at December 31, 1996.
RESALES OF UPC COMMON STOCK
UPC Common Stock to be issued to shareholders of CB&T in connection
with the Merger will be registered under the Securities Act. All shares of UPC
Common Stock received by holders of CB&T 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
CB&T not deemed to be "Affiliates" of CB&T or UPC. "Affiliates" generally are
defined as persons or entities who control, are controlled by, or are under
common control with CB&T or UPC at the time of the Annual 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 CB&T 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 CB&T 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 CB&T or UPC.
CB&T has agreed to use its reasonable efforts to cause each person who
may be deemed to be an Affiliate of CB&T 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 CB&T 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 CB&T
have been published. If the Merger qualifies for pooling-of-interests accounting
treatment, shares of UPC Common Stock issued to such Affiliates of CB&T in
exchange for shares of CB&T Common Stock will not be transferable until such
time as financial results covering at least 30 days of combined operations of
UPC and CB&T 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
CB&T). Certificates representing shares of CB&T Common Stock surrendered for
exchange by any person who is an Affiliate of CB&T for purposes of Rule 145(c)
under the Securities Act shall not be exchanged for certificates representing
shares of UPC Common Stock until UPC has received such a written agreement from
such person. Prior to publication of such results, UPC will not transfer on its
books any shares of UPC Common Stock received by an Affiliate pursuant to the
Merger. The stock certificates representing UPC Common Stock issued to
Affiliates in the Merger may bear a legend summarizing the foregoing
restrictions. See "-- Conditions to Consummation of the Merger."
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EFFECT OF THE MERGER ON RIGHTS OF SHAREHOLDERS
As a result of the Merger, holders of CB&T Common Stock will be
exchanging their shares of a Tennessee corporation governed by the TBCA and
CB&T'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 CB&T 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 CB&T'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.
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.
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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 CB&T will each
receive one Preferred Share Right for each share of UPC Common Stock received in
the Merger. The Preferred Share Rights are generally designed to deter coercive
takeover tactics and to encourage all persons interested in potentially
acquiring control of UPC to treat each shareholder on a fair and equal basis.
Each Preferred Share Right trades in tandem with the share of UPC Common Stock
to which it relates until the occurrence of certain events indicating a
potential change in control of UPC. Upon the occurrence of such an event, the
Preferred Share Rights would separate from UPC Common Stock and each holder of a
Preferred Share Right (other than the potential acquiror) would be entitled to
purchase certain equity securities of UPC at prices below their market value.
UPC has authorized 750,000 shares of Series A Preferred Stock for issuance under
the Preferred Share Rights Plan and no shares have been issued as of the date of
this Proxy Statement. Until a Preferred Share Right is exercised, the holder
thereof, as such, has no rights of a shareholder of UPC, including the right to
vote or receive dividends.
CB&T. CB&T's Amended and Restated Charter ("CB&T's Charter") authorizes
the issuance of up to 1,000,000 shares of CB&T Common Stock, of which 264,113
shares were issued and outstanding as of the CB&T Record Date. The CB&T Board
generally may authorize the issuance of additional previously authorized shares
of CB&T Capital Stock without further action by CB&T's shareholders, unless such
action is required in a particular case by applicable laws or regulations, upon
receipt of valid consideration in exchange for such shares.
PREEMPTIVE RIGHTS
UPC. The TBCA provides that, unless a Tennessee corporation's charter
expressly provides for preemptive rights, shareholders of a Tennessee
corporation do not have a preemptive right to acquire proportional
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amounts of the corporation's unissued shares upon a decision of the board of
directors to issue shares. The UPC Charter denies preemptive rights to its
shareholders.
CB&T. The TBCA provides that, unless a Tennessee corporation's
certificate of incorporation expressly provides for preemptive rights,
shareholders of a Tennessee corporation do not have a preemptive right to
acquire proportionate amounts of the corporation's unissued shares upon a
decision of the board of directors to issue shares. The CB&T 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.
CB&T. CB&T's Charter does not address amendment thereof, so under the
TBCA, CB&T's Charter may be amended by a majority of votes entitled to be cast
by shareholders upon such amendment, subject to any condition the CB&T Board may
place on to submission of the amendment to CB&T shareholders.
CB&T's Charter provides that a majority vote of the directors present
at a meeting at which a quorum is present may amend or repeal CB&T's Bylaws.
However, the CB&T shareholders have the right to amend the Bylaws by the vote of
a majority of the shareholders present at a shareholders meeting at which a
quorum is present. Since a quorum would be present at a CB&T shareholders
meeting if a majority of the outstanding shares entitled to vote are present in
person or by proxy, an amendment to CB&T's Amended and Restated Bylaws ("CB&T's
Bylaws") may be approved by less than a majority of all outstanding shares of
CB&T Common Stock. Therefore, it requires a greater vote of the stockholders of
UPC to amend the UPC Bylaws than it would for CB&T shareholders to approve an
amendment of the CB&T Bylaws.
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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.
CB&T. CB&T's Bylaws provide for an unclassified Board of Directors with
the number of directors to be fixed from time to time by the CB&T shareholders
or by a majority of the members of the CB&T Board. Each holder of CB&T Common
Stock is entitled to one vote for each share held and is not entitled to
cumulative voting in the election of directors.
DIRECTOR REMOVAL AND VACANCIES
UPC. UPC's Charter provides that a director may be removed by the
shareholders only upon the affirmative vote of the holders of at least
two-thirds of the voting power of all shares of capital stock entitled to vote
generally in the election of directors. The purpose of this provision is to
prevent a majority shareholder from circumventing the classified board system by
removing directors and filling the vacancies with new individuals selected by
that shareholder. Accordingly, the provision may have the effect of impeding
efforts to gain control of the Board of Directors by anyone who obtains a
controlling interest in UPC Common Stock. Vacancies on the Board of Directors
may be filled by the Board of Directors or shareholders, as provided under the
UPC Bylaws and the TBCA. The term of a director appointed to fill a vacancy
expires at the next meeting of shareholders at which directors are elected.
CB&T. CB&T's Charter provides that a director may be removed with cause
by a majority vote of the CB&T Board. Vacancies on the CB&T Board may be filled
by the CB&T Board or shareholders, as provided under the CB&T 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.
LIMITATIONS ON DIRECTOR LIABILITY
UPC. UPC's Charter does not address the issue of director liability to
the corporation.
CB&T. CB&T's Charter provides for director liability to the fullest
extent available under Tennessee law.
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INDEMNIFICATION
UPC. Under the TBCA, subject to certain exceptions, a Tennessee
corporation may indemnify an individual made a party to a proceeding, because he
or she is or was a director, against liability incurred in the proceeding if (i)
he or she conducted himself or herself in good faith; (ii) he or she reasonably
believed (a) in the case of conduct in his or her official capacity with the
corporation, that his or her conduct was in the best interests of the
corporation, and (b) in all other cases, that his or her conduct was at least
not opposed to the corporation's best interests; and (iii) in the case of any
criminal proceeding, he or she had no reasonable cause to believe his or her
conduct was unlawful (the "Standard of Conduct"). Moreover, unless limited by
its charter of incorporation, a Tennessee corporation must indemnify a director
who was wholly successful, on the merits or otherwise, in the defense of any
proceeding to which he or she was a party because he or she is or was a director
of the corporation against reasonable expenses incurred by him or her in
connection with the proceeding. Expenses incurred by a director in defending a
proceeding may be paid by the corporation in advance of the final disposition of
such proceeding upon receipt of a written affirmation by the director of his or
her good faith belief that he or she has met the Standard of Conduct, a written
undertaking by or on behalf of a director to repay such amount if it shall
ultimately be determined that he or she is entitled to be indemnified by the
corporation against such expenses and a determination is made that the facts
known to those making the determination would preclude indemnification. Before
any such indemnification is made, it must be determined that such
indemnification would not be precluded by the TBCA.
A director of a Tennessee corporation may also apply for court-ordered
indemnification under certain circumstances. Unless a Tennessee corporation's
charter of incorporation provide otherwise, (i) an officer of a corporation is
entitled to mandatory indemnification and is entitled to apply for court-ordered
indemnification to the same extent as a director; (ii) the corporation may
indemnify and advance expenses to an officer, employee, or agent of the
corporation to the same extent as to a director; and (iii) a corporation may
also indemnify and advance expenses to an officer, employee, or agent who is not
a director to the extent, consistent with public policy, that may be provided by
its charter of incorporation, bylaws, general or specific action of its board of
directors, or contract.
UPC's Charter and Bylaws provide for the indemnification of its
directors and officers, to the fullest extent permitted by Tennessee law.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, or persons controlling UPC pursuant
to the foregoing provisions, UPC has been informed that, in the opinion of the
SEC, such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
CB&T. CB&T's Charter provides for the indemnification of its directors
and officers to the fullest extent permitted by Tennessee law. See "THE MERGER
- -- Interests of Certain Persons in the Merger -- Indemnification; Directors and
Officers Insurance."
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.
CB&T. CB&T's Bylaws provide that Annual Meetings of shareholders may be
held at a time and place as specified by the Directors and consistent with state
and Federal law. Unless otherwise specified by the directors, the meeting shall
be held on the second Tuesday in April of each year at the main office of CB&T.
50
<PAGE> 60
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.
CB&T. CB&T's Bylaws state that any action required or permitted to be
taken by the shareholders may be taken without a meeting, without prior notice,
and without a vote, if a written consent to such action is signed by all persons
and entities entitled to vote on the action to be taken, as described in Article
VI of CB&T's Bylaws.
SHAREHOLDER NOMINATIONS AND PROPOSALS
UPC. UPC's Charter and Bylaws do not address whether a shareholder may
nominate members of the Board of Directors.
CB&T. CB&T's Charter and Bylaws also do not address whether a
shareholder may nominate members of the Board of Directors.
BUSINESS COMBINATIONS
UPC. UPC's Charter requires the affirmative vote of a super-majority of
the outstanding shares of UPC Common Stock for approval of a merger,
consolidation, or a sale or lease of all or substantially all of the assets of
UPC if the other party to the transaction is a beneficial owner of 10% or more
of the outstanding shares of UPC Common Stock. A majority vote is not required
for any merger or consolidation of UPC with or into any corporation or entity of
which a majority of the outstanding shares of all classes of capital stock is
owned by UPC or any UPC company.
The requirement of a supermajority vote of shareholders to approve
certain business transactions, as described above, may discourage a change in
control of UPC by allowing a minority of UPC's shareholders to prevent a
transaction favored by the majority of the shareholders. Also, in some
circumstances, the Board of Directors could cause a two-thirds vote to be
required to approve a transaction thereby enabling management to retain control
over the affairs of UPC and their positions with UPC. The primary purpose of the
supermajority vote requirement, however, is to encourage negotiations with UPC's
management by groups or corporations interested in acquiring control of UPC and
to reduce the danger of a forced merger or sale of assets.
As a Tennessee corporation, UPC is or could be subject to various
legislative acts set forth in Chapter 35 of Title 48 of the Tennessee Code,
which impose certain restrictions on business combinations, including, but not
limited to, combinations with interested shareholders similar to those described
above.
The TBCA generally prohibits a "business combination" (generally
defined to include mergers, share exchanges, sales and leases of assets,
issuances of securities, and similar transactions) by UPC or a subsidiary with
an "interested shareholder" (generally defined as any person or entity which
beneficially owns 10% or more of the voting power of any class or series of
UPC's stock then outstanding) within five years after the person or entity
becomes an interested shareholder, unless the business combination or the
transaction pursuant to which the interested shareholder became such was
approved by the UPC Board before the interested shareholder became such, and the
business combination satisfies any other applicable requirements imposed by law
or by UPC's Charter or Bylaws. The TBCA also severely limits the extent to which
UPC or any of its officers or directors could be held liable for resisting any
business combination.
The Tennessee Control Share Acquisition Act (the "Tennessee CSAA")
generally provides that any person or group of persons that acquires the power
to vote more than specified levels (one-fifth, one-third, or a majority)
of the shares of certain Tennessee corporations will not have the right to vote
such shares unless granted voting rights by the holders of a majority of the
votes entitled to be cast, excluding "interested shares." Interested shares
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<PAGE> 61
are those shares held by the acquiring person, officers of the corporation, and
employees of the corporation who are also directors of the corporation. If
approval of voting power for the shares is obtained at one of the specified
levels, additional shareholder approval is required when a shareholder seeks to
acquire the power to vote shares at the next level. In the absence of such
approval, the additional shares acquired by the shareholder may not be voted
until they are transferred to another person in a transaction other than a
control share acquisition. The Tennessee CSAA applies only to those Tennessee
corporations whose charters or bylaws contain an express declaration that
control share acquisitions in respect of the shares of such corporations are
governed by and subject to the provisions of such act. UPC's Charter and Bylaws
do not currently contain such an express declaration.
The Tennessee Greenmail Act ("Tennessee GA") prohibits a Tennessee
corporation having a class of voting stock registered or traded on a national
securities exchange or registered with the SEC pursuant to Section 12(g) of the
Exchange Act from purchasing, directly or indirectly, any of its shares at a
price above the market value of such shares (defined as the average of the
highest and lowest closing market price of such shares during the 30 trading
days preceding the purchase or preceding the commencement or announcement of a
tender offer if the seller of such shares has commenced a tender offer or
announced an intention to seek control of the corporation) from any person who
holds more than 3% of the class of securities to be purchased if such person has
held such shares for less than two years, unless the purchase has been approved
by the affirmative vote of a majority of the outstanding shares of each class of
voting stock issued by such corporation or the corporation makes an offer, of at
least equal value per share, to all holders of shares of such class.
The TBCA provides that no Tennessee corporation having any class of
voting stock registered or traded on a national securities exchange or
registered with the SEC pursuant to Section 12(g) of the Exchange Act or any of
its officers or directors may be held liable at law or in equity for either
having failed to approve the acquisition of shares by an interested shareholder
on or before such interested shareholder's share acquisition date, or for
seeking to enforce or implement the provisions of the TBCA or the Tennessee
CSAA, or for failing to adopt or recommend any charter or bylaw amendment or
provision in respect of any one or more of these acts or the Tennessee GA, or
for opposing any merger, exchange, tender offer, or significant disposition of
the assets of the resident domestic corporation or any subsidiary of such
corporation because of a good faith belief that such merger, exchange, tender
offer, or significant disposition of assets would adversely affect the
corporation's employees, customers, suppliers, the communities in which the
corporation or its subsidiaries operate or are located or any other relevant
factor if such factors are permitted to be considered by the board of directors
under the corporation's charter in connection with the merger, exchange, tender
offer or significant disposition of assets.
The acts described above along with the provisions of UPC's Charter
regarding business combinations might be deemed to make UPC less attractive as a
candidate for acquisition by another company than would otherwise be the case in
the absence of such provisions. For example, if another company should seek to
acquire a controlling interest of less than 66-2/3% of the outstanding shares of
UPC Common Stock, the acquiror would not thereby obtain the ability to replace a
majority of the UPC Board until at least the second annual meeting of
shareholders following the acquisition, and furthermore the acquiror would not
obtain the ability immediately to effect a merger, consolidation, or other
similar business combination unless the described conditions were met.
As a result, UPC's shareholders may be deprived of opportunities to
sell some or all of their shares at prices that represent a premium over
prevailing market prices in a takeover context. The provisions described above
also may make it more difficult for UPC's shareholders to replace the UPC Board
or management, even if the holders of a majority of the UPC Common Stock should
believe that such replacement is in the interests of UPC. As a result, such
provisions may tend to perpetuate the incumbent UPC Board and management.
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<PAGE> 62
CB&T. CB&T's Charter and Bylaws do not address the vote required for
business combinations. Therefore, a business combination including CB&T requires
the affirmative vote of the holders of a majority of the outstanding shares of
CB&T Common Stock. Furthermore, neither the CSAA nor the Tennessee CA would be
applicable to CB&T.
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.
CB&T. CB&T's Charter and Bylaws also do not contain any provision
restricting a shareholder's ability to vote shares of CB&T voting stock.
DISSENTERS' RIGHTS OF APPRAISAL
UPC. Under the TBCA, a shareholder is generally entitled to dissent
from a corporate action, and obtain payment of the fair value of his or her
shares in the event of: (i) consummation of a plan of merger to which the
corporation is a party, unless shareholder approval is not required by the TBCA;
(ii) consummation of a plan of share exchange to which the corporation is a
party as the corporation whose shares will be acquired if the shareholder is
entitled to vote on the plan; (iii) consummation of a sale or exchange of
substantially all of the corporation's property other than in the usual and
regular course of business, if the shareholder is entitled to vote on the sale
or exchange, including a sale in dissolution, but not including a sale pursuant
to court order or to a plan by which substantially all of the net proceeds of
the sale will be distributed in cash to the shareholders within one year after
the date of sale; (iv) an amendment of the charter that materially and adversely
affects rights in respect of a dissenter's shares because it (a) alters or
abolishes a preferential right of the shares, (b) creates, alters, or abolishes
a right in respect of redemption of the shares, including a provision respecting
a sinking fund for the redemption or repurchase of the shares, (c) alters or
abolishes a preemptive right of the holder of the shares to acquire shares or
other securities, (d) excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution through
issuance of shares or other securities with similar voting rights, or (e)
reduces the number of shares owned by the shareholder to a fraction of a share
if the fractional share so created is to be acquired for cash under the TBCA; or
(v) any corporate action taken pursuant to a shareholder vote, to the extent the
charter, bylaws, or a resolution of the board of directors provide that voting
or nonvoting shareholders are entitled to dissent and obtain payment for their
shares. UPC's Charter and Bylaws do not provide for any such additional
dissenters' rights.
CB&T. The rights of appraisal of dissenting shareholders of CB&T are
also governed by the TBCA. CB&T's Charter and Bylaws also do not provide for any
additional dissenter's 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
UPC. The TBCA provides that a shareholder of a Tennessee corporation
may inspect and copy books and records during regular business hours, if he or
she gives the corporation written notice of his or her demand at least five
business days before the date of the inspection. In order to inspect certain
records, written demand must also be made in good faith and for a proper purpose
and must describe with reasonable particularity the purpose of the request and
the records the shareholder desires to inspect.
CB&T. CB&T's Charter and Bylaws do not address a shareholder's right to
examine books and records; therefore, the TBCA would govern such rights.
DIVIDENDS
UPC AND CB&T. UPC's and CB&T's ability to pay dividends on their
respective capital stock is governed by Tennessee corporate law. Under Tennessee
corporate law, dividends may be paid so long as the corporation would be able
to pay its debts as they become due in the ordinary course of business and the
corporation's total assets would not be less than the sum of its total
liabilities plus the amount that would be needed, if the corporation
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<PAGE> 63
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 CB&T's banking subsidiaries to pay dividends to UPC and
CB&T, 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." CB&T
Common Stock is not traded on any exchange or quoted on any market system. The
following table sets forth, for the indicated periods, the high and low closing
sale prices for the UPC Common Stock as reported by the NYSE, and the cash
dividends declared per share of UPC Common Stock for the indicated periods. The
stock prices and dividend amounts for UPC have been restated to give effect to
stock splits and stock dividends. The stock prices do not include retail
mark-ups, mark-downs or commissions.
The 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
cash dividends declared per share of UPC Common Stock and CB&T Common Stock for
the indicated periods. The stock prices do not include retail mark-ups,
mark-downs or commissions. The high and low prices for CB&T Common Stock are
based upon transaction prices reported to management of CB&T and may not be
representative of all trades during the reported period.
<TABLE>
<CAPTION>
UPC CB&T
-------------------------------------- ---------------------------------------
Cash Cash
Price Range Dividends Price Range Dividends
----------------------- Declared ---------------------- Declared
Per Per
High Low Share High Low Share
--------- -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
1998
- --------
First Quarter ....... $ 67.31 $ 58.38 $. 50 $ 120.20 $ 120.20 $ 5.00
Second Quarter
(through 6/4/98) ..... 62.56 56.44 .50 120.20 120.20 2.50
--------- --------
Total ............. $ 1.00 $ 7.50
========= ========
1997
- --------
First Quarter ....... $ 47.75 $ 38.38 $ .320 $ 120.00 $ 115.40 $ 5.00
Second Quarter ...... 52.13 41.25 .375 120.00 117.26 N/A
Third Quarter ....... 56.50 49.25 .400 120.20 120.00 2.50
Fourth Quarter ...... 67.88 57.00 .400 120.20 120.20 N/A
--------- --------
Total ............. $ 1.495 $ 7.50
========= ========
1996
- --------
First Quarter ....... $ 31.75 $ 29.00 $ .27 $ 106.08 $ 76.00 $ 4.46
Second Quarter ...... 31.25 29.63 .27 108.79 100.00 N/A
Third Quarter ....... 36.25 28.63 .27 115.40 108.79 $ 2.04
Fourth Quarter ...... 41.38 34.63 .27 115.40 115.40 N/A
--------- --------
Total ............. $ 1.08 $ 6.50
========= ========
</TABLE>
On June 4, 1998, the last sale price of UPC Common Stock as reported on
the NYSE was $56.69 per share. On January 7, 1998, the last business day prior
to public announcement of the Merger, the last sale price of the UPC Common
Stock as reported by the NYSE was $63.50.
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
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<PAGE> 64
relevant factors. The Agreement provides that CB&T may not declare and pay cash
dividends, other than regular semi-annual cash dividends, on the shares of CB&T
Common Stock, in an amount not to exceed 2.50 per share prior to the Effective
Time or the termination of the Agreement. There is no assurance that CB&T will
pay any dividends at any time, or if it does, the amount of dividends it would
declare.
UPC and CB&T 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
CB&T'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 CB&T
GENERAL
CB&T, a Tennessee corporation, is a bank holding company registered
with the Federal Reserve under the BHC Act. As of March 31, 1998, CB&T had total
consolidated assets of approximately $272 million, total consolidated loans of
approximately $146 million, total consolidated deposits of approximately $225
million, and total consolidated shareholders' equity of approximately $34.4
million.
CB&T conducts its business activities through its wholly-owned bank
subsidiary, City Bank, which was organized in 1912 as a commercial bank
chartered under the laws of the State of Tennessee. City Bank operates from its
main office in McMinnville, Tennessee and at six branch offices located in the
Tennessee Counties of Warren and Dekalb. It is anticipated that City Bank will
close its Mt. Leo Branch prior to consummation of the Merger. 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. City Bank provides long-term financing for
owner-occupied residential real estate.
The principal executive offices of CB&T are located at 101 E. Main
Street, McMinnville, Tennessee and its telephone number at such address is (931)
473-2147. Additional information with respect to CB&T and its subsidiaries is
included elsewhere herein and in documents incorporated by reference in this
Proxy Statement. See "AVAILABLE INFORMATION" and "DOCUMENTS INCORPORATED BY
REFERENCE."
BENEFICIAL OWNERSHIP OF CB&T COMMON STOCK
The following table lists, as of December 31, 1997, each holder of
record of CB&T Common Stock who had filed with CB&T a copy of a Schedule 13D or
a Schedule 13G, indicating that the filers individually, or with a group, is, or
may be deemed to be, a beneficial owner of 5.0% or more of the outstanding
shares of CB&T Common Stock.
<TABLE>
<CAPTION>
Amount and Nature of
Percentage of Beneficial
Name and Address Ownership Percentage of Class(1)
---------------- --------- ----------------------
<S> <C> <C>
J. Paul Holder 14,422 5.46%
108 E. Main Street
McMinnville, Tennessee 37110
All directors and officers as a group (11 persons) 37,088 14.04%
</TABLE>
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. For information regarding the beneficial ownership of CB&T Common
Stock by each Director of CB&T, see "PROPOSAL I - Election of Directors.".
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<PAGE> 65
BUSINESS OF UPC
GENERAL
UPC, a Tennessee corporation, is a bank holding company registered with
the Federal Reserve under the BHC Act. As of March 31, 1998, UPC had total
consolidated assets of approximately $18.4 billion, total consolidated loans of
approximately $12.7 billion, total consolidated deposits of approximately $13.6
billion, and total consolidated shareholders' equity of approximately $1.8
billion.
UPC conducts its business activities through its principal bank
subsidiary, the $15.7 billion asset UPB, founded in 1869, headquartered in
Memphis, Tennessee, with branches in Tennessee, Mississippi, Missouri, Arkansas,
Louisiana, Alabama, and Kentucky. UPC also had, as of March 31, 1998, six other
financial institution subsidiaries, the largest of which being Union Planters
Bank of Florida, Miami, Florida, which had total consolidated assets as of March
31, 1998 of approximately $2.2 billion. UPC undertook a corporate reorganization
plan in the fourth quarter of 1997, the primary purpose of which was to
consolidate substantially all of its bank subsidiaries into UPB. This corporate
reorganization was completed January 1, 1998. It is likely that UPC will
continue to consolidate its various bank subsidiaries into UPB in the future, to
the extent allowed by law. Through the UPC Banking Subsidiaries, UPC provides a
diversified range of financial services in the communities in which it operates
and maintains approximately 518 banking offices and 676 ATMs. UPC's total
deposits at March 31, 1998 are allocable by state to its banking offices (before
consolidating adjustments) approximately as follows: $6.7 billion in Tennessee;
$2.9 billion in Mississippi; $1.3 billion in Florida; $1.2 billion in Missouri;
$596 million in Arkansas; $598 million in Louisiana; $412 million in Alabama;
and $103 million in Kentucky.
Acquisitions have been, and are expected to continue to be, an
important part of the expansion of UPC's business. UPC completed 13 acquisitions
in 1994, three in 1995, seven in 1996, and six in 1997, adding approximately
$3.8 billion in total assets in 1994, $1.3 billion in 1995, $4.2 billion in 1996
and $3.6 billion in 1997. In 1998, UPC has completed the acquisition of two
institutions with approximately $520 million in total assets (the "Recently
Completed Acquisitions"). UPC currently is a party to definitive agreements to
acquire ten financial institutions, in addition to CB&T, and to purchase certain
branch locations and assume deposit liabilities of California Federal Bank in
Florida ("the CalFed Branch Purchase") (collectively referred to as the "Other
Pending Acquisitions"). The Other Pending Acquisitions had aggregate total
assets of approximately $12.9 billion at March 31, 1998. For purposes of this
Proxy Statement, the Recently Completed Acquisitions and the Other Pending
Acquisitions are collectively referred to as the "Other Acquisitions." The
largest of the Other Pending Acquisitions is UPC's proposed acquisition of MGR
which had total consolidated assets of approximately $7.3 billion at March 31,
1998. On May 1, 1998, MGR consummated the acquisition of Charter Financial,
Inc., and its subsidiary, Charter Bank, S.B. (the "Charter Acquisition").
Charter is located in Sparta, Illinois and had at the time of consummation,
total assets of approximately $406 million, total deposits of approximately $309
million and total shareholders' equity of approximately $67 million. The Charter
Acquisition was accounted for as a purchase. For purposes of this Proxy
Statement, including the historical and equivalent pro forma data, the terms
"Other Acquisitions" and "Other Pending Acquisitions" include the completed
Charter Acquisition. For information with respect to these Other Acquisitions,
see "-- Recent Developments" and "PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
INFORMATION." For a discussion of UPC's acquisition program, see the caption
"Acquisitions" (pages 10, 11 and 12) in UPC's Annual Report to Shareholders and
Note 2 to UPC's audited consolidated financial statements for the years ended
December 31, 1997, 1996 and 1995 (pages 49 and 50) contained in such Annual
Report to Shareholders. UPC's Annual Report to Shareholders is included as
Exhibit 13 to the UPC 1997 Form 10-K and Exhibit 13 is incorporated by reference
herein to the extent indicated herein.
UPC expects to continue to take advantage of the consolidation of the
financial services industry by further developing its franchise through the
acquisition of financial institutions and other entities engaged in lines of
business permissible for banks and bank holding companies. Future acquisitions
may entail the payment by UPC of consideration in excess of the book value of
the underlying net assets acquired, may result in the issuance of
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<PAGE> 66
additional shares of UPC capital stock or the incurring of additional
indebtedness by UPC, and could have a dilutive effect on the earnings or book
value per share of UPC Common Stock. Moreover, significant charges against
earnings are sometimes required incidental to acquisitions. For a discussion of
UPC's acquisition program, including a discussion of the significant charges
UPC has incurred over the past three fiscal years incidental to acquisitions,
see the caption "Acquisitions" (on page 10) in UPC's Annual Report to
Shareholders and Note 2 to UPC's audited consolidated financial statements for
the years ended December 31, 1997, 1996, and 1995 (on pages 49 and 50)
contained in such Annual Report to Shareholders. UPC's Annual Report to
Shareholders is included as Exhibit 13 to the UPC 1997 Form 10-K and Exhibit 13
is incorporated by reference herein to the extent indicated herein.
The principal executive offices of UPC are located at 7130 Goodlett
Farms Parkway, Memphis, Tennessee 38018, and its telephone number at such
address is (901) 580-6000. Additional information with respect to UPC and its
subsidiary is included in documents incorporated by reference in this Proxy
Statement. See "AVAILABLE INFORMATION" and "DOCUMENTS INCORPORATED BY
REFERENCE."
RECENT DEVELOPMENTS
RECENTLY COMPLETED ACQUISITIONS. Since December 31, 1997, UPC has
completed the acquisition of two institutions (the "Recently Completed
Acquisition").
<TABLE>
<CAPTION>
Asset Size Type of
Institution (In Millions) Consideration
- -------------------------------------------------- ----------------------- -----------------------
<S> <C> <C>
Sho-Me Financial Corporation, Mt. Vernon, $374 Approximately
Missouri, and its subsidiary, 1st Savings Bank, 1,153,459 shares
f.s.b. of UPC Common
Stock
Security Bancshares, Inc., Des Arc, Arkansas, 146 Approximately
and its subsidiaries, Farmers & Merchants Bank, 490,821 shares of
Des Arc, Arkansas, and Merchants and Farmers UPC Common
Bank, West Helena, Arkansas Stock
-----------------------
TOTAL $520
=======================
</TABLE>
OTHER PENDING ACQUISITIONS. UPC has entered into definitive agreements
to acquire the following financial institutions in addition to CB&T
(collectively, the "Other Pending Acquisitions" and, together with the Recently
Completed Acquisitions, the "Other Acquisitions") which UPC's management
considers probable of consummation and which are expected to close in 1998. For
purposes of this Proxy Statement, including the pro forma financial information
included herein, the term "Other Pending Acquisitions" includes the Charter
Acquisition.
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<TABLE>
<CAPTION>
Asset Size Type of Projected
Institution (In Millions)(1) Consideration(2) Closing Date
- ----------------------------------------------- -------------------- ------------------------------- ------------------
<S> <C> <C> <C>
Magna Group, Inc., St. Louis, Missouri, and $7,657 Approximately 35,446,000 3rd Quarter
its subsidiaries, including Magna Bank, St. shares of UPC Common 1998
Louis, Missouri ("MGR')(3) Stock
Peoples First Corporation, Paducah, Kentucky 1,493 Approximately 6,338,000 3rd Quarter
and its subsidiaries, include Peoples First shares of UPC Common 1998
National Bank, Paducah, Kentucky Stock
("Peoples")
Purchase of 24 branches and assumption of 1,465 $110 million deposit 3rd Quarter
$1.5 billion of deposits of California Federal premium in cash 1998
Bank in Florida ("CalFed Branch Purchase")
AMBANC Corporation, Vincennes, Indiana, 734 Approximately 3,398,000 3rd Quarter
and its subsidiaries, AMBANC Illinois, N.A. shares of UPC Common 1998
and AMBANC Indiana ("AMBANC") Stock
Merchants Bancshares, Inc., Houston, Texas, 552 Approximately 2,000,000 3rd Quarter
and its subsidiary, Merchants Bank, Houston, shares of UPC Common 1998
Texas ("Merchants") Stock
TransFlorida Bank, Boca Raton, Florida 318 Approximately 1,655,000 3rd Quarter
shares of UPC Common 1998
Stock
Capital Savings Bancorp, Inc., Jefferson City,
Missouri, and its subsidiary, Capital Savings 232 Approximately 801,000 3rd Quarter
Bank, FSB, Jefferson City, Missouri shares of UPC Common 1998
Stock
First National Bancshares of Wetumpka, Inc., 217 Approximately 836,000 3rd Quarter
Wetumpka, Alabama, and its subsidiary, First shares of UPC Common 1998
National Bank, Wetumpka, Alabama Stock
Alvin Bancshares, Inc., Alvin, Texas and its 121 Approximately 425,000 3rd Quarter
subsidiary Alvin State Bank, Alvin, Texas shares of UPC Common 1998
Stock
First Community Bancshares, Inc., Middleton, 41 Approximately 129,000 3rd Quarter
TN, and its subsidiary, Bank of Middleton, shares of UPC Common 1998
Middleton, Tennessee Stock
Duck Hill Bank, Duck Hill, Mississippi 20 Approximately 42,000 3rd Quarter
------------------ shares of UPC Common 1998
Stock
TOTALS $ 12,850
==================
</TABLE>
- --------------------
(1) Approximate total assets at March 31, 1998.
(2) Assumes no adjustment to shares pursuant to exchange ratio adjustment
mechanisms.
(3) Includes the pro forma impact of the Charter Acquisition.
58
<PAGE> 68
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 and accounting fees, financial advisory fees,
consulting fees; (ii) payment of contractual benefits triggered by a change of
control, early retirement and involuntary separation and related benefits; (iii)
costs associated with elimination of duplicate facilities and branch
consolidations; (iv) data processing charges; (v) cancellation of vendor
contracts, and (vi) other contingencies and similar costs which normally arise
from the consolidation of operational activities.
For a discussion of the significant charges UPC has incurred over the
past three years incidental to its acquisition program, see the caption
"Acquisitions" (pages 10, 11 and 12) in UPC's Annual Report to Shareholders and
note 2 to UPC's audited consolidated financial statements for the years ended
December 31, 1997, 1996 and 1995 (pages 49 and 50) contained in such Annual
Report to Shareholders. UPC's Annual Report to Shareholders is included as
Exhibit 13 to UPC's 1997 Form 10-K and Exhibit 13 is incorporated by reference
herein to the extent indicated herein.
The Merger and the Other Acquisitions (with the exception of the Duck
Hill Bank, the Charter Acquisition, and the CalFed Branch Purchase, each of
which is expected to be accounted for as a purchase) are expected to be
accounted for as poolings of interests. UPC currently estimates incurring
aggregate pre-tax charges in the range of $100 million to $115 million
(approximately $91 million related to MGR) before taxes in connection with the
consummation of the Merger and the Other Acquisitions. On an after tax basis
these charges are estimated in the range of $75 million to $80 million
(approximately $61 million related to MGR). To the extent that UPC's recognition
of these acquisition-related charges is contingent upon consummation of a
particular transaction, those charges would be recognized in the period in which
such transaction closes. The pro forma impact of these charges is included in
the pro forma balance sheet information included in this Proxy Statement. See
"SUMMARY Historical and Pro Forma Per Share Data," and "Pro Forma Condensed
Consolidated Financial Information."
The range of anticipated charges to be incurred in connection with
consummating the Merger and the Other Acquisitions is a preliminary estimate of
the significant charges which may, in the aggregate, be required and should be
viewed accordingly. These charges are reflected in the pro forma consolidated
balance sheet. Moreover, this range has been based on the due diligence that has
been performed to date in connection with the Merger and the Other Acquisitions
and the range may be subject to change and the actual charges incurred may be
higher or lower than what is currently contemplated, once these institutions are
assimilated from an operational perspective and various contingencies are either
satisfied or eliminated. Furthermore, the range of anticipated charges will
change if additional entities are acquired. UPC regularly evaluates the
potential acquisition of, and holds discussions with, various potential
acquisition candidates. As a general rule, UPC will publicly announce such
acquisitions only after a definitive agreement has been reached, and only if UPC
considers the acquisition to be of such a size as to be a significant
acquisition. Since the range of anticipated merger-related charges is likely to
change with additional acquisitions, and since UPC regularly engages in
acquisitions, such range could change, and CB&T's shareholders should view such
information accordingly.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following tables contain unaudited pro forma condensed consolidated
financial statements including a balance sheet as of March 31, 1998 and
statements of earnings for the three months ended March 31, 1998, and for the
years ended December 31, 1997, 1996, and 1995. These statements present on a pro
forma basis historical results for (i) UPC for all periods, (ii) UPC and MGR for
all periods, (iii) UPC, CBT and the Other Acquisitions (including MGR) for the
three months ended March 31, 1998, and for the year ended December 31, 1997, and
(iv) UPC, MGR, Peoples, AMBANC and Merchants for the years ended December 31,
1996 and 1995 (see "BUSINESS OF UPC - Recent Developments - Other Pending
Acquisitions").
59
<PAGE> 69
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 the year ended December 31, 1997, reflect the acquisition of CB&T 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 the Merger and the Other Acquisitions
(other than MGR, Peoples, AMBANC, and Merchants) are not individually or in the
aggregate, considered material to UPC from a financial statement presentation
standpoint. Furthermore, the pro forma impact of the CalFed Branch Purchase on
the pro forma statement of earnings for each of the 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 Annual Report to Shareholders and Note 2 to
UPC's audited consolidated financial statements for the years ended December 31,
1997, 1996, and 1995 (pages 49 and 50) contained in such UPC 1997 Annual Report
to Shareholders. UPC's 1997 Annual Report to Shareholders is included in Exhibit
13 to UPC's 1997 Form 10-K, and Exhibit 13 is incorporated by reference herein
to the extent indicated herein. See "DOCUMENTS INCORPORATED BY REFERENCE."
The unaudited pro forma condensed consolidated financial statements
should be read in conjunction with the consolidated historical financial
statements of UPC which are incorporated by reference herein. Pro forma results
are not necessarily indicative of future operating results. See "DOCUMENTS
INCORPORATED BY REFERENCE."
60
<PAGE> 70
UNION PLANTERS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1998
<TABLE>
<CAPTION>
UPC,
MGR, CB&T
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."
61
<PAGE> 71
UNION PLANTERS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
UPC, MGR, CB&T
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>
62
<PAGE> 72
UNION PLANTERS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
UPC, MGR, CB&T
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>
63
<PAGE> 73
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>
64
<PAGE> 74
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>
65
<PAGE> 75
CERTAIN REGULATORY CONSIDERATIONS
The following discussion sets forth certain of the material elements
of the regulatory framework applicable to banks and bank holding companies and
provides certain specific information related to UPC. A more complete discussion
is included in the UPC's 1997 Form 10-K. Information relating to CB&T is
included in the CB&T 1997 Form 10-K. See "AVAILABLE INFORMATION" and "DOCUMENTS
INCORPORATED BY REFERENCE" and the CB&T 1997 Form 10-K, a copy of which is
attached hereto as Appendix C.
GENERAL
UPC is a bank holding company registered with the Federal Reserve
under the BHC Act. As such, UPC and its non-bank subsidiaries are subject to the
supervision, examination, and reporting requirements of the BHC Act and the
regulations of the Federal Reserve.
The BHC Act requires every bank holding company to obtain the prior
approval of the Federal Reserve before: (i) it may acquire direct or indirect
ownership or control of any voting shares of any bank if, after such
acquisition, the bank holding company will directly or indirectly own or control
more than 5.0% of the voting shares of the bank; (ii) it or any of its
subsidiaries, other than a bank, may acquire all or substantially all of the
assets of any bank; or (iii) it may merge or consolidate with any other bank
holding company.
The BHC Act further provides that the Federal Reserve may not
approve any transaction that would result in a monopoly or would be in
furtherance of any combination or conspiracy to monopolize or attempt to
monopolize the business of banking in any section of the United States, or the
effect of which may be substantially to lessen competition or to tend to create
a monopoly in any section of the country, or that in any other manner would be
in restraint of trade, unless the anticompetitive effects of the proposed
transaction are clearly outweighed by the public interest in meeting the
convenience and needs of the community to be served. The Federal Reserve is also
required to consider the financial and managerial resources and future prospects
of the bank holding companies and banks concerned and the convenience and needs
of the community to be served. Consideration of financial resources generally
focuses on capital adequacy which is discussed below, and consideration of
convenience and needs issues includes the parties' performance under the
Community Reinvestment Act of 1977.
The BHC Act, as amended by the interstate banking provisions of the
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 ("Interstate
Banking Act"), which became effective in September 1995, repealed the prior
statutory restrictions on interstate acquisitions of banks by bank holding
companies, such that UPC and any other bank holding company located in Tennessee
may now acquire a bank located in any other state, and any bank holding company
located outside Tennessee may lawfully acquire any Tennessee-based bank,
regardless of state law to the contrary, in either case subject to certain
deposit-percentage limitations, aging requirements, and other restrictions. The
Interstate Banking Act also generally provides that, after June 1, 1997,
national and state-chartered banks may branch interstate through acquisitions of
banks in other states. By adopting legislation prior to that date, a state has
the ability either to "opt in" and accelerate the date after which interstate
branching is permissible or "opt out" and prohibit interstate branching
altogether. None of the states in which the banking subsidiaries of UPC are
currently located has either moved up the date after which interstate branching
will be permissible or "opted out." UPC utilized the provisions of the
Interstate Banking Act at the end of 1997 to merge substantially all of UPC's
Banking Subsidiaries with and into UPB. As a result of such consolidation, UPB
is now a multi-state national bank with branches in Tennessee, Alabama,
Mississippi, Louisiana, Arkansas, Missouri and Kentucky.
The BHC Act generally prohibits UPC from engaging in activities
other than banking or managing or controlling banks or other permissible
subsidiaries and from acquiring or retaining direct or indirect control of any
company engaged in any activities other than those activities determined by the
Federal Reserve to be so closely related to banking or managing or controlling
banks as to be a proper incident thereto. In determining whether a
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particular activity is permissible, the Federal Reserve must consider whether
the performance of such an activity reasonably can be expected to produce
benefits to the public, such as greater convenience, increased competition, or
gains in efficiency, that outweigh possible adverse effects, such as undue
concentration of resources, decreased or unfair competition, conflicts of
interest, or unsound banking practices. For example, factoring accounts
receivable, acquiring or servicing loans, leasing personal property, conducting
discount securities brokerage activities, performing certain data processing
services, acting as agent or broker in selling credit life insurance and certain
other types of insurance in connection with credit transactions, and performing
certain insurance underwriting activities all have been determined by the
Federal Reserve to be permissible activities of bank holding companies. The BHC
Act does not place territorial limitations on permissible nonbanking activities
of bank holding companies. Despite prior approval, the Federal Reserve has the
power to order a holding company or its subsidiaries to terminate any activity
or to terminate its ownership or control of any subsidiary when it has
reasonable cause to believe that continuation of such activity or such ownership
or control constitutes a serious risk to the financial safety, soundness, or
stability of any bank subsidiary of that bank holding company.
Each of the UPC Banking Subsidiaries is a member of the Federal
Deposit Insurance Corporation ("FDIC"), and as such, its deposits are insured by
the FDIC to the extent provided by law. Each such subsidiary is also subject to
numerous state and federal statutes and regulations that affect 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 CB&T (the FDIC and the applicable
state authority in the case of state-chartered nonmember banks, the Office of
Thrift Supervision ("OTS") in the case of federally chartered thrift
institutions, the Federal Reserve in the case of state-chartered member banks,
and the Office of the Comptroller of the Currency ("OCC") in the case of
national banks) regularly examine the operations of such institutions and have
authority to approve or disapprove mergers, consolidations, the establishment of
branches, and similar corporate actions. The federal and state banking
regulators also have the power to prevent the continuance or development of
unsafe or unsound banking practices or other violations of law.
PAYMENT OF DIVIDENDS
UPC is a legal entity separate and distinct from its banking,
thrift, and other subsidiaries. The principal sources of cash flow of UPC,
including cash flow to pay dividends to its shareholders, are dividends from its
subsidiary depository institutions. There are statutory and regulatory
limitations on the payment of dividends by these subsidiary depository
institutions to UPC, as well as by UPC and CB&T to their shareholders.
As to the payment of dividends, each of UPC's state-chartered
banking subsidiaries is subject to the respective laws and regulations of the
state in which such bank is located, and to the regulations of the bank's
primary federal regulator. UPC's subsidiary that is a thrift institution is
subject to the OTS' dividend distributions regulation, and those that are
national banks are subject to the regulations of the OCC.
If, in the opinion of the federal banking regulator, a depository
institution under its jurisdiction is engaged in or is about to engage in an
unsafe or unsound practice (which, depending on the financial condition of the
depository institution, could include the payment of dividends), such agency may
require, after notice and hearing, that such institution cease and desist from
such practice. The federal banking agencies have indicated that paying dividends
that deplete a depository institution's capital base to an inadequate level
would be an unsafe and unsound banking practice. Under the Federal Deposit
Insurance Corporation Improvement Act of 1991 ("FDICIA"), a depository
institution may not pay any dividend if payment would cause it to become
undercapitalized or if it already is undercapitalized. See "-- Prompt
Corrective Action." Moreover, the federal agencies have issued policy
statements that provide that bank holding companies and insured banks should
generally only pay dividends out of current operating earnings.
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At March 31, 1998, under dividend restrictions imposed under federal
and state laws, the UPC Banking Subsidiaries, without obtaining governmental
approvals, could declare aggregate dividends to UPC of approximately $172.4
million.
The payment of dividends by UPC and the UPC Banking Subsidiaries may
also be affected or limited by other factors, such as the requirement to
maintain adequate capital above regulatory guidelines.
CAPITAL ADEQUACY
UPC and the UPC Banking Subsidiaries are required to comply with the
capital adequacy standards established by the Federal Reserve in the case of
UPC, and the appropriate federal banking regulator in the case of each of the
UPC Banking Subsidiary. There are two basic measures of capital adequacy for
bank holding companies and their subsidiary depository institutions that have
been promulgated by the Federal Reserve and each of the federal bank regulatory
agencies: a risk-based measure and a leverage measure. All applicable capital
standards must be satisfied for a bank holding company to be considered in
compliance.
The risk-based capital standards are designed to make regulatory
capital requirements more sensitive to differences in risk profile among
depository institutions and bank holding companies, to account for off-balance-
sheet exposure, and to minimize disincentives for holding liquid assets. Assets
and off-balance-sheet items are assigned to broad risk categories, each with
appropriate weights. The resulting capital ratios represent capital as a
percentage of total risk-weighted assets and off-balance-sheet items.
The minimum guideline for the ratio ("Total Capital Ratio") of total
capital ("Total Capital") to risk-weighted assets (including certain
off-balance-sheet items, such as standby letters of credit) is 8.0%. At least
half of Total Capital must be composed of common equity, undivided profits,
minority interests in the equity accounts of consolidated subsidiaries,
noncumulative perpetual preferred stock, and a limited amount of cumulative
perpetual preferred stock, less goodwill and certain other intangible assets
("Tier 1 Capital"). The remainder may consist of subordinated debt, other
preferred stock, and a limited amount of loan loss reserves ("Tier 2 Capital").
At 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 CB&T's Total Capital Ratio and Tier 1 Capital Ratio
were 23.87% and 22.62%, 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 CB&T's Leverage
Ratio at December 31, 1997 was 12.5%. The guidelines also provide that bank
holding companies experiencing internal growth or making acquisitions will be
expected to maintain strong capital positions substantially above the minimum
supervisory levels without significant reliance on intangible assets.
Furthermore, the Federal Reserve has indicated that it will consider a "tangible
Tier 1 Capital Leverage Ratio" (deducting all intangibles) and other indicia of
capital strength in evaluating proposals for expansion or new activities.
Each of the UPC Banking Subsidiaries is subject to risk-based and
leverage capital requirements adopted by its federal banking regulator, which
are substantially similar to those adopted by the Federal Reserve for bank
holding companies. Each of the UPC Banking Subsidiaries was in compliance with
applicable minimum capital requirements as of March 31, 1998. Neither UPC nor
any of the UPC Banking Subsidiaries has been advised by any federal banking
agency of any specific minimum capital ratio requirement applicable to it.
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Failure to meet capital guidelines could subject a bank or thrift to
a variety of enforcement remedies, including issuance of a capital directive,
the termination of deposit insurance by the FDIC, a prohibition on the taking of
brokered deposits, and certain other restrictions on its business. As described
below, substantial additional restrictions can be imposed upon FDIC-insured
depository institutions that fail to meet applicable capital requirements. See
"-- Prompt Corrective Action."
The federal bank regulators continue to indicate their desire to
raise capital requirements applicable to banking organizations beyond their
current levels. In this regard, the Federal Reserve, the FDIC, and the OCC have,
pursuant to FDICIA, proposed an amendment to the risk-based capital standards
that would calculate the change in an institution's net economic value
attributable to increases and decreases in market interest rates and would
require banks with excessive interest rate risk exposure to hold additional
amounts of capital against such exposures. The OTS has already included an
interest-rate risk component in its risk-based capital guidelines for savings
associations that it regulates.
SUPPORT OF SUBSIDIARY INSTITUTIONS
Under Federal Reserve policy, UPC is expected to act as a source of
financial strength for, and to commit resources to support, each of the UPC
Banking Subsidiaries. This support may be required at times when, absent such
Federal Reserve policy, UPC may not be inclined to provide it. In addition, any
capital loans by a bank holding company to any of its banking subsidiaries are
subordinate in right of payment to deposits and to certain other indebtedness of
such banks. In the event of a bank holding company's bankruptcy, any commitment
by the bank holding company to a federal bank regulatory agency to maintain the
capital of a banking subsidiary will be assumed by the bankruptcy trustee and
entitled to a priority of payment.
Under the Federal Deposit Insurance Act (the "FDIA"), a depository
institution insured by the FDIC can be held liable for any loss incurred by, or
reasonably expected to be incurred by, the FDIC after August 9, 1989, in
connection with (i) the default of a commonly controlled FDIC-insured depository
institution or (ii) any assistance provided by the FDIC to any commonly
controlled FDIC-insured depository institution "in danger of default." "Default"
is defined generally as the appointment of a conservator or receiver, and "in
danger of default" is defined generally as the existence of certain conditions
indicating that a default is likely to occur in the absence of regulatory
assistance. The FDIC's claim for damages is superior to claims of shareholders
of the insured depository institution or its holding company, but is subordinate
to claims of depositors, secured creditors, and holders of subordinated debt
(other than affiliates) of the commonly controlled insured depository
institution. The UPC Banking Subsidiaries are subject to these cross-guarantee
provisions. As a result, any loss suffered by the FDIC in respect of any of
these subsidiaries would likely result in assertion of the cross-guarantee
provisions, the assessment of such estimated losses against the depository
institution's banking or thrift affiliates, and a potential loss of UPC's
respective investments in such other subsidiary depository institutions.
PROMPT CORRECTIVE ACTION
FDICIA establishes a system of prompt corrective action to resolve
the problems of undercapitalized institutions. Under this system, which became
effective in December 1992, the federal banking regulators are required to
establish five capital categories (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, and critically
undercapitalized) and to take certain mandatory supervisory actions, and are
authorized to take other discretionary actions, with respect to institutions in
the three undercapitalized categories, the severity of which will depend upon
the capital category in which the institution is placed. Generally, subject to a
narrow exception, FDICIA requires the banking regulator to appoint a receiver or
conservator for an institution that is critically undercapitalized. The federal
banking agencies have specified by regulation the relevant capital level for
each category.
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Under the final agency rules implementing the prompt corrective
action provisions, an institution that (i) has a Total Capital Ratio of 10% or
greater, a Tier 1 Capital Ratio of 6.0% or greater, and a Leverage Ratio of 5.0%
or greater and (ii) is not subject to any written agreement, order, capital
directive, or prompt corrective action directive issued by the appropriate
federal banking agency is deemed to be well capitalized. An institution with a
Total Capital Ratio of 8.0% or greater, a Tier 1 Capital Ratio of 4.0% or
greater, and a Leverage Ratio of 4.0% or greater is considered to be adequately
capitalized. A depository institution that has a Total Capital Ratio of less
than 8.0%, a Tier 1 Capital Ratio of less than 4.0%, or a Leverage Ratio of less
than 4.0% is considered to be undercapitalized. A depository institution that
has a Total Capital Ratio of less than 6.0%, a Tier 1 Capital Ratio of less than
3.0%, or a Leverage Ratio of less than 3.0% is considered to be significantly
undercapitalized, and an institution that has a tangible equity capital to
assets ratio equal to or less than 2.0% is deemed to be critically
undercapitalized. For purposes of the regulation, the term "tangible equity"
includes core capital elements counted as Tier 1 Capital for purposes of the
risk-based capital standards, plus the amount of outstanding cumulative
perpetual preferred stock (including related surplus), minus all intangible
assets with certain exceptions. A depository institution may be deemed to be in
a capitalization category that is lower than is indicated by its actual capital
position if it receives an unsatisfactory examination rating.
An institution that is categorized as undercapitalized,
significantly undercapitalized, or critically undercapitalized is required to
submit an acceptable capital restoration plan to its appropriate federal banking
agency. Under FDICIA, a bank holding company must guarantee that a subsidiary
depository institution meet its capital restoration plan, subject to certain
limitations. The obligation of a controlling bank holding company under FDICIA
to fund a capital restoration plan is limited to the lesser of 5.0% of an
undercapitalized subsidiary's assets or the amount required to meet regulatory
capital requirements. An undercapitalized institution is also generally
prohibited from increasing its average total assets, making acquisitions,
establishing any branches, or engaging in any new line of business, except in
accordance with an accepted capital restoration plan or with the approval of the
FDIC. In addition, the appropriate federal banking agency is given authority
with respect to any undercapitalized depository institution to take any of the
actions it is required to or may take with respect to a significantly
undercapitalized institution as described below if it determines "that those
actions are necessary to carry out the purpose" of FDICIA.
For those institutions that are significantly undercapitalized or
undercapitalized and either fail to submit an acceptable capital restoration
plan or fail to implement an approved capital restoration plan, the
appropriate federal banking agency must require the institution to take one or
more of the following actions: (i) sell enough shares, including voting shares,
to become adequately capitalized; (ii) merge with (or be sold to) another
institution (or holding company), but only if grounds exist for appointing a
conservator or receiver; (iii) restrict certain transactions with banking
affiliates as if the "sister bank" exception to the requirements of Section 23A
of the Federal Reserve Act did not exist; (iv) otherwise restrict transactions
with bank or non-bank affiliates; (v) restrict interest rates that the
institution pays on deposits to "prevailing rates" in the institution's
"region;" (vi) restrict asset growth or reduce total assets; (vii) alter,
reduce, or terminate activities; (viii) hold a new election of directors; (ix)
dismiss any director or senior executive officer who held office for more than
180 days immediately before the institution became undercapitalized, provided
that in requiring dismissal of a director or senior officer, the agency must
comply with certain procedural requirements, including the opportunity for an
appeal in which the director or officer will have the burden of proving his or
her value to the institution; (x) employ "qualified" senior executive officers;
(xi) cease accepting deposits from correspondent depository institutions; (xii)
divest certain nondepository affiliates which pose a danger to the institution;
or (xiii) be divested by a parent holding company. In addition, without the
prior approval of the appropriate federal banking agency, a significantly
undercapitalized institution may not pay any bonus to any senior executive
officer or increase the rate of compensation for such an officer.
At March 31, 1998, all of the UPC Banking Subsidiaries had the
requisite capital levels to qualify as well capitalized. An institution's
capital category is determined solely for the purposes of applying the prompt
corrective action law and it may not constitute an accurate representation of an
institution's overall financial condition or prospects.
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DESCRIPTION OF UPC CAPITAL STOCK
UPC's Charter currently authorizes the issuance of 300,000,000
shares of UPC Common Stock and 10,000,000 shares of UPC Preferred Stock. As of
May 31, 1998, 84,970,899 shares of UPC Common Stock were outstanding and
approximately 7,792,332 shares were required for issuance in connection with
currently outstanding UPC options, UPC's dividend reinvestment plan and with
respect to conversion rights of the currently outstanding Series E Preferred
Stock (defined below). In addition, as of May 31, 1998, 1,156,231 shares of
UPC's 8% Cumulative, Convertible Preferred Stock, Series E (the "Series E
Preferred Stock") were outstanding. As of May 31, 1998, none of UPC's 750,000
authorized shares of Series A Preferred Stock were issued and outstanding nor is
management aware of the existence of circumstances from which it may be inferred
that such issuance is imminent. THE CAPITAL STOCK OF UPC DOES NOT REPRESENT OR
CONSTITUTE A DEPOSIT ACCOUNT AND IS NOT INSURED BY THE FDIC, THE BANK INSURANCE
FUND, THE SAVINGS ASSOCIATION INSURANCE FUND, OR ANY GOVERNMENTAL AGENCY.
UPC COMMON STOCK
GENERAL. Shares of UPC Common Stock may be issued at such time or
times and for such consideration (not less than the par value thereof) as the
UPC Board may deem advisable, subject to such limitations as may be set forth in
the laws of the State of Tennessee, UPC's Charter or Bylaws or the rules of the
NYSE. UPB is the Registrar, Transfer Agent and Dividend Disbursing Agent for
shares of UPC Common Stock. Its address is Union Planters Bank, National
Association, Corporate Trust Department, 6200 Poplar Avenue, Third Floor,
Memphis, Tennessee 38119. Its mailing address is P.O. Box 387, Memphis,
Tennessee 38147.
DIVIDENDS. Subject to the preferential dividend rights applicable to
outstanding shares of the UPC Preferred Stock and subject to applicable
requirements, if any, with respect to the setting aside of sums for purchase,
retirement, or sinking funds, if any, for all outstanding UPC Preferred Stock,
the holders of the UPC Common Stock are entitled to receive, to the extent
permitted by law, only such dividends as may be declared from time to time by
the UPC Board.
UPC has the right to, and may from time to time, enter into
borrowing arrangements or issue other debt instruments, the provisions of which
may contain restrictions on payment of dividends and other distributions on
UPC Common Stock and UPC Preferred Stock. In December, 1996, UPC caused to be
issued $200,000,000 in aggregate liquidation amount of 8.20% Capital Trust
Pass-through Securities ("UPC Capital Securities") through a Delaware trust
subsidiary. Pursuant to the terms of the governing instruments, UPC would be
prohibited from paying dividends on any UPC Capital Stock if all quarterly
payments on the UPC Capital Securities had not been paid in full. The UPC
Capital Securities mature in 2026 and may be redeemed under certain
circumstances prior to maturity.
LIQUIDATION RIGHTS. In the event of the voluntary or involuntary
liquidation, dissolution, distribution of assets, or winding-up of UPC, after
distribution in full of the preferential amounts required to be distributed to
the holders of UPC Preferred Stock, holders of UPC Common Stock will be entitled
to receive all of the remaining assets of UPC, of whatever kind, available for
distribution to shareholders ratably in proportion to the number of shares of
UPC Common Stock held. The UPC Board may distribute in kind to the holders of
UPC Common Stock such remaining assets of UPC or may sell, transfer, or
otherwise dispose of all or any part of such remaining assets to any other
person or entity and receive payment therefor in cash, stock, or obligations of
such other person or entity, and may sell all or any part of the consideration
so received and distribute any balance thereof in kind to holders of UPC Common
Stock. Neither the merger or consolidation of UPC into or with any other
corporation, nor the merger of any other corporation into UPC, nor any purchase
or redemption of shares of stock of UPC of any class, shall be deemed to be a
dissolution, liquidation, or winding-up of UPC for purposes of this paragraph.
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Because UPC is a holding company, its right and the rights of its
creditors and shareholders, including the holders of UPC Preferred Stock and UPC
Common Stock, to participate in the distribution of assets of a subsidiary on
its liquidation or recapitalization may be subject to prior claims of such
subsidiary's creditors except to the extent that UPC itself may be a creditor
having recognized claims against such subsidiary.
For a further description of UPC Common Stock, see "EFFECT OF THE
MERGER ON RIGHTS OF SHAREHOLDERS."
UPC PREFERRED STOCK
SERIES A PREFERRED STOCK. UPC's Charter provides for the issuance of
up to 750,000 shares (subject to adjustment by action of the UPC Board) of
Series A Preferred Stock under certain circumstances involving a potential
change in control of UPC. None of such shares are outstanding and management is
aware of no facts suggesting that issuance of such shares may be imminent. The
Series A Preferred Stock is described in more detail in UPC's Registration
Statement on Form 8-A, dated January 19, 1989, and filed February 1, 1989 (SEC
File No. 0-6919) which is incorporated by reference herein.
SERIES E PREFERRED STOCK. As of May 31, 1998, 1,156,231 shares of
Series E Preferred Stock were outstanding. All shares of Series E Preferred
Stock have a stated value of $25.00 per share. Dividends are payable at the rate
of $0.50 per share per quarter and are cumulative. The Series E Preferred Stock
is convertible at the rate of 1.25 shares of UPC Common Stock for each share of
Series E Preferred Stock. The Series E Preferred Stock is not subject to any
sinking fund provisions and has no preemptive rights. Such shares have a
liquidation preference of $25.00 per share plus unpaid dividends accrued thereon
and, at UPC's option and with the prior approval of the Federal Reserve, are
subject to redemption by UPC at any time at a redemption price of $25.00 per
share plus any unpaid dividends accrued thereon. Holders of Series E Preferred
Stock have no voting rights except as required by law and in certain other
limited circumstances. See "CERTAIN REGULATORY CONSIDERATIONS -- Payment of
Dividends."
OTHER MATTERS
As of the date of this Proxy Statement, the CB&T Board knows of no
matters that will be presented for consideration at the Annual Meeting other
than as described in this Proxy Statement. However, if any other matters shall
properly come before the Annual Meeting or any adjournment or postponement
thereof and be voted upon, the enclosed proxy shall be deemed to confer
discretionary authority to the individuals named as proxies therein to vote the
shares represented by such proxy as to any such matters.
SHAREHOLDER PROPOSALS
UPC expects to hold its next annual meeting of shareholders after
consummation of the Merger in April 1999. Under SEC rules, proposals of UPC
shareholders intended to be presented at that meeting must be received by UPC at
its principal executive offices no later than the date specified in UPC's 1998
annual meeting proxy statement. It is not currently anticipated that CB&T will
hold another annual meeting unless the Merger should not be consummated. In the
event the Merger is not consummated, proposals of CB&T shareholders intended to
be presented at that meeting must have been received by CB&T at its principal
executive offices no later than January 28, 1999.
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EXPERTS
The consolidated financial statements of UPC and subsidiaries
incorporated in this Prospectus/Proxy Statement by reference to the UPC Annual
Report on Form 10-K for the year ended December 31, 1997, have been so
incorporated in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The consolidated financial statements incorporated in this Proxy
Statement by reference to CB&T's Annual Report on Form 10-K for the year ended
December 31, 1997, have been audited by Kraft Bros., Esstman, Patton & Harrell,
PLLC, Nashville, 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 and Jenkens & Gilchrist, a
Professional Corporation for CB&T.
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APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
UNION PLANTERS CORPORATION,
UNION PLANTERS HOLDING CORPORATION
AND
CB & T, INC.
DATED AS OF JANUARY 6, 1998
<PAGE> 84
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER....................................... 1
1.1 Merger............................................................................... 1
------
1.2 Time and Place of Closing............................................................ 1
---- --- ----- -- -------
1.3 Effective Time....................................................................... 1
--------- ----
1.4 Restructure of Transaction........................................................... 2
----------- -- -----------
ARTICLE 2
TERMS OF MERGER............................................... 2
2.1 Charter.............................................................................. 2
-------
2.2 ByLaws............................................................................... 2
------
2.3 Directors and Officers............................................................... 2
--------- --- --------
ARTICLE 3
MANNER OF CONVERTING SHARES......................................... 2
3.1 Conversion of Shares................................................................. 2
---------- -- ------
3.2 Anti-Dilution Provisions............................................................. 3
------------- ----------
3.3 Shares Held by Subject Company or Parent............................................. 3
------ ---- -- ------- ------- -- ------
3.4 Fractional Shares.................................................................... 3
---------- ------
ARTICLE 4
EXCHANGE OF SHARES.............................................. 3
4.1 Exchange Procedures.................................................................. 3
-------- ----------
4.2 Rights of Former Subject Company Shareholders........................................ 4
------ -- ------ ------- ------- ------------
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF SUBJECT COMPANY.............................. 4
5.1 Organization, Standing, and Power.................................................... 4
------------- --------- --- -----
5.2 Authority; No Breach by Agreement.................................................... 5
---------- -- ------ -- ---------
5.3 Capital Stock........................................................................ 5
------- -----
5.4 Subject Company Subsidiaries......................................................... 6
------- ------- ------------
5.5 Financial Statements................................................................. 6
--------- ----------
5.6 Absence of Undisclosed Liabilities................................................... 7
------- -- ----------- -----------
5.7 Absence of Certain Changes or Events................................................. 7
------- -- ------- ------- -- ------
5.8 Tax Matters.......................................................................... 7
--- -------
5.9 Assets............................................................................... 8
------
5.10 Intellectual Property................................................................ 8
------------ --------
5.11 Environmental Matters................................................................ 9
------------- -------
5.12 Compliance With Laws................................................................. 9
---------- ---- ----
5.13 Labor Relations...................................................................... 10
----- ---------
5.14 Employee Benefit Plans............................................................... 10
-------- ------- -----
5.15 Material Contracts................................................................... 11
-------- ---------
5.16 Legal Proceedings.................................................................... 12
----- -----------
5.17 Reports.............................................................................. 12
-------
5.18 Statements True and Correct.......................................................... 12
---------- ---- --- -------
5.19 Accounting, Tax, and Regulatory Matters.............................................. 12
----------- ---- --- ---------- -------
5.20 Charter Provisions; Takeover Laws.................................................... 13
------- ----------- -------- ----
</TABLE>
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<TABLE>
<S> <C> <C>
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF PARENT................................... 13
6.1 Organization, Standing and Power..................................................... 13
------------- -------- --- -----
6.2 Authority; No Breach by Agreement.................................................... 13
---------- -- ------ -- ---------
6.3 Capital Stock........................................................................ 14
------- -----
6.4 Parent Subsidiaries.................................................................. 14
------ ------------
6.5 Financial Statements................................................................. 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 Accounting, Tax, and Regulatory Matters.............................................. 17
----------- ---- --- ---------- -------
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION................................... 17
7.1 Affirmative Covenants of Subject Company............................................. 17
----------- --------- -- ------- -------
7.2 Negative Covenants of Subject Company................................................ 17
-------- --------- -- ------- -------
7.3 Covenants of Parent.................................................................. 19
--------- -- ------
7.4 Adverse Changes in Condition......................................................... 19
------- ------- -- ---------
7.5 Reports.............................................................................. 20
-------
ARTICLE 8
ADDITIONAL AGREEMENTS............................................ 20
8.1 Registration Statement; Proxy Statement; Shareholder Approval........................ 20
------------ ---------- ----- ---------- ----------- -------
8.2 Authorization of Shares; Exchange Listing............................................ 20
------------- -- ------- -------- -------
8.3 Applications......................................................................... 20
------------
8.4 Filings With State Offices........................................................... 21
------- ---- ----- -------
8.5 Agreement as to Efforts to Consummate................................................ 21
--------- -- -- ------- -- ----------
8.6 Investigation and Confidentiality.................................................... 21
------------- --- ---------------
8.7 Press Releases....................................................................... 21
----- --------
8.8 Certain Actions...................................................................... 21
------- -------
8.9 Accounting and Tax Treatment......................................................... 23
---------- --- --- ---------
8.10 Agreement of Affiliates.............................................................. 23
--------- -- ----------
8.11 Employee Benefits and Contracts...................................................... 23
-------- -------- --- ---------
8.12 Indemnification...................................................................... 23
---------------
8.13 Termination by Parent Pursuant to Section 10.1(d)(2)................................. 25
----------- -- ------ -------- -- ------- ----------
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE.............................. 26
9.1 Conditions to Obligations of Each Party.............................................. 26
---------- -- ----------- -- ---- -----
9.2 Conditions to Obligations of Parent.................................................. 27
---------- -- ----------- -- ------
9.3 Conditions to Obligations of Subject Company......................................... 28
---------- -- ----------- -- ------- -------
ARTICLE 10
TERMINATION................................................. 29
10.01 Termination.......................................................................... 29
-----------
10.2 Effect of Termination................................................................ 31
------ -- -----------
10.3 Non-Survival of Representations and Covenants........................................ 31
------------ -- --------------- --- ---------
</TABLE>
ii
<PAGE> 86
<TABLE>
<S> <C> <C>
ARTICLE 11
MISCELLANEOUS................................................ 31
11.1 Definitions.......................................................................... 31
-----------
11.2 Expenses............................................................................. 37
--------
11.3 Brokers and Finders.................................................................. 37
------- --- -------
11.4 Entire Agreement..................................................................... 37
------ ---------
11.5 Amendments........................................................................... 37
----------
11.6 Waivers.............................................................................. 38
-------
11.7 Assignment........................................................................... 38
----------
11.8 Notices.............................................................................. 38
-------
11.9 Governing Law........................................................................ 39
--------- ---
11.10 Counterparts......................................................................... 39
------------
11.11 Captions............................................................................. 39
--------
11.12 Interpretations...................................................................... 39
---------------
11.13 Enforcement of Agreement............................................................. 39
----------- -- ---------
11.14 Severability......................................................................... 39
------------
</TABLE>
iii
<PAGE> 87
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and
entered into as of January 6, 1998, by and between CB & T, Inc., a Tennessee
corporation having its principal office located in McMinnville, Tennessee
("Subject Company"), Union Planters Holding Corporation, a Tennessee
corporation having its principal office located in Memphis, Tennessee ("Merger
Subsidiary"), and joined in by Union Planters Corporation, a Tennessee
corporation having its principal office located in Memphis, Tennessee
("Parent").
PREAMBLE
The Boards of Directors of Subject Company, Merger Subsidiary and
Parent are of the opinion that the transactions described herein are in the
best interests of the parties and their respective shareholders. This Agreement
and the Plan of Merger attached hereto at Exhibit 1 and incorporated herein by
reference, provide for the acquisition of Subject Company by Parent pursuant to
the merger of Subject Company with and into Merger Subsidiary. At the effective
time of such merger, the outstanding shares of the common stock of Subject
Company shall be converted into the right to receive shares of the common stock
of Parent (except as provided in Sections 3.3 and 3.4 of this Agreement). As a
result, shareholders of Subject Company shall become shareholders of Parent and
Surviving Corporation shall continue to conduct its business and operations as
a wholly owned subsidiary of Parent. The transactions described in this
Agreement are subject to the approvals of the shareholders of Subject Company,
the Board of Governors of the Federal Reserve System, the Department of
Financial Institutions of the State of Tennessee, and other applicable federal
and state regulatory authorities, and the satisfaction of certain other
conditions described in this Agreement. It is the intention of the parties to
this Agreement that (i) for federal income tax purposes this Agreement shall
constitute a plan of merger and the Merger shall qualify as a "reorganization"
within the meaning of Section 368(a) of the Internal Revenue Code and (ii) for
accounting purposes the Merger shall qualify for treatment as a
pooling-of-interests.
Certain terms used in this Agreement are defined in Section 11.1 of
this Agreement.
NOW, THEREFORE, in consideration of the above and the mutual
warranties, representations, covenants, and agreements set forth herein, the
parties agree as follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
1.1 Merger. Subject to the terms and conditions of this Agreement and
the Plan of Merger, at the Effective Time, Subject Company shall be merged with
and into Merger Subsidiary in accordance with the provisions of Section
48-21-109 of the TBCA and with the effect provided in Section 48-21-108 of the
TBCA (the "Merger"). Merger Subsidiary shall be the Surviving Corporation
resulting from the Merger and shall continue to be governed by the Laws of the
State of Tennessee. The Merger shall be consummated pursuant to the terms of
this Agreement and the Plan of Merger, which have been or will be approved and
adopted by the respective Boards of Directors of Subject Company, Parent and
Merger Subsidiary.
1.2 Time and Place of Closing. The Closing will take place at 9:00
A.M. on the date 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 at the time the Articles of Merger
reflecting the Merger shall become effective with the Secretary of State of the
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
shall use their reasonable efforts to cause the Effective Time to occur on a
date designated by Parent
UPC/CBT AGREEMENT - Page 1
<PAGE> 88
which date shall be within 60 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 (taking into account any
requisite waiting period in respect thereof), (ii) the date on which the
shareholders of Subject Company approve this Agreement, and (iii) the date on
which all other conditions precedent (other than those conditions which relate
to actions to be taken at the Closing) to each Party's obligations hereunder
shall have been satisfied or waived (to the extent waivable by such Party).
1.4 Restructure of Transaction. Parent shall, in its reasonable
discretion, have the unilateral right to revise the structure of the Merger
contemplated by this Agreement in order to achieve tax benefits or for any
other reason which Parent may deem advisable; provided, however, that Parent
shall not have the right, without the approval of the Board of Directors of
Subject Company and, if required by the TBCA, the holders of the Subject
Company Common Stock, to make any revision to the structure of the Merger
which: (i) changes the amount of the consideration which the holders of shares
of Subject Company Common Stock are entitled to receive (determined in the
manner provided in Section 3.1 of this Agreement); (ii) changes the intended
tax free effects of the Merger to Parent, Subject Company or the holders of
shares of Subject Company Common Stock or changes the intended
pooling-of-interests accounting treatment; (iii) would permit Parent to pay the
consideration other than by delivery of Parent Common Stock registered with the
SEC (in the manner described in Section 4.1 of this Agreement); (iv) would be
materially adverse to the interests of Subject Company or adverse to the
holders of shares of Subject Company Common Stock; (v) would materially impede
or delay consummation of the Merger; or (vi) would require a vote of Parent's
shareholders under relevant state Law. Parent may exercise this right of
revision by giving written notice to Subject Company in the manner provided in
Section 11.8 of this Agreement which notice shall be in the form of an
amendment to this Agreement and the Plan of Merger or in the form of an Amended
and Restated Agreement and Plan of Merger.
ARTICLE 2
TERMS OF MERGER
2.1 Charter. The Charter (the "Charter") of Merger Subsidiary in
effect immediately prior to the Effective Time shall be the Charter of the
Surviving Corporation until otherwise amended or repealed.
2.2 ByLaws. The Bylaws of Merger Subsidiary (the "Bylaws") in effect
immediately prior to the Effective Time shall be the Bylaws of the Surviving
Corporation until otherwise amended or repealed.
2.3 Directors and Officers. The directors of Merger Subsidiary in
office immediately prior to the Effective Time, together with such additional
persons as may thereafter be elected, shall serve as the directors of the
Surviving Corporation from and after the Effective Time in accordance with the
Bylaws of the Surviving Corporation. The officers of Merger Subsidiary in
office immediately prior to the Effective Time, together with such additional
persons as may thereafter be elected, shall serve as the officers of the
Surviving Corporation from the Effective Time in accordance with the Bylaws of
the Surviving Corporation.
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 Conversion of Shares. Subject to the provisions of this Article 3
(and Section 7 of the Plan of Merger), at the Effective Time, by virtue of the
Merger and without any action on the part of Parent, Merger Subsidiary, Subject
Company, or the shareholders of any of the foregoing, the shares of the
constituent corporations shall be converted as follows:
(a) Each share of Parent Capital Stock, including any associated
Parent Rights, issued and outstanding immediately prior to the Effective Time
shall remain issued and outstanding from and after the Effective Time.
UPC/CBT AGREEMENT - Page 2
<PAGE> 89
(b) Each share of Merger Subsidiary Common Stock issued and
outstanding immediately prior to the Effective Time shall remain issued and
outstanding and shall represent one share of the Surviving Corporation from and
after the Effective Time.
(c) Except for Dissenting Shares, each share of Subject Company
Common Stock, including any associated or attached Subject Company Rights,
(excluding shares held by Subject Company, any Subject Company Subsidiary,
Parent or any Parent Subsidiary, in each case other than in a fiduciary
capacity or as a result of debts previously contracted) issued and outstanding
at the Effective Time shall cease to be outstanding and shall be converted into
and exchanged for the right to receive 5.488 shares of Parent Common Stock
(subject to possible adjustment as set forth in Section 10.1(f) of this
Agreement, the "Exchange Ratio"). Pursuant to the Parent Rights Agreement, each
share of Parent Common Stock issued in connection with the Merger upon
conversion of Subject Company Common Stock shall be accompanied by a Parent
Right.
(d) Dissenting Shares shall not be converted pursuant to Section
3.1(c) in the Merger but, at and after the Effective Time, shall represent only
the right to receive payment in accordance with the TBCA. If a holder of
Dissenting Shares becomes ineligible for payment under the TBCA, then such
holder's Dissenting Shares shall cease to be Dissenting Shares and shall be
converted in the manner set forth in Section 3.1(c) effective as of the
Effective Time.
3.2 Anti-Dilution Provisions. In the event Parent changes the number
of shares of Parent Common Stock issued and outstanding after the date of this
Agreement and prior to the Effective Time as a result of a stock split, stock
dividend, or similar recapitalization with respect to such stock and the record
date therefor (in the case of a stock dividend) or the effective date thereof
(in the case of a stock split or similar recapitalization for which a record
date is not established) shall be prior to the Effective Time, the Exchange
Ratio shall be proportionately adjusted.
3.3 Shares Held by Subject Company or Parent. Each of the shares of
Subject Company Common Stock held by Subject Company, any Subject Company
Subsidiary, Parent or any Parent Subsidiary, in each case other than in
fiduciary capacity or as a result of debts previously contracted, shall be
canceled and retired at the Effective Time and no consideration shall be issued
in exchange therefor.
3.4 Fractional Shares. Notwithstanding any other provision of this
Agreement, each holder of shares of Subject Company Common Stock exchanged
pursuant to the Merger who would otherwise have been entitled to receive a
fractional share of Parent Common Stock (after taking into account all
certificates delivered by such holder) shall receive, in lieu thereof, cash
(without interest) in an amount equal to such fractional share of Parent Common
Stock multiplied by the closing price of such common stock on the
NYSE-Composite Transactions List (as reported by The Wall Street Journal or, if
not reported thereby, any other authoritative source selected by Parent) on the
last trading day preceding the Effective Time. No such holder will be entitled
to dividends, voting rights, or any other rights as a shareholder in respect of
any fractional shares.
ARTICLE 4
EXCHANGE OF SHARES
4.1 Exchange Procedures. Promptly after the Effective Time, Parent and
Subject Company shall cause the exchange agent selected by Parent (the
"Exchange Agent") to mail to the former shareholders of Subject Company
appropriate transmittal materials (which shall specify that delivery shall be
effected, and risk of loss and title to the certificates theretofore
representing shares of Subject Company Common Stock shall pass, only upon
proper delivery of such certificates to the Exchange Agent). Subject Company
shall have the right to review and approve the transmittal materials. The
Exchange Agent may establish reasonable and customary rules and procedures
UPC/CBT AGREEMENT - Page 3
<PAGE> 90
in connection with its duties. After the Effective Time, each holder of shares
of Subject Company Common Stock (other than Dissenting Shares or shares to be
canceled pursuant to Section 3.3 of this Agreement) issued and outstanding at
the Effective Time shall surrender the certificate or certificates representing
such shares to the Exchange Agent and shall promptly upon surrender thereof
receive in exchange therefor the consideration provided in Section 3.1(c) of
this Agreement, together with all undelivered dividends or distributions in
respect of such shares (without interest thereon) pursuant to Section 4.2 of
this Agreement. To the extent required by Section 3.4 of this Agreement, each
holder of shares of Subject Company Common Stock issued and outstanding at the
Effective Time also shall receive, upon surrender of the certificate or
certificates representing such shares, cash in lieu of any fractional share of
Parent Common Stock to which such holder may be otherwise entitled (without
interest). Parent shall not be obligated to deliver the consideration to which
any former holder of Subject Company Common Stock is entitled as a result of
the merger until such holder surrenders such holder's certificate or
certificates representing the shares of Subject Company Common Stock for
exchange as provided in this Section 4.1. The certificate or certificates of
Subject Company Common Stock so surrendered shall be duly endorsed as the
Exchange Agent may require. Any other provision of this Agreement
notwithstanding, neither Parent nor the Exchange Agent shall be liable to a
holder of Subject Company Common Stock for any amounts paid or property
delivered in good faith to a public official pursuant to any applicable
abandoned property Law.
4.2 Rights of Former Subject Company Shareholders. At the Effective
Time, the stock transfer books of Subject Company shall be closed as to holders
of Subject Company Common Stock immediately prior to the Effective Time and no
transfer of Subject Company Common Stock by any such holder shall thereafter be
made or recognized. Until surrendered for exchange in accordance with the
provisions of Section 4.1 of this Agreement, each certificate theretofore
representing shares of Subject Company Common Stock (other than Dissenting
Shares or shares to be canceled pursuant to Section 3.3 of this Agreement)
shall from and after the Effective Time represent for all purposes only the
right to receive the consideration provided in Sections 3.1(c) and 3.4 of this
Agreement in exchange therefor, subject, however, to the Surviving
Corporation's obligations to pay any dividends or make any other distributions
with a record date prior to the Effective Time which have been declared or made
by Subject Company in respect of such shares of Subject Company Common Stock in
accordance with the terms of this Agreement and which remain unpaid at the
Effective Time. Whenever a dividend or other distribution is declared by Parent
on the Parent Common Stock, the record date for which is at or after the
Effective Time, the declaration shall include dividends or other distributions
on all shares of Parent Common Stock issuable pursuant to this Agreement, but
beginning 30 days after the Effective Time no dividend or other distribution
payable to the holders of record of Parent Common Stock as of any time
subsequent to the Effective Time shall be delivered to the holder of any
certificate representing shares of Subject Company Common Stock issued and
outstanding at the Effective Time until such holder surrenders such certificate
for exchange as provided in Section 4.1 of this Agreement. However, upon
surrender of such Subject Company Common Stock certificate, both a Parent
Common Stock certificate (together with all such undelivered dividends or other
distributions without interest) and any undelivered dividends and cash payments
payable hereunder (without interest) shall be delivered and paid with respect
to each share represented by such certificate. In the event any Subject Company
Common Stock certificate shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming such certificate to
be lost, stolen or destroyed and, if reasonably required by Parent, the posting
by such person of a bond in such amount as Parent may reasonably direct as
indemnity against any claim that may be made against it with respect to such
certificate, the Exchange Agent shall issue in exchange for such lost, stolen
or destroyed certificate the shares of Parent Common Stock and cash in lieu of
fractional shares deliverable in respect thereof pursuant to this Agreement.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF SUBJECT COMPANY
Subject Company hereby represents and warrants to Parent, except as
set forth on the Subject Company Disclosure Memorandum, as follows:
5.1 Organization, Standing, and Power. Subject Company is a
corporation duly organized, validly existing, and in good standing under the
Laws of the State of Tennessee, and has the corporate power and authority
UPC/CBT AGREEMENT - Page 4
<PAGE> 91
to carry on its business as now conducted and to own, lease, and operate its
Assets. Subject Company is duly qualified or licensed to transact business as a
foreign corporation in good standing in the States of the United States and
foreign jurisdictions where the character of its Assets or the nature or
conduct of its business requires it to be so qualified or licensed, except for
such jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Subject Company.
5.2 Authority; No Breach by Agreement. (a) Subject Company has the
corporate power and authority necessary to execute, deliver, and perform its
obligations under this Agreement and the Plan of Merger and to consummate the
transactions contemplated hereby and thereby. The execution, delivery, and
performance of this Agreement and the Plan of Merger, and the consummation of
the transactions contemplated herein, including the Merger, have been duly and
validly authorized by all necessary corporate action (including valid
authorization and adoption of this Agreement by Subject Company's duly
constituted Board of Directors) in respect thereof on the part of Subject
Company, subject to the approval of this Agreement and the Plan of Merger by
the holders of the outstanding shares of Subject Company Common Stock, which is
the only shareholder vote required for approval of this Agreement and
consummation of the Merger by Subject Company. Subject to such requisite
shareholder approval and assuming due authorization, execution and delivery of
this Agreement and the Plan of Merger by each of Parent and Merger Subsidiary,
this Agreement and the Plan of Merger each represents a legal, valid, and
binding obligation of Subject Company, enforceable against Subject Company in
accordance with its terms (except in all cases as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, receivership,
conservatorship, moratorium, or similar Laws (including provisions of the U.S.
and Tennessee Constitutions) affecting the enforcement of creditors' rights
generally and except that the availability of the equitable remedy of specific
performance or injunctive relief is subject to the discretion of the court
before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement or the
Plan of Merger by Subject Company, nor the consummation by Subject Company of
the transactions contemplated hereby, nor compliance by Subject Company with
any of the provisions hereof or thereof, will (i) conflict with or result in a
breach of any provision of the Charter or Bylaws, or (ii) constitute or result
in a Default under, or require any Consent (excluding Consents required by Law
or Order) pursuant to, or result in the creation of any Lien on any material
Asset of Subject Company or any Subject Company Subsidiary under, any Contract
or Permit of Subject Company or any Subject Company Subsidiary, except for such
Defaults, Liens and Consents, which, if not obtained or made, are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Subject Company, or (iii) subject to receipt of the requisite
Consents referred to in Section 9.1(b) of this Agreement, violate any Law or
Order applicable to Subject Company, its Subsidiaries or any of their
respective material Assets.
(c) Other than in connection or compliance with the provisions of
the Securities Laws, applicable state corporate and securities Laws, and other
than Consents required from Regulatory Authorities, and other than notices to
or filings with the Internal Revenue Service or the Pension Benefit Guaranty
Corporation with respect to any employee benefit plans, or under the HSR Act,
and other than Consents, filings, or notifications which, if not obtained or
made, are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Subject Company, no notice to, filing with, or
Consent of, any public body or authority is necessary for the consummation by
Subject Company of the Merger and the other transactions contemplated in this
Agreement.
5.3 Capital Stock. (a) The authorized capital stock of Subject Company
consists of: 1,000,000 shares of Subject Company Common Stock, of which 264,113
shares are issued and outstanding as of the date of this Agreement (exclusive
of treasury shares) and not more than 264,113 shares of Subject Company Common
Stock will be issued and outstanding at the Effective Time. All of the issued
and outstanding shares of capital stock of Subject Company are duly and validly
issued and outstanding and are fully paid and nonassessable under the TBCA and
Subject Company's Charter and Bylaws. None of the outstanding shares of capital
stock of Subject Company has been issued in violation of any preemptive rights
of the current or past shareholders of Subject Company.
UPC/CBT AGREEMENT - Page 5
<PAGE> 92
(b) Other than as set forth in Section 5.3(a), there are no shares
of capital stock or other equity securities of Subject Company outstanding and
no outstanding Rights relating to the capital stock of Subject Company.
5.4 Subject Company Subsidiaries. Subject Company has disclosed in
Section 5.4 of the Subject Company Disclosure Memorandum all of the Subject
Company Subsidiaries that are corporations (identifying its jurisdiction of
incorporation) and all of the Subject Company Subsidiaries that are general or
limited partnerships or other non-corporate entities (identifying the Law under
which such entity is organized, and the amount and nature of the ownership
interest therein of Subject Company Subsidiaries). Subject Company or one of
its wholly owned Subsidiaries owns all of the issued and outstanding shares of
capital stock (or other equity interests) of each of the Subject Company
Subsidiaries. No capital stock (or other equity interest) of any Subject
Company Subsidiary is or may become required to be issued (other than to
another Subject Company Subsidiary) by reason of any option, warrant or any
other type of right, and there are no Contracts by which Subject Company or any
of the Subject Company Subsidiaries is bound to issue (other than to Subject
Company or another of the Subject Company Subsidiaries) additional shares of
its capital stock (or other equity interests) or Rights or by which Subject
Company or any of the Subject Company Subsidiaries is or may be bound to
transfer any shares of the capital stock (or other equity interests) of any of
Subject Company or any of the Subject Company Subsidiaries (other than to
Subject Company or any of the Subject Company Subsidiaries). There are no
Contracts relating to the rights of Subject Company or any Subject Company
Subsidiary to vote or to dispose of any shares of the capital stock (or other
equity interests) of Subject Company or any Subject Company Subsidiary. All of
the shares of capital stock (or other equity interests) of each Subject Company
Subsidiary held by Subject Company or any Subject Company Subsidiary are fully
paid and nonassessable under the applicable corporation or similar Law of the
jurisdiction in which such Subsidiary is incorporated or organized and are
owned by Subject Company or a Subject Company Subsidiary free and clear of any
Liens. Each Subject Company Subsidiary is either a bank, federal savings bank,
partnership, limited liability corporation, or a corporation, and each such
Subsidiary is duly organized, validly existing, and (as to corporations) in
good standing under the Laws of the jurisdiction in which it is incorporated or
organized, and has the corporate power and authority necessary for it to own,
lease, and operate its Assets and to carry on its business as now conducted.
Each Subject Company Subsidiary is duly qualified or licensed to transact
business as a foreign corporation in good standing in the States of the United
States and foreign jurisdictions where the character of its Assets or the
nature or conduct of its business requires it to be so qualified or licensed,
except for such jurisdictions in which the failure to be so qualified or
licensed is not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Subject Company. The only Subject Company Subsidiary
that is a depository institution is the City Bank & Trust Company, McMinnville,
Tennessee (the "Bank") . The Bank is an "insured institution" as defined in the
Federal Deposit Insurance Act and applicable regulations thereunder, and the
deposits in which are insured by the Bank Insurance Fund. The minute book and
other organizational documents (and all amendments thereto) for Subject Company
and each Subject Company Subsidiary that is a "Significant Subsidiary" (as such
term is defined in Regulation S-X promulgated under the 1934 Act) have been or
will be made available to Parent for its review, and are true and complete as
in effect as of the date of this Agreement.
5.5 Financial Statements. (a) Each of the Subject Company Financial
Statements (including, in each case, any related notes) contained in the
Subject Company SEC Reports, including any Subject Company SEC Reports filed
after the date of this Agreement until the Effective Time, complied, or will
comply, as to form in all material respects with the applicable published rules
and regulations of the SEC with respect thereto, was prepared, or will be
prepared, in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes to such financial
statements or, in the case of unaudited interim statements, as permitted by
Form 10-Q of the SEC), and fairly presented, or will fairly present, in all
material respects the consolidated financial position of Subject Company and
the Subject Company Subsidiaries as of the respective dates and the
consolidated results of its operations and cash flows for the periods
indicated, except that the unaudited interim financial statements were or are
subject to normal and recurring year-end adjustments which were not or are not
expected to be material in amount or effect.
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<PAGE> 93
(b) Each of the Subject Company Financial Statements (including,
in each case, any related notes) complied, or will comply, as to form in all
material respects with the applicable published rules and regulations of the
SEC with respect thereto, was prepared, or will be prepared, in accordance with
GAAP applied on a consistent basis throughout the periods involved (except as
may be indicated in the notes to such financial statements or, in the case of
unaudited interim statements, as permitted by Form 10-Q of the SEC), and fairly
presented, or will fairly present, in all material respects the consolidated
financial position of Subject Company and its Subsidiaries as of the respective
dates and the consolidated results of its operations and cash flows for the
periods indicated, except that the unaudited interim financial statements were
or are subject to normal and recurring year-end adjustments which were not or
are not expected to be material in amount or effect.
5.6 Absence of Undisclosed Liabilities. Neither Subject Company nor
any of the Subject Company Subsidiaries has any Liabilities that are reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Subject Company, except Liabilities which are accrued or reserved against in
the consolidated balance sheets of Subject Company as of September 30, 1997,
included in the Subject Company Financial Statements made available prior to
the date of this Agreement or reflected in the notes thereto. Neither Subject
Company nor any of the Subject Company Subsidiaries has incurred or paid any
Liability since September 30, 1997, except for such Liabilities incurred or
paid (i) in the ordinary course of business consistent with past business
practice or which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Subject Company or (ii) in connection
with the transactions contemplated by this Agreement.
5.7 Absence of Certain Changes or Events. Since December 31, 1996,
except as disclosed in the Subject Company Financial Statements made available
prior to the date of this Agreement or contemplated by pending federal
legislation or regulations applicable to financial institutions generally, or
as disclosed in Section 5.7 of the Subject Company Disclosure Memorandum, there
have been no events, changes, or occurrences which have had, or are reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Subject Company.
5.8 Tax Matters. Except as set forth in Section 5.8 of the Subject
Company Disclosure Memorandum:
(a) All material Tax Returns required to be filed by or on behalf
of Subject Company or any of the Subject Company Subsidiaries have been timely
filed or requests for extensions have been timely filed, granted, and have not
expired for periods ended on or before December 31, 1996, and on or before the
date of the most recent fiscal year end immediately preceding the Effective
Time, and all such Tax Returns filed are complete and accurate in all material
respects. All Taxes shown on filed Tax Returns have been paid. There is no
audit examination or refund Litigation with respect to any material Taxes,
except as reserved against in the Subject Company Financial Statements made
available prior to the date of this Agreement. All material Taxes and other
material Liabilities due with respect to completed and settled examinations or
concluded Litigation have been paid. There are no material Liens with respect
to Taxes upon any of the Assets of Subject Company or any of the Subject
Company Subsidiaries.
(b) Neither Subject Company nor any of the Subject Company
Subsidiaries has executed an extension or waiver of any statute of limitations
on the assessment or collection of any Tax due (excluding such statutes that
relate to years currently under examination by the Internal Revenue Service or
other applicable taxing authorities) that is currently in effect.
(c) Adequate provision for any material Taxes due or to become due
for Subject Company or the Subject Company Subsidiaries for the period or
periods through and including the date of the respective Subject Company
Financial Statements has been made and is reflected on such Subject Company
Financial Statements.
(d) Material deferred Taxes of Subject Company and the Subject
Company Subsidiaries have been provided for in accordance with GAAP.
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(e) Subject Company and the Subject Company Subsidiaries are in
material compliance with, and its records contain all information and documents
(including properly completed Internal Revenue Service Forms W- 9) necessary to
comply in all material respects with, all applicable information reporting and
Tax withholding requirements under federal, state, and local Tax Laws, and such
records identify with specificity all accounts subject to backup withholding
under Section 3406 of the Internal Revenue Code.
(f) Neither Subject Company nor any of the Subject Company
Subsidiaries has made any payments, is obligated to make any payments, or is a
party to any Contract that could obligate it to make any payments that would be
disallowed as a deduction under Section 280G or 162(m) of the Internal Revenue
Code.
(g) Neither Subject Company nor any of the Subject Company
Subsidiaries is a party to any tax allocation or sharing agreement and neither
Subject Company nor any of the Subject Company Subsidiaries has been a member
of an affiliated group filing a consolidated federal income tax return (other
than a group the common parent of which was Subject Company) or has any
material Liability for taxes of any Person (other than Subject Company and the
Subject Company Subsidiaries) under Treasury Regulation Section 1.15026 (or any
similar provision of state, local, or foreign law) as a transferee or successor
or by Contract or otherwise.
5.9 Assets. Except as disclosed or reserved against in the Subject
Company Financial Statements made available prior to the date of this
Agreement, to the Knowledge of Subject Company, Subject Company and the Subject
Company Subsidiaries have good and marketable title, free and clear of all
Liens, to all of their respective Assets. All tangible properties used in the
businesses of Subject Company and its Subsidiaries are in good condition,
reasonable wear and tear excepted, and are usable in the ordinary course of
business of Subject Company and its Subsidiaries. All Assets which are material
to Subject Company's business on a consolidated basis, held under leases or
subleases by the Subject Company or any of the Subject Company Subsidiaries,
are held under valid Contracts enforceable in accordance with their respective
terms (except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or other Laws (including provisions of
the U.S. and Tennessee Constitutions) affecting the enforcement of creditors'
rights generally and except that the availability of the equitable remedy of
specific performance or injunctive relief is subject to the discretion of the
court before which any proceedings may be brought), and each such Contract is
in full force and effect. Subject Company and the Subject Company Subsidiaries
currently maintain insurance in amounts, scope, and coverage which, in the
reasonable opinion of management of Subject Company, are adequate for the
operations of Subject Company and the Subject Company Subsidiaries. Neither
Subject Company nor any of the Subject Company Subsidiaries has received notice
from any insurance carrier that (i) such insurance will be canceled or that
coverage thereunder will be reduced or eliminated, or (ii) premium costs with
respect to such policies of insurance will be substantially increased. There
are presently no claims pending under any such policies of insurance and no
notices have been given by Subject Company or any of the Subject Company
Subsidiaries under such policies, except as disclosed in Section 5.9 of the
Subject Company Disclosure Memorandum.
5.10 Intellectual Property. All of the Intellectual Property rights of
Subject Company and the Subject Company Subsidiaries are in full force and
effect and, if applicable, constitute legal, valid, and binding obligations of
the respective parties thereto, and there have not been, and, to the Knowledge
of Subject Company, there currently are not, any Defaults thereunder by Subject
Company or a Subject Company Subsidiary. Subject Company or a Subject Company
Subsidiary owns or is the valid licensee of all such Intellectual Property
rights free and clear of all Liens or claims of infringement. Neither Subject
Company nor any of the Subject Company Subsidiaries nor, to the Knowledge of
Subject Company, their respective predecessors has infringed the Intellectual
Property rights of others and, to the Knowledge of Subject Company, none of the
Intellectual Property rights as used in the business conducted by Subject
Company or the Subject Company Subsidiaries infringes upon or otherwise
violates the rights of any Person, nor has any Person asserted a claim of such
infringement. To the Knowledge of Subject Company, neither Subject Company nor
the Subject Company Subsidiaries is obligated to pay any royalties to any
Person with respect to any such Intellectual Property. Subject Company or a
Subject Company Subsidiary owns or has the valid right to use all of the
Intellectual Property rights which it is presently using, or in connection with
performance of any material Contract to which it is a party. No officer,
director, or employee of Subject Company or the Subject
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Company Subsidiaries is party to any Contract which requires such officer,
director, or employee to assign any interest in any Intellectual Property or
keep confidential any trade secrets, proprietary data, customer information, or
other business information or which restricts or prohibits such officer,
director, or employee from engaging in activities competitive with any Person,
including Subject Company or any of the Subject Company Subsidiaries.
5.11 Environmental Matters. Except as set forth in Section 5.11 of the
Subject Company Disclosure Memorandum:
(a) To the Knowledge of Subject Company, each of Subject Company
and the Subject Company Subsidiaries, its Participation Facilities, and its
Operating Properties are, and have been, operated or maintained in compliance
with all Environmental Laws, except for violations which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Subject Company.
(b) To the Knowledge of Subject Company, there is no Litigation
pending or threatened before any court, governmental agency, or authority or
other forum in which Subject Company, any of the Subject Company Subsidiaries
or any of their respective Operating Properties or Participation Facilities (or
Subject Company in respect of such Operating Property or Participation
Facility) has been or, with respect to threatened Litigation, may be named as a
defendant (i) for alleged noncompliance (including by any predecessor) with any
Environmental Law or (ii) relating to the release into the environment of any
Hazardous Material, whether or not occurring at, on, under, adjacent to, or
affecting (or potentially affecting) a site owned, leased, or operated by
Subject Company or any of the Subject Company Subsidiaries or any of their
respective Operating Properties or Participation Facilities, except for such
Litigation pending or threatened that is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Subject Company,
nor, to the Knowledge of Subject Company, is there any reasonable basis in fact
for Subject Company to expect the commencement of any Litigation of a type
described in this sentence in the reasonably foreseeable future.
(c) During the period of (i) Subject Company's or any of the
Subject Company Subsidiaries' ownership or operation of any of their respective
current properties, (ii) Subject Company's or any of the Subject Company
Subsidiaries' participation in the management of any Participation Facility, or
(iii) Subject Company's or any of the Subject Company Subsidiaries' holding of
a security interest in an Operating Property, to the Knowledge of Subject
Company, there have been no releases of Hazardous Material in, on, under,
adjacent to, or affecting (or potentially affecting) such properties, except
such as are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Subject Company. Prior to the period of (i) Subject
Company's or any of the Subject Company Subsidiaries' ownership or operation of
any of their respective current properties, (ii) Subject Company's or any of
the Subject Company Subsidiaries' participation in the management of any
Participation Facility, or (iii) Subject Company's or any of the Subject
Company Subsidiaries' holding of a security interest in an Operating Property,
to the Knowledge of Subject Company, there were no releases of Hazardous
Material in, on, under, or affecting any such property, Participation Facility
or Operating Property, except such as are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Subject Company.
5.12 Compliance With Laws. Subject Company is duly registered as a
bank holding company under the BHC Act. Each of Subject Company and the Subject
Company Subsidiaries has in effect all Permits necessary for it to own, lease,
or operate its material Assets and to carry on its business as now conducted,
except where the failure to hold such Permits would not be reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on Subject
Company. Neither Subject Company nor any of the Subject Company Subsidiaries:
(a) is, to the Knowledge of Subject Company, in violation of any
Laws, Orders, or Permits applicable to its business or employees conducting its
business, except for such violations which would not be reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on Subject
Company; or
(b) has received any notification or communication from any
agency or department of federal, state, or local government or any Regulatory
Authority or the staff thereof (i) asserting that Subject Company or any of
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the Subject Company Subsidiaries is not in material compliance with any of the
Laws or Orders which such governmental authority or Regulatory Authority
enforces, (ii) threatening to revoke any Permits, or (iii) requiring Subject
Company or any of the Subject Company Subsidiaries to enter into or consent to
the issuance of a cease and desist order, formal agreement, directive,
commitment, or memorandum of understanding, or to adopt any Board resolution or
similar undertaking, which restricts materially the conduct of its business, or
in any manner relates to its capital adequacy, its credit or reserve policies,
its management, or the payment of dividends.
5.13 Labor Relations. Neither Subject Company nor any of the Subject
Company Subsidiaries is the subject of any Litigation asserting that Subject
Company or any of the Subject Company Subsidiaries has committed an unfair
labor practice (within the meaning of the National Labor Relations Act or
comparable state law) or seeking to compel Subject Company or any of the
Subject Company Subsidiaries to bargain with any labor organization as to wages
or conditions of employment, nor is there any strike or other labor dispute
involving Subject Company or any of the Subject Company Subsidiaries, pending
or, to the Knowledge of Subject Company, threatened, or to the Knowledge of
Subject Company, is there any activity involving Subject Company's or any of
the Subject Company Subsidiaries' employees seeking to certify a collective
bargaining unit or engaging in any other organization activity.
5.14 Employee Benefit Plans. (a) Subject Company has disclosed in
Section 5.14(a) of the Subject Company Disclosure Memorandum, and has delivered
or made available to Parent prior to the execution of this Agreement copies in
each case of, all pension, retirement, profit sharing, deferred compensation,
stock option, employee stock ownership, severance pay, vacation, bonus, or
other incentive plan, all other written employee programs, arrangements, or
agreements, all medical, vision, dental, or other health plans, all life
insurance plans, and all other employee benefit plans or fringe benefit plans,
including "employee benefit plans" as that term is defined in Section 3(3) of
ERISA, currently adopted, maintained by, sponsored in whole or in part by, or
contributed to by Subject Company or the Subject Company Subsidiaries or ERISA
Affiliate thereof for the benefit of employees, retirees, dependents, spouses,
directors, independent contractors, or other beneficiaries of Subject Company
or any Subject Company Subsidiary and under which employees, retirees,
dependents, spouses, directors, independent contractors, or other beneficiaries
of Subject Company or any Subject Company Subsidiary are eligible to
participate (collectively, the "Subject Company Benefit Plans"). Any of the
Subject Company Benefit Plans which is an "employee pension benefit plan," as
that term is defined in Section 3(2) of ERISA, is referred to herein as a
"Subject Company ERISA Plan." Neither Subject Company nor any Subject Company
Subsidiary maintains any "defined benefit plan" (as defined in Section 414(j)
of the Internal Revenue Code). No Subject Company Pension Plan is or has been a
multi-employer plan within the meaning of Section 3(37) of ERISA.
(b) All Subject Company Benefit Plans are in material compliance
with the applicable terms of ERISA, the Internal Revenue Code, and any other
applicable Laws the breach or violation of which are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Subject Company.
Each Subject Company ERISA Plan that is intended to be qualified under Section
401(a) of the Internal Revenue Code has either received a favorable
determination letter from the Internal Revenue Service (and Subject Company is
not aware of any circumstances likely to result in revocation of any such
favorable determination letter), if the ERISA Plan is a standardized plan, or
timely application has been made therefor. To the Knowledge of Subject Company,
neither Subject Company nor any of the Subject Company Subsidiaries has engaged
in a transaction with respect to any Subject Company Benefit Plan that,
assuming the taxable period of such transaction expired as of the date hereof,
would subject any Subject Company to a material Tax imposed by either Section
4975 of the Internal Revenue Code or Section 502(i) of ERISA.
(c) No "defined benefit plan" (as defined in Section 414(j) of
the Internal Revenue Code) or any "single-employer plan," within the meaning of
Section 4001(a)(15) of ERISA, formerly maintained by Subject Company or any of
the Subject Company Subsidiaries, or the single-employer plan of any entity
which is considered one employer with Subject Company under Section 4001 of
ERISA or Section 414 of the Internal Revenue Code or Section 302 of ERISA
(whether or not waived) (an "ERISA Affiliate") has an "accumulated funding
deficiency" within the meaning of Section 412 of the Internal Revenue Code or
Section 302 of ERISA. Neither Subject Company nor any of the Subject Company
Subsidiaries has provided, or, to Subject Company's knowledge, is
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required to provide, security to any single-employer plan of an ERISA Affiliate
pursuant to Section 401(a)(29) of the Internal Revenue Code.
(d) Within the six year period preceding the Effective Time, no
material Liability under Subtitle C or D of Title IV of ERISA has been incurred
by Subject Company or any of the Subject Company Subsidiaries with respect to
any current, frozen, or terminated single-employer plan or the single-employer
plan of any ERISA Affiliate. Neither Subject Company nor any of the Subject
Company Subsidiaries has incurred any material withdrawal Liability with
respect to a multi-employer plan under Subtitle E of Title IV of ERISA
(regardless of whether based on contributions of an ERISA Affiliate). No notice
of a "reportable event," within the meaning of Section 4043 of ERISA for which
the 30 day reporting requirement has not been waived, has been required to be
filed for any Subject Company Pension Plan or by any ERISA Affiliate within the
12 month period ending on the date hereof.
(e) Subject Company has disclosed in Section 5.14(e) of the
Subject Company Disclosure Memorandum its arrangements for coverage of retiree
health insurance. Neither Subject Company nor any of the Subject Company
Subsidiaries has any material Liability for retiree health and life benefits
under any of the Subject Company Benefit Plans.
(f) Except as set forth in Section 5.14(f) of the Subject Company
Disclosure Memorandum, neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation or golden parachute)
becoming due to any director or any employee of Subject Company or any of the
Subject Company Subsidiaries from Subject Company or any of the Subject Company
Subsidiaries under any Subject Company Benefit Plan, (ii) materially increase
any benefits otherwise payable under any Subject Company Benefit Plan, or (iii)
result in any acceleration of the time of payment or vesting of any such
benefit.
(g) The actuarial present values of all accrued deferred
compensation entitlements (including entitlements under any executive
compensation, supplemental retirement, or employment agreement) of employees
and former employees of any Subject Company Subsidiary and their respective
beneficiaries, other than entitlements accrued pursuant to funded retirement
plans subject to the provisions of Section 412 of the Internal Revenue Code or
Section 302 of ERISA, have been fully reflected on the Subject Company
Financial Statements to the extent required by and in accordance with GAAP.
5.15 Material Contracts. Except as set forth in Section 5.15 of the
Subject Company Disclosure Memorandum, neither Subject Company, the Subject
Company Subsidiaries, nor any of their respective Assets, businesses, or
operations, is a party to, or is bound or affected by, or receives benefits
under, (i) any employment, severance, termination, consulting, or retirement
Contract, (ii) any Contract relating to the borrowing of money by Subject
Company or any of the Subject Company Subsidiaries or the guarantee by Subject
Company or any of the Subject Company Subsidiaries of any such obligation
(other than Contracts evidencing deposit liabilities, purchases of federal
funds, fully-secured repurchase agreements, trade payables, and Contracts
relating to borrowings or guarantees made in the ordinary course of business),
(iii) any Contracts which prohibit or restrict Subject Company or any of the
Subject Company Subsidiaries from engaging in any business activities in any
geographic area, line of business, or otherwise in competition with any other
Person, (iv) any Contracts between or among Subject Company and the Subject
Company Subsidiaries, (v) any exchange-traded or over-the-counter swap,
forward, future, option, cap, floor, or collar financial Contract, or any other
interest rate or foreign currency protection Contract (not disclosed in the
Subject Company Financial Statements delivered prior to the date of this
Agreement) which is a financial derivative Contract (including various
combinations thereof), and (vi) any other Contract or amendment thereto that
would be required to be filed as an exhibit to a Subject Company SEC Report
filed by Subject Company with the SEC prior to the date of this Agreement if
Subject Company was required to file SEC Reports (together with all Contracts
referred to in Sections 5.9 and 5.14(a) of this Agreement, the "Subject Company
Contracts"). With respect to each Subject Company Contract: (i) the Contract is
in full force and effect; (ii) neither Subject Company nor any Subject Company
Subsidiary is in Default thereunder; (iii) neither Subject Company nor its
Subsidiaries has
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repudiated or waived any material provision of any such Contract; and (iv) no
other party to any such Contract is, to the Knowledge of Subject Company, in
Default in any respect or has repudiated or waived any material provision
thereunder.
5.16 Legal Proceedings. There is no Litigation instituted or pending,
or, to the Knowledge of Subject Company, threatened (or unasserted but
considered probable of assertion and which if asserted would have at least a
reasonable probability of an unfavorable outcome) against Subject Company or
any of the Subject Company Subsidiaries, or against any Asset, employee benefit
plan, interest, or right of any of them, that is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Subject Company,
nor are there any Orders of any Regulatory Authorities, other governmental
authorities, or arbitrators outstanding against Subject Company or any of the
Subject Company Subsidiaries. Section 5.16 of the Subject Company Disclosure
Memorandum includes a summary report of all material Litigation as of the date
of this Agreement to which Subject Company or any Subject Company Subsidiary is
a party and which names Subject Company or a Subject Company Subsidiary as a
defendant or cross-defendant.
5.17 Reports. Since January 1, 1994, or the applicable date of
organization if later, Subject Company and each Subject Company Subsidiary has
timely filed all reports and statements, together with any amendments required
to be made with respect thereto, that it was required to file with (i) the SEC,
including, but not limited to, Forms 10-K, Forms 10-Q, Forms 8-K, and proxy
statements (the "Subject Company SEC Reports"), (ii) other Regulatory
Authorities, and (iii) any applicable state securities or banking authorities,
except failures to file which are not reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on Subject Company. As of its
respective date (or, if amended or superseded by a filing prior to the date of
this Agreement, then on the date of such filing), each of such reports and
documents, including the financial statements, exhibits, and schedules thereto,
complied in all material respects with all applicable Laws. As of its
respective date (or, if amended or superseded by a filing prior to the date of
this Agreement, then on the date of such filing), each Subject Company SEC
Report did not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading. None of the Subject Company Subsidiaries is required to
file any SEC Documents.
5.18 Statements True and Correct. None of the information supplied or
to be supplied by Subject Company for inclusion in the Registration Statement
to be filed by Parent with the SEC will, when the Registration Statement
becomes effective, be false or misleading with respect to any material fact, or
omit to state any material fact necessary to make the statements therein not
misleading. None of the information supplied or to be supplied by Subject
Company for inclusion in the Proxy Statement to be mailed to Subject Company's
shareholders in connection with the Shareholders' Meeting, and any other
documents to be filed by Subject Company with the SEC or any other Regulatory
Authority in connection with the transactions contemplated hereby, will, at the
respective time such documents are filed, and with respect to the Proxy
Statement, when first mailed to the shareholders of Subject Company, be false
or misleading with respect to any material fact, or omit to state any material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, or, in the case of the Proxy
Statement or any amendment thereof or supplement thereto, at the time of the
Shareholders' Meeting, be false or misleading with respect to any material
fact, or omit to state any material fact necessary to correct any statement in
any earlier communication with respect to the solicitation of any proxy for the
Shareholders' Meeting. All documents that Subject Company or the Subject
Company Subsidiaries are responsible for filing with any Regulatory Authority
in connection with the transactions contemplated hereby will comply as to form
in all material respects with the provisions of applicable Law.
5.19 Accounting, Tax, and Regulatory Matters. Neither Subject Company
nor any of the Subject Company Subsidiaries has Knowledge of any action taken
or of any fact or circumstance relating to Subject Company that is reasonably
likely to (i) prevent the transactions contemplated hereby, including the
Merger, from qualifying for pooling-of-interests accounting treatment or as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, or (ii) materially impede or delay receipt of any Consents of Regulatory
Authorities referred to in Section 9.1(b) of this Agreement.
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5.20 Charter Provisions; Takeover Laws. Subject Company has taken all
action so that the entering into of this Agreement and the consummation of the
Merger and the other transactions contemplated by this Agreement do not and
will not result in the grant of any rights to any Person under the Charter,
Bylaws or other governing instruments of Subject Company or any Subject Company
Subsidiary or restrict or impair the ability of Parent or any of the Parent
Subsidiaries to vote, or otherwise to exercise the rights of a shareholder with
respect to, shares of Subject Company or any Subject Company Subsidiary.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent hereby represents and warrants to Subject Company,
except as set forth on Parent's Disclosure Memorandum, as follows:
6.1 Organization, Standing and Power. Parent is a corporation duly
organized, validly existing, and in good standing under the Laws of the State
of Tennessee, and has the corporate power and authority to carry on its
business as now conducted and to own, lease and operate its material Assets.
Parent is duly qualified or licensed to transact business as a foreign
corporation in good standing in the States of the United States and foreign
jurisdictions where the character of its Assets or the nature or conduct of its
business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Parent.
6.2 Authority; No Breach by Agreement. (a) Parent has the corporate
power and authority necessary to execute, deliver and perform its obligations
under this Agreement and the Plan of Merger and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated herein,
including the Merger, have been or will be duly and validly authorized by all
necessary corporate action (including valid authorization and adoption of this
Agreement and the Plan of Merger by Parent's duly constituted Board of
Directors) in respect thereof on the part of Parent, subject to the adoption of
an amendment to the charter of Parent to increase the number of authorized
shares of Parent Common Stock. Assuming due authorization, execution and
delivery of this Agreement and the Plan of Merger by Subject Company, this
Agreement and the Plan of Merger each represents a legal, valid, and binding
obligation of Parent, enforceable against Parent in accordance with its terms
(except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or similar Laws (including
provisions of the U.S. and Tennessee Constitutions) affecting the enforcement
of creditors' rights generally and except that the availability of the
equitable remedy of specific performance or injunctive relief is subject to the
discretion of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement or the
Plan of Merger by Parent, nor the compliance by Parent with any of the
provisions hereof, will (i) conflict with or result in a breach of any
provision of Parent's Restated Charter of Incorporation or Bylaws (subject to
the amendment of the Parent's Restated Charter of Incorporation to increase the
number of authorized shares of Parent Common Stock), or (ii) constitute or
result in a Default under, or require any Consent (excluding Consents required
by Law or Order) pursuant to, or result in the creation of any Lien on any
material Asset of Parent or any Parent Subsidiary under, any Contract or Permit
of Parent or any Parent Subsidiary, except for such Defaults, Liens and
Consents, which, if not obtained or made, are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Parent, or (iii)
subject to receipt of the requisite approvals referred to in Section 9.1(b) of
this Agreement, violate any Law or Order applicable to Parent or any Parent
Subsidiary or any of their respective material Assets.
(c) Other than in connection or compliance with the provisions of
the Securities Laws, applicable state corporate and securities Laws, and rules
of the NYSE, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit
plans, or under the HSR Act, and other than Consents, filings, or notifications
which, if not obtained or made, are not reasonably likely to have, individually
or in the aggregate, a
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Material Adverse Effect on Parent, no notice to, filing with, or Consent of,
any public body or authority is necessary for the consummation by Parent of the
Merger and the other transactions contemplated in this Agreement.
6.3 Capital Stock. The authorized capital stock of Parent consists of
(i) 100,000,000 shares of Parent Common Stock, of which 68,077,181 shares were
issued and outstanding as of October 31, 1997, and (ii) 10,000,000 shares of
Parent Preferred Stock, of which 2,278,228 shares of Parent Series E Preferred
Stock were issued and outstanding as of October 31, 1997. All of the issued and
outstanding shares of Parent Capital Stock are, and, subject to the amendment
of Parent's Restated Charter of Incorporation to increase the number of
authorized shares of Parent Common Stock, all of the shares of Parent Common
Stock to be issued in exchange for shares of Subject Company Common Stock upon
consummation of the Merger, when issued in exchange for shares of Subject
Company Common Stock upon consummation of the Merger, when issued in accordance
with the terms of this Agreement, will be, duly and validly issued and
outstanding and fully paid and nonassessable under the TBCA. None of the
outstanding shares of Parent Capital Stock has been, and none of the shares of
Parent Common Stock to be issued in exchange for shares of Subject Company
Common Stock upon consummation of the Merger will be, issued in violation of
any preemptive rights of the current or past shareholders of Parent.
6.4 Parent Subsidiaries. Except for Capital Factors, Inc., a majority
of the outstanding stock of which may be acquired prior to the Closing Date,
Parent or one of its wholly owned Subsidiaries owns all of the issued and
outstanding shares of capital stock (or other equity interests) of each of the
Parent Subsidiaries. No capital stock (or other equity interest) of any Parent
Subsidiary is or may become required to be issued (other than to another Parent
Subsidiary) by reason of any rights, and there are no Contracts by which the
Parent or any of the Parent Subsidiaries are bound to issue (other than to
Parent or any of the Parent Subsidiaries) additional shares of its capital
stock (or other equity interests) or Rights or by which Parent or any of the
Parent Subsidiaries are or may be bound to transfer any shares of the capital
stock (or other equity interests) of any of Parent or any of the Parent
Subsidiaries (other than to Parent or any of the Parent Subsidiaries). There
are no Contracts relating to the rights of Parent or any Parent Subsidiary to
vote or to dispose of any shares of the capital stock (or other equity
interests) of Parent or any of the Parent Subsidiaries. All of the shares of
capital stock (or other equity interests) of each Parent Subsidiary held by
Parent or any Parent Subsidiary are fully paid and nonassessable (except
pursuant to 12 U.S.C. Section 55 in the case of national banks and comparable,
applicable state Law, if any, in the case of state depository institutions)
under the applicable corporation or similar Law of the jurisdiction in which
such Subsidiary is incorporated or organized and are owned by Parent or a
Parent Subsidiary free and clear of any Liens. Each Parent Subsidiary is either
a bank, a savings association, partnership, limited liability corporation, or a
corporation, and each such Subsidiary is duly organized, validly existing, and
(as to corporations) in good standing under the Laws of the jurisdiction in
which it is incorporated or organized, and has the corporate power and
authority necessary for it to own, lease, and operate its Assets and to carry
on its business as now conducted. Each Parent Subsidiary is duly qualified or
licensed to transact business as a foreign corporation in good standing in the
States of the United States and foreign jurisdictions where the character of
its Assets or the nature or conduct of its business requires it to be so
qualified or licensed, except for such jurisdictions in which the failure to be
so qualified or licensed is not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Parent. The minute book and other
organizational documents (and all amendments thereto) for each of Parent and
each Parent Subsidiary that is a Significant Subsidiary have been made
available to Subject Company for its review, and are true and complete as in
effect as of the date of this Agreement.
6.5 Financial Statements. Each of the Parent Financial Statements
(including, in each case, any related notes) contained in the Parent SEC
Reports, including any Parent SEC Reports filed after the date of this
Agreement until the Effective Time, complied, or will comply, as to form in all
material respects with the applicable published rules and regulations of the
SEC with respect thereto, was prepared, or will be prepared, in accordance with
GAAP applied on a consistent basis throughout the periods involved (except as
may be indicated in the notes to such financial statements or, in the case of
unaudited interim statements, as permitted by Form 10-Q of the SEC), and fairly
presented, or will fairly present, in all material respects the consolidated
financial position of Parent and the Parent Subsidiaries as at the respective
dates and the consolidated results of its operations and cash flows for the
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periods indicated, except that the unaudited interim financial statements were
or are subject to normal and recurring year-end adjustments which were not or
are not expected to be material in amount or effect.
6.6 Absence of Undisclosed Liabilities. Neither Parent nor any of the
Parent Subsidiaries has any Liabilities that are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Parent, except
Liabilities which are accrued or reserved against in the consolidated balance
sheets of Parent as of September 30, 1997, included in the Parent Financial
Statements made available prior to the date of this Agreement or reflected in
the notes thereto. Neither Parent nor any of the Parent Subsidiaries has
incurred or paid any Liability since September 30, 1997, except for such
Liabilities incurred or paid (i) in the ordinary course of business consistent
with past business practice or which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Parent or (ii)
in connection with the transaction contemplated by this Agreement.
6.7 Absence of Certain Changes or Events. Since December 31, 1996,
except as disclosed in the Parent SEC Reports made available prior to the date
of this Agreement or contemplated by pending federal legislation or regulations
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 Parent, and (ii)
prior to the date of this Agreement, Parent has not taken any action or failed
to take any action, that after such date, would represent or result in a
material breach or violation of any covenant of Parent contained in this
Agreement.
6.8 Tax Matters. (a) All material Tax Returns required to be filed by
or on behalf of Parent or any of the Parent Subsidiaries have been timely filed
or requests for extensions have been timely filed, granted, and have not
expired for periods ended on or before December 31, 1996, and on or before the
date of the most recent fiscal year end immediately preceding the Effective
Time, and all such Tax Returns filed are complete and accurate in all material
respects. All Taxes shown on filed Tax Returns have been paid. There is no
audit examination, or refund Litigation with respect to any material Taxes,
except as reserved against in the Parent Financial Statements delivered prior
to the date of this Agreement. All material Taxes and other material
Liabilities due with respect to completed and settled examinations or concluded
Litigation have been paid. There are no material Liens with respect to Taxes
upon any of the Assets of Parent or any of the Parent Subsidiaries.
(b) Adequate provision for any material Taxes due or to become due
for Parent or any of the Parent Subsidiaries for the period or periods through
and including the date of the respective Parent Financial Statements has been
made and is reflected on such Parent Financial Statements.
(c) Material deferred Taxes of Parent and the Parent Subsidiaries
have been provided for in accordance with GAAP.
6.9 Environmental Matters. (a) To the Knowledge of Parent, each of
Parent and the Parent Subsidiaries, its Participation Facilities, and its
Operating Properties are, and have been, operated or maintained in compliance
with all Environmental Laws, except for violations which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Parent.
(b) To the Knowledge of Parent, there is no Litigation pending or
threatened before any court, governmental agency, or authority or other forum
in which Parent or any of the Parent Subsidiaries or any of their respective
Operating Properties or Participation Facilities (or Parent in respect of such
Operating Property or Participation Facility) has been or, with respect to
threatened Litigation, may be named as a defendant (i) for alleged
noncompliance (including by any predecessor) with any Environmental Law or (ii)
relating to the release into the environment of any Hazardous Material, whether
or not occurring at, on, under, adjacent to, or affecting (or potentially
affecting) a site owned, leased, or operated by Parent or any of the Parent
Subsidiaries or any of their respective Operating Properties or Participation
Facilities, except for such Litigation pending or threatened that is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Parent, nor, to the
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Knowledge of Parent, is there any reasonable basis in fact for Parent to expect
the commencement of any Litigation of a type described in this sentence in the
reasonably foreseeable future.
(c) During the period of (i) Parent's or any of the Parent
Subsidiaries' ownership or operation of any of their respective current
properties, (ii) any Parent's or any of the Parent Subsidiaries' participation
in the management of any Participation Facility, or (iii) Parent's or any of
the Parent Subsidiaries' holding of a security interest in an Operating
Property, to the Knowledge of Parent, there have been no releases of Hazardous
Material in, on, under, adjacent to, or affecting (or potentially affecting)
such properties, except such as are not reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on Parent. Prior to the period
of (i) Parent's or any of Parent Subsidiaries' ownership or operation of any of
their respective current properties, (ii) Parent's or any of Parent
Subsidiaries' participation in the management of any Participation Facility, or
(iii) Parent or any of Parent Subsidiaries' holding of a security interest in
an Operating Property, to the Knowledge of Parent, there were no releases of
Hazardous Material in, on, under, or affecting any such property, Participation
Facility or Operating Property, except such as are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on Parent.
6.10 Compliance With Laws. Parent is duly registered as a bank holding
company under the BHC Act. Each of Parent and the Parent Subsidiaries has in
effect all Permits necessary for it to own, lease, or operate its material
Assets and to carry on its business as now conducted, except where the failure
to hold such permits would not be reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Parent. Neither Parent nor any of
the Parent Subsidiaries:
(a) is, to the Knowledge of Parent, in violation of any Laws,
Orders, or Permits applicable to its business or employees conducting its
business, except for such violations which would not be reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on Parent; or
(b) has received any notification or communication from any
agency or department of federal, state, or local government or any Regulatory
Authority or the staff thereof (i) asserting that Parent or any Parent
Subsidiary is not in material compliance with any of the Laws or Orders which
such governmental authority or Regulatory Authority enforces, (ii) threatening
to revoke any Permits, or (iii) requiring Parent or any Parent Subsidiary to
enter into or consent to the issuance of a cease and desist order, formal
agreement, directive, commitment or memorandum of understanding, or to adopt
any Board resolution or similar undertaking, which restricts materially the
conduct of its business, or in any manner relates to its capital adequacy, its
credit or reserve policies, its management, or the payment of dividends.
6.11 Legal Proceedings. There is no Litigation instituted or pending,
or, to the Knowledge of Parent, threatened (or unasserted but considered
probable of assertion and which if asserted would have at least a reasonable
probability of an unfavorable outcome) against Parent or any Parent Subsidiary,
or against any Asset, interest, or right of any of them, that is reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Parent, nor are there any Orders of any Regulatory Authorities, other
governmental authorities, or arbitrators outstanding against Parent or any
Parent Subsidiary.
6.12 Reports. Since January 1, 1994, or the applicable date of
organization if later, Parent and each Parent Subsidiary has filed all reports
and statements, together with any amendments required to be made with respect
thereto, that it was required to file with (i) the SEC, including, but not
limited to, Forms 10-K, Forms 10-Q, Forms 8-K, and proxy statements (the
"Parent SEC Reports"), (ii) other Regulatory Authorities, and (iii) any
applicable state securities or banking authorities, except failures to file
which are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Parent. As of its respective date (or, if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing), each of such reports and documents, including, the financial
statements, exhibits, and schedules thereto complied in all material respects
with all applicable Laws. As of its respective date, each Parent SEC Report did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
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therein, in light of the circumstances under which they were made, not
misleading. Except for Parent Subsidiaries that are registered as a broker,
dealer, or investment advisor, no Parent Subsidiary is required to file any SEC
Documents.
6.13 Statements True and Correct. None of the information supplied or
to be supplied by Parent for inclusion in the Registration Statement to be
filed by Parent with the SEC, will, when the Registration Statement becomes
effective, be false or misleading with respect to any material fact, or omit to
state any material fact necessary to make the statements therein not
misleading. None of the information supplied or to be supplied by Parent for
inclusion in the Proxy Statement to be mailed to Subject Company's shareholders
in connection with the Shareholders' Meeting, and any other documents to be
filed by Parent or any Parent Subsidiary with the SEC or any other Regulatory
Authority in connection with the transactions contemplated hereby, will, at the
respective time such documents are filed, and with respect to the Proxy
Statement, when first mailed to the shareholders of Subject Company, be false
or misleading with respect to any material fact, or omit to state any material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, or, in the case of the Proxy
Statement or any amendment thereof or supplement thereto, at the time of the
Shareholders' Meeting, be false or misleading with respect to any material
fact, or omit to state any material fact necessary to correct any statement in
any earlier communication with respect to the solicitation of any proxy for the
Shareholders' Meeting. All documents that Parent or any Parent Subsidiary is
responsible for filing with any Regulatory Authority in connection with the
transactions contemplated hereby will comply as to form in all material
respects with the provisions of applicable Law.
6.14 Accounting, Tax, and Regulatory Matters. Neither Parent nor any
Parent Subsidiary has taken any action or has Knowledge of any action taken or
of any fact or circumstance relating to Parent that is reasonably likely to (i)
prevent the transactions contemplated hereby, including the Merger, from
qualifying for pooling-of-interests accounting treatment or as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code, or (ii)
materially impede or delay receipt of any Consents of Regulatory Authorities
referred to in Section 9.1(b) of this Agreement.
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 Affirmative Covenants of Subject Company. Unless the prior written
consent of Parent shall have been obtained, and except as otherwise expressly
contemplated herein or expressly provided for in the Subject Company Disclosure
Memorandum, Subject Company shall and shall cause each of the Subject Company
Subsidiaries to (i) operate its business only in the usual, regular, and
ordinary course, (ii) use reasonable efforts to preserve intact its business
organization and Assets and maintain its rights and franchises, and (iii) take
no action which would (a) materially adversely affect the ability of any Party
to obtain any Consents required for the transactions contemplated hereby or
prevent the transactions contemplated hereby, including the Merger, from
qualifying for pooling-of-interests accounting treatment or as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code, or (b)
materially adversely affect the ability of any Party to perform its covenants
and agreements under this Agreement.
7.2 Negative Covenants of Subject Company. Except as specifically
permitted by this Agreement or as and to the extent expressly disclosed or
provided for in the Subject Company Disclosure Memorandum, from the date of
this Agreement until the earlier of the Effective Time or the termination of
this Agreement, Subject Company covenants and agrees that it will not do or
agree or commit to do, or permit any of the Subject Company Subsidiaries to do
or agree or commit to do, any of the following without the prior written
consent of the chief executive officer, president, or chief financial officer
of Parent, which consent shall not be unreasonably withheld:
(a) amend the Charter, Bylaws, or other governing instruments of
Subject Company or any Subject Company Subsidiary; or
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(b) Except for debt to be incurred in connection with the purchase
of certain imaging equipment necessary for Subject Company's operations
(estimated to be approximately $125,000 to $145,000), incur any additional debt
obligation for borrowed money (other than indebtedness of Subject Company or
the Subject Company Subsidiaries to each other) in excess of an aggregate of
$100,000 (for Subject Company and the Subject Company Subsidiaries on a
consolidated basis) except in the ordinary course of the business of the
Subject Company Subsidiaries consistent with past practices (which shall
include, for the Subject Company Subsidiaries that are depository institutions,
creation of deposit liabilities, purchases of federal funds, advances from the
Federal Reserve Bank or Federal Home Loan Bank, and entry into repurchase
agreements fully secured by U.S. government or agency securities), or impose,
or suffer the imposition, on any material Asset of Subject Company or any of
the Subject Company Subsidiaries of any Lien or permit any such Lien to exist
(other than in connection with deposits, repurchase agreements, bankers
acceptances, "treasury tax and loan" accounts established in the ordinary
course of business, the satisfaction of legal requirements in the exercise of
trust powers, and Liens in effect as of the date hereof that are disclosed in
the Subject Company Disclosure Memorandum); or
(c) repurchase, redeem, or otherwise acquire or exchange (other
than exchanges in the ordinary course under employee benefit plans), directly
or indirectly, any shares, or any securities convertible into any shares, of
the capital stock of Subject Company or any of the Subject Company
Subsidiaries, or declare or pay any dividend or make any other distribution in
respect of Subject Company's capital stock, provided that Subject Company may
(to the extent legally and contractually permitted to do so), but shall not be
obligated to, declare and pay regular semi-annual cash dividends on the shares
of Subject Company Common Stock at a rate not in excess of $2.50 per share with
usual and regular record and payment dates in accordance with past practice,
provided, that, notwithstanding the provisions of Section 1.3, the Parties
shall cooperate in selecting the Effective Time to ensure that, with respect to
the semi-annual period in which the Effective Time occurs, the holders of
Subject Company Common Stock do not become entitled to receive both a dividend
in respect of their Subject Company Common Stock and a dividend in respect of
Parent Common Stock or fail to be entitled to receive any dividend; or
(d) except for this Agreement, issue, sell, pledge, encumber,
authorize the issuance of, enter into any Contract to issue, sell, pledge,
encumber, or authorize the issuance of, or otherwise permit to become
outstanding, any additional shares of its common stock or any other capital
stock, or any stock appreciation rights, or any option, warrant, conversion, or
other right to acquire any such stock, or any security convertible into any
such stock; or
(e) adjust, split, combine or reclassify any capital stock of
Subject Company or any of the Subject Company Subsidiaries or issue or
authorize the issuance of any other securities in respect of or in substitution
for shares of Subject Company Common Stock, or sell, lease, mortgage or
otherwise dispose of or otherwise encumber any shares of capital stock of any
Subject Company Subsidiary (unless any such shares of stock are sold or
otherwise transferred to another Subject Company Subsidiary) or any Asset
having a book value in excess of $50,000 other than in the ordinary course of
business for reasonable and adequate consideration; or
(f) except for purchases of investment securities acquired in the
ordinary course of business consistent with past practice, purchase any
securities or make any material investment, either by purchase of stock or
securities, contributions to capital, Asset transfers, or purchase of any
Assets, in any Person other than a wholly owned Subsidiary of Subject Company,
or otherwise acquire direct or indirect control over any Person, other than in
connection with (i) foreclosures in the ordinary course of business, (ii)
acquisitions of control by a depository institution Subsidiary in its fiduciary
capacity, or (iii) the creation of new wholly owned Subsidiaries organized to
conduct or continue activities otherwise permitted by this Agreement; or
(g) grant any increase in compensation or benefits to the
employees or officers of Subject Company or the Subject Company Subsidiaries,
except in the ordinary course of business consistent with past practice or as
required by Law; pay any severance or termination pay or any bonus other than
pursuant to written policies or written Contracts in effect on the date of this
Agreement; enter into or amend any severance agreements with officers of
Subject Company or the Subject Company Subsidiaries; grant any material
increase in fees or other
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increases in compensation or other benefits to directors of Subject Company or
the Subject Company Subsidiaries; or voluntarily accelerate the vesting of any
stock options or other stock-based compensation or employee benefits (other
than the acceleration of vesting which occurs under a benefit plan upon a
change of control of Subject Company); or
(h) enter into or amend any employment Contract between Subject
Company or the Subject Company Subsidiaries and any Person (unless such
amendment is required by Law) that Subject Company does not have the
unconditional right to terminate without Liability (other than Liability for
services already rendered), at any time on or after the Effective Time; or
(i) adopt any new employee benefit plan of Subject Company or the
Subject Company Subsidiaries or terminate or withdraw from, or make any
material change in or to, any existing employee benefit plans of Subject
Company or the Subject Company Subsidiaries other than any such change that is
required by Law or is requested by Parent, or that, in the opinion of counsel,
is necessary or advisable to maintain the tax qualified status of any such
plan, or make any distributions from such employee benefit plans, except as
required by Law, the terms of such plans or consistent with past practices; or
(j) make any material change in any Tax or accounting methods or
systems of internal accounting controls, except as may be appropriate to
conform to changes in Tax Laws or regulatory accounting requirements or GAAP;
or
(k) commence any Litigation other than in accordance with past
practice, settle any Litigation involving any Liability of Subject Company or
the Subject Company Subsidiaries for material money damages or restrictions
upon the operations of Subject Company or the Subject Company Subsidiaries; or
(l) except in the ordinary course consistent with past practice,
enter into, modify, amend, or terminate any material Contract (excluding any
loan Contract) or waive, release, compromise, or assign any material rights or
claims.
7.3 Covenants of Parent. From the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, Parent
covenants and agrees that it shall (i) continue to conduct its business and the
business of the Parent Subsidiaries in a manner designed in its reasonable
judgment to enhance the long-term value of the Parent Common Stock and the
business prospects of Parent and the Parent Subsidiaries, and (ii) take no
action which would (a) materially adversely affect the ability of any Party to
obtain any Consents required for the transactions contemplated hereby or
prevent the transactions contemplated hereby, including the Merger, from
qualifying as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code, (b) materially adversely affect the ability of any Party
to perform its covenants and agreements under this Agreement, or (c) result in
Parent entering into an agreement with respect to an Acquisition Proposal with
a third party which could be reasonably expected to result in the Merger not
being consummated or an agreement with respect to an Acquisition Proposal to be
consummated prior to the Closing Date which would effect a change in the number
or kind of shares of Parent Common Stock held by Parent shareholders
immediately prior to such consummation; provided, that the foregoing shall not
prevent Parent or any Parent Subsidiary from acquiring any other Assets or
businesses or from discontinuing or disposing of any of its Assets or business
if such action is, in the reasonable judgment of Parent, desirable in the
conduct of the business of Parent and the Parent Subsidiaries and would not, in
the reasonable judgment of Parent, likely delay the Effective Time to a date
subsequent to the date set forth in Section 10.1(e) of this Agreement.
7.4 Adverse Changes in Condition. Each Party agrees to give written
notice promptly to the other Party upon becoming aware of the occurrence or
impending occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on it or (ii) would cause or constitute a
material breach of any of its representations, warranties, or covenants
contained herein, and to use its reasonable efforts to prevent or promptly to
remedy the same.
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7.5 Reports. Each Party and its Subsidiaries shall file all reports
required to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time and, to the extent permitted by Law, shall
deliver to the other Party copies of all such reports promptly after the same
are filed. If financial statements are contained in any such reports filed with
the SEC, such financial statements will fairly present the consolidated
financial position of the entity filing such statements as of the dates
indicated and the consolidated results of operations, changes in shareholders'
equity, and cash flows for the periods then ended in accordance with GAAP
(subject in the case of interim financial statements to normal recurring year
end adjustments that are not material). As of their respective dates, such
reports filed with the SEC will comply in all material respects with the
Securities Laws and will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. Any financial statements contained in any other
reports to another Regulatory Authority shall be prepared in accordance with
Laws applicable to such reports.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 Registration Statement; Proxy Statement; Shareholder Approval.
Each of Parent and Subject Company shall prepare and file the Registration
Statement, of which the Proxy Statement shall form a part, with the SEC, and
shall use its reasonable efforts to cause the Registration Statement to become
effective under the 1933 Act and Parent shall take any action required to be
taken under the applicable state Blue Sky or securities Laws in connection with
the issuance of the shares of Parent Common Stock upon consummation of the
Merger. Each of Parent and Subject Company shall furnish all information
concerning it and the holders of its capital stock as the other Party may
reasonably request in connection with such action. Subject Company shall call a
Shareholders' Meeting, to be held 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.
Assuming the Registration Statement is then effective, the Subject Company
shall call the Shareholders' Meeting to be held not later than 40 days after
the Parent's 1998 Annual Meeting of Shareholders. Otherwise, the Subject
Company shall call a Shareholders' Meeting as soon thereafter as practicable
after the Registration Statement is declared effective by the SEC. In
connection with the Shareholders' Meeting, (i) the Board of Directors of
Subject Company shall recommend (subject to compliance with its fiduciary
duties as advised by counsel) to its shareholders the approval of the Merger,
and (ii) the Board of Directors (subject to compliance with its fiduciary
duties as advised by counsel) and officers of Subject Company shall use their
reasonable efforts to obtain shareholder approval.
8.2 Authorization of Shares; Exchange Listing. Parent shall submit to
its shareholders, at the 1998 Annual Meeting of Shareholders of Parent, a
proposal to amend the Restated Charter of Incorporation of Parent to increase
the number of authorized shares of Parent Common Stock by up to 100,000,000
shares and, subject to the approval of such amendment by the shareholders of
Parent, shall cause such amendment to become effective and reserve for issuance
a sufficient number of shares of Parent Common Stock for the purpose of issuing
shares of Parent Common Stock in accordance with the provisions of Section 3.1
of this Agreement and the Plan of Merger. Parent shall use its reasonable
efforts to list, prior to the Effective Time, on the NYSE, subject to official
notice of issuance, the shares of Parent Common Stock to be issued to the
holders of Subject Company Common Stock or Subject Company Options pursuant to
the Merger, and Parent shall give all notices and make all filings with the
NYSE required in connection with the transactions contemplated herein.
8.3 Applications. Parent shall prepare and file, and Subject Company
shall cooperate in the preparation and, where appropriate, filing of,
applications with all Regulatory Authorities having jurisdiction over the
transactions contemplated by this Agreement seeking the requisite Consents
necessary to consummate the transactions contemplated by this Agreement. At
least five business days prior to each filing, Parent shall provide Subject
Company and its counsel with copies of such applications. The Parties shall
deliver to each other copies of all filings, correspondence and orders to and
from all Regulatory Authorities in connection with the transactions
contemplated hereby as soon as practicable upon their becoming available.
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8.4 Filings With State Offices. Upon the terms and subject to the
conditions of this Agreement, Parent, Merger Subsidiary and Subject Company
shall execute and file the Articles of Merger with the Secretary of State of
the State of Tennessee in connection with the Closing.
8.5 Agreement as to Efforts to Consummate. Subject to the terms and
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper, or
advisable under applicable Laws to consummate and make effective, as soon as
practicable after the date of this Agreement, the transactions contemplated by
this Agreement, including using its reasonable efforts to lift or rescind any
Order adversely affecting its ability to consummate the transactions
contemplated herein and to cause to be satisfied the conditions referred to in
Article 9 of this Agreement. 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. Neither Party shall be required to provide access to or to disclose
information where such access or disclosure would violate or prejudice the
rights of such Party's customers, jeopardize any attorney-client privilege or
contravene any Law, rule, regulation, order, judgment, decree, fiduciary duty
or binding agreement entered into prior to the date of this Agreement. The
Parties will make appropriate substitute disclosure arrangements under
circumstances in which the restrictions of the preceding sentence apply. No
investigation by a Party shall affect the representations and warranties of the
other Party.
(b) Each Party will hold, and will cause its respective Affiliates
and their respective officers, directors, employees, agents, consultants, and
other representatives to hold, in strict confidence, unless compelled to
disclose by judicial or administrative process (including without limitation in
connection with obtaining the necessary Consents of Regulatory Authorities) or
by other requirements of Law, all confidential documents and confidential or
proprietary information concerning the other Parties gathered from the other
Parties, or their respective officers, directors, employees, agents,
consultants or Representatives, pursuant to this Agreement, except to the
extent that such documents or information can be shown to have been (a)
previously lawfully known by the Party receiving such documents or information,
(b) in the public domain through no fault of such receiving Party, or (c) later
acquired by the receiving party from other sources not themselves bound by, and
in breach of, a confidentiality agreement. Except as provided in Sections 8.1,
8.2 and 8.3 hereof, no Party will disclose or otherwise provide any such
confidential or proprietary documents or information to any other Person,
except to the Party's auditors, Representatives and other consultants and
advisors who need such documents or information in connection with this
Agreement and the transactions contemplated hereby, and the Parties agree to
cause each of the foregoing to be subject to and bound by the confidentiality
provisions hereof.
8.7 Press Releases. Prior to the Effective Time, Subject Company and
Parent shall consult with each other as to the form and substance of any press
release or other public disclosure materially related to this Agreement or any
other transaction contemplated hereby; provided, that nothing in this Section
8.7 shall be deemed to prohibit any Party from making any disclosure which its
counsel deems necessary or advisable in order to satisfy such Party's
disclosure obligations imposed by Law.
8.8 Certain Actions. (a) Except with respect to this Agreement and the
transactions contemplated hereby, after the date of this Agreement, neither
Subject Company, the Subject Company Subsidiaries nor any Representatives
thereof retained by Subject Company or the Subject Company Subsidiaries shall
directly or indirectly solicit any Acquisition Proposal by any Person. Except
to the extent necessary to comply with the fiduciary duties of Subject
Company's Board of Directors as advised by counsel, Subject Company, the
Subject Company
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Subsidiaries, or Representatives thereof shall not furnish any non-public
information that it is not legally obligated to furnish, negotiate with respect
to, or enter into any Contract with respect to, any Acquisition Proposal, but
Subject Company may communicate information about such an Acquisition Proposal
to its shareholders if and to the extent that it is required to do so in order
to comply with its legal obligations as advised by counsel. Subject Company
shall promptly notify Parent orally and in writing in the event that it
receives any Acquisition Proposal or inquiry related thereto. Subject Company
shall (i) immediately cease and cause to be terminated any existing activities,
discussions, or negotiations with any Persons conducted heretofore with respect
to any of the foregoing, and (ii) direct and use its reasonable efforts to
cause all of its Representatives not to engage in any of the foregoing.
(b) As a condition of and as an inducement to Parent's entering
into this Agreement, Subject Company covenants, acknowledges, and agrees that
it shall be a specific, absolute, and unconditionally binding condition
precedent to Subject Company's entering into a letter of intent, agreement in
principle, or definitive agreement (whether or not considered binding,
non-binding, conditional or unconditional) with any third party with respect to
an Acquisition Proposal, or supporting or indicating an intent to support an
Acquisition Proposal, other than this Agreement and the transactions
contemplated in this Agreement, regardless of whether Subject Company has
otherwise complied with the provisions of Section 8.8(a) hereof, that Subject
Company or such third party which is a party of the Acquisition Proposal shall
have paid Parent, as liquidated damages, the sum of Four Million Eight Hundred
Fifty Thousand Dollars ($4,850,000), which sum represents the (i) direct costs
and expenses (including, but not limited to, fees and expenses incurred by
Parent's financial or other consultants, printing costs, investment bankers,
accountants, and counsel) incurred by or on behalf of Parent in negotiating and
undertaking to carry out the transactions contemplated by this Agreement; and
(ii) indirect costs and expenses of Parent in connection with the transactions
contemplated by this Agreement, including Parent's management time devoted to
negotiation and preparation for the transactions contemplated by this
Agreement; and (iii) Parent's loss as a result of the transactions contemplated
by this Agreement not being consummated. Accordingly, Subject Company hereby
stipulates and covenants that prior to Subject Company's entering into a letter
of intent, agreement in principle, or definitive agreement, (whether binding or
non-binding, conditional or unconditional) with any third party with respect to
an Acquisition Proposal or supporting or indicating an intent to support an
Acquisition Proposal, either Subject Company or such third party shall have
paid to Parent the amount set forth above in immediately available funds to
satisfy the specific, absolute, and unconditionally binding condition precedent
imposed by this Section 8.8. Notwithstanding anything to the contrary in this
Section 8.8(b), in the event such Acquisition Proposal should be the result of
a hostile takeover of Subject Company, any sums due Parent hereunder shall be
paid only at the closing of the transactions set forth in such Acquisition
Proposal. Parent acknowledges that under no circumstances shall any officer or
director of Subject Company) (unless such officer or director shall have an
interest in a potential acquiring party in any Acquisition Proposal) be held
personally liable to Parent for any amount of the foregoing payment. On payment
of such amount to Parent, Parent shall have no cause of action or claim (either
in law or equity) whatsoever against Subject Company, or any officer of
director of Subject Company, with respect to or in connection with such
Acquisition Proposal or this Agreement.
(c) The requirements, conditions, and obligations imposed by this
Section 8.8 shall continue in full force and effect from the date of this
Agreement until the earlier of (i) the Effective Time or (ii) August 31, 1998,
unless the failure to consummate the transactions contemplated by this
Agreement by such date results from or is related to pending or threatened
Litigation arising out of or in connection with the Merger or an Acquisition
Proposal related to Subject Company or any Subject Company Subsidiary, in which
case the date shall be extended to that date which is thirty (30) days after
the final termination of such Litigation or threatened Litigation; or (iii) the
date on which this Agreement shall have been terminated (i) mutually by the
Parties pursuant to Section 10.1(a) of this Agreement; (ii) by Subject Company
pursuant to Section 10.1(b), 10.1(c) or 10.1(f) of this Agreement; (iii) by
Subject Company pursuant to Section 10.1(e), but only in the event the failure
to close by the particular date is not due to pending or threatened Litigation
or other delays related to an Acquisition Proposal; (iv) by either Party
pursuant to Section 10.1(d)(1)(i) of this Agreement; or (v) by Parent pursuant
to Section 10.1(d)(2) of this Agreement.
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8.9 Accounting and Tax Treatment. Each of the Parties undertakes and
agrees to use its reasonable efforts to cause the Merger, and to take no action
within its control which would cause the Merger not to qualify for
pooling-of-interests accounting treatment and treatment as a "reorganization"
within the meaning of Section 368(a) of the Internal Revenue Code for federal
income tax purposes; provided, however, that should Parent's shareholders fail
to approve the amendment to Parent's Restated Charter of Incorporation to
increase its authorized shares of Parent Common Stock as contemplated by
Section 8.2 of this Agreement, Parent, in its sole and absolute discretion, may
choose to take actions which would prevent the Merger from qualifying for
pooling-of-interests accounting treatment and such action shall not be deemed
to be a violation of any representation, warranty or covenant of Parent
contained in this Agreement related to qualifying the Merger for such
accounting treatment.
8.10 Agreement of Affiliates. Subject Company has disclosed in Section
8.10 of the Subject Company Disclosure Memorandum each Person whom it
reasonably believes is an "affiliate" of Subject Company as of the date of this
Agreement for purposes of Rule 145 under the 1933 Act. Subject Company shall
use its reasonable efforts to cause each such Person to deliver to Parent not
later than 40 days prior to the Effective Time, a written agreement,
substantially in the form of Exhibit 2, providing that such Person will not
sell, pledge, transfer, or otherwise dispose of the shares of Subject Company
Common Stock held by such Person except as contemplated by such agreement or by
this Agreement and will not sell, pledge, transfer, or otherwise dispose of the
shares of Parent Common Stock to be received by such Person upon consummation
of the Merger except in compliance with applicable provisions of the 1933 Act
and the rules and regulations thereunder and until such time as financial
results covering at least 30 days of combined operations of Parent and Subject
Company have been published within the meaning of Section 201.01 of the SEC's
Codification of Financial Reporting Policies. If the Merger will qualify for
pooling-of-interests accounting treatment, shares of Parent Common Stock issued
to such affiliates of Subject Company in exchange for shares of Subject Company
Common Stock shall not be transferable until such time as financial results
covering at least 30 days of combined operations of Parent and Subject Company
have been published within the meaning of Section 201.01 of the SEC's
Codification of Financial Reporting Policies, regardless of whether each such
affiliate has provided the written agreement referred to in this Section 8.10
(and Parent shall be entitled to place restrictive legends upon certificates
for shares of Parent Common Stock issued to affiliates of Subject Company
pursuant to this Agreement to enforce the provisions of this Section 8.10).
Parent shall not be required to maintain the effectiveness of the Registration
Statement under the 1933 Act for the purposes of resale of Parent Common Stock
by such affiliates.
8.11 Employee Benefits and Contracts. (a) Following the Effective
Time, Parent shall provide to officers and employees of the Subject Company and
any Subject Company Subsidiary, employee benefits under employee benefit and
welfare plans of Parent or the Parent Subsidiaries on terms and conditions
which when taken as a whole are substantially similar to those currently
provided by Parent or a Parent Subsidiary to their similarly situated officers
and employees. For purposes of participation, vesting, and (except in the case
of retirement plans) benefit accrual under such employee benefit plans, the
service of the employees of the Subject Company and any Subject Company
Subsidiary prior to the Effective Time shall be treated as service with Parent
or a Parent Subsidiary participating in such employee benefit plans.
(b) Parent shall, and shall cause the Parent Subsidiaries to,
honor in accordance with their terms the Subject Company Benefit Plans, each as
amended to the date hereof, and other contracts, arrangements, commitments or
understandings disclosed in Section 5.14 of the Subject Company Disclosure
Memorandum. Parent and Subject Company hereby acknowledge that consummation of
the Merger will constitute a "Change in Control" for purposes of all employee
benefit plans, contracts, arrangements and commitments that contain change in
control provisions and, agree to abide by the provisions of any employee
benefit plan, contract, arrangement or commitment which relates to a Change in
Control.
8.12 Indemnification. (a) After the Effective Time, Parent shall
indemnify, defend and hold harmless the present and former directors, officers,
employees, and agents of the Subject Company and any Subject Company Subsidiary
(each, an "Indemnified Party") (including any person who becomes a director,
officer, employee, or agent prior to the Effective Time) against all
Liabilities (including reasonable attorneys' fees, and expenses, judgments,
fines
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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) to the full extent permitted under any of Tennessee Law,
Subject Company's Charter and Bylaws as in effect on the date hereof and any
indemnity agreements entered into prior to the date of this Agreement by
Subject Company or any Subject Company Subsidiary and any director, officer,
employee or agent of Subject Company or any Subject Company Subsidiary,
including provisions relating to advances of expenses incurred in the defense
of any Litigation. Without limiting the foregoing, in any case in which
approval by Parent is required to effectuate any indemnification, Parent shall
direct, at the election of the Indemnified Party, that the determination of any
such approval shall be made by independent counsel mutually agreed upon between
Parent and the Indemnified Party.
(b) Parent shall use its reasonable efforts (and Subject Company
shall cooperate prior to the Effective Time in these efforts) to maintain in
effect for a period of three years after the Effective Time Subject Company's
existing directors' and officers' liability insurance policy (provided that
Parent may substitute therefor (i) policies of at least the same coverage and
amounts containing terms and conditions which are substantially no less
advantageous or (ii) with the consent of Subject Company given prior to the
Effective Time, any other policy) with respect to claims arising from facts or
events which occurred prior to the Effective Time and covering persons who are
currently covered by such insurance; provided, that the Surviving Corporation
shall not be obligated to make aggregate annual premium payments for such
three-year period in respect of such policy (or coverage replacing such policy)
which exceed, for the portion related to Subject Company's directors and
officers, 150% of the annual premium payments on Subject Company's current
policy in effect as of the date of this Agreement (the "Maximum Amount"). If
the amount of the premiums necessary to maintain or procure such insurance
coverage exceeds the Maximum Amount, Parent shall use its reasonable efforts to
maintain the most advantageous policies of directors' and officers' liability
insurance obtainable for a premium equal to the Maximum Amount.
(c) Any Indemnified Party wishing to claim indemnification under
paragraph (a) of this Section 8.12, upon learning of any such Liability or
Litigation, shall promptly notify Parent thereof, provided that the failure so
to notify shall not affect the obligations of Parent under this Section 8.12
unless and to the extent such failure materially increases Parent's Liability
under this Section 8.12. In the event of any such Litigation (whether arising
before or after the Effective Time), (i) Parent or the Surviving Corporation
shall have the right to assume the defense thereof and Parent shall not be
liable to such Indemnified Parties for any legal expenses of other counsel or
any other expenses subsequently incurred by such Indemnified Parties in
connection with the defense thereof, except that if Parent or the Surviving
Corporation elects not to assume such defense or counsel for the Indemnified
Parties advises that there are substantive issues which raise conflicts of
interest between Parent or the Surviving Corporation and the Indemnified
Parties or between the Indemnified Parties, the Indemnified Parties may retain
counsel satisfactory to them, and Parent or the Surviving Corporation shall pay
all reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received; provided, that Parent shall be
obligated pursuant to this paragraph (c) to pay for only two firms of counsel
for all Indemnified Parties in any jurisdiction, (ii) the Indemnified Parties
will cooperate in the defense of any such Litigation, and (iii) neither Parent
nor the Surviving Corporation shall be liable for any settlement effected
without its prior written consent or have any obligation hereunder to any
Indemnified Party when and if a court of competent jurisdiction shall
determine, and such determination shall have become final, that the
indemnification of such Indemnified Party in the manner contemplated hereby is
prohibited by applicable Law.
(d) If either Parent or the Surviving Corporation or any of their
respective successors or assigns shall consolidate with or merge into any other
Person and shall not be the continuing or surviving Person of such
consolidation or merger or shall transfer all or substantially all of its
assets to any Person, then and in each case, proper provision shall be made so
that the successors and assigns of Parent or the Surviving Corporation, as the
case may be, shall assume the obligations set forth in this Section 8.12.
(e) Parent shall pay all reasonable costs, including attorneys'
fees, that may be incurred by any Indemnified Party in enforcing the indemnity
and other obligations provided for in this Section 8.12.
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(f) The provisions of this Section 8.12 are intended to be for
the benefit of, and shall be enforceable by, each Indemnified Party and his or
her heirs and representatives.
8.13 Termination by Parent Pursuant to Section 10.1(d)(2). (a) As a
condition of and as an inducement to Subject Company's entering into this
Agreement, Parent covenants, acknowledges, and agrees that it shall be a
specific, absolute, and unconditionally binding condition precedent to Parents
termination of this Agreement pursuant to Section 10.1(d)(2) only, that Parent
shall have paid Subject Company, as liquidated damages, the sum of Four Million
Eight Hundred Fifty Thousand Dollars ($4,850,000), which sum represents the (i)
direct costs and expenses (including, but not limited to, fees and expenses
incurred by Subject Company's financial or other consultants, printing costs,
investment bankers, accountants, and counsel) incurred by or on behalf of
Subject Company in negotiating and undertaking to carry out the transactions
contemplated by this Agreement; and (ii) indirect costs and expenses of Subject
Company in connection with the transactions contemplated by this Agreement,
including Subject Company's management time devoted to negotiation and
preparation for the transactions contemplated by this Agreement; and (iii)
Subject Company's loss as a result of the transactions contemplated by this
Agreement not being consummated. Accordingly, Parent hereby stipulates and
covenants that prior to terminating this Agreement pursuant to Section
10.1(d)(2) only, Parent shall have paid to Subject Company the amount set forth
above in immediately available funds to satisfy the specific, absolute, and
unconditionally binding condition precedent imposed by this Section 8.13.
Subject Company acknowledges that under no circumstances shall any officer or
director of Parent be held personally liable to Parent for any amount of the
foregoing payment. On payment of such amount to Subject Company, Subject
Company shall have no cause of action or claim (either in law or equity)
whatsoever against Parent, or any officer of director of Parent, with respect
to or in connection with such termination of this Agreement.
(b) Notwithstanding the provisions of Section 8.13(a) above,
Subject Company covenants, acknowledges, and agrees that for two (2) years
after the termination of this Agreement by Parent pursuant to Section
10.1(d)(2) of this Agreement, it shall be a specific, absolute, and
unconditionally binding condition precedent to Subject Company's entering into
a letter of intent, agreement in principle, or definitive agreement (whether or
not considered binding, non-binding, conditional or unconditional) with any
third party with respect to an Acquisition Proposal, or supporting or
indicating an intent to support an Acquisition Proposal, in either case which
would result in the aggregate consideration to be paid by the third party in
such Acquisition Proposal (the "New Consideration") to exceed $95,080,680 ("the
"Base Consideration"), that Subject Company or such third party which is a
party to such Acquisition Proposal shall have agreed to pay Parent at the
closing of such transaction an amount (the "Refund Amount") equal to the
remainder after subtracting from "X" an amount equal to "Y" (where "X" equals
the amount remaining after subtracting from the New Consideration the Base
Consideration, and "Y" equals the remainder after subtracting from $4,850,000,
the direct costs and expenses (including, but not limited to, fees and expenses
incurred by Subject Company's financial or other consultants, printing costs,
investment bankers, accountants, and counsel) incurred by or on behalf of
Subject Company in negotiating and undertaking to carry out the transactions
contemplated by this Agreement, all as documented by Subject Company to
Parent's reasonable satisfaction; provided, however, that if such formula would
result in a negative number, no Refund Amount would be due or payable to
Parent. Accordingly, Subject Company hereby stipulates and covenants that for a
period of two (2) years after Parent's termination of this Agreement pursuant
to Section 10.1(d)(2) only, prior to Subject Company's entering into a letter
of intent, agreement in principle, or definitive agreement (whether or not
considered binding, non-binding, conditional or unconditional) with any third
party with respect to an Acquisition Proposal, or supporting or indicating an
intent to support an Acquisition Proposal, in either case which would result in
the aggregate consideration to be paid by the third party in such Acquisition
Proposal to exceed $95,080,680, that Subject Company or such third party which
is a party to such Acquisition Proposal shall have agreed to pay Parent at the
closing of such transaction the Refund Amount, if any, and that at the closing
of such transaction, Subject Company shall have taken such steps as are
necessary to insure that the Refund Amount is paid to Parent in immediately
available funds to satisfy the specific, absolute, and unconditionally binding
condition precedent to such transaction imposed by this Section 8.13(b). Parent
acknowledges that under no circumstances shall any officer or director of
Subject Company (unless such officer or director shall have an interest in a
potential acquiring party in any Acquisition Proposal) be held personally
liable to Parent for any amount of the foregoing payment; provided, however,
that Parent may seek
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damages from Subject Company and any of its directors or officers for failure
to take such actions as are necessary to ensure the payment of the refund
Amount to Parent as contemplated by this Section 8.13(b). On payment of such
Refund Amount to Parent, Parent shall have no cause of action or claim (either
in law or equity) whatsoever against Subject Company, or any officer of
director of Subject Company, with respect to or in connection with this Section
8.13(b).
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
9.1 Conditions to Obligations of Each Party. The respective
obligations of each Party to perform this Agreement and consummate the Merger
and the other transactions contemplated hereby are subject to the satisfaction
of the following conditions, unless waived by both Parties pursuant to Section
11.6 of this Agreement:
(a) Shareholder Approval. The shareholders of Subject Company
shall have approved this Agreement and the consummation of the transactions
contemplated hereby and thereby, including the Merger, as and to the extent
required by Law, or by the provisions of any governing instruments (without
regard to any shares which are voted pursuant to irrevocable proxies, the
validity of which has been contested by the underlying owner, unless the
underlying owner has given written instructions with respect to the voting of
such shares in connection with this Agreement).
(b) Regulatory Approvals. All Consents of, filings and
registrations with, and notifications to, all Regulatory Authorities required
for consummation of the Merger shall have been obtained or made and shall be in
full force and effect and all waiting periods required by Law shall have
expired. No Consent obtained from any Regulatory Authority which is necessary
to consummate the transactions contemplated hereby shall be conditioned or
restricted in a manner (other than matters relating to the raising of
additional capital or the disposition of Assets or deposit Liabilities and
associated branches) which in the reasonable judgment of the Board of Directors
of Parent would so materially adversely impact the financial or economic
benefits of the transactions contemplated by this Agreement that, had such
condition or requirement been known, Parent would not, in its reasonable
judgment, have entered into this Agreement.
(c) Consents and Approvals. Each Party shall have obtained any and
all Consents required for consummation of the Merger (other than those referred
to in Section 9.1(b) of this Agreement) or for the preventing of any Default
under any Contract or Permit of such Party which, if not obtained or made, is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on such Party.
(d) Legal Proceedings. No court or governmental or regulatory
authority of competent jurisdiction shall have enacted, issued, promulgated,
enforced, or entered by Law or Order (whether temporary, preliminary, or
permanent) or taken any other action which prohibits, restricts, or makes
illegal consummation of the transactions contemplated by this Agreement.
(e) Registration Statement. The Registration Statement shall be
effective under the 1933 Act, no stop orders suspending the effectiveness of
the Registration Statement shall have been issued, no action, suit, proceeding,
or investigation by the SEC to suspend the effectiveness thereof shall have
been initiated and be continuing, and all necessary approvals under state
securities Laws or the 1933 Act or 1934 Act relating to the issuance or trading
of the shares of Parent Common Stock issuable pursuant to the Merger shall have
been received.
(f) Exchange Listing. The shares of Parent Common Stock issuable
pursuant to the Merger shall have been approved for listing on the NYSE,
subject to official notice of issuance.
(g) Tax Matters. Parent shall have received a written opinion of
counsel from Wyatt, Tarrant & Combs, and Subject Company shall have received a
written opinion of counsel from Jenkens & Gilchrist, a Professional
Corporation, in form and substance reasonably satisfactory to Parent and
Subject Company, respectively,
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dated as of the Effective Time, in each case substantially to the effect that,
for federal income tax purposes (i) the Merger will constitute a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code, (ii) Parent,
Merger Subsidiary and Subject Company will each be "a party to a
reorganization" within the meaning of Section 368(b) of the Internal Revenue
Code; (iii) no gain or loss will be recognized by the shareholders of Subject
Company who exchange all of their Subject Company Common Stock solely for
Parent Common Stock pursuant to the Merger (except with respect to cash
received in lieu of a fractional share interest in Parent Common Stock), (iv)
the aggregate tax basis of the Parent Common Stock received by shareholders of
Subject Company who exchange Subject Company Common Stock solely for Parent
Common Stock in the Merger (including any fractional shares not actually
received) will be the same as the aggregate tax basis of the Subject Company
Common Stock surrendered in exchange therefor, (v) the holding period of the
Parent Common Stock received by shareholders of Subject Company in the Merger
(including any fractional shares not actually received) will include the period
during which the shares of Subject Company Common Stock surrendered in exchange
therefor were held, provided such Subject Company Common Stock was held as a
capital asset by the holder of such Subject Company Common Stock at the
Effective Time, and (vi) neither Subject Company nor Parent will recognize gain
or loss as a consequence of the Merger. In rendering such Tax Opinion, such
counsel shall require and be entitled to rely upon representations and
covenants of officers of Parent, Subject Company, shareholders of Subject
Company and others reasonably satisfactory in form and substance to such
counsel.
9.2 Conditions to Obligations of Parent. The obligations of Parent to
perform this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following
conditions, unless waived by Parent pursuant to Section 11.6(a) of this
Agreement:
(a) Representations and Warranties. For purposes of this Section
9.2(a), the accuracy of the representations and warranties of Subject Company
set forth in this Agreement shall be assessed as of the date of this Agreement
and as of the Effective Time with the same effect as though all such
representations and warranties had been made on and as of the Effective Time
(provided that representations and warranties which are confined to a specific
date shall speak only as of such date). The representations and warranties of
Subject Company set forth in Sections 5.1, 5.2, 5.3, 5.19 and 5.20 of this
Agreement shall each be true and correct in all material respects. There shall
not exist inaccuracies in the representations and warranties of Subject Company
set forth in this Agreement (including the representations and warranties set
forth in Sections 5.1, 5.2, 5.3, 5.19 and 5.20) such that the aggregate effect
of such inaccuracies has, or is reasonably likely to have, a Material Adverse
Effect on Subject Company, provided that, for purposes of this sentence only,
those representations and warranties which are qualified by references to
"material" or "Material Adverse Effect" or "Knowledge" shall be deemed not to
include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of Subject Company to be performed and complied with
pursuant to this Agreement and the other agreements contemplated hereby prior
to the Effective Time shall have been duly performed and complied with in all
material respects.
(c) Certificates. Subject Company shall have delivered to Parent
(i) a certificate, dated as of the Effective Time and signed on its behalf by
its chief executive officer and its chief financial officer, to the effect that
the conditions of its obligations set forth in Sections 9.2(a) and 9.2(b) of
this Agreement have been satisfied, and (ii) certified copies of resolutions
duly adopted by Subject Company's Board of Directors and shareholders
evidencing the taking of all corporate action necessary to authorize the
execution, delivery, and performance of this Agreement, and the consummation of
the transactions contemplated hereby, all in such reasonable detail as Parent
shall request.
(d) Parent Pooling Letter. Parent shall have received a copy of a
letter, dated as of the date of filing of the Registration Statement with the
SEC and as of the Effective Time, addressed to it and in a form reasonably
acceptable to it, from Price Waterhouse LLP to the effect that the Merger will
qualify for pooling-of-interests accounting treatment.
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(e) Amendment of Parent's Charter. The shareholders of Parent
shall have approved an amendment to Parent's Restated Charter of Incorporation
to increase the number of authorized shares of Parent Common Stock by up to
100,000,000 shares, and in any event to a sufficient number of authorized
shares of Parent Common Stock to enable Parent to issue authorized shares of
Parent Common Stock in accordance with its obligations under Article 3 of this
Agreement and the Plan of Merger.
9.3 Conditions to Obligations of Subject Company. The obligations of
Subject Company to perform this Agreement and consummate the Merger and the
other transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by Subject Company pursuant to Section
11.6(b) of this Agreement.
(a) Representations and Warranties. For purposes of this Section
9.3(a), the accuracy of the representations and warranties of Parent set forth
in this Agreement shall be assessed as of the date of this Agreement and as of
the Effective Time with the same effect as though all such representations and
warranties had been made on and as of the Effective Time (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date). The representations and warranties of Parent set
forth in Sections 6.1, 6.2, 6.3 and 6.14 of this Agreement shall each be true
and correct in all material respects; provided, however, that should Parent
take any action which would prevent the Merger from qualifying for
pooling-of-interests accounting treatment, such shall not be deemed a material
violation of Section 6.14. There shall not exist inaccuracies in the
representations and warranties of Parent set forth in this Agreement (including
the representations and warranties set forth in Sections 6.1, 6.2, 6.3 and
6.14, except as to Section 6.14, as noted in the immediately preceding
sentence) such that the aggregate effect of such inaccuracies has, or is
reasonably likely to have, a Material Adverse Effect on Parent; provided that,
for purposes of this sentence only, those representations and warranties which
are qualified by references to "material" or "Material Adverse Effect" or
"Knowledge" shall be deemed not to include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of Parent to be performed and complied with pursuant
to this Agreement and the other agreements contemplated hereby prior to the
Effective Time shall have been duly performed and complied with in all material
respects.
(c) Certificates. Parent shall have delivered to Subject Company
(i) a certificate, dated as of the Effective Time and signed on its behalf by
its chief executive officer and its chief financial officer, to the effect that
the conditions of its obligations set forth in Sections 9.3(a) and 9.3(b) of
this Agreement have been satisfied, and (ii) certified copies of resolutions
duly adopted by Parent's or Merger Subsidiary's Boards of Directors evidencing
the taking of all corporate action necessary to authorize the execution,
delivery and performance of this Agreement, and the consummation of the
transactions contemplated hereby, all in such reasonable detail as Subject
Company shall request.
(d) Fairness Opinion. Subject Company shall have received an
opinion from Alex Sheshunoff & Company to the effect that the Merger is fair to
Subject Company shareholders from a financial point of view dated the date of
the Proxy Statement.
(e) Stock Availability. Should Parent's shareholder's fail to
approve an increase in the number of authorized shares of Parent Common Stock
to a number sufficient for Parent to satisfy its obligations pursuant to
Section 3.1 of this Agreement, Parent shall have delivered to Subject Company
within ten (10) business days after written request by Subject Company, such
assurances as Subject Company may reasonably request that Parent will have a
sufficient number of unissued shares of Parent Common Stock to satisfy its
obligations under Section 3.1 of this Agreement at the Effective Time.
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ARTICLE 10
TERMINATION
10.01 Termination. Notwithstanding any other provision of this
Agreement, and notwithstanding the approval of this Agreement by the
shareholders of Subject Company, this Agreement may be terminated and the
Merger abandoned at any time prior to the Effective Time:
(a) By mutual consent of the Board of Directors of Parent and
the Board of Directors of Subject Company; or
(b) By the Board of Directors of either Party (provided that the
terminating Party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in Section
9.2(a) of this Agreement in the case of Subject Company and Section 9.3(a) in
the case of Parent or in material breach of any covenant or other agreement
contained in this Agreement) in the event of an inaccuracy of any
representation or warranty of the other Party contained in this Agreement which
cannot be or has not been cured within 30 days after the giving of written
notice to the breaching Party of such inaccuracy and which inaccuracy would
provide the terminating Party the ability to refuse to consummate the Merger
under the applicable standard set forth in Section 9.2(a) of this Agreement in
the case of Subject Company and Section 9.3(a) of this Agreement in the case of
Parent; or
(c) By the Board of Directors of either Party (provided that the
terminating Party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in Section
9.2(a) of this Agreement in the case of Subject Company and Section 9.3(a) in
the case of Parent or in material breach of any covenant or other agreement
contained in this Agreement) in the event of a material breach by the other
Party of any covenant or agreement contained in this Agreement which cannot be
or has not been cured within 30 days after the giving of written notice to the
breaching Party of such breach; or
(d) By (1) 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 non-appealable action of such authority or if any action taken by such
authority is not appealed within the time limit for appeal, or (ii) the
shareholders of Subject Company fail to vote their approval of this Agreement
and the transactions contemplated hereby as required by the TBCA and this
Agreement at the Shareholders' Meeting where the transactions were presented to
such shareholders for approval and voted upon, or (2) by Parent should the
shareholders of Parent, at the 1998 Annual Meeting of Shareholders of Parent,
fail to vote their approval of an amendment to the Restated Charter of
Incorporation of Parent to increase the number of authorized shares of Parent
Common Stock, to the extent Parent would not have sufficient authorized shares
of Parent Common Stock available for issuance in the Merger; provided, however,
that should Parent terminate this Agreement pursuant to this Section
10.1(d)(2), the provisions of Section 8.13 shall apply; or
(e) By the Board of Directors of either Party in the event that
the Merger shall not have been consummated by August 31, 1998, if the failure
to consummate the transactions contemplated hereby on or before such date is
not caused by any willful breach of this Agreement by the Party electing to
terminate pursuant to this Section 10.1(e); or
(f) By the Board of Directors of Subject Company upon written
notice to Parent at any time during the ten-day period commencing two days
after the Determination Date, if both of the following conditions are
satisfied:
(1) the Average Closing Price shall be less than the product of
(i) 0.80 and (ii) the Starting Price; and
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(2) (i) the quotient obtained by dividing the Average Closing
Price by the Starting Price (such number being referred to
herein as the "Parent Ratio") shall be less than (ii) the
quotient obtained by dividing the Index Price on the
Determination Date by the Index Price on the Starting Date
and subtracting 0.20 from the quotient in this clause (2)(ii)
(such number being referred to herein as the "Index Ratio");
subject, however, to the following three sentences. If
Subject Company refuses to consummate the Merger pursuant to
this Section 10.1(f), it shall give prompt written notice
thereof to Parent; provided, that such notice of election to
terminate may be withdrawn at any time within the
aforementioned ten-day period. During the five-day period
commencing with its receipt of such notice, Parent shall have
the option to elect to increase the Exchange Ratio to equal
the lesser of (i) the quotient obtained by dividing (1) the
product of 0.80, the Starting Price, and the Exchange Ratio
(as then in effect) by (2) the Average Closing Price, and
(ii) the quotient obtained by dividing (1) the product of the
Index Ratio and the Exchange Ratio (as then in effect) by (2)
the Parent Ratio. If Parent makes an election contemplated by
the preceding sentence, within such five-day period, it shall
give prompt written notice to Subject Company of such
election and the revised Exchange Ratio, whereupon no
termination shall have occurred pursuant to this Section
10.1(f) and this Agreement shall remain in effect in
accordance with its terms (except as the Exchange Ratio shall
have been so modified), and any references in this Agreement
to "Exchange Ratio" shall thereafter be deemed to refer to
the Exchange Ratio as adjusted pursuant to this Section
10.1(f).
For purposes of this Section 10.1(f), the following terms
shall have the meanings indicated:
"Average Closing Price" shall mean the average of
the daily last sales prices of Parent Common Stock as
reported on the NYSE (as reported by The Wall Street Journal
or, if not reported thereby, another authoritative source as
chosen by Parent) for the 20 consecutive full trading days in
which such shares are traded on the NYSE ending at the close
of trading on the Determination Date.
"Determination Date" shall mean the later of the
date (i) of the Shareholders' Meeting and (ii) on which the
Consent of the Board of Governors of the Federal Reserve
System shall be received (without regard to any requisite
waiting period thereof).
"Index Group" shall mean the 15 bank holding
companies listed below, the common stocks of all of which
shall be publicly traded and as to which there shall not have
been, since the Starting Date and before the Determination
Date, any public announcement of a proposal for such company
to be acquired or for such company to acquire another company
or companies in transactions with a value exceeding 25% of
the acquiror's market capitalization as of the Starting Date.
In the event that any such company or companies are removed
from the Index Group as a result of any of the events
described in the preceding sentence, the weights (which shall
be determined based upon the number of outstanding shares of
common stock) shall be redistributed proportionately for
purposes of determining the Index Price. The 15 bank holding
companies and the weights attributed to them are as follows:
UPC/CBT AGREEMENT - Page 30
<PAGE> 117
<TABLE>
<CAPTION>
Bank Holding Companies Weighting
---------------------- ---------
<S> <C>
AmSouth Bancorporation 5.367%
BB&T Corporation 8.928
Commerce Bancshares, Inc. 2.474
Crestar Financial Corporation 7.353
First American Corporation 3.895
First Security Corporation 7.725
First Tennessee National Corp. 4.275
Firstar Corporation 9.654
Huntington Bancshares, Inc. 12.753
Marshall & Ilsley Corporation 6.761
Mercantile Bancorporation, Inc. 8.688
National Commerce Bancorp 3.258
Old Kent Financial Corporation 3.137
Regions Financial Corporation 9.079
SouthTrust Corporation 6.655
------
Total 100.00%
======
</TABLE>
"Index Price" on a given date shall mean the
weighted average (weighted in accordance with the factors
listed above) of the closing prices of the companies
composing the Index Group.
"Starting Date" shall mean the fourth full trading
day after the announcement by press release of the Merger.
"Starting Price" shall mean the closing price per
share of Parent Common Stock as reported on the NYSE (as
reported by The Wall Street Journal or, if not reported
thereby, another authoritative source as chosen by Parent) on
the Starting Date.
If Parent or any company belonging to the Index Group declares or
effects a stock dividend, reclassification, recapitalization, split-up,
combination, exchange of shares, or similar transaction between the date of
this Agreement and the Determination Date, the prices for the common stock of
such company or Parent shall be appropriately adjusted for the purposes of
applying this Section 10.1(f).
10.2 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 10.1 of this Agreement, this
Agreement and the Plan of Merger shall become void and have no effect, except
that (i) the provisions of this Section 10.2, Section 8.6(b), Section 8.8,
Section 8.13, Section 11.2 and Section 11.3 of this Agreement shall survive any
such termination and abandonment, and (ii) a termination pursuant to the terms
of this Agreement shall not relieve the breaching Party from Liability for an
uncured willful breach of a representation, warranty, covenant, or agreement.
10.3 Non-Survival of Representations and Covenants. The respective
representations, warranties, obligations, covenants, and agreements of the
Parties shall not survive the Effective Time except for those covenants and
agreements which by their terms apply in whole or in part after the Effective
Time.
ARTICLE 11
MISCELLANEOUS
11.1 Definitions. (a) Except as otherwise provided herein, the
capitalized terms set forth below shall have the following meanings:
UPC/CBT AGREEMENT - Page 31
<PAGE> 118
"Acquisition Proposal" with respect to a Party shall mean any tender
offer or exchange offer or any proposal for a merger, acquisition of all of the
stock or assets of, or other business combination involving such Party or any
of its Subsidiaries or the acquisition of a substantial equity interest in, or
a substantial portion of the assets of, such Party or any of its Subsidiaries.
"Affiliate" of a Person shall mean any other Person, directly or
indirectly through one or more intermediaries, controlling, controlled by, or
under common control with such Person.
"Agreement" shall mean this Agreement, including the Stock Option
Agreement and the Exhibits delivered pursuant hereto and incorporated herein by
reference.
"Articles of Merger" shall mean the Articles of Merger to be executed
by Parent, Merger Subsidiary and Subject Company and filed with the Secretary
of State of the Tennessee relating to the Merger as contemplated by Section 1.1
of this Agreement.
"Assets" of a Person shall mean all of the assets,
properties,businesses, and rights of such Person of every kind, nature,
character and description, whether real, personal or mixed, tangible or
intangible, accrued or contingent, or otherwise relating to or utilized in such
Person's business, directly or indirectly, in whole or in part, whether or not
carried on the books and records of such Person, and whether or not owned in
the name of such Person or any Affiliate of such Person and wherever located.
"Bank" shall mean City Bank and Trust Company.
"BHC Act" shall mean the federal Bank Holding Company Act of 1956, as
amended.
"Closing Date" shall mean the date on which the Closing occurs.
"Consent" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order or Permit.
"Contract" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease, obligation,
plan, practice, restriction, understanding, or undertaking of any kind or
character, or other document to which any Person is a party or that is binding
on any Person or its capital stock, Assets or business.
"Default" shall mean (i) any breach or violation of or default under
any Contract, Order, or Permit, (ii) any occurrence of any event that with the
passage of time or the giving of notice or both would constitute a breach or
violation of or default under any Contract, Order, or Permit, or (iii) any
occurrence of any event that with or without the passage of time or the giving
of notice would give rise to a right to terminate or revoke, change the current
terms of, or renegotiate, or to accelerate, increase or impose any Liability
under, any Contract, Order or Permit.
"Dissenting Shares" shall mean any shares of Subject Company Common
Stock with respect to which the record or beneficial holder has properly
perfected the holder's rights to dissent under Chapter 23 of the TBCA.
"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
UPC/CBT AGREEMENT - Page 32
<PAGE> 119
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of any Hazardous Material.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" shall mean any trade or business, whether or not
incorporated, that together with Subject Company would be deemed a "single
employer" within the meaning of section 4001(b) of ERISA.
"Exhibits" shall mean the Exhibits so marked, copies of which are
attached to this Agreement. Such Exhibits are hereby incorporated by reference
herein and made a part hereof, and may be referred to in this Agreement and any
other related instrument or document without being attached hereto.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"Hazardous Material" shall mean (i) any hazardous substance, hazardous
material, hazardous waste, regulated substance, or toxic substance (as those
terms are defined by any applicable Environmental Laws) and (ii) any chemicals,
pollutants, contaminants, petroleum, petroleum products, or oil (and
specifically shall include asbestos requiring abatement, removal, or
encapsulation pursuant to the requirements of governmental authorities and any
polychlorinated biphenyls).
"HSR Act" shall mean Section 7A of the Clayton Act, as added by Title
II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
the rules and regulations promulgated thereunder.
"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 Taxes upon the assets or
properties of a Party or its Subsidiaries which are not yet due and payable,
and (ii) for depository institution Subsidiaries of a Party, pledges to secure
deposits and other Liens incurred in the ordinary course of the banking
business.
UPC/CBT AGREEMENT - Page 33
<PAGE> 120
"Litigation" shall mean any action, arbitration, cause of action,
claim, complaint, criminal prosecution, demand letter, governmental or other
examination or investigation, hearing, inquiry, administrative or other
proceeding, or notice (written or oral) by any Person alleging potential
Liability or requesting information relating to or affecting a Party, its
business, its Assets (including Contracts related to it), or the transactions
contemplated by this Agreement, but shall not include regular, periodic
examinations of depository institutions and their Affiliates by Regulatory
Authorities.
"Material Adverse Effect" on a Party shall mean an event, change, or
occurrence which, individually or together with any other event, change, or
occurrence, has a material adverse impact on (i) the financial position,
business, or results of operations of such Party and its Subsidiaries, taken as
a whole, or (ii) the ability of such Party to perform its obligations under
this Agreement or to consummate the Merger or the other transactions
contemplated by this Agreement in accordance with applicable Law, provided that
"Material Adverse Effect" and "material adverse impact" shall not be deemed to
include the impact of (a) changes in banking and similar Laws of general
applicability or interpretations thereof by courts or governmental authorities,
(b) changes in GAAP or regulatory accounting principles generally applicable to
banks and their holding companies, (c) actions or omissions of a Party (or any
of its Subsidiaries) taken with the prior written consent of the other Party,
(d) changes in economic conditions or interest rates generally affecting
financial institutions, (e) the direct effects of compliance with this
Agreement (including the expense associated with the vesting of benefits under
the various employee benefit plans of Subject Company as a result of the Merger
constituting a change of control) on the operating performance of the Parties,
including expenses incurred by the Parties in consummating the transactions
contemplated by the Agreement, or (f) deposit attrition incurred after the date
of this Agreement and reasonably related to the Merger; provided, however, in
the instance of deposit attrition, Subject Company shall have continued to
operate in its normal course of business.
"Merger Subsidiary" shall mean Union Planters Holding Corporation, a
wholly owned subsidiary of Parent organized under the Laws of the State of
Tennessee.
"Merger Subsidiary Common Stock" shall mean the $1.00 par value common
stock of Merger Subsidiary.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NYSE" shall mean the New York Stock Exchange, Inc.
"1933 Act" shall mean the Securities Act of 1933, as amended.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
"Operating Property" shall mean any property owned by the Party in
question or by any of its Subsidiaries or in which such Party or Subsidiary
holds a security interest, and, where required by the context, includes the
owner or operator of such property, but only with respect to such property.
"Order" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or writ
of any federal, state, local, or foreign or other court, arbitrator, mediator,
tribunal, administrative agency, or Regulatory Authority.
"Parent Capital Stock" shall mean, collectively, the Parent Common
Stock, the Parent Preferred Stock and any other class or series of capital
stock of Parent.
"Parent Common Stock" shall mean the $5.00 par value common stock of
Parent.
"Parent Disclosure Memorandum" shall mean the written information
entitled "Parent Memorandum" delivered prior to the date of this Agreement to
Subject Company describing in reasonable detail the matters
UPC/CBT AGREEMENT - Page 34
<PAGE> 121
contained therein and, with respect to each disclosure made therein,
specifically referencing each Section of this Agreement under which such
disclosure is being made.
"Parent Financial Statements" shall mean (i) the consolidated balance
sheets (including related notes and schedules, if any) of Parent as of
September 30, 1997, and as of December 31, 1996 and 1995, and the related
statements of earnings, changes in shareholders' equity, and cash flows
(including related notes and schedules, if any) for the nine months ended
September 30, 1997 and for each of the three years ended December 31, 1996,
1995 and 1994, as filed by Parent in SEC Documents, and (ii) the consolidated
balance sheets of Parent (including related notes and schedules, if any) and
related statements of earnings, changes in shareholders' equity, and cash flows
(including related notes and schedules, if any) included in SEC Documents filed
with respect to periods ended subsequent to September 30, 1997.
"Parent Preferred Stock" shall mean the no par value preferred stock
of Parent and shall include the (i) Series A Preferred Stock and (ii) Series E
8% Cumulative, Convertible Preferred Stock, of Parent ("Parent Series E
Preferred Stock").
"Parent Rights" shall mean the preferred stock purchase rights issued
pursuant to the Parent Rights Agreement.
"Parent Rights Agreement" shall mean that certain Rights Agreement,
dated January 19, 1989, between Parent and UPNB, as Rights Agent.
"Parent Subsidiaries" shall mean the Subsidiaries of Parent and any
corporation, bank, or other organization acquired as a Subsidiary of Parent in
the future and owned by Parent at the Effective Time.
"Participation Facility" shall mean any facility or property in which
the Party in question or any of its Subsidiaries participates in the management
and, where required by the context, said term means the owner or operator of
such facility or property, but only with respect to such facility or property.
"Party" shall mean either Subject Company or Merger Subsidiary or
Parent, and "Parties" shall mean, collectively, Subject Company, Merger
Subsidiary and Parent.
"Permit" shall mean any federal, state, local, and foreign
governmental approval, authorization, certificate, easement, filing, franchise,
license, notice, permit, or right to which any Person is a party or that is or
may be binding upon or inure to the benefit of any Person or its securities,
Assets or business.
"Person" shall mean a natural person or any legal, commercial, or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting in a
representative capacity.
"Plan of Merger" shall mean the Plan of Merger of even date herewith
entered into by Parent, Merger Subsidiary and Subject Company, in the form of
Exhibit 1.
"Proxy Statement" shall mean the proxy statement used by Subject
Company to solicit the approval of its shareholders of the transactions
contemplated by this Agreement, which shall include the prospectus of Parent
relating to the issuance of the Parent Common Stock to holders of Subject
Company Common Stock.
"Registration Statement" shall mean the Registration Statement on Form
S-4, or other appropriate form, including any pre-effective or post-effective
amendments or supplements thereto, filed with the SEC by Parent under the 1933
Act with respect to the shares of Parent Common Stock to be issued to the
shareholders of Subject Company in connection with the transactions
contemplated by this Agreement.
UPC/CBT AGREEMENT - Page 35
<PAGE> 122
"Regulatory Authorities" shall mean, collectively, the Federal Trade
Commission, the United States Department of Justice, the Board of the Governors
of the Federal Reserve System, the Office of the Comptroller of the Currency,
the Federal Deposit Insurance Corporation, the Department of Financial
Institutions of the State of Tennessee, all state regulatory agencies having
jurisdiction over the Parties and their respective Subsidiaries, the NYSE, the
NASD, and the SEC.
"Representative" shall mean any investment banker, financial advisor,
attorney, accountant, consultant, or other representative of a Person.
"Rights" shall mean all arrangements, calls, commitments, Contracts,
options, rights to subscribe to, scrip, warrants, or other binding obligations
of any character whatsoever by which a Person is or may be bound to issue
additional shares of its capital stock or other Rights, or securities or rights
convertible into or exchangeable for, shares of the capital stock of a Person.
"SEC Documents" shall mean all forms, proxy statements, registration
statements, reports, schedules, and other documents filed, or required to be
filed, by a Party or any of its Subsidiaries with any Regulatory Authority
pursuant to the Securities Law.
"Securities Laws" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940, as amended, the Investment Advisors Act of
1940, as amended, the Trust Indenture Act of 1939, as amended, and the rules
and regulations of any Regulatory Authority promulgated thereunder.
"Shareholders' Meeting" shall mean the meeting of the shareholders of
Subject Company to be held pursuant to Section 8.1 of this Agreement, including
any adjournment or adjournments thereof.
"Subject Company Common Stock" shall mean the common stock of Subject
Company.
"Subject Company Disclosure Memorandum" shall mean the written
information entitled "Subject Company Disclosure Memorandum" delivered prior to
the date of this Agreement to Parent describing in reasonable detail the
matters contained therein and, with respect to each disclosure made therein,
specifically referencing each Section of this Agreement under which such
disclosure is being made.
"Subject Company Financial Statements" shall mean (i) the consolidated
statements of financial position (including related notes and schedules, if
any) of Subject Company as of September 30, 1997, and as of December 31, 1996
and 1995, and the related statements of operations, shareholders' equity, and
cash flows (including related notes and schedules, if any) for the nine months
ended September 30, and for each of the three fiscal years ended December 31,
1996, 1995 and 1994, as filed by Subject Company in SEC Documents, and (ii) the
consolidated statements of financial position of Subject Company (including
related notes and schedules, if any) and related statements of operations,
shareholders' equity, and cash flows (including related notes and schedules, if
any) included in SEC Documents filed with respect to periods ended subsequent
to September 30, 1997.
"Subject Company Stock Plans" shall mean the existing stock option and
other stock-based compensation plans of Subject Company, if any.
"Subject Company Subsidiaries" shall mean the Subsidiaries of Subject
Company, which shall include Subject Company Subsidiaries described in Section
5.4 of this Agreement and any corporation, bank, or other organization acquired
as a Subsidiary of Subject Company in the future and owned by Subject Company
at the Effective Time.
"Subsidiaries" shall mean all those corporations, banks, associations,
or other entities of which the entity in question owns or controls 10% or more
of the outstanding equity securities either directly or through an unbroken
chain of entities as to each of which 10% or more of the outstanding equity
securities is owned directly or indirectly
UPC/CBT AGREEMENT - Page 36
<PAGE> 123
by its parent; provided, there shall not be included any such entity acquired
through foreclosure or any such equity the equity securities of which are owned
or controlled in a fiduciary capacity.
"Surviving Corporation" shall mean Merger Subsidiary as the surviving
corporation resulting from the Merger.
"Tax" or "Taxes" shall mean all taxes, charges, fees, levies or other
assessments, including, without limitation, all net income, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits, license,
withholding, payroll, employment, excise, estimated, severance, stamp,
occupation, property or other taxes, customs duties, fees, assessments or
charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any taxing authority
(domestic or foreign).
"TBCA" shall mean the Tennessee Business Corporation Act.
(b) Any singular term in this Agreement shall be deemed to include the
plural, and any plural term the singular. Whenever the words "include,"
"includes," or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation."
11.2 Expenses. (a) Except as otherwise provided in this Section 11.2,
each of the Parties shall bear and pay all direct costs and expenses incurred
by it or on its behalf in connection with the transactions contemplated
hereunder, including filing, registration and application fees, printing fees,
and fees and expenses of its own financial or other consultants, investment
bankers, accountants, and counsel, except that each of the Parties shall bear
and pay the filing fees payable in connection with the Registration Statement
and the Proxy Statement and printing costs incurred in connection with the
printing of the Registration Statement and the Proxy Statement based on the
relative Asset sizes of the Parties at December 31, 1996.
(b) Nothing contained in this Section 11.2 shall constitute or
shall be deemed to constitute liquidated damages for the willful breach by a
Party of the terms of this Agreement or otherwise limit the rights of the
non-breaching Party.
11.3 Brokers and Finders. Except for Alex Sheshunoff & Company as to
Subject Company, each of the Parties represents and warrants that neither it
nor any of its officers, directors, employees, or Affiliates has employed any
broker or finder or incurred any Liability for any financial advisory fees,
investment bankers' fees, brokerage fees, commissions, or finders' fees in
connection with this Agreement or the transactions contemplated hereby. In the
event of a claim by any broker or finder based upon his or its representing or
being retained by or allegedly representing or being retained by Subject
Company or Parent other than those disclosed in the previous sentence, each of
Subject Company and Parent, as the case may be, agrees to indemnify and hold
the other Party harmless of and from any Liability incurred by such party in
respect of any such claim.
11.4 Entire Agreement. Except as otherwise expressly provided herein,
this Agreement (including the other documents and instruments referred to
herein) constitutes the entire agreement between the Parties with respect to
the transactions contemplated hereunder and supersedes all prior arrangements
or understandings with respect thereto, written or oral, including, without
limitation, the Confidentiality Agreement, dated October 15, 1997, between
Parent and Subject Company. Nothing in this Agreement expressed or implied is
intended to confer upon any Person, other than the Parties or their respective
successors, any rights, remedies, obligations, or liabilities under or by
reason of this Agreement, other than as provided in Section 8.12 of this
Agreement.
11.5 Amendments. To the extent permitted by Law, this Agreement may be
amended by a subsequent writing signed by each of the Parties upon the approval
of the Boards of Directors of each of the Parties, whether before or after
shareholder approval of this Agreement has been obtained.
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<PAGE> 124
11.6 Waivers. (a) Prior to or at the Effective Time, Parent, acting
through its Board of Directors, chief executive officer, or other authorized
officer, shall have the right to waive any Default in the performance of any
term of this Agreement by Subject Company, to waive or extend the time for the
compliance or fulfillment by Subject Company of any and all of its obligations
under this Agreement, and to waive any or all of the conditions precedent to
the obligations of Parent under this Agreement, except any condition which, if
not satisfied, would result in the violation of any Law. No such waiver shall
be effective unless in writing signed by a duly authorized officer of Parent.
(b) Prior to or at the Effective Time, Subject Company, acting
through its Board of Directors, chief executive officer, or other authorized
officer, shall have the right to waive any Default in the performance of any
term of this Agreement by Parent, to waive or extend the time for the
compliance or fulfillment by Parent of any and all of its obligations under
this Agreement, and to waive any or all of the conditions precedent to its
obligations of Subject Company under this Agreement, except any condition
which, if not satisfied, would result in the violation of any Law. No such
waiver shall be effective unless in writing signed by a duly authorized officer
of Subject Company.
(c) The failure of any Party at any time or times to require
performance of any provision hereof shall in no manner affect the right of such
Party at a later time to enforce the same or any other provision of this
Agreement. No waiver of any condition or of the breach of any term contained in
this Agreement in one or more instances shall be deemed to be or construed as a
further or continuing waiver of such condition or breach of a waiver of any
other condition or of the breach of any other term of this Agreement.
11.7 Assignment. Neither this Agreement nor any of the rights,
interests, or obligations hereunder shall be assigned by any Party hereto
(whether by operation of Law or otherwise) without the prior written consent of
the other Party. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the Parties and
their respective successors and assigns.
11.8 Notices. All notices or other communications which are required
or permitted hereunder shall be in writing and sufficient if delivered by hand,
by facsimile transmission, by registered or certified mail, postage prepaid, or
by courier or overnight carrier, to the person at the addresses set forth below
(or at such other address as may be provided hereunder), and shall be deemed to
have been delivered as of the date so delivered:
<TABLE>
<S> <C>
Subject Company: CB & T, Inc.
101 E. Main Street
McMinnville, Tennessee 37110
Attention: Jeffrey A. Golden
Telecopy Number: (615) 473-4279
Copy to Subject Counsel: Jenkens & Gilchrist, a Professional Corporation
Fountain Place
1445 Ross Avenue, Suite 3200
Dallas, Texas 76202
Attention: Carolyn V. Kelly, Esq.
Telecopy Number: (214) 855-4300
Parent: Union Planters Corporation
7130 Goodlett Farms Parkway
Memphis, Tennessee 38018
Attention: Jackson W. Moore
Telecopy Number: (901) 5802939
</TABLE>
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<PAGE> 125
<TABLE>
<S> <C>
Copy to Counsel: Union Planters Corporation
7130 Goodlett Farms Parkway
Memphis, Tennessee 38018
Attention: E. James House, Jr., Esq.
Telecopy Number: (901) 5802939
and
Wyatt, Tarrant & Combs
6075 Poplar Avenue, Suite 650
Memphis, Tennessee 38017
Attention: R. Nash Neyland, Esq.
Telecopy Number: (901) 537-1010
</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 agree that time is of the
essence in the performance of their respective obligations under this
Agreement. The Parties hereto agree that irreparable damage would occur in the
event that any of the provisions of this Agreement was not performed in
accordance with its specific terms or was otherwise breached. It is accordingly
agreed that the Parties shall be entitled to an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically the terms and
provisions hereof in any court of the United States or any state having
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity.
11.14 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be enforceable, the provision shall be
interpreted to be only so broad as is enforceable.
UPC/CBT AGREEMENT - Page 39
<PAGE> 126
IN WITNESS WHEREOF, each of the Parties has caused this
Agreement to be executed on its behalf and its corporate seal to be hereunto
affixed and attested by officers thereunto as of the day and year first above
written.
<TABLE>
<S> <C>
ATTEST: CB & T, INC.
By: /s/ Carolyn V. Kelly By: /s/ Jeffrey A. Golden
------------------------------------ ---------------------------------------------
Jeffrey A. Golden
Chairman, President & CEO
[CORPORATE SEAL]
ATTEST: UNION PLANTERS CORPORATION
By: /s/ E. James House, Jr. By: /s/ Jackson W. Moore
------------------------------------ ---------------------------------------------
Secretary Jackson W. Moore
President & Chief Operating Officer
ATTEST: UNION PLANTERS HOLDING CORPORATION
By: /s/ E. James House, Jr. By: /s/ Jackson W. Moore
------------------------------------ ---------------------------------------------
Secretary Jackson W. Moore
Chairman & President
</TABLE>
[CORPORATE SEAL]
UPC/CBT AGREEMENT - Page 40
<PAGE> 127
January 6, 1998
CB & T, Inc.
101 E. Main Street
McMinnville, Tennessee 37110
Ladies and Gentlemen:
We have, today, entered into an Agreement and Plan of Merger
(the "Agreement") between Union Planters Corporation ("Parent"), Union Planters
Holding Corporation ("Merger Subsidiary") and CB & T, Inc. ("Subject Company").
This Supplemental Letter is intended to set forth certain additional agreements
and understandings of Parent and Subject Company. Each of such parties agrees
that this letter is an integral part of the Agreement and is being entered into
separately, solely as an accommodation to Subject Company. All terms used
herein without definition have the same meaning as ascribed to such terms in
the Agreement.
Accordingly, in consideration of the Parties having entered
into the Agreement and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, it is further agreed that:
A. BENEFIT PLANS
1. 401(K) PLAN. Notwithstanding anything to the contrary in
the Agreement, after the Effective Time, all contributions under Subject
Company's 401(k) Plan ("Plan") as in effect on the date of the Agreement shall
cease and employees of Subject Company and the Subject Company Subsidiaries who
continue their employment with Parent or Parent's Subsidiaries after the
Effective Time shall be entitled to participate in Parent's 401(k) Plan to the
same extent as other employees of Parent as of immediately after the Effective
Time. Subject Company employees shall receive past service credit for their
service with Subject Company and the Subject Company Subsidiaries for purposes
of eligibility, participation, and vesting in Parent's 401(k) Plan. Subject
Company, in coordination with Parent's Human Resources Department, shall take
such steps as are necessary to merge Subject Company's 401(k) Plan with and
into Parent's 401(k) Plan as of the Effective Time or as soon as reasonably
practicable after the Effective Time, but any
<PAGE> 128
delay in effectuating such merger shall not delay Subject Company's employees'
right to participate in Parent's 401(k) Plan as of the Effective Time;
provided, however, that should a merger of Subject Company's Plan be prohibited
by law or not administratively feasible, as determined by Parent's Human
Resources Department prior to the Effective Time, then Subject Company shall
take such steps necessary to terminate its 401(k) Plan prior to the Effective
Time of the Merger. Prior to the Effective Time, Subject Company shall fully
reserve for all the costs and expenses as estimated by Parent's Human Resources
Department and agreed to by Subject Company related to the merger of its 401(k)
Plan into Parent's 401(k) Plan, or termination thereof, whichever may be the
case. Subject Company shall cooperate with Parent's Human Resources Department
to obtain regulatory determinations regarding the termination of Subject
Company's 401(k) Plan, if applicable, or regarding the merger of Subject
Company's Plan into the Parent 401(k) Plan, in either case as may be
appropriate to ensure the qualified status of such plans and related trusts
under the Internal Revenue Code. No distributions from the Subject Company
401(k) Plan due to termination of the subject Company 401(K) Plan shall be
required prior to receipt of IRS approval.
2. Employee Severance Pay Plan. Notwithstanding anything to the
contrary in the Agreement, prior to the Effective time Subject Company shall
take such steps as are necessary to amend the Subject Company Employee
Severance Pay Plan so that it will terminate automatically on the six-month
anniversary of the Effective Time. During that six month time period, Subject
Company employees shall have such rights provided by the Subject Company
Employee Severance Pay Plan only, and no right to severance benefits otherwise
provided by Parent, unless required by law or pursuant to specific written
employment agreements with such employee(s), if any. After the termination of
such Plan on the six month anniversary of the Effective Time, Parent will
provide severance payments to employees of Subject Company (other than
employees whose severance benefits are provided in written employment
agreements) whose employment is terminated as a result of situations covered
under Parent's then current involuntary severance pay plan. Such payments shall
be consistent with the terms and conditions the Parent involuntary severance
pay plan. Prior to the Effective Time, Subject Company shall fully reserve for
all anticipated severance benefits to be paid at or subsequent to the Effective
Time. Furthermore, Subject Company shall also take such steps as are necessary
to name a person or committee designated by Parent's Human Resources Department
as the Administrator of the Subject Company Severance Pay Plan at and after the
Effective Time of the Merger until such plan is terminated in accordance with
its terms.
3. Incentive Compensation Plan. Parent acknowledges the existence of
Subject Company's incentive bonus plan arrangement and agrees that prior to the
Effective Time, Subject Company shall be able to pay the benefits under such
plan, prorated through the date of Closing; provided, however, that Subject
Company or the applicable Subject Company Subsidiary shall fully reserve for
all such anticipated payments prior to the Effective Time of the Merger, that
the incentive compensation plan is interpreted and implemented in accordance
and consistent with past practices, including, but not limited to, amount of
payments thereunder, and further provided that such payments are made the prior
to the Effective Time. Subject Company shall take such steps as are necessary
to amend such plan to provide that it terminates at the Effective Time of the
Merger.
<PAGE> 129
4. Director's Deferred Compensation Plan. To the extent not prohibited
by Law and the applicable terms, Subject Company shall take all steps necessary
to amend its Directors Deferred Compensation Plan ("Deferred Compensation
Plan") so that either before or at the Effective Time of the Merger there shall
be no further deferrals under such Deferred Compensation Plan. Subject Company,
in its sole discretion, may terminate such Plan prior to the Effective Time.
Notwithstanding the above, Subject Company, in consultation and coordination
with Parent's Human Resources Department, shall fully reserve for all
anticipated costs associated with the amendment or termination of such Deferred
Compensation Plan.
5. Medical, Life and Related Employee Welfare Benefits. After the
Effective Time of the Merger, the continuing employees of Subject Company and
any Subject Company Subsidiary shall be immediately eligible to receive group
hospitalization, medical, life, disability, and other employee welfare benefits
no less than those provided to other employees of Parent or Parent Subsidiaries
holding comparable positions. Parent shall provide full coverage under its
group medical, dental, flex benefits, severance, disability, and life insurance
plans. For purposes of eligibility, benefit accrual and vesting, Subject
Company employees shall receive full service credit for service at Subject
Company prior to the Effective Date of the Merger. After the Effective Time of
Merger, Subject Company, in coordination with Parent's Human Resources
Department, shall take such steps as are necessary to terminate all such
employee welfare benefits plans it maintained for its employees immediately
prior to the Effective Time of the Merger. Prior to the Effective Time of the
Merger, Subject Company shall fully reserve for all costs and expenses related
to such employee welfare benefit plans, and the termination thereof, as well as
for all costs related thereto which would continue after the Effective Time of
Merger, including, but not limited to, costs arising under or pursuant to the
Consolidated Omnibus Budget Reconciliation Act and reserves required for
post-termination benefits.
6. Accrued Vacation and Sick Leave. Notwithstanding anything to the
contrary above, beginning with the calendar first year following the Effective
Time of the Merger, Subject Company employees shall become subject to Parent's
policies and procedures relative to accrued vacation, sick leave and other paid
time-off benefits. For the remainder of the calendar year in which the
Effective Time of the Merger occurs, however, all existing Subject Company
vacation, sick leave and other paid time-off benefits will remain in force and
effect as to the then former Subject Company employees and shall be
administered in accordance with the terms of such plans and consistent with
past practices. On January 1st next following the Effective Time of the Merger,
the Subject Company vacation, sick leave and other paid time-off benefit plans
and arrangements shall terminate. In their place Parent's vacation, sick leave
and other paid time-off benefit plans, arrangements and policies shall become
effective and applicable to the then former Subject Company employees who are
still employed by Parent or any of its Subsidiaries. The applicable then former
Subject Company employees will be given full credit for prior service at
Subject Company or any Subject Company subsidiary for purposes of
participation, vesting and benefit accrual under the terms of the Parent plans,
arrangements and policies; however, the applicable then former Subject Company
employees shall not be allowed to carryover or carryforward any accrued
vacation, sick leave or other paid time-off benefits under the former Subject
Company
<PAGE> 130
plans and neither Subject Company, any Subject Company Subsidiary, Parent nor
any Parent Subsidiary shall pay for any of the accrued vacation, sick leave
other paid time-off days or benefits under the Subject Company plans unless
payment for lost accrued days or benefits is specifically provided for in the
respective plans as they exist on the date hereof. The agreement of Parent to
provide Subject Company employees with credit for prior service is based on the
representation by Subject Company that its vacation, sick leave and other paid
time-off benefit plans do not provide for payment of unused days or benefits
upon termination of the plans or should the employee's employment with Subject
Company or any Subject Company Subsidiary be terminated for any reason.
B. OTHER BENEFIT MATTERS
1. Severance Agreement with Jeffrey Golden. Due to
inconsistencies between the terms and provisions of Subject Company's Severance
Agreement for Chief Executive Officer with Mr. Golden and similar agreements
with similarly situated employees of Parent and Parent Subsidiaries, Parent has
requested, and Subject Company and Jeffrey Golden have agreed, that the
Severance Agreement for Chief Executive Officer shall be terminated as of the
Effective Time and that payments shall be made to Jeffrey Golden in accordance
therewith and as if his employment were terminated as of the Effective Time.
Subject Company shall fully reserve for all costs and expenses associated with
the termination of such agreement, including all payments to be made thereunder
to Mr. Golden. Notwithstanding the foregoing, it is understood that Mr. Golden
will be employed by City Bank & Trust Company or the bank subsidiary of Parent
into which City Bank & Trust Company is merged, as of the Effective Time with
title and duties substantially similar to those of Mr. Golden in connection
with his employment with City Bank & Trust Company prior to the Effective Time.
Mr. Golden will not be granted an employment agreement and will be subject to
termination by Parent or the Parent Subsidiary with which he is employed after
the Effective Time in Parent's or the applicable Parent Subsidiary's
discretion.
2. Restricted Stock Grants. Parent agrees to make restricted
stock grants under Parent's 1992 Stock Incentive Plan for 6,000 shares of
Parent Common Stock to Jeffrey Golden, 1,500 shares of Parent Common Stock to
Larry Brown, 1,500 shares of parent Common Stock to James H. Hillis and 1,000
shares of Parent Common Stock to Glyna F. Lee. Such restricted stock grants
shall be made as of the Effective Time of the Merger and shall be subject to
the terms and restrictions of Parent's 1992 Stock Incentive Plan and the
agreements with the individuals; provided, however, such restricted stock
grants shall vest twenty-five percent (25%) on each of the first four
anniversary dates of the Effective Time of the Merger, provided the recipient
is then employed by Parent or any Parent Subsidiary. Such restricted stock
grants shall also be structured to fully vest in the event of a
change-in-control of Parent, upon the death of recipient or should the
recipient's employment be terminated other than for cause. Should a recipient's
employment be terminated for "cause" or should a recipient voluntarily
terminate his or her employment, then all restricted stock grants that had not
vested as of the termination of employment shall lapse. Specific terms shall be
set forth in the agreements between parent and the recipient, to be
<PAGE> 131
negotiated in good faith and to be consistent with similar arrangements or
agreements with other similarly situated officers of Parent or a Parent
Subsidiary except as specifically provided herein.
C. GENERAL CONCERNS.
Notwithstanding anything in this Supplemental Letter to the
contrary, the rights granted by Parent to Subject Company employees in
connection with the Merger shall not in and of themselves be construed in any
way to be an employment contract with, or right to employment by, Subject
Company, Parent, or any other subsidiary of Parent after the Effective Time. In
addition, no rights or vesting in any stock, pension, welfare, benefit or other
benefit or welfare plan of Subject Company or any Subject Company Subsidiary,
shall be accelerated or modified in contravention of the accounting rules
necessary to account for the Merger under the "pooling of interest" method of
accounting. To the extent that any employee benefit or welfare benefit plan of
Subject Company or Subject Company Subsidiary provides for acceleration of
vesting rights upon consummation of the Merger, Subject Company shall take such
steps as are appropriate or necessary to amend such plan or arrangement if such
amendment were determined to be necessary to allow the Merger to be accounted
for under the "pooling of interests" method of accounting. Furthermore, 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 Subject Company is not 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.
Upon execution of this Supplemental Letter (or counterparts thereof)
by the parties hereto this Supplemental Letter shall constitute an agreement
between the parties to be enforceable following the Effective Time of the
Merger by either party hereto or by any other party who is intended to be
benefitted hereunder.
UNION PLANTERS CORPORATION
By: /s/ Jackson W. Moore
-------------------------------------
UNION PLANTERS HOLDING CORPORATION
By: /s/ Jackson W. Moore
-------------------------------------
CB & T, INC.
By: /s/ Jeffrey A. Golden
-------------------------------------
<PAGE> 132
APPENDIX B
PLAN OF MERGER
PROVIDING FOR THE MERGER OF
CB & T, INC., A TENNESSEE CORPORATION,
WITH AND INTO
UNION PLANTERS HOLDING CORPORATION
THIS PLAN OF MERGER is made and entered into as of January 6, 1998, by
and between CB & T, Inc., a Tennessee corporation ("Subject Company"), Union
Planters Holding Corporation, a Tennessee corporation ("Merger Subsidiary"),
and joined in by Union Planters Corporation, a Tennessee corporation
("Parent").
This Plan of Merger is entered into concurrently with, and pursuant
to, the Plan and Agreement of Merger (the "Acquisition Agreement"), dated the
date hereof, between Subject Company and Merger Subsidiary, and joined in by
Parent.
Capitalized terms used but not defined herein shall have the meanings
assigned to them in the Acquisition Agreement.
ARTICLE 1
TERMS OF MERGER
1.1 Merger. Subject to the terms and conditions of the Agreement and
this Plan of Merger, at the Effective Time, Subject Company shall be merged
with and into Merger Subsidiary in accordance with the provisions of Section
48-21-109 of the TBCA and with the effect provided in Section 48-21-108 of the
TBCA (the "Merger"). Merger Subsidiary shall be the Surviving Corporation
resulting from the Merger and shall continue to be governed by the Laws of the
State of Tennessee. The Merger shall be consummated pursuant to the terms of
the Agreement and this Plan of Merger, which have been or will be approved and
adopted by the respective Boards of Directors of Subject Company, Parent and
Merger Subsidiary.
1.2 Time and Place of Closing. The Closing will take place at 9:00
A.M. on the date 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
the Agreement and this Plan of Merger shall become effective at the time the
Articles of Merger reflecting the Merger shall become effective with the
Secretary of State of the State of the State of Tennessee (the "Effective
Time").
1.4 Restructure of Transaction. Subject to the terms of the Agreement,
Parent shall, in its reasonable discretion, have the unilateral right to revise
the structure of the Merger contemplated by the Agreement and this Plan of
Merger in order to achieve tax benefits or for any other reason which Parent
may deem advisable.
ARTICLE 2
TERMS OF MERGER
2.1 Charter. The Charter (the "Charter") of Merger Subsidiary in
effect immediately prior to the Effective Time shall be the Charter of the
Surviving Corporation until otherwise amended or repealed.
2.2 Bylaws. The Bylaws of Merger Subsidiary (the "Bylaws") in effect
immediately prior to the Effective Time shall be the Bylaws of the Surviving
Corporation until otherwise amended or repealed.
UPC/CBT PLAN OF MERGER-PAGE 1
<PAGE> 133
2.3 Directors and Officers. The directors of Merger Subsidiary in
office immediately prior to the Effective Time, together with such additional
persons as may thereafter be elected, shall serve as the directors of the
Surviving Corporation from and after the Effective Time in accordance with the
Bylaws of the Surviving Corporation. The officers of Merger Subsidiary in
office immediately prior to the Effective Time, together with such additional
persons as may thereafter be elected, shall serve as the officers of the
Surviving Corporation from the Effective Time in accordance with the Bylaws of
the Surviving Corporation.
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 Conversion of Shares. Subject to the provisions of this Article 3
(and Article 3 of the Agreement), at the Effective Time, by virtue of the
Merger and without any action on the part of Parent, Merger Subsidiary, Subject
Company, or the shareholders of any of the foregoing, the shares of the
constituent corporations shall be converted as follows:
(a) Each share of Parent Capital Stock, including any associated
Parent Rights, issued and outstanding immediately prior to the Effective Time
shall remain issued and outstanding from and after the Effective Time.
(b) Each share of Merger Subsidiary Common Stock issued and
outstanding immediately prior to the Effective Time shall remain issued and
outstanding and shall represent one share of the Surviving Corporation from and
after the Effective Time.
(c) Except for Dissenting Shares, each share of Subject Company
Common Stock, including any associated or attached Subject Company Rights,
(excluding shares held by Subject Company, any Subject Company Subsidiary,
Parent or any Parent Subsidiary, in each case other than in a fiduciary
capacity or as a result of debts previously contracted) issued and outstanding
at the Effective Time shall cease to be outstanding and shall be converted into
and exchanged for the right to receive 5.488 shares of Parent Common Stock
(subject to possible adjustment as set forth in Section 10.1(f) of the
Agreement, the "Exchange Ratio"). Pursuant to the Parent Rights Agreement, each
share of Parent Common Stock issued in connection with the Merger upon
conversion of Subject Company Common Stock shall be accompanied by a Parent
Right.
(d) Dissenting Shares shall not be converted pursuant to Section
3.1(c) in the Merger but, at and after the Effective Time, shall present only
the right to receive payment in accordance with Chapter 23 of the TBCA If a
holder of Dissenting Shares becomes ineligible for payment under Chapter 23 of
the TBCA, then such holder's Dissenting Shares shall cease to be Dissenting
Shares and shall be converted in the manner set forth in Section 3.1(c)
effective as of the Effective Time.
3.2 Anti-Dilution Provisions. In the event Parent changes the number
of shares of Parent Common Stock issued and outstanding after the date of this
Agreement and prior to the Effective Time as a result of a stock split, stock
dividend, or similar recapitalization with respect to such stock and the record
date therefor (in the case of a stock dividend) or the effective date thereof
(in the case of a stock split or similar recapitalization for which a record
date is not established) shall be prior to the Effective Time, the Exchange
Ratio shall be proportionately adjusted.
3.3 Shares Held by Subject Company or Parent. Each of the shares of
Subject Company Common Stock held by Subject Company, any Subject Company
Subsidiary, Parent or any Parent Subsidiary, in each case other than in
fiduciary capacity or as a result of debts previously contracted, shall be
canceled and retired at the Effective Time and no consideration shall be issued
in exchange therefor.
3.4 Fractional Shares. Notwithstanding any other provision of this
Agreement, each holder of shares of Subject Company Common Stock exchanged
pursuant to the Merger who would otherwise have been entitled to
UPC/CBT PLAN OF MERGER-PAGE 2
<PAGE> 134
receive a fractional share of Parent Common Stock (after taking into account
all certificates delivered by such holder) shall receive, in lieu thereof, cash
(without interest) in an amount equal to such fractional share of Parent Common
Stock multiplied by the closing price of such common stock on the
NYSE-Composite Transactions List (as reported by The Wall Street Journal or, if
not reported thereby, any other authoritative source selected by Parent) on the
last trading day preceding the Effective Time. No such holder will be entitled
to dividends, voting rights, or any other rights as a shareholder in respect of
any fractional shares.
ARTICLE 4
EXCHANGE OF SHARES
4.1 Exchange Procedures. Promptly after the Effective Time, Parent and
Subject Company shall cause the exchange agent selected by Parent (the
"Exchange Agent") to mail to the former shareholders of Subject Company
appropriate transmittal materials (which shall specify that delivery shall be
effected, and risk of loss and title to the certificates theretofore
representing shares of Subject Company Common Stock shall pass, only upon
proper delivery of such certificates to the Exchange Agent). Subject Company
shall have the right to review and approve the transmittal materials. The
Exchange Agent may establish reasonable and customary rules and procedures in
connection with its duties. After the Effective Time, each holder of shares of
Subject Company Common Stock (other than Dissenting Shares or shares to be
canceled pursuant to Section 3.1(d) of this Agreement) issued and outstanding
at the Effective Time shall surrender the certificate or certificates
representing such shares to the Exchange Agent and shall promptly upon
surrender thereof receive in exchange therefor the consideration provided in
Section 3.1(c) of this Plan of Merger, together with all undelivered dividends
or distributions in respect of such shares (without interest thereon) pursuant
to Section 4.2 of this Plan of Merger. To the extent required by Section 3.4 of
this Plan of Merger, each holder of shares of Subject Company Common Stock
issued and outstanding at the Effective Time also shall receive, upon surrender
of the certificate or certificates representing such shares, cash in lieu of
any fractional share of Parent Common Stock to which such holder may be
otherwise entitled (without interest). Parent shall not be obligated to deliver
the consideration to which any former holder of Subject Company Common Stock is
entitled as a result of the merger until such holder surrenders such holder's
certificate or certificates representing the shares of Subject Company Common
Stock for exchange as provided in this Section 4.1. The certificate or
certificates of Subject Company Common Stock so surrendered shall be duly
endorsed as the Exchange Agent may require. Any other provision of this Plan of
Merger or the Agreement notwithstanding, neither Parent nor the Exchange Agent
shall be liable to a holder of Subject Company Common Stock for any amounts
paid or property delivered in good faith to a public official pursuant to any
applicable abandoned property Law.
4.2 Rights of Former Subject Company Shareholders. At the Effective
Time, the stock transfer books of Subject Company shall be closed as to holders
of Subject Company Common Stock immediately prior to the Effective Time and no
transfer of Subject Company Common Stock by any such holder shall thereafter be
made or recognized. Until surrendered for exchange in accordance with the
provisions of Section 4.1 of this Plan of Merger, each certificate theretofore
representing shares of Subject Company Common Stock (other than Dissenting
Shares or shares to be canceled pursuant to Section 3.1(d) of this Agreement)
shall from and after the Effective Time represent for all purposes only the
right to receive the consideration provided in Sections 3.1(c) and 3.4 of this
Plan of Merger in exchange therefor, subject, however, to the Surviving
Corporation's obligations to pay any dividends or make any other distributions
with a record date prior to the Effective Time which have been declared or made
by Subject Company in respect of such shares of Subject Company Common Stock in
accordance with the terms of this Plan of Merger and the Agreement and which
remain unpaid at the Effective Time. Whenever a dividend or other distribution
is declared by Parent on the Parent Common Stock, the record date for which is
at or after the Effective Time, the declaration shall include dividends or
other distributions on all shares of Parent Common Stock issuable pursuant to
this Agreement, but beginning 30 days after the Effective Time no dividend or
other distribution payable to the holders of record of Parent Common Stock as
of any time subsequent to the Effective Time shall be delivered to the holder
of any certificate representing shares of Subject Company Common Stock issued
and outstanding at the Effective Time until such holder surrenders such
certificate for exchange as provided in Section 4.1 of this Plan of Merger and
the Agreement. However, upon surrender of such Subject Company Common Stock
certificate, both a Parent Common Stock certificate (together with all such
undelivered dividends or other
UPC/CBT PLAN OF MERGER-PAGE 3
<PAGE> 135
distributions without interest) and any undelivered dividends and cash payments
payable hereunder (without interest) shall be delivered and paid with respect
to each share represented by such certificate. In the event any Subject Company
Common Stock certificate shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming such certificate to
be lost, stolen or destroyed and, if reasonably required by Parent, the posting
by such person of a bond in such amount as Parent may reasonably direct as
indemnity against any claim that may be made against it with respect to such
certificate, the Exchange Agent shall issue in exchange for such lost, stolen
or destroyed certificate the shares of Parent Common Stock and cash in lieu of
fractional shares deliverable in respect thereof pursuant to this Plan of
Merger and the Agreement.
ARTICLE 5
MISCELLANEOUS
5.1 Conditions Precedent. Consummation of the Merger by Merger
Subsidiary shall be conditioned on the satisfaction of or waiver by Parent of
the conditions precedent to the Merger set forth in Sections 9.1 and 9.2 of the
Agreement. Consummation of the Merger by Subject Company shall be conditioned
on the satisfaction of, or waiver by Subject Company of, of the conditions
precedent to the Merger set forth in Sections 9.1 and 9.3 of the Agreement.
5.2 Termination. This Plan of Merger may be terminated at any time
prior to the Effective Time by the Parties hereto as provided in Article 10 of
the Agreement.
5.3 Amendments. To the extent permitted by Law, this Plan of Merger
may be amended by a subsequent writing signed by each of the Parties upon the
approval of the Boards of Directors of each of the Parties, whether before or
after shareholder approval of the Agreement and this Plan of Merger has been
obtained; provided, that after any such approval by the holders of Subject
Company Common Stock, there shall be made no amendment that modifies in any
material respect the Consideration to be received by the Subject Company Record
Holders.
5.4 Assignment. Except as expressly contemplated hereby, neither this
Plan of Merger nor the Agreement, nor any of the rights, interests, or
obligations hereunder or thereunder shall be assigned by any Party hereto
(whether by operation of Law or otherwise) without the prior written consent of
the other Party. Subject to the preceding sentence, the Agreement and this Plan
of Merger will be binding upon, inure to the benefit of and be enforceable by
the Parties and their respective successors and assigns.
5.5 Governing Law. This Plan of Merger shall be governed by and
construed in accordance with the Laws of the State of Tennessee, without regard
to any applicable conflicts of Laws.
5.6 Counterparts. This Plan of Merger may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same document.
5.7 Captions. The captions contained in this Plan of Merger are for
reference purposes only and are not part of this Plan of Merger.
UPC/CBT PLAN OF MERGER-PAGE 4
<PAGE> 136
IN WITNESS WHEREOF, each of the Parties hereto has duly
executed and delivered this Plan of Merger or has caused this Plan of Merger to
be executed and delivered in its name and on its behalf by its representatives
thereunto duly authorized, all as of the date first written above.
<TABLE>
<S> <C>
ATTEST: CB & T, INC.
By: /s/ Carolyn V. Kelly By: /s/ Jeffrey A. Golden
----------------------------- ------------------------------------------
Title: Counsel Title: Chairman, President & CEO
-------------------------- ---------------------------------------
[CORPORATE SEAL]
ATTEST: UNION PLANTERS CORPORATION
By: /s/ E. James House, Jr. By: /s/ Jackson W. Moore
----------------------------- ------------------------------------------
Title: Secretary Jackson W. Moore
-------------------------- Title: President and Chief Operating Officer
ATTEST: UNION PLANTERS HOLDING CORPORATION
By: /s/ E. James House, Jr. By: /s/ Jackson W. Moore
----------------------------- ------------------------------------------
Title: Secretary Jackson W. Moore
-------------------------- Title: Chairman & President
</TABLE>
[CORPORATE SEAL]
UPC/CBT PLAN OF MERGER-PAGE 5
<PAGE> 137
APPENDIX C
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997.
------------------------------
Commission file number 0-10669
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C B & T, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
TENNESSEE 62-1121054
---------------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 EAST MAIN STREET
MCMINNVILLE, TENNESSEE 37110
---------------------------------------- ------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code (931) 473-2147
--------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange
which registered
None
-------------------- ----------------------
-------------------- ----------------------
Securities registered pursuant to Section 12(g) of the Act:
Common Stock par value $2.50 per share
--------------------------------------
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
This filing contains 76 pages.
1
<PAGE> 138
The aggregate market value of the voting stock held by non-affiliates of C B &
T, Inc. as of March 2, 1998 was $31,746,383.
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of March 2, 1998 -- 264,113 shares.
DOCUMENTS INCORPORATED BY REFERENCE
1. Proxy statements for 1997 annual shareholders' meeting of May 29, 1998
-- Part I and III
2. Annual Report to shareholders for year ended December 31, 1997 -- Parts
I and II.
2
<PAGE> 139
PART I.
ITEM 1. BUSINESS
(a) GENERAL DEVELOPMENT OF BUSINESS
C B & T, Inc. ("C B & T") was incorporated in October, 1981 to take advantage of
the opportunities afforded bank holding companies for expansion of banking
operations and diversification into activities closely related to banking. In
September, 1982, C B & T commenced operations as a registered bank holding
company and The City Bank and Trust Company became a wholly-owned subsidiary of
C B & T. C B & T engages and proposes to engage in various business activities
permitted bank holding companies, either directly, through newly formed
subsidiaries, or through acquisitions. In 1983, the name of The City Bank and
Trust Company was changed to City Bank & Trust Company ("the Bank"). The Bank
extended its services into DeKalb County, Tennessee, with the July, 1983,
acquisition of the assets of The First Central Bank, Smithville, Tennessee, from
the Federal Deposit Insurance Corporation (the "FDIC"). The Bank subsequently
reopened the offices of The First Central Bank as the Bank's Smithville Branch.
CBT Realty, Inc., a wholly-owned subsidiary of the Corporation, was formed for
the purpose of holding and disposing of real estate acquired through
foreclosure.
During 1996, the Corporation formed CBT Insurance, Inc., a wholly-owned
subsidiary of the Corporation, for the purpose of selling insurance services.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
C B & T is a financial services organization incorporated in Tennessee and
registered under the Bank Holding Company Act of 1956, as amended (the "Bank
Holding Company Act"). The Bank which is a wholly-owned subsidiary of C B & T,
services the Warren County and DeKalb County, Tennessee trade area and provides
traditional banking services throughout the area.
(c) NARRATIVE DESCRIPTION OF BUSINESS
SUPERVISION AND REGULATION
As a registered bank holding company within the meaning of the Bank Holding
Company Act, the financial condition and operations of C B & T as well as those
of its subsidiary are subject to examination and supervision by the Board of
Governors of the Federal Reserve System (the "Board of Governors"). C B & T is
required to file with the Board of Governors an annual report and such
additional information as may be required. The Bank Holding Company Act
generally limits the business in which a bank holding company may engage to
banking, managing or controlling banks, and furnishing or performing services
for the banks controlled by it. The major exception to this rule is that,
pursuant to Section 4(c)(8) of the Bank Holding Company Act, a bank holding
company may engage in non-banking activities which, or may acquire shares in any
company the activities of which, the Board of Governors has determined, by
regulation or order, to be so closely related to banking or managing or
controlling banks as to be a proper incident thereto. The non-banking activities
of C B & T and the Bank are so limited.
The Bank Holding Company Act requires that a bank holding company obtain prior
approval of the Board of Governors before (1) acquiring directly or indirectly
(except in certain limited circumstances) ownership or control of more than 5%
of the voting stock of a bank, (2) acquiring substantially all of the assets of
a
3
<PAGE> 140
ITEM 1. BUSINESS - CONTINUED
bank, or (3) merging or consolidated with another bank holding company. The
Bank Holding Company Act provides that the Board of Governors shall not approve
any such acquisition, merger, or consolidation: (a) which would result in a
monopoly, or which would be in furtherance of any combination or conspiracy to
monopolize or to attempt to monopolize the business of banking in any part of
the United States; or (b) the effect of which, in any section of the country,
may be to substantially lessen competition, or to tend to create a monopoly, or
which in any other manner would be in restraint of trade, unless the Board of
Governors finds that the anti-competitive effects of the proposed transaction
are clearly outweighed in the public interest by the probable effect of the
transaction in meeting the convenience and needs of the community to be served.
In conducting its review of any application for approval the Board of Governors
is required to consider the financial and managerial resources and future
prospects of the company or companies and the banks concerned, and the
convenience and needs of the community to be served. The Bank Holding Company
Act further requires that consummation of approved acquisitions or mergers be
delayed for a period of not less than 30 days following the date of such
approval during which time company parties may obtain a review of the Board of
Governors' order by filing a petition praying that the order be set aside in the
United States Court of Appeals for the District of Columbia Circuit, or in the
Court of Appeals for the circuit in which the complaining party has his, her, or
its principal place of business. If no action based on the antitrust laws is
commenced before the termination of the thirty-day period, the acquisition or
merger may not thereafter be attacked in any judicial proceeding on the ground
that it alone and of itself constituted a violation of any antitrust laws other
than Section 2 of the Sherman Antitrust Act.
Except in certain circumstances, the Bank Holding Company Act also prohibits a
bank holding company from acquiring a bank outside the state where the bank
holding company's banking business is principally conducted, unless the laws of
the state where the bank is located specifically, and not merely by implication,
authorize such acquisitions by out-of-state bank holding companies. The
Tennessee General Assembly enacted a national reciprocal interstate banking act
permitting banking combinations with banking institutions located anywhere in
the United States, which became effective January 1, 1991.
Effective September 29, 1995, the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 ("IBBEA") amends the Bank Holding Company Act of 1956 to
permit a bank holding company to acquire a bank located in any state, provided
that the acquisition does not result in the bank holding company controlling
more than 10% of the deposits in the United States or 30% of deposits in the
state in which the bank to be acquired is located. A state may waive the 30%
deposit limitation. IBBEA also permits individual states to restrict the ability
of an out-of-state bank holding company or bank to acquire an instate bank that
has been in existence for less than five years and to establish a state
concentration limit of less than 30% if such reduced limit does not discriminate
against out-of-state bank holding companies or banks.
Effective June 1, 1997, an "adequately capitalized" bank, with the approval of
the appropriate federal banking agency, may merge with another adequately
capitalized bank in any state that has not opted out of interstate branching and
operate the target's offices as branches if certain conditions are satisfied.
The same national (10%) and state (30%) deposit concentration limits and any
applicable state minimum-existence restrictions (up to a maximum of five years)
apply to interstate mergers as to interstate acquisitions. The applicant also
must comply with any nondiscriminatory host state filing and notice requirements
and demonstrate a record of compliance with applicable federal and state
community reinvestment laws. A state may opt out of interstate branching by
enacting a law before June 1, 1997, expressly prohibiting interstate merger
transactions.
4
<PAGE> 141
ITEM 1. BUSINESS - CONTINUED
Under IBBEA, the resulting bank to an interstate merger may establish or acquire
additional branches at any location in a state where any of the banks involved
in the merger could have established or acquired a branch. A bank also may
acquire one or more branches of an out-of-state bank if the law of the target's
home state permits such action. In addition, IBBEA permits a bank to establish a
de novo branch in another state if the host state by statute expressly permits
de novo interstate branching.
IBBEA also permits a bank subsidiary of a bank holding company to act as agent
for other depository institutions owned by the same holding company for purposes
of receiving deposits, renewing time deposits, closing or servicing loans, and
receiving loan payments effective as of September 29, 1995. Under IBBEA, a
savings association may perform similar agency services for affiliated banks to
the extent that the savings association was affiliated with a bank on July 1,
1994, and satisfies certain additional requirements.
The Federal Reserve Act imposes strict limitations on investments by subsidiary
banks in the stock or other securities of their parent bank holding company or
any of its other subsidiaries and on the taking of such stock or securities as
collateral for loans to any borrowers. In addition, the Federal Reserve Act
imposes strict limitations on extensions of credit and other transactions by and
between subsidiary banks and their parent bank holding company or any of its
other subsidiaries. The 1974 Amendments to the Federal Reserve Act also granted
the Board of Governors discretionary authority to regulate interest rates on
debt obligations issued by bank holding company affiliates of banks which are
members of the Federal Reserve System. This authority does not extend to
commercial paper.
The Bank Holding Company Act, as amended, and regulations of the Board of
Governors thereunder prohibit a bank holding company and its subsidiaries from
engaging in certain tie-in arrangements in connection with any extension of
credit, lease, or sale of property or the furnishing of services. The Bank
Holding Company Act requires that a corporation, partnership, trust, or other
specified entity obtain prior approval of the Board of Governors before taking
any action that causes the corporation to become a bank holding company, which
may occur if it acquires ownership, control, or the power to vote 25% or more of
any class of voting securities of a bank, or if it otherwise controls the
election of a majority of the directors of the bank, or if the Board of
Governors determines that it exercises a controlling influence over the
management or policies of the bank. Although the Bank Holding Company Act does
not apply to the acquisition of a bank by an individual, any individual or group
of individuals acting in concert that proposes to acquire control of a bank
insured under the Federal Deposit Insurance Act or the control of a bank holding
company that has control of any such insured bank, must provide sixty days prior
written notice to the appropriate federal banking agency, which may disapprove
the proposed action under certain standards specified in the Change in Bank
Control Act. For purposes of the Change in Bank Control Act, control means the
power to direct the management or policies of the bank or to vote 25% or more of
any class of voting securities of the bank. Bank holding company acquisitions of
banks and bank holding companies pursuant to certain provisions of the Bank
Holding Company Act are exempt from the Change in Bank Control Act.
TENNESSEE BANK HOLDING COMPANY REGULATION
C B & T is prohibited under Tennessee law from acquiring a bank outside the four
major metropolitan areas (Shelby, Davidson, Knox, and Hamilton Counties in which
Memphis, Nashville, Knoxville, and Chattanooga are located, respectively) unless
the bank has been incorporated more than five years or is in
5
<PAGE> 142
ITEM 1. BUSINESS - CONTINUED
financial difficulty as determined by the appropriate regulatory agency and the
regulatory agency approves the acquisition. A bank holding company is prohibited
from acquiring any Tennessee bank if the holding company's banks control as much
as 16 1/2% of the total deposits in all federally insured financial institutions
in Tennessee. Tennessee banking laws permit a bank to serve as the agent of
another bank for the purposes of accepting deposits, loan payments, or other
payments of funds on behalf of the bank without regard to the locations of the
respective banks. Under Tennessee law, banks may branch state-wide, subject in
certain instances to the approval by the Tennessee Commissioner of Financial
Institutions.
THE BANK
The operations of the Bank are affected by various requirements and restrictions
imposed by the laws of the United States and the State of Tennessee, including
requirements to maintain reserves against deposits, limitations on the interest
rates that may be paid on various types of deposits, and restrictions on the
nature and amount of loans that may be granted and on the types of investments
that may be made. The operations of the Bank are also affected by various
consumer laws and regulations, including those relating to equal credit
opportunity and regulation of consumer lending practices. All subsidiary banks
of a bank holding company must become and remain insured banks under the Federal
Deposit Insurance Act.
The Bank is chartered under the banking laws of Tennessee and, as such is
subject to the applicable provisions of such laws. Tennessee banks are required
to maintain certain cash reserves either directly or indirectly. As a member of
the FDIC, the Bank is subject to the provisions of the Federal Deposit Insurance
Act. The bank, as a state bank whose deposits are insured by the FDIC, may not
engage as principal in any type of activity that is impermissible for a national
bank, unless the FDIC has determined that the activity would not pose a
significant risk to the deposit insurance fund and the Bank meets applicable
capital standards. The Bank is subject to supervision and regular examination by
the FDIC and by the Tennessee Department of Financial Institutions. A Tennessee
bank may declare dividends not more than once in each calendar quarter from its
undivided profits account.
COMMUNITY INVESTMENT
The Bank is subject to the provisions of the Community Reinvestment Act ("CRA").
Under this Act, the Bank has a continuing and affirmative obligation, consistent
with safe and sound operation, to help meet the credit needs of its entire
community, including low and moderate income neighborhoods. The CRA does not
establish specific lending requirements or programs for financial institutions,
nor does it limit an institution's discretion to develop the types of products
and services that it believes are best suited to its particular community,
consistent with the CRA. The CRA requires the FDIC, in connection with its
examination of the Bank, to assess the institution's record of meeting the
credit needs of its community and to take such record into account in its
evaluation of certain applications by the Bank. Information concerning the
Bank's CRA rating can be obtained by contacting its main office at 101 East Main
Street, McMinnville, TN 37110.
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<PAGE> 143
ITEM 1. BUSINESS - CONTINUED
RESTRICTIONS ON DIVIDENDS PAID BY SUBSIDIARY BANKS
Substantially all of the funds available for the payment of dividends by C B & T
are derived from the Bank. Both federal and state laws impose restrictions on
the ability of the Bank to pay dividends.
The Tennessee banking statutes provide that the directors of a state bank, after
making proper deduction for all expenditures, expenses, taxes, losses, bad
debts, and any write-offs or other deductions required by the Department of
Finance Institutions, may credit net profits to the bank's undivided profits
account, and therefrom may quarterly, semi-annually, or annually declare a
dividend in such amount as they shall judge expedient after deducting any net
loss from the undivided profits account and transferring to the bank's surplus
account (1) the amount (if any) required to raise the surplus to 50% of the
capital stock and (2) an amount, not less than 10% of net profits, until the
surplus equals the capital stock, provided that the bank has adequately reserved
against deposits and such reserve will not be impaired by the declaration of the
dividend. A state bank, with the approval of the Department of Financial
Institutions, may transfer funds from its surplus account to the undivided
profits account or any part of its capital stock account.
The payment of dividends by any bank is, of course, dependent upon its earnings
and financial condition and, in addition to the limitations referred to above,
is subject to the statutory power of certain federal and state regulatory
agencies to act to prevent unsafe or unsound banking practices.
USURY PROVISIONS
The Constitution of the State of Tennessee requires the state legislature to fix
interest rates in the State of Tennessee. The Tennessee General Assembly has
adopted such statutes. The general interest rate statutes currently in effect
establish a maximum rate of interest at 4% above the average prime loan rate (or
the average short-term business loan rate, however denominated) for the most
recent week for which such average rate has been published by the Board of
Governors or 24% per annum, whichever is lower. In the event that the Board of
Governors fails to publish the average rate for four consecutive weeks or the
maximum rate of interest should be adjudicated or become inapplicable for any
reason whatsoever, the maximum rate of interest is denied to be 24% until the
Tennessee General Assembly otherwise provides. As of December 31, 1997, the
maximum effective rate in the state of Tennessee was 12.5%.
Although the statutory maximum effective rate in the state of Tennessee as of
December 31, 1997, was 12.5%, decisions by Federal District Courts have held
that notwithstanding the general interest rate statutes described above, the
maximum rate of interest that a state bank may charge is 24%, at least with
respect to the types of loans that a Tennessee industrial loan and thrift
company registered under the provisions of Tennessee law would have been
authorized to make. In general, a Tennessee industrial loan and thrift company
is authorized to charge interest at a rate of 24% on loans of $100 or more.
These Federal District Court decisions have observed that under federal law, a
national bank can charge interest at the highest rate allowed by state law in
the state where the national bank is located and held that a national bank in
Tennessee can charge interest at the same rate as a Tennessee industrial loan
and thrift company.
Tennessee banking laws permit a state bank to make loans upon the same terms and
at the maximum effective interest rate as authorized on credit extended by
national banks in Tennessee. These decisions held that a state bank in Tennessee
therefore can charge the same rate of interest as a Tennessee industrial loan
and thrift company.
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<PAGE> 144
ITEM 1. BUSINESS - CONTINUED
The relative importance of the usury laws to the financial operations of C B & T
and the Bank varies from time to time, depending on a number of factors,
including conditions in the money markets, the cost and the availability of
funds, and prevailing interest rates. The management of C B & T is unable to
state whether existing usury laws have had or will have a material adverse
effect on the business or earnings of C B & T or the Bank.
COMPETITION
The banking business in the areas served by the Bank is highly competitive.
Competition exists with other area banks for deposits, loans, and trust
accounts, and with larger banks located in some of the principal cities within
Tennessee and certain other states for commercial loans and trust services. The
Bank also competes for funds with savings and loan associations and certain
government agencies and in the open money market. Competition also exists for
loans from other financial institutions, such as savings banks, savings and loan
associations, insurance companies, small loan companies, credit unions, and
certain governmental agencies.
SUBSIDIARY
City Bank & Trust Company
The Bank commenced operations in 1912 as a state chartered bank under the laws
of the State of Tennessee. In September, 1982, the Bank, pursuant to a corporate
reorganization, became a wholly-owned subsidiary of C B & T, a one-bank holding
company.
On July 8, 1983, the Bank acquired certain assets and assumed certain
liabilities of The First Central Bank, Smithville, Tennessee, which commenced
operations as the City Bank & Trust Company, Smithville Branch, on July 11,
1983, which extended the Banks services into DeKalb County in addition to Warren
County.
The Bank conducts a full service banking and trust business in Warren County and
DeKalb County, Tennessee. The Bank's main office is located in McMinnville,
Warren County, Tennessee, and the Bank operates a full service branch in
Smithville, DeKalb County, Tennessee. There are four banks, including the Bank,
two federal savings banks and one federal credit union within Warren County,
which has a population of approximately 33,000. DeKalb County has a population
of approximately 14,400 and is served by four banks, including the Bank's
Smithville Branch. Both counties are centers of a diversified commercial,
industrial, agricultural, and tourism area.
The Bank offers such customary commercial banking services as checking and
savings accounts, certificates of deposit, safe deposit facilities and money
transfers. Its principal source of income is from interest earned on personal,
commercial, agricultural, real estate, and installment loans.
The Bank's Trust Department acts as trustee, executor, and administrator under
wills, and serves in trustee, conservator, VA guardian, and agent capacities for
individual and corporate customers. It functions as trustee under bond
indentures, as well as trustee and administrator under pension, IRA, SEPP, and
other employee benefit plans for corporations and other organizations. The Bank
handles approximately 582 individual and corporate trust accounts, and provides
investment management and other related services. The Bank's Trust Department
had assets of approximately $85,991,000 under management as of December 31,
1997. These assets are not included as assets in the balance sheet of the Bank
or C B & T.
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<PAGE> 145
ITEM 1. BUSINESS - CONTINUED
EMPLOYEES
C B & T, including the Bank, has approximately 121 employees, which includes six
part-time employees. Four of the Bank's officers are also officers of C B & T.
None of the Bank's employees are covered by a collective-bargaining agreement.
DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDER'S EQUITY; INTEREST RATE AND
INTEREST DIFFERENTIAL
This table is incorporated herein by reference as a financial table pages 36-39
which are attached to and made a part of the Annual Report to Shareholders which
is attached hereto as Exhibit 13.
INVESTMENT PORTFOLIO
The investment portfolio is incorporated herein by reference to Notes to
Consolidated Financial Statements pages 20-21 which are attached and made a part
of the Annual Report to Shareholders which is attached hereto as Exhibit 13.
LOAN PORTFOLIO
The loan portfolio is incorporated herein by reference to Notes to Consolidated
Financial Statements pages 22-23 which are attached to and made a part of Annual
Report to Shareholders which is attached hereto as Exhibit 13.
RISK ELEMENT
The risk element is incorporated herein by reference to Notes to Consolidated
Financial Statements page 23 which is attached to and made a part of Annual
Report to Shareholders which is attached hereto as Exhibit 13.
SUMMARY OF LOAN LOSS EXPERIENCE
The summary of loan loss experience is incorporated by reference as a financial
table page 40 which is attached to and made a part of Annual Report to
Shareholders which is attached hereto as Exhibit 13.
ALLOCATION OF THE ALLOWANCE FOR POSSIBLE LOAN LOSSES
The allocation of the allowance for possible loan losses is incorporated herein
by reference to Management's Discussion and Analysis of Financial Condition and
Results of Operation pages 8 and 9 which are attached to and made a part of
Annual Report to Shareholders which is attached hereto as Exhibit 13.
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<PAGE> 146
ITEM 1. BUSINESS - CONTINUED
DEPOSITS
The deposits are incorporated herein by reference to Notes to Consolidated
Financial Statements pages 25 and 26 which is attached to and made a part of
Annual Report to Shareholders which is attached hereto as Exhibit 13.
FINANCIAL RATIOS
Financial ratios are incorporated by reference as a financial table page 41
which is attached to and made a part of Annual Report to Shareholders which is
attached hereto as Exhibit 13.
SHORT-TERM BORROWINGS
There were no short-term borrowings with an average balance outstanding during
the year as great as 30% of shareholders' equity at December 31, 1997.
ITEM 2. PROPERTIES
A discussion of the properties owned by the Corporation and the Bank is
incorporated herein by reference to Notes to Consolidated Financial Statements
page 24 which is attached to and made a part of Annual Report to Shareholders
which is attached hereto as Exhibit 13.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings, other than ordinary routine
litigation incidental to the business known to the Board of Directors to which C
B & T or the Bank is a party or of which any of their property is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to the Shareholders during the fourth quarter of the
fiscal year ended December 31, 1997.
ITEM 4(B). EXECUTIVE OFFICERS OF REGISTRANT
The following is a list of March 2, 1998 showing the names and ages of all
executive officers of the registrant, the nature of any family relationship
between them, and all positions and offices held by each of them:
<TABLE>
<CAPTION>
NAME AGE POSITIONS AND OFFICES HELD
- ---- --- --------------------------
<S> <C> <C>
Jeffrey A. Golden* 57 Chairman of the Corporation and the Bank since October 1994. President
and Chief Executive Officer of the Corporation since November, 1981 and
the Bank since January, 1982.
</TABLE>
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<PAGE> 147
<TABLE>
<CAPTION>
<S> <C> <C>
M. Thomas Mullican* 76 Vice Chairman of Corporation since April, 1983; Board of Directors of
Corporation since November, 1981. Farmer and Investor.
Larry E. Brown* 51 Executive Vice President of the Corporation and the Bank since April, 1987; Senior
Vice President of the Bank, 1986 - 1987.
Ann Martin 48 Secretary of Corporation since November, 1986; Secretary to the Board
since December, 1986.
James H. Hillis 58 Treasurer of the Corporation since October, 1983; Senior Vice President
of the Bank since April, 1983.
</TABLE>
* Member of C B & T's Executive Committee
All of the officers of C B & T listed above are subject to re-election at the
Board of Directors meeting following the Annual Meeting of Shareholders
scheduled for May 29, 1998.
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<PAGE> 148
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
The market for C B & T's Common Stock and related shareholder matters are
incorporated herein by reference to Common Stock Market Price Information on
page 42 of the Annual Report to Shareholders which is attached hereto as Exhibit
13.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data is incorporated herein by reference to Consolidated
Selected Financial Data on page 42 of the Annual Report to Shareholders which is
attached hereto as Exhibit 13.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations is incorporated herein by reference to Management's Discussion and
Analysis of Financial Condition and Results of Operations on pages 7-12 of the
Annual Report to Shareholders which is attached hereto as Exhibit 13.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements and supplementary data are incorporated herein by reference
to the Consolidated Financial Statements on pages 12-35 of the Annual Report to
Shareholders which is attached hereto as Exhibit 13.
ITEM 9. DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
C B & T and its accountants have had no reportable disagreement on any matter of
accounting principles or practices or financial statement disclosure.
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<PAGE> 149
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Identification of Directors
<TABLE>
<CAPTION>
POSITION & POSITION & DIRECTOR
OFFICE HELD OFFICE HELD OF CORP.
NAME AGE WITH CORP. WITH BANK SINCE
---- --- ---------- --------- -----
<S> <C> <C> <C> <C>
Robert W. Boyd, Sr. 78 Director Director 1981
Larry E. Brown 51 Director & Director & 1990
Executive V.P. Executive V.P.
John R. Collier, Jr. 57 Director Director 1994
James A. Dillon, Jr. 69 Director Director 1981
Jeffrey A. Golden 57 Director & Chairman of Director & Chairman of the 1981
Board, President & Chief Board, President & Chief
Executive Officer Executive Officer
Charles D. Haston 62 Director Director 1981
James H. Hillis 58 Director & Treasurer Director & Senior V.P. 1990
J. Paul Holder 68 Director Director 1981
<CAPTION>
BUSINESS EXP. SHARES OF CORP.
DURING LAST BENEFICIALLY OWNED PERCENT
NAME FIVE YEARS AS OF 3/2/98(1) OF CLASS
---- ------------- -------------------- ---------
<S> <C> <C> <C>
Robert W. Boyd, Sr. Retired Owner, Globe Nursery 1,900(2) .72
McMinnville, TN
Larry E. Brown Executive Vice President 1,419 .54
of City Bank
John R. Collier, Jr. President, Pleasant Cove 2,088(3) .79
Nursery, Inc.
McMinnville, TN
James A. Dillon, Jr. Agent, Hoover & Sons, 3,726(4) 1.41
J.A. Dillon Ins. Agency
McMinnville, TN
Jeffrey A. Golden Chairman of the Board 2,009(5) .76
President & Chief Executive
Officer of City Bank
Charles D. Haston Circuit Court Judge 452(6) .17
31st Judicial District
State of Tennessee
James H. Hillis Senior Vice President of City 1,000(7) .38
Bank
Owner, Paul Holder Realty &
J. Paul Holder Auction Co. 14,422(8) 5.46
</TABLE>
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<PAGE> 150
<TABLE>
<CAPTION>
POSITION & POSITION & DIRECTOR BUSINESS EXP.
OFFICE HELD OFFICE HELD OF CORP. DURING LAST
NAME AGE WITH CORP. WITH BANK SINCE FIVE YEARS
---- --- ----------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C>
M. Thomas Mullican 76 Director & Vice Director & Vice 1981 Farmer and Investor
Chairman of the Board Chairman of the Board
James A. Puckett 71 Director Director 1981 Investor
Leon B. Stribling 57 Director Director 1992 President, Stribling
Chevrolet-GEO, Inc.
Smithville, TN
James E. Walling 60 Director Director 1994 President, Tennessee
Roasters Enterprise, Inc.
Owner, Vilco Supply Co.
<CAPTION>
SHARES OF CORP.
BENEFICIALLY OWNED PERCENT
NAME AS OF 3/11/97 1 OF CLASS
---- ------------------- ---------
<S> <C> <C>
M. Thomas Mullican 10,438(9) 3.95
James A. Puckett 194 .07
Leon B. Stribling 2,401 .91
James E. Walling 765 .29
</TABLE>
14
<PAGE> 151
FOOTNOTES
<TABLE>
<S> <C>
(1) Unless otherwise indicated, all shares are owned of record.
(2) 1,900 shares are registered to Robert W. Boyd, Sr. or Elinor Boyd (Mr. Boyd, Sr.'s wife).
(3) 1,688 shares are registered to John R. Collier, Jr.
100 shares are registered to Suzanne E. Collier Reynolds (Mr. Collier, Jr.'s daughter).
300 shares are registered to Pleasant Cove Nursery, Inc. (Mr. Collier, Jr. is President of Pleasant Cove Nursery, Inc.).
(4) 2,971 shares are registered to James A. Dillon, Jr.
223 shares are registered to James A. Dillon, Jr. and Phyllis M. Dillon (Mr. Dillon, Jr.'s wife).
532 shares are registered to Phyllis M. Dillon (Mr. Dillon, Jr.'s wife).
(5) 1,404 shares are registered to Jeffrey A. Golden WROS Linda Golden.
605 shares are registered to Linda Golden WROS Jeffrey A. Golden.
(6) 360 shares are registered to Charles D. Haston.
92 shares are registered to Charles D. Haston, a general partnership.
(7) 1,000 shares are registered to James H. or Carolyn Hillis (Mr. Hillis's wife).
(8) 14,386 shares are registered to J. Paul Holder.
36 shares are registered to Steven Thomas Holder, Trust UMGA (Mr. Holder's grandson) and J. Paul Holder, Trustee
(9) 10,168 shares are registered to M. Thomas Mullican.
270 shares are registered to Connie W. Mullican (Mr. Mullican's wife).
</TABLE>
15
<PAGE> 152
(b) Identification of Executive Officers - Information regarding
identification of executive officers may be found in Item 4(b) of Part
I of this Form 10-K.
(c) Section 16(a) reporting Delinquencies - Under the Securities Laws of
the United States, the Corporation's directors, executive officers and
any person who holds more than ten percent (10%) of the Shares of the
Corporation are required to report their ownership of the Shares and
any changes in that ownership to the Securities and Exchange Commission
(the "SEC"). These persons are also required by the SEC's regulations
to furnish the Corporation with copies of these reports. Specific due
dates for these reports have been established by the SEC, and the
corporation is required to report in this Proxy Statement any failure
to file by these dates during 1997. Based solely upon a review of the
reports furnished to the corporation or written representations from
the Corporation's directors and executive officers, the Corporation
believes that, during the 1997 fiscal year, all filing requirements
applicable to its officers, directors and greater than 10% beneficial
owners were complied.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the aggregate compensation accrued or paid by the
Bank during the fiscal years ended December 31, 1997, 1996, and 1995 to the
highest compensated officers whose aggregate compensation exceeds $100,000.00.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
========================================================================================================================
Name of Individual All Other
and Principal Position Year Salary Bonus Compensation (1)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Jeffrey A. Golden 1997 $ 138,000.00 $ 10,350.00 $ 31,718.06
Chairman of the Board, President and Chief 1996 133,500.00 10,012.50 22,499.35
Executive Officer 1995 130,000.00 9,750.00 20,684.04
- ------------------------------------------------------------------------------------------------------------------------
Larry E. Brown 1997 $ 93,000.00 $ 6,975.00 $ 28,107.30
Director of Bank and 1996 90,000.00 6,750.00 21,147.71
Executive Vice President 1995 86,500.00 6,487.50 15,518.76
- ------------------------------------------------------------------------------------------------------------------------
James H. Hillis 1997 $ 83,500.00 $ 6,262.50 $ 23,213.44
Director and Treasurer 1996
1995
========================================================================================================================
</TABLE>
(1) All Other Compensation for Mr. Golden, Mr. Brown and Mr. Hillis includes
Director fees for the Bank both cash paid and deferred fees, deferred
compensation paid pursuant to the Corporation's 401(k) plan, a premium
payment for life insurance, use of a bank vehicle and country club dues.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding security ownership of certain beneficial owners and
management may be found in Item 10(a) of Part III of this Form 10-K.
16
<PAGE> 153
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Some of the Corporation's directors and officers, businesses with which they are
associated, and members of their immediate families are at present, as in the
past, customers of the Bank and have had transactions with the Bank, including
borrowings. All transactions involving loans to such persons and businesses have
been made in the ordinary course of business on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other borrowers. In the opinion of the Board, such
transactions do not involve more than a normal risk of collectibility nor
present any other unfavorable features.
17
<PAGE> 154
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) and (2) The response to this portion of Item 14 is submitted
as a separate section of this report.
(3) The following exhibits are filed herewith:
(3) February 10, 1998 Amendment to Corporate Bylaws
(13) Annual Report to Security Holders
18
<PAGE> 155
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
C B & T, Inc.
By: /s/ Jeffrey A. Golden
----------------------------------
Jeffrey A. Golden, Chairman,
President, Chief Executive Officer
Date: March 10, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
/s/ Jeffrey A. Golden
- --------------------------------------------
Jeffrey A. Golden, Chairman
President, Chief Executive Officer
(Principal Executive and Financial Officer)
Date: March 10, 1998
-------------------------------------
/s/ Jerry N. Brown
- --------------------------------------------
Jerry N. Brown, Senior Vice President
City Bank & Trust Company
(Chief Financial Officer)
Date: March 10, 1998
-------------------------------------
19
<PAGE> 156
SIGNATURES -- CONTINUED
<TABLE>
<S> <C>
/s/ Robert W. Boyd, Sr. /s/ James H. Hillis
- -------------------------------------------- --------------------------------
Robert W. Boyd, Sr., Director James H. Hillis, Director
Date: March 10, 1998 Date: March 10, 1998
-------------------------------------- --------------------------
/s/ Larry E. Brown /s/ J. Paul Holder
- -------------------------------------------- --------------------------------
Larry E. Brown, Director J. Paul Holder, Director
Date: March 10, 1998 Date: March 10, 1998
-------------------------------------- --------------------------
/s/ John R. Collier, Jr. /s/ M. Thomas Mullican
- -------------------------------------------- --------------------------------
John R. Collier, Jr., Director M. Thomas Mullican, Director
Date: March 10, 1998 Date: March 10, 1998
-------------------------------------- ------------------------
/s/ James A. Dillon, Jr. /s/ James A. Puckett
- -------------------------------------------- --------------------------------
James A. Dillon, Jr., Director James A. Puckett, Director
Date: March 10, 1998 Date: March 10, 1998
-------------------------------------- --------------------------
/s/ Jeffrey A. Golden /s/ Leon B. Stribling
- -------------------------------------------- --------------------------------
Jeffrey A. Golden, Director Leon B. Stribling, Director
Date: March 10, 1998 Date: March 10, 1998
-------------------------------------- --------------------------
/s/ Charles D. Haston /s/ James E. Walling
- -------------------------------------------- --------------------------------
Charles D. Haston, Director James E. Walling, Director
Date: March 10, 1998 Date: March 10, 1998
-------------------------------------- --------------------------
</TABLE>
20
<PAGE> 157
Form 10-K -- Item 14(a)(1) and (2) and Item 14(d)
C B & T, Inc. and Subsidiaries
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of C B & T, Inc. and
Subsidiaries, included in the annual report of the registrant to its
shareholders for the year ended December 31, 1997, and incorporated by reference
in Item 8:
Independent Auditors' Report
Consolidated Balance Sheets -- December 31, 1997 and 1996
Consolidated Statements of Income -- Years ended December 31, 1997,
1996 and 1995
Consolidated Statements of Shareholders' Equity -- Years ended December
31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows -- Years ended December 31, 1997,
1996 and 1995
Notes to Consolidated Financial Statements -- December 31, 1997, 1996
and 1995
All schedules to the consolidated financial statements required by Article 9 of
Regulation S-X are not required under the related instructions or are
inapplicable, and therefore have been omitted.
21
<PAGE> 158
EXHIBIT INDEX
C B & T, INC.
<TABLE>
<CAPTION>
EXHIBIT NUMBER TITLE OR DESCRIPTION
-------------- --------------------
<S> <C>
(3) February 10, 1998 Amendment to Corporate Bylaws
(13) Annual Report to Security Holders
</TABLE>
22
<PAGE> 159
EXHIBIT 3
BYLAWS
C B & T, INC.
THIS AMENDMENT TO THE AMENDED AND RESTATED BY-LAWS OF
C B & T, INC. (this "Amendment") is made and adopted as of the 10th day of
February, 1998, by the board of directors of C B & T, Inc. (the "Board").
WITNESSETH:
WHEREAS, the Board deems it to be in the best interest of the Company
to permit greater flexibility in setting the date of its annual meeting, it is
therefore
RESOLVED that the Amended and Restated Bylaws for C B & T, Inc., be
amended as follows:
Article I-Meetings of Shareholders, Section 1 "Annual Meeting": shall be
replaced in its entirety with the following:
"The annual meeting of the shareholders shall be held at such time and place,
either within or without the State of Tennessee, as may be designated from time
to time by the Directors, consistent with state and federal law. Unless the time
and place are otherwise specified by the Directors, the meeting shall be held on
the second Tuesday in April of each year, at the main office of the Company."
IN WITNESS WHEREOF, the parties hereto have approved this Amendment as
of the day and year first above written to be included in the official minutes
of the meeting of the Board.
23
<PAGE> 160
EXHIBIT 13
ANNUAL REPORT TO SHAREHOLDERS
C B & T, INC.
24
<PAGE> 161
C B & T, INC.
AND ITS SUBSIDIARIES
CITY BANK & TRUST COMPANY
FINANCIAL REVIEW
<TABLE>
<S> <C>
Forward .......................................................................2
Letter From the President .....................................................6
Financial Discussion...........................................................9
Report of Independent Certified Public Accountants............................14
Consolidated Balance Sheets ..................................................15
Consolidated Statements of Income ............................................16
Consolidated Statements of Shareholder's Equity...............................17
Consolidated Statements of Cash Flows ........................................18
Notes to Consolidated Financial Statements ...................................19
</TABLE>
1
<PAGE> 162
FORWARD
<TABLE>
<S> <C>
City Bank & Trust Company has completed 85 years of dedicated service to our
trade area. We opened our doors for business on April 1, 1912 and received a
Charter on October 30, 1912 as a State Bank. Since that first day, the bank has PICTURE
been among those at the forefront of business, agricultural, industrial and
technological functions that have helped develop the economy of our trade area.
As we celebrate we want to review where we have been and tell you where we are
headed.
At the age of 72, having contributed more than 50 years of business and banking
leadership to the community, the elder Mr. Jesse Walling began the bank with the
help of his three sons, H.R. Walling, E.W. Walling and C.D Walling. Pa "J" as he
was affectionately called was the bank's first President. Huel Walling served as
the Cashier and E.W. filled the position of Vice President. The bank has
continued to live by the pledge made by the Walling's to serve the customers and
the community aggressively and efficiently. Assets on opening day were
$42,648.54. One of the town's most aggressive business men and an influential
civic and political leader assumed the presidency of City Bank & Trust company
with the retirement of the founder. He was James D. Elkins, whose business
affiliations also included President of the McMinnville Hardware and Furniture
Company.
He hired the first woman, Mrs. Georgia Moore who became the bank's first
Assistant Cashier and the first woman officer. In 1932 the bank merged with
Peoples National Bank of McMinnville. The bank successfully weathered the bank PICTURE
holidays declared in March, 1933 by the President of the United States and
emerged from the crucial economic period an even stronger financial institute
passing the one- million dollar mark with assets of $1,026,076.44 in 1935.
The bank's founder, Jesse Walling died March 11, 1930, followed by the
unexpected death in 1936 of President Elkins. Turning to the official family,
the bank's directors elected C. D. Walling as president to succeed Mr. Elkins.
The new president brought with him to the office a wealth of knowledge not only
of the banking business, but of the area served by the bank and it's people.
Being the son of the founder and having "grown up" in the bank, he was eminently
qualified to succeed to the presidency until 1966 when Mr. H. B. Roney was named
to the presidency. Keeping in mind the founders dedication of the bank to
service, management soon found the banking quarters to be inadequate to provide
the services needed by the community. The Board of Directors quickly responded
by opening the West Main Branch in October, 1964. This provided the first
drive-in facility in Warren County.
In January 1962 the Board of Directors named Mr. Joe H. Womack was the bank's
first Assistant Vice President. He was known for his wisdom in agricultural
lending and progressed to the position of Senior Vice President and member of
the Board of Directors.
</TABLE>
2
<PAGE> 163
<TABLE>
<S> <C>
Mr. Roney was a colorful individual who served this institution for almost two
decades in the areas of Cashier, Vice President, Executive Vice President,
President and only briefly as President Emeritus. He was a person who had a love
for life and a love for helping others. He was a man that appreciated his staff
and wanted them to do well. He was constantly encouraging them and giving them
moral and educational support. Under his leadership Jeffrey A. Golden became the
first First Vice President. He progressed quickly through the ranks and
PICTURE currently serves as the bank's Chairman of the Board, President and Chief
Executive Officer, the only person to hold all three titles. Mrs. Glyna F. Lee
became the bank's first woman loan officer, she too became a leader in the
financial industry, and is currently serving as Senior Vice President and
Director of Marketing and Business Development. Early on as President it became
clear to Mr. Roney and the Board that we were in need of another location to
handle the growth of the bank. Again the Board of Directors quickly initiated
plans which resulted in the opening of the Plaza Branch in temporary quarters in
April, 1967. The permanent structure was completed and occupied in February,
1968. After opening two modern banking facilities within a four year period,
City Bank & Trust Company was still facing another problem in order to provide
adequate banking services. The facilities at the Main Office were crowded to
capacity, with a need for expansion. After acquiring some adjoining property,
plans were formulated to construct a new main office building. In February 1968,
City Bank & Trust Company moved into temporary quarters to allow for the
renovation of the new building which was occupied in May, 1969. In 1974 the Mt.
Leo Branch was opened. Under Mr. Roney's leadership the bank grew to
$68,670,000.00 by year end 1978 when Mr. Roney retired and the Board of
Directors elected long time employee Jeffrey A. Golden as President.
Mr. Golden became the youngest President in the bank's history, taking over the
helm at the age of 38. Under his leadership the bank has experienced the
greatest growth in the history of the bank, with assets soaring from $68 to $265
PICTURE million. In 1980 the Federal Deposit Insurance Corporation and the Tennessee
Banking Department approved the opening of our fifth branch on March 1, 1981 at
the Three Star Mall. The bank began to offer two new types of accounts The N.O.W
account, which stood for "Negotiable Order of Withdrawal," worked like a regular
savings account, and the new tax free All Savers Certificate was introduced. As
the bank was experiencing great growth Mr. Golden saw the need to restructure
the bank and set up division heads so that more time could be devoted to
strengthening the different areas of the bank. Today Larry E. Brown, Executive
Vice President of the bank oversees the divisions. The following people
presently head these divisions. Loan Division, Senior Vice President James H.
(Dickie) Hillis; Operations
</TABLE>
3
<PAGE> 164
<TABLE>
<S> <C>
Division, Senior Vice President and Chief Financial Officer Jerry N. Brown;
Trust/Investment Division, Senior Vice President Kenneth W. Smith, and the
Data Processing Division, Vice President Edward Wayne Martin. PICTURE
Under the wise leadership of Mr. Golden another historic event occurred in the
growth of City Bank & Trust Company when at the annual shareholders meeting,
90.74% of the shareholders concurred with recommendations of Management and the
Board of Directors in approving plan to reorganize The City Bank & Trust Company
into a one bank holding company structure to be known as C B & T, Inc. This new
structure positioned the bank to compete in the new deregulated market place.
Many new deposit accounts were introduced. It also brought about a different
form of lending as the need for variable rate loans came into place. Changes in
tax laws brought about changes for wage earners in the Individual Retirement
Account program (IRA) that allowed the deferment of income, as well as earnings
on that income. Deregulation gave use the ability to become more competitive by
being a more complete financial planner for our customers and still provide
personal service.
City Bank & Trust Company's strength and commitment continued to grow and in
July of 1983 the bank was invited by the Federal Deposit Insurance Corporation
to bid for the purchase of certain assets and assume certain liabilities of the
First Central Bank of Smithville. The bank was successful in this acquisition on
July 8, 1983. The bank continued to expand and offer new services which included
the direct Federal Reserve Wire Service, expanded leasing programs, MasterCard
Gold cards, investment and brokerage services, personal and home equity lines of
credit, limited insurance activities and discount brokerage services.
In 1986, Mr. Frank Henegar, the oldest person to serve on the bank's Board of
Directors died at the age of 98 after serving this institution for 39 years. He
achieved the singular distinction of "Tennessee's Most Senior Bank Board Member"
presented by the Tennessee State Senate. During that same year, Mrs. Edith Ann
Martin was named Secretary to the Bank's Board of Directors. A job she so
capably handles to this date.
As the bank faced the 90's there was a concern for many of the nations banks. A
recognized beginning of a national recession, and a threat of war in the Middle
East. However, C B & T, Inc. grew and prospered during this difficult period.
The bank continued to be a leader in extending new products & services with new
Automated Clearing Operations, which included new service offerings of direct
deposit, payroll services, automatic bill paying, cash concentrations, and
corporate trade payments.
In October, 1994, an era of leadership was brought to an end upon the retirement
of Mr. Clarence D. Walling, Jr.. The Walling family had served CB &T, Inc., and
its subsidiary, City Bank & Trust Company from its beginning. Mr. Jesse Walling,
founder of City Bank & Trust Company served as Chairman from 1912 until his
death on March 11, 1930. His son, Mr. Clarence D. Walling, Sr. was an original
signer of the corporate charter and virtually served his lifetime for this
institution and this community. His term as chairman ended with his untimely
death in 1969. Mr. C D. Walling Jr. then served as Chairman from 1970 until 1994
and served as Chairman of C B & T, Inc. from its inception date in 1981 until
1994, at which time his retirement concluded the Walling era.
1996 was a very successful year for the bank. Business customers were offered a
Cash Management Investment Account. This program offered business customers an
efficient means of managing their daily funds and earning a fair return on
excess cash through the use of repurchase agreements of U.S. Government
Securities. The Bank rolled out the new 24-Hour Telephone Banking service, that
offered voice response information to customers, day or night as well as
Loans-by-Phone. The opening to the new SuperCenter Branch in the Wal-Mart Super
Store facility offered new extended banking hours with a 24-hour full service
ATM in a safe and secure environment.
</TABLE>
4
<PAGE> 165
A full service ATM was installed in the new River Park Hospital and a cash
dispenser in the Calsonic Yorozu Corporation plant in Morrison, Tennessee. The
H. G. Hill property adjacent to the West Main Branch was purchased in order to
expand the West Main facility. The Board of Directors approved the organization
of two new companies. CBT Insurance, Inc. was organized to provide the bank new
opportunities in the insurance arena. CBT Realty, Inc. was organized for the
purpose of holding and disposing of foreclosed properties.
As we celebrated our 85th Anniversary many events were planned for our customers
and staff. The bank held customer appreciation day on the first Friday of each
month in McMinnville and Smithville. The staff participated in several in-house
contests and promotions, which also involved our customers. There was a pumpkin
contest for the kids, fall decorating contest throughout the bank and a drawing
was held for $1,000.00 ion cash. The employees continued to be involved in local
charity, raising thousands of dollars. Also in 1997, there was a focus on
training for our entire staff, preparing our people for the twenty-first
century. To better serve our customers, a cash machine was installed at our
Three Star Mall Branch.
During the last 85 years the bank and its employees have won many awards for
community service, exhibiting sustained superior performance through strong
leadership, as well as, the hard work, talent and input of our employees on
behalf of our customers and community. Among the bank awards are the 5 Star
Superior Bank Award by Bauer Financial, Named Employer of the Year by the
Tennessee Committee for People with Disabilities, Named the "Best Bank" in a
community wide contest sponsored by the Southern Standard Newspaper, received an
"Obelisk" from KPMG Peat-Marwick of New York for being a Superior Bank, selected
as the "Business of the Year" by the African-American Athletic & Scholarship
organization and received an "A" rating by Sheshunoff for many years.
As we look to new horizons, we see the financial market becoming global, the
economy is shifting more and more toward services, and toward work knowledge.
New technologies -- especially computers and telecommunications -- have already
created intense, worldwide competition for business. Considering the scope and
speed of change these days, there will be may priceless opportunities for those
of us who play by the new rules, position ourselves right, and take personal
responsibility for our future. We can't stop the world from changing. The best
we can do is adapt. As we move into the twenty-first century we pledge to you
our continued leadership, superior service and our efforts to improve the
quality of life for all we serve.
5
<PAGE> 166
TO OUR SHAREHOLDERS AND FRIENDS:
1997 symbolizes 85 years of
dedicated service to our trade area.
We realize the success of C B & T,
Inc. and its subsidiary City Bank &
Trust Company could not have been
possible without the support and
encouragement of our shareholders
and friends; the excellent
performance of our current staff and
those who have served in the past
PICTURE years; our management for their
leadership and commitment; and our
Board of Directors for their
participation and guidance. Thanks
to each of you for your part in the
many successes that we have enjoyed
throughout these 85 years.
We are happy to report that 1997 was
a very successful year as indicated
by the following highlights:
- - Income per share increased by $0.79 to a record high of $16.16 while
maintaining a l.60% return on assets
- - The percentage of net income to average shareholders' equity at
year-end was 13.33%.
- - Shareholders' equity to total average assets increased to 11.98% after
paying a record high $7.50 cash dividend.
- - The percentage of dividends declared per average common share to net
income per average common share increased to 46.41%.
The philosophy of our board and management team is to keep pace with changes and
opportunities and provide our market area with a high quality, high performing,
full service financial institution. Therefore, on January 8, 1998, a public
announcement was made as a result of a decision made by our Board of Directors
to merge (subject to shareholder and regulatory approval) with Union Planters
Corporation, a Memphis, Tennessee based corporation, who like C B &T, Inc. and
its subsidiary, City Bank & Trust Company, is a very highly communityoriented
company. Personally, I feel this decision will enable us to keep pace with
change and technology and provide more resources while maintaining high quality
services. Also you will continue to see the same friendly contact staff and
management who serve you on a daily basis.
Please review in detail the financial data and the proposed merger information.
I encourage you to vote FOR the adoption of the Agreement and the Plan of Merger
and return your Proxy to us as soon as possible.
We sincerely appreciate and value your business and ask that you encourage your
family and friends to use our services.
Yours truly,
Jeffrey A. Golden
Chairman of the Board
President and Chief Executive Officer
6
<PAGE> 167
C B & T, INC. AND SUBSIDIARIES BOARD OF DIRECTORS
<TABLE>
<S> <C> <C>
JEFFREY A. GOLDEN(1) JOHN R. COLLIER, JR. JAMES A. PUCKETT(2)
Chairman of the Board President Investor
President & Chief Executive Officer Pleasant Cove Nursery
CB&T, Inc. And (Wholesale Nursery-Trees & Shrubs) LEON B. STRIBLING(3)
City Bank & Trust Company President
(State Bank) JAMES A. DILLON, JR.(2) Stribling Chevrolet-GEO Inc.
Chairman, McMinnville Electric System Agent (Automobile Agency)
Hoover & Son - J.A. Dillon
M. THOMAS MULLICAN(2) Insurance Agency JAMES E. WALLING
Vice Chairman of the Board (General Insurance) President
CB&T, Inc. And Tennessee Roasters Enterprise, Inc.
Farmer & Investor CHARLES D. HASTON(2)(3) Owner, Vilco Supply Co.
Circuit Court Judge (Car Wash Supply)
ROBERT W. BOYD, SR.(3) 31st Judicial District
Retired Owner State of Tennessee
Globe Nursery J. RAY TROOP, JR. M.D.*(3)
(Wholesale Nursery-Trees and Shrubs) JAMES H. HILLIS Family Practice Physician
Treasurer, CB&T. Inc.
LARRY E. BROWN(2) Senior Vice President EDITH ANN MARTIN
Executive Vice President City Bank & Trust Company Secretary to the Board
CB&T, Inc. And (State Bank) CB&T, Inc. and
City Bank & Trust Company City Bank & Trust Company
(State Bank) J. PAUL HOLDER(2) (State Bank)
Owner
Paul Holder Realty & Auction Co. (1) Ex-Officio Member of All Committees
(Land Development, Sales & Auction) except the Audit Committee
(2) Member of Executive Committee
(3) Member of Audit Committe
*Advisory Directory
</TABLE>
PICTURE OF BOARD
- -----------------------
1
2
3
2
2
2,3
3
*3
2
2
1
2
3
*
7
<PAGE> 168
C B & T, Inc. And subsidiaries officers and advisory committee
C B & T, INC. - Officers
<TABLE>
<S> <C> <C> <C> <C>
JEFFREY A. GOLDEN M. THOMAS MULLICAN LARRY E. BROWN JAMES H. HILLIS EDITH ANN MARTIN
Chairman, President & Vice Chairman Executive Vice President Treasurer Secretary to the
Chief Executive Officer Board
</TABLE>
<TABLE>
<CAPTION>
CITY BANK & TRUST COMPANY - OFFICERS
<S> <C> <C>
JEFFREY A. GOLDEN KENNETH D. MARTIN DANA M. GREEN
Chairman of the Board, President, CEO Vice President Assistant Vice President
EDITH ANN MARTIN EDWARD WAYNE MARTIN SHANNON L. HASTON
Secretary to the Board Vice President Assistant Vice President
LARRY E. BROWN ROBERT L. MILLER JOHNNY T. TAYLOR
Executive Vice President Vice President Assistant Vice President
JERRY N. BROWN LONNIE D. MILSTEAD DONNA BRYANT
Senior Vice President & CFO Vice President Administrative Assistant
JAMES H. HILLIS DAN T. WOLFE SHERRY A. CLENDENON
Senior Vice President Loan Analyst Compliance Officer
GLYNA F. LEE KENNETH DWAYNE WOODS BARBARA D. DAVIS
Senior Vice President Vice President Administrative Assistant
KENNETH W. SMITH EDMOND D. BUSIC TERESA A. HENNESSEE
Senior Vice President Loan Review Officer Administrative Assistant
RANDALL G. TRAMEL DONNA D. EVANS LISA A. HILLIS
Senior Vice President Operations Coordinator Administrative Assistant
ERIC GOLDEN RHONDA A. CARR CHARLES TIM PRATER
Cashier Senior Auditor Administrative Assistant
RONALD G. GOODWIN SHERRY LYNN DAUGHERTY JANE ANN PRYOR
Vice President Branch Manager Administrative Assistant
LYNNE R. HAMRICK BETTY B. PRATER ELIZABETH P. SMITH
Human Resource Officer Branch Manager Administrative Assistant
DEBRA T. KELL TRACIE J. TRAVIS SHARON E. WEST
Vice President Branch Manager Administrative Assistant
EMOGENE R. MAGNESS DAWN M. CHRISTIAN
Vice President, Branch Manager Assistant Vice President
DANNY L. MARTIN DEBORAH E. GLENN
Vice President Assistant Vice President
</TABLE>
<TABLE>
<CAPTION>
CITY BANK & TRUST COMPANY - SMITHVILLE ADVISORY COMMITTEE
<S> <C> <C>
H. J. JUDKINS VESTER PARSLEY
H. J. Judkins & Son Nursery, Inc. Attorney-at-Law
JIM ED RICE NORVAL WEBB, JR. PICTURE OF ADVISORY
Local Businessman F.Z. Webb & Son Pharmacy Committee
LEON B. STRIBLING MARK ASHBURN
Stribling Chevrolet-GEO, Inc. Manager, Smithville Elec. System
JEANETTE FRANCE LENA BUCK
Farming Operation Attorney-at-Law
</TABLE>
8
<PAGE> 169
FINANCIAL DISCUSSION
The following discussion is presented to assist in understanding the current
financial condition and results of operations of C B & T, Inc. and subsidiaries.
This discussion should be read in conjunction with the consolidated financial
statements and related disclosures presented in other sections of this annual
report.
PERFORMANCE OVERVIEW
Net income for 1997 was $4,271,000 or $16.16 per share, compared to $4,117,000
or $15.37 per share in 1996 and $4,067,000 or $15.00 per share in 1995. Two key
measures of performance in the banking industry are return on average equity
(ROE) and return on average assets (ROA). ROE is the ratio of income earned to
average shareholders' equity. ROE for 1997 was 13.33 percent compared to 13.76
percent in 1996 and 14.37 percent in 1995. ROA measures how effectively a
corporation uses its assets to produce earnings. For 1997, return on average
assets was 1.60 percent. ROA was 1.60 percent in 1996 and 1.64 percent in 1995.
ROE and ROA have been negatively impacted by an increase in the net loan charge
offs in 1997 and 1996 as compared to 1995.
NET INTEREST INCOME
The Corporation's primary source of earnings is net interest income, which is
the difference between revenue generated from earning assets and the interest
cost of funding those assets. For discussion, net interest income is adjusted to
reflect the effect of the tax benefits of certain tax-exempt investments and
loans to compare with other sources of interest income. Net interest income on a
fully taxable-equivalent basis has increased to $12,142,000 in 1997, from
$11,903,000 in 1996 and $11,334,000 in 1995. Net yield on interest earning
assets, which is net interest income on a tax equivalent basis divided by
average earning assets, was 4.85 percent in 1997, compared with 4.93 percent in
1996 and 4.87 percent for 1995. Average earning assets, as a percentage of total
assets, decreased slightly to 93.7 in 1997 compared to 93.8 percent in 1996 and
93.9 percent in 1995.
PROVISION FOR POSSIBLE LOAN LOSSES
The provision for possible loan losses is an operating expense recorded to
maintain the related balance sheet allowance account that is provided to cover
losses that may be incurred in the normal course of lending. The total provision
for possible loan losses was $413,000 in 1997, $628,000 in 1996, and $376,000 in
1995. Management regularly monitors the allowance for possible loan losses and
considers it to be adequate.
NONINTEREST INCOME
Total noninterest income of $2,122,000 in 1997 increased $64,000 or 3.1 percent,
when compared to 1996. This follows an increase of 13.3 percent in 1996 and 35.5
percent in 1995. Service charges on deposit accounts increased $12,000 in 1997
due, principally, to growth in transaction and savings deposit accounts. Other
service charges decreased $67,000 in 1997, due, principally, to reductions in
credit life and accident and health insurance commissions. Gains and losses on
the sale of investment securities also impact comparisons. Security transactions
resulted in a gain of $36,000 in 1997 and in losses of $22,000 and $14,000 in
1996 and 1995.
NONINTEREST EXPENSES
Noninterest expenses increased 4.2 percent in 1997, a slightly lower rate of
growth than the 5.6 percent in 1996 and higher than 3.2 percent in 1995. The
smaller increase in 1997 can be attributed to a leveling of salaries and other
expenses. Salaries, wages and benefits accounted for 54.9 percent of total
noninterest expense in 1997 compared to 56.5 percent of total noninterest
expense in 1996 and 56.0 percent in 1995. Federal Deposit Insurance
Corporation's insurance assessment increased $25,000 in 1997 after a decrease of
$240,000 in 1996 and a decrease of $235,000 in 1995.
9
<PAGE> 170
FINANCIAL DISCUSSION
INCOME TAXES
One element of the Corporation's tax planning is the implementation of various
investment and loan strategies to maximize after-tax profits. This planning is
an ongoing process which considers the levels of tax-exempt securities and
loans, investment securities gains or losses and allowable loan loss deductions.
The Corporation's effective income tax rate (income tax expense divided by
income before income taxes) is less than the statutory rate primarily due to
income on tax-exempt securities and loans. It should be recognized that the
yield on these types of assets is considerably less than on other investments of
the same maturity and risk.
The income tax provision was $1,754,000 in 1997 compared with $1,856,000 in 1996
and $1,788,000 in 1995. The Corporation's effective tax rate was 29.1 percent in
1997, 31.1 percent in 1996 and 30.5 percent in 1995.
It has been determined that for the year ended December 31, 1997, a valuation
allowance is not required on any of the deferred tax assets recorded due,
primarily, to the earnings history of the Corporation and the significant amount
of federal income taxes paid in prior years.
CREDIT QUALITY AND EXPERIENCE
IMPAIRED LOANS
Effective January 1, 1995, the Corporation and the Bank adopted Statement of
Financial Accounting Standards No. 114. (as amended by No 118), "Accounting by
Creditors for Impairment of a Loan". SFAS 114 established the accounting by
creditors for impairment of a loan by specifying how allowances for possible
loan losses related to certain loans should be determined. This Statement also
addresses the accounting by creditors for certain loans that are restructured in
a troubled debt restructuring. A loan is considered impaired when it is probable
that an institution will be unable to collect all amounts due (principal and
interest) according to the contractual terms of the loan agreement. Management
evaluates smaller balance homogeneous loans collectively for impairment. Loans
collateralized by one-to-four family residential properties, consumer
installment loans and credit card loans are considered smaller-balance
homogeneous loans.
Loans that are ninety days past-due, loans on non-accrual status, loans that are
restructured in a troubled debt restructuring, and loans that are included on
the Bank's problem loan list are evaluated for impairment. A loan on non-accrual
status is a loan on which interest accruals are discontinued. Interest accruals
are discontinued when management believes, after considering economic and
business conditions and collection efforts, that the borrower's financial
condition is such that it is not reasonable to expect that such interest will be
collected. Interest income is subsequently recognized only to the extent of the
excess of cash payments received over the principal balance due.
When a loan is impaired, the amount of impairment is measured based on the
present value of expected future cash flows discounted at the loan's effective
interest rate. For collateral dependent loans, impairment is measured based on a
loan's observable market price or the fair value of the collateral. The entire
change in the net carrying amount is reported as an adjustment to the provision
for possible loan losses, but in no event are changes in the net present value
used to justify having a loan on the Bank's books at a value that exceeds its
recorded investment. Estimated losses from impaired loans are included in the
Bank's allowance for possible loan losses. Impaired loans are charged-off once
management has exhausted all efforts to collect the loan.
Inherent in the business of providing financial services is the risk involved in
extending credit. Management believes the objective of a sound credit policy is
to extend quality loans to customers while reducing risk affecting shareholders'
and depositors' investments. Risk reduction is achieved through diversity of the
loan portfolio as to type, borrower, and industry concentration as well as sound
credit policy guidelines and procedures.
Total impaired loans at December 31, 1997 were $1,404,000 compared to $1,733,000
and $398,000 at December 31, 1996 and 1995 respectively. The ratio of impaired
loans to the allowance for loan losses at December 31, 1997, was 73.4 percent
compared to 89.7 percent and 21.4 percent at December 31, 1996 and 1995,
respectively. Total impaired loans as a percentage of total loans decreased to
1.0 percent at December 31, 1997, compared to 1.2 percent at December 31, 1996
and 0.3 percent at December 31, 1995.
10
<PAGE> 171
FINANCIAL DISCUSSION
ALLOWANCE FOR POSSIBLE LOAN LOSSES AND LOAN CHARGE-OFFS
The allowance for possible loan losses is maintained to cover losses that may be
incurred in the normal course of lending. The allowance for possible loan losses
is increased by provisions charged against income and recoveries of loans
previously charged off. The allowance is decreased by loans that are determined
uncollectible by management and charged against the allowance, net of
recoveries.
In determining the adequacy of the allowance for possible loan losses,
management on a regular basis evaluates and gives consideration to the following
factors: estimated future losses of significant loans including identified
problem credits; historical loss experience based on volume and types of loans;
trends in portfolio volume, maturity and composition; off-balance sheet credit
risk; volume and trends in delinquencies and non-accruals; economic conditions
in the market area; and any other relevant factors that may be pertinent.
Potential problem loans are those loans which are on the Corporation's "watch
list". These loans exhibit characteristics that could cause the loans to become
impaired or require restructuring in the future. Periodically, and at a minimum
monthly, this "watch list' is reviewed and adjusted for changing conditions.
FINANCIAL CONDITION
The following discussions address key elements of financial condition, including
earning assets, the source of funds supporting earning assets, capital adequacy
and asset and liability management.
EARNING ASSETS
LOANS
At December 31, 1997, loans were $147.5 million, compared to $144.9 million at
December 31, 1996. This represents an increase of 1.8 percent in 1997. In 1996,
loans increased 3.1 percent from $140.5 million at December 31, 1995.
Loans comprise the majority of the Corporation's earning assets representing
57.7 percent of average earning assets in 1997 and 57.4 percent in 1996. Average
loans outstanding increased 4.4 percent in 1997 and 5.1 percent in 1996.
The largest category in the loan portfolio was real estate mortgage loans, which
comprised 66.2 percent of total loans at the end of 1997. Installment loans
totaled 22.2 percent of the portfolio and commercial, financial and agricultural
loans comprised 9.1 percent of the portfolio. All other loans were 2.5 percent
of the portfolio. In 1996, real estate mortgages were 66.5 percent of the
portfolio, installment loans were 22.1 percent, commercial, financial and
agricultural loans were 9.4 percent and other loans were 2.0 percent.
The mix within the commercial loan portfolio is diverse and represents loans to
a broad range of business interests located, primarily, within the Bank's
defined market area with agribusiness industry being the only concentration. The
installment loan portfolio is composed, principally, of financing to individuals
for vehicles and consumer assets. The real estate portfolio is primarily
residential mortgages.
Loans that mature within one year totaled $49,514,000, or 33.6 percent of the
loan portfolio at December 31, 1997.
INVESTMENT SECURITIES
The investment portfolio represented 40.7 percent of average earning assets in
1997 and 40.4 percent in 1996. Average investment securities increased 4.5
percent in 1997 compared to 1996. The tax-equivalent yield on the entire
portfolio was 7.07, 6.96 and 7.01 percent in 1997, 1996 and 1995, respectively.
These investments provide a stable yet diversified income stream and serve
useful roles in liquidity and interest-rate-sensitivity management. In addition,
they serve as a source of collateral for low-cost funding. The decision to
purchase securities is based upon the assessment of current economic, tax status
and financial trends.
11
<PAGE> 172
FINANCIAL DISCUSSION
The investment portfolio is comprised of U.S. Treasury and other U.S. Government
agency-backed securities, collateralized mortgage-backed securities, tax-exempt
obligations of states and political subdivisions and certain other investments.
The quality of obligations of states and political subdivisions will be BAA, A,
AA, or AAA, the majority of which is AA or AAA, as rated by a nationally
recognized service. As a matter of policy, in support of our service area, we
may purchase certain unrated bonds of local municipalities provided they are of
reasonable credit risk.
On November 15, 1995, the Financial Accounting Standards Board issued a guide
for the implementation of SFAS 115 which allowed a bank to reassess the
appropriateness of the classification of all securities held at November 15,
1995 and until December 31, 1995, and account for any resulting changes in
classifications as a transfer. Changes in classification from the
held-to-maturity category that result from this one-time reassessment did not
call into question the intent of a bank to hold other debt securities to
maturity in the future. As a result of this one-time reassessment, on November
30, 1995, the Bank transferred securities with a book value of approximately
$42.8 million and related unrealized gains and losses of approximately $0.8
million and $0.2 million, respectively (net unrealized gain of approximately
$0.6 million), from held-to-maturity to available-for-sale.
As of December 31, 1997, all investment securities were classified as
available-for-sale. Management classified all securities as available-for-sale
so that securities may be sold prior to their maturity for purposes of bank
asset allocations, rate sensitivity or liquidity and, hence, tend to be more
liquid.
FEDERAL FUNDS SOLD
Federal funds sold are used to manage interest rate sensitivity and to meet
liquidity needs. During 1997, 1996 and 1995, these funds represented
approximately 1.5 percent, 2.2 percent and 2.2 percent, respectively, of average
earning assets.
SOURCES OF FUNDS
DEPOSITS
The Corporation's major source of investable funds is core deposits from retail
and business customers. Core deposits consist of interest-bearing and
noninterest-bearing deposits, including certificates of deposit over $100,000.
Average interest-bearing core deposits, comprised of interest-bearing checking
accounts, savings, certificates of deposit, money market and other time
accounts, increased 2.7 percent in 1997, compared to 5.0 percent in 1996 and a
5.3 percent reduction in 1995. Average demand deposits (noninterest-bearing core
deposits) increased 2.4 percent in 1997, 0.8 percent in 1996 and 10.3 percent in
1995. These deposits represent approximately 12.6 of average core deposits in
1997 and 1996.
FEDERAL HOME LOAN BANK BORROWINGS
In 1997 these average borrowings increased slightly to 2.7 percent of average
assets compared to 2.6 percent in 1996.
SHAREHOLDERS' EQUITY AND CAPITAL ADEQUACY
Shareholders' equity is a stable, noninterest-bearing source of funds which
provides support for asset growth and is the primary component of capital.
Capital adequacy refers to the level of capital required to sustain growth over
time and to absorb unanticipated losses. Shareholders' equity at December 31,
1997, was $34.9 million, or $132.09 per share, compared with $32.2 million, or
$121.85 per share at December 31, 1996 and $30.7 million, or $113.92 per share
at December 31, 1995. At December 31, 1997, the Corporation's leverage ratio was
12.5 percent. At December 31, 1997, the Corporation's risk-based capital ratios
based on Federal Reserve Board guidelines were 22.5 percent for Tier 1, or
"core" capital, and 23.8 percent for total qualifying capital. At December 31,
1996, the Corporation's leverage ratio was 12.2 percent. At December 31, 1996,
the Corporation's risk-based capital ratios based on Federal Reserve Board
guidelines were 21.4 percent for Tier 1 or "core" capital and 22.7 percent for
total qualifying capital. These ratios substantially exceed the Federal Reserve
Board's capital guidelines for a well-capitalized institution, which are 6.0
percent for Tier 1, 10.0 percent for total qualifying capital, and 5.0 percent
for leverage ratio. It is management's intent to maintain a level of
capitalization that allows the flexibility to take advantage of opportunities
that may arise in the future.
12
<PAGE> 173
FINANCIAL DISCUSSION
INTEREST RATE SENSITIVITY
Balance sheet structure and interest rate changes play important roles in the
growth of net interest income. The Bank's Asset/Liability Committee manages the
overall rate sensitivity and mix of the balance sheet to anticipate and minimize
the effects of interest rate fluctuations and to maintain a consistent net
interest margin. Interest rate risk is monitored through gap analysis to ensure
proper positioning of the Corporation in various interest rate scenarios.
LIQUIDITY
Liquidity management ensures that the cash flow requirements of borrowers,
depositors and the Corporation can be met. The funds for short-term liquidity
needs are provided through maturing securities, the Bank's extensive core
deposit base, payments received on loans and the acquisition of new deposits.
Long-term funding needs can additionally be met, if required, through the
issuance of common stock. The Corporation's liquidity is considered by
management to be adequate to meet all current and projected levels of need.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS ON THE
FINANCIAL STATEMENTS WHEN ADOPTED IN A FUTURE PERIOD
The Financial Accounting Standards Board (FASB) has issued two standards that
have not been adopted by C B & T, Inc. but will be required to adopt after
December 31, 1997 as follows:
Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income
a. Effective for fiscal year beginning after December 15, 1997.
b. The purpose of reporting comprehensive income is to report a
measure of all changes in equity of an enterprise that result
from recognized transactions and other economic events of the
period other than transactions with owners in their capacity
or owners.
c. Management does not believe this statement will have any
material effect on future financial statements.
Statement of Financial Accounting Standards No. 131, Disclosures about
Segments of an Enterprise and Related Information
a. Effective for fiscal year beginning after December 15, 1997.
b. This statement applies to public business enterprises.
c. An operating segment is a component of an enterprise:
1. That engages in business activities from which it may earn
revenue and incur expense.
2. Whose operating results are regularly reviewed by the
enterprise's chief operating decision maker to make
decisions about resources to be allocated to the segment
and assess its performance, and
3. For which discrete financial information is available.
d. Management does not believe this statement will have any
material effect on future financial statements.
The Financial Accounting Standards Board (FASB) has issued two standards that
have been adopted by C B & T, Inc. as follows:
Statement of Financial Accounting Standards No. 128, Earnings Per Share
a. Effective prospectively for earnings per share computation for
both interim and annual periods ending after December 15,
1997.
b. The statement requires a reconciliation of the numerators and
the denominators of the basic and diluted per-share
computation for income and from continuing operations.
c. Management does not believe this statement will have any
material effect on future financial statements.
Statement of Financial Accounting Standards No. 129, Disclosure of
Information about Capital Structure.
a. Effective for financial statements for periods ending after
December 15, 1997.
b. An entity shall explain, in summary form within its financial
statements, the pertinent rights and privileges of the various
securities outstanding.
c. Management does not believe this statement will have any
material effect on future financial statements.
13
<PAGE> 174
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Shareholders and Board of Directors
C B & T, Inc.
McMinnville, Tennessee
We have audited the accompanying consolidated balance sheets of C B &
T, Inc. (the "Corporation") and its wholly-owned subsidiaries, principally City
Bank & Trust Company (the "Bank"), as of December 31, 1997 and 1996, and the
related consolidated statements of income, shareholders' equity, and cash flows
for each of the three years in the period ended December 31, 1997. These
consolidated financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of C B &
T, Inc. and subsidiaries as of December 31, 1997 and 1996, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1997, in conformity with generally accepted
accounting principles.
Nashville, Tennessee
January 16, 1998
14
<PAGE> 175
C B & T, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
(Dollars in Thousands, Except Share Data)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
ASSETS
Cash and due from banks $ 8,456 $ 7,021
Federal funds sold - 1,175
Investment securities - Note 2 105,404 102,070
Loans, net of unearned income and allowance for possible
loan losses - Notes 3 and 4 145,335 142,096
Interest receivable 3,160 3,116
Bank premises and equipment, at cost
less allowance for depreciation - Note 5 2,061 2,333
Other assets - Notes 6 and 13 4,070 3,648
-------- --------
TOTAL ASSETS $268,486 $261,459
======== ========
LIABILITIES
Deposits:
Noninterest-bearing deposits 28,207 28,178
Interest-bearing deposits (including certificates of
deposit over $100: 1997 - $31,387; 1996 - $28,943) - Note 7 190,936 189,379
-------- --------
219,143 217,557
Securities sold under agreements to repurchase - Note 8 2,273 1,362
Federal funds purchased - Note 8 2,000 -
Accounts payable and accrued liabilities - Note 13 1,839 1,637
Interest payable 1,558 1,460
Federal Home Loan Bank borrowings - Note 9 6,787 7,203
-------- --------
TOTAL LIABILITIES 233,600 229,219
-------- --------
COMMITMENTS AND CONTINGENCIES - Notes 10, 11 and 17
SHAREHOLDERS' EQUITY - Note 14
Common stock, $2.50 par value, authorized 1,000,000
shares; issued 331,814 shares, including 67,701 treasury shares
in 1997 and 67,229 treasury shares in 1996 830 830
Additional paid-in capital 5,000 5,000
Retained earnings - Note 15 33,467 31,179
Net unrealized gains (losses) on available-for-sale securities,
net of deferred income taxes - Note 2 1,060 647
-------- --------
40,357 37,656
Less cost of treasury shares (5,471) (5,416)
-------- --------
TOTAL SHAREHOLDERS' EQUITY 34,886 32,240
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $268,486 $261,459
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
15
<PAGE> 176
C B & T, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(Dollars in Thousands, Except Share Data)
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 14,043 $ 13,657 $ 13,021
-------- -------- --------
Interest on investment securities:
Taxable interest 4,632 4,772 4,952
Tax-exempt interest 1,699 1,336 1,180
-------- -------- --------
6,331 6,108 6,132
-------- -------- --------
Other interest income 216 280 301
-------- -------- --------
TOTAL INTEREST INCOME 20,590 20,045 19,454
-------- -------- --------
INTEREST EXPENSE
Interest on deposits 8,779 8,372 8,069
Interest on other borrowed funds - Note 8 109 46 56
Interest on long-term debt - Note 9 435 412 593
-------- -------- --------
TOTAL INTEREST EXPENSE 9,323 8,830 8,718
-------- -------- --------
NET INTEREST INCOME 11,267 11,215 10,736
Provision for possible loan losses - Note 4 413 628 376
-------- -------- --------
NET INTEREST INCOME AFTER PROVISION FOR POSSIBLE LOAN LOSSES 10,854 10,587 10,360
-------- -------- --------
NONINTEREST INCOME
Service charges on deposit accounts 1,223 1,211 1,064
Other service charges, commissions and fees 266 333 310
Net realized gains (losses) on investment securities - Note 2 36 (22) (14)
Other income 597 536 456
-------- -------- --------
TOTAL NONINTEREST INCOME 2,122 2,058 1,816
-------- -------- --------
NONINTEREST EXPENSES
Salaries and employee benefits - Notes 12 and 18 3,817 3,772 3,540
Net occupancy expense 352 306 283
Furniture and equipment expense 859 812 764
Deposit insurance premium 27 2 242
Directors deferred compensation expense 213 249 235
Other expenses 1,683 1,531 1,257
-------- -------- --------
TOTAL NONINTEREST EXPENSES 6,951 6,672 6,321
-------- -------- --------
INCOME BEFORE PROVISION FOR INCOME TAXES 6,025 5,973 5,855
Provision for income taxes - Note 6 1,754 1,856 1,788
-------- -------- --------
NET INCOME $ 4,271 $ 4,117 $ 4,067
======== ======== ========
Weighted average number of shares outstanding 264,288 267,865 271,150
Per share of Common Stock:
Net income $ 16.16 $ 15.37 $ 15.00
</TABLE>
See accompanying notes to consolidated financial statements.
16
<PAGE> 177
C B & T, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(Dollars in Thousands, Except Share Data)
<TABLE>
<CAPTION>
Net Unrealized
Gains (Losses)
Common Stock Additional on Available-
------------------ Paid-in Retained For-Sale Treasury
Shares Amount Capital Earnings Securities Shares Total
------- ------ ---------- -------- -------------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE - JANUARY 1, 1995 331,814 $830 $5,000 $25,973 $ (657) $(4,549) $26,597
Net income for 1995 -- -- -- 4,067 -- -- 4,067
Cash dividends declared, $4.50 per share -- -- -- (1,225) -- -- (1,225)
Purchase of outstanding Common Stock -- -- -- -- -- (287) (287)
Adjustment to account for transfer
of securities from held-to-maturity
to available-for-sale, net of
deferred income taxes - Note 1 -- -- -- -- 375 -- 375
Net change in unrealized gains (losses)
on available-for-sale securities,
net of deferred income taxes -- -- -- -- 1,194 -- 1,194
------- ---- ------ ------- ------- ------- -------
BALANCE - DECEMBER 31, 1995 331,814 830 5,000 28,815 912 (4,836) 30,721
Net income for 1996 -- -- -- 4,117 -- -- 4,117
Cash dividends declared, $6.50 per share -- -- -- (1,753) -- -- (1,753)
Purchase of outstanding Common Stock -- -- -- -- -- (580) (580)
Net change in unrealized gains (losses)
on available-for-sale securities,
net of deferred income taxes -- -- -- -- (265) -- (265)
------- ---- ------ ------- ------- ------- -------
BALANCE - DECEMBER 31, 1996 331,814 830 5,000 31,179 647 (5,416) 32,240
Net income for 1997 -- -- -- 4,271 -- -- 4,271
Cash dividends declared, $7.50 per share -- -- -- (1,983) -- -- (1,983)
Purchase of outstanding Common Stock -- -- -- -- -- (55) (55)
Net change in unrealized gains (losses)
on available-for-sale securities,
net of deferred income taxes -- -- -- -- 413 -- 413
------- ---- ------ ------- ------- ------- -------
BALANCE - DECEMBER 31, 1997 331,814 $830 $5,000 $33,467 $ 1,060 ($5,471) $34,886
======= ==== ====== ======= ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
17
<PAGE> 178
C B & T, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(Dollars in Thousands)
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income for the year $ 4,271 $ 4,117 $ 4,067
Adjustments to reconcile net income to net
cash provided by operating activities:
Stock dividend (90) (82) (79)
Provision for possible loan losses 413 628 376
Provision for depreciation and amortization 563 531 481
Amortization of investment security premiums,
net of accretion of discounts 82 (3) 11
Net realized (gains) losses on investment securities (36) 22 14
Net loss on the disposal of fixed assets 12 -- 4
Deferred income taxes (88) (51) (107)
Increase in interest receivable (44) (55) (119)
Increase in interest payable 98 131 441
Decrease (increase) in other assets (167) 102 (40)
Increase in other liabilities 201 287 203
-------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 5,215 5,627 5,252
-------- -------- --------
INVESTING ACTIVITIES
Purchases of investment securities (56,440) (54,964) (23,970)
Proceeds from sale of investment securities 24,575 17,254 22,537
Proceeds from maturities, calls and principal collections of
investment securities 29,151 32,838 16,615
Net increase in loans (3,651) (6,185) (10,778)
Net purchases of premises and equipment (304) (731) (245)
Increase in cash value of life insurance (330) (244) (179)
-------- -------- --------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (6,999) (12,032) 3,980
-------- -------- --------
FINANCING ACTIVITIES
Net increase in noninterest-bearing and interest-bearing deposits 1,586 4,300 436
Proceeds from securities sold under
agreements to repurchase 912 1,362 --
Net increase (decrease) in federal funds purchased 2,000 -- (5,700)
Cash dividends (1,983) (1,753) (1,225)
Purchase of outstanding common stock (55) (580) (287)
Proceeds from long-term debt 349 993 4,000
Repayments of long-term debt (765) (3,017) (2,594)
-------- -------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 2,044 1,305 (5,370)
-------- -------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 260 (5,100) 3,862
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 8,196 13,296 9,434
-------- -------- --------
CASH AND CASH EQUIVALENTS - END OF YEAR $ 8,456 $ 8,196 $ 13,296
======== ======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest expense $ 9,225 $ 8,699 $ 8,281
Income taxes 1,875 2,105 1,753
</TABLE>
See accompanying notes to consolidated financial statements.
18
<PAGE> 179
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
C B & T, Inc. (the "Corporation") is a one-bank holding company formed
in 1981, with a wholly-owned subsidiary, City Bank & Trust Company,
McMinnville, Tennessee (the "Bank"). The Bank, which is regulated by
the Federal Deposit Insurance Corporation and Tennessee Department of
Financial Institutions, provides deposit services and grants real
estate, commercial, agricultural and consumer loans to customers
primarily in Warren and DeKalb counties of Tennessee.
CBT Realty, Inc., a wholly-owned subsidiary of the Corporation, was
formed for the purpose of holding and disposing of real estate acquired
through foreclosure.
During 1996, the Corporation formed CBT Insurance, Inc., a wholly-owned
subsidiary of the Corporation, for the purpose of selling insurance
services.
The accounting principles followed and the methods of applying those
principles conform with generally accepted accounting principles and to
general practices in the banking industry. The significant policies are
summarized as follows:
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements present the accounts
and operations of the Corporation and the Bank. Material intercompany
accounts and transactions have been eliminated in consolidation.
CASH AND DUE FROM BANKS
Reserve requirements amounted to approximately $1.6 million and $1.4
million at December 31, 1997 and 1996, respectively.
CASH EQUIVALENTS
Cash equivalents include amounts due from banks, interest-bearing
deposits in other banks and federal funds sold. Generally, federal
funds are purchased or sold for one-day periods.
INVESTMENT SECURITIES
The Bank follows the accounting and reporting principles of Statement
of Financial Accounting Standards No.115 (SFAS 115), "Accounting for
Certain Investments in Debt and Equity Securities," which requires that
securities be categorized as held-to-maturity, available-for-sale, and
trading securities, as follows:
Trading Securities
Debt and equity securities held principally for resale in the near term
are classified as trading account securities and recorded at their fair
values. Unrealized gains and losses on trading account securities are
recognized currently.
Securities Held-to-Maturity
Debt securities which the Bank has the positive intent and ability to
hold to maturity are reported at cost, adjusted for premiums and
discounts that are recognized in interest income using the interest
method over the period to maturity.
Securities Available-for-Sale
Securities not classified as trading or held-to-maturity are classified
as available-for-sale. Unrealized holding gains and losses, net of
deferred income taxes, on available-for-sale securities are netted and
reported as a separate component of shareholders' equity until
realized. Realized gains and losses on the sale of available-for-sale
securities are determined using the specific-identification method.
19
<PAGE> 180
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVESTMENT SECURITIES (CONTINUED)
Restricted Equity Securities
Federal Home Loan Bank and First Community L.P. stock are classified as
restricted equity securities and included in other assets.
On November 15, 1995, the Financial Accounting Standards Board issued a
guide for the implementation of SFAS 115 which allowed a bank to reassess
the appropriateness of the classification of all securities held at November
15, 1995 and until December 31, 1995, and account for any resulting changes
in classifications as a transfer. Changes in classification from the
held-to-maturity category that result from this one-time reassessment did
not call into question the intent of a bank to hold other debt securities to
maturity in the future. As a result of this one-time reassessment, on
November 30, 1995, the Bank transferred securities with a book value of
approximately $42.8 million and related unrealized gains and losses of
approximately $0.8 million and $0.2 million, respectively (net unrealized
gain of approximately $0.6 million), from held-to-maturity to
available-for-sale.
Declines in the fair value of individual available-for-sale and
held-to-maturity securities below their cost that are other than temporary
result in write-downs of the individual securities to their fair value. The
related write-downs are included in earnings as realized losses.
LOANS
Loans receivable that management has the intent and ability to hold for the
foreseeable future or until maturity or payoff are reported at their
outstanding unpaid principal balances reduced by any charge-offs or specific
valuation accounts and net of any deferred fees or costs on originated
loans. Loan origination fees and certain related direct costs are deferred
and recognized as an adjustment of the yield on the interest method.
Interest on loans is recognized as income based on the daily loan principal
amounts outstanding.
Loans are considered impaired when, based on current information, it is
probable that all amounts of principal and interest due will not be
collected according to the contractual terms of the loan agreement. The
amount of impairment is measured based on the present value of expected
future cash flows discounted at the loan's effective interest rate, or for
collateral dependent loans, impairment is measured based on a loan's
observable market price or the fair value of the collateral. For purposes of
applying impairment standards, the bank defines impaired loans as nonaccrual
loans, loans contractually past due ninety days or more, loans identified as
non-performing on the bank's problem loan list and certain loans
restructured in a troubled debt restructuring. Interest accruals on impaired
loans are discontinued when management believes, after considering economic
and business conditions and collection efforts, that the borrower's
financial condition is such that it is not reasonable to expect such
interest will be collected. Interest income is subsequently recognized only
to the extent cash payments are received.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
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 as of the date of the
balance sheet and the revenues and expenses for the period. Actual results
could differ significantly from those estimates. Material estimates that are
particularly susceptible to significant change in the near term relate to
the determination of the allowance for possible loan losses.
ALLOWANCE FOR POSSIBLE LOAN LOSSES
The allowance for possible loan losses is established by charges to
operations and is maintained at an amount which management believes adequate
to absorb possible losses on existing loans that may become uncollectible,
based on evaluations of loan collectibility and on prior loan loss
experience. The evaluations consider such factors as changes in the nature
and volume of the loan portfolio, overall portfolio quality, review of
specific problem loans, and current economic conditions that may affect the
borrower's ability to pay. Uncollectible loans are charged to the allowance
account in the period such determination is made. Subsequent recoveries on
loans previously charged off are credited to the allowance account in the
period received.
While management uses available information to recognize losses on loans,
future losses may be accruable based on changes in economic conditions. In
addition, various regulatory agencies, as an integral part of their
examination process, periodically review the Bank's allowance for possible
loan losses. Such agencies may require the Bank to recognize additional
losses based on their judgment of information available to them at the time
of their examination.
20
<PAGE> 181
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost, less accumulated depreciation and
amortization. The provision for depreciation is computed substantially by
the straight-line method over the estimated useful lives of the assets,
which are as follows: buildings - up to 40 years; equipment - 5 to 10 years.
Leasehold improvements are amortized over the lesser of the lease terms or
the estimated lives of the improvements. Gains or losses from the
disposition of property are reflected in operations, and the asset accounts
and related allowance for depreciation are reduced.
LONG-LIVED ASSETS
On January 1, 1996, the Corporation adopted SFAS No. 121, "Accounting for
the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed
Of." SFAS 121 requires that long-lived assets and certain identifiable
intangibles to be held and used by the Corporation be reviewed for
impairment whenever events or changes in circumstances indicate the carrying
amount of an asset may not be recoverable. Measurement of an impairment loss
for long-lived assets and identifiable intangibles that an entity expects to
hold and use is based on the fair market value of the asset. This statement
requires that the majority of long-lived assets and certain identifiable
intangibles to be disposed of be reported at the lower of carrying amount or
fair value less costs to sell. The adoption of this statement had no effect
on the consolidated financial statements.
TRUST DEPARTMENT INCOME
Trust department income is recognized on the accrual basis in accordance
with generally accepted accounting principles.
INCOME TAXES
The Corporation and its subsidiaries file a consolidated federal income tax
return.
Deferred income tax assets and liabilities are computed annually for the
differences between the financial statement and tax bases of assets and
liabilities. Such differences will result in taxable or deductible amounts
in the future based on enacted tax laws and rates applicable to the periods
in which the differences are expected to affect taxable income. Valuation
allowances are established, when necessary, to reduce deferred tax assets to
the amount expected to be realized. Income tax expense is the tax payable or
refundable for the period plus or minus the change during the period in
deferred tax assets and liabilities.
RECLASSIFICATION
Certain amounts have been reclassified in the 1996 and 1995 consolidated
financial statements to conform to the 1997 presentation.
OTHER REAL ESTATE
Other real estate, which is included in other assets, represents real estate
acquired through foreclosure and is stated at lower of (i) fair value minus
estimated costs to sell, or (ii) cost. If, at the time of foreclosure, the
fair market value of the real estate is less than the Bank's carrying value
of the related loan, a writedown is recognized through a charge to the
allowance for possible loan losses, and the fair market value becomes the
new cost for subsequent accounting. If the Bank later determines that the
cost of the property cannot be recovered through sale or use, a writedown is
recognized by a charge to operations. When the property is not in a
condition suitable for sale or use at the time of foreclosure, completion
and holding costs, including such items as real estate taxes, maintenance
and insurance, are capitalized up to the estimated net realizable value of
the property. However, when the property is in a condition for sale or use
at the time of foreclosure, or the property is already carried at its
estimated net realizable value, any subsequent holding costs are expensed.
Legal fees and any other direct costs relating to foreclosures are charged
to operations when incurred.
NET INCOME PER SHARE
Net income per share of common stock has been computed based on the weighted
average number of shares of common stock outstanding each period.
21
<PAGE> 182
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
NOTE 2 - INVESTMENT SECURITIES
The following tables reflect the amortized cost, estimated fair values and
gross unrealized gains and losses of debt securities held at December 31,
1997 and 1996:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------- ---------- ---------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
1997
Available-for-sale securities:
U.S. Government and agency securities $ 28,305 $ 274 $ (4) $ 28,575
Mortgage-backed securities 28,720 184 (108) 28,796
State and municipal securities 34,346 1,319 -- 35,665
Corporate debt securities 12,324 44 -- 12,368
-------- ------- ----- --------
$103,695 $ 1,821 $(112) $105,404
======== ======= ===== ========
1996
Available-for-sale securities:
U.S. Government and agency securities $ 44,058 $ 387 $ (58) $ 44,387
Mortgage-backed securities 16,029 118 (156) 15,991
State and municipal securities 27,939 741 (48) 28,632
Corporate debt securities 13,000 70 (10) 13,060
-------- ------- ----- --------
$101,026 $ 1,316 $(272) $102,070
======== ======= ===== ========
</TABLE>
No investment securities were required to be written down pursuant to any
other than temporary declines in fair value in 1997, 1996 or 1995.
The amortized cost, estimated fair value and weighted yields of debt
securities at December 31, 1997, by contractual maturities, are presented on
the following schedule. Expected maturities will differ from contractual
maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties. Mortgage-backed
securities are included in the final stated maturities which are consistent
with the remaining portfolio. For tax-exempt obligations, the yields are
shown on a fully taxable basis assuming a 34% tax rate.
22
<PAGE> 183
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
NOTE 2 - INVESTMENT SECURITIES (CONTINUED)
<TABLE>
<CAPTION>
Amortized Fair Yield
Cost Value (unaudited)
--------- -------- -----------
(Dollars in Thousands)
<S> <C> <C> <C>
U.S. Government and agency securities:
Within one year $ 4,495 $ 4,508 6.76%
After one but within five years 18,206 18,417 6.79%
After five but within ten years 5,604 5,650 6.68%
Mortgage-backed securities:
Within one year 108 111 8.09%
After one but within five years 1,307 1,350 8.26%
After five but within ten years 25,368 25,398 6.92%
After ten years 1,937 1,937 6.74%
States and political subdivisions:
Within one year 1,103 1,113 8.17%
After one but within five years 12,800 13,351 8.75%
After five but within ten years 7,726 8,067 7.62%
After ten years 12,717 13,134 7.56%
Other investments:
Within one year 4,390 4,413 6.75%
After one but within five years 7,934 7,955 6.14%
-------- --------
$103,695 $105,404
======== ========
</TABLE>
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
(Dollars in Thousands)
Proceeds from sales of investment securities $24,575 $17,254 $22,537
======= ======= =======
Gross realized gains $ 56 $ 19 $ 70
Gross realized losses 20 41 84
------- ------- -------
Investment securities gain (losses), net $ 36 $ (22) $ (14)
======= ======= =======
</TABLE>
Securities carried at $24 million and $22 million at December 31, 1997 and
1996, respectively (fair value: 1997 - $24.1 million; 1996 - $22.7 million),
were pledged to secure deposits or for other purposes as required or
permitted by law.
At December 31, 1997, the Corporation did not hold securities of any single
issuer, other than obligations of the U.S. Treasury and other U.S.
Government agencies, whose aggregate book value exceeded ten percent of
shareholders' equity.
23
<PAGE> 184
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
NOTE 3 - LOANS
The following is a summary by category of loans outstanding as of December
31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
-------- --------
(Dollars in Thousands)
<S> <C> <C>
Commercial, financial and agricultural $ 13,475 $ 13,574
Real estate - construction 3,597 2,903
Real estate - mortgage 97,653 96,326
Installment 32,758 32,073
Lease financing 52 68
-------- --------
147,535 144,944
Less:
Unearned income (287) (917)
Allowance for possible loan losses (1,913) (1,931)
-------- --------
$145,335 $142,096
======== ========
</TABLE>
A summary of loan maturities as of December 31, 1997 and 1996 follows:
<TABLE>
<S> <C> <C>
Fixed Rate Loans
Due in one year or less $ 28,573 $ 31,155
Due after one year 85,823 81,703
Due after five years 8,098 7,957
-------- --------
$122,494 $120,815
======== ========
Floating Rate Loans
Due in one year or less $ 20,941 $ 19,222
Due after one year 3,343 4,525
Due after five years 757 382
-------- --------
$ 25,041 $ 24,129
======== ========
</TABLE>
Directors, executive officers or principal holders of equity securities (and
their associates, including organizations of which such person is a general
partner or in which such person holds a ten percent or more ownership) of
the Corporation and/or the Bank were customers of, and had loans and other
transactions with, the Bank in the ordinary course of business. The
following is a summary of the changes in related party loans in 1997 and
1996.
<TABLE>
<CAPTION>
1997 1996
------- -------
(Dollars in Thousands)
<S> <C> <C>
Balance - beginning of year $ 3,498 $ 3,524
New loans made or additions to existing loans 1,807 2,365
Repayments (2,161) (2,391)
------- -------
Balance - end of year $ 3,144 $ 3,498
======= =======
</TABLE>
These loan transactions were made on substantially the same terms as those
prevailing at the time for comparable loans to other persons. They did not
involve more than the normal risk of collectibility or present other
unfavorable features.
24
<PAGE> 185
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
NOTE 3 - LOANS (CONTINUED)
IMPAIRED LOANS
The following loans have been identified as impaired as of December 31:
<TABLE>
<CAPTION>
1997 1996
------ ------
(Dollars in Thousands)
<S> <C> <C>
Impaired loans with an allowance $1,115 $1,280
Impaired loans without an allowance 289 453
------ ------
Total impaired loans $1,404 $1,733
====== ======
Allowance for impaired loans $ 317 $ 370
====== ======
Average balance of impaired loans during the year $1,568 $1,724
====== ======
</TABLE>
During 1997, the Bank recognized interest income on impaired loans of
$119,000 ($123,000 in 1996), which included $113,000 of cash payments
received ($104,000 in 1996). Interest income in the amount of $19,000 was
recognized for cash payments received in 1995.
NOTE 4 - ALLOWANCE FOR POSSIBLE LOAN LOSSES
Changes in the allowance for possible loan losses follow:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(Dollars in Thousands)
<S> <C> <C> <C>
Balance - beginning of year $ 1,931 $ 1,864 $ 1,733
Provision charged to operating expenses 413 628 376
------- ------- -------
2,344 2,492 2,109
------- ------- -------
Amount charged off (614) (639) (339)
Recoveries 183 78 94
------- ------- -------
Net loans charged off (431) (561) (245)
------- ------- -------
Balance - end of year $ 1,913 $ 1,931 $ 1,864
======= ======= =======
</TABLE>
25
<PAGE> 186
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
NOTE 4 - ALLOWANCE FOR POSSIBLE LOAN LOSSES (CONTINUED)
It is management's opinion that the allowance was adequate at December 31,
1997 and 1996, based on conditions reasonably known to management. However,
the allowance may be increased or decreased based on loan growth, changes in
credit quality, and changes in general economic conditions.
For federal income tax purposes, the allowance for possible loan losses is
maintained at the maximum amount allowable by the Internal Revenue Code.
NOTE 5 - PREMISES AND EQUIPMENT
Premises and equipment consist of the following at December 31:
<TABLE>
<CAPTION>
1997 1996
------- -------
(Dollars in Thousands)
<S> <C> <C>
Land $ 208 $ 208
Buildings 1,732 1,732
Fixtures and equipment 3,888 3,777
------- -------
5,828 5,717
Less allowances for depreciation (3,767) (3,384)
------- -------
$ 2,061 $ 2,333
======= =======
</TABLE>
The provision for depreciation of premises and equipment amounted to
$563,000 for 1997, $531,000 for 1996, and $481,000 for 1995.
NOTE 6 - INCOME TAXES
The provisions for income taxes consist of the following:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(Dollars in Thousands)
<S> <C> <C> <C>
Current:
Federal $ 1,470 $ 1,536 $ 1,526
State 372 371 369
------- ------- -------
Total current 1,842 1,907 1,895
------- ------- -------
Deferred:
Federal (74) (43) (91)
State (14) (8) (16)
------- ------- -------
Total deferred (88) (51) (107)
------- ------- -------
Total provision for income tax $ 1,754 $ 1,856 $ 1,788
======= ======= =======
</TABLE>
26
<PAGE> 187
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
NOTE 6 - INCOME TAXES (CONTINUED)
The deferred tax effects of principal temporary differences are shown in the
following table:
<TABLE>
<CAPTION>
1997 1996
---- ----
(Dollars in Thousands)
<S> <C> <C>
Deferred tax assets:
Deferred benefit plan liability $497 $400
Allowance for possible loan losses 328 335
Leases -- 2
Premises and equipment 14 --
---- ----
Total deferred tax assets 839 737
---- ----
Deferred tax liabilities:
Leases 1 --
Premises and equipment -- 21
Stock dividends received 118 84
Net unrealized gain on available-for-sale securities 650 397
---- ----
Total deferred tax liabilities 769 502
---- ----
Net deferred tax asset $ 70 $235
==== ====
</TABLE>
A reconciliation of total income taxes reported with the amount of income
taxes computed at the federal statutory rate (34% each year) follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(Dollars in Thousands)
<S> <C> <C> <C>
Tax expense at statutory rates $ 2,049 $ 2,031 $ 1,991
Increase (decrease) in taxes resulting from:
Nondeductible interest expense 71 57 54
Tax-exempt income (587) (474) (413)
Tax effect of state income taxes 236 239 232
Other - net (15) 3 (76)
------- ------- -------
$ 1,754 $ 1,856 $ 1,788
======= ======= =======
</TABLE>
NOTE 7 - DEPOSITS
The following is a detail of the maturity ranges of certificates of deposit
of $100,000 or more as of December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
----- -----
(Dollars in Millions)
<S> <C> <C>
Under 3 months $ 7.4 $ 7.4
3 to 6 months 6.4 7.0
6 to 12 months 8.4 10.8
Over 12 months 9.2 3.7
----- -----
$31.4 $28.9
===== =====
</TABLE>
27
<PAGE> 188
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
NOTE 7 - DEPOSITS (CONTINUED)
Deposits from related parties amounted to $3.3 million at December 31, 1997
and $3.8 million at December 31, 1996.
NOTE 8 - FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER AGREEMENTS TO
REPURCHASE
For the year ended December 31, 1997, the average balance of federal funds
purchased was $131,000 ($7,000 in 1996), and the average interest rate
charged was 5.6% (5.6% in 1996). Unused lines of credit for short-term
financing totaled $12 million at December 31, 1997 ($11 million at December
31, 1996).
Securities sold under agreements to repurchase mature one business day
following the transaction date. The securities sold represent investments
which are registered to and under control of the Bank. For the year ended
December 31, 1997, securities sold under agreements to repurchase averaged
approximately $2,380,000 ($1,129,000 in 1996). The average interest rate
paid on such agreements during the year was 4.00% (4.00% in 1996), and the
maximum month-end balance during the year was $3,334,000 ($1,578,000 in
1996).
NOTE 9 - FEDERAL HOME LOAN BANK BORROWINGS
The Bank has a line-of-credit under an agreement with the Federal Home Loan
Bank of Cincinnati (FHLB). The purpose of the line is to hedge the interest
rate on long-term lending. The Bank applied for and received various
commitments under the agreement, with respect to which borrowings
outstanding amounted to $6,787,000 at December 31, 1997 ($7,203,000 at
December 31, 1996). Such borrowings mature in level monthly installments
through 2013. The Bank had no remaining optional takedown commitments under
the agreement at December 31, 1997.
The advances accrue interest at a fixed rate which is determined when the
advance is made. The weighted average rate on all such borrowings drawn to
date is 6.06%.
The FHLB requires the Bank to maintain FHLB stock and obligations of the
United States of America, obligations fully guaranteed by the United States
of America, or other securities approved by and delivered to the FHLB as
collateral for such borrowings. The carrying value of the collateral
securing the advances at December 31, 1997 and 1996, was as follows:
<TABLE>
<CAPTION>
1997 1996
------ ------
(Dollars in Thousands)
<S> <C> <C>
FHLB stock $1,317 $1,227
U.S. Government agency securities 8,318 8,500
------ ------
$9,635 $9,727
====== ======
</TABLE>
28
<PAGE> 189
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
NOTE 9 - FEDERAL HOME LOAN BANK BORROWINGS (CONTINUED)
During each twelve month period, the Bank has the option of making one
partial prepayment of principal without a prepayment fee. The remaining
principal balance of all advances outstanding as of December 31, 1997,
matures as follows:
<TABLE>
<CAPTION>
Year ending December 31, Amount
------------------------ ------
(Dollars in Thousands)
<S> <C>
1998 $ 821
1999 849
2000 879
2001 914
2002 953
Thereafter 2,371
------
$6,787
======
</TABLE>
NOTE 10 - LEASES
The Corporation and the Bank are obligated for rental payments under various
operating leases. All building leases have renewal options available. There
are no contingent rental clauses in any of the leases.
Total rental expense incurred under all operating leases amounted to $77,000
in 1997 ($70,000 in 1996 and $72,000 in 1995).
Future minimum rental commitments as of December 31, 1997 for all
noncancellable operating leases with initial or remaining terms of one year
or more are as follows:
<TABLE>
<CAPTION>
Year ending December 31, Amount
------------------------ ------
(Dollars in Thousands)
<S> <C>
1998 $ 99
1999 80
2000 65
2001 40
2002 18
Thereafter 43
----
Total future minimum lease payments $345
====
</TABLE>
NOTE 11 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Bank is 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 standby
letters of credit. Those instruments involve, to varying degrees, elements
of credit risk in excess of the amount recognized in the balance sheet.
The Bank's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
standby letters of credit is represented by the contract or notional amount
of those instruments. The Bank uses the same credit policies in making
commitments and conditional obligations as it does for extending loans.
29
<PAGE> 190
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
NOTE 11 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK (CONTINUED)
Unless noted otherwise, the Bank does not require collateral or other
security to support financial instruments with credit risk.
<TABLE>
<CAPTION>
Contract or
Notional Amount
---------------
(Dollars in Thousands)
<S> <C>
Financial instruments whose contract amounts represent credit risk at
December 31, 1997:
Commitments to extend credit $ 31,089
Standby letters of credit 105
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since many of the commitments are
expected to expire without being drawn upon, the total commitment amounts do
not necessarily represent future cash requirements. The Bank evaluates each
customer's creditworthiness on a case-by-case basis. The amount of
collateral obtained is based on management's credit assessment of the
customer. Collateral held varies but consists primarily of real estate.
Standby letters of credit and financial guarantees written are conditional
commitments issued by the Bank to guarantee the performance of a customer to
a third party. Both arrangements have credit risks essentially the same as
that involved in extending loans to customers and are subject to the Bank's
normal credit policies.
Income from fees on lines of credit and letters of credit is recognized as
collected.
NOTE 12 - DEFINED CONTRIBUTION PLAN
The Bank sponsors an employees' Thrift Plan (the "Plan"), which encourages
employees (Participants) to set aside a percentage of their earnings in an
account to provide a source of income for their retirement. The Plan has
been amended and restated since its initial adoption to comply with tax law
changes, add a 401(k) provision, clarify the definition of compensation and
reflect participants' ability to direct investments.
The Plan, a defined contribution plan, meets the requirements of the
Employee Retirement Income Security Act of 1974 ("ERISA") which, among other
things, prohibits discriminating in favor of officers, shareholders or
highly compensated employees with respect to eligibility, contributions or
benefits. To participate in the Plan, Participants must be 21 years of age
and have completed one year of service in which they are credited with at
least 1,000 hours of service. Vesting of Bank contributions to the Plan is
as follows:
<TABLE>
<CAPTION>
Years of Employment Percentage of Account
at Termination Vested
------------------- ---------------------
<S> <C>
Less than 3 0%
3 20%
4 40%
5 60%
6 80%
7 years or more 100%
</TABLE>
30
<PAGE> 191
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
NOTE 12 - DEFINED CONTRIBUTION PLAN (CONTINUED)
The Bank contributes to the Plan a minimum of 1% of each Participant's
compensation (compensation excludes bonuses and gifts). In addition, the
Bank matches Participants' before-tax contributions up to 3% of each
Participant's compensation whenever Bank profits are deemed adequate by the
Board of Directors. Plan Participants may contribute before-tax dollars, up
to 15% of their annual compensation, to the 401(k) Plan (to a maximum
contribution of $9,500, indexed by the rate of change in inflation, per
calendar year subject to overall IRS limitations). These contributions will
be tax-deferred, within limits prescribed by the Plan. Plan Participants may
also make voluntary after-tax contributions of up to 10% of their
compensation to the Plan. The fund earnings to their Individual Account are
also tax-deferred.
The contributions are invested in a Trust fund managed by the Bank's Trust
Department and from which benefits are distributed. As of December 31, 1997,
100 persons (98 in 1996 and 95 in 1995) were participating in the Plan, and
the Bank's annual contribution amounted to $105,000 ($103,000 in 1996 and
$98,000 in 1995). Total salaries of Participants during 1997 were $2,901,000
($2,664,000 in 1996 and $2,521,000 in 1995). The Bank contributed
approximately 3.62% of Participants' salaries in 1997 (3.87% in 1996 and
3.89% in 1995).
NOTE 13 - DEFERRED COMPENSATION PLAN
In 1988, the Bank entered into nonqualified deferred compensation agreements
with certain of its directors. There are presently eleven directors and two
former directors included in the group which, when certain conditions are
met, will be paid monthly benefits of varying amounts for up to 180 months.
Upon retirement on or after normal retirement age, benefits will be paid to
the covered person or his beneficiary, in case of the director's death, for
the maximum term of 180 months. If the director retires for any other
reason, the benefits will be reduced pro rata based on the length of time
the director was included in the plan.
In accordance with generally accepted accounting principles, the Bank has
recorded a liability in the amount of the present value of an investment
necessary to amortize the future liability over the years the services are
rendered. The amount charged to expense for 1997 was $268,000 ($226,000 in
1996 and $201,000 in 1995).
The Bank has chosen to fund the obligation by purchasing and owning life
insurance contracts, naming the Bank as beneficiary, on each participating
director. The value of the contracts is carried as an asset of the Bank as
follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
(Dollars in Thousands)
<S> <C> <C>
Value of contracts - beginning of year $ 1,485 $ 1,241
Increase in surrender value 330 244
------- -------
Value of contracts - end of year $ 1,815 $ 1,485
======= =======
Liabilities for contracts - beginning of year $ 1,054 $ 831
Increase in liabilities recognized as expense for the year 268 235
Payment of benefits (12) (12)
------- -------
Liabilities for contracts - end of year $ 1,310 $ 1,054
======= =======
</TABLE>
The Board of Directors elected to terminate the plan effective January 7,
1998. Under the provisions of this resolution, no additional fees may be
deferred after January 7, 1998. The Bank further elected to pay monthly
benefits to all current and past directors in the same manner and amount
that would have occurred had the participant terminated service as a
director on January 7, 1998.
31
<PAGE> 192
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
NOTE 14 - REGULATORY MATTERS
The Corporation and the Bank are subject to various federal and state
regulatory capital requirements. Failure to meet capital requirements can
initiate certain mandatory, and possibly additional discretionary, actions
by regulators that could have a direct material effect on the Corporation
and the Bank's financial statements. Under capital adequacy guidelines and
the regulatory framework for prompt corrective action, the Corporation and
the Bank are required to meet specific capital adequacy guidelines that
involve quantitative measures of the Corporation's and the Bank's assets,
liabilities and certain off-balance-sheet items as calculated under
regulatory accounting practices. The capital classification is 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 Corporation and the Bank to maintain minimum amounts and ratios
of Total Capital and Tier I Capital to risk-weighted assets and of Tier I
Capital to average assets. Management believes, as of December 31, 1997 and
1996, that the Corporation and the Bank meet all capital adequacy
requirements to which they are subject.
As of December 31, 1997 and 1996, the Corporation and the Bank both had
ratios which exceeded the regulatory requirement to be classified as " well
capitalized" under the regulatory framework for prompt corrective action. As
of March 3, 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 Corporation and the Bank must maintain minimum total
risk-based, Tier I risk-based, Tier I leverage ratios as set forth in the
table. There are no conditions or events since that notification that
management believes have changed the institution's category.
The Corporation's and the Bank's risk-based capital and related ratios as of
December 31, 1997 and 1996 are as follow:
<TABLE>
<CAPTION>
Capitalized Under
For Capital Prompt Corrective
Adequacy Action
Actual Purposes Provisions
------------------ ----------------- ------------------
Amount Ratio Amount Ratio Amount Ratio
------- ----- ------- ----- ------- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
AS OF DECEMBER 31, 1997
Total Capital (to Risk Weighted Assets):
Consolidated $35,703 23.8% $12,013 8.0% $15,016 10.0%
Bank $35,616 23.9% $11,932 8.0% $14,916 10.0%
Tier 1 Capital (to Risk Weighted Assets):
Consolidated $33,826 22.5% $ 6,006 4.0% $ 9,009 6.0%
Bank $33,751 22.6% $ 5,966 4.0% $ 8,949 6.0%
Tier 1 Capital (to Average Assets):
Consolidated $33,826 12.5% $10,867 4.0% $13,584 5.0%
Bank $33,751 12.5% $10,765 4.0% $13,457 5.0%
AS OF DECEMBER 31, 1996
Total Capital (to Risk Weighted Assets):
Consolidated $33,436 22.7% $11,789 8.0% $14,736 10.0%
Bank $33,356 22.7% $11,731 8.0% $14,664 10.0%
Tier 1 Capital (to Risk Weighted Assets):
Consolidated $31,593 21.4% $ 5,895 4.0% $ 8,843 6.0%
Bank $31,522 21.5% $ 5,865 4.0% $ 8,798 6.0%
Tier 1 Capital (to Average Assets):
Consolidated $31,593 12.2% $10,370 4.0% $12,963 5.0%
Bank $31,522 12.2% $10,367 4.0% $12,959 5.0%
</TABLE>
32
<PAGE> 193
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
NOTE 15 - DIVIDEND AND NET ASSET RESTRICTIONS
Dividends paid by the Bank are the primary source of funds available to the
Corporation for payment of dividends to its shareholders and for other
working capital needs. Applicable Tennessee statutes and regulations impose
restrictions on the amount of dividends that may be declared by the
subsidiary Bank.
NOTE 16 - SELF-INSURED PLANS
On October 1, 1996, the Bank began self-insuring its employees' medical and
short-term disability claims. A liability and a provision for claims is
recorded monthly by the Bank to recognize estimated claims under this plan.
A portion of these costs is recovered through employee contributions, which
amounted to $101,800 in 1997 and $20,700 in 1996. Those eligible under the
plan include full-time employees who have met certain length-of-service
requirements.
The Bank's maximum liability for covered claims under the plan for the year
ended September 30, 1998 is estimated to be approximately $350,000 (less
employee contributions), with a maximum of $10,000 for any individual
employee claim. The Bank's expense under the plan amounted to $158,000 in
1997 ($50,470 in 1996).
NOTE 17 - SIGNIFICANT GROUP CONCENTRATION OF CREDIT RISK
The Bank grants agribusiness, commercial and residential loans to customers
primarily in Warren and DeKalb Counties, Tennessee. Although the Bank has a
diversified loan portfolio, a substantial portion of its debtors' ability to
honor their contracts is dependent on the agribusiness industry.
NOTE 18 - INCENTIVE BONUS PLAN
The Bank has an incentive bonus plan pursuant to which officers of the Bank
receive, subject to an annual review and modification by the Bank's Board of
Directors, a bonus determined by the Bank's performance as measured by its
return on assets. For the year 1997, the bonus was $133,000 ($136,000 in
1996 and $126,000 in 1995).
33
<PAGE> 194
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
NOTE 19 - CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
1997 1996
-------- --------
(Dollars in Thousands)
<S> <C> <C>
ASSETS
Cash $ 1 $ --
Investment in bank subsidiary 34,811 32,169
Investment in non-bank subsidiaries 9 6
Other investments 69 69
-------- --------
$ 34,890 $ 32,244
======== ========
LIABILITIES
Taxes payable $ 4 $ 4
-------- --------
SHAREHOLDERS' EQUITY
Common stock, par value $2.50 per share, authorized 1,000,000 shares;
issued 331,814 shares, including 67,701 treasury shares in 1997
(67,229 treasury shares in 1996) 830 830
Additional paid-in capital 5,000 5,000
Retained earnings 33,467 31,179
Net unrealized gains (losses) on available-for-sale securities 1,060 647
-------- --------
40,357 37,656
Less cost of treasury shares (5,471) (5,416)
-------- --------
34,886 32,240
-------- --------
$ 34,890 $ 32,244
======== ========
</TABLE>
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
(Dollars in Thousands)
<S> <C> <C> <C>
INCOME:
Dividends received - bank $1,999 $2,306 $1,481
Other income 46 33 56
------ ------ ------
2,045 2,339 1,537
EXPENSES:
Professional fees -- -- 9
------ ------ ------
Income before income tax allocation and equity in undistributed
net income of subsidiary 2,045 2,339 1,528
Allocation of income taxes 7 4 5
------ ------ ------
INCOME BEFORE EQUITY IN UNDISTRIBUTED
NET INCOME OF SUBSIDIARY 2,038 2,335 1,523
------ ------ ------
Net income of subsidiaries less distributions:
Subsidiary bank 2,230 1,778 2,544
Non-bank subsidiaries 3 4 --
------ ------ ------
2,233 1,782 2,544
------ ------ ------
NET INCOME $4,271 $4,117 $4,067
====== ====== ======
</TABLE>
34
<PAGE> 195
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
NOTE 19 - CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY (CONTINUED)
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(Dollars in Thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 4,271 $ 4,117 $ 4,067
Adjustments to reconcile net income to net cash provided by
operating activities:
Net income of subsidiaries less distributions:
Subsidiary bank (2,229) (1,778) (2,544)
Non-bank subsidiaries (3) (4) --
Increase (decrease) in taxes payable -- -- (11)
------- ------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,039 2,335 1,512
------- ------- -------
INVESTING ACTIVITIES
Investment in non-bank subsidiaries -- (2) --
------- ------- -------
NET CASH USED IN INVESTING ACTIVITIES -- (2) --
------- ------- -------
FINANCING ACTIVITIES
Purchase of outstanding common stock (55) (580) (287)
Cash dividends (1,983) (1,753) (1,225)
------- ------- -------
NET CASH USED IN FINANCING ACTIVITIES (2,038) (2,333) (1,512)
------- ------- -------
INCREASE IN CASH 1 -- --
CASH - BEGINNING OF YEAR -- -- --
------- ------- -------
CASH - END OF YEAR $ 1 $ -- $ --
======= ======= =======
</TABLE>
NOTE 20 - FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value estimates made as of December 31, 1997 and 1996 are based on
relevant market information about the financial instruments. These estimates
do not reflect any premiums or discounts that could result from offering for
sale at one time the Corporation's or the Bank's entire holding of a
particular financial instrument. In cases where quoted market prices are not
available, fair value estimates are based on judgments regarding future
expected loss experience, current economic conditions, risk characteristics
of various financial instruments, and other factors. These estimates are
subjective in nature and involve uncertainties and matters of significant
judgment and, therefore, cannot be determined with precision. Changes in
assumptions could significantly affect the estimates. In addition, the tax
ramifications related to the realization of the unrealized gains and losses
can have a significant effect on fair value estimates and have not been
considered in the estimates.
35
<PAGE> 196
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
NOTE 20 - FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The following methods and assumptions were used in estimating the fair value
disclosures for financial instruments:
CASH AND CASH EQUIVALENTS -- The carrying amounts reported in the balance
sheets for cash and short-term instruments approximate those assets' fair
values.
SECURITIES AVAILABLE-FOR-SALE -- Fair values were based on quoted market
prices available. If quoted market prices were not available, fair values
were based on quoted market prices of comparable instruments.
LOANS -- The carrying values, reduced by estimated inherent credit losses,
of variable-rate loans and other loans with short-term characteristics were
considered fair values. For other loans, the fair market values were
calculated by discounting scheduled future cash flows using current interest
rates offered on loans with similar terms adjusted to reflect the estimated
credit losses inherent in the portfolio.
ACCRUED INTEREST RECEIVABLE AND ACCRUED INTEREST PAYABLE -- The carrying
amounts reported in the balance sheets for accrued interest receivable and
accrued interest payable approximate their fair values.
DEPOSIT LIABILITIES -- The fair value of deposits with no stated maturity,
was, by definition, equal to the amount payable on demand as of December 31,
1997 and 1996. The fair value of certificates of deposit was based on the
discounted value of contractual cash flows, calculated using discount rates
equal to interest rates offered at the valuation date for deposits of
similar remaining maturities.
SHORT-TERM BORROWINGS -- The carrying amounts of federal funds purchased,
borrowings under repurchase agreements, and other short-term borrowings, if
any, are considered to approximate their fair values.
The estimated fair values of financial instruments are as follows:
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
---------------------- ----------------------
Carrying Fair Carrying Fair
Amounts Values Amounts Values
-------- -------- -------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Financial Assets
Cash and cash equivalents $ 8,456 $ 8,456 $ 8,196 $ 8,196
Securities available-for-sale 105,404 105,404 102,070 102,070
Loans, net of allowance for possible loan losses 145,335 142,345 142,096 141,754
Accrued interest receivable 3,160 3,160 3,116 3,116
Financial Liabilities
Deposits 219,143 219,306 217,557 217,701
Long-term debt 6,787 6,759 7,203 6,755
Short-term borrowings 4,273 4,273 1,362 1,362
Accrued interest payable 1,558 1,558 1,460 1,460
</TABLE>
At December 31, 1997 and 1996, the Bank had commitments to extend credit and
outstanding standby letters of credit. These off-balance-sheet financial
instruments are generally exercisable at the market rate prevailing at the
date the underlying transaction will be completed and, therefore, are deemed
to have no current fair market value.
Fair value estimates are based on existing on-balance sheet and off-balance
sheet financial instruments without attempting to estimate the value of
anticipated future business and the value of assets and liabilities that are
not considered financial instruments. Significant assets and liabilities
that are not considered financial assets or liabilities include the value of
deferred tax assets, premises and equipment.
36
<PAGE> 197
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
NOTE 21 - QUARTERLY RESULTS OF OPERATIONS
The following is a summary of the unaudited consolidated quarterly results
of operations:
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
------- ------- ------- ------- -------
(Dollars in Thousands Except Share Data)
<S> <C> <C> <C> <C> <C>
1997
Interest income $5,012 $5,201 $5,225 $5,152 $20,590
Interest expense 2,245 2,345 2,376 2,357 9,323
------ ------ ------ ------ -------
Net interest income 2,767 2,856 2,849 2,795 11,267
Provision for possible loan losses 140 82 91 100 413
Noninterest expenses, net of noninterest income 1,062 1,219 1,107 1,441 4,829
------ ------ ------ ------ -------
Income before income taxes 1,565 1,555 1,651 1,254 6,025
Income taxes 486 442 487 339 1,754
------ ------ ------ ------ -------
Net income $1,079 $1,113 $1,164 $ 915 $ 4,271
====== ====== ====== ====== =======
Earnings per share $ 4.08 $ 4.21 $ 4.41 $ 3.46 $ 16.16
</TABLE>
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
1996
Interest income $4,929 $5,026 $5,049 $5,041 $20,045
Interest expense 2,205 2,174 2,206 2,245 8,830
------ ------ ------ ------ -------
Net interest income 2,724 2,852 2,843 2,796 11,215
Provision for possible loan losses 93 85 123 327 628
Noninterest expenses, net of noninterest income 992 1,136 1,037 1,449 4,614
------ ------ ------ ------ -------
Income before income taxes 1,639 1,631 1,683 1,020 5,973
Income taxes 519 512 533 292 1,856
------ ------ ------ ------ -------
Net income $1,120 $1,119 $1,150 $ 728 $ 4,117
====== ====== ====== ====== =======
Earnings per share $ 4.15 $ 4.15 $ 4.35 $ 2.72 $ 15.37
</TABLE>
NOTE 22 - MERGER AGREEMENT
Effective January 6, 1998, the Bank's Board of Directors approved a
preliminary merger agreement pursuant to which, if consummated, the Bank
will become a subsidiary of Union Planters National Bank, a registered bank
holding company with its principal office in Memphis, Tennessee. The Board
is scheduled to meet on May 29, 1998 to finalize the agreement. The
agreement is subject to the approval of the Bank's shareholders and
appropriate regulatory authorities and includes certain other conditions
precedent.
37
<PAGE> 198
C B & T, INC. AND SUBSIDIARIES
Table 1 -- Distribution of Assets, Liabilities and Shareholders' Equity,
Interest Rates and Interest Differential
<TABLE>
<CAPTION>
1997
----
AVERAGE INTEREST INTEREST
BALANCE INCOME/EXPENSE RATE
-------- -------------- --------
(Dollars in Thousands)
<S> <C> <C> <C>
ASSETS
Bank interest-bearing deposits $ 65 $ 4 6.15%
U.S. Treasury securities 8,295 579 6.98
U.S. Government agencies and corporations 49,397 3,265 6.61
Securities of States and political subdivisions 31,638 2,574* 8.14
Other investments 12,603 788 6.25
Federal funds sold 3,869 212 5.48
Loans, net 144,592 14,043 9.71
-------- -------
TOTAL EARNING ASSETS 250,459 $21,465 8.57
=======
Cash and due from banks 7,033
Other assets 9,859
--------
TOTAL ASSETS $267,351
========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing deposits:
NOW accounts $ 23,826 $ 578 2.43%
Money market deposit accounts 19,694 761 3.86
Savings 29,415 875 2.97
Time of $100M or more 30,381 1,747 5.75
Time--other 90,487 4,818 5.32
-------- -------
TOTAL INTEREST-BEARING DEPOSITS 193,803 8,779 4.53
Federal funds purchased 2,505 109 4.35
Long-term debt 7,134 435 6.10
-------- -------
TOTAL INTEREST-BEARING LIABILITIES 203,442 $ 9,323 4.58
=======
Demand deposits 27,864
Other liabilities 4,006
--------
TOTAL LIABILITIES 235,312
Shareholders' equity 32,039
--------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $267,351
========
Spread between combined rates earned
and combined rates paid* 3.99%
====
Net yield on interest earning assets* 4.85%
====
</TABLE>
*Taxable equivalent basis
36
<PAGE> 199
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1996 1995
---- ----
AVERAGE INTEREST INTEREST AVERAGE INTEREST INTEREST
BALANCE INCOME/EXPENSE RATE BALANCE INCOME/EXPENSE RATE
------- -------------- ---- ------- -------------- ----
(Dollars in Thousands) (Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
$ 62 $ 5 8.06% $ 60 $ 3 5.00%
18,221 1,284 7.05 20,465 1,451 7.09
43,377 2,797 6.45 49,820 3,227 6.48
24,765 2,024* 8.17 21,454 1,788* 8.33
11,212 691 6.16 4,466 274 6.14
5,199 275 5.29 5,070 297 5.86
138,511 13,657 9.86 131,761 13,021 9.88
-------- ------- -------- -------
241,347 $20,733 8.59 233,096 $20,061 8.61
======= =======
6,855 6,353
9,148 8,880
-------- --------
$257,350 $248,329
======== ========
$ 24,158 $ 588 2.43% $ 23,758 $ 660 2.78%
18,333 574 3.13 18,990 593 3.12
30,530 904 2.96 30,733 1,003 3.26
27,186 1,543 5.68 23,622 1,348 5.71
88,563 4,763 5.38 82,632 4,466 5.40
-------- ------- -------- -------
188,770 8,372 4.44 179,735 8,070 4.49
1,136 46 4.05 825 54 6.55
6,802 412 6.06 9,907 593 5.99
-------- ------- -------- -------
196,708 $ 8,830 4.49 190,467 $ 8,717 4.58
======= =======
27,217 27,013
3,498 2,538
-------- --------
227,423 220,018
29,927 28,311
-------- --------
$257,350 $248,329
======== ========
4.10% 4.03%
==== ====
4.93% 4.87%
==== ====
</TABLE>
37
<PAGE> 200
C B & T, INC. AND SUBSIDIARIES
Table 2 -- Distribution of Assets, Liabilities and Shareholders' Equity,
Interest Rates and Interest Differential -- (Continued)
The following table sets forth for the periods indicated a summary of the
changes in interest earned and interest paid resulting from changes in volume
and changes in rates:
<TABLE>
<CAPTION>
1997 COMPARED TO 1996
INCREASE (DECREASE)
-----------------------------
VOLUME RATE NET
------ ----- -----
(Dollars in Thousands)
<S> <C> <C> <C>
Interest Income
Bank interest-bearing deposits $ 0 $ (1) $ (1)
Net Loans 600 (214) 386
Taxable investment securities (311) 74 (237)
Nontaxable investment securities* 562 (12) 550
Other securities 86 11 97
Federal funds sold (70) 7 (63)
----- ----- -----
TOTAL INTEREST INCOME* $ 867 ($135) $ 732
===== ===== =====
Interest Expense
NOW accounts $ (10) $ (0) $ (10)
Money market deposit accounts 43 144 187
Savings (33) 4 (29)
Time deposits 288 (29) 259
Federal funds purchased 55 8 63
Long-term debt 20 3 23
----- ----- -----
TOTAL INTEREST EXPENSE $ 363 $ 130 $ 493
===== ===== =====
</TABLE>
* Tax equivalent basis
The rate/volume variances are allocated between rate and volume variances in
proportion to the relationship of the absolute dollar amounts of the change in
each.
38
<PAGE> 201
<TABLE>
<CAPTION>
1996 COMPARED TO 1995 1995 COMPARED TO 1994
INCREASE (DECREASE) INCREASE (DECREASE)
--------------------------------------- -------------------------------------
VOLUME RATE NET VOLUME RATE NET
------ ----- ----- ------- ------ -------
(Dollars in Thousands) (Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
$ 0 $ 2 $ 2 $ (1) $ 1 $ 0
667 (31) 636 1,395 430 1,825
(576) (21) (597) (1,379) 297 (1,082)
276 (40) 236 (340) (84) (424)
414 3 417 136 41 177
8 (30) (22) 119 122 241
----- ----- ----- ------- ------ -------
$ 789 $(117) $ 672 $ (70) $ 807 $ 737
===== ===== ===== ======= ====== =======
$ 11 $ (83) $ (72) $ (13) $ 22 $ 9
(21) 2 (19) (286) 38 (248)
(7) (92) (99) (175) 76 (99)
524 (32) 492 235 1,461 1,696
20 (28) (8) (25) 15 (10)
(186) 5 (181) 116 2 118
----- ----- ----- ------- ------ -------
$ 341 $(228) $ 113 $ (148) $1,614 $ 1,466
===== ===== ===== ======= ====== =======
</TABLE>
39
<PAGE> 202
C B & T, INC. AND SUBSIDIARIES
Table 3 --Summary of Loan Loss Experience
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Balance at beginning of period $1,931 $1,864 $1,733 $1,601 $1,453
Loans charged off:
Commercial, financial, and agricultural 206 170 128 129 143
Real estate-mortgage 105 241 39 90 49
Installment 303 228 172 124 179
------ ------ ------ ------ ------
TOTAL LOANS CHARGED OFF 614 639 339 343 371
Recoveries of loans previously charged off:
Commercial, financial, and agricultural 8 21 25 65 9
Real estate--mortgage 109 17 5 3 9
Installment 66 40 64 77 70
------ ------ ------ ------ ------
TOTAL RECOVERIES 183 78 94 145 88
------ ------ ------ ------ ------
NET LOANS CHARGED OFF 431 561 245 198 283
Additions to the allowance charged to
operating expenses 413 628 376 330 431
------ ------ ------ ------ ------
BALANCE AT END OF PERIOD $1,913 $1,931 $1,864 $1,733 $1,601
====== ====== ====== ====== ======
<CAPTION>
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
Ratio of net charge-offs (recoveries) during
the periods to average loans outstanding .30% .41% .19% .17% .26%
</TABLE>
40
<PAGE> 203
C B & T, INC. AND SUBSIDIARIES
Table 4 -- Financial Ratios
The ratio of net income to average shareholders' equity and average total
assets, and certain other ratios, are presented below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Percentage of net income to:
Total average assets 1.60 1.60 1.64
Average shareholders' equity 13.33 13.76 14.37
Percentage of dividends declared per average
Common share to net income
per average Common Share 46.41 42.29 30.00
Percentage of average shareholders' equity
to total average assets 11.98 11.63 11.40
</TABLE>
41
<PAGE> 204
C B & T, INC. AND SUBSIDIARIES
SUMMARY OF CONSOLIDATED SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(Dollars in Thousands - Except Per Share)
<S> <C> <C> <C> <C> <C>
Interest Income ......................... $ 20,590 $ 20,045 $ 19,454 $ 18,572 $ 18,730
Net interest income ..................... 11,267 11,215 10,736 11,321 11,578
Provision for possible loan losses ...... 413 628 376 330 431
Income from continuing operations
(net income) ........................ 4,271 4,117 4,067 4,260 4,966
Total assets ............................ 268,486 261,459 255,882 254,973 247,524
Long-term debt .......................... 6,787 7,203 9,226 7,821 7,729
Per share data of Common Stock:
Income from continuing
operations (net income) ......... 16.16 15.37 15.00 14.37 15.58
Dividends ........................... 7.50 6.50 4.50 4.10 3.95
</TABLE>
COMMON STOCK MARKET PRICE INFORMATION
There is no established public trading market for the Corporation's common Stock
and the stock is not traded on any securities exchange. There were approximately
625 shareholders of record of the Common Stock of the Corporation at December
31, 1997.
The price range of the known sales of the Common Stock of the corporation for
1997 and 1996 was a minimum of $115.40 to a maximum of $120.20 and a minimum of
$76.00 to a maximum of $115.40 respectively.
The Corporation paid dividends of $7.50 per share in 1997 and $6.50 per share in
1996. The dividends were paid semiannually.
The Corporation expects to continue to pay regular semiannual cash dividends,
although there is no assurance as to future dividends because they are dependent
on future earnings, capital requirements and financial condition.
42
<PAGE> 205
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------
FORM 10-K/A
(Amendment No. 1)
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1997
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to ____________
Commission File Number: 0-10669
------------------------------
CB&T, INC.
(Exact name of registrant as specified in its charter)
Tennessee 62-1121054
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 East Main Street
McMinnville, Tennessee 37110
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (931) 473-2147
------------------------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Name of each exchange on which registered:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $2.50 par value
(Title of Class)
------------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. |X|
The aggregate market value of shares of the Registrant's Common Stock held
by nonaffiliates, as of March 2, 1998, was approximately $31,746,383. As of
March 2, 1998, 264,113 shares of Common Stock, $2.50 par value, were
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
- --------------------------------------------------------------------------------
<PAGE> 206
CB&T, Inc. ("CB&T") hereby amends and restates in its entirety each of the
following items of CB&T's Annual Report on Form 10-K filed with the Securities
and Exchange Commission on or about March 24, 1998.
PART I
ITEM 2. PROPERTIES
CB&T owns the land and building located at 101 East Main Street,
McMinnville, Tennessee, which houses CB&T's principal executive offices. CB&T
also owns the land and buildings in McMinnville, Tennessee that house the West
Main and Mount Leo full service branch operations of CB&T, the building in
McMinnville, Tennessee that houses CB&T's Plaza branch, and the land and
building in Smithville, Tennessee that houses CB&T's DeKalb branch. CB&T leases
land and buildings, pursuant to renewable leases, in McMinnville, Tennessee for
its Three Star Mall branch and its Super Center branch, and land, pursuant to a
renewable lease, in McMinnville, Tennessee for its Plaza branch. Management
believes CB&T's facilities are adequate for its current needs.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
(a) Market Information
There is no established public trading market for CB&T's Common Stock and
the Common Stock is not traded on any securities exchange. The price range of
the known sales of the Common Stock for each quarter of 1996 and 1997 are set
forth below.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
---- -------- -------- -------- --------
Ended High Low High Low High Low High Low
----- ---- --- ---- --- ---- --- ---- ---
1997 $ 120.00 - 115.40 $ 120.00 - 117.26 $ 120.20 - 120.00 $ 120.20 - 120.20
1996 $ 106.08 - 76.00 $ 108.79 - 100.00 $ 115.40 - 108.79 $ 115.40 - 115.40
</TABLE>
(b) Shareholders
At December 31, 1997, there were approximately 625 shareholders of record
of the Common Stock of CB&T.
(c) Dividends
CB&T paid dividends on its Common Stock of $5.00 per share in the first
quarter of 1997 and $2.50 per share in the third quarter of 1997 for an
aggregate per share dividend of $7.50 per share in 1997. CB&T paid dividends of
$4.46 per share in the first quarter of 1996 and $2.04 per share in the third
quarter of 1996 for an aggregate per share dividend of $6.50 per share in 1996.
CB&T expects to continue to pay regular semi-annual cash dividends. However,
there is no assurance as to the payment of future dividends because the payment
of future dividends will be at the sole discretion of CB&T's Board of Directors
and will depend on, among other things, CB&T's earnings, operations, capital
requirements, financial condition, restrictions in then existing financing
agreements, and other factors deemed relevant by the Board of Directors.
1
<PAGE> 207
PART III
ITEM 11. EXECUTIVE COMPENSATION
Director Compensation
---------------------
CB&T pays no fees to Directors or Advisory Directors for service on the
Board or Committees of the Board. Each Director or Advisory Director of CB&T,
however, is also a Director or Advisory Director of City Bank & Trust Company, a
wholly-owned subsidiary of CB&T ("City Bank"), and, as such, receives $1,500.00
for each meeting of City Bank's Board of Directors attended. In addition, City
Bank pays all non-employee members of the standing committees of City Bank
$150.00 for each meeting attended that continues longer than one hour. During
the fiscal year 1997, City Bank paid total cash Directors' fees of $163,275.00
and Directors' fees were deferred in the amount of $105,475.00 under City Bank's
Director's Deferred Compensation Plan.
City Bank's Director's Deferred Compensation Plan was amended and
terminated as of January 7, 1998. However, unlike a strict termination in the
traditional sense, the amendment stops all future deferrals, but continues the
Deferred Compensation Plan for amounts deferred prior to January 7, 1998. Hence,
existing distributions, funded by insurance policies owned by CB&T on the lives
of the Directors, will occur at the scheduled time, rather than being made in an
immediate payout to terminated participants who have not yet begun receiving
benefit payments. Furthermore, according to the terms of the Deferred
Compensation Plan, Directors are treated as if they terminated service on the
date of termination of the Deferred Compensation Plan. Therefore, death benefits
are removed and the projected benefits are reduced.
Compensation of Executive Officers
----------------------------------
The following table sets forth the aggregate remuneration accrued or paid
by City Bank during the fiscal years ended December 31, 1997, 1996, and 1995 to
the President and Chief Executive Officer, Jeffrey A. Golden, and to the other
highest compensated executive officers who received aggregate remuneration in
excess of $100,000 for the fiscal year ended December 31, 1997.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation
Name of Individual and Principal Year Salary Bonus All Other
Position Compensation (1)
<S> <C> <C> <C> <C>
Jeffrey A. Golden 1997 $138,000.00 $10,350.00 $31,718.06
Chairman of the Board, President 1996 133,500.00 10,012.50 22,499.35
and Chief Executive Officer 1995 130,000.00 9,750.00 20,684.04
Larry E. Brown 1997 $93,000.00 $6,975.00 $28,107.30
Director of Bank and Executive Vice 1996 90,000.00 6,750.00 21,147.71
President 1995 86,500.00 6,487.50 15,518.76
James H. Hillis(2) 1997 $83,500.00 $6,262.50 $23,213.44
Director and Treasurer 1996
1995
</TABLE>
2
<PAGE> 208
(1) All Other Compensation for Mr. Golden and Mr. Brown and Mr. Hillis includes
Director fees for the Bank both cash paid and deferred fees, deferred
compensation paid pursuant to the Corporation's 401(k) plan, a premium
payment for life insurance, use of a bank vehicle and country club dues.
(2) The aggregate remuneration accrued or paid by City Bank to Mr. Hillis did
not exceed $100,000 in fiscal years 1995 or 1996.
Employment Contracts and Termination of Employment and Change-in
Control Arrangements
----------------------------------------------------------------
When the Board of Directors of CB&T concluded that a sale of CB&T was a
viable alternative, the Board also concluded that steps should be taken to
enhance the likelihood of retention of key employee service during negotiation
with potential acquirors in order to minimize any disruption to the service
delivery by CB&T's employees. Accordingly, at its September 5, 1997 meeting, the
Board directed the Special Acquisitions Committee (the "Committee") to review
and make a recommendation to the Board regarding appropriate plans to protect,
retain or terminate employees with as little as possible disruption to CB&T's
and City Bank's operations.
The Committee met on September 8, 1997 and, at a meeting of the full Board
on September 9, 1997, recommended that a $170,000 amount be made available for
bonuses to be paid upon consummation of a sale or merger for the efforts of key
executive officers of CB&T and/or City Bank in connection with a sale or merger
of CB&T ("Retention Bonus Plan").
The Retention Bonus Plan was adopted by the Board, which directed the
Committee to approve any disbursements under the Retention Bonus Plan. At its
September 18, 1997 and January 2, 1998 meeting, the Committee approved cash
bonuses to be paid upon consummation of a sale or merger of CB&T, in the
aggregate, as follows:
<TABLE>
<CAPTION>
Officer CB&T/City Bank Amount
------- -------------- ------
<S> <C> <C>
Jeffrey Golden President, Chairman and Chief Executive Officer* $130,000
Larry Brown Director, Executive Vice President* 12,500
James Hillis Director, Treasurer/Director, Senior Vice President 10,000
Glynna Lee /Compliance Officer 7,000
Jerry Brown /Chief Financial Officer 5,000
Ken Smith /Senior Vice President Trusts, Investments 5,000
</TABLE>
*Position with each of CB&T and City Bank.
In addition, the Committee recommended that a severance policy plan be
adopted by the Board providing for certain payments to terminated employees. The
Board adopted these recommendations at its September 9, 1997 meeting and
instructed counsel to prepare a formal severance pay plan for review at its next
regular meeting. The CB&T, Inc. Employee Severance Pay Plan was adopted by the
Board, effective October 31, 1997. Under the terms of the CB&T, Inc. Employee
Severance Pay Plan, non-officer employees, non-executive officers, and executive
officers other than the Chief Executive Officer, who is ineligible under the
Plan, may receive severance benefits payable in single lump sum cash payments.
None of the executive officers named in the Summary Compensation Table will
receive severance benefits under the Plan in excess of $100,000.
The Committee also recommended and the Board approved a Severance Agreement
for the Chief Executive Officer as of November 12, 1997 providing certain
monetary protection for Mr. Golden as Chief Executive Officer of CB&T, in the
event of the termination of Mr. Golden without cause or relocation in connection
with a sale or merger of CB&T. Under the terms of Mr. Golden's Severance
Agreement, if CB&T or City Bank undergoes a change-in-control on or before
October 31, 1999 and if Mr. Golden remains in continuous service as the Chief
Executive Officer until the effective date of the change-in-control and is
3
<PAGE> 209
thereafter "terminated without good cause," which definition generally includes
termination of employment or a substantial reduction in duties, salary or
benefits, or a change in the location at which he performs his services for any
reason other than intentional fraud, intentional damage to property of CB&T or
City Bank, intentional wrongful disclosure of confidential information, willful
violation of a law, intentional breach of fiduciary duty involving personal
profit or gross misconduct, then CB&T is obligated to pay Mr. Golden a lump sum
cash payment equal to his monthly base pay (which is currently $12,083.33),
multiplied by 36 less the number of months that have elapsed from the effective
date of the change-in-control to the termination date, plus an additional amount
to cover the excise tax, if any, and all federal, state and local income taxes
assessed on the severance payment.
Compensation Committee Interlocks and Insider Participation
-----------------------------------------------------------
Decisions on compensation of City Bank's executives are made by a six
member Personnel/Nominating Committee of the Board. The following persons were
members of the Personnel/Nominating Committee during the 1997 fiscal year: J.
Paul Holder, James A. Dillon, Jr., Charles D. Haston, John R. Collier, Jr., Leon
Stribling, and James H. Hillis, Treasurer of CB&T and Senior Vice President of
City Bank.
During the 1997 fiscal year, none of the executive officers of CB&T or City
Bank served as a director, on the compensation committee, or any other committee
of the board of directors performing similar functions of another entity, one of
whose executive officers served as a director on the Personnel/Nominating
Committee of CB&T or City Bank.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of Common Stock as of December 31, 1997 by (i) each person known by
CB&T to own beneficially five percent or more of the outstanding Common Stock of
CB&T; (ii) each of CB&T's directors; (iii) each of the executive officers named
in the Summary Compensation Table; and (iv) all directors and executive officers
as a group. The address of each person listed below is 108 E. Main Street,
McMinnville, Tennessee 37110.
<TABLE>
<CAPTION>
Shares Beneficially
Owned (1)
-----------------------------------------------
Percent
Name Number of Class
- ------------------------------------------------ ----------------- -----------------------
<S> <C> <C>
J. Paul Holder(2) 14,422 5.46
Robert W. Boyd, Sr.(3) 1,900 *
Larry E. Brown 1,419 *
John R. Collier, Jr.(4) 2,088 *
Jeffrey A. Golden(5) 2,009 *
Charles D. Haston(6) 452 *
James H. Hillis(7) 1,000 *
M. Thomas Mullican(8) 10,438 3.95
James A. Puckett 194 *
Leon B. Stribling 2,401 *
James E. Walling 765 *
All current directors and executive officers
as a group
(11 persons) (2)(3)(4)(5)(6)(7)(8) 37,088 14.04
</TABLE>
- ------------------
* Represents less than one percent.
4
<PAGE> 210
(1) Based on 264,113 shares of Common Stock outstanding on December 31, 1997.
Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect
to securities. Except as indicated in the footnotes to this table and
subject to applicable community property laws, the persons named in the
table have sole voting and investment power with respect to all shares of
Common Stock beneficially owned.
(2) Includes 36 shares registered to Steven Thomas Holder, Trust UMGA (Mr.
Holder's grandson) and J. Paul Holder, Trustee.
(3) Shares are registered to Robert W. Boyd, Sr. or Elinor Boyd, Mr. Boyd Sr.'s
wife.
(4) Includes 100 shares registered to Suzanne E. Collier Reynolds, Mr. Collier,
Jr.'s daughter, and 300 shares registered to Pleasant Cove Nursery, Inc.,
of which Mr. Collier, Jr. is the President.
(5) 1,404 shares are registered to Jeffrey A. Golden WROS Linda Golden, and 605
shares are registered to Linda Golden WROS Jeffrey A. Golden.
(6) Includes 92 shares registered to Charles D. Haston, a general partnership.
(7) Shares are registered to James H. or Carolyn Hillis, Mr. Hillis' wife.
(8) Includes 270 shares registered to Connie W. Mullican, Mr. Mullican's wife.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) Financial Statements:
The following consolidated financial statements were previously filed
as part of CB&T's Form 10-K:
Consolidated Balance Sheets as of December 31, 1997 and 1996.
Consolidated Statements of Income for the years ended December 31,
1997, 1996 and 1995.
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1997, 1996 and 1995.
Consolidated Statements of Cash Flows for the years ended December 31,
1997, 1996 and 1995.
Notes to Consolidated Financial Statements.
(2) Financial Statement Schedules:
Not applicable.
5
<PAGE> 211
(3) Exhibits:
The exhibits are listed on the Exhibit Index attached hereto.
(b) Reports on Form 8-K:
The Registrant did not file any reports on Form 8-K during the
quarterly period ended December 31, 1997.
6
<PAGE> 212
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this amended report to be
signed on its behalf by the undersigned, thereunto duly authorized, on April 28,
1998.
CB&T, INC.
By: /s/ Jeffrey A. Golden
-------------------------------------------------------
Jeffrey A. Golden, Chairman of the Board, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Jeffrey A. Golden Chairman of the Board, President April 28, 1998
- --------------------- and Chief Executive Officer
Jeffrey A. Golden (Principal Executive and Financial
Officer)
/s/ Jerry N. Brown Senior Vice President of City Bank April 28, 1998
- --------------------- & Trust Company (Principal
Jerry N. Brown Accounting Officer)
/s/ Robert W. Boyd, Sr. Director April 28, 1998
- -----------------------
Robert W. Boyd, Sr.
/s/ Larry E. Brown Director April 29, 1998
- -----------------------
Larry E. Brown
/s/ John R. Collier, Jr. Director April 29, 1998
- ------------------------
John R. Collier, Jr.
/s/ James A. Dillon, Jr. Director April 29, 1998
- ------------------------
James A. Dillon, Jr.
/s/ Jeffrey A. Golden Director April 28, 1998
- ------------------------
Jeffrey A. Golden
/s/ Charles D. Haston Director April 29, 1998
- ------------------------
Charles D. Haston
/s/ James H. Hillis Director April 29, 1998
- ------------------------
James H. Hillis
</TABLE>
<PAGE> 213
<TABLE>
<S> <C> <C>
/s/ J. Paul Holder Director April 28, 1998
- ------------------------
J. Paul Holder
/s/ M. Thomas Mullican Director April 28, 1998
- ------------------------
M. Thomas Mullican
/s/ James A. Puckett Director April 28, 1998
- ------------------------
James A. Puckett
/s/ Leon B. Stribling Director April 29, 1998
- ------------------------
Leon B. Stribling
Director April ___, 1998
- ------------------------
James E. Walling
</TABLE>
<PAGE> 214
INDEX TO EXHIBITS
The following documents are filed as a part of this report. Exhibits not
required for this report have been omitted.
<TABLE>
<CAPTION>
Exhibit
Number Description
- -------- -----------
<S> <C> <C>
3.1 -- Amended and Restated Charter of the Registrant.
3.2 -- Amended and Restated Bylaws of the Registrant, effective as of
February 10, 1998.
+10.1 -- Severance Agreement for Chief Executive Officer, dated as of
November 12, 1997.
+10.2 -- CB&T, Inc. Employee Severance Pay Plan, dated as of October
31, 1997.
21 -- Subsidiaries of the Registrant.
27 -- Financial Data Schedule
</TABLE>
- -----------------------------
+Compensation plan, benefit plan or employment contract or arrangement.
<PAGE> 215
EXHIBIT-3(I)
AMENDED AND RESTATED
CHARTER OF
C B & T, INC.
Pursuant to the Tennessee Business Corporation Act, the undersigned
corporation hereby adopts the following as its charter:
1. The name of the corporation is C B & T, Inc.
2. The maximum number of shares that the corporation shall have the
authority to issue is:
One million (1,000,000) shares of common stock, with a par value of
two and 50/100 dollars ($2.50) per share, all of which shall have
equal rights and privileges with each other share and which have
unlimited voting rights and which are entitled to receive the net
assets of the corporation upon dissolution.
3. The street address of the registered office of the corporation shall be
101 East Main Street, McMinnville, Warren County, Tennessee 37110. The name of
the corporation's registered agent at its registered office is Jeffrey A.
Golden.
4. The address of the principal office of the corporation is 101 East
main Street, McMinnville, Warren County, Tennessee 37110.
5. The corporation is for profit.
6. The purposes for which the corporation is organized are:
(a) To carry on the business of a bank holding company, as defined in
the Bank Holding Company Act of 1956, as amended, and to do all
acts and things now and hereinafter permitted to be done by such
a company.
(b) To exercise all powers granted to such corporations by and under
applicable law, to act as principal, as a member of a joint
venture or as agent for others, including, but not limited to the
acquisition, ownership, operation, management, and disposition of
all types of enterprises, properties, and investments, such as
real estate, leasehold interests as either lessor or lessee, and
all other types of interests in real estate; all kinds of
tangible property, including without limitation, equipment,
fixtures, machinery, livestock, commodities, minerals, timber,
motor vehicles, aircraft, computers, ships, and any other
vessels; and intangible property such as stocks, bonds,
mortgages, notes, contracts, evidences of indebtedness, options,
securities, debentures, and any forms or variations of any of the
above, and any other asset, enterprise, or investment which a
holding company may own, manage, or in which it may have an
interest.
-1-
<PAGE> 216
(c) To acquire by purchase, subscription, or otherwise, and to
receive, hold, own, guarantee, sell, assign, exchange, transfer,
mortgage, pledge, or otherwise dispose of or deal in and with any
and all securities, as such term is hereinafter defined, issued
or created by any corporation, firm, association, or other
entity, public or private, whether formed under the laws of the
United States of America or of any state, commonwealth,
territory, dependency, or possession thereof, or of any foreign
country, or of any political subdivision, territory, dependency,
possession, or municipality thereof, or issued or created by the
United States of America or any state or commonwealth thereof, or
any foreign country, or by any agency, subdivision, territory,
dependency, possession, or municipality of any of the foregoing;
and as owner thereof to possess and exercise all the rights,
powers, and privileges of ownership, including the right to
execute consents and vote thereon. The term "securities" as used
in this charter shall mean any and all notes, stocks, treasury
stocks, bonds, debentures, evidences of indebtedness,
certificates of interest or participation in any profit-sharing
agreement, collateral trust certificates, preorganization
certificates or subscriptions, transferable shares, investment
contracts, voting trust certificates, certificates of deposit for
a security, or, in general, any interests or instruments commonly
known as "securities," or any and all certificates of interest or
participation in, temporary or interim certificates for, receipts
for, guaranties of, or warrants or rights to subscribe to or
purchase, any of the foregoing. The terms "securities, contracts,
and properties" and all other terms above listed as assets and
forms of property which the corporation may own or have an
interest in shall be given their broadest connotation and
construction and shall include fractional undivided interests in
lands or minerals, temporary or interim in lands or minerals,
temporary or interim certificates, subscriptions, voting trust
certificates, options, warrants, and any and all contracts
(written or unwritten), or documents relating to or evidencing
investments of all kinds.
(d) To make, establish, and maintain investments in securities, and
to supervise and manage such investments.
(e) To cause to be organized under the laws of the United States of
America or of any state, commonwealth, territory, dependency, or
possession thereof, or of any foreign country, or of any
political subdivision, territory, dependency, possession, or
municipality thereof, one or more corporations, firms,
organizations, associations, or other entities and to cause the
same to be operated and/or to be dissolved, wound up, liquidated,
merged, or consolidated.
(f) To acquire by purchase or exchange, or by transfer to, or by
merger or consolidation, with, the corporation or any
corporation, firm, organization, association, or other entity
owned or controlled, directly or indirectly, by the corporation,
or to otherwise acquire, the whole or any part of the business,
good will, rights, or other assets of any corporation, firm,
organization, association, or other entity; to operate and/or
-2-
<PAGE> 217
carry on the business of same, and to undertake or assume in
connection therewith the whole or any part of the liabilities and
obligations thereof; to effect any such acquisition in whole or
in part by delivery of cash or other property, including
securities issued by the corporation, or by any other lawful
means.
(g) To aid by loan, subsidy, guaranty, or in any other lawful manner,
any corporation, firm, organization, association, or other entity
of which any securities are in any manner directly or indirectly
held by the corporation, or in which the corporation,
association, or entity may be or become otherwise interested; to
guarantee the payment of dividends on any stock issued by any
such corporation, firm, organization, association, or entity; to
guarantee, with or without recourse, against any such
corporation, firm, or organization, association, or entity, or to
assume the payment of the principal of, or the interest on, any
obligations issued or incurred by such corporation, firm,
organization, association, or entity; to do any and all other
acts and things for the enhancement, protection, or preservation
of any securities which are in any manner, directly or
indirectly, held, guaranteed, or assumed by the corporation, and
to do any and all acts and things designed to accomplish any such
purpose.
(h) To borrow money for any business, object, or purpose of the
corporation from time to time, without limit as to amount; to
issue any kind of evidence of indebtedness, whether or not in
connection with borrowing money, including evidences of
indebtedness convertible into stock of the corporation, to secure
the payment of any evidence of indebtedness by the creation of
any interest in any of the property or rights of the corporation,
whether at that time owned or thereafter acquired.
(i) To render service, assistance, counsel, and advice to, and to act
in any capacity as representative or agent (whether managing,
operating, financial, purchasing, selling, advertising, or
otherwise) of, any corporation, firm, organization, association,
or other entity.
(j) To engage in any lawful business and, in connection therewith, to
do any lawful act in furtherance of or otherwise necessary or
convenient to such business.
(k) To engage in management consulting and to provide management for
any business, enterprise, venture, or asset in which the
corporation shall be interested, either for its own account or
for the account of others.
The corporation shall possess and may exercise all powers and privileges
necessary or convenient to effect any or all of the foregoing purposes, or to
further any or all of the foregoing powers, and the enumeration herein of any
specific purposes or powers shall not be held to limit or restrict in any manner
the exercise by the corporation of the general powers now or hereafter conferred
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by the laws of the State of Tennessee upon corporations formed under the
Tennessee Business Corporation Act, as the same shall or may be from time to
time amended and/or recodified.
7. For the management of the business and for the conduct of the affairs of
the corporation, and in further definition, limitation, and regulation of the
powers of the corporation and of its Directors, and of its shareholders or any
class thereof, as the case may be, it is further provided:
(a) The management of the business and the conduct of the affairs of
the corporation, including the election of the Chairman, the
President and Chief Executive Officer, the Treasurer, the
Secretary, and other principal officers of the corporation, shall
be vested in its Board of Directors. The number of Directors
which shall constitute the whole Board of Directors shall be
fixed by, or in the manner provided in, the by-laws.
(b) Whenever the Board of Directors is required or permitted to take
any action by vote, such action may be taken without a meeting on
written consent, setting forth the action so taken, if all the
Directors entitled to vote thereon consent to the taking of
action on written consent without a meeting. Any such action
shall be as valid and effective as any resolution duly adopted at
an annual or regularly scheduled or special meeting of the Board
of Directors.
(c) The Board of Directors shall have the power by majority vote of
the Directors present at a meeting at which a quorum is present
to adopt, amend, or repeal any of the by-laws of the corporation,
but any by-law adopted by the Board of Directors may be amended
or repealed by the shareholders.
(d) The corporation from time to time may provide either directly or
through the purchase of insurance, for the indemnification of
Directors, officers, employees, and agents of the corporation and
of any of its subsidiaries to the fullest extent permitted by
law.
(e) Each holder of the common stock of the corporation shall have one
vote in respect of each share of stock held by him of record on
the books of the corporation on all matters to be voted upon by
the shareholders.
(f) The Board of Directors shall have authority to issue bonds,
debentures, notes, or other obligations of the corporation, and
to fix all the terms thereof, including without limitation the
convertibility or non-convertibility thereof. Any and all shares
of stock so issued for which the consideration so fixed has been
paid or delivered shall be deemed fully paid and not liable to
any further call or assessment.
(g) Any part of the authorized capital stock and any bonds,
debentures, notes, or other obligations of the corporation may at
any time, to the extent permitted by law, be issued, optioned, or
reserved for sale, sold, or disposed of by the corporation
pursuant to appropriate action by the Board of Directors, to such
parties and upon such terms as the Board of Directors shall deem
proper.
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(h) The corporation shall have the right to purchase its own shares
to the extent of unreserved and unrestricted earned or capital
surplus available therefore and to the extent otherwise permitted
by law.
(i) Any Director may be removed with cause by a majority vote of the
entire Board of Directors.
8. To the fullest extent that the Tennessee Business Corporation Act as it
exists on the date hereof or as it may hereafter be amended permits the
limitation or elimination of the liability of Directors, a Director of the
corporation shall not be personally liable to the corporation or its
shareholders for monetary damages for a breach of fiduciary duty as a Director,
except for liability (i) for any breach of the Director's duty of loyalty to the
corporation or its shareholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, or (iii)
under Section 48-18-304 of the Tennessee Business Corporation Act, as the same
exists or hereafter may be amended. If the Tennessee Business Corporation Act
hereafter is amended to authorize the further elimination or limitation of the
liability of Directors, then the liability of a Director of the corporation, in
addition to the limitation on personal liability provided herein, shall be
limited to the fullest extent permitted by the amended Tennessee Business
Corporation Act. This Paragraph 8 shall not eliminate or limit the liability of
a Director for any act or omission occurring prior to the date when this
Paragraph 8 became effective, if such a limitation or elimination of liability
of a Director for such acts or omission is prohibited by Tennessee law as then
in effect. Any repeal or modification of this Paragraph 8 by the shareholders of
the corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a Director of the corporation existing
at the time of such repeal or modification.
April 26, 1988 C B &T, Inc.
By: /s/ Jeffrey A. Golden
---------------------------------------------
Jeffrey A. Golden
Title: President and Chief Executive Officer
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CERTIFICATE OF RESTATEMENT OF
CHARTER OF C B & T, INC.
C B & T, Inc. (the "corporation") hereby certifies that the Amended and
Restated Charter of the corporation contains amendments to the charter of the
corporation requiring shareholder approval, and that the Amended and Restated
Charter was duly adopted by vote of the corporation's shareholders at its annual
meeting on April 12, 1988.
April 26, 1988 C B & T, Inc.
By: /s/ Jeffrey A. Golden
---------------------------------------------
Jeffrey A. Golden
Title: President and Chief Executive Officer
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EXHIBIT-3.2
AMENDED AND RESTATED BY-LAWS
OF
C B & T, INC.
ARTICLE I: MEETINGS OF SHAREHOLDERS
1. Annual Meeting - The annual meeting of the shareholders shall be held
at such time and place, either within or without the State of Tennessee, as may
be designated from time to time by the Directors, consistent with state and
federal law. Unless the time is otherwise specified by the Directors, the
meeting shall be held on the second Tuesday in April of each year, at the main
office of the Company.*
2. Special Meetings - Special meetings of the shareholders may be called
by the President, a majority of the Board of Directors, or by the holders of not
less than one-tenth (1/10) of all the shares entitled to vote on any issue
proposed to be considered at such a meeting. The Directors shall designate the
place of a special meeting.
3. Notice of Shareholders Meeting - Written or printed notice stating the
place, date, and time of the meeting, and, in the case of a special meeting, the
purpose or purposes for which the special meeting is called and the person or
persons calling the special meeting, shall be delivered either personally or by
mail by or at the direction of the President, the Secretary, or the officer or
person calling the meeting to each shareholder entitled to vote at the meeting.
If mailed, the notice shall be delivered not less than ten (10) days nor more
than two (2) months before the date of the meeting, and the notice shall be
deemed to be delivered when deposited in the United States mail, postage
prepaid, addressed to the shareholder at his address as it appears on the stock
transfer books of the corporation. If delivered personally, the notice shall be
delivered not less than ten (10) days nor more than two (2) months before the
date of the meeting and shall be deemed to be delivered when actually received
by the shareholder. The person giving the notice shall certify that the notice
required by this paragraph has been given. Any shareholder may waive his right
to notice of annual or special meetings of shareholders either before, during,
or after any such meeting.
4. Quorum Requirements - A majority of the shares entitled to vote shall
constitute a quorum for the transaction of business. A meeting may be adjourned
despite the absence of a quorum, and notice of an adjourned meeting is not
necessary if the time and place to which the meeting is adjourned are announced
at the meeting at which the adjournment is taken. When a quorum is present at
any meeting and votes cast in favor of an action exceed votes cast in opposition
to such action, then such action shall constitute corporate action and shall
decide any question brought before that meeting, unless the question is one upon
which, by express provision of the corporation's charter, these by-laws, or by
the laws of the State of Tennessee, a larger or different vote is required, in
which case any such express provision shall govern the decision of that
question.
*2/10/98
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5. Voting and Proxies - Every shareholder entitled to vote at a meeting
may do so either in person or by written proxy, which proxy shall be filed with
the Secretary of the meeting before being voted. Any such proxy shall entitle
the holders of that proxy to vote at any adjournment of that meeting, but shall
not be valid after the final adjournment of that meeting. No proxy shall be
valid after the expiration of eleven (11) months from the date of its execution
unless the proxy provides otherwise.
ARTICLE II: BOARD OF DIRECTORS
1. Qualification and Election - Directors shall be shareholders and of
legal age but need not be residents of the State of Tennessee. A plurality of
the votes cast at an annual meeting of the shareholders (or a special meeting
called for such purpose) entitled to vote shall elect the Directors. Each
Director shall hold office until the expiration of the term for which he is
elected and thereafter until his successor has been elected and qualified.
2. Number - The number of Directors shall be fixed from time to time by
the shareholders or by a majority of the entire Board of Directors.
3. Meetings - The annual meeting of the Board of Directors shall be held
immediately after the adjournment of the annual meeting of the shareholders, at
which time the Board of Directors shall elect the officers of the corporation.
The Board of Directors also may designate more frequent intervals for regular
meetings. Special meetings may be called at any time by the Chairman of the
Board, the President, or any two (2) directors.
4. Notice of Director's Meetings - The annual and all regular Board
meetings may be held without notice. Special meetings shall be held upon notice
sent by any usual means of communication not less than two (2) days before the
special meeting. A Director may waive the right to receive notice before,
during, or after a meeting.
5. Quorum and Vote - The presence of a majority of the Directors shall
constitute a quorum for the transaction of business. (The Advisory Director(s)
shall not be counted towards establishing a quorum.) A meeting may be adjourned
despite the absence of a quorum, and notice of an adjourned meeting is not
necessary if the time and place to which the meeting is adjourned are fixed at
the meeting at which the adjournment is taken, and if the period of adjournment
does not exceed one month in any one adjournment. The vote of a majority of the
Directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors, unless the vote of a greater number is required by the
charter, these by-laws, or the laws of the State of Tennessee.
6. Executive and Other Committees - The Board of Directors, by a
resolution adopted by a majority of its members, may designate an executive
committee, consisting of three or more Directors, and other committees,
consisting of three or more persons who may or may not be Directors and may
delegate to any such committee or committees any and all authority that the
Board of Directors deems desirable, including the right to delegate to an
executive committee the power to exercise all the authority of the Board of
Directors, in the management of the affairs and property of the corporation.
All members of the Committee that exercise powers of the Board of Directors
must be members of the Board of Directors.
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ARTICLE III: OFFICERS
1. Number - The corporation shall have a Chairman, President and Chief
Executive Officer, a Secretary, and a Treasurer, and any other officer that the
Board of Directors from time to time shall deem necessary. The same person may
hold any two or more offices, except the offices of President and Secretary.
2. Election and Term - The Board of Directors shall elect the officers at
its annual meeting (or at a special meeting called for such purpose). Each
officer shall serve until the expiration of the term for which he is elected and
thereafter until his successor has been elected and qualified.
3. Duties - All officers shall have that authority and perform those
duties in the management of the corporation which are normally incident to their
offices and as the Board of Directors from time to time may provide. The
Secretary shall be responsible for the recording of the minutes of shareholders;
and Directors' meeting and shall have custody of the minute books of the
corporation.
ARTICLE IV: RESIGNATIONS, REMOVALS, AND VACANCIES
1. Resignations - Any officer or Director may resign at any time by giving
written notice to the Chairman of the Board of Directors, the President, or the
Secretary. Any such resignation shall take affect at the time specified in the
resignation, or, if no time is specified, then upon its acceptance by the Board
of Directors.
2. Removal of Officers - The Board of Directors may remove any officer or
agent whenever in the judgment of the Board of Directors the best interests of
the corporation will be served by the removal.
3. Removal of Directors - Any or all of the Directors may be removed
either with or without cause by a proper vote of the shareholders; and may be
removed with cause by a majority vote of the entire Board of Directors.
4. Vacancies - Newly created directorships resulting from an increase in
the number of Directors, and vacancies occurring in any office or Directorship
for any reason, including removal of an officer or Director, may be filled by
the vote of a majority of the Directors then in office, even if less than a
quorum exists.
ARTICLE V: CAPITAL STOCK
1. Stock Certificates - The Board of Directors may determine to issue to
each shareholder a certificate or certificates of capital stock of the
corporation in the form prescribed by the Board of Directors. Unless otherwise
decided by the Board of Directors, the certificates shall be signed by any two
of the following officers: President, Secretary, or Treasurer. The Board of
Directors also may elect, in lieu of issuing certificates, to provide for the
issuance of uncertificated shares of the capital stock of the corporation,
provided, however, that all shares of the same class must be either certificated
or uncertificated.
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2. Transfer of Shares - Subject to any restrictions on transfer imposed by
either the applicable securities laws or any shareholder agreement, shares of
stock may be transferred on the books of the corporation by delivery and
surrender of the properly assigned certificate or, with respect to a transfer of
uncertificated shares, a written order to the corporation, in a form acceptable
to the corporation, authorizing and instructing the corporation to effect the
transfer.
3. Loss of Certificates - In the case of the loss, mutilation, or
destruction of a certificate of stock, a duplicate certificate may be issued
upon the terms that the Board of Directors shall prescribe.
ARTICLE VI: ACTION BY CONSENT
Whenever the shareholders or Directors are required or permitted to take
any action by vote, the action may be taken without a meeting on written
consent. Such written consent shall (i) set forth the action so taken, (ii) be
signed by all the persons or entities entitled to vote on that action, (iii)
indicate each shareholder's or Director's vote or abstention, as the case may
be, and (iv) be delivered to the corporation for inclusion in the corporate
records.
ARTICLE VII: INDEMNIFICATION OF DIRECTORS, OFFICERS, AND OTHERS
1. Right to Indemnification - The corporation, to the fullest extent
permitted by applicable law as then in effect, shall indemnify any person (an
"Indemnitee") who was or is involved in any manner (including, without
limitation, as a party or a witness), or is threatened to be made so involved,
in any threatened, pending, or completed investigation, claim, action, suit, or
proceeding, whether civil, criminal, administrative, or investigative
(including, without limitation, any action, suit, or proceeding by or in the
right of the corporation to procure a judgment in its favor) (a "Proceeding") by
reason of the fact that he is or was a Director, officer, employee, or agent of
the corporation, or is or was serving at the request of the corporation, as a
Director, officer, or employee or agent of another corporation, partnership,
joint venture, trust, or other enterprise against all expenses (including
attorney's fees), judgments, fines, and amounts paid in settlement actually and
reasonably incurred by him in connection with any such Proceedings. This
indemnification shall be a contract right and shall include the right to receive
payment in advance of any expenses incurred by an Indemnitee in connection with
a Proceeding, consistent with the provisions of applicable law as then in
effect.
2. Contracts and Funding - The corporation may enter into contracts with
any Director, officer, employee, or agent of the corporation in furtherance of
the provisions of this Article VII, and may create a trust fund, grant a
security interest, or use other means (including, without limitation, a letter
of credit) to ensure the payment of such amounts as may be necessary to effect
indemnification as provided in this Article VII.
3. Employee Benefit Plans - For purposes of this Article VII, references
to "other enterprises" shall include employee benefit plans and employee welfare
benefit plans; references to "fines" shall include any excise taxes assessed on
a person with respect to any employee benefit plan; and references to "serving
at the request of the corporation" shall include any service as a Director,
officer, employee, or agent, of the corporation which imposes duties on, or
involves services by, such Director, officer, employee, or agent with respect to
an employee benefit plan, its participants,
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or beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner not
opposed to the best interests of a corporation.
4. Indemnification Not Exclusive Right - The right of indemnification and
advancement of expenses provided in this Article VII shall not be exclusive of
any other rights to which a person seeking indemnification may otherwise be
entitled, under any statute, by-law, agreement, vote of shareholders or
disinterested Directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office. The provisions
of this Article VII shall inure to the benefit of the heirs and legal
representatives of any person entitled to indemnity under this Article VII and
shall be applicable to Proceedings commenced or continuing after the adoption of
this Article VII, whether arising from acts or omissions occurring before or
after such adoption.
5. Advancement of Expenses: Procedures - In furtherance, but not in
limitation, of the foregoing provisions, the following procedures and remedies
shall apply with respect to advancement of expenses and the right to
indemnification under this Article VII:
(a) Advancement of Expenses - All reasonable expenses incurred by or on
behalf of and Indemnitee in connection with any Proceeding shall be
advanced to the Indemnitee by the corporation within twenty (20) days
after the receipt by the corporation of a statement or statements from
the Indemnitee requesting such advance or advances from time to time,
whether prior to or after final disposition of a Proceeding. the
statement or statements shall reasonably evidence the expenses
incurred by the Indemnitee and, if required by law at the time of such
advance, shall include or be accompanied by an undertaking by or on
behalf of the Indemnitee to repay the amounts advanced if it should
ultimately be determined that the Indemnitee is not entitled to be
indemnified against such expenses.
(b) Written Request for Indemnification - To obtain indemnification under
this Article VII, an Indemnitee shall submit to the Secretary of the
corporation a written request, including such documentation and
information as is reasonably available to the Indemnitee and
reasonably necessary to determine whether and to what extent the
Indemnitee is entitled to indemnification (the "Supporting
Documentation"). The determination of the Indemnitee's entitlement to
indemnification shall be made within a reasonable time after receipt
by the corporation of the written request for indemnification together
with the Supporting Documentation. The Secretary of the corporation,
promptly upon receipt of such a request for indemnification, shall
advise the Board of Directors in writing that the Indemnitee has
requested indemnification.
(c) Procedure for Determination - An Indemnitee's entitlement to
indemnification under this Article VII shall be determined:
(i) by the Board of Directors by majority vote of a quorum (as
defined in Article II of these by-laws), consisting of Directors
not at the time parties to the Proceeding;
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(ii) if a quorum cannot be obtained under subdivision (i), by majority
vote of a committee duly designated by the Board of Directors (in
which designation Directors who are parties may participate),
consisting solely of two (2) or more Directors not at the time
parties to the Proceeding;
(iii) by independent special legal counsel:
(A) selected by the Board of Directors or its committee in the
manner prescribed in subdivision (i) or (ii); or
(B) if a quorum of the Board of Directors cannot be obtained
under subdivision (i) and a committee cannot be designated
under subdivision (ii), selected by majority vote of the
full Board of Directors (in which selection Directors who
are parties may participate), or
(iv) by the shareholders, but shares owned by or voted under the
control of Directors who are at the time parties to the
Proceeding may not be voted on the determination.
ARTICLE VIII: AMENDMENT OF BY-LAWS
These by-laws may be amended, supplemented, or repealed either by: (i) a
shareholders' vote in which an affirmative vote of the shares represented at any
duly constituted shareholders' meeting exceeds the shares voted in opposition
thereto, or (ii) a majority vote of the entire Board of Directors. The
shareholders, however, may amend or repeal any change in the by-laws made by the
Board of Directors.
ARTICLE IX: ADVISORY DIRECTORS
1. Duties of Advisory Directors - Each Advisory Director shall be
authorized and expected to participate fully in all the affairs of the Board of
Directors to the extent permitted by applicable laws; and each Advisory Director
shall be eligible for appointment on any and all committees of, or created by,
the Board of Directors.
2. Listing of Advisory Directors - In listing the Board in advertisements
and elsewhere, the Directors and Advisory Directors shall be listed
alphabetically in one listing with an * (asterisk), appearing after the name of
each Advisory Director. At an appropriate place on each such listing, the *
(asterisk) shall appear, followed by the words, "Advisory Director".
3. Appointment of Advisory Directors - Advisory Directors may be appointed
by the Directors of the corporation under the following conditions:
(a) When in the opinion of the Executive Management of the
Corporation an individual is available whose qualifications make
it desirable that he or she be elected to the Board of Directors,
it is recommended such individual be elected an Advisory
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Director; after having served as Advisory Director, this person
may be elected as Director. **
When an individual having been elected as a Director reaches the
age of 70, said Director shall serve until the end of the month
during which the Director reached age 70. * **
(b) This restriction shall in no way apply to members of the
subsidiary banks' Board of Directors as of September 14, 1965.
4. Term of Advisory Director(s) - The term of service of an Advisory
Director shall be at the will and pleasure of the Directors.
5. Quorum Requirements and Advisory Director(s) - Pursuant to these
by-laws, Advisory Directors shall not be considered when determining a quorum.
* 2/14/89
** 5/09/89
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EXHIBIT-10.1
SEVERANCE AGREEMENT FOR CHIEF EXECUTIVE OFFICER
-----------------------------------------------
This SEVERANCE AGREEMENT FOR CHIEF EXECUTIVE OFFICER ("Agreement") is made
and entered into as of this 12th day of November, 1997, by C B & T, INC.
(together with its successors, the "Company") and JEFF GOLDEN (the "Executive").
WHEREAS, the Executive currently serves as Chief Executive Officer of the
Company; and
WHEREAS, the Company is currently contemplating the sale of the Company;
and
WHEREAS, the Company desires and intends to continue to employ the
Executive as Chief Executive Officer of the Company and wishes to encourage the
Executive to remain in such position during the negotiations for the sale of the
Company; and
WHEREAS, both the Company and the Executive have read and understood the
terms and provisions set forth in this Agreement, and have been afforded a
reasonable opportunity to review this Agreement with their respective legal
counsel.
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth in this Employment Agreement, the Executive and the Company agree as
follows:
1. DURATION: This Agreement will remain in effect until (1) the termination of
the Executive by the Company before a Change of Control of the Company (as
hereafter defined); (2) the voluntary resignation of the Executive before a
Change of Control of the Company; (3) the death or disability of the Executive
before a Change of Control; or (4) October 31, 1999, if there has been no Change
of Control of the Company before such date, whichever of the preceding four
conditions occurs first.
2. CHANGE IN CONTROL: If the Company should undergo a "Change of Control," whose
Effective Date is on or before October 31, 1999, and if the Executive remains in
continuous service as Chief Executive Officer of the Company until the Effective
Date of a Change of Control, and if the Executive is Terminated Without Good
Cause on or after thirty-six (36) months of the Effective Date of a Change of
Control, the parties agree as follows:
a. Compensation: Within thirty (30) days of the Termination Date, the
Company will pay the Executive the following:
(1) A lump sum cash payment equal to the Severance Factor times the
Monthly Rate of Pay of the Executive as of the Effective Date of a Change
of Control; where
(2) The Severance Factor is the number 36 less the number of complete
months elapsing from the Effective Date of the Change of Control until the
Termination Date.
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b. Definitions: For purposes of this Agreement, the terms "Change of
Control," "Effective Date of Change of Control," "Monthly Rate of Pay," and
"Termination Date," shall be defined the same as those definitions found in the
C B &T, Inc. Employee Severance Pay Plan, As Effective October 31, 1997 (the
"Plan"). The term "Termination without Good Cause" shall mean (a) the
termination of the Executive's employment or a substantial reduction in his
duties, salary or benefits, or the location at which he performs services, as in
effect the day prior to the Effective Date of a Change of Control (b) which is
for a reason other than those listed in the definition of a Termination for
Cause under the Plan.
c. Tax Liability: In the event that any compensation payable under this
Paragraph (the "Payment") is determined to be a "parachute payment" under
section 280G of the Internal Revenue Code of 1986, as amended (the "Code") or
any successor provision, subject to the excise tax imposed by section 4999 of
the Code or any successor provision (the "Excise Tax"), the Company agrees to
pay to the Executive an additional amount (the "Gross Up") such that the net
amount retained by the Executive, after receiving both the Payment and the Gross
Up after reduction by the sum of (i) any Excise Tax on the Payment and (ii) any
Federal, state and local income taxes on the Payment, is equal to the amount of
the Payment determined as if it were not a parachute payment under the Code.
For purposes of determining the Gross Up, the Executive shall be deemed to
pay Federal, state and local income taxes at the highest marginal rate of
taxation in his filing status for the calendar year in which the Payment is to
be made. State and local taxes shall be determined using the same rate
assumption, but based upon the Executive's domicile on the date of the Change of
Control. The determination of whether such Excise Tax is payable and the amount
of such Excise Tax shall be based upon the opinion of tax counsel selected by
the Company subject to the approval of the Executive. If such opinion is not
finally accepted by the Internal Revenue Service, then appropriate adjustments
shall be calculated (with Gross Up, if applicable) by such tax counsel based
upon the final amount of Excise Tax so determined. The final amount shall be
paid, if applicable, within thirty (30) days after such calculations are
completed.
3. SUCCESSORS AND ASSIGNS: The parties acknowledge and agree that this Agreement
may not be assigned by either party without the written consent of the other
party. In the event of the Executive's death, this Agreement shall be
enforceable by the Executive's estate, executors or legal representatives, but
only to the extent that such persons may collect any compensation due to the
Executive under this Agreement.
4. RULES OF CONSTRUCTION: The following provisions shall govern the
interpretation and enforcement of this Agreement:
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a. Severability: The parties acknowledge and agree that each provision of
this Agreement shall be enforceable independently of every other provision.
Furthermore, the parties acknowledge and agree that, in the event any provision
of this Agreement is determined to be unenforceable for any reason, the
remaining covenants and/or provisions will remain effective, binding and
enforceable.
b. Waiver: The parties acknowledge and agree that the failure of either to
enforce any provision of this Agreement shall not constitute a waiver of that
particular provision, or of any other provisions, of this Agreement.
c. Choice of Law: The parties acknowledge and agree that except as
specifically provided otherwise in this Agreement, the law of Tennessee will
govern the validity, interpretation and effect of this Agreement.
d. Modification: The parties acknowledge and agree that this Agreement
constitutes the complete and entire agreement between the parties with respect
to its subject matter (i.e, Severance Benefits arising out of the termination of
the Executive following a Change of Control); that the parties have executed
this Agreement based upon the express terms and provisions set forth herein;
that the parties have not relied on any representations, oral or written, which
are not set forth in this Agreement; that no previous agreement, either oral or
written, shall have any effect on the terms or provisions of this Agreement; and
that all previous agreements, either oral or written, are expressly superseded
and revoked by this Agreement. In addition, the parties acknowledge and agree
that the provisions of this Agreement may not be modified by any subsequent
agreement unless the modifying agreement (i) is in writing (ii) contains an
express provision referencing this Agreement (iii) is signed by the Executive
and (iv) is approved by the Board of Directors. This Agreement may not be
modified by the Company so as to diminish the Severance Benefits to the
Executive prior to a Change of Control of the Company that occurs on or before
October 31, 1999. Likewise, this Agreement may not be modified by the Purchaser
or the Company so as to diminish the Executive's benefits hereunder for three
years following the Effective Date of a Change of Control.
e. Execution: The parties agree that this Agreement may be executed in
multiple counterparts, each of which shall be deemed an Original for all
purposes.
f. Headings: The parties agree that the subject headings set forth at the
beginning of each paragraph in this Agreement are provided for ease of reference
only, and shall not be utilized for any purpose in connection with the
construction, interpretation or enforcement of this Agreement.
5. LEGAL CONSULTATION: The parties acknowledge and agree that both parties have
been accorded a reasonable opportunity to review this Agreement with legal
counsel prior to executing the agreement. The Executive acknowledges that the
firm of Jenkens & Gilchrist, a Professional Corporation, represents only the
Company with respect to this Agreement.
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<PAGE> 231
6. NOTICES: The parties acknowledge and agree that any and all Notices required
to be delivered under the terms of this Agreement shall be forwarded by personal
delivery or certified U.S. mail. Notices shall be effective on the day of
receipt. Such Notices shall be addressed to each party as follows:
PROVIDE ADDRESSES FOR NOTICES
7. EMPLOYMENT STATUS. This Agreement will not be construed as giving to the
Executive, or other person, any legal or equitable right against the Company or
any person acting on behalf of the Company, except as expressly provided herein.
Likewise, nothing appearing in or done pursuant to the Agreement shall be held
or construed to create a contract of employment with the Executive or to
obligate the Company to continue the service of the Executive or to affect or
modify his or her terms of employment in any way, except to provide the
severance benefits stated herein.
EXECUTED on this 8 day of December, 1997, at McMinnville,
Tennessee.
/s/ Jeff Golden
---------------------------------------------
JEFF GOLDEN
C B & T, Inc.
By: /s/ M.T. Mullican
-----------------------------------
Title: Vice Chairman
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<PAGE> 232
EXHIBIT-10.2
C B & T, Inc.
EMPLOYEE SEVERANCE PAY PLAN
As Effective October 31, 1997
<PAGE> 233
C B & T, Inc.
EMPLOYEE SEVERANCE PAY PLAN
As Effective October 31, 1997
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I - PURPOSE AND SCOPE..................................................1
1.1 Purpose of Plan.....................................1
1.2 Plan Status.........................................1
ARTICLE II - DEFINITIONS.......................................................1
2.1 "Administrator".....................................1
2.2 "Affiliate".........................................1
2.4 "Claim Form"........................................2
2.7 "Company"...........................................2
2.9 "Eligible Employee".................................2
2.11 "ERISA".............................................3
2.12 "Independent Contractor"............................3
2.14 "Part-time Employee"................................3
2.15 "Plan"..............................................3
2.16 "Plan Year".........................................3
2.18 "Regular Employee"..................................3
2.19 "Severance Benefits"................................3
2.20 "Termination Date"..................................3
2.21 "Termination for Cause".............................3
2.22 "Termination Upon Natural Disaster".................4
2.23 "Temporary Employee"................................4
2.24 "Years of Service"..................................4
2.25 "Weekly Rate of Pay"................................4
ARTICLE III - ELIGIBLE EMPLOYEES...............................................4
ARTICLE IV - SEVERANCE BENEFITS................................................5
4.1 Requirements for Severance Benefits.................5
4.2 Amount of Severance Benefits........................5
ARTICLE V - PAYMENT OF SEVERANCE BENEFITS......................................6
5.1 Severance Benefits..................................6
5.2 Processing of Severance Payments....................6
5.3 Deductions From Severance Benefits..................6
5.4 Severance Benefits Are Not Compensation
for Other Benefits..................................7
5.5 Payment after Death.................................7
</TABLE>
i
<PAGE> 234
<TABLE>
<S> <C>
ARTICLE VI - CLAIMS AND APPEAL PROCEDURES......................................7
ARTICLE VII - PLAN ADMINISTRATION..............................................8
7.1 In General..........................................8
7.2 Reimbursement and Compensation......................8
7.3 Rulemaking Powers...................................9
ARTICLE VIII - AMENDMENT AND TERMINATION.......................................9
ARTICLE IX - MISCELLANEOUS INFORMATION.........................................9
9.1 Limitation of Rights................................9
9.2 Governing Law.......................................9
9.3 Severability........................................9
9.4 Captions............................................9
9.5 Gender and Numbers.................................10
9.6 Spendthrift Provision..............................10
9.7 Mistaken Payments..................................10
9.8 Information Requested..............................10
</TABLE>
ii
<PAGE> 235
C B & T, Inc.
EMPLOYEE SEVERANCE PAY PLAN
As Effective October 31, 1997
WHEREAS, C B & T, Inc. (the "Company") wishes to establish the C B & T,
Inc. Severance Pay Plan effective October 31, 1997 to provide certain severance
benefits to eligible persons under the terms and conditions provided therein;
and
NOW, THEREFORE, the Company hereby establishes the C B & T, Inc. Severance
Pay Plan ("Plan") effective October 31, 1997 to provide certain severance
benefits to eligible persons under the terms and conditions provided herein.
ARTICLE I - PURPOSE AND SCOPE
1.1 Purpose of Plan. The Company has established and maintains the Plan as
a severance program in connection with the potential Change of Control of the
Company (as defined in Section 2.5). The purpose of this Plan is to provide to
Eligible Employees certain Severance Benefits under the terms and conditions
specified in Article IV of the Plan and to provide financial security to
Eligible Employees who suffer a permanent job loss due to a Change of Control.
No other employee of the Company or any other person shall have any right to
benefits under this Plan.
1.2 Plan Status. The Company intends for the Plan to qualify as an
"employee welfare benefit plan" within the meaning of section 3(1) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"). The Plan
shall, at all times, be interpreted and administered in accordance with ERISA
and any other pertinent provisions of Federal law.
ARTICLE II - DEFINITIONS
Wherever used herein, the following terms have the following meanings
unless the context clearly requires a different meaning:
2.1 "Administrator" means the Company or such other person or committee as
may be appointed from time to time by the Company to supervise the
administration of the Plan. The Administrator will be the named fiduciary for
purposes of section 402(a)(1) of ERISA with respect to all duties and powers
assigned to the Administrator hereunder and will be responsible for complying
with all reporting and disclosure requirements of Part I of Subtitle B of Title
I of ERISA.
2.2 "Affiliate" means any of the following for the Company: the Company and
(i) a member of a controlled group of corporations of which the Company is a
member, or (ii) an unincorporated trade or business which is under common
control with the Company as determined in accordance with Code Section 414(c)
and regulations issued thereunder. Subject to Code Section 415(h), a "controlled
group of corporations" shall mean a controlled group of corporations as defined
in Code Section 414(b). The definition of an "Affiliate" of the Purchaser will
be the same, except to the extent of substituting "Purchaser" for "Company" for
purposes of this Definition only.
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<PAGE> 236
2.3 "Annual Rate of Pay" means an Eligible Employee's Compensation
calculated on an annual basis.
2.4 "Claim Form" means the claim form attached as Attachment A or any other
form designated by the Administrator in its sole and absolute discretion to be
completed by an Eligible Employee to claim Severance Benefits under the Plan.
The Administrator in its exclusive discretion shall decide the required content
of the Claim Form and may modify such content as its deems appropriate in its
exclusive discretion from time to time.
2.5 "Change of Control" shall be deemed to have occurred in any of the
following instances:
a. the Company or the Bank is merged or consolidated with another
corporation and as a result of such merger or consolidation less than
fifty percent (50%) of the outstanding voting securities (on a fully
diluted basis) of the surviving or resulting corporation are owned in
the aggregate by the former shareholders of the Company;
b. the Company or the Bank sells all or substantially all of its assets
to another corporation; or
c. there is an acquisition of fifty percent (50%) or more of the
outstanding voting securities of the Company or the Bank pursuant to
any transaction or combination of transactions by any person or group
within the meaning of the Securities Exchange Act of 1934, as amended.
2.6 "Compensation" means the Eligible Employee's base salary or base rate
of pay at his Termination Date, excluding any extraordinary or premium pay such
as shift differentials, bonuses, commissions, incentive payments, benefits, car
allowances, or overtime compensation. The Administrator shall determine the
Eligible Employee's Compensation and its determination shall be binding and
conclusive on all persons.
2.7 "Company" means C B & T, Inc. and its U.S. subsidiaries or any
successor thereto, which elects to continue the Plan.
2.8 "Effective Date of a Change of Control" means the effective date of a
Change of Control, as defined in Section 2.5.
2.9 "Eligible Employee" means an individual who the Administrator
determines to be qualified as an Eligible Employee under the terms and
conditions specified in Article III of the Plan as it shall be amended from time
to time. Only Eligible Employees who satisfy all applicable terms and conditions
of the Plan may receive Severance Benefits.
2
<PAGE> 237
2.10 "Executive Officer" means an individual who is a senior vice president
or above as of October 31, 1997.
2.11 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
2.12 "Independent Contractor" means an individual contracted for a specific
assignment that is of specific duration. A verbal or written contract may be in
effect.
2.13 "Monthly Rate of Pay" means an Eligible Employee's Compensation
calculated on a monthly basis.
2.14 "Part-time Employee" means a person whose work week is regularly
scheduled to be less than thirty hours a week.
2.15 "Plan" means the C B & T, Inc. Employee Severance Pay Plan as set
forth herein, together with any amendments and attachments hereto as shall be
adopted from time to time.
2.16 "Plan Year" means the twelve-month period that begins on each January
1, and ends on the following December 31.
2.17 "Purchaser" means the survivor of any merger, the resulting company of
any consolidation, or the purchaser of stock or assets in a Change in Control as
defined in Section 2.5.
2.18 "Regular Employee" means an individual who (a) was hired by the
Company to perform services as a regular common law employee (whose employment
is not the subject of any type of collective bargaining agreement) on a
full-time basis in a position that the Company expected to be continuous in
nature and who was an employee of the Company on October 31, 1997, (b) who was
continuously employed by the Company from October 31, 1997 until his Termination
Date; (c) who was performing services on a full-time basis as a regular common
law employee of the Company or a Purchaser of the Company on his Termination
Date provided that the Termination Date occurs no later than six (6) months
following the Effective Date of a Change of Control, and (d) who is not a
director of the Company or a Purchaser.
2.19 "Severance Benefits" means the benefits provided under the terms and
conditions specified in Article IV of the Plan.
2.20 "Termination Date" means the date upon which the Company or the
Purchaser designates as the effective date of the Eligible Employee's
termination of employment where such termination of employment with the Company
occurs on or after the Effective Date of a Change of Control.
2.21 "Termination for Cause" means an involuntary termination of employment
based upon an Employee's commission of any of the following:
3
<PAGE> 238
(a) an intentional act of fraud, embezzlement or theft in connection
with his duties or in the course of his employment with the
Company;
(b) intentional damage to property of the Company;
(c) intentional wrongful disclosure of trade secrets or confidential
information of the Company;
(d) willful violation of any law, rule or regulation (other than
traffic violations or similar offenses) or final cease and desist
order;
(e) intentional breach of fiduciary duty owed to the Company
involving personal profit; or
(f) gross misconduct.
2.22 "Termination Upon Natural Disaster" means an involuntary termination
of employment which is caused by the occurrence of a natural disaster outside of
the direct control of the Company (i.e. earthquake, fire, flood, explosion,
bombing, picketing or strike).
2.23 "Temporary Employee" means a person contracted through a temporary
service company, agency, employee leasing company, staffing company, or a person
individually who supplements the work force temporarily, to perform services as
a temporary employee, or is otherwise hired to perform services for the Company
and is not classified on the Company's books as a regular common law employee of
the Company.
2.24 "Years of Service" means the number of complete consecutive 12 month
periods of time for which an Eligible Employee has been on the Company payroll
from his last date of hire to his Termination Date.
2.25 "Weekly Rate of Pay" means an Eligible Employee's Compensation
calculated on a weekly basis.
ARTICLE III - ELIGIBLE EMPLOYEES
An individual will qualify as an Eligible Employee only if the individual
satisfies each of the following conditions:
(a) The individual was employed by the Company or the Purchaser as a
Regular Employee of the Company or the Purchaser on the date the
Company or the Purchaser notified the individual that it was
involuntarily terminating his employment;
(b) The individual was involuntarily terminated from employment with
the Company on or within six (6) months after the Effective Date
of a Change of Control, but not later than October 31, 1999, and
4
<PAGE> 239
for a reason other than: (i) a Termination for Cause; (ii)
Termination Upon Natural Disaster; (iii) termination of
employment with the Company where the individual is immediately
transferred to an Affiliate Company of the Company or the
Purchaser to a similar or equivalent position with no decrease in
base pay; (iv) termination due to the sale of the Company where
the individual is immediately hired by the Purchaser to a similar
or equivalent position with no decrease in base pay;
(c) Prior to the date that the Company notified the individual of his
employment termination the individual did not: (1) voluntarily
terminate employment or notify the Company of his intent or
election to terminate employment at some future date by
resignation (either voluntarily or in lieu of Termination for
Cause), failure to appear for work, or retirement; or (2)
terminate employment upon the expiration of disability leave;
(d) The Employee is either (a) an Officer of the Company as of
October 31, 1997, or (b) a Regular Employee with at least 5 Years
of Service for the Company as of October 31, 1997.
(e) The Administrator determines that the individual satisfies all
other conditions under the Plan required to qualify as an
Eligible Employee and that the individual is not otherwise
disqualified or excluded from eligibility under the terms of the
Plan.
If an individual does not meet these conditions and all other requirements of
the Plan, he will not be entitled to any Severance Benefits under this Plan.
Casual Employees, Independent Contractors, Part-Time Employees and Temporary
Employees are not Regular Employees. This means that, except as provided in
IX(a), Independent Contractors, Temporary Employees, and Part-Time Employees are
not eligible for Severance Benefits.
ARTICLE IV - SEVERANCE BENEFITS
4.1 Requirements for Severance Benefits. The Plan shall pay Severance
Benefits in accordance with this Article IV only to Eligible Employees.
4.2 Amount of Severance Benefits. The amount of Severance Benefits will be
determined in accordance with this Paragraph.
(a) Non-Officer Employees. The amount of the Severance Benefits for
Eligible Employees who are not officers of the Company as of
October 31, 1997, will equal the product of (a) the Weekly Rate
of Pay of the Eligible Employee on his Termination Date,
multiplied by (b) the Year of Service for the Eligible Employee,
up to a maximum Severance Benefit of 10 weeks.
5
<PAGE> 240
(b) Non-Executive Officers. The amount of the Severance Benefits for
Eligible Employees who are officers of the Company, but who are
not Executive Officers of the Company, will be one month
severance pay (according to the Monthly Rate of Pay of the
Employee) for each $10,000.00 of the officer's Annual Rate of Pay
as of the Termination Date with a minimum Severance Benefit of
three times the officer's Monthly Rate of Pay.
(c) Executive Officers. The amount of Severance Benefits for
Executive Officers of the Company (other than the Chief Executive
Officer) shall be equal to the Annual Rate of Pay of the Eligible
Employee as of his Termination Date.
(d) Chief Executive Officer. The Chief Executive Officer is not an
Eligible Employee under this Plan.
ARTICLE V - PAYMENT OF SEVERANCE BENEFITS
Any Severance Benefits payable under the Plan shall be paid as specified in
this Article V of the Plan or in accordance with such other uniform
nondiscriminatory rules as the Administrator, in its exclusive discretion, deems
appropriate.
5.1 Severance Benefits. The Plan will automatically pay the Severance
Benefits, if any, payable to an Eligible Employee on or before the
next regularly scheduled payroll date after the Termination Date of
the Eligible Employee. Severance Benefits shall be paid in a single
lump sum cash payment.
5.2 Processing of Severance Payments. Except as required otherwise by
state or local law, all Severance Benefits shall be processed and paid
on the Company's regular payroll dates.
5.3 Deductions From Severance Benefits. The following items will be
deducted from any Severance Benefits payable under this Plan:
(a) All required Federal, state and local taxes;
(b) To the extent permitted by law, any amounts owed to the Company
by an Eligible Employee;
(c) Any compensation or other payments that the Eligible Employee
receives (or may be entitled to receive) on termination of
employment pursuant to any rights or entitlement that the
Eligible Employee possesses or asserts pursuant to a written or
oral employment agreement with the Company or any successor
thereto, regardless of whether the term of such agreement is
expired or unexpired as of the Eligible Employee's Termination
Date; and
6
<PAGE> 241
(d) Any compensation or other payments that the Eligible Employee
receives (or may be entitled to receive) on termination of
employment pursuant to any rights under any severance plan of
Purchaser.
By acceptance of any Severance Benefits from the Plan the Eligible Employee
shall be deemed to have agreed to adhere to all terms of the Plan. The Eligible
Employee also shall be deemed to agree that the Eligible Employee will repay any
Severance Benefits that the Administrator determines he has received from the
Plan in excess of the amount provided under the Plan.
5.4 Severance Benefits Are Not Compensation for Other Benefits. Severance
Benefits are not considered as covered compensation for benefit plan purposes.
The number of weeks of Severance Benefits provided to an Eligible Employee shall
not be considered in calculating the Eligible Employee's entitlement, if any, to
vacation, sick leave, bonus, incentive compensation, retirement or other
benefits except as is specifically provided in the Company's other employee
benefit plans. In addition, except as required by law, all employee benefits
cease as of the Eligible Employee's Termination Date.
5.5 Payment after Death. If an Eligible Employee dies before Severance
Benefits have been paid in full, the remaining Severance Benefits will be paid
to the Participant's estate. The Plan shall be discharged fully and completely
to the extent of any payment made to any such estate.
5.6 Release. The Administrator, in his sole and absolute discretion, may
require an Eligible Employee to sign a Release, in a form prescribed by the
Company, that releases all claims that the Eligible Employee may have, whether
known or unknown, arising out of or related to his employment with the Company
or the Purchaser, including claims arising out of Title VII of the Civil Rights
Act of 1964, as amended, the Age Discrimination in Employment Act, the Americans
with Disabilities Act, the Equal Pay Act, and any and all State and Federal
statutes concerning employment. In the event that an Eligible Employee does not
execute such a Release within forty-five days of receipt of such Release, the
Administrator shall not pay any Severance Benefits to the otherwise Eligible
Employee; further, the Administrator shall withhold any Severance Benefits until
such Release has been executed and until any revocation period for the Release
has expired.
ARTICLE VI - CLAIMS AND APPEAL PROCEDURES
Severance Benefits payable under this Plan shall be paid automatically on
or before the next regularly scheduled payroll date after the period in
paragraph 5.6 has expired. In the event an employee fails to receive a Severance
Benefit to which he believes he is entitled, he must make a claim for Severance
Benefits in writing to the Administrator describing the claim and asking the
Administrator to rule on the claim's validity under the terms of the Plan. With
respect to any claim for the requested Severance Benefits, the Administrator
will then issue a decision on whether the claim is denied or granted within 90
days after receiving the claim, unless special circumstances require an
extension of time for processing the claim, in which case a decision will be
7
<PAGE> 242
rendered not later than 180 days after receipt of the claim. Written notice of
the extension will be furnished to the employee prior to the expiration of the
initial 90 day period and will indicate the special circumstances requiring an
extension of time for processing the claim and will indicate the date the
Administrator expects to render its decision. If the claim is denied in whole or
in part, the decision in writing by the Administrator must include the specific
reasons for the denial and reference to the Plan provisions on which the denial
is based. The decision must also include a description of any additional
information which the employee needs to submit in order to refile the claim,
along with an explanation of why such additional information is necessary and
how the procedure for reviewing claims works. If the notice of denial is not
furnished in accordance with the above procedure, the claim shall be deemed
denied and the employee is permitted to proceed with the review procedure.
If his claim is denied in whole or in part, an employee may appeal in
writing a denial of the claim, in part or in whole, and request a review by the
Administrator. The appeal must be submitted within 60 days after notice of the
denial of the claim. The employee may request in writing to review copies of
pertinent Plan documents in connection with the appeal. The Administrator will
review the appeal and notify the employee of the final decision within 60 days
after receiving the request for review (unless the Administrator requires an
extension due to special circumstances, in which case the final decision will be
made within 120 days after the Administrator receives the request for review).
The notice of the final decision must include the specific reasons for the
decision and specific references to the pertinent Plan provisions on which the
Administrator's decision is based. If the employee is dissatisfied with the
Administrator's review decision, the employee has the right to file suit.
A deceased employee's beneficiary should follow the same claims procedure
in the event of the employee's death.
ARTICLE VII - PLAN ADMINISTRATION
7.1 In General. The general administration of the Plan and the duty to
carry out its provisions shall be vested in the Administrator, which shall be
the named fiduciary of the Plan for purposes of ERISA. The Plan and Severance
Benefits under the Plan shall be administered by the Administrator appointed
from time to time by the Company. The Administrator may, in its discretion,
secure the services of other parties, including agents and/or employees to carry
out the day-to-day functions necessary to an efficient operation of the Plan.
The Administrator shall have the exclusive right to interpret the terms of the
Plan, to determine eligibility for coverage and benefits, and to make such other
determinations and to exercise such other powers and responsibilities as shall
be provided for in the Plan or shall be necessary or helpful with respect
thereto and its good faith interpretation shall be binding and conclusive upon
all persons.
7.2 Reimbursement and Compensation. The Administrator shall receive no
compensation for its services as Administrator, but it shall be entitled to
reimbursement for all sums reasonably and necessarily expended by it in the
performance of such duties.
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<PAGE> 243
7.3 Rulemaking Powers. The Administrator shall have the power to make
reasonable rules and regulations required in the administration of the Plan, to
make all determinations necessary for the Plan's administration, except those
determinations which the Plan requires others to make, and to construe and
interpret the Plan wherever necessary to carry out its intent and purpose and to
facilitate its administration. The Administrator and the Company, with respect
to all duties assigned to such entities hereunder, shall have the exclusive
right to interpret the terms of the Plan and determine eligibility for coverage
and benefits under the Plan and its good faith interpretation shall be binding
and conclusive on all persons. In the exercise of such discretionary powers, the
Administrator shall treat all similarly-situated Eligible Employees uniformly
and equitably under the Plan. No action may be brought for benefits under the
Plan until a claim has been submitted and the appeal rights under the Plan have
been exhausted.
ARTICLE VIII - AMENDMENT AND TERMINATION
This Plan will terminate automatically, and without any action by the Board
of Directors of the Company or the Administrator, if there has been no Change of
Control of the Company by October 31, 1999. After October 31, 1999, the Company,
acting through its Chief Executive Officer or such other person or committee
appointed by its Board of Directors, reserves the right to amend or terminate
the Plan at any time, without the consent of any person or entity. Such
amendment or termination shall not affect benefits to which an Eligible Employee
who has already been terminated may be entitled to under the Plan prior to such
amendments or termination.
ARTICLE IX - MISCELLANEOUS INFORMATION
9.1 Limitation of Rights. Neither the establishment of the Plan nor any
amendment thereof, nor the payment of any benefits, will be construed as giving
to any Eligible Employee, or other person any legal or equitable right against
the Company or any person acting on behalf of the Company, except as expressly
provided herein. Likewise, nothing appearing in or done pursuant to the Plan
shall be held or construed to create a contract of employment with any Eligible
Employee, to obligate the Company to continue the service of the Eligible
Employee or to affect or modify his or her terms of employment in any way.
9.2 Governing Law. The provisions of the Plan shall be construed, enforced
and administered according to ERISA and any otherwise applicable Federal law
and, to the extent not preempted by Federal law, the laws of the State of
Tennessee.
9.3 Severability. If any provision of the Plan is held invalid or
unenforceable, its validity or unenforceability shall not affect any other
provisions of the Plan, and the Plan shall be construed and enforced as if such
provision had not been included herein.
9.4 Captions. The captions contained herein are inserted only as a matter
of convenience and for reference and in no way define, limit, enlarge or
describe the scope or intent of the Plan, nor in any way shall affect the Plan
or the construction of any provision thereof.
9
<PAGE> 244
9.5 Gender and Numbers. A pronoun or adjective in the masculine or feminine
gender include both genders, and the singular includes the plural, and vice
versa, unless the context clearly indicates otherwise.
9.6 Spendthrift Provision. No benefit, right or interest of any person
hereunder shall be subject to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge, seizure, attachment or legal,
equitable or other process or be liable for, or subject to, the debts,
liabilities or other obligations of such persons, except as otherwise required
by law.
9.7 Mistaken Payments. Any amounts paid to a Eligible Employee or other
person in excess of the amount to which he is entitled hereunder shall be repaid
by the Eligible Employee or other person promptly following receipt by the
Eligible Employee or other person of a notice of such excess payments. In the
event such repayment is not made by the Eligible Employee or other person, such
repayment shall be made, at the discretion of the Administrator, either by
reducing or suspending future payments hereunder to the Eligible Employee or
other person, or by requiring an assignment of a portion of the Eligible
Employee or other person's earnings, until the amount of such excess payments
are recovered by the Administrator.
9.8 Information Requested. Eligible Employee or other persons shall provide
the Company, the Administrator, and their authorized representatives with such
information and evidence, and shall sign such documents, as may reasonably be
requested from time to time for the purpose of administration of the Plan.
C B & T, Inc.
By: /s/ Jeffrey A. Golden
-----------------------------------
Its: Chairman, President & CEO
10
<PAGE> 245
Attachment ___ to the C B & T, Inc.
Employee Severance Pay Plan
C B & T, Inc.
EMPLOYEE SEVERANCE PAY PLAN
CLAIM FORM
Name of Plan: C B & T, Inc. Employee Severance Pay Plan
THIS CLAIM FORM MUST BE RETURNED
WITHIN THIRTY (30) WORKING DAYS OF YOUR DATE OF TERMINATION
As explained in the C B & T, Inc., Employee Severance Pay Plan and Summary
Plan Description, you may make a claim for Severance Benefits by completing and
signing this form. If you apply for Severance Benefits and the Administrator
determines that you otherwise satisfy the requirements to qualify for those
benefits and approves your application, you will receive Severance Benefits
pursuant to the terms of the C B & T, Inc. Severance Pay Plan. To make a claim
for Severance Benefits, return the completed form to the Administrator, c/o
Human Resources Department of C B & T, Inc., 101 E. Main Street, McMinnville, TN
37110, within thirty (30) days of your Termination Date.
I have read the C B & T, Inc. Employee Severance Pay Plan Summary Plan
Description, and I understand my rights under it. I understand that my claim for
Severance Benefits under the Plan will be reviewed by the Administrator and that
approval of my application for Severance Benefits will be granted or denied
based on the terms of the C B & T, Inc. Employee Severance Pay Plan.
Your signature:
----------------------------
Your Printed Name:
----------------------------
Date:
----------------------------
Address:
----------------------------
Telephone:
----------------------------
- --------------------------------------------------------------------------------
Received by Administrator:_________________________Date:__________Time:_________
Severance Claim, check only ONE:_____________Approved _____________Disapproved
By:
--------------------------
Manager Human Resources
Severance Date:
----------------------
Reason for Disapproval (if applicable):
--------------------------------------
11
<PAGE> 246
EXHIBIT 21
<TABLE>
<CAPTION>
CB&T, INC.
SUBSIDIARIES OF THE REGISTRANT
Legal Name of Subsidiary
Principal Trade Name(s) Used State of Organization Type of Entity Percentage Owned
- ---------------------------- --------------------- -------------- ----------------
<S> <C> <C> <C>
City Bank & Trust Company Tennessee Corporation 100%
City Bank & Trust
CBT Realty, Inc. Tennessee Corporation 100%
CBT Realty
CBT Insurance, Inc. Tennessee Corporation 100%
CBT Insurance
</TABLE>
<PAGE> 247
APPENDIX D
ALEX SHESHUNOFF & CO.
INVESTMENT BANKING
January 6, 1998
Board of Directors
CB & T, Inc.
101 East Main Street
McMinnville, TN 37110
Members of the Board:
We understand that CB & T, Inc. McMinnville, Tennessee ("CB & T") and Union
Planters Corporation, Memphis, Tennessee ("Union Planters") entered into a Plan
of Merger and Merger Agreement (the "Agreement"), which provides, among other
things, for the acquisition of all of the capital stock of CB & T by means of a
merger of CB & T with and into Union Planters (the "Merger"). Pursuant to the
Agreement, at the Effective Time, each share of CB & T Common Stock, issued and
outstanding, except for Dissenting Shares, shall be converted into and exchanged
for the right to receive $360.00 worth of Union Planters Common Stock determined
using the average of the closing prices of such stock on the New York Stock
Exchange for the ten trading days immediately preceding the date the Agreement
is executed (the "Exchange Ratio"). Pursuant to the Union Planters Rights
Agreement, each share of Union Planters Common Stock issued in connection with
the Merger shall be accompanied by a Union Planters Right. The Exchange Ratio is
subject to possible adjustment as provided for in the Agreement.
You requested our opinion, as to whether the Exchange Ratio is fair from a
financial point of view to the holders of CB & T's Common Stock.
In connection with our opinion, we: (i.) reviewed a draft of the Agreement;
(ii.) reviewed certain publicly available financial statements and other
information of CB & T and Union Planters, respectively; (iii.) reviewed certain
internal financial statements and other financial and operating data concerning
CB & T provided to us by its management; (iv.) analyzed certain budget and
financial projections of CB & T prepared by its management; (v.) analyzed
certain publicly available financial analyses and projections of Union Planters
provided by independent banking industry securities analysts; (vi.) reviewed the
reported prices and share trading activity for Union
<PAGE> 248
Board of Directors
CB & T, Inc.
January 6, 1998
Page 2
Planters Common Stock; (vii.) discussed the past and current operations,
financial condition, and future prospects of CB & T with its executive
management; (viii.) compared CB & T and Union Planters from a financial point of
view with certain other banking companies that we deemed to be relevant; (ix.)
reviewed the financial terms, to the extent publicly available, of certain
comparable merger transactions nationally, in the Southeastern United States and
in Tennessee, and; (x) performed such other analyses and reviews as we deem
appropriate.
We assumed and relied upon, without independent verification, the accuracy and
completeness of the information supplied or otherwise made available to us by CB
& T and Union Planters for the purposes of this opinion. Where appropriate, we
used information from publicly available sources that we believe to be reliable,
however, we cannot guarantee the accuracy or completeness of such information.
We are not experts in legal and tax matters which may impact the Merger, and
have relied upon the opinion of CB & T's counsel and accountants with respect to
such matters.
We did not make an independent evaluation of the assets or liabilities of CB &
T, nor have we been furnished with any such appraisals. We did not perform an
independent due diligence review of Union Planters but reviewed and relied upon
publicly available information on Union Planters. With respect to budgets and
financial forecasts, we assumed that they were reasonably prepared and reflect
the best currently available estimates and judgments of management of CB & T, as
to the future financial performance of CB & T, and we assumed such forecasts and
projections will be realized in the amounts and at the times contemplated
thereby. We have further assumed that in the course of obtaining the necessary
regulatory and third party consents for the Merger, no restriction will be
imposed that will have a material adverse effect on the contemplated benefits of
the Merger or the transactions contemplated thereby, and that the Merger will be
consummated in accordance with the terms of the Agreement, without any
amendments to, and without any waiver by CB & T of, any of the material
conditions to its obligations thereunder.
We are not experts in the evaluation of loan portfolios for the purpose of
assessing the adequacy of the allowance for losses with respect thereto and
assumed that such allowances for each of the companies are in the aggregate,
adequate to cover such losses. In addition, we did not review any individual
credit files or make an independent evaluation, appraisal or physical inspection
of the assets or individual properties of CB & T or Union Planters, nor were we
furnished with any such evaluations or appraisals.
Our opinion is necessarily based on economic, market and other conditions as in
effect on, and the information made available to us as of the date hereof.
Events occurring after the date hereof could materially affect the assumptions
used in preparing this opinion. We assumed that there are no material changes in
CB & T's or Union Planters' assets, financial condition, results of
<PAGE> 249
Board of Directors
CB & T, Inc.
January 6, 1998
Page 3
operations, business or prospects since the respective dates of their last
financial statements reviewed by us, and that off-balance sheet activities of CB
& T and Union Planters will not materially impact the future financial position
or results of operation of CB & T and Union Planters. We assumed the Merger will
be completed as set forth in the draft Agreement and that no material changes
will be made or restrictions imposed by regulatory or other parties on the terms
of the Agreement.
Our opinion is limited to the fairness, from a financial point of view, to the
holders of CB & T's Common Stock of the Exchange Ratio and does not address CB &
T's underlying business decision to undertake the Merger. Moreover, this letter,
and the opinion expressed herein, do not constitute a recommendation to any
shareholder as to any approval of the Merger or the Agreement. It is understood
that this letter is for the information of the Board of Directors of CB & T and
may not be used for any other purpose without our prior written consent, except
that this opinion may be included in its entirety in any filing made by CB & T
or Union Planters with the Securities and Exchange Commission with respect to
the Merger.
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the Exchange Ratio is fair from a financial point of view to CB & T's
common shareholders.
Very truly yours,
/S/ ALEX SHESHUNOFF & CO.
INVESTMENT BANKING
ALEX SHESHUNOFF & CO.
INVESTMENT BANKING
<PAGE> 250
[ALEX SHESHUNOFF & CO. LETTERHEAD]
May 27, 1998
Board of Directors
C B & T, Inc.
101 East Main Street
McMinnville, Tennessee 37110
Members of the Board:
You have requested a confirmation of our January 6, 1998 opinion as to the
fairness, from a financial point of view, to the holders of the outstanding
shares of common stock of CB&T, Inc. ("CBT"), of the consideration (the "Merger
Consideration") to be received by such holders pursuant to the Agreement and
Plan of the Merger dated as of January 6, 1998 (the "Merger Agreement"), which
provides for the merger (the "Merger") of CBT with and into Union Planters
Holding Corporation, a wholly-owned subsidiary of Union Planters Corporation
("UPC"). Pursuant to section 3.1 of the Merger Agreement, each shareholder of
the outstanding common stock of CBT (the "CBT Common Stock") has a right to
receive 5.488 shares of common stock of UPC (the "UPC Common Stock").
It is our opinion that no material changes have occurred to alter our January 6,
1998 opinion that the consideration to be received by CBT's shareholders is fair
from a financial point of view. As such, we are of the opinion that the Merger
Consideration is fair, from a financial point of view, to the holders of CBT
common stock as of May 26, 1998.
Respectfully submitted,
/s/ ALEX SHESHUNOFF & CO.
INVESTMENT BANKING
ALEX SHESHUNOFF & CO.
INVESTMENT BANKING
<PAGE> 251
APPENDIX E
CHAPTER 23
DISSENTERS' RIGHTS
<TABLE>
<CAPTION>
SECTION SECTION
<S> <C> <C> <C>
PART 1--RIGHT TO DISSENT AND 48-23-203. Dissenters' notice.
OBTAIN PAYMENT FOR SHARES 48-23-204. Duty to demand payment.
48-23-205. Share restrictions.
48-23-101. Definitions. 48-23-206. Payment.
48-23-102. Right to dissent. 48-23-207. Failure to take action.
48-23-103. Dissent by nominees and beneficial 48-23-208. After-acquired shares.
owners. 48-23-209. Procedure if shareholder dissatisfied
with payment or offer.
PART 2--PROCEDURE FOR EXERCISE OF
DISSENTERS' RIGHTS PART 3--JUDICIAL APPRAISAL OF SHARES
48-23-201. Notice of dissenters' rights. 48-23-301. Court action.
48-23-202. Notice of intent to demand payment. 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> 252
(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> 253
(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> 254
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> 255
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.]
