<PAGE> 1
As filed with the Securities and Exchange Commission on November 23, 1998
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT UNDER
The Securities Act of 1933
UNION PLANTERS CORPORATION
(Exact Name of Registrant as Specified in its Charter)
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TENNESSEE 6712 62-0859007
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
Incorporation or Organization) Classification Code Number)
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7130 GOODLETT FARMS PARKWAY
MEMPHIS, TENNESSEE 38018
(901) 580-6000
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
E. JAMES HOUSE, JR., ESQ.
SECRETARY AND MANAGER OF THE LEGAL DEPARTMENT OF
UNION PLANTERS CORPORATION
7130 GOODLETT FARMS PARKWAY
MEMPHIS, TENNESSEE 38018
(901) 580-6495
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
WITH COPIES TO:
ANN W. LANGSTON, ESQ. VIRGINIA B. WILSON, ESQ.
Gerrish & McCreary, P.C. Wyatt, Tarrant & Combs
700 Colonial Road 6075 Poplar Avenue
Suite 200, Suite 650
Memphis, Tennessee 38117 Memphis, Tennessee 38119
(901) 767-0900 (901) 537-2164
-----------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If the securities being registered on this form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. | |
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. | |
If this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. | |
CALCULATION OF REGISTRATION FEE
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<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
TITLE OF EACH Proposed Proposed
CLASS OF Maximum Offering Maximum
SECURITIES Amount Price Aggregate Amount of
TO BE To Be per share(2) Offering Registration
REGISTERED Registered(1) Price(2) Fee
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stock, $5.00 par 907,301 shares $20.51 $18,611,000 $5,173.86
value per share (and associated (with Preferred
Preferred Share Rights) Share Rights)
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</TABLE>
(1) This Registration Statement covers the maximum number of shares of
common stock of the Registrant which is expected to be issued in
connection with the merger described herein.
(2) Estimated solely for the purpose of calculating the Registration Fee
and based, pursuant to Rule 457(f)(2) under the Securities Act of
1933, as amended, on the book value per share of the Common stock of
FSB, Inc. as of the latest practicable date prior to the filing of
this Registration Statement.
DELAYING AMENDMENT
The Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE> 2
FSB, INC.
103 E. PLEASANT AVENUE
COVINGTON, TENNESSEE 38019-2531
November __, 1998
Dear Shareholder:
You are cordially invited to attend a special meeting of shareholders of
FSB, Inc. to be held at 10:00 A.M., local time, on December 29, 1998 at 103
East Pleasant Avenue, Covington, Tennessee 38019. At the special meeting, you
will be asked to vote on a proposal to approve an Agreement and a related Plan
of Merger (the "Agreement" and the "Plan of Merger") between FSB and Union
Planters Corporation ("Union Planters"). The Agreement and the Plan of Merger
provide for the merger of FSB and Union Planters Holding Corporation, a
wholly-owned subsidiary of Union Planters. As a result of the merger, each
outstanding share of FSB common stock will be converted into 1.61 shares of
Union Planters common stock and associated Preferred Share Rights (as defined
in the accompanying proxy statement-prospectus). Cash (without interest) will
be paid in lieu of the issuance of fractional shares of Union Planters common
stock. THE ACCOMPANYING PROXY STATEMENT-PROSPECTUS CONTAINS DETAILED
INFORMATION ABOUT THE PROPOSED MERGER.
YOU SHOULD READ IT CAREFULLY.
The closing price of Union Planters common stock on the New York Stock
Exchange on November 18, 1998 was $48.00. If the merger had been consummated on
that date the value of the Union Planters shares to be received for each share
of FSB common stock, based on the closing price of Union Planters common stock
on November 18, 1998, would have been $77.28 per share.
AFTER CAREFUL CONSIDERATION, YOUR BOARD OF DIRECTORS UNANIMOUSLY APPROVED
THE AGREEMENT AND THE RELATED PLAN OF MERGER. THE BOARD BELIEVES THE MERGER IS
IN THE BEST INTERESTS OF FSB AND ITS SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS
THAT YOU VOTE FOR APPROVAL OF THE AGREEMENT AND THE RELATED PLAN OF MERGER. THE
REASONS FOR THE BOARD OF DIRECTORS' RECOMMENDATION ARE STATED IN THE
ACCOMPANYING PROXY STATEMENT-PROSPECTUS. FURTHERMORE, FSB'S FINANCIAL ADVISOR,
MERCER CAPITAL MANAGEMENT, INC., HAS ISSUED ITS OPINION TO THE EFFECT THAT THE
EXCHANGE RATIO OF UNION PLANTERS COMMON STOCK FOR FSB COMMON STOCK IN THE
MERGER IS FAIR, FROM A FINANCIAL POINT OF VIEW, TO FSB'S SHAREHOLDERS.
The merger presents an opportunity for holders of FSB common stock to join
on favorable terms in a combined enterprise with greater financial resources
and a more geographically diversified business. As a result of the proposed
merger, you, as a new shareholder of Union Planters, will own common stock in a
bank holding company whose shares are actively traded on the New York Stock
Exchange.
We urge you to read the enclosed materials carefully so that you can
evaluate the merger for yourself.
All shareholders are invited to attend the special meeting in person.
However, in order to ensure that your shares will be represented at the special
meeting, please date, sign and promptly return the enclosed proxy card in the
enclosed postage paid envelope, whether or not you plan to attend the special
meeting. If you attend the special meeting in person, you may, if you wish,
vote personally on all matters brought before the special meeting.
Very truly yours,
------------------------------------
Theodore B. Sloan
Chairman and Chief Executive Officer
YOUR VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR PROXY
<PAGE> 3
PROXY STATEMENT
FOR THE SPECIAL MEETING PROSPECTUS
OF SHAREHOLDERS OF UNION PLANTERS CORPORATION
FSB, INC.
The board of directors of FSB, Inc. has unanimously approved a merger of
FSB into Union Planters Holding Corporation, a wholly-owned subsidiary of Union
Planters Corporation. Union Planters Corporation is a multi-state bank holding
company headquartered in Memphis, Tennessee. In the proposed merger, Union
Planters will issue shares of Union Planters common stock in exchange for
shares of FSB common stock. At the special meeting, we will ask FSB
shareholders to approve the merger, and the agreement and related plan of
merger, which set out the terms of the merger. We cannot complete the merger
unless FSB shareholders approve it.
In the proposed merger, you will receive 1.61 shares of Union Planters
common stock for each of your shares of FSB common stock. If the exchange
results in your owning any fraction of a share of Union Planters common stock,
you will receive cash (without interest) instead of stock for that fraction.
Union Planters common stock is traded on the New York Stock Exchange under the
symbol "UPC." Based on the closing price of Union Planters common stock on
November 18, 1998, and the 1.61 exchange ratio, you will receive shares of
Union Planters common stock having a market value of $77.28 for each share of
FSB common stock. The market value of the Union Planters stock you will receive
in the merger will go up or down depending on the market price of Union
Planters common stock.
This proxy statement-prospectus provides you with detailed information
about the proposed merger. In addition, you may obtain information about Union
Planters from documents filed with the Securities and Exchange Commission. We
encourage you to read carefully this entire document and the other documents
that we refer you to in this document.
The term "Union Planters" as used in this proxy statement-prospectus,
refers to Union Planters Corporation and its subsidiaries, and the term "FSB"
as used in this proxy statement-prospectus refers to FSB, Inc. and its
subsidiaries.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE SHARES OF UNION PLANTERS COMMON
STOCK TO BE ISSUED IN THE MERGER OR DETERMINED IF THIS PROXY
STATEMENT-PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
SHARES OF UNION PLANTERS COMMON STOCK 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.
The date of this proxy statement-prospectus is November __, 1998. It is
first being mailed to shareholders on November ___, 1998.
<PAGE> 4
FSB, INC.
103 E. PLEASANT AVENUE
COVINGTON, TENNESSEE 38019-2531
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To The Shareholders of FSB, Inc.:
FSB, Inc. will hold a special meeting of shareholders at 103 East Pleasant
Avenue, Covington, Tennessee 38019 on Tuesday, December 29, 1998 at 10:00
A.M.., local time, to vote on:
1. The Agreement and Plan of Merger, dated as of August 4, 1998, between
FSB, Union Planters Corporation, and Union Planters Holding Corporation, a
wholly-owned subsidiary of Union Planters. The terms of the Agreement and the
related Plan of Merger call for the merger of FSB into Union Planters Holding
Corporation.
2. Any other matters that properly come before the special meeting or any
adjournment or postponement of the special meeting.
DISSENTING SHAREHOLDERS WHO COMPLY WITH THE PROCEDURES REQUIRED BY THE
TENNESSEE BUSINESS CORPORATION ACT WILL BE ENTITLED TO RECEIVE PAYMENT OF THE
FAIR CASH VALUE OF THEIR SHARES. WE HAVE ATTACHED A COPY OF THIS LAW AS AN
APPENDIX TO THE ACCOMPANYING PROXY STATEMENT-PROSPECTUS. FSB SHAREHOLDERS
CONSIDERING THE EXERCISE OF THEIR DISSENTERS' RIGHTS SHOULD CAREFULLY REVIEW
THESE MATERIALS AND INFORMATION BEFORE VOTING AT THE SPECIAL MEETING.
All shareholders are invited to attend the special meeting in person.
However, in order to ensure that your shares will be represented at the special
meeting, please date, sign and promptly return the enclosed proxy card in the
enclosed postage-paid envelope, whether or not you plan to attend the special
meeting. If you do not return your card, the effect will be a vote against the
merger. Your proxy may be revoked by notice to the Secretary of FSB at any time
prior to the vote at the special meeting or by delivery of a later-dated proxy.
If you attend the special meeting in person, you may withdraw your proxy and
vote personally on all matters brought before the special meeting.
By Order of the Board of Directors.
-----------------------------------
Theodore B. Sloan
Chairman of the Board
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
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Page
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SUMMARY ........................................................................ 1
The Companies ............................................................. 1
The Merger ................................................................ 2
What FSB Shareholders Will Receive in the Merger .......................... 2
Ownership of Union Planters After the Merger .............................. 3
Dissenters' Rights ........................................................ 3
Certain Federal Income Tax Consequences of the Merger ..................... 3
Comparative Market Prices of Common Stock ................................. 4
Our Reasons for the Merger ................................................ 4
Fairness Opinion of FSB's Financial Advisor ............................... 4
Special Meeting of FSB Shareholders ....................................... 5
Voting Rights at the Special Meeting ...................................... 5
Our Recommendation to Shareholders ........................................ 5
Shareholder Vote Required to Approve the Merger ........................... 5
Share Ownership of Management and Certain Shareholders .................... 6
Interests of Certain Persons in the Merger That May Be Different From Yours 6
Effective Time ............................................................ 6
Exchange of Stock Certificates ............................................ 6
Termination Fee Agreement ................................................. 7
Regulatory Approval and Other Conditions .................................. 7
Waiver, Amendment, and Termination ........................................ 7
Accounting Treatment ...................................................... 8
Certain Differences in Shareholders' Rights ............................... 8
Historical and Pro Forma Comparative Per Share Data ....................... 9
Selected Financial Data ................................................... 11
INTRODUCTION ................................................................... 15
SPECIAL MEETING OF FSB SHAREHOLDERS ............................................ 15
Date, Place, Time and Purpose ............................................. 15
Record Date, Voting Rights, Required Vote, and Revocability Of Proxies .... 15
Solicitation of Proxies ................................................... 17
Dissenters' Rights ........................................................ 17
Recommendation ............................................................ 20
DESCRIPTION OF TRANSACTION ..................................................... 20
General ................................................................... 20
Certain Federal Income Tax Consequences of the Merger ..................... 21
Background of and Reasons for the Merger .................................. 24
Opinion of FSB's Financial Advisor ........................................ 26
Effective Time of the Merger .............................................. 32
Distribution of Union Planters Stock Certificates ......................... 32
Termination Fee Agreement ................................................. 33
Conditions to Consummation of the Merger .................................. 34
Regulatory Approval ....................................................... 35
Waiver, Amendment, and Termination ........................................ 36
Conduct of Business Pending the Merger .................................... 37
Management and Operations After the Merger ................................ 37
Interests of Certain Persons in the Merger ................................ 38
Accounting Treatment ...................................................... 39
Expenses and Fees ......................................................... 40
Resales of Union Planters Common Stock .................................... 40
EFFECT OF THE MERGER ON RIGHTS OF SHAREHOLDERS ................................. 42
Anti-Takeover Provisions Generally ........................................ 42
</TABLE>
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Authorized Capital Stock ............................................... 43
Preemptive Rights ...................................................... 44
Amendment of Charter and Bylaws ........................................ 44
Classified Board of Directors and Absence of Cumulative Voting ......... 45
Director Removal and Vacancies ......................................... 46
Limitations on Director Liability ...................................... 47
Indemnification ........................................................ 47
Special Meeting of Shareholders ........................................ 49
Actions by Stockholders Without a Meeting .............................. 49
Shareholder Nominations and Proposals .................................. 49
Business Combinations .................................................. 50
Limitations on Ability to Vote Stock ................................... 53
Dissenters' Rights of Appraisal ........................................ 54
Shareholders' Rights to Examine Books and Records ...................... 54
Dividends .............................................................. 54
COMPARATIVE MARKET PRICES AND DIVIDENDS ..................................... 55
BUSINESS OF FSB, INC ........................................................ 57
General ................................................................ 57
Competition ............................................................ 57
Properties ............................................................. 57
Bank Lending ........................................................... 57
Loan "Watch List" ...................................................... 58
Investment Activities .................................................. 58
Legal Proceedings ...................................................... 58
Beneficial Ownership of FSB Common Stock ............................... 59
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF FSB, INC. AND SUBSIDIARY ................................. 60
Results of Operations .................................................. 60
Provision for Possible Loan Losses ..................................... 64
Capital Resources, Liquidity and Financial Condition ................... 65
Interest Rate Sensitivity Gaps ......................................... 67
Investment Securities .................................................. 68
Deposits ............................................................... 68
Loans .................................................................. 69
Reserve for Bad Debts and Risk Elements ................................ 69
Nonaccrual, Past Due and Restructured Loans ............................ 70
Return on Equity and Assets ............................................ 70
BUSINESS OF UNION PLANTERS .................................................. 71
General ................................................................ 71
Recent Developments .................................................... 72
CERTAIN REGULATORY CONSIDERATIONS ........................................... 75
General ................................................................ 75
Payment of Dividends ................................................... 78
Capital Adequacy ....................................................... 79
Support of Subsidiary Institutions ..................................... 80
Prompt Corrective Action ............................................... 81
DESCRIPTION OF UNION PLANTERS CAPITAL STOCK ................................. 83
Union Planters Common Stock ............................................ 84
</TABLE>
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Union Planters Preferred Stock ......................................... 85
OTHER MATTERS ............................................................... 86
SHAREHOLDER PROPOSALS ....................................................... 86
EXPERTS ..................................................................... 86
OPINIONS .................................................................... 86
WHERE YOU CAN FIND MORE INFORMATION ......................................... 87
</TABLE>
iii
<PAGE> 8
HOW TO OBTAIN ADDITIONAL INFORMATION
THIS PROXY STATEMENT-PROSPECTUS INCORPORATES IMPORTANT BUSINESS AND
FINANCIAL INFORMATION ABOUT UNION PLANTERS THAT IS NOT INCLUDED IN OR DELIVERED
WITH THIS DOCUMENT. YOU CAN OBTAIN FREE COPIES OF THIS INFORMATION BY WRITING
OR CALLING:
FOR UNION PLANTERS DOCUMENTS: FOR FSB DOCUMENTS
E. James House, Jr. T.B. Sloan
Secretary and Manger of the Legal Department Chairman and CEO
Union Planters Corporation FSB, Inc.
7130 Goodlett Farms Parkway P. O. Box 808
Memphis, Tennessee 38018 Covington, Tennessee 38019-0808
Telephone (901) 580-6584 Telephone (901) 475-5000
IN ORDER TO OBTAIN TIMELY DELIVERY OF THE DOCUMENTS, YOU MUST REQUEST
THE INFORMATION BY DECEMBER ____, 1998.
PLEASE NOTE
We have not authorized anyone to provide you with any information
other than the information included in this document and the documents we refer
you to. If someone provides you with other information, please do not rely on
it as being authorized by us.
This proxy statement-prospectus has been prepared as of _________,
1998. There may be changes in the affairs of Union Planters or FSB since that
date which are not reflected in this document.
A WARNING ABOUT FORWARD-LOOKING STATEMENTS
This document contains forward-looking statements about Union
Planters and FSB and about Union Planters following the merger and other
acquisitions by Union Planters. These statements can be identified by our use
of words like "expect," "may," "could," "intend," "project," "estimate" or
"anticipate." These forward-looking statements reflect our current views, but
they are based on assumptions and are subject to risks, uncertainties and other
factors. These factors include the following:
(1) expected cost savings from the merger and the other acquisitions
cannot be fully realized;
(2) deposit attrition, customer loss, or revenue loss following the
merger and the other acquisitions is greater than expected;
(3) competitive pressure in the banking industry increases significantly;
iv
<PAGE> 9
(4) costs or difficulties related to the integration of the businesses of
Union Planters and the institutions to be acquired are greater than
expected;
(5) changes in the interest rate environment reduce margins;
(6) general economic conditions, either nationally or regionally, are
less favorable than expected, resulting in, among other things, a
deterioration in credit quality;
(7) changes occur in the regulatory environment;
(8) changes occur in business conditions and inflation;
(9) changes occur in the securities markets; and
(10) disruptions of the operations of Union Planters, FSB or any of their
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-prospectus have not been examined or compiled by the independent
public accountants of Union Planters and FSB, nor have our independent
accountants applied any procedures to our estimates. 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
Union Planters after the merger and the other acquisitions is included in the
Securities and Exchange Commission filings incorporated by reference in this
proxy statement-prospectus.
v
<PAGE> 10
SUMMARY
This summary highlights selected information from this proxy
statement-prospectus and may not contain all of the information that is
important to you. You should carefully read this entire document and the other
documents we refer to in this document. These will give you a more complete
description of the transaction we are proposing. For more information about
Union Planters, see "WHERE YOU CAN FIND MORE INFORMATION" on page ___. We have
included page references in this summary to direct you to a more complete
description of the topics provided elsewhere in this proxy
statement-prospectus.
THE COMPANIES (SEE PAGE 57 FOR FSB, PAGE 71 FOR UNION PLANTERS)
FSB, Inc.
103 East Pleasant Avenue
Covington, Tennessee 38019
(901) 475-5000
FSB is a registered bank holding company incorporated in Tennessee.
FSB conducts its business activities through its wholly-owned subsidiary, First
State Bank, Covington, Tennessee. First State Bank is a full service commercial
bank offering consumer and commercial banking services in Covington, Tennessee.
The bank operates its main office and two branches in Covington, Tennessee, and
one branch in Munford, Tennessee. As of September 30, 1998, FSB had
consolidated assets of approximately $146 million, consolidated loans of
approximately $104 million, consolidated deposits of approximately $115
million, and consolidated shareholders' equity of approximately $18.6 million.
Union Planters Corporation
7130 Goodlett Farms Parkway
Memphis, Tennessee 38018
(901)580-6000
Union Planters is a registered bank holding company incorporated in
Tennessee. Through Union Planters Bank, National Association, its principal
bank subsidiary, and various other banking and banking-related subsidiaries,
Union Planters provides a diversified range of financial services in the
communities in which it operates. It maintains 801 banking offices and 1,000
automated teller machines.
Union Planters considers acquisitions an important part of its
business strategy and expects that they will continue to be important in the
future. During the period beginning January 1, 1994 and ending September 30,
1998, Union Planters has completed 43 acquisitions adding approximately $26.4
billion to its assets. Union Planters also has pending agreements to acquire
five financial institutions, in addition to FSB, in four states, and an
agreement to purchase 56 branches and assume deposit liabilities of
approximately $1.8 billion in Indiana ("Indiana Branch
1
<PAGE> 11
Purchase"). These other pending acquisitions had combined total assets of
approximately $3.4 billion at September 30, 1998.
On September 30, 1998, Union Planters had consolidated assets of
approximately $30.5 billion, consolidated loans of approximately $19.7 billion,
consolidated deposits of approximately $23.3 billion, and consolidated
shareholders' equity of approximately $2.9 billion.
Union Planters Holding Corporation
7130 Goodlett Farms Parkway
Memphis, Tennessee 38018
(901) 580-6000
Union Planters Holding Corporation is a wholly-owned subsidiary of
Union Planters. It is a bank holding company. Union Planters owns most of its
banking subsidiaries through Union Planters Holding Corporation. The directors
and officers of Union Planters Holding Corporation are officers of Union
Planters.
Union Planters Bank, National Association
7130 Goodlett Farms Parkway
Memphis, Tennessee 38018
(901) 580-6000
Union Planters Bank, National Association, a wholly owned subsidiary
of Union Planters Holding Corporation, is a multi-state national banking
association headquartered in Memphis, Tennessee with total assets of $27
billion. Union Planters Bank, National Association has 709 branches in Alabama,
Arkansas, Florida, Illinois, Iowa, Kentucky, Louisiana, Mississippi, Missouri,
and Tennessee.
THE MERGER (SEE PAGE 20)
Union Planters proposes to acquire FSB by merging FSB with Union
Planters Holding Corporation, a wholly owned subsidiary of Union Planters.
After the merger, FSB's business will continue to be conducted by Union
Planters Holding Corporation as the surviving corporation in the merger. The
agreement, which is an agreement between Union Planters and FSB, governs the
whole transaction. The plan of merger, which is attached to the agreement as an
exhibit, is an agreement between Union Planters Holding Corporation and FSB
that governs the merger of these two corporations. The agreement and related
plan of merger were entered into on August 4, 1998.
WHAT FSB SHAREHOLDERS WILL RECEIVE IN THE MERGER (SEE PAGE 20)
If the merger is completed, you will receive 1.61 shares of Union
Planters common stock for each share of your FSB common stock.
2
<PAGE> 12
Union Planters will not issue any fractions of a share of common
stock. Rather, Union Planters will pay cash (without interest) for any
fractional share interest any FSB shareholder would otherwise receive in the
merger. The cash payment will be in an amount equal to the fraction multiplied
by the closing price of one share of Union Planters common stock on the New
York Stock Exchange on the last trading day before the merger is completed.
OWNERSHIP OF UNION PLANTERS AFTER THE MERGER
Union Planters will issue approximately 907,301 shares of Union
Planters common stock to FSB shareholders in the merger. Based on that number,
after the merger, FSB shareholders will own approximately .66% of the
outstanding shares of Union Planters common stock This information is based on
the number of shares of FSB and Union Planters common stock outstanding on
October 31, 1998. It does not reflect shares that Union Planters may issue due
to other pending acquisitions or due to the exercise of Union Planters stock
options, or for other purposes.
DISSENTERS' RIGHTS (SEE PAGE 54)
FSB shareholders have the right, under chapter 23 of the Tennessee
Business Corporation Act, to dissent from the merger. Certain specific
procedures must be followed to dissent from the merger. An FSB shareholder who
complies with the required procedures will not receive Union Planters common
stock in the merger. Instead, if the merger is completed, a dissenting
shareholder will be entitled to demand payment of the fair cash value of his
FSB shares. A copy of chapter 23 of the Tennessee Business Corporation Act
("TBCA") is attached as Appendix E to this proxy statement-prospectus.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER (SEE PAGE 21)
We expect that, for federal income tax purposes, FSB shareholders
will not recognize any gain or loss upon the exchange of their FSB shares
solely for shares of Union Planters common stock. You may recognize taxable
gain or loss related to any cash you receive in lieu of a fractional share of
Union Planters common stock. See discussion under "What You Will Receive in the
merger." Before the merger can be completed, Union Planters and FSB expect to
receive opinions of Wyatt, Tarrant & Combs and Gerrish & McCreary, P.C.
substantially to this effect.
Tax matters are very complicated and the tax consequences of the
merger to you will depend on your own situation. You should consult your own
tax advisors to determine the effect of the merger on you under federal, state,
local, and foreign tax laws.
3
<PAGE> 13
COMPARATIVE MARKET PRICES OF COMMON STOCK
Shares of Union Planters common stock are traded on the New York
Stock Exchange under the symbol "UPC." Shares of FSB common stock are not
traded on any national exchange. On August 3, 1998, the last trading day before
we announced the execution of the agreement, Union Planters common stock closed
at $54.00 per share. On November 18, 1998, the latest practicable date before
the mailing of this proxy statement-prospectus, Union Planters common stock
closed at $48.00 per share.
The total market value of the Union Planters common stock to be
issued to FSB shareholders would be $49 million based on Union Planters' August
3, 1998 closing price, and $43.5 million based on Union Planters' November 18,
1998 closing price.
We can provide no assurance as to what the market price of the Union
Planters common stock will be if and when the merger is completed. You should
obtain current stock price quotations for Union Planters common stock.
OUR REASONS FOR THE MERGER (SEE PAGE 24)
The FSB Board believes that the proposed merger is fair to, and in
the best interests of, FSB and its shareholders. If the merger is consummated,
the FSB shareholders will acquire stock in a much larger and more diversified
corporation. The Union Planters common stock is traded on the NYSE and is more
readily marketable than the FSB common stock.
The FSB Board recommends that the holders of FSB common stock vote
"FOR" approval of the Agreement and the Plan of Merger and the transactions
provided for therein.
In unanimously approving the Agreement and the Plan of Merger, the
FSB Board considered, among other things, the financial condition of FSB and
Union Planters, the financial terms and income tax consequences of the merger,
the higher dividend rate of Union Planters compared with FSB, the likelihood of
the merger being approved by regulatory authorities.
FAIRNESS OPINION OF FSB'S FINANCIAL ADVISOR (SEE PAGE 26)
Mercer Capital Management, Inc., financial advisor to FSB, rendered a
written fairness opinion, dated November ____, 1998, to the FSB Board that as
of that date the Exchange Ratio was fair to FSB shareholders from a financial
point of view. A copy of the fairness opinion is attached to this Proxy
Statement-Prospectus as Appendix D. You should read the fairness opinion in its
entirety.
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<PAGE> 14
SPECIAL MEETING OF FSB SHAREHOLDERS (SEE PAGE 15)
The special meeting will be held at 103 East Pleasant Avenue,
Covington, Tennessee 38019 at 10:00 A.M., local time, on Tuesday, December 29,
1998. At the special meeting, we will ask you:
(1) to approve the merger, the agreement, and the related plan of
merger; and
(2) to act on any other matters that may be put to a vote at the
special meeting.
VOTING RIGHTS AT THE SPECIAL MEETING (SEE PAGE 15)
You are entitled to vote at the special meeting if you owned shares
as of the close of business on November 20, 1998, the record date. On the
record date, there were 563,541 shares of FSB common stock outstanding. You
will be entitled to one vote for each share of FSB common stock you own on the
record date. You may vote either by attending the special meeting and voting
your shares, or by completing the enclosed proxy card and mailing it to us in
the enclosed envelope.
We are seeking your proxy to use at the special meeting. We have
prepared this proxy statement-prospectus to assist you in deciding how to vote
and whether or not to grant your proxy to us. If you have elected not to attend
the meeting, please indicate on your proxy card how you want to vote. Then
sign, date and mail it to us as soon as possible so that your shares will be
represented at the special meeting. If you sign, date and mail your proxy card
without indicating how you wish to vote, your proxy will be counted as a vote
for the merger and the related agreement and plan of merger. If you fail to
return your proxy card and fail to vote at the meeting, the effect will be a
vote against the merger. If you have elected to attend the meeting, you need to
do nothing at this time. If you sign a proxy, you may revoke it at any time
before the special meeting, or by attending and voting at the special meeting.
You cannot vote shares held in "street name;" only your broker can vote them,
with your instructions. If you do not provide your broker with instructions on
how to vote your shares, your broker will not be permitted to vote them, and
your shares will be treated as votes against the merger.
OUR RECOMMENDATION TO SHAREHOLDERS (SEE PAGE 20)
FSB's board of directors unanimously approved the Agreement and the
related Plan of Merger. We believe that the proposed merger is fair to you and
in your best interests. We unanimously recommend that you vote to approve the
merger, the agreement and the related plan of merger.
SHAREHOLDER VOTE REQUIRED TO APPROVE THE MERGER (SEE PAGE 15)
Assuming that a quorum is present at the special meeting, to approve
the merger, shareholders who own a majority of the outstanding shares of FSB
common stock must vote for the merger. Union Planters shareholders will not
vote on the merger.
5
<PAGE> 15
SHARE OWNERSHIP OF MANAGEMENT AND CERTAIN SHAREHOLDERS (SEE PAGE 59)
On the record date, FSB's directors and officers, their immediate
family members and entities they control owned 128,225 shares, or approximately
22.75% of the outstanding shares of FSB common stock.
On the record date, Union Planters' directors and executive officers
owned no shares of FSB common stock and Union Planters held no shares of FSB
common stock in a fiduciary capacity for others, or as a result of debts
previously contracted.
INTERESTS OF CERTAIN PERSONS IN THE MERGER THAT MAY BE DIFFERENT FROM YOURS
(SEE PAGE 38)
FSB's board of directors and certain officers may have interests in
the merger that differ from the interests of FSB shareholders generally. Those
interests include, among others, provisions in the Agreement and Plan of Merger
regarding indemnification, insurance and eligibility to participate in certain
Union Planters employee benefit plans. Certain executive officers of FSB also
have interests in the merger that are different from other FSB shareholders
because they will terminate their existing employment agreements with FSB and
its bank subsidiary and enter into employment agreements with a banking
subsidiary of Union Planters upon consummation of the merger. The board of
directors of FSB was aware of these interests and considered them in approving
and recommending the merger.
EFFECTIVE TIME (SEE PAGE 32)
The merger will become final when Articles of Merger are filed with
the Secretary of State of the State of Tennessee. If FSB shareholders approve
the merger at the special meeting, we currently anticipate that the merger will
be completed on or about December 31, 1998, although delays could occur.
Union Planters and FSB cannot assure you that they can obtain the
necessary shareholder and regulatory approvals or that the other conditions
precedent to the merger can or will be satisfied. FSB and Union Planters
anticipate that the merger can be completed on or before December 31, 1998,
however, delays could occur.
EXCHANGE OF STOCK CERTIFICATES (SEE PAGE 32)
Promptly after the merger is completed, you will receive a letter and
instructions on how to surrender your FSB stock certificates in exchange for
Union Planters stock certificates. You will need to carefully review and
complete these materials and return them as instructed along with your stock
certificates for FSB common stock. Please do not send FSB, Union Planters or
Union Planters' transfer agent any stock certificates until you receive these
instructions. If you do not have stock certificates but hold shares of FSB
common stock in the form of a book entry with
6
<PAGE> 16
FSB's transfer agent, the transfer agent will automatically exchange the shares
unless you have elected to exercise your dissenters' rights. If you elected to
exercise your dissenters' rights, you should follow the procedures outlined in
the "Dissenters' Rights" section beginning on page 54 of this proxy
statement-prospectus.
Do not send in your stock certificates until you receive a letter and
instructions on how to surrender your FSB stock certificates.
TERMINATION FEE AGREEMENT (SEE PAGE 33)
FSB and Union Planters entered into a termination fee arrangement
under which FSB has agreed to pay to Union Planters a termination fee of
$2,400,000 under certain circumstances if the merger is not consummated.
REGULATORY APPROVAL AND OTHER CONDITIONS (SEE PAGE 35)
Union Planters is required to notify and get approvals from certain
government regulatory agencies before the merger, including the Board of
Governors of the Federal Reserve System. We expect that Union Planters will
obtain all required regulatory approvals before the special meeting.
In addition to the required regulatory approvals, the merger will be
completed if certain conditions, including the following, are met:
(1) FSB shareholders approve the merger at the special meeting;
(2) FSB and Union Planters receive an opinion of counsel that the
merger will qualify as a tax-free reorganization;
(3) Union Planters receives a letter from its accountants
concerning the pooling-of-interests accounting treatment of
the merger (discussed below under "Accounting Treatment");
and
(4) neither Union Planters nor FSB has breached any of its
representations or obligations under the agreement.
The agreement attached to this proxy statement-prospectus as an
appendix describes other conditions that must be met before the merger may be
completed.
WAIVER, AMENDMENT, AND TERMINATION (SEE PAGE 36)
Union Planters and FSB may agree to terminate the agreement and the
related plan of merger and not complete the merger at any time before the
merger is completed.
In addition, each of the parties can terminate the merger in certain
other circumstances, including either party may terminate the agreement if the
merger is not completed by June 1, 1999.
7
<PAGE> 17
But a party may not terminate the agreement if (a) it willfully breached the
agreement and (b) its breach is the reason the merger has not been completed.
There are also some instances where the parties cannot use this reason to
terminate the merger if the delay results from actions of third parties.
The parties may also terminate the merger if other conditions occur.
These conditions are described in the agreement, attached to this proxy
statement-prospectus as an appendix.
The agreement and the related plan of merger may be amended by the
written agreement of Union Planters and FSB . The parties can amend the
agreement to a certain extent without shareholder approval, even if the FSB
shareholders have already approved the merger.
ACCOUNTING TREATMENT (SEE PAGE 39)
Union Planters intends to account for the merger as a
pooling-of-interests transaction for accounting and financial reporting
purposes.
Pooling-of-interests is an accounting method that assumes that each
company's shareholders have combined their ownership interests in such a manner
that each group becomes an owner of the combined, enlarged business. The key
differences between this method of accounting and the more common purchase
accounting method fall into two areas: income measurement and asset valuation.
Under pooling-of-interests, the earnings of each company are combined as though
the combination had occurred at the beginning of the earliest financial period
presented or in the case of transactions which are not considered significant,
from the date of consummation forward. Under purchase accounting, the earnings
of the acquired company are included only after the closing of the merger.
Under pooling-of-interests, the assets of the acquired company are valued at
their historical cost. Under the purchase method, the assets are valued at
their fair value. The excess of the consideration the acquiring company pays
over the fair value of the target's assets is recorded as goodwill.
CERTAIN DIFFERENCES IN SHAREHOLDERS' RIGHTS (SEE PAGE 42)
When the merger is completed, unless you have elected to exercise
your right to dissent, you will automatically become a Union Planters
shareholder. The rights of Union Planters shareholders differ from the rights
of FSB shareholders in certain important ways. Many of these have to do with
provisions in Union Planters' charter and bylaws and Tennessee law. These
provisions are intended to make a takeover of Union Planters harder if the
Union Planters board of directors does not approve it.
8
<PAGE> 18
HISTORICAL AND PRO FORMA COMPARATIVE PER SHARE DATA
The following table shows certain comparative per share data relating
to earnings (before extraordinary items and accounting changes), cash
dividends, and book value. The equivalent pro forma information assumes an
exchange ratio of 1.61 shares of Union Planters common stock for each share of
FSB common stock.
With the exception of the Indiana Branch Purchase and the pending
mergers of First Mutual Bancorp, Inc. and First & Farmers Bancshares, Inc.
which are expected to be accounted for using the purchase method of accounting,
the merger and the other acquisitions which Union Planters has pending are
expected to be accounted for using the pooling-of-interests method of
accounting. The FSB equivalent pro forma information reflects only the
acquisition of FSB because the other acquisitions which Union Planters
currently has pending are not considered significant to Union Planters from a
financial statement presentation standpoint. See "BUSINESS OF UNION PLANTERS -
Recent Developments" for a discussion of Union Planters' other pending
acquisitions.
We present the pro forma and the equivalent pro forma data for your
information only. It does not necessary indicate the results of operations or
combined financial position that would have resulted had Union Planters
completed the merger or the other acquisitions at the times indicated, and it
does not necessarily indicate what future results of operations or combined
financial position will be.
You should read the information shown below in conjunction with the
historical consolidated financial statements of Union Planters and FSB and the
notes provided with them. In reviewing Union Planters' historical information,
please keep in mind that Union Planters has restated its historical financial
statements to reflect the impact of the several mergers completed through the
third quarter of 1998. You will find the restated numbers in Union Planters'
September 30, 1998 Quarterly Report on Form 10-Q, Exhibit 99.1. See "WHERE YOU
CAN FIND MORE INFORMATION," "-Selected Financial Data," and "BUSINESS OF UNION
PLANTERS - Recent Developments."
9
<PAGE> 19
UNION PLANTERS CORPORATION
AND FSB, INC.
HISTORICAL AND PRO FORMA COMPARATIVE PER SHARE DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,(1)
NINE MONTHS
ENDED
SEPTEMBER 30,
1995 1996 1997 1998
------ ------ ------ ---------------
<S> <C> <C> <C> <C>
EARNINGS BEFORE EXTRAORDINARY ITEMS
AND ACCOUNTING CHANGES
Union Planters
Basic $2.55 $2.24 $2.50 $1.44
Diluted 2.46 2.17 2.43 1.41
FSB
Basic 3.26 3.79 4.19 3.16
Pro Forma (Union Planters and FSB)
Basic 2.55 2.24 2.50 1.44
Diluted 2.46 2.17 2.43 1.42
FSB equivalent pro forma
(Union Planters only)(1)
Basic 4.11 3.61 4.03 2.32
Diluted 3.96 3.49 3.91 2.29
CASH DIVIDENDS PER SHARE
Union Planters $ .98 $1.08 $1.495 $1.50
FSB .88 1.08 1.30 1.32
FSB equivalent pro forma(1) 1.58 1.74 2.41 2.42
<CAPTION>
September 30, 1998 December 31, 1997
---------------------------------------------
<S> <C> <C>
BOOK VALUE PER COMMON SHARE
Union Planters $21.43 $20.93
FSB 33.02 31.90
Pro Forma (Union Planters and FSB) 21.43 20.92
FSB equivalent pro forma (Union Planters only)(1) 34.50 33.68
</TABLE>
- -------------------------------------------------------------
(1) The equivalent pro forma per share data for FSB is computed by
multiplying Union Planters' pro forma information by an exchange ratio of
1.61.
10
<PAGE> 20
SELECTED FINANCIAL DATA
The following tables present selected consolidated historical data for
Union Planters and FSB. The information is based on the consolidated financial
information that is contained in reports Union Planters has previously filed
with the Securities and Exchange Commission, including its September 30, 1998
Quarterly Report on Form 10-Q. Union Planters' September 30, 1998 Quarterly
Report on Form 10-Q includes as Exhibit 99.1, restated 1997 audited financial
statements and restated Management Discussion and Analysis of Results of
Operation and Financial Condition for the three years ended December 31, 1997.
The financial information was restated for four significant acquisitions
completed in the third quarter of 1998 and accounted for as
pooling-of-interests. All of these documents are incorporated by reference in
this proxy statement-prospectus. See "WHERE YOU CAN FIND MORE INFORMATION" on
page 87.
The information for FSB is based on its Consolidated Financial
Statements including its unaudited financial statements for the nine months
ended September 30, 1998 and 1997, and its audited consolidated financial
statements for the year ended December 31, 1997, all of which are included in
this proxy statement-prospectus. See "Consolidated Financial Statements"
attached as Appendix C.
You should read the following tables in conjunction with the
Consolidated Financial Statements of Union Planters and FSB described above and
with the notes to them.
Historical results do not necessarily indicate the results that you
can expect for any future period. In the opinion of the respective managements
of Union Planters and FSB, all adjustments (which include only normal,
recurring adjustments) necessary to arrive at a fair statement of interim
results of operations of Union Planters and of FSB have been included. With
respect to Union Planters and FSB, results for the nine months ended September
30, 1998 do not necessarily indicate the results which you can expect for any
other interim period or for the year as a whole. See "BUSINESS OF UNION
PLANTERS -- Recent Developments" on page 72 for information concerning Union
Planters' other acquisitions.
11
<PAGE> 21
UNION PLANTERS AND SUBSIDIARIES
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Years Ended December 31, (1)
---------------------------------------------------------------------------
1993 1994 1995 1996
---- ---- ---- ----
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net interest income ................... $ 779,756 $ 881,875 $ 944,694 $ 1,043,942
Provision for losses on loans ......... 49,267 23,000 47,393 84,198
Investment securities gains (losses) .. 12,160 (21,053) 2,008 4,942
Other noninterest income .............. 282,124 297,596 355,317 383,824
Noninterest expense ................... 737,608 845,217 818,944 942,733
------------ ------------ ------------ ------------
Earnings before income taxes
extraordinary item, and
accounting changes ................. 287,165 290,201 435,682 405,777
Applicable income taxes ............... 86,669 92,325 145,485 139,649
------------ ------------ ------------ ------------
Earnings before extraordinary
item and accounting changes ........ 200,496 197,876 290,197 266,128
Extraordinary item and
accounting changes, net
of taxes ........................... 4,757 -- -- --
------------ ------------ ------------ ------------
Net earnings .......................... $ 205,253 $ 197,876 $ 290,197 $ 266,128
============ ============ ============ ============
PER COMMON SHARE DATA(4)
Basic
Earnings before extraordinary
item and accounting changes......... $ 2.11 $ 1.74 $ 2.55 $ 2.24
Net earnings........................... 2.16 1.74 2.55 2.24
Diluted
Earnings before extraordinary..........
item and accounting changes......... 1.97 1.71 2.46 2.17
Net earnings........................... 2.02 1.71 2.46 2.17
Cash dividends......................... .72 .88 .98 1.08
Book value............................. 15.23 15.66 18.64 19.87
Balance sheet data at period end
Total assets .......................... $ 20,330,065 $ 22,260,487 $ 24,596,205 $ 26,427,236
Loans, net of unearned income ......... 11,815,553 14,381,566 15,713,783 17,819,088
Allowance for losses on loans ......... 229,334 237,377 243,395 257,638
Investment securities ................. 5,970,140 5,810,934 5,976,297 5,667,251
Total deposits ........................ 16,989,720 17,954,001 19,014,248 19,899,772
Short-term borrowings ................. 432,461 980,935 1,074,673 1,732,437
Long-term debt(5)
Parent company ...................... 114,729 114,790 214,758 373,459
Subsidiary banks .................... 530,810 937,160 1,193,861 1,426,433
Total shareholders' equity ............. 1,657,832 1,768,009 2,147,621 2,376,768
Average assets ......................... 19,462,599 21,796,952 23,261,530 26,003,849
Average shareholders' equity ........... 1,481,351 1,779,158 1,963,852 2,247,335
Average shares outstanding
(in thousands)(4)
Basic ................................. 90,360 107,981 110,255 115,794
Diluted ............................... 96,001 114,810 117,673 123,793
PROFITABILITY AND CAPITAL RATIOS:
Return on average assets............... 1.05% .91% 1.25% 1.02
Return on average common
equity.............................. 14.65 11.89 15.60 12.32
Net interest income (taxable
equivalent)/average earning 4.28 4.53 4.52 4.45
assets(6).............................
<CAPTION>
Nine Months
Ended
Years Ended December 31, (1) September 30, (2) and (3)
-----------------------------------------------------------------
(Dollars in thousands,
except per share data)
1997 1997 1998
---- ---- ----
<S> <C> <C> <C>
INCOME STATEMENT DATA
Net interest income ................... $ 1,122,149 $ 835,730 $ 858,506
Provision for losses on loans ......... 150,606 104,440 122,436
Investment securities gains (losses) .. 4,781 4,500 (15,111)
Other noninterest income .............. 449,261 333,146 375,596
Noninterest expense ................... 950,986 645,979 795,169
------------ ------------ ------------
Earnings before income taxes
extraordinary item, and
accounting changes ................. 474,599 422,957 301,386
Applicable income taxes ............... 162,302 144,291 113,321
------------ ------------ ------------
Earnings before extraordinary
item and accounting changes ........ 312,297 278,666 188,065
Extraordinary item and
accounting changes, net
of taxes ........................... -- -- --
------------ ------------ ------------
Net earnings .......................... $ 312,297 $ 278,666 $ 188,065
============ ============ ============
PER COMMON SHARE DATA(4)
Basic
Earnings before extraordinary
item and accounting changes......... $ 2.50 $ 2.25 $ 1.44
Net earnings........................... 2.50 2.25 1.44
Diluted
Earnings before extraordinary
item and accounting changes......... 2.43 2.18 1.41
Net earnings........................... 2.43 2.18 1.41
Cash dividends......................... 1.495 1.095 1.50
Book value............................. 20.93 21.13 21.43
Balance sheet data at period end
Total assets .......................... $ 27,993,452 $ 27,939,458 $ 30,525,482
Loans, net of unearned income ......... 19,126,708 18,936,526 19,653,468
Allowance for losses on loans ......... 310,385 291,084 352,643
Investment securities ................. 5,840,704 5,709,842 7,867,587
Total deposits ........................ 21,203,147 20,800,890 23,288,899
Short-term borrowings ................. 1,784,347 1,827,953 1,829,275
Long-term debt (5)
Parent company ...................... 373,746 373,169 380,164
Subsidiary banks .................... 1,327,451 1,588,764 1,362,894
Total shareholders' equity ............ 2,668,721 2,680,841 2,932,567
Average assets ........................ 27,366,896 27,240,642 28,724,000
Average shareholders' equity .......... 2,562,009 2,396,275 2,734,717
Average shares outstanding
(in thousands)(4)
Basic ................................. 122,812 122,068 129,561
Diluted ............................... 129,397 127,924 133,784
PROFITABILITY AND CAPITAL RATIOS:
Return on average assets............... 1.14% 1.37% .88%
Return on average common
equity.............................. 12.51 15.79 9.23
Net interest income (taxable
equivalent)/average earning 4.57 4.55
assets (6)............................
</TABLE>
12
<PAGE> 22
UNION PLANTERS AND SUBSIDIARIES
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Nine Months
Ended
Years Ended December 31, (1) September 30, (2) and (3)
------------------------------------------------- -------------------------
1993 1994 1995 1996 1997 1997 1998
------ ------ ------ ------ ------ ------ ------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest income (taxable
equivalent/average earning
assets........................... 4.28% 4.53% 4.52% 4.45% 4.57% 4.55% 4.45%
Loan/deposits....................... 69.55 80.10 82.64 89.54 90.21 91.04 84.39
Equity/assets (period end) 8.15 7.82 8.73 8.99 9.53 9.60 9.61
Average shareholders' equity/
average total assets.............. 7.61 8.16 8.44 8.64 9.36 8.80 9.52
Leverage ratio...................... 8.02 7.93 8.41 9.32 9.62 9.67 9.29
Tier 1 capital/risk-weighted assets 13.47 12.75 13.32 14.39 14.25 14.05 13.49
Total capital/risk-weighted assets 15.41 14.57 15.71 16.63 16.39 16.20 17.07
CREDIT QUALITY RATIOS (7)
Allowance/period end loans 2.02 1.74 1.65 1.59 1.74 1.66 1.87
Nonperforming loans/
total loan.................... 1.22 .76 .80 .81 .83 .83 .79
Allowance/nonperforming
loans......................... 166 228 206 195 210 199 236
Nonperforming assets/loans
and foreclosed properties 1.73 1.06 1.03 1.04 1.01 1.01 .93
Provision/average loans.......... .45 .18 .33 .54 .87 .80 .88
Net charge-offs/average loans .38 .21 .31 .49 .66 .65 .75
</TABLE>
(1) Union Planters' audited financial statements for the three years ended
December 31, 1997 and the related management's discussion and analysis
of results of financial condition and operations were restated for
four acquisitions completed in the third quarter of 1998 and accounted
for as poolings-of-interests. The 1997 restated audited financial
statements (the "1997 Restated Financial Statements") and the restated
management's discussion and analysis of results of financial condition
and operations were filed as Exhibit 99.1 to Union Planters Quarterly
Report on Form 10-Q dated September 30, 1998. Additionally, the
selected financial data for 1993 and 1994 has been restated to reflect
the aforementioned four acquisitions.
(2) Interim period ratios have been annualized where applicable.
(3) Reference is made to Union Planters' Quarterly Report on Form 10-Q
dated September 30, 1998 for a discussion of merger-related and other
charges that significantly impacted operating results for the nine
months ended September 30, 1998.
(4) Share and per share amounts have been retroactively restated for
significant acquisitions accounted for as poolings-of-interests and to
reflect the changes in presentation of Earnings Per Share as discussed
in Notes 2 and 16 to the 1997 Restated Financial Statements.
(5) Long-term debt includes Medium-Term Notes, Federal Home Loan Bank
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.
(6) Average balances and calculations do not include the impact of the net
unrealized gain or loss on available for sale securities. (7) FHA/VA
government-insured/guaranteed loans have been excluded, since they
represent minimal credit risk to Union Planters.
13
<PAGE> 23
FSB, INC, AND SUBSIDIARIES
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
------------------------------------------------------------------------
1993 1994 1995 1996 1997
------------------------------------------------------------------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net interest income.................... $ 5,001 $ 5,230 $ 5,392 $ 5,798 $ 6,294
Provision for losses on loans.......... (120) (150) (132) (93) (123)
Investment securities gains (losses)... - (29) 60 3 25
Other noninterest income............... 943 920 1,122 1,294 1,369
Noninterest expense.................... 3,792 3,911 3,951 4,067 4,241
Earnings before income taxes........... 2,032 2,060 2,491 2,935 3,324
Applicable income taxes................ 429 454 693 844 1,007
Net earnings........................... 1,603 1,606 1,799 2,091 2,317
PER COMMON SHARE DATA
Net earnings............................ $ 2.88 $ 2.89 $ 3.26 $ 3.79 $ 4.19
Cash dividends.......................... 1.22 1.40 .88 1.08 1.30
Book value.............................. 18.70 18.75 23.94 26.98 31.90
BALANCE SHEET DATA AT PERIOD END
Total assets............................ $ 117,711 132,158 131,720 136,329 145,888
Loans, net of unearned income........... 64.962 66,994 73,653 84,912 98,063
Allowance for losses on loans........... 884 858 981 964 1,021
Investment securities................... 38,309 50,136 39,795 38,671 36,149
Deposits................................ 97,895 108,929 109,449 110,122 116,299
Short-term borrowings................... 8,344 8,314 7,734 9,827 9,454
Total shareholders' equity.............. 10,437 10,388 13,201 14,812 17,779
Average assets
Average shareholders' equity
Total shares outstanding................ 279,016 553,913 551,369 548,957 557,357
PROFITABILITY AND CAPITAL RATIOS:
Return on average assets............... 1.41% 1.32% 1.42% 1.60% 1.68%
Return on average common
equity.............................. 17.44 15.48 15.39 14.99 14.45
Net interest income (taxable
equivalent/average earning
assets)............................. 5.09 4.89 4.77 4.95 4.97
Loan/deposits.......................... 66.35 61.50 67.29 77.10 84.32
Equity/assets (period end)............. 8.87 7.86 10.02 10.87 12.19
Average stockholders' equity/
average total assets................ 8.10 8.53 9.25 10.68 11.60
Leverage ratio......................... 8.30 8.42 9.18 10.01 10.14
Tier 1 capital/risk-weighted assets.... 14.58 15.20 15.82 15.93 15.37
Total capital/risk-weighted assets..... 15.83 16.43 17.07 17.12 16.48
CREDIT QUALITY RATIOS (6)
Allowance/period end loans............. 1.36 1.28 1.33 1.14 1.04
Nonperforming loans/
total loan.......................... 0.12 0.71 0.10 0.24 0.13
Allowance/nonperforming
loans............................... 9.05 55.59 7.54 21.45 12.54
NINE MONTHS
ENDED
SEPTEMBER 30, (1)
-------------------------
1997 1998
-------------------------
<S> <C> <C>
INCOME STATEMENT DATA
Net interest income.................... $ 4,625 $ 4,975
Provision for losses on loans.......... (87) (273)
Investment securities gains (losses)... (13) 23
Other noninterest income............... 966 1,231
Noninterest expense.................... 3,161 3,360
Earnings before income taxes........... 2,330 2,596
Applicable income taxes................ 692 819
Net earnings........................... 1,638 1,777
PER COMMON SHARE DATA
Net earnings............................ $ 2.95 $ 3.16
Cash dividends.......................... .95 1.32
Book value.............................. 29.98 33.02
BALANCE SHEET DATA AT PERIOD END
Total assets............................ 140,504 145,930
Loans, net of unearned income........... 96,940 103,948
Allowance for losses on loans........... 1,025 1,163
Investment securities................... 36,895 29,353
Deposits................................ 109,999 114,839
Short-term borrowings................... 9,680 10,519
Total shareholders' equity.............. 16,643 18,611
Average assets
Average shareholders' equity
Total shares outstanding................ 555,110 563,610
PROFITABILITY AND CAPITAL RATIOS:
Return on average assets............... 1.60% 1.63%
Return on average common
equity.............................. 13.98 12.94
Net interest income (taxable
equivalent/average earning
assets)............................. 4.77 4.79
Loan/deposits.......................... 88.13 90.52
Equity/assets (period end)............. 11.85 12.75
Average stockholders' equity/
average total assets................ 11.47 12.59
Leverage ratio......................... 10.13 10.49
Tier 1 capital/risk-weighted assets.... 15.15 15.46
Total capital/risk-weighted assets..... 16.28 16.68
CREDIT QUALITY RATIOS (6)
Allowance/period end loans............. 1.06 1.12
Nonperforming loans/
total loan.......................... 0.21 0.29
Allowance/nonperforming
loans............................... 20.00 26.31
</TABLE>
- -----------------------------
(1) Interim period ratios have been annualized where applicable.
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INTRODUCTION
Union Planters and FSB are furnishing this proxy statement-prospectus
to holders of FSB common stock, $10 par value per share, in connection with the
proxy solicitation by FSB's board of directors. The FSB board of directors will
use the proxies at the special meeting of shareholders of FSB to be held on
December 29, 1998, and at any adjournments.
At the special meeting, holders of FSB common stock will be asked to
vote upon a proposal to approve the Agreement and Plan of Merger, dated August
4, 1998, between Union Planters and FSB, attached to this proxy
statement-prospectus as Appendix A, and the related Plan of Merger between FSB
and Union Planters Holding Corporation, a wholly owned subsidiary of Union
Planters, attached to this proxy statement-prospectus as Appendix B (the
"Agreement" and the "Plan of Merger"). Pursuant to the Agreement and the Plan
of Merger, FSB will merge into Union Planters Holding Corporation, and the
outstanding shares of FSB common stock will be converted into whole shares of
Union Planters common stock, $5.00 par value per share, and associated
Preferred Share Rights. For information about Union Planters' Preferred Share
Rights, see page 85. FSB shareholders will receive cash in lieu of any
fractional shares.
SPECIAL MEETING OF FSB SHAREHOLDERS
MEETING OF FSB SHAREHOLDERS - DATE, PLACE, TIME AND PURPOSE
A Special Meeting of FSB shareholders will be held on December 29,
1998, at the main office of FSB at 103 East Pleasant Avenue, Covington,
Tennessee 38019 at 10:00 A.M.., local time. At the special meeting, FSB
shareholders will be asked to vote on a proposal to approve the Agreement and
the Plan of Merger.
RECORD DATE, VOTING RIGHTS, REQUIRED VOTE, AND REVOCABILITY OF PROXIES
You are entitled to vote at the special meeting if you owned shares on
November 20, 1998, the Record Date. As of that date, there were 563,541 shares
of FSB common stock issued and outstanding and held by approximately 269
holders of record. FSB shareholders are entitled to one vote for each share of
FSB common stock on any matter that properly comes before the special meeting.
Your vote is important and you are encouraged to vote your shares in person or
by proxy at the special meeting.
Approval by the FSB shareholders of the proposal to approve and adopt
the Agreement and the Plan of Merger requires the affirmative vote of a
majority of the shares of FSB common stock outstanding on the Record Date.
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<PAGE> 25
Brokers who hold shares in street name for customers who are the
beneficial owners of such shares may not give a proxy to vote those shares
without specific instructions from their customers. Any abstention, non-voting
share or "broker non-vote" will have the same effect as a vote AGAINST the
approval of the Agreement and the Plan of Merger.
Properly executed proxies that FSB receives before the vote at the
special meeting that are not revoked will be voted in accordance with the
instructions indicated on the proxies. IF NO INSTRUCTIONS ARE INDICATED, SUCH
PROXIES WILL BE VOTED FOR THE PROPOSAL TO APPROVE THE AGREEMENT AND THE PLAN OF
MERGER, AND THE PROXY HOLDER MAY VOTE THE PROXY IN ITS DISCRETION AS TO ANY
OTHER MATTER WHICH MAY COME PROPERLY BEFORE THE SPECIAL MEETING. IF NECESSARY,
THE PROXY HOLDERS MAY VOTE IN FAVOR OF A PROPOSAL TO ADJOURN THE SPECIAL
MEETING IN ORDER TO PERMIT FURTHER SOLICITATION OF PROXIES IF THERE ARE NOT
SUFFICIENT VOTES TO APPROVE THE PROPOSAL AT THE TIME OF THE SPECIAL MEETING.
HOWEVER, NO PROXY HOLDER WILL VOTE ANY PROXIES VOTED AGAINST APPROVAL OF THE
AGREEMENT AND THE PLAN OF MERGER IN FAVOR OF A PROPOSAL TO ADJOURN THE SPECIAL
MEETING.
A FSB shareholder who has given a proxy solicited by FSB's board of
directors may revoke it at any time prior to its exercise at the special
meeting by (1) giving written notice of revocation to the Secretary of FSB, (2)
properly submitting to FSB a duly executed proxy bearing a later date, or (3)
attending the special meeting and voting in person. All written notices of
revocation and other communications with respect to revocation of proxies
should be sent to: FSB, 103 E. Pleasant Avenue, Covington, Tennessee 38019,
Attention: Rita Hubbard, Secretary.
On the Record Date, the officers and directors of FSB, including their
affiliates, beneficially owned an aggregate of 128,225 shares of FSB common
stock, or approximately 22.75% of the shares of FSB common stock outstanding.
On the Record Date, FSB had three shareholders beneficially owning 5% or more
of the FSB common stock outstanding, including James Edmonds with 5.69%;
Theodore B. Sloan with 6.12% (including Mr. Sloan's beneficial ownership of
shares allocated to him in the ESOT); and FSB's Employee Stock Ownership Trust
("ESOT") with 17.14%. Participants in the ESOT will have the right to vote the
shares of FSB common stock in the ESOT allocated to them at the special
meeting.
On the record date, Union Planters held no shares of FSB common stock
in a fiduciary capacity for others, or as a result of debts previously
contracted.
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<PAGE> 26
SOLICITATION OF PROXIES
FSB and Union Planters will share the costs of soliciting proxies. In
addition to the use of the mail, proxies may be solicited by the directors,
officers and employees of FSB in person, or by telephone, telecopier or
telegram. Directors, officers and employees will not be additionally
compensated for solicitation but may be reimbursed for out-of-pocket expenses
incurred in connection with solicitation activities. Arrangements will also be
made with custodians, nominees and fiduciaries for the forwarding of
solicitation material to the beneficial owners of FSB common stock held of
record by such persons, and FSB may reimburse custodians, nominees and
fiduciaries for reasonable out-of-pocket expenses incurred for these services.
DISSENTERS' RIGHTS
Any holder of FSB 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 summary is qualified in its entirety by reference
to Chapter 23 of the TBCA, which is reproduced in full as Appendix D to this
proxy statement-prospectus.
Under the TBCA, any holder of FSB 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 FSB in writing of the name and address of the record holder of the
shares, if known to him or her.
Any FSB 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 FSB 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 FSB 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 FSB's
shareholders at the special meeting, each FSB shareholder who has filed an
Objection Notice will be notified by FSB of such approval no later than ten
days after the special meeting (the "Dissenter's Notice"). The Dissenter's
Notice will (i) state where the payment demand must be sent and where and when
certificates for certificated shares of FSB 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
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<PAGE> 27
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 FSB 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 FSB 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
FSB common stock before August 4, 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 FSB shareholder until these rights are canceled 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 FSB 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, FSB 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 FSB estimates to be the fair
value of the shares of FSB common stock, plus accrued interest. Such payment
must be accompanied by (i) certain of FSB's financial statements, (ii) a
statement of FSB'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, FSB
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 August 4, 1997, the date of the first public announcement of the
terms of the Agreement. To the extent FSB should elect to withhold payment,
after effecting the merger, UPHC 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. Union Planters Holding Corporation ("UPHC") 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 under Section 48-23-206 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) UPHC fails to make payment
under Section 48-23-206 within two months after the date set for demanding
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<PAGE> 28
payment, or (iii) FSB, 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 FSB (or its successor in the
merger) in writing (which notice is invalid if not delivered to FSB within one
month after FSB 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 FSB, reject FSB'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 UPHC (as the surviving corporation) cannot agree with such
Dissenting Shareholder on a fair value within two months after UPHC receives
the Payment Demand, UPHC will institute judicial proceedings in either the
Chancery or Circuit Court of Tipton 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 FSB 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 FSB or the fair value, plus accrued
interest, of his or her after-acquired shares for which FSB elected to withhold
payment under Section 48-23-208 of the TBCA.
The Court shall assess costs and expenses of such proceeding
(including reasonable compensation for and expenses of the appraiser but
excluding fees and expenses of counsel and experts) against FSB (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 FSB, if the Court finds that FSB did not comply substantially with the
relevant requirements of the TBCA or (ii) against FSB 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 as Appendix D. Any FSB shareholder who intends to
dissent from the merger should review the text of Appendix D carefully and
should also
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<PAGE> 29
consult with an attorney. Any shareholder who fails to strictly follow the
procedures described in the statute will forfeit dissenters' rights.
For a discussion of certain federal income tax consequences in
connection with exercising dissenters' rights, see "The Merger -- Material
Federal Income Tax Consequences."
RECOMMENDATION
The FSB Board has unanimously approved and adopted the Agreement and
the Plan of Merger and recommends a vote "FOR" approval of the Agreement and
the Plan of Merger. You should refer to the reasons that the FSB Board
considered in determining whether to approve and adopt the Agreement and the
related Plan of Merger.
DESCRIPTION OF TRANSACTION
The following information describes material aspects of the merger.
This description does not provide a complete description of all the terms and
conditions of the Agreement and the Plan of Merger. It is qualified in its
entirety by the Appendices hereto, including the text of the Agreement and the
Plan of Merger, which are attached as Appendices A and B, respectively, to this
proxy statement-prospectus. The Agreement and Plan of Merger are incorporated
herein by reference. You are urged to read the Appendices in their entirety.
GENERAL
The Agreement provides for the acquisition of FSB by Union Planters
pursuant to the merger of FSB with and into Union Planters Holding Corporation.
Union Planters Holding Corporation is a Tennessee corporation and a
wholly-owned subsidiary of Union Planters. Union Planters Holding Corporation
will be the surviving corporation resulting from the merger. At the time the
merger becomes effective, each share of FSB common stock then issued and
outstanding (except shares held by FSB, Union Planters and their subsidiaries
other than shares held in a fiduciary capacity or as a result of debts
previously contracted) will be converted into and exchanged for the right to
receive 1.61 shares of Union Planters common stock and the associated Preferred
Share Rights (the "Exchange Ratio").
No fractional shares of Union Planters common stock will be issued.
Rather, Union Planters will pay cash (without interest) in an amount equal to
such fractional part of a share of Union Planters common stock multiplied by
the closing price of Union Planters common stock on the New York Stock Exchange
(as reported by The Wall Street Journal) on the last trading day before the
merger becomes effective. On the record date, FSB had 563,541 shares of common
stock issued and outstanding. Based on an Exchange Ratio of 1.61, upon
completion of the merger, Union Planters will issue approximately 907,307
shares of its common stock to FSB shareholders. After the merger, Union
Planters would then have outstanding approximately 136,970,336 shares of common
stock based on the number of shares of Union Planters common
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<PAGE> 30
stock outstanding on __________, 1998 (not including shares Union Planters may
issue in its other pending acquisitions and shares it may issue pursuant to the
exercise of Union Planters stock options or for other purposes).
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following is a summary of the material anticipated federal income
tax consequences of the merger to FSB shareholders who hold their FSB 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 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 statement in this proxy statement-prospectus. This summary does
not purport to address all aspects of the possible federal income tax
consequences of the merger that may be relevant to U.S. shareholders of FSB.
The tax discussion below is included for general information only and should
not be construed as tax advice to a particular shareholder of FSB.
Union Planters and FSB have not and do not intend to seek a ruling
from the Internal Revenue Service ("IRS") as to the federal income tax
consequences of the merger. Instead, Union Planters has obtained the opinion of
its counsel, Wyatt, Tarrant & Combs, and FSB has obtained the opinion of its
counsel, Gerrish & McCreary P.C. as to certain of the expected federal income
tax consequences of the merger. Copies of these opinions are attached as
exhibits to the registration statement.
The tax opinions which Union Planters and FSB have obtained do not
address, among other matters:
(1) state, local, estate, foreign or other federal tax
consequences of the merger not specifically addressed in the
opinion;
(2) federal income tax consequences to FSB shareholders who are
subject to special rules under the Internal Revenue Code,
such as foreign persons, corporations, tax-exempt
organizations, insurance companies, financial institutions,
dealers in stocks and securities, and persons who do not own
such stock as a capital asset;
(3) federal income tax consequences affecting shares of FSB
common stock acquired upon the exercise of stock options,
stock purchase plan rights or otherwise as compensation;
(4) federal income tax consequences affecting shares of FSB
common stock acquired as part of a hedge, straddle or
conversion transaction;
(5) the tax consequences to holders of warrants, options or other
rights to acquire shares of such stock;
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<PAGE> 31
(6) the tax consequences to Union Planters, Union Planters
Holding Corporation and FSB of the inclusion as income the
amount of the bad-debt reserve maintained by FSB and/or its
subsidiaries and any other amounts resulting from any
required change in accounting methods; and
(7) the tax consequences of Union Planters, Union Planters
Holding Corporation and FSB of any income and deferred gain
recognized pursuant to Treasury Regulations issued under
Section 1502 of the Internal Revenue Code.
Subject to the conditions, qualifications, representations and
assumptions contained herein, and in the tax opinions, Union Planters' and
FSB's counsel have opined that:
(1) The acquisition by Union Planters Holding Corporation of
substantially all of the assets of FSB in exchange for shares
of Union Planters common stock and the assumption of
liabilities of FSB pursuant to the merger will constitute a
reorganization within the meaning of Section 368(a) of the
Internal Revenue Code.
(2) FSB, Union Planters and Union Planters Holding Corporation
will each be "a party to a reorganization" within the meaning
of Section 368(b) of the Internal Revenue Code.
(3) No gain or loss will be recognized by FSB as a result of the
merger.
(4) No gain or loss will be recognized by Union Planters Holding
Corporation or Union Planters as a result of the merger.
(5) No gain or loss will be recognized by the shareholders of FSB
as a result of the exchange of FSB common stock for Union
Planters common stock pursuant to the merger, except that a
gain or loss will be recognized on the receipt of any cash in
lieu of a fractional share. Assuming that the FSB common
stock is a capital asset in the hands of the respective FSB
shareholders, any gain or loss recognized as a result of the
receipt of cash in lieu of a fractional share will be a
capital gain or loss equal to the difference between the cash
received and that portion of the holder's tax basis in the
FSB common stock allocable to the fractional share.
(6) The tax basis of Union Planters common stock to be received
by the shareholders of FSB will be the same as the tax basis
of the FSB common stock surrendered in exchange therefor
(reduced by any amount allocable to a fractional share
interest for which cash is received).
(7) The holding period of the Union Planters common stock to be
received by shareholders of FSB will include the holding
period of the FSB common stock surrendered in exchange
therefor, provided the FSB shares were held as a capital
asset by the shareholders of FSB on the date of the exchange.
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<PAGE> 32
(8) A shareholder of FSB who perfects his dissenters' rights and
who receives payment of the fair market value of his shares
of FSB common stock will be treated as having received such
payment in redemption of such stock. Such redemption will be
subject to the conditions and limitations of Section 302 of
the Internal Revenue Code.
The tax opinions are based on the Internal Revenue Code, the Treasury
Regulations promulgated under the Internal Revenue Code by the IRS, judicial
decisions and administrative pronouncements of the IRS, all existing and in
effect on the date of this proxy statement-prospectus and all of which are
subject to change at any time, possibly retroactively. Any such change could
have a material impact on the conclusions reached in the opinions. The opinions
represent only such counsel's best judgment as to the expected federal income
tax consequences of the merger and are not binding on the IRS or the courts.
The IRS may challenge the conclusions stated in the opinions and shareholders
of FSB may incur the cost and expense of defending positions taken by them with
respect to the merger. A successful challenge by the IRS could have material
adverse consequences to the parties to the merger, including shareholders of
FSB and Union Planters.
In rendering the tax opinions, counsel for Union Planters and FSB have
relied, as to factual matters, solely on the continuing accuracy of (1) the
description of the facts relating to the merger contained in the Agreement and
this proxy statement-prospectus, (2) the factual representations and warranties
contained in the Agreement and this proxy statement-prospectus and related
documents and agreements, and (3) certain factual matters addressed by
representations made by certain executive officers of FSB, Union Planters and
Union Planters Holding Corporation, as further described in the opinions.
Events occurring after the date of the opinions could alter the facts upon
which the opinions are based. In such case, the conclusions reached in the
opinions and in this summary could be materially impacted.
Accordingly, for all of the above reasons, shareholders of FSB are
urged to consult their own tax advisors as to the specific tax consequences to
them of the merger, including the applicability and effect of federal, state,
local and other tax laws, and the implications of any proposed changes in the
tax laws.
The obligation of Union Planters and FSB to complete the merger is
conditioned on, among other things, receipt by Union Planters of an opinion of
Wyatt, Tarrant & Combs and the receipt by FSB of an opinion of Gerrish &
McCreary P.C., substantially to the foregoing effect. The conditions relating to
the receipt of the tax opinions may be waived by both Union Planters and FSB.
Neither Union Planters nor FSB currently intends to waive the conditions
relating to the receipt of tax opinions. If the conditions relating to the
receipt of tax opinions were waived and the material federal income tax
consequences of the merger were substantially different from those described in
this proxy statement-prospectus, FSB would resolicit the approval of its
shareholders prior to completing the merger.
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BACKGROUND OF AND REASONS FOR THE MERGER
BACKGROUND OF THE MERGER. After studying the rapidly changing nature
of the banking industry, working with a bank operations consultant and
consulting with its financial advisors, a special committee of the FSB Board
and Theodore B. Sloan, Chairman, presented strategic choices to the FSB Board
in October 1997. Two choices were outlined as possible future plans for FSB and
First State Bank of Covington, including (i) re-engineering the Bank, and (ii)
considering a sale of FSB and the Bank taking into consideration various
stakeholders. That Board meeting marked the beginning of a continuing process
over the next several months for strategic planning by the Board for FSB and
the Bank.
On December 19, 1997, Mr. Sloan presented a strategic planning report
to the FSB Board. This report was focused on re-engineering the Bank while
continuing to study the option of a sale of FSB and the Bank. In February, 1998
the Board considered a presentation on the sale alternative as opposed to the
no sale/re-engineering alternative. After that meeting, the Strategic Planing
Committee of the Board met and discussed these alternatives. After extensive
discussion, this committee decided the sale alternative should be further
considered, and the Board should move forward to determine the market value of
FSB by presenting bid information to interested parties. At its meeting on
March 27, 1998, the FSB Board agreed with the recommendations of the Strategic
Planning Committee and approved a motion that the sale alternative be
considered and action be taken to move forward to determine the market value of
FSB by presenting bid information to interested parties.
During May 1998, Mercer Capital Management, Inc. ("Mercer") and legal
counsel to FSB, on behalf of FSB, sent information to seventeen prospective
bidders. A response from the prospective purchasers was requested by June 30,
1998, and seven prospective purchasers responded with bid proposals.
One of the bid proposals received was from Union Planters On June 30,
1998, Union Planters submitted a term sheet with a proposed purchase price of
$50 million dollars, payable in a fixed number of shares of Union Planters
common stock in a tax-free transaction. The FSB Board reviewed Union Planters'
proposal, along with the other proposals received from prospective purchasers,
at a meeting on July 17, 1998. At that meeting, the FSB Board authorized
management to engage in due diligence with Union Planters and one other
regional bank in order to identify and price terms for a possible sale for a
net price of not less than $90.00 per share plus expenses, subject to final
approval by the FSB Board. Following that meeting, the officers designated by
the Board met with representatives of the two prospective bidders including
Union Planters.
As a result of negotiations between the acquisition committee of FSB
and Union Planters, on July 31, 1998, the FSB Board was presented with a
proposed Agreement and Plan of Merger from Union Planters. After lengthy
discussion and consideration, the FSB Board unanimously approved the proposed
merger Agreement and the related Plan of Merger.
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RECOMMENDATION OF THE FSB BOARD AND REASONS FOR THE MERGER. The FSB
Board believes that the proposed merger is fair to, and in the best interests
of, FSB and its shareholders. If the merger is consummated, the FSB
shareholders will acquire stock in a much larger and more diversified
corporation. The Union Planters common stock is traded on the NYSE and is more
readily marketable than FSB common stock.
The FSB Board recommends that the holders of FSB common stock vote
"FOR" approval of the Agreement and the Plan of Merger and the transactions
provided for therein.
The terms of the merger, including the Exchange Ratio are the results
of arm's-length negotiations between representatives of FSB and Union Planters.
Before reaching its unanimous decision to approve the Agreement, the FSB Board
consulted with its financial advisor on the financial aspects of the merger and
the fairness of the Exchange Ratio to the Shareholders of FSB, with its legal
advisors regarding the terms of the proposed merger, and with management and
the banking consultant to FSB. The FSB Board considered a number of factors in
deciding to approve the Agreement and the Plan of Merger. The Board did not
assign any priority or special consideration to any of these factors, but it
considered the following:
- - The higher dividend rate of Union Planters compared with FSB.
- - The value of the Union Planters common stock to be received by FSB
shareholders, compared to the value of your FSB common stock, based on
the preliminary valuation analysis conducted by Mercer.
- - The trading of Union Planters common stock on the NYSE, compared to
the lack of an established trading market for FSB common stock.
- - FSB's business, financial condition, results of operations, and
prospects for growth and profitability and the business risk involved
in achieving additional growth and profitability.
- - The banking industry environment for FSB, the need for new products
and services, technology enhancements, additional employee benefits,
management succession plans for FSB, national and local economic
conditions, the competitive environment in banking, and the rapid
consolidation in the financial services industry.
- - Both the financial terms and other terms of the proposed Merger with
Union Planters, and the review of those terms by the FSB Board with
its legal and financial advisors.
- - Comparison of the value to be received by FSB shareholders from Union
Planters to the value in the other proposals from other prospective
purchasers of FSB.
- - The proposed tax-free exchange of FSB common stock for Union Planters
common stock.
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UNION PLANTERS' REASONS FOR THE MERGER. In adopting the Agreement, the
Plan of Merger, and the merger, the Union Planters' board of directors
considered a number of factors concerning the benefits of the merger. Without
assigning any relative or specific weights to the factors, the Union Planters'
board of directors considered the following additional material factors:
- - a review, based in part on a presentation by Union Planters'
management, of
Other business, operations, earnings, and financial condition,
including the capital levels and asset quality, of FSB on an
historical, prospective, and pro forma basis and in comparison to
other financial institutions in the area,
Other demographic, economic, and financial characteristics of the
markets in which FSB operates, including existing competition, history
of the market areas with respect to financial institutions, and
average demand for credit, on historical and prospective basis, and
Other results of Union Planters' due diligence review of FSB; and
- a variety of factors affecting and relating to the overall strategic
focus of Union Planters, including Union Planters' desire to expand
into markets in Tipton County and the business lines pursued by FSB.
Union Planters' board of directors determined that the merger was in
the best interests of Union Planters and its stockholders and unanimously
approved the proposed merger on October 15, 1998.
OPINION OF FSB'S FINANCIAL ADVISOR
Mercer Capital Management, Inc., as part of its valuation consulting
and investment banking businesses, is regularly engaged to assist financial
institutions in mergers and acquisitions and to value the debt and equity
securities of such institutions. The FSB Board of Directors retained Mercer
Capital during April, 1998 on the basis of its reputation and experience in
negotiating mergers among financial institutions and in representing such
institutions in merger transactions. No limitations were imposed by FSB's Board
with respect to the investigations made or the procedures followed by Mercer
Capital in rendering its fairness opinion. Mercer Capital was paid a fee of
$15,000 for preparing a valuation analysis of FSB. In addition, Mercer Capital
will be paid a fee equal to 0.1875% of the value of the consideration received
by FSB shareholders on the effective date.
Mercer Capital prepared a valuation analysis, dated July 10, 1998,
which developed a range of value for FSB utilizing various valuation methods
for purposes of comparing the analysis with the initial expressions of interest
received from potential acquirors. Upon completion of negotiations with Union
Planters during early July, Mercer Capital rendered a preliminary fairness
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opinion, dated August 4, 1998, which stated that the exchange ratio was fair to
FSB shareholders from a financial point of view. Mercer Capital subsequently
rendered a written fairness opinion, dated November ___, 1998. Mercer Capital's
preliminary and updated opinions are directed only to the fairness to the FSB
shareholders, from a financial point of view, of the Exchange Ratio, and such
opinions do not address any other aspect of the merger or related transactions
and do not constitute a recommendation to any stockholder as to how the
stockholder should vote at the special meeting. The fairness opinion, which is
included in Appendix D of this proxy statement-prospectus, should be read in
its entirety by FSB shareholders.
As part of its investigation, Mercer Capital reviewed: (1) the
Agreement and the Plan of Merger; (2) FSB's annual reports for fiscal years
1995, 1996, and 1997; (3) the Bank's Call Reports for fiscal years 1995, 1996,
and 1997 and the quarters ended March 31, 1998 and June 30, 1998; (4) Union
Planters' annual reports for the fiscal years ended December 31, 1995, 1996 and
1997; (5) Union Planters' 10-K for fiscal years 1995, 1996, and 1997 and Form
10-Q for the quarters ended March 31, 1998, June 30, 1998, and September 30,
1998; (6) Union Planters' proxy statements for fiscal years 1996, 1997, and
1998; (7) FSB's 1998 budget prepared by FSB management; (8) public market
pricing data of publicly traded banks which Mercer Capital deemed comparable to
Union Planters; and, (9) transaction data involving other banks which have been
acquired.
As part of its engagement, representatives of Mercer Capital visited
with FSB management in Covington, Tennessee and Union Planters management in
Memphis, Tennessee. Factors considered in rendering the opinion included: (1)
terms of the Agreement and the Plan of Merger; (2) the arms' length process by
which the Agreement was negotiated; (3) the valuation analysis prepared by
Mercer Capital; (4) an analysis of the estimated pro-forma changes in book
value per share, earnings per share, and dividends per share from the
perspective of the FSB shareholders; (5) a review of Union Planters' historical
financial performance, historical stock pricing, the liquidity of its shares
and pricing in relation to other publicly traded bank holding companies; (6) a
review of FSB's historical financial performance and projected financial
performance; and, (7) tax consequences of the merger for FSB shareholders.
In connection with rendering its opinion, Mercer Capital performed a
variety of financial analyses, which are summarized below. Mercer Capital
believes that its analyses must be considered as a whole and that selection of
portions of such analyses and the factors considered therein, without
considering all factors and analyses, could create an incomplete view of the
analyses and the process underlying Mercer Capital's opinion.
Mercer Capital did not compile nor audit FSB's or Union Planters'
financial statements, nor did Mercer Capital independently verify the
information reviewed. Mercer Capital relied upon such information as being
complete and accurate in all material respects. Mercer Capital did not make an
independent valuation of the loan portfolio, adequacy of the loan loss reserve
or other assets or liabilities of either institution.
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Mercer Capital's opinion does not constitute a recommendation to any
FSB shareholder as to how the shareholder should vote on the proposed merger;
nor did Mercer Capital express any opinion as to the prices at which any
security of FSB or Union Planters might trade in the future.
The following is a summary of Mercer Capital's valuation analysis and
the analysis of the proposed merger with Union Planters.
TRANSACTION SUMMARY. Mercer Capital and Gerrish & McCreary, P.C.
conducted a joint marketing effort for FSB in which 17 banks were contacted
regarding their interest in acquiring FSB. Seven institutions submitted
proposals. Union Planters' offer was determined to be the best offer of the
seven, based upon the price offered, liquidity of its shares, increase in
dividends to FSB shareholders, and its perceived attractiveness as a possible
acquisition party. Negotiations were then conducted with Union Planters
management which led to the signing of the Agreement.
During the negotiations, Union Planters management agreed to increase
the exchange ratio to reflect a value of $95.00 per FSB share, from $89.00 per
FSB share as submitted originally, with the exchange ratio based upon Union
Planters' 20 day average closing price for the period ended immediately before
the Agreement was executed. The negotiated value of the transaction of $95.00
per share, or $53.5 million, represented 22.4x FSB's trailing 12 months ended
March 31, 1998 and 294% of reported book value as of the same date.
Mercer Capital cautioned, however, that the ultimate value of the
Union Planters shares received by FSB shareholders would be contingent upon the
value of Union Planters' shares on the effective date of the merger given the
fixed exchange ratio.
PRO FORMA ANALYSIS OF PER SHARE DATA. Mercer Capital analyzed the
changes in pro forma dividends per share, earnings per share and book value per
share from the perspective of the FSB shareholders. Mercer Capital did not
represent or warrant that the actual pro forma data reflected in the proxy
statement-prospectus mailed to FSB shareholders would reflect that which was
developed in its analysis.
Based upon financial data as of March 31, 1998 for both Union Planters
and FSB, Mercer Capital calculated that: (a) book value per share would
increase to $34.02 per exchange adjusted share from $32.28 per share; (b)
earnings per share for the trailing twelve months would decline to $4.23 per
exchange adjusted share from $4.25 per share; (c) budgeted 1998 earnings would
increase to $5.76 per exchange adjusted share from $4.44 per share, based upon
FSB's 1998 budget and analysts' 1998 median earnings estimate for Union
Planters of $3.58 per share; and, (d) annual dividends would increase to $3.22
per exchange adjusted share from $1.80 per share based upon FSB's and Union
Planters' annualized quarterly dividends.
CONTRIBUTION ANALYSIS. Mercer Capital compared FSB's relative
contribution to a summary pro forma balance sheet and income statement for
Union Planters after giving effect to a
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merger with Union Planters. FSB's contribution to the pro forma financial
statements was then contrasted with the FSB shareholders' pro forma ownership
interest in Union Planters.
Mercer Capital calculated that FSB shareholders would receive
approximately 907,301 shares in the merger, which would represent 1.070% of
Union Planters' pro forma outstanding common shares based upon 83.86 million
outstanding shares as of March 31, 1998. FSB would contribute: (a) 0.861% of net
interest income, (b) 0.411% of fee income; (c) 0.670% of operating expenses; (d)
0.788% of operating income; (e) 1.112% of reported net income; (f) 0.977% of net
income from operations; (g) 0.775% of loans; (h) 0.837% of deposits; (i) 1.016%
of common equity; and, (j) 0.777% of total assets.
COMPARABLE TRANSACTION ANALYSIS. Mercer Capital reviewed the prices
paid for various banks which have been acquired based upon certain available
public information as compiled by SNL Securities. Mercer Capital noted that most
banking transactions are measured in terms of the price/book ("P/B"),
price/tangible book ("P/TB"), price/earnings ("P/E"), price/assets ("P/A") and
tangible book premium/core deposit ("TBP/CD") ratios.
The bank acquisition data was divided into the following six groups:
(1) aggregate national acquisition data; (2) banks based in the Southeast; (3)
banks based in Tennessee, Arkansas, and Mississippi; (4) banks with assets of
$100 million to $300 million with equity capital of 8% to 12% of assets; (5)
Union Planters' acquisitions; and, (6) Regions Financial's acquisitions.
For each group, average and median P/E, P/B, P/TB, P/A and TBP/CD
ratios were calculated for calendar years 1993-1997 and through mid-year 1998.
The 1998 median P/E ratio and average P/B, P/TB, P/A and TBP/CD ratios were then
multiplied times the Bank's net income for the twelve months ended March 31,
1998, and the book value, tangible book value, assets and core deposits as of
March 31, 1998, to develop an initial indication of value, to which FSB's $3.7
million of excess capital held by its parent company was added to derive an
overall indicated range for FSB.
The range of indicated multiples and values as applied to FSB's March
31, 1998, financial data were as follows: (a) P/E 19.2x-22.8x, $48.0-$56.4
million; (b) P/B 227%-318%, $36.7-$50.0 million; (c) P/TB 239%-324%, $38.4-$50.1
million; (d) P/A 23.4%-30.1%, $36.5-$50.0 million; and, (e) TBP/CD 18.1%-34.6%,
$36.0-$52.2 million. Mercer Capital noted that the implied value of the
transaction at the time the Agreement was negotiated fell towards the upper end
of the indicated comparable transaction range.
Mercer Capital further noted that the pricing for community banks had
risen substantially during 1997 and the first half of 1998. The increase in
acquisition P/E multiples was attributable to an expansion in P/E multiples at
which publicly traded banks were valued in the public markets. Thus, an acquiror
could pay a higher price without issuing additional shares and thereby avoid
issuing additional shares and incurring the additional earnings per share and
ownership dilution.
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With regard to the P/B multiples, the increase in pricing was attributable to
the expansion in P/E ratios and, for many banks, an improvement in their ROE.
DILUTION ANALYSIS. A dilution analysis was conducted whereby
hypothetical non-dilutive prices for FSB were generated under the assumption
that various potential buyers would structure an offer so that FSB's pro-forma
earnings per share would equal that of the assumed buyer based solely on the
shares issued to FSB.
The valuation analysis was based upon hypothetical non-dilutive mergers
with Union Planters, Regions Financial, First Tennessee, National Commerce
Bancorporation, BancorpSouth, SouthTrust, and The Peoples Holding Company. The
analysis calculated a range of values for each assumed buyer based upon FSB's
trailing twelve month earnings, plus after-tax cost savings that a buyer might
realize, less revenues lost from some core deposit run off of 0% to 10%. Expense
savings were assumed to range from 0% to 35% of FSB's non-interest operating
expenses.
Excluding National Commerce Bancorporation whose shares were trading in
the vicinity of 27x estimated 1998 earnings at the time the analysis was
prepared, the indicated lower range was $42.0 million to $49.7 million assuming
no expense savings and no core deposit run-off. The analysis indicated a higher
range of $52.5 million to $62.4 million assuming the buyer credited FSB with a
35% reduction in overhead and a 10% run-off in core deposits.
At the time the analysis was prepared, the banks in the analysis were
trading at a range of 17x to 22x estimated 1998 earnings. Union Planters was
trading in the vicinity of $59 per share and 17x estimated 1998 earnings, which
resulted in an indicated range of $42.0 million to $52.5 million. Mercer Capital
noted that while other institutions had submitted initial expressions of
interests which credited FSB with no or few expense savings, Union Planters'
offer was at the high end of the range which it could pay, given the noted
assumptions, without diluting its per share earnings.
Mercer Capital further noted that the analysis was predicated upon the
hypothetical buyer's earnings per share and public market stock price. It was
noted that a buyer can pay a higher price without issuing additional shares the
greater the buyer's P/E ratio. Mercer Capital cautioned, however, that the
implicit assumption in the analysis is that the buyer "pays" the seller for all
expense savings. Mercer Capital noted that in its opinion, buyers rarely credit
the seller with all expense savings, particularly when the seller is a small
community bank.
DISCOUNTED CASH FLOW ANALYSIS. A discounted cash flow ("DCF") analysis
was prepared to develop an estimate of value FSB shareholders might realize
assuming a merger was delayed five years. Indications of value derived using the
DCF method reflected interim cash flows (dividends) and a terminal cash flow
(the value of FSB at the end of the projection period), both discounted to the
present at an appropriate required rate of return.
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Mercer Capital prepared projections which were reviewed by FSB
management for overall reasonableness. Mercer Capital did not warrant or
represent that the projections could or would be realized. Rather, the
projections were prepared to derive a range of present values given a set of
assumptions. Those assumptions included annual balance sheet growth of 10%, an
ROA of 1.85%-1.90%, and distribution of about 50% of earnings each year in order
to maintain the equity-to-asset ratio at its then current level.
The terminal value was based upon the product of projected earnings for
2002 of $3.3 million and a range of P/E ratios of 18x to 24x. The terminal
values and interim dividends were discounted to present values at a rate of 15%
to derive an overall range of $37.2 million to $47.1 million. When the analysis
was expanded to include a range of earnings of $3.1 million to $3.7 million in
2002, the overall indicated range of value was $35.4 million to $51.8 million.
REVIEW OF UNION PLANTERS. Using public and other available information,
Mercer Capital compared the historical financial performance and current market
pricing of Union Planters with the following: (1) publicly traded bank holding
companies based in the Mid-South; (2) publicly traded bank holding companies
with $10 billion to $35 billion of assets; and, (3) aggregate data for all
publicly traded bank holding companies. None of the companies considered in the
comparison analysis are Union Planters.
Based upon pricing data as of mid July 1998, Mercer Capital calculated
that Union Planters was trading at 22.7x reported twelve month earnings for the
period ended March 31, 1998, and 16.7x and 14.5x, 1998 and 1999 earnings,
respectively, based upon the median of analysts' estimates of Union Planters'
operating earnings of $3.58 per share for 1998 and $4.10 per share for 1999. By
way of comparison, the comparable groups were trading at the following
multiples: (a) Mid-South Group - 21.2x trailing twelve month earnings, 18.8x
estimated 1998 earnings, and 16.8x estimated 1999 earnings; (b) $10-$35 Billion
Group - 21.0x trailing twelve month earnings, 19.0x estimated 1998 earnings, and
17.1x estimated 1999 earnings; and, (c) National Group - 22.4x trailing twelve
month earnings, 18.4x estimated 1998 earnings, and 16.2x estimated 1999
earnings.
In terms of book value, Union Planters' P/B ratio was 282% as compared
to median P/B multiples of 260% for the Mid-South Group, 311% for the $10-$35
Billion Group, and 259% for the National Group. Union Planters' dividend yield
was 3.35% compared to median yields of 1.82% for the Mid-South Group, 2.03% for
the $10-$35 Billion Group, and 1.55% for the National Group.
Union Planters' reported ROE and ROA for the twelve month period ended
March 31, 1998 were, respectively, 12.75% and 1.23% as compared to 13.29% and
1.21% for the Mid-South, 16.28% and 1.35% for the $10-$35 Billion Group, and
13.21% and 1.18% for the National Group. Mercer Capital noted that Union
Planters' historical financial statements included merger related charges for
consummated acquisitions given that growth through acquisitions is a key
component of Union Planters' strategy. Mercer Capital stated that, in its
opinion, Union Planters
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has tended to trade at a discount to its peers in relation to forward operating
earnings estimates because of Union Planters' active acquisition program.
OTHER FACTORS. Other factors considered by Mercer Capital in rendering
its opinion included the possibility that FSB shareholders may benefit from an
acquisition of Union Planters being acquired given the ongoing industry
consolidation. Mercer Capital made no representation or warranty, however, that
such an event would occur, or if it did occur, that it would occur on favorable
terms.
EFFECTIVE TIME OF THE MERGER
Subject to the conditions to the obligations of the parties to effect
the merger, the merger will become effective when Articles of Merger reflecting
the merger become effective with the Secretary of State of the State of
Tennessee. Unless Union Planters and FSB agree otherwise, they will use
reasonable efforts to cause the merger to become effective as soon as is
reasonably practicable, but in no event later than 30 days following the last to
occur of (1) the effective date of the last consent of any regulatory authority
having authority over and approving or exempting the merger (taking into account
any required waiting period), (2) the date on which FSB's shareholders approve
the Agreement and the Plan of Merger, and (3) the date all other conditions
precedent have been satisfied or waived. Union Planters and FSB anticipate that
the merger will become effective on or about December 31, 1998.
Union Planters and FSB cannot assure that the necessary shareholder and
regulatory approvals of the merger will be obtained or that other conditions
precedent to the merger can or will be satisfied. FSB and Union Planters
anticipate that all conditions to consummation of the merger will be satisfied
so that the merger can be completed on or about December 31, 1998.
However, completion of the merger could be delayed.
Either FSB's or Union Planters' board of directors may terminate the
Agreement and the Plan of Merger if the merger is not completed by June 1, 1999,
unless it is not completed because of the willful breach of the Agreement by the
party seeking termination. See "-- Conditions to Consummation of the merger" and
"-- Waiver, Amendment, and Termination."
DISTRIBUTION OF UNION PLANTERS STOCK CERTIFICATES
Promptly after the merger is completed, each former FSB shareholder
will be mailed a letter of transmittal and instructions for the exchange of the
certificates representing shares of FSB common stock for certificates
representing shares of Union Planters common stock. Union Planters expects that
one of its bank subsidiaries will serve as Exchange Agent.
You should not send in your certificates until you receive a letter of
transmittal and instructions.
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After you surrender to the Exchange Agent certificates for FSB common
stock with a properly completed letter of transmittal, the Exchange Agent will
mail you a certificate or certificates representing the number of shares of
Union Planters common stock to which you are 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 the shares of
Union Planters common stock (without interest thereon), if any. Union Planters
will not be obligated to deliver the consideration to you, as a former FSB
shareholder, until you have surrendered your FSB common stock certificates.
Whenever a dividend or other distribution is declared by Union Planters
on Union Planters common stock with a record date after the date on which the
merger became effective, the declaration will include dividends or other
distributions on all shares of Union Planters common stock that may be issued in
the merger. However, Union Planters will not pay any dividend or other
distribution that is payable after the effective date of the merger to any
former FSB shareholder who has not surrendered his or her FSB common stock
certificate until the holder surrenders the certificate. If any FSB
shareholder's common stock certificate has been lost, stolen, or destroyed, the
Exchange Agent will issue the shares of Union Planters common stock and any cash
in lieu of fractional shares upon the shareholder's submission of an affidavit
claiming the certificate to be lost, stolen, or destroyed by the shareholder of
record and, the posting of a bond in such amount as Union Planters will
reasonably direct as indemnity against any claim that may be made against Union
Planters with respect to the certificate.
At the time the merger becomes effective, the stock transfer books of
FSB will be closed to FSB's shareholders and no transfer of shares of FSB common
stock by any shareholder will thereafter be made or recognized. If certificates
for shares of FSB common stock are presented for transfer after the merger
becomes effective, they will be canceled and exchanged for shares of Union
Planters common stock, a check for the amount due in lieu of fractional shares,
if any, and any undelivered dividends on the Union Planters common stock.
TERMINATION FEE AGREEMENT
FSB and Union Planters have entered into a termination fee agreement
which requires FSB to pay Union Planters $2,400,000 as liquidated damages if FSB
enters into a letter of intent, agreement in principle, or definitive agreement
with any third party with respect to an acquisition proposal, or indicates an
intent to support an acquisition proposal, other than the Agreement. The
termination fee is payable by FSB immediately upon entering into a letter of
intent, agreement in principle, or definitive agreement concerning an
acquisition proposal other than that contemplated in the Agreement, unless the
acquisition proposal results from a hostile takeover. In that event the
termination fee is due at the closing of the transaction. The amount of the
termination fee represents:
- - direct costs and expenses incurred by Union Planters in negotiating and
preparing to consummate the transactions contemplated in the Agreement;
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- - Union Planters' indirect costs and expenses incurred in connection with
the transactions contemplated in the Agreement, including management's
time spent in negotiating and preparing for consummation of the
transactions; and
- - Union Planters' loss as a result of not consummating the transactions
contemplated in the Agreement.
FSB's obligation to pay the termination fee could extend as late as
September 30, 1999, in the event that the merger is not consummated or
terminated for certain specific reasons provided in the Agreement.
CONDITIONS TO CONSUMMATION OF THE MERGER
Union Planters and FSB are required to complete the merger only after
the satisfaction of various conditions. These conditions include:
(1) the holders of a majority of the outstanding shares of FSB
common stock must approve the Agreement and the Plan of
Merger;
(2) Union Planters and FSB must receive certain required
regulatory approvals;
(3) Union Planters and FSB must receive a written opinion of
counsel as to the tax-free nature of the merger;
(4) the Securities and Exchange Commission must declare the
registration statement, registering the shares of Union
Planters common stock to be issued to FSB shareholders in the
merger, effective under the Securities Act of 1933, as
amended;
(5) the shares of Union Planters common stock to be issued in the
merger must be approved for listing on the New York Stock
Exchange, subject to official notice of issuance;
(6) the representations and warranties of FSB and Union Planters
as set forth in the Agreement must be true and correct in all
material respects;
(7) the performance of all agreements and the compliance with all
covenants of FSB and Union Planters as set forth in the
Agreement must be accurate as of the date of the Agreement and
as of the date the merger becomes effective;
(8) Union Planters and FSB must receive all other consents that
may be required to complete the merger or to prevent any
default under any contract or permit which would be reasonably
likely to have, individually or in the aggregate, a material
adverse effect on FSB or Union Planters;
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(9) Union Planters must receive a letter, as of the date the
merger becomes effective, from PricewaterhouseCoopers LLP to
the effect that the merger will qualify for
pooling-of-interests accounting treatment;
(10) the absence of any law or order or any action taken by any
court, governmental, or regulatory authority of competent
jurisdiction prohibiting or restricting the merger or making
it illegal;
(11) Union Planters must receive agreements from each person FSB
reasonably believes may be deemed an affiliate of FSB; and
(12) certain other conditions must be satisfied, including receipt
of various certificates from the officers of FSB and Union
Planters.
Neither Union Planters nor FSB can assure FSB shareholders as to when
or if all of the conditions to the merger can or will be satisfied or waived by
the party permitted to do so. If the merger is not effected on or before June 1,
1999 the board of directors of either FSB or Union Planters may terminate the
Agreement and abandon the merger. See "-- Waiver, Amendment, and Termination."
REGULATORY APPROVAL
Union Planters must receive certain regulatory approvals before the
merger can be completed. There is no assurance that these regulatory approvals
will be obtained or when they will be obtained.
It is a condition to the completion of the merger that Union Planters
and FSB receive all necessary regulatory approvals to the merger, without the
imposition by any regulator of any condition that, in the reasonable judgment of
the Union Planters board of directors, would so materially adversely impact the
financial or economic benefits of the merger that, had such condition or
requirement been known, Union Planters would not have entered into the
Agreement. There can be no assurance that the regulatory approvals of the merger
will not contain terms, conditions or requirements which would have such an
impact.
FSB and Union Planters are not aware of any material governmental
approvals or actions that are required to complete the merger, except as
described below. Should any other approval or action be required, Union Planters
and FSB contemplate that they would seek such approval or action.
The merger is subject to the prior approval of the Federal Reserve,
pursuant to Section 3 of the Bank Holding Company Act. Factors considered by the
Federal Reserve in evaluating the merger are discussed under the heading
"CERTAIN REGULATORY CONSIDERATIONS-General" on page 75. The merger may not be
completed until the 30th day following the date of the Federal Reserve approval,
although the Federal Reserve may reduce that period to 15 days. During this
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period the United States Department of Justice is given 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 specifically ordered otherwise. Union
Planters filed an application with the Federal Reserve Bank of St. Louis on or
about October 27, 1998, seeking prior approval of the merger from the Federal
Reserve Bank of St. Louis, pursuant to authority delegated by the Board of
Governors of the Federal Reserve. As of the date of this proxy
statement-prospectus the Federal Reserve Bank of St. Louis has not acted to
approve or disapprove the application.
WAIVER, AMENDMENT, AND TERMINATION
To the extent permitted by law, the Boards of Directors of Union
Planters and FSB may agree in writing to amend the Agreement, whether before or
after FSB's shareholders have approved the Agreement and the Plan of Merger. In
addition, before or at the time the merger becomes effective, either FSB or
Union Planters, or both, may waive any default in the performance of any term of
the Agreement by the other party or 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. In addition, either Union Planters or FSB may waive any of
the conditions precedent to its obligations under the Agreement, unless a
violation of any law or governmental regulation would result. To be effective, a
waiver must be in writing and signed by a duly authorized officer of FSB or
Union Planters, as the case may be.
At any time before the merger becomes effective, the Boards of
Directors of Union Planters and FSB may agree to terminate the Agreement and the
Plan of Merger. In addition, either FSB's board of directors or the Union
Planters board of directors may terminate the Agreement in the following
circumstances:
(1) in certain circumstances, upon the inaccuracy of any
representation or warranty of a party contained in the
Agreement if the inaccuracy cannot be or has not been cured
within 30 days after the giving of written notice to the
breaching party of such inaccuracy (provided that the
terminating party is not itself then in breach of the
Agreement),
(2) if a material breach by the other party of any covenant or
agreement contained in the Agreement 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 itself then in breach of the Agreement),
(3) if any consent of any regulatory authority required to
complete the merger has been denied by final nonappealable
action, or if any action taken by such authority is not
appealed within the time limit for appeal,
(4) if the shareholders of FSB fail to approve the Agreement, the
Plan of Merger and the merger at the special meeting, or
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(5) if the merger is not consummated by June 1, 1999, provided
that the failure to consummate is not caused by any willful
breach of the Agreement by the party electing to terminate.
If the merger is terminated, 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 and
maintain the confidentiality of certain information obtained, will survive.
Termination of the Agreement will not relieve any breaching party from liability
for any uncured willful breach of a representation, warranty, covenant, or
agreement.
CONDUCT OF BUSINESS PENDING THE MERGER
The Agreement obligates FSB to conduct its business only in the usual,
regular, and ordinary course before the merger becomes effective and imposes
certain limitations on the operations of FSB and its banking subsidiaries. These
items are listed in Article 7 of the Agreement which is attached as Appendix A
to this proxy statement-prospectus. The Agreement authorizes FSB to declare and
pay regular quarterly dividends on the FSB common stock in accordance with its
past practice in an amount not to exceed $ .45 per share per quarter. The
Agreement contemplates that the merger will be timed to occur at such a time
that the FSB shareholders will not fail to receive a dividend during a quarterly
period, nor will they receive a dividend on both their FSB common stock and the
Union Planters common stock they receive in the merger during the same quarterly
period.
FSB has also agreed that neither it nor any of its representatives will
directly or indirectly solicit any proposal for the acquisition of FSB or,
except to the extent necessary to comply with the fiduciary duties of FSB's
board of directors as advised by its counsel, furnish any non-public information
concerning FSB that it is not legally obligated to furnish, negotiate with
respect to, or enter into any contract with respect to, any proposal to acquire
FSB .
Union Planters and FSB have also agreed not to take any action that
would (a) materially adversely affect their ability to obtain any consents
required for the merger or prevent the merger from qualifying for
pooling-of-interests accounting treatment or as a tax-free reorganization under
the Internal Revenue Code (see "-- Certain Federal Income Tax Consequences of
the merger"), or (b) materially adversely affect their ability to perform their
covenants and agreements under the Agreement.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
The merger will not change the present management team or board of
directors of Union Planters. Information concerning the management of Union
Planters is included in the documents incorporated by reference in this proxy
statement-prospectus. See "WHERE YOU CAN FIND MORE INFORMATION."
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The current officers and directors of FSB's subsidiary bank will
continue to serve in their respective capacities on behalf of First State Bank.
Union Planters Holding Corporation, as the sole shareholder of First State Bank
after the merger, may change the composition of the Bank's board of directors.
Union Planters currently expects that First State Bank will be merged into Union
Planters Bank, National Association at an undetermined future date. At such
time, executive officers of First State Bank could be offered positions as
regional officers, and directors of First State Bank could be offered positions
as advisory directors of Union Planters Bank, National Association. For
additional information regarding the interests of certain persons in the merger,
see "-- Interests of Certain Persons in the merger."
Union Planters Holding Corporation will be the surviving corporation
resulting from the merger and will 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. In considering the FSB Board's recommendation regarding the
Agreement, FSB shareholders should be aware that certain members of FSB's
management and Board have interests in the merger that may differ from, or be in
addition to, their interests as FSB shareholders. Two executive officers of FSB,
Theodore B. Sloan and Jerry L. DuPriest, are members of the FSB Board that
approved the merger.
EMPLOYEE BENEFITS. The Agreement provides that, after the effective
date of the merger, Union Planters will, subject to compliance with applicable
legal and regulatory requirements, provide coverage for all employees of FSB and
First State Bank under Union Planters' benefit plans for which they are eligible
participants under any health, group term life benefit plan, or 401(k) plan, and
no employee will be denied benefits under any such plan for pre-existing
conditions. All prior years of service of First State Bank employees will be
counted for vesting and eligibility purposes under all applicable Union Planters
employee benefit plans to the extent permitted by applicable law. Any First
State Bank employee who, immediately prior to the effective date, is covered by
or is a participant in a First State Bank employee benefit plan, shall on the
effective date, be covered by or participate in the comparable Union Planters
employee benefit plan if a comparable plan otherwise is maintained by Union
Planters and if the eligibility requirements of the Union Planters plan are met.
EMPLOYMENT AGREEMENTS. The Agreement provides that Union Planters will
enter into employment agreements, no later than the closing date, with Theodore
B. Sloan and Jerry L. DuPriest. It is the intent of the parties for these
employment agreements to bring Mr. Sloan and Mr. DuPriest's respective
employment terms in line with the corporate policies and practices of Union
Planters and with other Union Planters contracts with similarly situated
employees.
INDEMNIFICATION; DIRECTORS AND OFFICERS INSURANCE. Union Planters has
agreed to indemnify the present and former directors, officers, employees, and
agents of FSB and its subsidiaries against certain liabilities arising out of
actions or omissions occurring at or prior to the
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time the merger becomes effective (including the merger) to the full extent
permitted under Tennessee law, FSB's charter and bylaws, and any indemnity
agreements previously entered into by FSB or any of its subsidiaries and any
director, officer, employee, or agent of FSB or any of its subsidiaries. This
provision of the Agreement is consistently included in Union Planters' 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 FSB and its subsidiaries are entitled, but serves to ratify the
legal obligations of FSB and its subsidiaries to provide indemnification in
accordance with Tennessee law, FSB's charter and bylaws, and any indemnification
agreements to which FSB or its subsidiaries is a party with an indemnified
person. These obligations will be assumed by Union Planters Holding Corporation
upon completion of the merger. The indemnification provided under these
instruments will be subject to the same standards that currently apply in
determining whether indemnified parties are entitled to indemnification.
BONUSES. At closing of the merger, certain officers of FSB will be paid
special bonuses. These "Retention Bonuses," in the amount of $100,000 each, will
be paid to Theodore B. Sloan and Jerry L. DuPriest. As an additional part of
these Retention Bonuses, if, on the first anniversary of the effective date of
the merger, neither Mr. Sloan nor Mr. DuPriest's respective employment
agreements have been terminated by either of these officers or by Union
Planters, then each of these individuals will receive additional payments, in
the amount of $290,000 to Mr. Sloan and $246,000 to Mr. DuPriest, plus interest
calculated at the one year Treasury note rate from the effective date of the
merger to the date of such payments. If, during the period beginning on the
effective date of the merger and ending at midnight on the date immediately
preceding the first anniversary of the Effective Date, either of these officers'
employment agreement is terminated due to death or disability by Union Planters
without cause, or by the officer for good reason, Union Planters will pay the
entire remaining balance due for such Retention Bonuses within 30 days following
the date the employment agreement is terminated.
DIRECTOR RETENTION AND ADVISORY SERVICE. The Agreement provides that
the directors of FSB in office immediately prior to the effective time of the
merger shall serve as directors of the Bank from and after the effective time,
in accordance with the terms of certain Director Retention and Advisory Service
Agreements between FSB and its directors. These agreements provide that such
directors shall remain as directors of the Bank and receive their regular
director fees for a period of one year after the effective date of the merger.
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 FSB will be carried forward at
their previously recorded amounts. Since FSB is not considered significant to
Union Planters from a financial statement presentation standpoint, the operating
results will be included in Union Planters results from the effective time of
the merger forward.
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In order for the merger to qualify for pooling-of-interests accounting
treatment, substantially all (90% or more) of the outstanding FSB common stock
must be exchanged for Union Planters 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 the criteria cannot be
satisfied until after the merger becomes effective. In addition, it is a
condition to closing the merger that PricewaterhouseCoopers LLP deliver a letter
to Union Planters to the effect the merger will qualify for pooling-of-interests
accounting treatment.
Certain conditions will be imposed on the exchange of FSB common stock
for Union Planters common stock in the merger by affiliates of FSB . Certain
restrictions will also be imposed on the transferability of the Union Planters
common stock received by those affiliates in the merger. These conditions and
restrictions will be imposed in order, among other things, to ensure the
availability of pooling-of-interests accounting treatment. For information
concerning these conditions and restrictions see"-- Resales of Union Planters
common stock."
EXPENSES AND FEES
Union Planters and FSB will each pay its own expenses in connection
with the merger, 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 Union Planters
and FSB will bear and pay one-half of the printing costs in connection with the
registration statement and this proxy statement-prospectus.
RESALES OF UNION PLANTERS COMMON STOCK
Union Planters common stock to be issued to shareholders of FSB in the
merger will be registered under the Securities Act of 1933, as amended. All
shares of Union Planters common stock received by shareholders of FSB in the
merger will be freely transferable after the merger by those shareholders of FSB
who are not considered to be "affiliates" of FSB or Union Planters. "Affiliates"
generally are defined as persons or entities who control, are controlled by, or
are under common control with FSB or Union Planters at the time of the special
meeting (generally, executive officers, directors, and 10% or greater
shareholders).
Rule 145 promulgated under the Securities Act of 1933, as amended,
restricts the sale of Union Planters common stock received in the merger by
affiliates of FSB and certain of their family members and related interests.
Under the rule, during the one year after the merger becomes effective,
affiliates of FSB or Union Planters may resell publicly the Union Planters
common stock they receive in the merger within certain limitations as to the
amount of Union Planters common stock they can sell in any three-month period
and as to the manner of sale. After the one-year period, affiliates of FSB who
are not affiliates of Union Planters may resell their shares without
restriction. Union Planters must continue to satisfy its reporting requirements
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), in
order for affiliates to resell, under Rule 145, shares of Union Planters common
stock received in the merger. Affiliates also would be permitted to resell Union
Planters common stock received in the merger
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pursuant to an effective registration statement under the Securities Act of
1933, as amended, or an available exemption from the Securities Act of 1933, as
amended, registration requirements. This proxy statement-prospectus does not
cover any resales of Union Planters common stock received by persons who may be
deemed to be affiliates of FSB or Union Planters.
Securities and Exchange Commission guidelines regarding qualifying for
the "pooling of interests" method of accounting also limit sales of shares of
Union Planters and FSB by their affiliates in connection with the merger.
Securities and Exchange Commission guidelines indicate that the "pooling of
interests" method of accounting generally will not be challenged on the basis of
sales by affiliates of the acquiring or acquired company if such affiliates do
not dispose of any of the shares of the corporation they own, or shares of a
corporation they receive in connection with a merger, during the period
beginning 30 days before the merger is consummated and ending when financial
results covering at least 30 days of post-merger operations of the combined
companies have been published.
FSB has agreed to use its reasonable efforts to cause each person who
may be deemed to be an affiliate of FSB to execute and deliver to Union Planters
not later than 30 days prior to the effective time of the merger, an agreement
intended to ensure compliance with the Securities Act of 1933, as amended, and
to preserve the ability of the merger to be accounted for as a "pooling of
interests." Each FSB affiliate must agree not to sell, pledge, transfer, or
otherwise dispose of any FSB common stock held by the affiliate except as
contemplated by the Agreement or the affiliate agreement. In addition, each FSB
affiliate must agree not to sell, pledge, transfer or otherwise dispose of any
Union Planters common stock received in the merger (1) except in compliance with
the Securities Act of 1933, as amended, and the rules and regulations under the
Securities Act of 1933, as amended, and (2) until such time as financial results
covering 30 days of combined operations of Union Planters and FSB have been
published. Prior to publication of such results, Union Planters will not
transfer on its books any shares of Union Planters common stock received by an
affiliate in the merger. The stock certificates representing Union Planters
common stock issued to affiliates in the merger may bear a legend summarizing
these restrictions on transfer. See "-- Conditions to Consummation of the
merger."
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EFFECT OF THE MERGER ON RIGHTS OF SHAREHOLDERS
In the merger, shareholders of FSB will exchange their shares of FSB
for shares of Union Planters. FSB is a Tennessee corporation governed by
Tennessee law and FSB's Charter and bylaws. Union Planters is a Tennessee
corporation governed by Tennessee law and Union Planters' charter and bylaws.
There are significant differences between the rights of FSB shareholders and
Union Planters shareholders. The following is a summary of the principal
differences between the current rights of FSB shareholders and those of Union
Planters' shareholders.
The following summary is not intended to be complete and is qualified
it its entirety by reference to the Tennessee Business Corporation Law and the
Tennessee Business Corporation Act as well as Union Planters' charter and
bylaws and FSB's charter and bylaws. Copies of the Union Planters charter and
bylaws are incorporated by reference in this proxy statement-prospectus and
will be sent to holders of FSB common stock upon request. See "WHERE YOU CAN
FIND MORE INFORMATION" on page 87.
ANTI-TAKEOVER PROVISIONS GENERALLY
UNION PLANTERS. Union Planters' charter and bylaws contain certain
provisions designed to assist the Union Planters board of directors in playing
a role if any group or person attempts to acquire control of Union Planters so
that the Union Planters board of directors can further protect the interests of
Union Planters and its shareholders under the circumstances. These provisions
may help the Union Planters board of directors determine that a sale of control
is in the best interests of Union Planters shareholders, or enhance the Union
Planters board of directors' ability to maximize the value to be received by
the shareholders upon a sale of control of Union Planters.
Although Union Planters management believes that these provisions are
beneficial to Union Planters shareholders, they also may tend to discourage
some takeover bids. As a result, Union Planters 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 these provisions discourage undesirable proposals, Union Planters
may be able to avoid those expenditures of time and money.
These provisions also may discourage open market purchases by a
company that may desire to acquire Union Planters. Those purchases may increase
the market price of Union Planters common stock temporarily, and enable
shareholders to sell their shares at a price higher than that they might
otherwise obtain. In addition, these provisions may decrease the market price
of Union Planters common stock by making the stock less attractive to persons
who invest in securities in anticipation of price increases from potential
acquisition attempts. The provisions also may make it more difficult and time
consuming for a potential acquiror to obtain control of Union Planters through
replacing the board of directors and management. Furthermore, the provisions
may make it more difficult for Union Planters shareholders to replace the board
of directors or
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management, even if a majority of the shareholders believe that replacing the
board of directors or management is in the best interests of Union Planters.
Because of these factors, these provisions may tend to perpetuate the incumbent
board of directors and management.
FSB. FSB's charter and bylaws also contain certain anti-takeover
provisions which are described below. These provisions may discourage or
prevent tender or exchange offers by a corporation or group that intends to use
the acquisition of a substantial number of shares of FSB to initiate a takeover
culminating in a merger or other business combination. These provisions may
also have the effect of making the removal of current management more
difficult.
For more information about these provisions, see "--Authorized
Capital Stock," "-- Amendment of Charter and Bylaws," "-- Classified Board of
Directors and Absence of Cumulative Voting," "-- Director Removal and
Vacancies," "-- Limitations on Director Liability," "-- Indemnification,"
"--Special Meetings of Stockholders," "-- Actions by Stockholders Without a
Meeting," "-- Stockholder Nominations and Proposals" and "-- Business
Combinations."
AUTHORIZED CAPITAL STOCK
UNION PLANTERS. Union Planters is authorized to issue 300,000,000
shares of common stock, of which 136,063,035 shares were issued and outstanding
as of October 31, 1998, and 10,000,000 shares of no par value preferred stock,
of which 968,865 shares of Series E preferred stock were issued and outstanding
as of October 31, 1998. The Union Planters board of directors may authorize the
issuance of additional shares of common stock without further action by its
shareholders, unless applicable laws or regulations or a stock exchange on
which Union Planters' capital stock is listed requires shareholder action.
Union Planters may issue, without a shareholders vote, shares of its
preferred stock, in one or more classes or series, with voting, conversion,
dividend, and liquidation rights as it specifies in its charter. The Union
Planters board of directors may determine, among other things, the distinctive
designation and number of shares comprising a series of preferred stock, the
dividend rate or rates on the shares of such series and the relation of such
dividends to the dividends payable on other classes of stock, whether the
shares of such series shall be convertible into or exchangeable for shares of
any other class or series of Union Planters 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 Union Planters, holders of preferred
stock will have priority over holders of common stock.
The authority to issue additional shares of common stock or preferred
stock provides Union Planters with the flexibility necessary to meet its future
needs without the delay resulting from seeking shareholder approval. The
authorized but unissued shares of common stock and preferred stock may be
issued from time to time for any corporate purpose, including, stock splits,
stock dividends, employee benefit and compensation plans, acquisitions, and
public or private sales
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for cash as a means of raising capital. The shares could be used to dilute the
stock ownership of persons seeking to obtain control of Union Planters. The
sale of a substantial number of shares of voting stock to persons who have an
understanding with Union Planters concerning the voting of such shares, or the
distribution or declaration of a dividend of shares of voting stock (or the
right to receive voting stock) to its shareholders, may have the effect of
discouraging or increasing the cost of unsolicited attempts to acquire control
of Union Planters.
Union Planters has 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 Union Planters
common stock. Under the Plan, one Preferred Share Right is automatically
distributed for each share of Union Planters common stock. The Preferred Share
Rights may deter coercive takeover tactics and encourage persons interested in
potentially acquiring control of Union Planters to treat each shareholder on a
fair and equal basis. Each Preferred Share Right trades on the same basis with
the share of Union Planters common stock to which it relates until the
occurrence of certain events. Upon a potential change in control of Union
Planters, the Preferred Share Rights would separate from Union Planters common
stock and each holder of a Preferred Share Right (other than the potential
acquiror) would be entitled to purchase equity securities of Union Planters at
prices below their market value. Union Planters has authorized 750,000 shares
of Series A preferred stock for issuance under the Preferred Share Rights Plan.
No shares have been issued as of the date of this proxy statement-prospectus.
Until a Preferred Share Right is exercised, the holder has no rights as a
shareholder of Union Planters.
FSB. FSB is authorized to issue 2,500,000 shares of common stock, par
value $10.00 per share, of which 563,541 shares were issued and outstanding as
of the record date. FSB has no other authorized class of stock. The FSB board
of directors may authorize the issuance of additional shares of common stock
for valid corporate purposes without prior shareholder approval.
PREEMPTIVE RIGHTS
UNION PLANTERS. The Tennessee Business Corporation Act provides that,
unless a Tennessee corporation's charter expressly provides for preemptive
rights, stockholders of a Tennessee corporation do not have a preemptive right
to acquire proportional amounts of the corporation's unissued shares upon a
decision of the board of directors to issue shares. The Union Planters charter
does not provide for preemptive rights to its stockholders.
FSB. The FSB charter does not provide for preemptive rights to its
shareholders.
AMENDMENT OF CHARTER AND BYLAWS
UNION PLANTERS. Union Planters may amend its charter in any manner
permitted by Tennessee law. The Tennessee Business Corporation Act provides
that a corporation's charter may be amended by a majority of votes entitled to
be cast on an amendment, subject to any condition the board of directors may
place on its submission of the amendment to the shareholders.
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Union Planters' charter requires a vote of two-thirds or more of the shares of
capital stock entitled to vote in an election of directors to amend the
articles of the charter governing directors and to remove a director from
office, whether with or without cause. A two-thirds vote is also required to
amend, alter, or repeal the article of the charter relating to business
combinations.
The Union Planters board of directors may adopt, amend, or repeal
Union Planters' bylaws by a majority vote of the entire board of directors. The
bylaws may also be amended or repealed by action of Union Planters
shareholders.
Union Planters' charter provides that the Union Planters board of
directors must exercise all powers unless otherwise provided by law. The board
of directors may designate an executive committee consisting of five or more
directors and may authorize that committee to exercise all of the authority of
the board of directors.
FSB. FSB may amend its charter in any manner permitted by Tennessee
law. The FSB charter requires a vote of at least 80% of the outstanding voting
stock of FSB to amend or repeal the sections of the charter relating to
business combinations.
The FSB bylaws may be amended, added to, or repealed by a majority
vote of the shares represented at a shareholders' meeting, or a majority vote
of the entire FSB board of directors. Any change in the FSB bylaws made by its
board of directors may be amended or repealed by the FSB shareholders.
CLASSIFIED BOARD OF DIRECTORS AND ABSENCE OF CUMULATIVE VOTING
UNION PLANTERS. The Union Planters charter provides that the Union
Planters board of directors is divided into three classes, with each class to
be as nearly equal in number as possible. The directors in each class serve
three-year terms of office. The effect of Union Planters having a classified
board of directors is that only approximately one-third of the members of the
Union Planters board of directors are elected each year. As a result, two
annual meetings are required for Union Planters stockholders to change a
majority of the members of the Union Planters board of directors. The purpose
of dividing the Union Planters board of directors into classes is to facilitate
continuity and stability of leadership of Union Planters by ensuring that
experienced personnel familiar with Union Planters will be represented on the
board of directors at all times, and to permit Union Planters management to
plan for the future for a reasonable amount of time. However, by potentially
delaying the time within which an acquirer could obtain working control of the
Union Planters board of directors, this provision may discourage some potential
mergers, tender offers, or takeover attempts.
Pursuant to the Union Planters charter, each holder of Union Planters
common stock is entitled to one vote for each share of Union Planters common
stock held in the election of directors, and is not entitled to cumulative
voting rights in the election of directors. With cumulative voting, a
stockholder has the right to cast a number of votes equal to the total number
of such holder's shares multiplied by the number of directors to be elected.
The stockholder has
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the right to distribute all of his or her votes in any manner among any number
of candidates or to accumulate such shares in favor of one candidate.
Directors are elected by a plurality of the total votes cast by all
stockholders. With cumulative voting, it may be possible for minority
stockholders to obtain representation on the Union Planters board of directors.
Without cumulative voting, the holders of more than 50% of the shares of Union
Planters common stock generally have the ability to elect 100% of the Union
Planters board of directors. As a result, the holders of the remaining Union
Planters common stock effectively may not be able to elect any person to the
Union Planters board of directors. The absence of cumulative voting thus could
make it more difficult for a stockholder who acquires less than a majority of
the shares of Union Planters common stock to obtain representation on the Union
Planters board of directors.
FSB. The FSB charter provides that the FSB board of directors will be
composed of 10 shareholders of FSB. The number of directors may be increased or
decreased only by an amendment to the FSB charter. FSB directors are elected by
a plurality of the votes cast, with 3 directors to be elected at the 1999
annual meeting of shareholders, 4 directors at the 2000 annual meeting of
shareholders and 3 directors at the 2001 annual meeting of shareholders, each
to serve three year terms and the same number to be elected every three years
thereafter. The staggered election of the FSB board of directors exists for the
same purpose as the staggered election of the Union Planters board of directors
described above. The FSB charter also does not provide for cumulative voting in
the election of directors.
DIRECTOR REMOVAL AND VACANCIES
UNION PLANTERS. Union Planters' charter provides that a director may
be removed by the shareholders only if the shareholders holding at least
two-thirds of the voting power entitled to vote generally in the election of
directors vote for such removal. 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. This provision may have the effect of impeding efforts to gain
control of the board of directors by anyone who obtains a controlling interest
in Union Planters common stock.
FSB. The FSB charter provides that a director may be removed only for
"cause" by the affirmative vote of a majority of the entire FSB board of
directors or by the FSB shareholders. "Cause" is defined in the FSB charter as
"fraudulent or dishonest conduct or gross abuse of authority or discretion with
respect to the corporation." The purpose of this provision is to prevent a
majority shareholder from removing directors and filling vacancies with new
individuals selected by that shareholder. This provision may have the effect of
impeding efforts to gain control of the FSB board of directors by anyone who
obtains a controlling interest in FSB common stock.
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LIMITATIONS ON DIRECTOR LIABILITY
UNION PLANTERS. Union Planters' charter does not address the issue of
a directors liability to the corporation. Section 48-18-301 of the Tennessee
Business Corporation Act provides that a director shall not be liable for any
action, or failure to take action if he discharges his duties:
(1) in good faith;
(2) with the care of an ordinarily prudent person in a like
position under similar circumstances; and
(3) in a manner the director reasonably believes to be in the best
interests of the corporation.
In discharging his duties, a director may rely on the information,
opinions, reports, or statements, including financial statements, if prepared
or presented by officers or employees of the corporation whom the director
reasonably believes to be reliable. The director may also rely on such
information prepared or presented by legal counsel, public accountants or other
persons as to matters that the director reasonably believes are in the person's
competence.
FSB. The FSB charter contains the following indemnification provision:
"The personal liability of any director to the corporation or its
shareholders for monetary damages for breach of fiduciary duty as a
director shall be eliminated to the maximum extent authorized by
Sections 48-18-501 et seq. of the Tennessee Business Corporation Act,
as amended from time to time; provided that the foregoing shall not
eliminate or limit the liability of a director:
(a) For any breach or the director's duty of loyalty to the
corporation or its shareholders;
(b) For acts or omissions not in good faith or which involve
intentional misconduct or knowing violations of laws; or
(c) For any unlawful distribution under Section 48-18-304 of the
Tennessee Business Corporation Act, as amended from time to time."
INDEMNIFICATION
UNION PLANTERS. Under the Tennessee Business Corporation Act, a
corporation may indemnify any director against liability if the director:
- conducted himself or herself in good faith;
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- reasonably believed, 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;
- reasonably believed, and in all other cases, that his
or her conduct was at least not opposed to the
corporation's best interests;
- and, in the case of any criminal proceeding, had no
reasonable cause to believe his or her conduct was
unlawful.
Unless limited by its charter, a Tennessee corporation must indemnify,
against reasonable expenses incurred by him or her, a director who was wholly
successful, on the merits or otherwise, in defending any proceeding to which he
or she was a party because he or she is or was a director of the corporation.
Expenses incurred by a director in defending a proceeding may be paid by the
corporation in advance of the final disposition of the proceeding if three
conditions are met:
(1) the director must furnish the corporation a written
affirmation of the director's good faith belief that he or
she has met the standard of conduct as set forth above;
(2) the director must furnish the corporation a written
undertaking by or on behalf of a director to repay such
amount if it is ultimately determined that he or she is not
entitled to be indemnified by the corporation against such
expenses; and
(3) a determination must be made that the facts then known to
those making the determination would not preclude
indemnification.
A director may apply for court-ordered indemnification under certain
circumstances. Unless a corporation's charter provides otherwise:
(1) 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;
(2) 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
(3) 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, bylaws, general or specific action of its
board of directors, or contract.
Union Planters' 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 of 1933, as amended, may be permitted to directors, officers, or
persons controlling Union Planters under the
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<PAGE> 58
provisions described above, Union Planters has been informed that, in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act of 1933, as amended,
and is therefore unenforceable.
FSB. The FSB charter and bylaws do not provide for or limit the
indemnification of its directors and officers. Therefore, its directors and
officers are indemnified to the fullest extent permitted by the Tennessee
Business Corporation Act and Tennessee law.
SPECIAL MEETING OF SHAREHOLDERS
UNION PLANTERS. Special meetings of Union Planters shareholders may be
called for any purpose or purposes whatever at any time by the Chairman of the
Board, the President, the Secretary, or the holders of not less than one-tenth
of the shares entitled to vote at such meeting.
FSB. The FSB bylaws provide that a special meeting of FSB shareholders
may be called by the President, a majority of the FSB board, or by the holders
of not less than one tenth of all the shares of FSB entitled to vote at such
meeting.
ACTIONS BY STOCKHOLDERS WITHOUT A MEETING
UNION PLANTERS. The Union Planters charter and bylaws provide that any
action required or permitted to be taken by Union Planters shareholders at a
duly called meeting of Union Planters shareholders may be effected by the
unanimous written consent of the shareholders entitled to vote on such action.
FSB. The FSB bylaws provided that whenever the shareholders or
directors of FSB are 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, and signed by all the persons or entities entitled to vote.
SHAREHOLDER NOMINATIONS AND PROPOSALS
UNION PLANTERS. Union Planters' charter and bylaws do not address
whether a shareholder may nominate members of the board of directors.
Holders of Union Planters common stock are entitled to submit
proposals to be presented at an annual meeting of Union Planters shareholders.
Union Planters' bylaws provide that any proposal of a shareholder which is to
be presented at any annual meeting of shareholders must be sent so it is be
received by Union Planters not less than 120 days in advance of the anniversary
date of the proxy statement issued in connection with the previous year's
annual meeting.
FSB. The FSB charter and bylaws do not address whether a shareholder
may nominate members of the board or directors or submit proposals to be
presented at the annual meeting of FSB shareholders.
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BUSINESS COMBINATIONS
UNION PLANTERS. Holders of two-thirds or more of Union Planters common
stock must approve a merger, consolidation, or a sale or lease of all or
substantially all of the assets of Union Planters if the other party to the
transaction is a beneficial owner of 10% or more of the outstanding shares of
Union Planters. A two-thirds vote is not required for any merger or
consolidation of Union Planters with or into any corporation or entity if a
majority of the outstanding shares of voting capital stock is owned by Union
Planters.
The requirement of a supermajority vote of shareholders to approve
certain business transactions may discourage a change in control of Union
Planters by allowing a minority of Union Planters 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 and thereby enable management to retain
control over the affairs of Union Planters. The primary purpose of the
supermajority vote requirement is to encourage negotiations with Union Planters
management by groups or corporations interested in acquiring control of Union
Planters and to reduce the danger of a forced merger or sale of assets.
As a Tennessee corporation, Union Planters is or could be subject to
certain restrictions on business combinations under Tennessee law, including,
but not limited to, combinations with interested shareholders. See the
discussion in the following section entitled "-- Takeover Statutes."
Tennessee has three anti-takeover acts which are applicable to Union
Planters, the Tennessee Business Combination Act, the Tennessee Greenmail Act,
and the Tennessee Investor Protection Act. The Tennessee Control Share
Acquisition Act does not apply to Union Planters, because Union Planters'
charter does not include a provision electing to be covered by that act.
The Tennessee Business Combination Act. The Tennessee Business
Combination Act generally prohibits a "business combination" by Union Planters
or a subsidiary with an "interested shareholder" within five years after the
shareholder becomes an interested shareholder. But Union Planters or a
subsidiary can enter into a business combination within that period if, before
the interested shareholder became such, the Union Planters board of directors
approved:
- the business combination or
- the transaction in which the interested shareholder became an
interested shareholder.
After that five year moratorium, the business combination with the
interested shareholder can be consummated only if it satisfies certain fair
price criteria or is approved by two-thirds of the other shareholders.
For purposes of the Tennessee Business Combination Act, a "business
combination" includes mergers, share exchanges, sales and leases of assets,
issuances of securities, and similar transactions. An "interested shareholder"
is generally any person or entity that beneficially owns ten percent or more of
the voting power of any outstanding class or series of Union Planters stock.
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<PAGE> 60
Tennessee law also severely limits the extent to which Union Planters
or any of its officers or directors could be held liable for resisting any
business combination. Under the Tennessee Business Corporation Act, neither a
Tennessee corporation having any stock registered or traded on a national
securities exchange, nor any of its officers or directors, may be held liable
for:
- Failing to approve the acquisition of shares by an interested
shareholder on or before the date the shareholders acquired
such shares;
- Seeking to enforce or implement the provisions of Tennessee
law;
- Failing to adopt or recommend any charter or by-law amendment
or provision relating to such provisions of Tennessee law; or
- Opposing any merger, exchange, tender offer, or significant
asset sale because of a good faith belief that such
transaction would adversely affect the corporation's
employees, customers, suppliers, the communities in which the
corporation or its subsidiaries operate or any other relevant
factor. But the officers and directors can only consider such
factors if the corporation's charter permits the board to do
so in connection with the transaction.
The Tennessee Greenmail Act. The Tennessee Greenmail Act applies to a
Tennessee corporation that has a class of voting stock registered or traded on
a national securities exchange or registered with the Securities and Exchange
Commission pursuant to Section 12(g) of the Exchange Act. Under the Tennessee
Greenmail Act, Union Planters may not purchase any of its shares at a price
above the market value of such shares 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 Union Planters or Union Planters makes an offer, of at least equal
value per share, to all shareholders of such class.
The Tennessee Investor Protection Act. The Tennessee Investor
Protection Act generally requires the registration, or an exemption from
registration, before a person can make a tender offer for shares of a Tennessee
corporation which, if successful, would result in the offeror beneficially
owning more than 10% of any class. Registration requires the filing with the
Tennessee Commissioner of Commerce and Insurance of a registration statement, a
copy of which must be sent to the target company, and the public disclosure of
the material terms of the proposed offer. Additional requirements are imposed
under that act if the offeror beneficially owns 5% or more of any class of
equity securities of the target company, any of which was purchased within one
year prior to the proposed takeover offer. The Tennessee Investor Protection
Act also prohibits fraudulent and deceptive practices in connection with
takeover offers, and provides remedies for violations.
The Tennessee Investor Protection Act does not apply to an offer
involving a vote by holders of equity securities of the offeree company,
pursuant to its charter, on a merger, consolidation or sale of corporate assets
in consideration of the issuance of securities of another corporation, or on a
sale of its securities in exchange for cash or securities of another
corporation. Also excepted from the Tennessee Investor Protection Act are
tender offers which are open on
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<PAGE> 61
substantially equal terms to all shareholders, are recommended by the board of
directors of the target company and include full disclosure of all terms.
The Tennessee Investor Protection Act applies to tender offers for
corporations with substantial ties in Tennessee, including corporations
incorporated in Tennessee or which have their principal offices in the state.
The Sixth Circuit Court of Appeals has held that the application of this act,
and Tennessee's other takeover statutes, to a target company that was not
organized under Tennessee law is unconstitutional. Tyson Foods, Inc. v.
McReynolds, 865 F.2d 99 (6th Cir. 1989).
The acts described above along with the provisions of Union Planters'
charter regarding business combinations might be deemed to make Union Planters
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 Union Planters common stock, the acquiror
would not thereby obtain the ability to replace a majority of the Union
Planters board of directors until at least the second annual meeting of
shareholders following the acquisition. 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, Union Planters' 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 Union Planters'
shareholders to replace the Union Planters board of directors or management,
even if the holders of a majority of the Union Planters common stock should
believe that such replacement is in the interests of Union Planters. As a
result, such provisions may tend to perpetuate the incumbent Union Planters
board of directors and management.
FSB. The FSB charter provides that the affirmative vote of at least
80% of the outstanding voting stock of FSB is required in the event that the
FSB board does not recommend to the FSB shareholders a vote in favor of (1) a
merger or a consolidation of FSB with, (2) a sale, exchange or lease of all or
substantially all of the assets of FSB to, any person or entity.
The affirmative vote of the holders of not less than 80% of the
outstanding shares of voting stock of FSB and the affirmative vote of the
holders of not less than 67% of the outstanding shares of voting stock held by
stockholders other than the "controlling party" is required for the approval or
authorization of any merger, consolidation, reverse stock split, sale, exchange
or lease of all or substantially all of the assets of FSB, if any such
transaction involves any shareholder owning or controlling 20% or more of FSB's
voting stock (a "controlling party") at the time of the proposed transaction.
However, these voting requirements do not apply in any transaction in which all
of the conditions specified in either (A) or (B) are met:
A. The transaction has been approved by a majority of the continuing
directors of FSB. A continuing director is any member of the FSB
board, such person is a member of the FSB board, who is not a
controlling party or in any manner affiliated or associated with
or representative of a controlling party and was a member of the
FSB board prior to the time that the controlling party became a
controlling party. A continuing director also means any person
who subsequently becomes a member of the FSB board and, while a
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<PAGE> 62
member of the board, is not a controlling party or in any manner
affiliated or associated with or a representative of a controlling
party, if such person's nomination for election or election to the
FSB board is recommended or approved by a majority of the
continuing directors then in office.
B. All of the following conditions shall have been met:
(i) The aggregate amount of cash and fair market value (as
determined by the continuing directors in good faith) as of
the date of the consummation of any transaction for
consideration other than cash, to be received per share by
holders of FSB common stock in such transaction, shall be at
least equal to the highest amount determined under
sub-clauses a, b, c below:
(a) (If applicable) the highest per share price (including
any brokerage commissions, transfer taxes and soliciting
dealers' fees) paid by the controlling party for any
share of common stock acquired by it within the three
year period immediately prior to the first public
announcement of the proposal of the transaction, or in
the transaction in which it became a controlling party,
whichever is higher;
(b) The fair market value (as determined by the continuing
directors in good faith) per share of FSB common stock on
the announcement date of the transaction or on the date
on which the controlling party became a controlling
party, whichever is higher; and
(c) (If applicable) the price per share equal to the fair
market value (as determined by the continuing directors
in good faith) per share of FSB common stock determined
pursuant to (B)(i) (b) above, multiplied by the ratio of
(1) the highest per share price (including any brokerage
commissions, transfer taxes and soliciting dealers fees)
paid by the controlling party for any shares of FSB
common stock acquired by it within the three year period
immediately prior to the announcement date to (2) the
total shareholder's equity per share of FSB common stock
(determined in accordance with generally accepted
accounting principles) on the first day of such three
year period on which the controlling party acquired any
shares of FSB common stock.
In addition to the charter provision described above, FSB has the
benefit of the Tennessee Business Combination Act and the Tennessee Investor
Protection Act, described above for Union Planters.
The FSB charter provision regarding business combinations and the two
applicable Tennessee acts described above could be deemed to make FSB less
attractive as an acquisition candidate than might be the case in the absence of
such provisions.
LIMITATIONS ON ABILITY TO VOTE STOCK
UNION PLANTERS. The Union Planters charter and bylaws do not contain
any provision restricting a shareholder's ability to vote shares of Union
Planters voting stock.
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<PAGE> 63
FSB. The FSB charter and bylaws do not contain any provision
restricting a shareholder's ability to vote shares of FSB voting stock.
DISSENTERS' RIGHTS OF APPRAISAL
UNION PLANTERS AND FSB. Under the Tennessee Business Corporation Act,
a shareholder is generally entitled to dissent from a corporate action and
obtain payment of the fair value of his shares in certain events. These events
generally include:
(1) mergers, share exchanges and sales of substantially all of
the corporation's assets other than in the usual and regular
course of business, if the shareholder is entitled to vote on
the transaction;
(2) certain types of amendments of the corporation's charter that
materially and adversely affects a shareholder's rights; or
(3) other corporate actions taken pursuant to a shareholder vote,
to the extent the charter, bylaws, or a resolution of the
board of directors provide for dissenters' rights. Union
Planters' charter and bylaws do not provide for any such
additional dissenters' rights.
Under the Tennessee Business Corporation Act, a shareholder will not have the
right to dissent as to any shares which are listed on a national securities
exchange registered under Section 6 of the Exchange Act or are national market
system securities under the Exchange Act rules. Union Planters common stock is
currently listed on the New York Stock Exchange. Accordingly, shareholders of
Union Planters will NOT be able to assert dissenters' rights with respect to
their shares of Union Planters common stock even if Union Planters were to
engage in one of the actions listed above.
SHAREHOLDERS' RIGHTS TO EXAMINE BOOKS AND RECORDS
UNION PLANTERS AND FSB. The Tennessee Business Corporation Act
provides that a shareholder of a Tennessee corporation may inspect and copy
books and records of the corporation 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 stockholder desires to inspect.
DIVIDENDS
UNION PLANTERS AND FSB. Union Planters' and FSB's ability to pay
dividends on its common stock is governed by Tennessee corporate law. Under
Tennessee corporate law, dividends may be paid so long as the corporation would
be able to pay its debts as they become due in the ordinary course of business
and the corporation's total assets would not be less than the sum of its total
liabilities plus the amount that would be needed, if the corporation were to be
dissolved at the time of the distribution, to satisfy the preferential rights
upon dissolution to shareholders whose preferential rights are superior to
those receiving the distribution.
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There are various statutory limitations on the ability of the Union
Planters' and FSB's banking subsidiaries to pay dividends to Union Planters.
and FSB ,respectively See "CERTAIN REGULATORY CONSIDERATIONS -- Payment of
Dividends."
COMPARATIVE MARKET PRICES AND DIVIDENDS
Union Planters common stock is traded on the New York Stock Exchange
under the symbol "UPC." The following table sets forth, for the indicated
periods, the high and low closing sale prices for the Union Planters common
stock as reported by the New York Stock Exchange, and the cash dividends
declared per share on Union Planters common stock and FSB common stock for the
indicated periods. The stock prices and dividend amounts for Union Planters
have been restated to give effect to stock splits and stock dividends. The
stock prices do not include retail mark-ups, mark-downs or commissions.
<TABLE>
<CAPTION>
UNION PLANTERS FSB
---------------------------------------- ----------
Cash Cash
Price Range Dividends Dividends
----------------------- Declared Declared
High Low Per Share Per Share
-------------------------------------------------------
<S> <C> <C> <C> <C>
1996
First Quarter................................ $31.75 $29.00 $ .27 $ .26
Second Quarter............................... 31.25 29.63 .27 .26
Third Quarter................................ 36.25 28.63 .27 .28
Fourth Quarter............................... 41.38 34.63 .27 .28
------ -----
Total $ 1.08 $1.08
====== =====
1997
First Quarter................................ $47.75 $38.38 $ .320 $ .30
Second Quarter............................... 52.13 41.25 .375 .30
Third Quarter................................ 56.50 49.25 .400 .35
Fourth Quarter............................... 67.88 57.00 .400 .35
------ -----
Total $1.495 $1.30
====== =====
1998
First Quarter................................ $67.31 $58.38 $ .50 $ .42
Second Quarter............................... 62.56 53.94 .50 .45
Third Quarter................................ 61.94 40.25 .50 .45
Fourth Quarter (through November __, 1998)... -.- -.- .50 .45
------ -----
Total......................................... $ 2.00 $1.77
====== =====
</TABLE>
FSB. FSB common stock is not listed for quotation on any stock
exchange. The price of FSB common stock in the last known sales transaction
prior to August 4, 1998 (the date the merger was publicly announced) was $69.00
per share and occurred on July 20, 1998. Based on
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transactions of which FSB management is aware, sales of FSB common stock have
been effected in a range of $42.57 to $69.00 per share during the period from
August 4, 1997 to August 4, 1998. Management has not determined that such sales
were arms-length transactions. Thus, no assurance can be given that the stated
price range represents the actual market value of FSB common stock.
On November 18, 1998, the last sale prices of Union Planters common
stock as reported on the New York Stock Exchange was $48.00 per share. On
August 3, 1998, the last business day prior to public announcement of the
proposed merger, the last sale price of the Union Planters common stock as
reported by the New York Stock Exchange was $54.00.
The holders of Union Planters common stock are entitled to receive
dividends when and if declared by the board of directors out of funds legally
available for the payment of such dividends. Although Union Planters currently
intends to continue to pay quarterly cash dividends on the Union Planters
common stock, there is no assurance that Union Planters' dividend policy will
remain unchanged after completion of the merger. The declaration and payment of
dividends thereafter will depend upon business conditions, operating results,
capital and reserve requirements, and the board of directors' consideration of
other relevant factors. The Agreement provides that FSB may not declare and pay
cash dividends, other than regular quarterly cash dividends, on the shares of
FSB common stock.
Union Planters and FSB are each legal entities separate and distinct
from their subsidiaries and their revenues depend in significant part on the
payment of dividends from their subsidiary depository institutions. Union
Planters' and FSB'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."
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BUSINESS OF FSB, INC.
GENERAL
FSB, Inc. is a bank holding company which owns First State Bank,
Covington, Tennessee (the "Bank"). FSB was chartered as a Tennessee corporation
on March 9, 1982, and the Bank is its sole operating subsidiary.
The Bank was chartered as a Tennessee state bank on March 5, 1919. The
Bank operates a general retail banking business in Covington, Tennessee and
surrounding communities, providing customary banking services such as checking
and savings accounts, various types of time deposits, safe deposit facilities
and money transfers. The Bank finances commercial transactions and makes and
services both secured and unsecured loans to individuals, firms and
corporations.
COMPETITION
Commercial banking in the market areas serviced by FSB and the Bank is
highly competitive. The Bank faces substantial competition from other
commercial banks, savings banks, credit unions, mortgage companies and other
non-traditional financial entities. The Bank also competes for interest-bearing
funds with a number of other financial intermediaries and investment
alternatives, including brokerage firms, money market mutual funds, government
bonds, corporate bonds and other securities. In addition to local credit unions
and brokerage firms, the Bank competes with numerous financial institutions in
its market area including Insouth Bank, Volunteer Bank, Munford Union Bank,
Brighton Bank and Bank of Mason. Bank management considers Volunteer Bank and
Munford Union Bank to be its primary competitors for deposits.
As a result of its economic stability, the primary market of the Bank
in Tipton County provides competing financial institutions with strong loan
demand, especially in the Munford-Atoka area, where residential mortgage demand
has been quite high. The Bank serves the Munford area through its full service
branch in Munford, and that area continues to flourish and has expanded the
Bank's overall mortgage portfolio.
PROPERTIES
FSB's main office is located at 103 East Pleasant Avenue, Covington,
Tennessee 38019, which is also the main office of the Bank. The Bank has two
branches in Covington and a branch office in Munford, Tennessee. The Bank owns
the properties which it occupies as its main office and its branches in
Covington and Munford. The Bank also holds, from time to time, real estate
acquired through foreclosure.
BANK LENDING
The Bank provides a wide variety of commercial, consumer and mortgage
loans. The Bank provides commercial lending for agricultural equipment
purposes, general commercial lending for commercial and industrial businesses,
individuals, churches, clubs and other community affiliated organizations. In
addition, the Bank provides consumer lending for new and used cars, residential
home improvement, mobile home, farm home and other buildings. The Bank provides
mortgage
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loans for construction and land development, farm acreage, residential home
loans and FHLB home loans.
LOAN "WATCH LIST"
Each quarter, management analyzes the loan portfolio to determine the
Bank's potential problem loans and to create a "Watch List." The "Watch List"
has categories of substandard, doubtful, loss, and loans meriting special
attention. The total amount of loans on this list as of September 30, 1998 was
$681,900.
INVESTMENT ACTIVITIES
As of September 30, 1998, FSB had investments totaling $29.353 million.
These investments were comprised of 5.13% U.S. Treasury securities, 41.25%
government agency obligations, 35.88% municipal securities, and 17.74% other
securities. The duration for the portfolio is approximately 2.12 years.
LEGAL PROCEEDINGS
FSB and its subsidiary are not a party to any legal proceedings.
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BENEFICIAL OWNERSHIP OF FSB COMMON STOCK
The following table lists, as of September 30, 1998, the number of shares of
FSB common stock beneficially owned by each person known to FSB to be the
holder of record of 5.0% or more of the outstanding shares of FSB common stock,
by each officer and director of FSB, and by all officers and directors of FSB
as a group.
<TABLE>
<CAPTION>
Amount and Nature
Name and Address of Beneficial Ownership (1) Percent of Class
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
First State Bank ESOT
P. O. Box 808 96,629 17.14%
Covington, TN 38019
James Q. Edmonds
2657 Mount Carmel Rd. 32,090 (2) 5.69%
Covington, TN 38019
Theodore B. Sloan
1401 Roane Avenue 34,469 (3) 6.12%
Covington, TN 38019
All Directors and Officers as 128,225 22.75%
a group (13 persons)
- -----------------------------------------------------------------------------------------------------
</TABLE>
(1) Fractional share interests are in the FSB Dividend
Reinvestment Plan ("DRIP"). No fractional shares will be
issued, but participants in the DRIP will receive cash in
lieu of fractional shares.
(2) Includes 16,400 shares in Mr. Edmonds' IRA; 8,304 shares in
the J. Q. Edmonds Trust of which Mr. Edmonds is Trustee;
1,630 shares owned jointly with his son; 2,556 shares of
which Mr. Edmonds is custodian for his minor grandchildren;
and 3,200 shares in his wife's trust of which she is Trustee.
(3) Includes 2,777 shares in Mr. Sloan's IRA; 20,025 shares
allocated to Mr. Sloan in the FSB ESOT; 7,244 shares owned
jointly with his wife; 3,348 shares owned by his wife or held
in her IRA; and 1075 owned by Mr. Sloan individually.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF FSB, INC. AND SUBSIDIARY
The following discussion provides certain information regarding the
financial condition and results of operations of FSB, Inc. This discussion
should be read in conjunction with FSB's Consolidated Financial Statements and
Notes to Consolidated Financial Statements presented elsewhere in this Proxy
Statement-Prospectus.
RESULTS OF OPERATIONS
General. The earnings of FSB depend primarily on net interest income
(i.e., the difference between the income earned on loans and investments and
the interest paid on its deposits and other borrowed funds). Among the factors
affecting net interest income are the type and volume of its deposits and other
borrowed funds, and the relative sensitivity of its interest-earning assets and
its interest-bearing liabilities to changes in market interest rates.
FSB's income also is affected by fees it receives from other banking
services, by its provisions for loan losses and the level of operating
expenses. All aspects of FSB's operations are affected by general market,
economic and competitive conditions.
FSB reported net income of $1,777,000 for the nine month period ended
September 30, 1998, an increase of $139,000 from the nine month period ended
September 30, 1997. Pre-tax income was $2,596,000 for the nine month period
ended September 30, 1998, a $266,000 increase from the nine month period ended
September 30, 1997.
FSB reported net income of $2,317,000 for the year ended December 31,
1997, an increase of $226,000 from net income of $2,091,000 for the year ended
December 31, 1996. Pretax income was $3,324,000 for the year ended December 31,
1997, a $389,000 increase from the $2,935,000 earned during the year ended
December 31, 1996. FSB had net income of $1,799,000 and pretax income of
$2,491,000 for the year ended December 31, 1995. Changes occurring in the major
components of FSB's income statement for such periods are discussed below.
Net interest income. Net interest income is the primary source of
income for FSB and represents the amount by which interest generated by earning
assets exceeds the cost of funds, primarily paid to depositors on
interest-bearing accounts.
Net interest income was $4,975,000 for the nine months ended September
30, 1998, a 7.57% increase from net interest income of $4,625,000 for the nine
months ended September 30, 1997. This increase in net interest income is
primarily due to the increases in interest on loans. The average yield earned
on loans was 9.71% as of September 30, 1998. Average deposits for the nine
months ended September 30, 1998 were $114,637,000.
Net interest income was $6,294,000 for the year ended December 31,
1997, a 8.57% increase from net interest income of $5,797,000 for the year
ended December 31, 1996. This increase in net interest income is primarily due
to the increases in interest on loans. Average yields earned on
interest-bearing assets increased to 8.63% as of December 31, 1997, from 8.62%
as of December 31, 1996. Average loans of $91,992,000 for the year ended
December 31, 1997,
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increased 11.86% from average loans of $82,239,000 for the year ended December
31, 1996. The increase in average loans resulted from increases in commercial,
installment and mortgage loans. Average deposits for the year ended December
31, 1997 were $109,351,000, an increase of 2.20% over average deposits of
$106,997,000 for the year ended December 31, 1996.
Net interest income was $5,797,000 for the year ended December 31,
1996, a 7.51% increase from net interest income of $5,392,000 for the year
ended December 31, 1995. This increase in net interest income is primarily due
to the increases in interest on loans. The average loans as of December 31,
1996, were $82,239,000. Average deposits for the year ended December 31, 1996
were $106,997,000.
The following table sets forth for the periods indicated net interest
income by each major category of interest-bearing assets and interest-bearing
liabilities. The yields earned and paid on each major type of asset and
liability account are set forth beside the average level in the account for the
period, and the average yields on all interest-bearing liabilities also are
summarized.
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<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
--------------------------------------------------------------------
AVERAGE INTEREST AVERAGE INTEREST
BALANCE INC/EXP YIELD BALANCE INC/EXP YIELD
--------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
INTEREST EARNING ASSETS
Loans $ 91,992 $ 9,025 9.81% $ 82,239 $ 8,173 9.94%
Securities 37,808 2,207 5.84% 38,416 2,299 5.98%
Federal Funds Sold 799 42 5.26% 2,102 111 5.28%
Deposits in Financial Institutions
64 3 4.69% 69 3 4.35%
-------- ------- ---- -------- ------- ----
Total Interest Earning Assets/
Interest Income/Average Yield 130,663 11,277 8.63% 122,826 $10,586 8.62%
Non Interest Earning Assets:
Cash and Due from Banks 3,682 3,824
Other Assets 4,901 4,962
Allowance for Loan Losses (1,017) (999)
-------- --------
TOTAL ASSETS $138,229 $130,613
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
INTEREST BEARING LIABILITIES
NOW, Money Market and Savings $ 35,041 $ 1,139 3.25% $ 36,255 $ 1,222 3.37%
Certificates of Deposit 58,962 3,223 5.47% 56,968 3,106 5.45%
Fed Funds Purchased and FHLB Advances 10,495 621 5.92% 7,677 461 6.00%
-------- ------- ---- -------- ------- ----
Total Interest Bearing Liabilities/
Interest Expense/Average Yield 104,498 4,983 4.77% 100,900 4,789 4.75%
NON INTEREST BEARING DEMAND 15,348 13,744
DEPOSITS
OTHER LIABILITIES 2,352 1,987
-------- --------
TOTAL LIABILITIES 122,198 116,661
-------- --------
STOCKHOLDERS' EQUITY 16,031 13,952
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' $138,229 $130,613
======== ========
EQUITY
NET INTEREST INCOME $ 6,294 3.86% $ 5,797 3.87%
======= =======
</TABLE>
62
<PAGE> 72
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1998
-------------------------------
Average Interest
Balance Inc/Exp Yield
-------------------------------
(Dollars in Thousands)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
INTEREST EARNING ASSETS
Loans $100,022 $ 9,709 9.71%
Securities 32,949 1,823 5.53%
Federal Funds Sold 5,519 299 5.41%
Deposits in Financial Institutions 77 4 5.19%
Total Interest Earning Assets/
Interest Income/Average Yield 138,567 11,835 8.54%
Non Interest Earning Assets:
Cash and Due from Banks 3,731
Other Assets 4,164
Allowance for Loan Losses (1,058)
--------
TOTAL ASSETS $145,404
========
LIABILITIES AND STOCKHOLDERS' EQUITY
INTEREST BEARING LIABILITIES
NOW, Money Market and Savings $ 35,766 $ 1,139 3.18%
Certificates of Deposit 62,810 3,441 5.48%
Fed Funds Purchased and FHLB Advances 10,582 621 5.87%
-------- ------- ----
Total Interest Bearing Liabilities/
Interest Expense/Average Yield 109,158 5,201 4.76%
NON INTEREST BEARING DEMAND DEPOSITS 16,061
OTHER LIABILITIES 1,880
--------
TOTAL LIABILITIES 127,099
--------
STOCKHOLDERS' EQUITY 18,305
--------
TOTAL LIABILITIES AND SHAREHOLDER'S 145,404
EQUITY ========
NET INTEREST INCOME 6,634 3.78%
=======
</TABLE>
63
<PAGE> 73
PROVISION FOR POSSIBLE LOAN LOSSES
First State Bank's allowance for loan losses is established through
charges to operating income in the form of the provision for loan losses.
Actual credit losses or recoveries of credit losses are charged or credited
directly to the reserve for bad debt account.
First State Bank recorded a provision for possible loan losses of
$273,000 for the nine months ended September 30, 1998, and $87,000 for the nine
months ended September 30, 1997. The reserve for bad debt expressed as a
percentage of outstanding loans was 1.12% and 1.06% as of September 30, 1998
and 1997, respectively.
For the year ended December 31, 1997, the Bank recorded a provision
for possible loan losses of $123,000. For the year ended December 31, 1996, the
Bank recorded a provision for possible loan losses of $93,000. The reserves for
bad debts as of December 31, 1997 and 1996 were $1,021,000 and $965,000,
respectively. The reserve for bad debts expressed as a percentage of
outstanding loans was 1.04% and 1.14% as of December 31, 1997 and 1996,
respectively.
There were no nonaccrual loans as of September 30, 1998, or December
31, 1997.
Non-interest income. Non-interest income, which primarily includes
service charges, mortgage banking fee income and trust income was $1,254,000
for the nine months ended September 30, 1998, and $966,000 for the nine months
ended September 30, 1997. Non-interest income increased 7.48% to $1,393,000 for
the year ended December 31, 1997, from $1,298,000 for the year ended December
31, 1996, primarily due to an increase in service charge fee income.
Non-interest income increased 10.48% to $1,298,000 for the year ended December
31, 1996, from $1,182,000 for the year ended December 31, 1995, primarily due
to an increase in service charge fee income.
Non-interest Expense. Non-interest expense includes expenses which the
Bank incurs in the course of operations such as employee compensation and
benefits, occupancy expense and general operating expenses. These expenses
increased 5.86% from $3,174,000 for the nine months ended September 30,1997, to
$3,360,000 for the nine months ended September 30, 1998. Non-interest expense
increased from $4,067,000 for the year ended December 31, 1996, to $4,240,000
for the year ended December 31, 1997, primarily due in an increase in other
operating expenses. Non-interest expense increased from $3,951,000 for the year
ended December 31, 1995, to $4,067,000 for the year ended December 31, 1996,
primarily due in an increase in salary and benefit costs.
Federal Income Taxes. FSB's provisions for income taxes were $692,000
and $819,000 for the nine months ended September 30, 1997 and 1998,
respectively. FSB's provisions for income taxes were $1,007,000, $844,000, and
$692,000 for the years ended December 31, 1997, 1996, and 1995, respectively.
64
<PAGE> 74
CAPITAL RESOURCES, LIQUIDITY AND FINANCIAL CONDITION
Capital Resources. Capital resources are subject to various regulatory
capital requirements administered by the federal and state banking agencies.
Any institution that fails to meet its minimum capital requirements is subject
to actions by regulators that could have a direct material effect on the
financial statements. Under the capital adequacy guidelines and the regulatory
framework for prompt corrective action, First State Bank must meet specific
capital requirements based on its assets, liabilities, and certain off-balance
sheet items as calculated under regulatory accounting practices. FSB and First
State Bank's capital amounts and the Bank's classification under the regulatory
framework for prompt corrective action also are subject to qualitative
judgments by the regulators regarding the components, risk weightings and other
factors.
To meet the capital adequacy requirements, FSB and the Bank must
maintain minimum amounts and ratios as defined in the regulations. FSB and
First State Bank met all capital adequacy requirements as of September 30, 1998
and December 31, 1997. The most recent notification from the Federal Deposit
Insurance Corporation, as of June 2, 1997, categorized First State Bank as
"well-capitalized" under the regulatory framework for prompt corrective action.
To be categorized as well-capitalized, the Bank must maintain minimum total
risked-based, Tier 1 risked-based, and Tier 1 leverage ratios as set forth in
the table below. There have been no conditions or events since that
notification which management of FSB believes have changed the Bank's category.
65
<PAGE> 75
The Bank's actual capital amounts and ratios as of September 30, 1998,
and December 31, 1997, are presented in the table below (dollars in thousands).
<TABLE>
<CAPTION>
TO BE "WELL
CAPITALIZED"
FOR CAPITAL UNDER PROMPT
ADEQUACY CORRECTIVE
ACTUAL PURPOSES ACTION PROVISIONS
--------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
--------------------------------------------------------------------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
As of September 30, 1998:
Total Capital (to Risk-Weighted Assets) $15,975 16.68% >$7,663 >8.00% >$9,579 >10.00%
Tier 1 Capital (to Risked-Weighted Assets) $14,812 15.46% >$3,831 >4.00% >$5,747 >6.00%
Tier 1 Capital (to Average Assets) $14,812 10.49% >$4,237 >3.00% >$7,062 >5.00%
As of December 31, 1997:
Total Capital (to Risk-Weighted Assets) $15,122 16.48% >$7,339 >8.00% >$9,174 >10.00%
Tier 1 Capital (to Risked-Weighted Assets) $14,100 15.37% >$3,669 >4.00% >$5,504 >6.00%
Tier 1 Capital (to Average Assets) $14,100 10.14% >$4,173 >3.00% >$6,955 >5.00%
</TABLE>
Liquidity. FSB's asset and liability management policy is intended to
maintain adequate liquidity and thereby enhance its ability to raise funds to
support asset growth, meet deposit withdrawals and lending needs, maintain
reserve requirements, and otherwise sustain operations. FSB accomplishes this
through management of the maturities of its interest-earning assets and
interest-bearing liabilities. Liquidity is monitored and overall interest rate
risk is assessed through reports showing both sensitivity ratios and existing
dollar "gap" data. FSB believes its present position to be adequate to meet its
current and future liability needs.
The liquidity of FSB is maintained in the form of readily marketable
investment securities, vault cash and federal funds sold. While the minimum
liquidity requirement for banks is determined by federal bank regulatory
agencies as a percentage of deposit liabilities, FSB's management monitors
liquidity requirements as warranted by interest rate trends, changes in the
economy and the scheduled maturity and interest rate sensitivity of the
investment and loan portfolio and deposits. In addition to the liquidity
provided by the foregoing, FSB has correspondent relationships as of September
30, 1998, with other institutions with available secured lines of credit to
purchase overnight funds totaling $11,500,000 should additional liquidity be
needed. Also fsb can borrow $24.78 million from the Federal Home Loan Bank in
Cincinnati, of which $10,519,000 was borrowed as of September 30, 1998.
Financial Condition. From December 31, 1997, to September 30, 1998, FSB
increased its total assets by approximately $42,000, primarily through increases
of approximately $610,000 in
66
<PAGE> 76
cash and cash equivalents, decreases of $6,796,000 in investment securities,
and increases in loans of $5,743,000. These decreases were offset by increases
in deposits of approximately $1,460,000.
From year end 1996 to year end 1997, total assets increased by
approximately $9,559,000. The increase in deposits was invested in the loan
portfolio.
Interest Rate Sensitivity. Interest rate sensitivity refers to the
relationship between market interest rates and net interest income resulting
from the repricing of certain assets and liabilities. Interest rate risk arises
when an earning asset matures or when its rate of interest changes in a time
frame different from that of the supporting interest-bearing liability. One way
to reduce the risk of significant adverse effects of market rate fluctuations
on net interest income is to minimize the difference between rate sensitive
assets and liabilities, referred to as "gap," by maintaining a similar interest
rate sensitivity position of the assets and liabilities within a particular
time frame.
Maintaining an equilibrium between sensitive assets and liabilities
will reduce some of the risk associated with changes in market rates, but it
will not guarantee a stable net interest spread because yields and rates may
change simultaneously and by different amounts. These changes in market spreads
could materially affect the overall net interest spread even if assets and
liabilities were perfectly matched. If more assets than liabilities reprice
within a given period, an asset sensitive position or "positive gap" is
created. During a positive gap, a decline in market rates will have a negative
Impact on net interest income. Alternatively, where more liabilities than
assets reprice in a given period, a liability sensitive position or "negative
gap" is created and a decline in interest rates will have a positive impact on
net interest income.
INTEREST RATE SENSITIVITY GAPS
The following table shows the interest rate sensitivity gaps for
different time periods and the cumulative interest rate sensitivity gap as of
September 30, 1998.
<TABLE>
<CAPTION>
0 to 90 Days 91 Days to 1 Year Over One Year Total
-----------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST EARNING ASSETS
Loans $ 16,451 $ 20,539 $66,958 $103,948
Securities 4,911 4,248 20,194 29,353
Federal Funds Sold 5,249 -- -- 5,249
-------- -------- ------- --------
Total Interest Earning Assets $ 26,611 $ 24,787 $87,152 $138,550
INTEREST BEARING LIABILITIES
NOW, Money Market and Savings Deposits $ 8,571 $ 8,571 $17,142 $ 34,284
Time Deposits 17,892 35,960 10,343 64,195
FHLB Borrowings 3,283 -- 7,236 10,519
-------- -------- ------- --------
Total Interest Bearing Liabilities $ 29,746 $ 44,531 $34,721 $108,998
PERIOD GAP $ (3,135) $(19,744) $52,431 $ 29,552
CUMULATIVE GAP $ (3,135) $(22,879) $29,552 $ 29,552
CUMULATIVE GAP AS A PERCENTAGE
OF TOTAL ASSETS -2.15% -15.68% 20.25% 20.25%
</TABLE>
67
<PAGE> 77
Varying interest rate environments can create unexpected changes in
prepayment levels of assets and liabilities which are not reflected in the
interest sensitivity analysis. These prepayments may have significant effects
of FSB's net interest margin. Because of these factors, an interest sensitivity
gap report may not provide a complete assessment of FSB's exposure to changes
in interest rates.
INVESTMENT SECURITIES
Set forth below is a distribution of FSB's investment securities by
contractual maturity dates at September 30, 1998 (mortgage-backed securities
are classified in the period of final maturity). Borrowers may have the right
to call or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
After One Maturing After
Within One but within Five but Within After Ten
Year Five Years Ten Years Years Total
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SECURITIES HELD TO MATURITY:
Obligations of States and Other
Political Subdivisions -- $ 770 $2,295 $ 748 $ 3,813
------ ------ ------ ------ -------
Total Securities Held to Maturity -- $ 770 $2,295 $ 748 $ 3,813
SECURITIES AVAILABLE FOR SALE:
U. S. Government Obligations $1,505 -- -- -- $ 1,505
U.S. Government Agency Obligations 1,500 7,544 1,571 -- 10,615
Obligations of States and Other
Political Subdivisions 948 704 3,109 1,959 6,720
Mortgage-backed Securities -- -- 1,025 469 1,494
Marketable Equity Securities 3,786 -- -- -- 3,786
Other Equity Securities 1,420 -- -- -- 1,420
------ -------
Total Securities Available for Sale 9,159 8,248 5,705 2,428 25,540
------ ------ ------ ------ -------
Total All Securities $9,159 $9,018 $8,000 $3,176 $29,353
====== ====== ====== ====== =======
</TABLE>
DEPOSITS
The average balances and average rates paid by category of deposits at
the dates shown below are as follows:
<TABLE>
<CAPTION>
September 30, 1998 December 31, 1997 December 31, 1996
-----------------------------------------------------------------------
(Dollars in Thousands)
-----------------------------------------------------------------------
Amount Rate Amount Rate Amount Rate
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NON-INTEREST BEARING:
Demand $ 16,061 -- $ 15,348 -- $ 13,774 --
INTEREST BEARING:
NOW, Money Market, and Savings Deposits 35,766 3.18% 35,041 3.25% 36,255 3.37%
Certificates of Deposit 62,810 5.48% 58,962 5.47% 56,968 5.45%
-------- -------- --------
Total Interest Bearing 98,576 4.65% 94,003 4.64% 93,223 4.64%
-------- -------- --------
TOTAL DEPOSITS $114,637 $109,351 $106,997
======== ======== ========
</TABLE>
68
<PAGE> 78
The scheduled maturities of certificates of deposit in denominations
of $100,000 or more at September 30, 1998, and December 31, 1997, including
public funds, are shown below:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
----------------------------
(DOLLARS IN THOUSANDS)
----------------------------
<S> <C> <C>
Due in three months or less $ 1,305 $ 5,342
Due in over three to twelve months 7,478 4,835
Due in over twelve months 2,913 2,295
------- -------
TOTAL $11,696 $12,472
======= =======
</TABLE>
LOANS
The following table classifies the Bank's loans according to type as
of the dates shown:
<TABLE>
<CAPTION>
September 30, 1998 December 31, 1997 December 31, 1996 December 31, 1995
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(Dollars in Thousands)
Commercial Loans $ 13,982 $ 12,869 $10,706 $ 9,715
Installment Loans 14,974 14,981 15,705 13,762
Mortgage Loans 75,115 71,116 60,185 51,563
Mortgage Loans Sold 2,003 1,179 647 414
-------- -------- ------- -------
TOTAL 106,074 100,145 87,243 75,454
Less Allowance for Loan Losses 1,163 1,022 964 981
Less Unearned Income 2,126 2,081 2,331 2,171
-------- -------- ------- -------
TOTAL NET LOANS $102,785 $ 97,042 $83,948 $72,302
======== ======== ======= =======
</TABLE>
The maturities of loans, net of unearned discount, at September 30,
1998, were as follows:
<TABLE>
<CAPTION>
(Dollars in Thousands)
----------------------
<S> <C>
Less than 1 year $ 33,961
1-5 years 54,439
5-15 years 15,127
Over 15 years 421
--------
TOTAL LOANS $103,948
========
</TABLE>
RESERVE FOR BAD DEBTS AND RISK ELEMENTS
The provision for loan losses represents a determination by FSB's
management of the amount necessary to be charged to operating income and
transferred to the reserve for bad debts to maintain a level which it considers
adequate in relation to the risk of losses inherent in the loan portfolio. It
is FSB's policy to provide for exposure to losses of assets identified on the
internal "watch list" and a general allowance for the remainder of the loan
portfolio. While it is also FSB's policy to charge off in the current period
those loans in which a loss is deemed to exist, risks of losses also exist
which cannot be quantified precisely or attributed to particular loans or
classes of loans.
69
<PAGE> 79
In assessing the adequacy of its reserve for bad debts, management
relies on its ongoing review of the loan portfolio, which is undertaken both to
ascertain whether there are probable losses which must be charged off and to
assess the risk characteristics of individually significant loans and of the
portfolio in the aggregate. This review takes into consideration the judgments
of responsible lending officers, senior loan officers, the Finance Committee,
the President, the Chief Executive Officer and the Board of Directors.
NONACCRUAL, PAST DUE AND RESTRUCTURED LOANS
The following is an analysis of non-performing assets as of the dates
shown and the cumulative interest rate sensitivity gap as of September 30,
1998.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996
-------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
-------------------------------------------------------------------
<S> <C> <C> <C>
Loans accounted for on a
nonaccrual basis -- -- --
Accruing loans which are
contractually past due 90 days
or more as to principal or
interest payments $142 $93 $92
---- --- ---
TOTAL $142 $93 $92
==== === ===
</TABLE>
The accrual of interest on a loan is discontinued when, in the opinion of
management (based upon such criteria as default in payment, asset
deterioration, decline in cash flow, recurring operating loss, declining sales,
bankruptcy and other financial conditions which could result in default), the
borrower's financial condition is such that the collection of interest is
doubtful.
RETURN ON EQUITY AND ASSETS
The return on equity and return on assets for the periods ended as
shown below are as follows:
<TABLE>
<CAPTION>
September 30, 1998 December 31, 1997 December 31, 1996
-----------------------------------------------------------------
<S> <C> <C> <C>
Return on Average Assets 1.63% 1.59% 1.53%
Return on Average Equity 12.94% 13.03% 14.12%
Average Equity to 12.59% 11.60% 10.68%
Average Assets
Dividend Payout Ratio 42.00% 31.00% 28.00%
</TABLE>
70
<PAGE> 80
BUSINESS OF UNION PLANTERS
GENERAL
Union Planters, a Tennessee corporation, is a bank holding company
registered with the Federal Reserve under the Bank Holding Company Act. As of
September 30, 1998, Union Planters had total consolidated assets of
approximately $30.5 billion, total consolidated loans of approximately $19.7
billion, total consolidated deposits of approximately $23.3 billion, and total
consolidated shareholders' equity of approximately $2.9 billion.
Union Planters conducts its business activities through Union Planters Bank,
National Association, its principal bank subsidiary, and a number of other
banking and banking-related subsidiaries. Through its various subsidiaries,
Union Planters provides a diversified range of financial services, maintaining
at September 30, 1998, 801 banking offices and 1,000 ATMs in the states in which
it operates, as follows:
<TABLE>
<CAPTION>
Full Service and
Limited Service
State Branches ATMs
- -------------------------------------------------------------
<S> <C> <C>
Alabama 22 22
Arkansas 48 37
Florida 65 47
Illinois 95 104
Indiana 17 18
Iowa 30 33
Kentucky 28 26
Louisiana 22 17
Mississippi 151 170
Missouri 98 123
Tennessee 209 375
Texas 16 28
--- -----
801 1,000
=== =====
</TABLE>
Acquisitions have been, and are expected to continue to be, an
important part of the expansion of Union Planters' business. During the period
beginning January 1, 1994 and ending September 30, 1998, Union Planters
completed the acquisition of 43 institutions with approximately $26.4 billion
in total assets. The restated consolidated financial statements of Union
Planters included in Exhibit 99.1 to its September 30, 1998 Quarterly Report on
Form 10- Q and filed with the SEC, and the financial information relating to
Union Planters included under "Selected Financial Data" in this proxy
statement-prospectus, reflect the financial impact of all of such acquisitions,
including the acquisitions completed during 1998.
71
<PAGE> 81
In addition, as of September 30, 1998, Union Planters was a party to
definitive agreements to acquire five financial institutions in addition to
FSB, and to purchase 56 branch locations and assume deposit liabilities of
approximately $1.8 billion in Indiana (the "Indiana Branch Purchase" and,
together with all other pending acquisitions, the "Other Pending
Acquisitions:). The Other Pending Acquisitions had aggregate total assets of
approximately $3.3 billion at September 30, 1998. For information with respect
to these acquisitions, see " -- Recent Developments" below.
Union Planters expects to continue to take advantage of the
consolidation of the financial services industry by further developing its
franchise through the acquisition of financial institutions. Future
acquisitions may entail the payment by Union Planters of consideration in
excess of the book value of the underlying net assets acquired, may result in
the issuance of additional shares of Union Planters capital stock or the
incurring of additional indebtedness by Union Planters, and could have a
dilutive effect on the earnings or book value per share of Union Planters
common stock. Moreover, significant charges against earnings are sometimes
required incidental to acquisitions. For a description of the acquisitions in
addition to the merger which are currently pending, see "-- Recent
Developments."
The principal executive offices of Union Planters 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 Union
Planters and its subsidiaries is included in documents incorporated by
reference in this proxy statement-prospectus. See "WHERE YOU CAN FIND MORE
INFORMATION."
RECENT DEVELOPMENTS
RECENT SALE OF CREDIT CARD PORTFOLIO. On October 15, 1998, Union
Planters sold substantially all of its credit card portfolio to MBNA Bank
America, N.A. Union Planters also entered into an agreement with MBNA Bank
America, N.A. to sell it a large majority of the credit card portfolios of
Union Planters Bank of Kentucky, a wholly owned subsidiary of Union Planters,
and of Magna Bank, N.A. which merged into Union Planters Bank, National
Association on October 9, 1998. The value of the credit card portfolio sold
totaled $460 million. In the fourth quarter of 1998, Union Planters expects to
recognize a net gain of $65 to $70 million on a pretax basis and approximately
$40 to $43 million after taxes as a result of the sale. Certain estimated costs
related to selling the credit card portfolios, including employee severance,
equipment write-offs and other fees, have been netted against the gain. Union
Planters also expects to charge off approximately $10 million to $15 million of
credit card receivables that will not be purchased by MBNA Bank America, N.A.
in the fourth quarter of 1998. A smaller portion of the transaction will settle
in the first quarter of 1999.
RECENTLY COMPLETED ACQUISITIONS. Since December 31, 1997, Union
Planters has completed 14 acquisitions, representing approximately $13.5
billion in assets. The financial impact of all of such acquisitions deemed
material are reflected in the restated consolidated financial statements of
Union Planters included in its Exhibit 99.1 to the September 30, 1998 Quarterly
Report on Form 10-Q and filed with the Securities and Exchange Commission, and
in
72
<PAGE> 82
the financial information relating to Union Planters included under "Summary-
Selected Financial Data" in this proxy statement-prospectus.
OTHER PENDING ACQUISITIONS. Union Planters has entered into definitive
agreements to acquire the following financial institutions in addition to FSB
(collectively, the "Other Pending Acquisitions") which Union Planters'
management considers probable of consummation and which are expected to close in
1998.
<TABLE>
<CAPTION>
Asset Size Projected
Institution (in Millions)(1) Type of Consideration(2) Closing Date
========================================================================================================================
<S> <C> <C> <C>
Purchase of 58 branches and
assumption of $1.8 billion of
deposits of First Chicago NBD $1,800 $294 million deposit premium in 02/12/99
Corporation in Indiana ("Indiana cash(3)
Branch Purchase")(3)
Ready State Bank and its
subsidiary Ready Holding, Inc., Approximately 3,214,000 shares
Hialeah, Florida 595 of Union Planters common stock 12/31/98
First Mutual Bancorp, Inc. and its
subsidiary First Mutual Bank, Approximately 1,100,000 shares
S.D., Decatur, Illinois(4) 370 of Union Planters common stock 12/31/98
Southeast Bancorp, Inc. and
subsidiaries First National Bank &
Trust Company, Corbin, Kentucky,
and First State Bank of East 335 Approximately 1,250,000 shares 12/31/98
Tennessee N.A., LaFolette, of Union Planters common stock.
Tennessee
First & Farmers Bancshares, Inc.
and subsidiaries First & Farmers
Bank of Somerset, Somerset,
Kentucky, and Bank of 275 $76 million in cash 1/31/99
Cumberland, Burkesville,
Kentucky
LaPlace Bancshares, Inc. and
Subsidiary Banks, LaPlace of St. Approximately 412,000 shares of
John The Baptist Parish, 70 Union Planters common stock 12/31/98
------
Louisiana, LaPlace, Louisiana
$3,445
TOTAL
======
- --------------------------------------
</TABLE>
(1) Approximate total assets on September 30, 1998.
(2) Assumes no adjustment to shares pursuant to exchange rates adjustment
mechanisms.
73
<PAGE> 83
(3) The purchase price of the premises and equipment to be purchased has
not yet been determined.
(4) Union Planters intends to purchase in the open market, approximately
one million Union Planters common shares to facilitate its purchase
of First Mutual Bancorp, Inc.
FOURTH QUARTER EARNINGS CONSIDERATIONS. It is expected that either
Union Planters or the institutions acquired or 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 Union
Planters organization. Anticipated charges would normally arise from matters
such as, but not limited to:
- legal, accounting, financial advisory and consulting fees;
- payment of contractual benefits triggered by a change of control,
early retirement and involuntary separation and related benefits;
- costs associated with elimination of duplicate facilities and
branch consolidations;
- data processing charges;
- cancellation of vendor contracts; and
- other contingencies and similar costs which normally arise from
the consolidation of operational activities.
For a discussion of Union Planters' acquisition program and the
significant charges Union Planters has incurred over the past three years
incidental to its acquisition program, see the caption "Acquisitions" on pages
A-3, A-4 and A-5 in Union Planters' restated financial statements filed in Union
Planters' September 30, 1998 Quarterly Report on Form 10-Q, Exhibit 99.1 and
Note 2 to Union Planters' audited Consolidated Financial Statements for the
years ended December 31, 1997, 1996, and 1995 also contained in Union Planters'
September 30, 1998 Quarterly Report on Form 10-Q, Exhibit 99.1. Reference is
also made to pages 17, 18, 20, and 21 to Union Planters September 30, 1998
Quarterly Report on Form 10-Q for a discussion of significant charges incurred
in the nine months ended September 30, 1998.
The merger and the Other Pending Acquisitions (with the exception of
the Indiana Branch Purchase) are expected to be accounted for as
pooling-of-interests. Union Planters currently estimates incurring aggregate
pre-tax and after-tax charges in the range of $5 million to $6 million in
connection with completing the merger and the Other Pending Acquisitions. Union
Planters also expects to incur expenses of approximately $30 million in the
fourth quarter of 1998, both as a pretax and after-tax basis, primarily in
connection with the settlement of employment agreements related to entities
acquired in the third quarter of 1998. To the extent that Union Planters'
recognition of these acquisition-related charges is contingent upon consummation
of a
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particular transaction, those charges would be recognized in the period in which
such transaction closes. 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 Pending Acquisitions is a preliminary
estimate of the significant charges which may, in the aggregate, be required and
should be viewed accordingly. Moreover, this range has been based on the due
diligence that has been performed to date in connection with the merger and the
Other Pending Acquisitions. The range may be subject to change, and the actual
charges incurred may be higher or lower than what is currently contemplated,
once the acquired institutions are assimilated from an operational perspective
and various contingencies are either satisfied or eliminated. Furthermore, the
range of anticipated charges will change if additional entities are acquired.
Union Planters regularly evaluates the potential acquisition of, and holds
discussions with, various potential acquisition candidates. As a general rule,
Union Planters will publicly announce such acquisitions only after a definitive
agreement has been reached, and only then if Union Planters considers the
acquisition to be of such a size as to be a significant acquisition. Since the
range of anticipated acquisition-related charges is likely to change with
additional acquisitions, and since Union Planters regularly engages in
acquisitions, such range could change, and you should view such information
accordingly.
Since September 30, 1998, Union Planters has expensed that portion of
certain restricted stock grants that would otherwise have remained unrecognized
at the recipients earliest possible retirement age. This will have the effect of
increasing benefits expense in the fourth quarter of 1998 by approximately $8.9
million pretax and $5.5 million on an after tax basis. Additionally, in
connection with the consolidation of certain loan and deposit functions, Union
Planters is implementing a plan to image all documents related to loans and
deposits. During the fourth quarter of 1998, Union Planters will engage a third
party to image all of its current documents. The total expenses estimated to be
incurred in the fourth quarter of 1998 related to this project is approximately
$4.8 million pretax and $3.29 million on an after tax basis.
Certain acquisitions during 1998 have significantly increased the
goodwill and other intangible costs to $361 million at September 30, 1998. Given
changing market conditions, primarily interest rate and the related volatility
of the mortgage markets, Union Planters plans to perform a review of the
realization of these intangibles and other related assets such as investment
securities premiums during the fourth quarter of 1998. The impact of this review
cannot be quantified at this time.
CERTAIN REGULATORY CONSIDERATIONS
GENERAL
Union Planters and FSB are bank holding companies registered with the
Federal Reserve. As such, Union Planters and FSB and their non-bank subsidiaries
are subject to the supervision,
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examination, and reporting requirements of the Bank Holding Company Act and the
regulations of the Federal Reserve. The following discussion summarizes the
regulatory framework applicable to banks and bank holding companies and provides
certain specific information related to Union Planters. A more complete
discussion is included in Union Planters' 1997 Annual Report on Form 10-K. See
"WHERE YOU CAN FIND MORE INFORMATION."
Bank holding companies are required to obtain the prior approval of
the Federal Reserve before they may:
- acquire direct or indirect ownership or control of more than 5%
of the voting shares of any bank;
- acquire all or substantially all of the assets of any bank; or
- merge or consolidate with any other bank holding company.
The Federal Reserve generally may not approve any transaction that
would result in a monopoly or that would further a combination or conspiracy to
monopolize banking in the United States. Nor can the Federal Reserve approve a
transaction that could substantially lessen competition in any section of the
country, that would tend to create a monopoly in any section of the country, or
that would be in restraint of trade. But the Federal Reserve may approve any
such transaction if it determines that the public interest in meeting the
convenience and needs of the community served clearly outweigh the
anticompetitive effects of the proposed transaction. The Federal Reserve is also
required to consider the financial and managerial resources and future prospects
of the bank holding companies and banks concerned, as well as 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 includes the parties' performance under
the Community Reinvestment Act of 1977.
Another factor that is gaining increasing scrutiny in the application
process is the Year 2000 readiness of the parties involved in acquisition
transactions. Banking organizations whose Year 2000 readiness is in less than
satisfactory condition are undergoing special scrutiny in connection with
acquisition transactions requiring regulatory approval, and may not be eligible
to use expedited application procedures for acquisition transactions
Under the Riegle-Neal Interstate Banking and Branching Efficiency Act
of 1994 ("Interstate Banking Act"), Union Planters and any other bank holding
company may now acquire a bank located in any state, subject to certain
deposit-percentage limitations, aging requirements, and other restrictions. The
Interstate Banking Act also generally permits a bank to branch interstate
through acquisitions of banks in other states. By adopting legislation prior to
June 1, 1997, a state had the ability either to "opt in" and accelerate the date
after which interstate branching is permissible or "opt out" and prohibit
interstate branching altogether. Texas, where Union Planters recently completed
an acquisition, elected to "opt out," in legislation that expires
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September 2, 1999. Union Planters has used the Interstate Banking Act to merge
substantially all of Union Planters' banking subsidiaries with and into Union
Planters Bank, National Association. As a result, that bank is now a multi-state
national bank with branches in Alabama, Arkansas, Florida, Illinois, Iowa,
Kentucky, Louisiana, Mississippi, Missouri, and Tennessee.
The Bank Holding Company Act prohibits Union Planters from:
(1) engaging in activities other than banking, managing, or
controlling banks or other permissible subsidiaries; and
(2) acquiring or retaining direct or indirect control of any company
engaged in any activities other than those activities determined
by the Federal Reserve to be so closely related to banking or
managing or controlling banks as to be a proper incident thereto.
In determining whether a particular activity is permissible, the
Federal Reserve must consider whether the performance of such an activity
reasonably can be expected to produce benefits to the public that outweigh
possible adverse effects. Possible benefits the Federal Reserve considers
include greater convenience, increased competition, or gains in efficiency.
Possible adverse effects include undue concentration of resources, decreased or
unfair competition, conflicts of interest, or unsound banking practices. The
Federal Reserve has determined the following to be permissible activities of
bank holding companies:
- 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.
There are no territorial limitations on permissible non-banking
activities of bank holding companies. Despite prior approval, the Federal
Reserve has the power to order a holding company or its subsidiaries to
terminate any activity or to terminate its ownership or control of any
subsidiary when it has reasonable cause to believe that a serious risk to the
financial safety,
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soundness, or stability of any bank subsidiary of that bank holding company may
result from such activity.
The banks owned by Union Planters are members of the Federal Deposit
Insurance Corporation. Their deposits are insured by the Federal Deposit
Insurance Corporation to the extent provided by law. Each bank is also subject
to numerous state and federal statutes and regulations that affect its business,
activities, and operations, and each is supervised and examined by one or more
state or federal bank regulatory agencies.
The Federal Deposit Insurance Corporation and the applicable state
authority in the case of state-chartered nonmember banks, the Office of Thrift
Supervision 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 in the case of national banks supervise the
subsidiaries of Union Planters and FSB and regularly examine the operations of
such institutions. They 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
Union Planters is a legal entity separate and distinct from its
banking, thrift, and other subsidiaries. The principal sources of cash flow of
Union Planters, 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 Union Planters, as well as by Union Planters and FSB
to their shareholders.
As to the payment of dividends, each of Union Planters'
state-chartered banking subsidiaries is subject to the laws and regulations of
the state in which the bank is located, and to the regulations of the bank's
primary federal regulator. Union Planters' subsidiaries that are thrift
institutions are subject to the Office of Thrift Supervision's capital
distributions regulations, and those that are national banks are subject to the
regulations of the Office of the Comptroller of the Currency.
If the federal banking regulator determines that a depository
institution under its jurisdiction is engaged in or is about to engage in an
unsafe or unsound practice, the regulator may require, after notice and hearing,
that the institution cease and desist from such practice. Depending on the
financial condition of the depository institution, an unsafe or unsound practice
could include the payment of dividends. 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, 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
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Action." The federal agencies have also issued policy statements that provide
that bank holding companies and insured banks should generally only pay
dividends out of current operating earnings.
At September 30,1998, under dividend restrictions imposed under
federal and state laws, Union Planters' banking subsidiaries, without obtaining
governmental approvals, could declare aggregate dividends to Union Planters of
approximately $119 million.
The payment of dividends by Union Planters and its bank subsidiaries
may also be affected or limited by other factors, such as the requirement to
maintain adequate capital above regulatory guidelines.
CAPITAL ADEQUACY
Union Planters and its banking subsidiaries are required to comply
with the capital adequacy standards established by the Federal Reserve in the
case of Union Planters, and the appropriate federal banking regulator in the
case of each Union Planters bank. There are two basic measures of capital
adequacy for bank holding companies and the depository institutions that they
own: 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 September 30, 1998, Union Planters' consolidated Total Capital Ratio and its
Tier 1 Capital Ratio (i.e., the ratio of Tier 1 Capital to risk-weighted assets)
were 17.07% and 13.49%, 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
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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. Union Planters' Leverage Ratio at September 30, 1998, was
9.29%. The guidelines also provide that bank holding companies that experience
internal growth or make acquisitions will be expected to maintain strong capital
positions substantially above the minimum supervisory levels without significant
reliance on intangible assets. The Federal Reserve 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 Union Planters' banks is subject to risk-based and leverage
capital requirements adopted by its federal banking regulator. Those
requirements are similar to those adopted by the Federal Reserve for bank
holding companies. Banking regulators may establish higher capital requirements
for a particular institution bused upon the institution's risk profile
including, without limitation, exposure to interest rate risk. Each of Union
Planters' banks was in compliance with those minimum capital requirements as of
September 30, 1998. No federal banking agency has advised Union Planters or its
bank subsidiaries of any specific minimum capital ratio requirement applicable
to it.
A bank or thrift that fails to meet its capital guidelines may be
subject to a variety of enforcement remedies and certain other restrictions on
its business. Remedies could include the issuance of a capital directive, the
termination of deposit insurance by the Federal Deposit Insurance Corporation,
and a prohibition on the taking of brokered deposits. As described below,
substantial additional restrictions can be imposed upon Federal Deposit
Insurance Corporation-insured depository institutions that fail to meet their
capital requirements. See "-- Prompt Corrective Action."
The federal bank regulators continue to indicate their desire to raise
the capital requirements that apply to banks beyond their current levels. The
Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of
the Comptroller of the Currency have proposed an amendment to the risk-based
capital standards that would calculate the change in a bank'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 Office of Thrift Supervision 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, Union Planters is expected to act as a
source of financial strength for, and commit its resources to support, each
Union Planters bank. This support may be required at times when Union Planters
may not be inclined to provide it. In addition, any capital loans by a bank
holding company to any of its bank subsidiaries are subordinate to the payment
of deposits and to certain other indebtedness. 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
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capital of a bank subsidiary will be assumed by the bankruptcy trustee and
entitled to a priority of payment.
A depository institution insured by the Federal Deposit Insurance
Corporation can be held liable for any loss incurred by, or reasonably expected
to be incurred by, the Federal Deposit Insurance Corporation in connection with
the default of a commonly controlled Federal Deposit Insurance
Corporation-insured depository institution or any assistance provided by the
Federal Deposit Insurance Corporation to any commonly controlled Federal Deposit
Insurance Corporation-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 Federal Deposit Insurance Corporation'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. Union Planters' banks
are subject to these cross-guarantee provisions. As a result, any loss suffered
by the Federal Deposit Insurance Corporation in respect of any of Union
Planters' banks would likely result in assertion of the cross-guarantee
provisions, the assessment of estimated losses against Union Planters' banking
or thrift affiliates, and a potential loss of Union Planters' investments in its
other banks.
PROMPT CORRECTIVE ACTION
Federal Deposit Insurance Corporation Improvement Act of 1991 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). With respect to institutions
in the three undercapitalized categories, the regulators must take certain
supervisory actions, and are authorized to take other discretionary actions. The
severity of the actions will depend upon the capital category in which the
institution is placed. Generally, subject to a narrow exception, Federal Deposit
Insurance Corporation Improvement Act of 1991 requires the banking regulator to
appoint a receiver or conservator for an institution that is critically
undercapitalized. The federal banking agencies have specified the relevant
capital level for each category.
An institution is deemed to be well capitalized if it
- has a Total Capital Ratio of 10% or greater;
- has a Tier 1 Capital Ratio of 6.0% or greater;
- has a Leverage Ratio of 5.0% or greater; and
- is not subject to any written agreement, order, capital
directive, or prompt corrective action directive issued by its
federal banking agency.
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An institution is considered to be adequately capitalized if it has
- 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.
A depository institution is considered to be undercapitalized if it
has
- a Total Capital Ratio of less than 8.0%; o a Tier 1 Capital Ratio
of less than 4.0%; or o a Leverage Ratio of less than 4.0%.
A depository institution is considered to be significantly
undercapitalized if it 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%.
An institution that has a tangible equity capital to assets ratio equal
to or less than 2.0% is deemed to be critically undercapitalized. "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.
In addition, a bank holding company must guarantee that a subsidiary bank meet
its capital restoration plan. This obligation 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. Except in
accordance with an accepted capital restoration plan or with the approval of the
Federal Deposit Insurance Corporation, 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. In addition, its federal banking agency is given authority with
respect to any undercapitalized institution to take any of the actions it is
required to or may take with respect to a significantly undercapitalized
institution 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, its federal
banking agency must require the institution to:
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(1) sell enough shares, including voting shares, to become adequately
capitalized;
(2) merge with (or be sold to) another institution (or holding
company), but only if grounds exist for appointing a conservator
or receiver;
(3) restrict certain transactions with its banking affiliates;
(4) restrict transactions with bank or non-bank affiliates;
(5) restrict interest rates that the institution pays on deposits to
"prevailing rates" in the institution's "region;"
(6) restrict asset growth or reduce total assets;
(7) alter, reduce, or terminate activities;
(8) hold a new election of directors;
(9) 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;
(10) employ "qualified" senior executive officers;
(11) cease accepting deposits from correspondent depository
institutions;
(12) divest certain nondepository affiliates which pose a danger to
the institution; or
(13) be divested by a parent holding company. In addition, without the
prior approval of its 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.
DESCRIPTION OF UNION PLANTERS CAPITAL STOCK
Union Planters' charter currently authorizes the issuance of
300,000,000 shares of Union Planters common stock and 10,000,000 shares of Union
Planters Preferred Stock. On October 31, 1998, 136,063,035 shares of Union
Planters common stock were outstanding and approximately 11,819,841 shares were
earmarked for issuance in connection with currently outstanding Union Planters
options, Union Planters' dividend reinvestment plan, two small convertible debt
issues, and with respect to conversion rights of currently outstanding Union
Planters Series E preferred stock. In addition, as of October 31, 1998, 968,865
shares of Union Planters' 8% Cumulative, Convertible Series E preferred stock,
were outstanding. On October 31, 1998, none of Union Planters' 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 UNION PLANTERS DOES NOT
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REPRESENT OR CONSTITUTE A DEPOSIT ACCOUNT AND IS NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE FUND, THE SAVINGS ASSOCIATION
INSURANCE FUND, OR ANY GOVERNMENTAL AGENCY.
UNION PLANTERS COMMON STOCK
GENERAL. Shares of Union Planters common stock may be issued at such
time or times and for such consideration (not less than the par value thereof)
as the Union Planters board of directors may deem advisable, subject to such
limitations as may be set forth in the laws of the State of Tennessee, Union
Planters' charter or bylaws or the rules of the New York Stock Exchange. Union
Planters Bank is the Registrar, Transfer Agent and Dividend Disbursing Agent for
shares of Union Planters common stock. Its address is Union Planters Bank,
Corporate Trust Department,1 South Church Street, Belleville, Illinois 62220.
DIVIDENDS. Subject to the preferential dividend rights applicable to
outstanding shares of the Union Planters 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 Union
Planters preferred stock, the holders of the Union Planters 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 Union Planters board of directors.
Union Planters 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
Union Planters common stock and Union Planters preferred stock. Union Planters
has no such arrangements in effect at the date hereof. In December 1996, Union
Planters caused to be issued $200,000,000 in aggregate liquidation amount of
8.20% Capital Trust Pass-through Securities ("Union Planters Capital
Securities") through a Delaware trust subsidiary. Pursuant to the terms of the
governing instruments, Union Planters would be prohibited from paying dividends
on any Union Planters common stock or Union Planters preferred stock if all
quarterly payments on the Union Planters Capital Securities had not been paid in
full. The Union Planters 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 Union
Planters, after distribution in full of the preferential amounts required to be
distributed to the holders of Union Planters preferred stock, holders of Union
Planters common stock will be entitled to receive all of the remaining assets of
Union Planters, of whatever kind, available for distribution to shareholders
ratably in proportion to the number of shares of Union Planters common stock
held. The Union Planters board of directors may distribute in kind to the
holders of Union Planters common stock such remaining assets of Union Planters
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
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distribute any balance thereof in kind to holders of Union Planters common
stock. Neither the merger or consolidation of Union Planters into or with any
other corporation, nor the merger of any other corporation into Union Planters,
nor any purchase or redemption of shares of stock of Union Planters of any
class, shall be deemed to be a dissolution, liquidation, or winding-up of Union
Planters for purposes of this paragraph.
Because Union Planters is a holding company, its right and the rights
of its creditors and shareholders, including the holders of Union Planters
preferred stock and Union Planters 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 Union Planters itself may be a creditor having recognized claims
against such subsidiary.
For a further description of Union Planters common stock, see "EFFECT
OF THE MERGER ON RIGHTS OF SHAREHOLDERS."
UNION PLANTERS PREFERRED STOCK
SERIES A PREFERRED STOCK. Union Planters' charter provides for the
issuance of up to 750,000 shares (subject to adjustment by action of the Union
Planters board of directors) of Series A preferred stock under certain
circumstances involving a potential change in control of Union Planters. 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 Union Planters' registration statement on Form 8-A,
dated January 19, 1989, and filed February 1, 1989 (Securities and Exchange
Commission File No. 0-6919) which is incorporated by reference herein.
SERIES E PREFERRED STOCK. As of October 31, 1998, 968,865 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 Union Planters 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 Union Planters' option and with the prior approval of the
Federal Reserve, are subject to redemption by Union Planters 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."
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OTHER MATTERS
As of the date of this proxy statement-prospectus, FSB's board of directors
knows of no matters that will be presented for consideration at the special
meeting other than as described in this proxy statement-prospectus. However, if
any other matters properly come before the special meeting or any adjournment or
postponement of the special meeting and are voted upon, the enclosed proxy will
be deemed to confer discretionary authority to the individuals named as proxies
to vote the shares represented by such proxy as to any such matters.
SHAREHOLDER PROPOSALS
Union Planters expects to hold its next annual meeting of shareholders in April
1999, after the merger. Under Securities and Exchange Commission rules,
proposals of Union Planters shareholders intended to be presented at that
meeting must be received by Union Planters at its principal executive offices no
later than _______________, 1998.
EXPERTS
The consolidated financial statements of Union Planters and subsidiaries
incorporated in this proxy statement-prospectus by reference to Exhibit 99.1 to
Union Planters' September 30, 1998 Quarterly Report on Form 10-Q have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The financial statements of FSB, Inc. as of December 31, 1997 and 1996, and for
each of the two years ended December 31, 1997 incorporated by reference into
this proxy statement-prospectus have been included herein in reliance on the
report of Whitehorn Tankersley & Co., PLLC, independent accountants, given on
the authority of said firm as experts in accounting and auditing.
OPINIONS
The legality of the shares of Union Planters 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 Union Planters. E. James House, Jr. is an officer of, and
receives compensation from, Union Planters.
Certain tax consequences of the transaction have been passed upon by Wyatt,
Tarrant & Combs for Union Planters and by Gerrish & McCreary, P.C. for FSB.
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In addition, Gerrish & McCreary, P.C. joined Mercer in marketing FSB and
soliciting prospective bidders, for which the firm will be paid a fee equal to
0.1875% of the value of the consideration received by FSB shareholders on the
effective date.
WHERE YOU CAN FIND MORE INFORMATION
Union Planters files annual, quarterly and current reports, proxy and
information statements, and other information with the Securities and Exchange
Commission (the "Securities and Exchange Commission") under the Securities
Exchange Act of 1934. You may read and copy this information at the Public
Reference Section at the Securities and Exchange Commission at 450 Fifth Street,
N.W., Judiciary Plaza, Washington, D.C. 20549. You may obtain information on the
operation of the Public Reference Room by calling the Securities and Exchange
Commission at 1- 800-Securities and Exchange Commission-0330. The Securities and
Exchange Commission maintains an Internet site that contains reports, proxy and
information statements, and other information about issuers that file
electronically with the Securities and Exchange Commission. The address of that
site is http://www.sec.gov. In addition, you can read and copy this information
at the regional offices of the Securities and Exchange Commission at 7 World
Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. You can also inspect
reports, proxy and information statements, and other information about Union
Planters at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005 and about FSB at the offices of the National Association of
Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
Union Planters filed a registration statement with the Securities and Exchange
Commission under the Securities Act of 1933, as amended , relating to the Union
Planters common stock offered to the FSB shareholders. The registration
statement contains additional information about Union Planters and the Union
Planters common stock. The Securities and Exchange Commission allows Union
Planters to omit certain information included in the registration statement from
this proxy statement-prospectus. The registration statement may be inspected and
copied at the Securities and Exchange Commission's public reference facilities
described above.
This proxy statement-prospectus incorporates important business and financial
information about Union Planters that is not included in or delivered with this
proxy statement-prospectus. The following documents filed with the Securities
and Exchange Commission by Union Planters are incorporated by reference in this
proxy statement-prospectus (Securities and Exchange Commission File No.
1-10160):
(1) Union Planters' 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 (l) of Regulation S-K of the Securities and Exchange
Commission shall not be deemed to be incorporated herein and
is not part of the Registration Statement);
87
<PAGE> 97
(2) Union Planters' Quarterly Report on Form 10-Q for the three
months ended March 31, 1998 and the amendment thereto filed on
Form 10-Q/A;
(3) Union Planters' Quarterly Report on Form 10-Q for the six
months ended June 30, 1998;
(4) Union Planters' Quarterly Report on Form 10-Q for the nine
months ended September 30, 1998 (which includes restated
consolidated financial statements of Union Planters and
related management's discussion and analysis of financial
condition and results of operations of Union Planters, giving
effect to the acquisitions Union Planters has consummated
since December 31, 1997);
(5) Union Planters' Current Reports on Form 8-K dated January 15,
1998, February 22, 1998, April 16, 1998, July 10, 1998 , July
16, 1998, September 1, 1998, September 8, 1998, October 15,
1998, and October 16, 1998;
(6) The description of the current management and board of
directors of Union Planters contained in the proxy statement
of Union Planters filed pursuant to Section 14(a) of the
Exchange Act for Union Planters' Annual Meeting of Share
holders held on April 16, 1998;
(7) Union Planters' Registration Statement on Form 8-A dated
January 19, 1989, filed on February 1, 1989; (Securities and
Exchange Commission File No. 0-6919) in connection with Union
Planters' designation and authorization of its Series A
Preferred Stock; and
(8) The description of the Union Planters common stock contained
in Union Planters' registration statement under Section 12(b)
of the Exchange Act and any amendment or report filed for the
purpose of updating such description.
Union Planters also incorporates by reference additional documents
filed by it pursuant to Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act
after the date of this proxy statement-prospectus and prior to final adjournment
of the special meeting. Any statement contained in this proxy
statement-prospectus or in a document incorporated or deemed to be incorporated
by reference in this proxy statement-prospectus shall be deemed to be modified
or superseded 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. In particular, reference
is made to the Union Planters' September 30, 1998 Quarterly Report on Form 10-Q,
1998, which includes in Exhibit 99.1 restated consolidated financial statements
and the related management's discussion and analysis of financial condition and
results of operations of Union Planters, giving effect to the acquisitions Union
Planters has consummated since December 31, 1997. See "Business of Union
Planters --Recent Developments."
88
<PAGE> 98
You may obtain copies of the information incorporated by reference in this proxy
statement-prospectus upon written or oral request. The inside front cover of
this proxy statement-prospectus (page ii) contains information about how such
requests should be made.
All information contained in this proxy statement-prospectus or incorporated
herein by reference with respect to Union Planters was supplied by Union
Planters, and all information contained in this proxy statement-prospectus with
respect to FSB was supplied by FSB.
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<PAGE> 99
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
UNION PLANTERS CORPORATION,
UNION PLANTERS HOLDING CORPORATION,
UNION PLANTERS BANK, NATIONAL ASSOCIATION
FSB, INC.,
AND
FIRST STATE BANK OF COVINGTON
DATED AS OF
AUGUST 4, 1998
<PAGE> 100
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.................................................... 5
5.2 Authority; No Breach by Agreement.................................................... 5
5.3 Capital Stock........................................................................ 5
5.4 Subject Company Subsidiaries......................................................... 6
5.5 Financial Statements................................................................. 6
5.6 Absence of Undisclosed Liabilities................................................... 7
5.7 Absence of Certain Changes or Events................................................. 7
5.8 Tax Matters.......................................................................... 7
5.9 Assets............................................................................... 8
5.10 Intellectual Property................................................................ 9
5.11 Environmental Matters................................................................ 9
5.12 Compliance With Laws................................................................. 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.............................................. 13
5.20 Charter Provisions; Takeover Laws.................................................... 13
</TABLE>
<PAGE> 101
<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................................................................. 15
6.6 Absence of Undisclosed Liabilities................................................... 15
6.7 Absence of Certain Changes or Events................................................. 15
6.8 Compliance With Laws................................................................. 15
6.9 Legal Proceedings.................................................................... 16
6.10 Reports.............................................................................. 16
6.11 Statements True and Correct.......................................................... 16
6.12 Accounting, Tax, and Regulatory Matters.............................................. 17
6.13 Material Contracts................................................................... 17
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION................................... 17
7.1 Affirmative Covenants of Subject Company............................................. 17
7.2 Negative Covenants of Subject Company................................................ 17
7.3 Covenants of Parent.................................................................. 19
7.4 Adverse Changes in Condition......................................................... 19
7.5 Reports.............................................................................. 19
ARTICLE 8
ADDITIONAL AGREEMENTS............................................ 20
8.1 Registration Statement; Proxy Statement; Shareholder Approval........................ 20
8.2 Exchange Listing..................................................................... 22
8.3 Applications......................................................................... 22
8.4 Filings With State Offices........................................................... 22
8.5 Agreement as to Efforts to Consummate................................................ 22
8.6 Investigation and Confidentiality.................................................... 22
8.7 Press Releases....................................................................... 23
8.8 Certain Actions...................................................................... 23
8.9 Accounting and Tax Treatment......................................................... 24
8.10 Agreement of Affiliates.............................................................. 24
8.11 Employee Benefits and Contracts...................................................... 24
8.12 Filing of Reports by Parent.......................................................... 25
8.13 Employment Agreement................................................................. 25
8.14 Director Retention and Advisory Service.............................................. 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
10.1 Termination.......................................................................... 29
10.2 Effect of Termination................................................................ 30
10.3 Non-Survival of Representations and Covenants........................................ 30
</TABLE>
<PAGE> 102
<TABLE>
<S> <C> <C>
ARTICLE 11
MISCELLANEOUS............................................... 30
11.1 Definitions......................................................................... 30
11.2 Expenses............................................................................ 36
11.3 Brokers and Finders................................................................. 37
11.4 Entire Agreement.................................................................... 37
11.5 Amendments.......................................................................... 37
11.6 Waivers............................................................................. 37
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>
<PAGE> 103
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and
entered into as of August 4, 1998 by and between FSB, Inc., a Tennessee
corporation having its principal office located in Covington, 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"). Union Planters Bank,
National Association, a national banking association having its principal office
located in Memphis, Tennessee ("UPB"), and First State Bank of Covington, a
Tennessee banking corporation having its principal office located in Covington,
Tennessee ('Bank") join in this Agreement for the purpose of joining in certain
covenants and conditions.
PREAMBLE
The Board of Directors of each of Subject Company, Merger Subsidiary
and Parent is of the opinion that the transactions described herein are in the
best interests of such Party and its respective shareholders. This Agreement and
the Plan of Merger attached hereto at Exhibit 1 and incorporated herein by
reference provide for the acquisition of Subject Company by Parent pursuant to
the merger of Subject Company with and into Merger Subsidiary. At the Effective
Time, the outstanding shares of the common stock of Subject Company shall be
converted into the right to receive shares of the common stock of Parent (except
as provided in Sections 3.1, 3.3 and 3.4 of this Agreement). As a result,
shareholders of Subject Company shall become shareholders of Parent, and
Surviving Corporation shall continue to conduct its business and operations as a
wholly-owned subsidiary of Parent. The transactions described in this Agreement
are subject to the approvals of the shareholders of Subject Company, the FRB,
the TDFI, 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 effects 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 approved and adopted by
the respective Boards of Directors of Subject Company, Parent and Merger
Subsidiary.
1.2 Time and Place of Closing. The Closing will take place at 9:00 A.M.
on the date on which the Effective Time is to occur (or the immediately
preceding day if the Effective Time is to be earlier than 9:00 A.M.), or at such
other time as the Parties, acting through their chief executive officers, may
mutually agree. The Closing shall be held at such place as may be mutually
agreed upon by the Parties.
1.3 Effective Time. The Merger and other transactions contemplated by
this Agreement shall become effective at the time the Articles of Merger
reflecting the Merger shall become effective with the Secretary of State of the
State of Tennessee (the "Effective Time"). Subject to the terms and conditions
hereof, unless otherwise
FSB, Inc. - Merger Agreement Page 1
<PAGE> 104
mutually agreed upon in writing by the chief executive officers of each Party,
the Parties shall use their reasonable efforts to cause the Effective Time to
occur as soon as is reasonably practicable, but in no event later than 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 (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). It is the intent of the Parties
to use their respective best efforts to cause the Effective Time to occur on or
before December 31, 1998.
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; (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 adverse to the
interests of Subject Company or adverse to the holders of shares of Subject
Company Common Stock; (v) would impede or delay consummation of the Merger by
more than 30 days; or (vi) would require a vote of Parent's shareholders under
relevant state Law.
ARTICLE 2
TERMS OF MERGER
2.1 Charter. The Charter of Merger Subsidiary in effect immediately
prior to the Effective Time shall be the Charter of the Surviving Corporation
until otherwise amended or repealed.
2.2 Bylaws. The Bylaws of Merger Subsidiary in effect immediately prior
to the Effective Time shall be the Bylaws of the Surviving Corporation until
otherwise amended or repealed.
2.3 Directors and Officers. The directors of Merger Subsidiary in
office immediately prior to the Effective Time, together with such additional
persons as may thereafter be elected, shall serve as the directors of the
Surviving Corporation from and after the Effective Time in accordance with the
Bylaws of the Surviving Corporation. The officers of Merger Subsidiary in office
immediately prior to the Effective Time, together with such additional persons
as may thereafter be elected, shall serve as the officers of the Surviving
Corporation from the Effective Time in accordance with the Bylaws of the
Surviving Corporation.
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 Conversion of Shares. Subject to the provisions of this Article 3
(and Article 3 of the Plan of Merger), at the Effective Time, by virtue of the
Merger and without any action on the part of Parent, Merger Subsidiary, Subject
Company, or the shareholders of any of the foregoing, the shares of the
constituent corporations shall be converted as follows:
(a) Each share of Parent Capital Stock, including any
associated Parent Rights, issued and outstanding immediately prior to the
Effective Time shall remain issued and outstanding from and after the Effective
Time.
FSB, Inc. - Merger Agreement Page 2
<PAGE> 105
(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 common stock of the Surviving
Corporation from and after the Effective Time.
(c) Except for Dissenting Shares, each share of Subject
Company Common Stock, (excluding shares held by Subject Company, any Subject
Company Subsidiary, Parent or any Parent Subsidiary, in each case other than in
a fiduciary capacity or as a result of debts previously contracted) issued and
outstanding at the Effective Time shall cease to be outstanding and shall be
converted into and exchanged for the right to receive 1.61 shares of Parent
Common Stock (subject to possible adjustment as set forth in Section 3.2 of this
Agreement, the "Exchange Ratio"). The Exchange Ratio shall be determined by
dividing the average closing price for UPC Common Stock for the 20 trading days
immediately preceding the date of the execution of this Agreement into $95.00.
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 applicable
provisions of Section 131 of the TBCA. If a holder of Dissenting Shares becomes
ineligible for payment under Section 131 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, subdivision, reclassification, conversion or similar recapitalization
with respect to such stock and the record date therefor (in the case of a stock
dividend) or the effective date thereof (in the case of a stock split,
subdivision, reclassification, conversion or similar recapitalization for which
a record date is not established) shall be prior to the Effective Time, the
Exchange Ratio shall be proportionately adjusted.
3.3 Shares Held by Subject Company or Parent. Each of the shares of
Subject Company Common Stock held by Subject Company, any Subject Company
Subsidiary, Parent or any Parent Subsidiary, in each case other than in a
fiduciary capacity or as a result of debts previously contracted, shall be
canceled and retired at the Effective Time and no consideration shall be issued
in exchange therefor.
3.4 Fractional Shares. Notwithstanding any other provision of this
Agreement, each holder of shares of 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 which, immediately prior to the Effective
Time, represented shares of Subject Company Common Stock (each a "Subject
Company Certificate") 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 Parent Common Stock on the NYSE- Composite Transactions
List (as reported by The Wall Street Journal or, if not reported thereby, any
other authoritative source reasonably selected by Parent) on the last trading
day preceding the Effective Time. No such holder will be entitled to dividends,
voting rights, or any other rights as a shareholder in respect of any fractional
shares.
ARTICLE 4
EXCHANGE OF SHARES
4.1 Exchange Procedures. As soon as reasonably practicable, after the
Effective Time, Parent and Subject Company shall cause the exchange agent
selected by Parent (the "Exchange Agent") to mail to each holder of record of a
Subject Company Certificate appropriate transmittal materials (which shall
specify that delivery shall be effected, and risk of loss and title to the
Subject Company Certificates shall pass, only upon proper delivery of such
Subject Company 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
FSB, Inc. - Merger Agreement Page 3
<PAGE> 106
in connection with its duties, provided such rules and procedures do not have
the effect of unreasonably delaying or limiting or eliminating the obligation of
Parent and/or Merger Subsidiary to deliver the consideration contemplated by
Article 3 of this Agreement. After the Effective Time, each holder of shares of
Subject Company Common Stock (other than Dissenting Shares or shares to be
canceled pursuant to Section 3.3 of this Agreement) issued and outstanding at
the Effective Time shall surrender the certificate or certificates representing
such shares to the Exchange Agent and shall promptly upon surrender thereof
receive in exchange therefor the consideration provided in Section 3.1(c) of
this Agreement, together with all undelivered dividends and other distributions,
if any, in respect of such shares (without interest thereon) pursuant to Section
4.2 of this Agreement. To the extent required by Section 3.4 of this Agreement,
each holder of shares of Subject Company Common Stock issued and outstanding at
the Effective Time also shall receive, upon surrender of the certificate or
certificates representing such shares, cash in lieu of any fractional share of
Parent Common Stock to which such holder may be otherwise entitled (without
interest). Parent shall not be obligated to deliver the consideration to which
any former holder of Subject Company Common Stock is entitled as a result of the
Merger until such holder surrenders such holder's Subject Company Certificates
for exchange as provided in this Section 4.1 or in Section 4.2 of this
Agreement. The Subject Company Certificates so surrendered shall be duly
endorsed as the Exchange Agent may reasonably require. Any other provision of
this Agreement notwithstanding, neither Parent, Merger Subsidiary nor the
Exchange Agent shall be liable to a holder of Subject Company Common Stock for
any amounts paid or property delivered in good faith to a public official
pursuant to any applicable abandoned property Law.
4.2 Rights of Former Subject Company Shareholders. At the Effective
Time, the stock transfer books of Subject Company shall be closed as to holders
of Subject Company Common Stock immediately prior to the Effective Time and no
transfer of Subject Company Common Stock by any such holder shall thereafter be
made or recognized. Until surrendered for exchange in accordance with the
provisions of Section 4.1 of this Agreement, each certificate theretofore
representing shares of Subject Company Common Stock (other than Dissenting
Shares or shares to be canceled pursuant to Section 3.3 of this Agreement) shall
from and after the Effective Time represent for all purposes only the right to
receive the consideration provided in Sections 3.1(c) and 3.4 of this Agreement
in exchange therefor, subject, however, to the Surviving Corporation's
obligations to pay any dividends or make any other distributions with a record
date prior to the Effective Time which have been declared or made by Subject
Company in respect of such shares of Subject Company Common Stock in accordance
with the terms of this Agreement and which remain unpaid at the Effective Time.
In addition, whenever a dividend or other distribution is declared by Parent on
the Parent Common Stock, the record date for which is at or after the Effective
Time, the declaration shall include dividends or other distributions on all
shares of Parent Common Stock issuable pursuant to this Agreement, but no
dividend or other distribution payable to the holders of record of Parent Common
Stock as of any time subsequent to the Effective Time shall be delivered to the
holder of any certificate representing shares of Subject Company Common Stock
issued and outstanding at the Effective Time until such holder surrenders such
certificate for exchange as provided in Section 4.1 of this Agreement. However,
upon surrender of such Subject Company Common Stock certificate, both a Parent
Common Stock certificate and any undelivered dividends and other distributions
payable hereunder (without interest) shall be delivered and paid with respect to
each share represented by such certificate. In the event any Subject Company
Common Stock certificate shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming such certificate to
be lost, stolen or destroyed and, if reasonably required by Parent, the posting
by such person of a bond in such amount as Parent may reasonably direct as
indemnity against any claim that may be made against it with respect to such
certificate, the Exchange Agent shall issue in exchange for such lost, stolen or
destroyed certificate the shares of Parent Common Stock and cash in lieu of
fractional shares and dividends and other distributions deliverable in respect
thereof pursuant to this Agreement.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF SUBJECT COMPANY
Subject Company hereby represents and warrants to Parent, except as set
forth in the Subject Company Disclosure Memorandum, as follows:
FSB, Inc. - Merger Agreement Page 4
<PAGE> 107
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 to carry on its
business as now conducted and to own, lease, and operate its Assets. Subject
Company is duly qualified or licensed to transact business as a foreign
corporation in good standing in each of the States of the United States and in
each foreign jurisdiction where the character of its Assets or the nature or
conduct of its business requires it to be so qualified or licensed, except for
such jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Subject Company.
5.2 Authority; No Breach by Agreement. (a) Subject Company has the
corporate power and authority necessary to execute, deliver, and perform its
obligations under this Agreement and the Plan of Merger and to consummate the
transactions contemplated hereby and thereby. The execution, delivery, and
performance of this Agreement and the Plan of Merger, and the consummation of
the transactions contemplated herein and therein, including the Merger, have
been duly and validly authorized by all necessary corporate action 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 number of outstanding
shares of Subject Company Common Stock required by the TBCA, which is the only
shareholder vote required by Subject Company for approval of this Agreement and
consummation of the Merger. Subject to such requisite shareholder approval, the
receipt of all Consents required from Regulatory Authorities and the expiration
of all mandatory waiting periods, and assuming due authorization, execution and
delivery of this Agreement and the Plan of Merger by each of Parent and Merger
Subsidiary, this Agreement and the Plan of Merger each represents a legal,
valid, and binding obligation of Subject Company, enforceable against Subject
Company in accordance with its terms (except in all cases as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization,
receivership, conservatorship, moratorium, or similar Laws (including provisions
of the U.S. and Tennessee Constitutions) affecting the enforcement of creditors'
rights generally and except that the availability of equitable remedies is
subject to the discretion of the court before which any proceeding may be
brought).
(b) Neither the execution and delivery of this Agreement or
the Plan of Merger by Subject Company, nor the consummation by Subject Company,
of the transactions contemplated hereby, nor compliance by Subject Company with
any of the provisions hereof or thereof, will (i) conflict with or result in a
breach of any provision of the Articles of Incorporation or Bylaws of Subject
Company, or (ii) constitute or result in a Default under, or require any Consent
(excluding Consents required by Law or Order) pursuant to, or result in the
creation of any Lien on any material Asset of Subject Company or any Subject
Company Subsidiary under, any Contract or Permit of Subject Company or any
Subject Company Subsidiary, except for such Defaults and Liens which are not,
and for such Consents which, if not obtained, are not, reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on Subject
Company, or (iii) subject to receipt of the requisite Consents referred to in
Section 9.1(b) of this Agreement, violate any Law or Order applicable to Subject
Company, its Subsidiaries or any of their respective material Assets.
(c) Other than in connection or compliance with the provisions
of the Securities Laws, applicable state corporate and securities Laws, and
other than Consents required from the FRB and from the TDFI, and other than
Consents, filings, or notifications which, if not obtained or made, are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Subject Company, no notice to, filing with, or Consent of, any public
body or authority is necessary for the consummation by Subject Company of the
Merger and the other transactions contemplated in this Agreement.
5.3 Capital Stock. (a) The authorized capital stock of Subject Company
consists solely of: (i) 2,500,000 shares of Subject Company Common Stock, of
which not more than 563,610.7089 shares of Subject Company Common Stock are
outstanding as of the date of this Agreement and not more than 563,610.7089
shares of Subject Company Common Stock will be issued and outstanding at the
Effective Time. All of the issued and outstanding shares of Subject Company
Common Stock are duly and validly issued and outstanding and are fully paid and
nonassessable under the TBCA and Subject Company's Articles of Incorporation and
Bylaws. None of
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the outstanding shares of Subject Company Common Stock has been issued in
violation of any preemptive rights of the current or past shareholders of
Subject Company.
(b) Other than as set forth in Section 5.3(a) of this
Agreement, there are no shares of capital stock or other equity securities of
Subject Company outstanding and no outstanding Rights relating to the capital
stock of Subject Company.
5.4 Subject Company Subsidiaries. Subject Company has disclosed in
Section 5.4 of the Subject Company Disclosure Memorandum all of the Subject
Company Subsidiaries that are corporations (identifying its jurisdiction of
incorporation) and all of the Subject Company Subsidiaries that are general or
limited partnerships or other non-corporate entities (identifying the Law under
which such entity is organized, and the amount and nature of the ownership
interest therein of Subject Company Subsidiaries). Except as set forth in
Section 5.4 of the Subject Company Disclosure Memorandum, Subject Company or one
of its wholly-owned Subsidiaries owns all of the issued and outstanding shares
of capital stock (or other equity interests) of each of the Subject Company
Subsidiaries. Except as set forth in Section 5.4 of the Subject Company
Disclosure Memorandum, no capital stock (or other equity interest) of any
Subject Company Subsidiary is or may become required to be issued (other than to
another Subject Company Subsidiary) by reason of any Rights, and there are no
Contracts by which Subject Company or any of the Subject Company Subsidiaries is
bound to issue (other than to Subject Company or another of the Subject Company
Subsidiaries) additional shares of its capital stock (or other equity interests)
or Rights or by which Subject Company or any of the Subject Company Subsidiaries
is or may be bound to transfer any shares of the capital stock (or other equity
interests) of any of Subject Company or any of the Subject Company Subsidiaries
(other than to Subject Company or any of the Subject Company Subsidiaries).
Except as set forth in Section 5.4 of the Subject Company Disclosure Memorandum,
there are no Contracts relating to the rights of Subject Company or any Subject
Company Subsidiary to vote or to dispose of any shares of the capital stock (or
other equity interests) of Subject Company or any Subject Company Subsidiary.
All of the shares of capital stock (or other equity interests) of each Subject
Company Subsidiary held by Subject Company or any Subject Company Subsidiary are
fully paid and are owned by Subject Company or a Subject Company Subsidiary free
and clear of any Liens. Each Subject Company Subsidiary is either a bank or a
corporation, and each such Subsidiary is duly organized, validly existing, and
(as to corporations) in good standing under the Laws of the jurisdiction in
which it is incorporated or organized, and has the corporate power and authority
necessary for it to own, lease, and operate its Assets and to carry on its
business as now conducted. Each Subject Company Subsidiary is duly qualified or
licensed to transact business as a foreign corporation in good standing in each
of the States of the United States and in each foreign jurisdiction where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for such jurisdictions in which the failure
to be so qualified or licensed is not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Subject Company. The only Subject
Company Subsidiary that is a depository institution is the Bank. The Bank is an
"insured depository institution" as defined in Section 3(c)(2) of the Federal
Deposit Insurance Act and applicable regulations thereunder. The deposits in the
Bank are insured by the Federal Deposit Insurance Corporation to the maximum
extent permitted by the Federal Deposit Insurance Act, as amended, and
applicable regulations thereunder. The Bank is a member of the Bank Insurance
Fund. The minute book and other organizational documents (and all amendments
thereto) for Subject Company and each Subject Company Subsidiary that is a
"Significant Subsidiary" (as such term is defined in Rule 1.02(w) of Regulation
S-X promulgated under the Securities Laws) have been or will be made available
to Parent for its review, and are true and complete (except as set forth in
Section 5.4 of the Subject Company Disclosure Memorandum) in all material
respects as in effect as of the date of this Agreement.
5.5 Financial Statements. Subject Company has delivered to Parent (or
will deliver, when available, with respect to periods ended after the date of
this Agreement) true, correct and complete copies of (i) the audited
consolidated statements of financial position (including related notes and
schedules, if any) of Subject Company as of December 31, 1997, and as of
December 31, 1996 and December 31, 1995, and the related consolidated statements
of operations, changes in stockholders' equity, and cash flows (including
related notes and schedules, if any) for the years ended December 31, 1997, 1996
and 1995 (the "Audited Subject Company Financial Statements"); and (ii) the
unaudited consolidated statements of financial position of Subject Company
(including related notes and
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schedules, if any) and related statements of operations, changes in
stockholders' equity, and cash flows (including related notes and schedules, if
any) of Subject Company with respect to any period ending subsequent to December
31, 1997, and prior to the Closing Date (the "Interim Subject Company Financial
Statements" and, collectively with the Audited Subject Company Financial
Statements, the "Subject Company Financial Statements"). Such Subject Company
Financial Statements (i) were (or will be) prepared from the records of Subject
Company and/or each Subject Company Subsidiary; (ii) were (or will be) prepared
in accordance with GAAP (or, where applicable, regulatory accounting principles)
consistently applied (except that substantially all of the disclosures and the
statements of cash flows have been omitted from the Interim Subject Company
Financial Statements); (iii) fairly present (or, when prepared, will fairly
present) in all material respects Subject Company's consolidated financial
condition and the consolidated results of its operations, changes in
stockholders' equity and cash flows at the relevant dates thereof and for the
periods covered thereby, except that the Interim Subject Company Financial
Statements were or are subject to normal and recurring year-end adjustments
which were or are not expected to be material in amount or effect; (iv) do
contain or reflect (or, when prepared, will contain and reflect) all necessary
adjustments and accruals for a fair presentation of Subject Company's
consolidated financial condition and the consolidated results of its operations
and cash flows for the periods covered by such financial statements; (v) do
contain and reflect (or, when prepared, will contain and reflect) adequate
provisions or allowances for loan losses and for other real estate and Taxes,
with respect to the periods then ended; and (vi) do contain and reflect (or,
when prepared, will contain and reflect) adequate provisions for all reasonably
anticipated liabilities for Post Retirement Benefits Other Than Pensions
("OPEB") pursuant to SFAS Nos. 106 and 112.
5.6 Absence of Undisclosed Liabilities. Neither Subject Company nor any
of the Subject Company Subsidiaries has any Liabilities that are reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Subject Company, except Liabilities which are accrued or reserved against in the
consolidated balance sheets of Subject Company as of December 31, 1997, or which
are included in the Subject Company Financial Statements made available prior to
the date of this Agreement or reflected in the notes and schedules, if any,
thereto. Neither Subject Company nor any of the Subject Company Subsidiaries has
incurred or paid any Liability since June 30, 1998, 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 June 30, 1998, except
as disclosed in Section 5.7 of the Subject Company Disclosure Memorandum, there
have been no events, changes, or occurrences which have had, or are reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Subject Company.
5.8 Tax Matters. Except as set forth in Section 5.8 of the Subject
Company Disclosure Memorandum:
(a) All 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, 1997, and, to the
knowledge of Subject Company, all such Tax Returns filed are complete and
accurate in all material respects. All Taxes shown on filed Tax Returns have
been paid. There is no audit examination or refund Litigation with respect to
any material Taxes, except as reserved against in the Subject Company Financial
Statements made available prior to the date of this Agreement. All Taxes and
other Liabilities due with respect to completed and settled examinations or
concluded Litigation related to Tax Returns and/or Taxes of Subject Company have
been paid. There are no Liens with respect to Taxes upon any of the Assets of
Subject Company or any of the Subject Company Subsidiaries.
(b) Neither Subject Company nor any of the Subject Company
Subsidiaries has executed an extension or waiver of any statute of limitations
on the assessment or collection of any Tax due (excluding such statutes that
relate to years currently under examination by the Internal Revenue Service or
other applicable taxing authorities) that is currently in effect.
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(c) Adequate provision for any Taxes due or to become due for
Subject Company or the Subject Company Subsidiaries for the period or periods
through and including the date of the respective Subject Company Financial
Statements has been (or will be) made and is (or will be) reflected on such
Subject Company Financial Statements.
(d) Material deferred Taxes of Subject Company and the Subject
Company Subsidiaries have been provided for in accordance with GAAP.
(e) Subject Company and the Subject Company Subsidiaries are
in compliance with, and the records of Subject Company and each of the Subject
Company Subsidiaries contain all information and documents (including properly
completed Internal Revenue Service Forms W-9) necessary to comply 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, except for such instances of non-compliance and such omissions as
are not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Subject Company.
(f) Neither Subject Company nor any of the Subject Company
Subsidiaries has made any payments, is obligated to make any payments, or is a
party to any Contract that could obligate it to make any payments that would be
disallowed as a deduction under Section 280G or 162(m) of the Internal Revenue
Code.
(g) There has not been an ownership change, as defined in
Internal Revenue Code Section 382(g), of Subject Company or any of the Subject
Company Subsidiaries that occurred during or after any Taxable Period in which
Subject Company or any of the Subject Company Subsidiaries incurred a net
operating loss that carries over to any Taxable Period ending after December 31,
1997.
(h) Neither Subject Company nor any of the Subject Company
Subsidiaries is a party to any tax allocation or sharing agreement and neither
Subject Company nor any of the Subject Company Subsidiaries has been a member of
an affiliated group filing a consolidated federal income tax return (other than
a group the common parent of which was Subject Company) or has any Liability for
taxes of any Person (other than Subject Company and the Subject Company
Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local, or foreign Law) as a transferee or successor or by
Contract or otherwise.
5.9 Assets. Except as disclosed or reserved against in the Subject
Company Financial Statements made available prior to the date of this Agreement,
Subject Company and the Subject Company Subsidiaries have good and indefeasible
title, free and clear of all Liens, to all of their respective material Assets
reflected on the balance sheet as of June 30, 1998 included in such Subject
Company Financial Statements, other than any of such Assets which have been sold
or otherwise disposed of since June 30, 1998. All tangible properties used in
the businesses of Subject Company and its Subsidiaries are in good condition,
reasonable wear and tear excepted, and are usable in the ordinary course of
business of Subject Company and its Subsidiaries, except for instances in which
the failure to so be is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Subject Company. All Assets which are
material to Subject Company's business on a consolidated basis, held under
leases or subleases by the Subject Company or any of the Subject Company
Subsidiaries, are held under valid Contracts enforceable in accordance with
their respective terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or other Laws (including
provisions of the U.S. and Tennessee Constitutions) affecting the enforcement of
creditors' rights generally and except that the availability of equitable
remedies is subject to the discretion of the court before which any proceedings
may be brought), and each such Contract is in full force and effect. Subject
Company and the Subject Company Subsidiaries currently maintain insurance in
amounts 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) insurance
that is now in effect will be canceled or that coverage thereunder will be
reduced or eliminated, or (ii) premium costs with respect to policies of
insurance that are now in effect will be substantially increased. There are
presently no
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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.
5.10 Intellectual Property. Subject Company or a Subject Company
Subsidiary owns, is the valid licensee of, or otherwise has the right to use,
all Intellectual Property material to the business of Subject Company. To the
Knowledge of Subject Company, none of the Intellectual Property material to 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 or violation. Except as set forth
in Section 5.10 of the Subject Company Disclosure Memorandum, neither Subject
Company nor the Subject Company Subsidiaries is obligated to pay any royalties
to any Person with respect to any such Intellectual Property. To the Knowledge
of Subject Company, no officer, director, or employee of Subject Company or the
Subject Company Subsidiaries is party to any Contract which requires such
officer, director, or employee to assign any interest in any Intellectual
Property or keep confidential any trade secrets, proprietary data, customer
information, or other business information or which restricts or prohibits such
officer, director, or employee from engaging in activities competitive with any
Person, including Subject Company or any of the Subject Company Subsidiaries.
5.11 Environmental Matters. Except as set forth in Section 5.11
of the Subject Company Disclosure Memorandum:
(a) To the Knowledge of Subject Company, each of Subject
Company and the Subject Company Subsidiaries, its Participation Facilities, and
its Operating Properties are, and have been, in compliance with all applicable
Environmental Laws, except for instances of non-compliance 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 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 a site owned, leased, or operated by Subject Company or any of the
Subject Company Subsidiaries or any of their respective Operating Properties or
Participation Facilities, except for such Litigation pending or threatened that
is not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Subject Company, nor, to the Knowledge of Subject Company, is
there any reasonable basis for any Litigation of a type described in this
sentence.
(c) During the period of (i) Subject Company's or any of the
Subject Company Subsidiaries' ownership or operation of any of their respective
current properties, (ii) Subject Company's or any of the Subject Company
Subsidiaries' participation in the management of any Participation Facility, or
(iii) Subject Company's or any of the Subject Company Subsidiaries' holding of a
security interest in an Operating Property, to the Knowledge of Subject Company,
there have been no releases of Hazardous Material in, on, under, adjacent to, or
affecting 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
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Adverse Effect on Subject Company. Neither Subject Company nor any of the
Subject Company Subsidiaries:
(a) is in violation of any Laws, Orders, or Permits applicable
to its business or employees conducting its business, except for any such
violations as are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Subject Company; or
(b) has received any notification or communication since
January 1, 1996 from any agency or department of federal, state, or local
government or any Regulatory Authority or the staff thereof (i) asserting that
Subject Company or any of the Subject Company Subsidiaries is in violation of
any of the Laws or Orders which such governmental authority or Regulatory
Authority enforces (excluding violations which would not be reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on Subject
Company), (ii) threatening to revoke any material Permits, or (iii) requiring
Subject Company or any of the Subject Company Subsidiaries to enter into or
consent to the issuance of a cease and desist order, formal agreement,
directive, commitment, or memorandum of understanding, or to adopt any Board of
Directors resolution or similar undertaking, which is still in effect and 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 (excluding matters
which are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Subject Company) involving Subject Company or any of
the Subject Company Subsidiaries, pending or, to the Knowledge of Subject
Company, threatened, nor to the Knowledge of Subject Company, is there any
activity involving Subject Company's or any of the Subject Company Subsidiaries'
employees seeking to certify a collective bargaining unit or engaging in any
other collective bargaining organizational activity.
5.14 Employee Benefit Plans. (a) Subject Company has disclosed in
Section 5.14(a) of the Subject Company Disclosure Memorandum, and has delivered
or made available to Parent prior to the execution of this Agreement copies of,
all pension, retirement, profit sharing, deferred compensation, stock option,
employee stock ownership, severance pay, vacation, bonus, or other material
incentive plans, all other written employee programs, arrangements, or
agreements, all medical, vision, dental, or other health plans, all life
insurance plans, and all other material employee benefit or fringe benefit
plans, including "employee benefit plans" as that term is defined in Section
3(3) of ERISA, currently adopted, maintained by, sponsored in whole or in part
by, or contributed to by Subject Company, the Subject Company Subsidiaries or
any ERISA Affiliate thereof for the benefit of employees, retirees, dependents,
spouses, directors, independent contractors, or other beneficiaries of Subject
Company or any Subject Company Subsidiary and under which employees, retirees,
dependents, spouses, directors, independent contractors, or other beneficiaries
of Subject Company or any Subject Company Subsidiary are eligible to participate
(collectively, the "Subject Company Benefit Plans"). Any of the Subject Company
Benefit Plans which is an "employee pension benefit plan," as that term is
defined in Section 3(2) of ERISA, is referred to herein as a "Subject Company
ERISA Plan." Neither Subject Company nor any Subject Company Subsidiary
maintains any "defined benefit plan" (as defined in Section 414(j) of the
Internal Revenue Code). No Subject Company ERISA Plan is or has been a
multiemployer plan within the meaning of Section 3(37) of ERISA.
(b) To the knowledge of Subject Company, all Subject Company
Benefit Plans are in compliance in all material respects 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 either is a standardized prototype plan or has received a
favorable determination letter from the Internal Revenue Service, and Subject
Company is not aware of any circumstances likely to result in revocation of any
such favorable determination letter. To the Knowledge of Subject Company,
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neither Subject Company nor any of the Subject Company Subsidiaries is subject
to a Tax imposed by Section 4975 of the Internal Revenue Code or a civil penalty
imposed by Section 502(i) of ERISA.
(c) No "defined benefit plan" (as defined in Section 414(j) of
the Internal Revenue Code) or any "single-employer plan," within the meaning of
Section 4001(a)(15) of ERISA, formerly maintained by Subject Company or any of
the Subject Company Subsidiaries, or the single-employer plan of any entity
which is considered one employer with Subject Company under Section 4001 of
ERISA or Section 414 of the Internal Revenue Code or Section 302 of ERISA
(whether or not waived) (an "ERISA Affiliate") has an "accumulated funding
deficiency" within the meaning of Section 412 of the Internal Revenue Code or
Section 302 of ERISA. Neither Subject Company nor any of the Subject Company
Subsidiaries has provided, or, to Subject Company's knowledge, is required to
provide, security to any single-employer plan of an ERISA Affiliate pursuant to
Section 401(a)(29) of the Internal Revenue Code.
(d) Within the six year period preceding the Effective Time,
no 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 withdrawal Liability with
respect to a multiemployer plan under Subtitle E of Title IV of ERISA
(regardless of whether based on contributions of an ERISA Affiliate). No notice
of a "reportable event," within the meaning of Section 4043 of ERISA for which
the 30 day reporting requirement has not been waived, has been required to be
filed for any Subject Company Pension Plan or by any ERISA Affiliate within the
12 month period ending on the date hereof.
(e) Neither Subject Company nor any of the Subject Company
Subsidiaries has any material Liability for retiree health and life benefits
under any of the Subject Company Benefit Plans, and there are no restrictions on
the rights of Subject Company or any of the Subject Company Subsidiaries to
amend or terminate any such retiree health or benefit Plan without incurring
Liability thereunder.
(f) Except as set forth in Section 5.14(f) of the Subject
Company Disclosure Memorandum, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (i)
result in any payment (including severance, unemployment compensation or golden
parachute) becoming due to any director or any employee of Subject Company or
any of the Subject Company Subsidiaries from Subject Company or any of the
Subject Company Subsidiaries under any Subject Company Benefit Plan, (ii)
increase any benefits otherwise payable under any Subject Company Benefit Plan,
or (iii) result in any acceleration of the time of payment or vesting of any
such benefit.
(g) The actuarial present values of all accrued deferred
compensation entitlements (including entitlements under any executive
compensation, supplemental retirement, or employment agreement) of employees and
former employees of any Subject Company Subsidiary and their respective
beneficiaries, other than entitlements accrued pursuant to funded retirement
plans subject to the provisions of Section 412 of the Internal Revenue Code or
Section 302 of ERISA, have been fully reflected on the Audited 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,
Federal Home Loan Bank advances, 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
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Contracts between or among Subject Company and the Subject Company Subsidiaries,
(v) any exchange-traded or over-the-counter swap, forward, future, option, cap,
floor, or collar financial Contract, or any other interest rate or foreign
currency protection Contract (not disclosed in the Subject Company Financial
Statements delivered prior to the date of this Agreement) which is a financial
derivative Contract (including various combinations thereof), and (vi) any other
Contract or amendment thereto that would be required to be filed as an exhibit
to a Subject Company SEC Document which would have been filed by Subject Company
prior to the date of this Agreement if Subject Company was required to file SEC
Documents (together with all Contracts referred to in Sections 5.9 and 5.14(a)
of this Agreement, the "Subject Company Contracts"). With respect to each
Subject Company Contract: (i) the Contract is in full force and effect; (ii)
neither Subject Company nor any Subject Company Subsidiary is in Default
thereunder, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Subject Company);
(iii) neither Subject Company nor any Subject Company Subsidiary has repudiated
or waived any material provision of any such Contract; and (iv) no other party
to any such Contract is, to the Knowledge of Subject Company, in Default in any
material respect or has repudiated or waived any material provision thereunder.
Except as set forth in Section 5.15 of the Subject Company Disclosure
Memorandum, all of the indebtedness of Subject Company or any Subject Company
Subsidiary for money borrowed is prepayable at any time by Subject Company or
the particular Subject Company Subsidiary without material penalty or premium.
5.16 Legal Proceedings. There is no Litigation instituted or pending,
or, to the Knowledge of Subject Company, threatened (or unasserted but
considered probable of assertion and which if asserted would have at least a
reasonable probability of an unfavorable outcome) against Subject Company or any
of the Subject Company Subsidiaries, or against any Asset, employee benefit
plan, interest, or right of any of them, that is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Subject Company,
nor are there any Orders of any Regulatory Authorities, other governmental
authorities, or arbitrators outstanding against Subject Company or any of the
Subject Company Subsidiaries. Section 5.16 of the Subject Company Disclosure
Memorandum includes a summary report of all material Litigation as of the date
of this Agreement which names Subject Company or a Subject Company Subsidiary as
a defendant or cross-defendant.
5.17 Reports. Since January 1, 1995, or the applicable date of
organization if later, Subject Company and each Subject Company Subsidiary has
timely filed all reports and statements, together with any amendments required
to be made with respect thereto, that it was required to file with (i) the SEC,
if any, (ii) other Regulatory Authorities, and (iii) any applicable state
securities or banking authorities, except untimely filings or failures to file
which are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Subject Company. As of its respective date (or, if
amended or superseded by a filing prior to the date of this Agreement, then on
the date of such filing), each of such reports and documents, including the
financial statements, exhibits, and schedules thereto, complied in all material
respects with all applicable Laws. As of its respective date (or, if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing), no Subject Company document or report contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading. None of the Subject
Company Subsidiaries is required to file any SEC Documents.
5.18 Statements True and Correct. None of the information supplied or
to be supplied by Subject Company expressly for inclusion in the Registration
Statement to be filed by Parent with the SEC will, when the Registration
Statement becomes effective, be false or misleading with respect to any material
fact, or omit to state any material fact necessary to make the statements
therein not misleading. None of the information supplied or to be supplied by
Subject Company expressly for inclusion in the Subject Company Proxy Statement
to be mailed to Subject Company's shareholders in connection with the Subject
Company Shareholders' Meeting, and any other documents to be filed by 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 Subject Company Proxy Statement, when first
mailed to the shareholders of Subject Company, be false or misleading with
respect to any material fact, or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, or, in the case of the Subject Company Proxy
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Statement or any amendment thereof or supplement thereto, at the time of the
Subject Company Shareholders' Meeting, be false or misleading with respect to
any material fact, or omit to state any material fact necessary to correct any
statement made by Subject Company in any earlier communication with respect to
the solicitation of any proxy for the Subject Company Shareholders' Meeting. All
documents that Subject Company or any Subject Company Subsidiary is responsible
for filing with any Regulatory Authority in connection with the transactions
contemplated hereby will comply as to form in all material respects with the
provisions of applicable Law.
5.19 Accounting, Tax, and Regulatory Matters. Neither Subject Company
nor any of the Subject Company Subsidiaries has taken any action or has any
Knowledge of any fact or circumstance relating to Subject Company that is
reasonably likely to (i) prevent the transactions contemplated hereby, including
the Merger, from qualifying for pooling-of-interests accounting treatment or as
a reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, or (ii) materially impede or delay receipt of any Consents of Regulatory
Authorities referred to in Section 9.1(b) of this Agreement.
5.20 Charter Provisions; Takeover Laws. Subject Company has taken all
action so that the entering into of this Agreement and the consummation of the
Merger and the other transactions contemplated by this Agreement do not and will
not result in the grant of any rights to any Person under the Articles of
Incorporation, Bylaws or other governing instruments of Subject Company or any
Subject Company Subsidiary or restrict or impair the ability of Parent or any of
the Parent Subsidiaries to vote, or otherwise to exercise the rights of a
shareholder with respect to, shares of Subject Company or any Subject Company
Subsidiary. Subject Company has taken all necessary action to exempt this
Agreement and the Plan of Merger from, and the transactions contemplated hereby
and thereby are exempt from, any "super-majority" voting requirements or the
requirements of any "moratorium," "fair price," "business combination," "control
share," or other anti-takeover provisions under applicable Laws, or the Articles
of Incorporation or Bylaws of the Subject Company or any Subject Company
Subsidiary (collectively, "Takeover Laws").
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent hereby represents and warrants to Subject Company,
except as set forth in Parent's Disclosure Memorandum, as follows:
6.1 Organization, Standing and Power. Parent is a corporation duly
organized, validly existing, and in good standing under the Laws of the State of
Tennessee, and has the corporate power and authority to carry on its business as
now conducted and to own, lease and operate its Assets. Parent is duly qualified
or licensed to transact business as a foreign corporation in good standing in
each of the States of the United States and in each foreign jurisdiction where
the character of its Assets or the nature or conduct of its business requires it
to be so qualified or licensed, except for such jurisdictions in which the
failure to be so qualified or licensed is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Parent.
6.2 Authority; No Breach by Agreement. (a) Parent and Merger Subsidiary
each have the corporate power and authority necessary to execute, deliver and
perform its respective obligations under this Agreement and the Plan of Merger
and to consummate the transactions contemplated hereby and thereby. The
execution, delivery and performance of this Agreement and the Plan of Merger by
Parent and Merger Subsidiary and the consummation of the transactions
contemplated herein and therein, including the Merger, have been duly and
validly authorized by all necessary corporate action in respect thereof on the
part of Parent and Merger Subsidiary, subject to the adoption of an amendment to
the Restated Charter of Incorporation of Parent to increase the number of
authorized shares of Parent Common Stock. Subject to the receipt of all Consents
required from Regulatory Authorities and the expiration of all mandatory waiting
periods, assuming the due authorization, execution and delivery of this
Agreement and the Plan of Merger by Subject Company, this Agreement and the Plan
of Merger each represents a legal, valid, and binding obligation of each of
Parent and Merger Subsidiary, enforceable against each of them in
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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., Tennessee and Tennessee
Constitutions) affecting the enforcement of creditors' rights generally and
except that the availability of equitable remedies is subject to the discretion
of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement or
the Plan of Merger by Parent and/or Merger Subsidiary, nor the consummation by
Parent and Merger Subsidiary, of the transactions contemplated hereby or
thereby, nor compliance by Parent and Merger Subsidiary with any of the
provisions hereof or thereof will (i) conflict with or result in a breach of any
provision of Parent's Restated Charter of Incorporation or Bylaws or of Merger
Subsidiary's Charter of Incorporation or Bylaws, or (ii) constitute or result in
a Default under, or require any Consent (excluding Consents required by Law or
Order) pursuant to, or result in the creation of any Lien on any material Asset
of Parent or any Parent Subsidiary under, any Contract or Permit of Parent or
any Parent Subsidiary, except for such Defaults and Liens which are not, and for
such Consents which, if not obtained, are not, reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Parent or Merger
Subsidiary, or (iii) subject to receipt of the requisite Consents referred to in
Section 9.1(b) of this Agreement, violate any Law or Order applicable to Parent
or any Parent Subsidiary or any of their respective material Assets.
(c) Other than in connection or compliance with the provisions
of the Securities Laws, applicable state corporate and securities Laws, and
rules of the NYSE, and other than Consents required from the FRB under Sections
3 and 4 of the BHC Act and from the TDFI, and other than Consents, filings, or
notifications which, if not obtained or made, are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Parent, no notice
to, filing with, or Consent of, any public body or authority is necessary for
the consummation by Parent and Merger Subsidiary of the Merger and the other
transactions contemplated in this Agreement.
6.3 Capital Stock. The authorized capital stock of Parent consists
solely of (i) 300,000,000 shares of Parent Common Stock, of which 85,073,166
shares were issued and outstanding as of June 30, 1998, and (ii) 10,000,000
shares of Parent Preferred Stock, of which 1,109,270 shares of Parent Series E
Preferred Stock were issued and outstanding as of June 30, 1998. All of the
issued and outstanding shares of Parent Capital Stock are, and all of the shares
of Parent Common Stock to be issued in exchange for shares of Subject Company
Common Stock upon consummation of the Merger, when issued in exchange for shares
of Subject Company Common Stock upon consummation of the Merger and in
accordance with the terms of this Agreement, will be, duly and validly
authorized, issued and outstanding, and fully paid and nonassessable under the
TBCA and Parent's Restated Charter of Incorporation and Bylaws. All shares of
Parent Common Stock to be issued upon consummation of the Merger, when issued in
accordance with this Agreement, will be, at the time of their delivery, free and
clear of all Liens. None of the outstanding shares of Parent Capital Stock has
been, and none of the shares of Parent Common Stock to be issued in exchange for
shares of Subject Company Common Stock upon consummation of the Merger will be,
issued in violation of any preemptive rights of any Person. As of the date
hereof and as of the Closing Date, to the Knowledge of Parent, none of the
issued and outstanding shares of Parent Capital Stock has been or will have been
issued in violation of the Securities Laws or any other applicable securities
Laws. To the Knowledge of Parent, there are no facts or circumstances that would
preclude the Parent Common Stock to be issued in the Merger from being approved
for listing on the NYSE.
6.4 Parent Subsidiaries. Except as set forth in Section 6.4 of the
Parent Disclosure Memorandum, Parent owns all of the issued and outstanding
capital stock of Merger Subsidiary, and Parent or one of its wholly-owned
Subsidiaries owns all of the issued and outstanding shares of capital stock (or
other equity interests) of each of the other Parent Subsidiaries which would
qualify as a "Significant Subsidiary" (as such term is defined in Rule 1.02(w)
of Regulation S-X promulgated under the Securities Laws) of Parent. No capital
stock (or other equity interest) of any Parent Subsidiary which would qualify as
a Significant Subsidiary of Parent, is or may become required to be issued
(other than to another Parent Subsidiary) by reason of any Rights, and there are
no Contracts by which Parent or any of the Parent Subsidiaries which is a
Significant Subsidiary of Parent, is bound to issue (other than to Parent or any
of the Parent Subsidiaries) additional shares of its capital stock (or other
equity interests) or Rights or by which Parent or any of such significant Parent
Subsidiaries is or may be bound to transfer any shares
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of the capital stock (or other equity interests) of any of Parent or any of the
Parent Subsidiaries (other than to Parent or any of the Parent Subsidiaries).
There are no Contracts relating to the rights of Parent or any Parent Subsidiary
which would qualify as a Significant Subsidiary of Parent, to vote or to dispose
of any shares of the capital stock (or other equity interests) of any of the
Parent Subsidiaries. All of the shares of capital stock (or other equity
interests) of each Parent Subsidiary which would qualify as a Significant
Subsidiary of Parent and held by Parent or any Parent Subsidiary have been duly
and validly authorized and issued and are fully paid and nonassessable (except
pursuant to 12 U.S.C. Section 55 in the case of national banks and comparable,
applicable state Law, if any, in the case of state depository institutions)
under the applicable corporation or similar Law of the jurisdiction in which
such Subsidiary is incorporated or organized and are owned by Parent or a Parent
Subsidiary free and clear of any Liens. None of the issued and outstanding
shares of capital stock of Merger Subsidiary, and none of the issued and
outstanding stock of any other Parent Subsidiary which qualifies as a
Significant Subsidiary of Parent, has been issued in violation of any preemptive
rights of any Person. Each Parent Subsidiary is either a bank, federal savings
bank, or a savings association, partnership, limited liability company or a
corporation, and each such Parent Subsidiary which qualifies as a Significant
Subsidiary of Parent is duly organized, validly existing and (as to
corporations) in good standing under the Laws of the jurisdiction in which it is
incorporated or organized, and has the corporate power and authority necessary
for it to own, lease, and operate its Assets and to carry on its business as now
conducted. Each Parent Subsidiary which qualifies as a Significant Subsidiary of
Parent is duly qualified or licensed to transact business as a foreign
corporation in good standing in each of the States of the United States and in
each foreign jurisdiction where the character of its Assets or the nature or
conduct of its business requires it to be so qualified or licensed, except for
such jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Parent.
6.5 Financial Statements. Each of the Parent Financial Statements
(including, in each case, any related notes) contained in the Parent SEC
Documents, including any Parent SEC Document filed after the date of this
Agreement until the Effective Time,: (i) complied, or will comply, as to form in
all material respects with the applicable published rules and regulations of the
SEC with respect thereto, (ii) was prepared, or will be prepared, in accordance
with GAAP applied on a consistent basis throughout the periods involved (except
as may be indicated in the notes to such financial statements or, in the case of
unaudited interim statements, as permitted by Regulation S-X promulgated under
the Securities Laws), (iii) fairly presented, or will fairly present, in all
material respects the consolidated financial position of Parent and the Parent
Subsidiaries as at the respective dates and the consolidated results of its
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal and recurring
year-end adjustments which were not or are not expected to be material in amount
or effect.
6.6 Absence of Undisclosed Liabilities. Neither Parent nor any of the
Parent Subsidiaries has any Liabilities that are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Parent, except
Liabilities which are accrued or reserved against in the consolidated balance
sheets of Parent as of December 31, 1997, or which are included in the Parent
Financial Statements made available prior to the date of this Agreement, or
reflected in the notes and schedules, if any, thereto. Neither Parent nor any of
the Parent Subsidiaries has incurred or paid any Liability since June 30, 1998,
except for such Liabilities incurred or paid (i) which are not reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on Parent
or (ii) in connection with the transactions contemplated by this Agreement.
6.7 Absence of Certain Changes or Events. Since June 30, 1998, except
as disclosed in the Parent SEC Documents made available prior to the date of
this Agreement, there have been no events, changes, or occurrences which have
had, or are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Parent.
6.8 Compliance With Laws. Parent is duly registered as a bank holding
company under the BHC Act. Each of Parent and the Parent Subsidiaries has in
effect all Permits necessary for it to own, lease, or operate its material
Assets and to carry on its business as now conducted, except where the failure
to hold such permits would not be reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Parent. Neither
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Parent nor any of the Parent Subsidiaries:
(a) is in violation of any Laws, Orders, or Permits applicable
to its business or employees conducting its business, except for such violations
which would not be reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on Parent; or
(b) has received any notification or communication since
January 1, 1996 from any agency or department of federal, state, or local
government or any Regulatory Authority or the staff thereof (i) asserting that
Parent or any Parent Subsidiary is in violation of any of the Laws or Orders
which such governmental authority or Regulatory Authority enforces (excluding
violations which would not be reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Parent), (ii) threatening to revoke any
material 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 is still in effect and which restricts
materially the conduct of its business, or in any manner relates to its capital
adequacy, its credit or reserve policies, its management, or the payment of
dividends.
6.9 Legal Proceedings. There is no Litigation instituted or pending,
or, to the Knowledge of Parent, threatened (or unasserted but considered
probable of assertion and which if asserted would have at least a reasonable
probability of an unfavorable outcome) against Parent or any Parent Subsidiary,
or against any Asset, employee benefit plan, interest, or right of any of them,
that is reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Parent, nor are there any Orders of any Regulatory
Authorities, other governmental authorities, or arbitrators outstanding against
Parent or any Parent Subsidiary.
6.10 Reports. Since January 1, 1995, or the applicable date of
organization if later, Parent and each Parent Subsidiary has timely filed all
reports and statements, together with any amendments required to be made with
respect thereto, that it was required to file with (i) the SEC, including, but
not limited to, Forms 10-K, Forms 10-Q, Forms 8-K, and proxy statements, (ii)
other Regulatory Authorities, and (iii) any applicable state securities or
banking authorities, except untimely filings or failures to file which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Parent. As of its respective date (or, if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing),
each of such reports and documents, including the financial statements,
exhibits, and schedules thereto, complied in all material respects with all
applicable Laws. As of its respective date, no Parent document or report
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. Except for Parent Subsidiaries that are registered as a broker,
dealer, or investment advisor, no Parent Subsidiary is required to file any SEC
Documents.
6.11 Statements True and Correct. None of the information supplied or
to be supplied by Parent or any Parent Subsidiary expressly for inclusion in the
Registration Statement to be filed by Parent with the SEC, will, when the
Registration Statement becomes effective, be false or misleading with respect to
any material fact, or omit to state any material fact necessary to make the
statements therein not misleading. None of the information supplied or to be
supplied by Parent or any Parent Subsidiary expressly for inclusion in the
Subject Company Proxy Statement to be mailed to Subject Company's shareholders
in connection with the Subject Company Shareholders' Meeting, and any other
documents to be filed by Parent or any Parent Subsidiary with the SEC or any
other Regulatory Authority in connection with the transactions contemplated
hereby, will, at the respective time such documents are filed, and with respect
to the Subject Company Proxy Statement, when first mailed to the shareholders of
Subject
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Company, be false or misleading with respect to any material fact, or omit to
state any material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, or, in the case of
the Subject Company Proxy Statement or any amendment thereof or supplement
thereto, at the time of the Subject Company Shareholders' Meeting, be false or
misleading with respect to any material fact, or omit to state any material fact
necessary to correct any information supplied or to be supplied by Parent or any
Parent Subsidiary which was contained in any earlier communication with respect
to the solicitation of any proxy for the Subject Company Shareholders' Meeting.
All documents that Parent or any Parent Subsidiary is responsible for filing
with any Regulatory Authority in connection with the transactions contemplated
hereby will comply as to form in all material respects with the provisions of
applicable Law.
6.12 Accounting, Tax, and Regulatory Matters. Neither Parent nor any
Parent Subsidiary has taken any action or has any Knowledge of any fact or
circumstance relating to Parent that is reasonably likely to (i) prevent the
transactions contemplated hereby, including the Merger, from qualifying for
treatment as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code, or (ii) materially impede or delay receipt of any
Consents of Regulatory Authorities referred to in Section 9.1(b) of this
Agreement, or (iii) prevent the transactions contemplated hereby, including the
Merger, from qualifying for pooling-of-interests accounting treatment.
6.13 Material Contracts. Except as set forth in Section 6.13 of the
Parent Disclosure Memorandum, neither Parent, the Parent Subsidiaries, nor any
of their respective Assets, businesses or operations is a party to, or is bound
or affected by, or receives benefits under, any Contract or amendment thereto
that falls within the definition of a "Material Contract" contained in Item 601
of Regulation S-K promulgated under the Securities Laws (the "Parent Material
Contracts") that has not been filed as an exhibit to a Parent SEC Document filed
by Parent prior to the date of this Agreement. With respect to each Parent
Material Contract: (i) the Contract is in full force and effect; (ii) neither
Parent nor any Parent Subsidiary is in Default thereunder, other than Defaults
which are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Parent; (iii) neither Parent nor any Parent
Subsidiary has repudiated or waived any material provision of any such Contract;
and (iv) no other party to any such Contract is, to the Knowledge of Parent, in
Default in any material respect or has repudiated or waived any material
provisions thereunder.
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 Affirmative Covenants of Subject Company. Unless the prior written
consent of Parent shall have been obtained, and except as otherwise expressly
contemplated herein or expressly provided for in the Subject Company Disclosure
Memorandum, from the date of this Agreement until the earlier of the Effective
Time or the termination of this Agreement, Subject Company shall and shall cause
each of the Subject Company Subsidiaries to (i) operate its business only in the
usual, regular, and ordinary course, (ii) use reasonable efforts to preserve
intact its business organization and Assets and maintain its rights and
franchises, and (iii) take no action which would (a) materially adversely affect
the ability of any Party to obtain any Consents required for the transactions
contemplated hereby or prevent the transactions contemplated hereby, including
the Merger, from qualifying for pooling-of-interests accounting treatment or as
a reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, or (b) materially adversely affect the ability of any Party to perform its
covenants and agreements under this Agreement.
7.2 Negative Covenants of Subject Company. Except as specifically
permitted by this Agreement or as and to the extent expressly disclosed or
provided for in the Subject Company Disclosure Memorandum, from the date of this
Agreement until the earlier of the Effective Time or the termination of this
Agreement, Subject Company covenants and agrees that it will not do or agree or
commit to do, or permit any of the Subject Company Subsidiaries to do or agree
or commit to do, any of the following without the prior written consent of the
chief executive officer, president, or chief financial officer of Parent, which
consent shall not be unreasonably withheld:
(a) amend the Articles of Incorporation, Bylaws, or other
governing instruments of Subject Company or any Subject Company Subsidiary; or
(b) incur any additional debt obligation for borrowed money
(other than indebtedness of Subject Company or the Subject Company Subsidiaries
to each other) in excess of an aggregate of $50,000 (for Subject Company and the
Subject Company Subsidiaries on a consolidated basis) except in the ordinary
course of the
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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 and the satisfaction of legal requirements in the exercise of trust
powers and Liens in effect as of the date hereof that are disclosed in the
Subject Company Disclosure Memorandum); or
(c) repurchase, redeem, or otherwise acquire or exchange
(other than exchanges in the ordinary course under employee benefit plans),
directly or indirectly, any shares, or any securities convertible into any
shares, of the capital stock of Subject Company or any of the Subject Company
Subsidiaries, or declare or pay any dividend or make any other distribution in
respect of Subject Company's capital stock, provided that Subject Company may
(to the extent legally and contractually permitted to do so), but shall not be
obligated to, declare and pay regular cash dividends on the shares of Subject
Company Common Stock in an amount not in excess of $0.45 per share per quarter
during 1998, and $0.45 per share per quarter during 1999; 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 period in which
the Effective Time occurs, the holders of Subject Company Common Stock do not
become entitled to receive both a dividend in respect of their Subject Company
Common Stock and a dividend in respect of Parent Common Stock or fail to be
entitled to receive any dividend; or
(d) except for this Agreement, issue, sell, pledge, encumber,
authorize the issuance of, enter into any Contract to issue, sell, pledge,
encumber, or authorize the issuance of, or otherwise permit to become
outstanding, any additional shares of common stock or any other capital stock of
Subject Company or any Subject Company Subsidiary, or any stock appreciation
rights, or any option, warrant, conversion, or other Right to acquire any such
stock, or any security convertible into any such stock; or
(e) adjust, split, combine or reclassify any capital stock of
Subject Company or any of the Subject Company Subsidiaries or issue or authorize
the issuance of any other securities in respect of or in substitution for shares
of Subject Company Common Stock, or sell, lease, mortgage or otherwise dispose
of or otherwise encumber any shares of capital stock of any Subject Company
Subsidiary (unless any such shares of stock are sold or otherwise transferred to
another Subject Company Subsidiary) or any Asset having a book value in excess
of $50,000 other than in the ordinary course of business for reasonable and
adequate consideration; or
(f) except for purchases of investment securities acquired in
the ordinary course of business consistent with past practice, purchase any
securities or make any material investment, either by purchase of stock or
securities, contributions to capital, Asset transfers, or purchase of any
Assets, in any Person other than a wholly-owned Subsidiary of Subject Company,
or otherwise acquire direct or indirect control over any Person, other than in
connection with (i) foreclosures in the ordinary course of business, (ii)
acquisitions of control by a depository institution Subsidiary in its fiduciary
capacity, or (iii) the creation of new wholly-owned Subsidiaries organized to
conduct or continue activities otherwise permitted by this Agreement; or
(g) except as set forth in Section 7.2(g) of the Subject
Company Disclosure Memorandum, grant any increase of more than 5% in annual
compensation or benefits to any employees or officers of Subject Company or the
Subject Company Subsidiaries whose total compensation after such increase would
exceed $25,000 per year, except in the ordinary course of business consistent
with past practice or as required by Law; pay any severance or termination pay
or any bonus other than pursuant to written policies or written Contracts in
effect on the date of this Agreement; enter into or amend any severance
agreements with officers of Subject Company or the Subject Company Subsidiaries;
grant any material increase in fees or other increases in compensation or other
benefits to directors of Subject Company or the Subject Company Subsidiaries; or
voluntarily accelerate the vesting of any stock options or other stock-based
compensation or employee benefits (other than the acceleration of vesting which
occurs
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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 any Subject Company Subsidiary and any Person (unless such
amendment is required by Law) that Subject Company does not have the
unconditional right to terminate without Liability (other than Liability for
services already rendered), at any time on or after the Effective Time; or
(i) adopt any new employee benefit plan of Subject Company or
the Subject Company Subsidiaries or terminate or withdraw from, or make any
material change in or to, any existing employee benefit plans of Subject Company
or any of the Subject Company Subsidiaries, other than any such change that is
required by Law or that, in the opinion of counsel, is necessary or advisable to
maintain the tax qualified status of any such plan, nor shall Subject Company or
any Subject Company Subsidiary make any distributions from such employee benefit
plans, except as required by Law, by the terms of such plans, or in a manner
consistent with past practices with respect to the applicable plan; or
(j) make any material change in any Tax or accounting methods
or systems of internal accounting controls, except as may be appropriate to
conform to changes in Tax Laws or regulatory accounting requirements or GAAP; or
(k) commence any Litigation other than in accordance with past
practice, settle any Litigation involving any Liability of Subject Company or
any Subject Company Subsidiary for material money damages or restrictions upon
the operations of Subject Company or any Subject Company Subsidiary; or
(l) except as set forth in Section 7.2(g) of the Subject
Company Disclosure Memorandum, other than in the ordinary course consistent with
past practice, enter into, modify, amend, or terminate any material Contract
(excluding any loan Contract) or waive, release, compromise, or assign any
material rights or claims.
7.3 Covenants of Parent. From the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, Parent
covenants and agrees that it shall (i) continue to conduct its business and the
business of the Parent Subsidiaries in a manner designed in its reasonable
judgment to enhance the long-term value of the Parent Common Stock and the
business prospects of Parent and the Parent Subsidiaries, and (ii) take no
action which would (a) materially adversely affect the ability of any Party to
obtain any Consents required for the transactions contemplated hereby or prevent
the transactions contemplated hereby, including the Merger, from qualifying for
pooling-of-interests accounting treatment or as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code, or (b) materially
adversely affect the ability of any Party to perform its covenants and
agreements under 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 or which would prevent the satisfaction of the conditions
precedent set forth in Article 9 of this Agreement, and to use its reasonable
efforts to prevent or promptly to remedy the same.
7.5 Reports. Each Party and its Subsidiaries shall file all reports
required to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time and, to the extent permitted by Law, shall
deliver to the other Party copies of all such reports promptly after the same
are filed.
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ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 Registration Statement; Proxy Statement; Shareholder Approval. (a)
As soon as reasonably practicable after the execution of this Agreement, each of
Parent and Subject Company shall cooperate in the preparation and filing of, and
Parent will file, the Registration Statement, with the SEC. The Subject Company
Proxy Statement shall form a part of such Registration Statement. Each of the
Parties will, as promptly as practicable after the date hereof, furnish all such
data and information relating to it and its Subsidiaries as any of the other
Parties may reasonably request for the purpose of including such data and
information in the Registration Statement and the Subject Company Proxy
Statement. Parent shall use its reasonable efforts to cause the Registration
Statement to become effective under the 1933 Act as soon as reasonably
practicable, and Parent shall take any action required to be taken under the
applicable state Blue Sky or securities Laws in connection with the issuance of
the shares of Parent Common Stock upon consummation of the Merger. Subject
Company shall furnish all information concerning it and the holders of its
capital stock as Parent may reasonably request in connection with such action.
Parent shall use all reasonable efforts to cause the Registration Statement to
become effective under the 1933 Act as soon as reasonably practicable, and shall
take any action required to be taken under any applicable federal or state
securities Laws in connection with the issuance of shares of Parent Common Stock
in the Merger. Parent shall use its commercially reasonable best efforts to
cause the Registration Statement to remain effective through the Effective Time.
No amendment or supplement to the Registration Statement shall be made by Parent
without the approval of Subject Company. Parent and Subject Company each will
advise the other, promptly after it receives notice thereof, of the time when
the Registration Statement has become effective or any supplement or amendment
has been filed, the issuance of any stop order suspending the effectiveness of
the Registration Statement, the suspension of the qualification of the Parent
Common Stock issuable in connection with the Merger for offering or sale in any
jurisdiction, any request by the staff of the SEC for amendment of the
Registration Statement or the Subject Company Proxy Statement, the receipt from
the staff of the SEC of comments thereon or any request by the staff of the SEC
for additional information with respect thereto. All documents that Parent is
responsible for filing with the SEC in connection with the transactions
contemplated hereby shall at the time of filing comply as to form in all
material respects with the applicable requirements of the 1933 Act and the 1934
Act. Subject Company shall call the Subject Company Shareholders' Meeting for
the purpose of voting upon approval of this Agreement and the Plan of Merger and
such other related matters as it deems appropriate. Subject Company shall call
the Subject Company Shareholders' Meeting as soon as practicable after the
Registration Statement is declared effective by the SEC. In connection with the
Subject Company Shareholders' Meeting, (i) at least a majority of 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, (ii) at least a majority of the Board of Directors (subject to
compliance with its fiduciary duties as advised by counsel) and officers of
Subject Company shall use their reasonable efforts to obtain shareholder
approval of the Merger, and (iii) at least a majority of the Board of Directors
shall vote all of the shares of Subject Company Common Stock over which such
Directors have voting control, by ownership or otherwise, in favor of the Merger
at the meeting of shareholders of Subject Company to be called for the purpose
of approving the Merger (the "Meeting"). Subject Company further agrees that it
shall use its good faith best efforts to cause Subject Company's Board of
Directors to unanimously undertake the actions enumerated in clauses (i), (ii),
and (iii) of the preceding sentence.
(b) As to the obligations undertaken in the foregoing clauses (i),
(ii), and (iii) of Section 8.1(a) Subject Company and Parent understand and
agree that a majority, or more, of the members of the Subject Company Board of
Directors shall not be obligated to recommend the approval of the Merger, use
reasonable efforts to obtain shareholder approval of the Merger, or personally
vote in favor of the Merger if both of the following conditions are satisfied on
the Determination Date:
a. the Average Closing Price is less than the product of
(i) 0.80 and (ii) the Starting Price; and
b. the Average Closing Price divided by the Starting Price
(the "UPC Ratio") is less
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than the Index Price on the Determination Date divided by the Index Price on the
Starting Date minus 0.15 (the "Index Ratio").
For purposes of this Section 8.1(b), the following terms shall have the
meanings indicated:
"Average Closing Price" shall mean the average of the daily last sales
prices of UPC Common Stock as reported on the NYSE (as reported by the Wall
Street Journal or, if not reported thereby, another authoritative source as
chosen by UPC) for the 20 consecutive full trading days in which such shares are
traded on the NYSE ending at the close of trading on the Determination Date.
"Determination Date" shall mean the last full trading day on the NYSE
immediately preceding the date that the Registration Statement becomes effective
with the SEC.
"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 14 bank holding companies and the weights
attributed to them are as follows
<TABLE>
<CAPTION>
Bank Holding Companies Weighting
<S> <C>
AmSouth Bancorporation 6.89%
BB&T Corporation 8.03
Compass Bancshares 3.99
Crestar Financial Corporation 6.38
First Virginia Banks, Inc. 2.95
First Security Corporation 10.12
First Tennessee National Corporation 7.27
Hibernia Corporation 8.67
Huntington Bancshares, Inc. 10.94
Marshall & Ilsley Corporation 6.02
Mercantile Bancorporation, Inc. 7.58
National Commerce Bancorp 2.80
Old Kent Financial Corporation 5.17
SouthTrust Corporation 9.13
Trustmark Corporation 4.18
-------
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 last full trading day on the NYSE
immediately preceeding the date of this Agreement.
"Starting Price" shall mean the closing price per share of UPC Common
Stock as reported on the NYSE (as reported by The Wall Street Journal or, if not
reported thereby, another authoritative source as chosen by UPC) on the Starting
Date.
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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 UPC shall be appropriately adjusted for the purposes of applying this
Section 8.1(b)
8.2 Exchange Listing. Parent shall use its reasonable efforts to list,
prior to the Effective Time, on the NYSE, subject to official notice of
issuance, the shares of Parent Common Stock to be issued to the holders of
Subject Company Common Stock 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. As soon as reasonably practicable after the date
hereof, Parent or UPB, as appropriate, shall prepare and file, and Subject
Company and Bank 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. Parent
or UPB shall provide Subject Company and Bank and its counsel with copies of
such applications prior to filing. Each of the Parties shall deliver to each of
the other Parties copies of all filings, correspondence and orders sent by such
Party to and copies of all filings, correspondence and orders received by such
Party from all Regulatory Authorities in connection with the transactions
contemplated hereby as soon as practicable upon their becoming available.
8.4 Filings With State Offices. Upon the terms and subject to the
conditions of this Agreement, Parent, Merger Subsidiary and Subject Company each
agree to execute and file Articles of Merger with the Secretary of State of the
State of Tennessee in connection with the Closing.
8.5 Agreement as to Efforts to Consummate. Subject to the terms and
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper, or
advisable under applicable Laws to consummate and make effective, as soon as
practicable after the date of this Agreement, the transactions contemplated by
this Agreement, including using its reasonable efforts to lift or rescind any
Order adversely affecting its ability to consummate the transactions
contemplated herein and to cause to be satisfied the conditions referred to in
Article 9 of this Agreement. Each Party shall use, and shall cause each of its
Subsidiaries to use, its reasonable efforts to obtain all Consents necessary or
desirable for the consummation of the transactions contemplated by this
Agreement.
8.6 Investigation and Confidentiality. (a) Prior to the Effective Time,
each Party shall keep the other Parties advised of all material developments
relevant to its business and to consummation of the Merger and shall permit the
other Parties to make or cause to be made such investigation of the business and
properties of it and its Subsidiaries and of their respective financial and
legal conditions as any other Party reasonably requests, provided that such
investigation shall be reasonably related to the transactions contemplated
hereby and shall not interfere unnecessarily with normal operations. No Party
shall be required to provide access to or to disclose information where such
access or disclosure would violate or prejudice the rights of such Party's
customers, jeopardize any attorney-client privilege or contravene any Law, rule,
regulation, Order, judgment, decree, fiduciary duty or binding agreement entered
into prior to the date of this Agreement. The Parties will make appropriate
substitute disclosure arrangements under circumstances in which the restrictions
of the preceding sentence apply. No investigation by a Party shall affect the
representations and warranties of any other Party.
(b) Each Party will hold, and will cause its respective
Affiliates and their respective officers, directors, employees, agents,
consultants, and other representatives to hold, in strict confidence, unless
compelled to disclose by judicial or administrative process (including without
limitation in connection with obtaining the necessary Consents of Regulatory
Authorities) or by other requirements of Law, all confidential documents and
confidential or proprietary information concerning the other Parties gathered
from the other Parties, or their respective officers, directors, employees,
agents, consultants or Representatives, pursuant to this Agreement, except
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to the extent that such documents or information can be shown to have been (i)
previously lawfully known by the Party receiving such documents or information,
(ii) in the public domain through no fault of such receiving Party, or (iii)
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 confidential or proprietary documents or information of another Party 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 reasonably deems necessary or advisable in order to satisfy such Party's
disclosure obligations imposed by Law. Parent and Subject Company agree to use
their reasonable best efforts to issue a press release announcing the execution
and delivery of this Agreement within two (2) days after the date of this
Agreement.
8.8 Certain Actions. (a) Except with respect to this Agreement and the
transactions contemplated hereby, after the date of this Agreement, neither
Subject Company, the Subject Company Subsidiaries nor any Representatives
thereof retained by Subject Company or the Subject Company Subsidiaries shall
directly or indirectly solicit any Acquisition Proposal by any Person. Except to
the extent necessary to comply with the fiduciary duties of Subject Company's
Board of Directors as advised by counsel, Subject Company, the Subject Company
Subsidiaries, or Representatives thereof shall not furnish any non-public
information that it is not legally obligated to furnish, negotiate with respect
to, or enter into any Contract with respect to, any Acquisition Proposal, but
Subject Company may communicate information about such an Acquisition Proposal
to its shareholders if and to the extent that it is required to do so in order
to comply with its legal obligations as advised by counsel. Subject Company
shall promptly notify Parent orally and in writing in the event that it receives
any Acquisition Proposal or inquiry related thereto. Subject Company shall (i)
immediately cease and cause to be terminated any existing activities,
discussions, or negotiations with any Persons conducted heretofore with respect
to any of the foregoing, and (ii) direct and use its reasonable efforts to cause
all of its Representatives not to engage in any of the foregoing.
(b) As a condition of and as an inducement to Parent's
entering into this Agreement, Subject Company covenants, acknowledges, and
agrees that it shall be a specific, absolute, and unconditionally binding
condition precedent to Subject Company's entering into a letter of intent,
agreement in principle, or definitive agreement (whether or not considered
binding, non-binding, conditional or unconditional) with any third party with
respect to an Acquisition Proposal, or supporting or indicating an intent to
support an Acquisition Proposal, other than this Agreement and the transactions
contemplated in this Agreement, regardless of whether Subject Company has
otherwise complied with the provisions of Section 8.8(a) hereof, that Subject
Company or such third party which is a party of the Acquisition Proposal shall
have paid Parent, as liquidated damages, the sum of Two Million, Four Hundred
Thousand Dollars ($2,400,000), 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
FSB, Inc. - Merger Agreement Page 23
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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
Section 8.8(b) shall continue in full force and effect from the date of this
Agreement until the earlier of (i) the Effective Time; (ii) September 30, 1999;
or (iii) the date on which this Agreement shall have been terminated (A)
mutually by the Parties pursuant to Section 10.1(a) of this Agreement; (B) by
Subject Company pursuant to Section 10.1(b) or 10.1(c) of this Agreement; (C) by
Subject Company pursuant to Section 10.1(e) or Section 10.1(f), unless the
failure to consummate the transactions contemplated by this Agreement by June 1,
1999 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 (D) by either Party pursuant to
Section 10.1(d)(i) of this Agreement.
8.9 Accounting and Tax Treatment. Each of the Parties undertakes and
agrees to use its reasonable efforts to cause the Merger, and to take no action
which would cause the Merger not, to qualify for pooling-of-interests accounting
treatment and treatment as a "reorganization" within the meaning of Section
368(a) of the Internal Revenue Code for federal income tax purposes.
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 may be deemed to be 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: (i) will not
sell, 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 (ii) will not sell, transfer, or otherwise dispose of the shares
of Parent Common Stock to be received by such Person upon consummation of the
Merger except in compliance with applicable provisions of the 1933 Act and the
rules and regulations thereunder and until such time as financial results
covering at least 30 days of combined operations of Parent and Subject Company
have been published within the meaning of Section 201.01 of the SEC's
Codification of Financial Reporting Policies. If the Merger will qualify for
pooling-of-interests accounting treatment, shares of Parent Common Stock issued
to such affiliates of Subject Company in exchange for shares of Subject Company
Common Stock shall not be transferable until such time as financial results
covering at least 30 days of combined operations of Parent and Subject Company
have been published within the meaning of Section 201.01 of the SEC's
Codification of Financial Reporting Policies, regardless of whether each such
affiliate has provided the written agreement referred to in this Section 8.10
(and Parent shall be entitled to place restrictive legends upon certificates for
shares of Parent Common Stock issued to affiliates of Subject Company pursuant
to this Agreement to enforce the provisions of this Section 8.10). Parent shall
not be required to maintain the effectiveness of the Registration Statement
under the 1933 Act for the purposes of resale of Parent Common Stock by such
affiliates.
8.11 Employee Benefits and Contracts. Following the Effective Time,
Parent shall provide to officers and employees of the Subject Company and any
Subject Company Subsidiary, employee benefits under employee benefit and welfare
plans of Parent or the Parent Subsidiaries on terms and conditions which when
taken as a whole are substantially similar to those currently provided by Parent
or a Parent Subsidiary to their similarly situated officers and employees. For
purposes of participation, vesting, and benefit accrual under such employee
benefit plans, the service of the employees of the Subject Company and any
Subject Company Subsidiary prior to the Effective Time shall be treated as
service with Parent or a Parent Subsidiary participating in such employee
benefit
FSB, Inc. - Merger Agreement Page 24
<PAGE> 127
plans. At and after the Effective Time, all contributions under Subject
Company's Employee Stock Ownership Plan ("ESOP") and 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, in
coordination with Parent's Human Resources Department, shall take such steps as
necessary to terminate its 401(k) Plan as of or immediately prior to the
Effective Time of the Merger. Upon the Effective Time of the Merger, all
participants in Subject Company's ESOP Plan and 401(k) Plan shall become fully
vested, and all benefit distributions will be made in accordance with Subject
Company's ESOP Plan and 401(k) Plan provisions. Any such benefit distributions
will include the option to roll distributions into the UPC 401(k) Plan. Prior to
the Effective Time, Subject Company shall fully reserve for all anticipated
costs and expenses related to its Plan and termination thereof. Subject Company,
in coordination with Parent's Human Resources Department, shall obtain such
regulatory determinations regarding the termination of Subject Company's Plan,
as may be appropriate to ensure the qualified status of such plans and related
trusts under the Code. Additionally, after the Effective Time, 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.
Notwithstanding anything to the contrary above, beginning with the first
calendar day of the first calendar year following the Effective Time, 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 shall not be
allowed to carryover or carry forward any accrued vacation, sick leave or other
paid time-off benefits under the former Subject Company 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.
8.12 Filing of Reports by Parent. During the six-month period following
the Effective Time, Parent shall use its commercially reasonable best efforts to
timely file all SEC Documents required to be filed by it and will issue press
releases concerning earnings in accordance with its established practice. Parent
agrees, for a period of three years after the Effective Time of the Merger, to
file on a timely basis all reports required to be filed by it pursuant to
Section 13 of the Securities Exchange Act of 1934, as amended, so that the
public information provisions of Rule 145(d) promulgated by the SEC as the same
are presently in effect will be available to the shareholders of Subject Company
in the event such shareholders desire to transfer any shares of Parent issued
pursuant to the Merger.
8.13 Employment Agreement. Parent and Merger Subsidiary agree to cause
UPB to enter into employment agreements, no later than the Closing Date, with
Theodore B. Sloan and Jerry L. DuPriest, respectively, which agreements shall be
substantially in the form of Exhibit 4 attached hereto.
8.14 Director Retention and Advisory Service. The directors of Subject
Company in office immediately prior to the Effective Time shall serve as the
Directors of the Bank, from and after the Effective Time, in accordance
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with the terms of certain Director Retention and Advisory Service Agreements
between Subject Company and its directors.
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, by the vote, 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. If, in Parent's discretion, Parent determines that Bank shall be merged
with and into UPNB (the "Bank Merger") simultaneously with the consummation of
the Merger, then all Consents, filings, and registrations with, and
notifications to, all Regulatory Authorities required for such Bank Merger shall
also have been obtained or made and shall also be in full force and effect, and
all waiting periods required by Law shall have expired. No Consent obtained from
any Regulatory Authority which is necessary to consummate the transactions
contemplated hereby shall be conditioned or restricted in any manner reasonably
deemed to be material by Parent.
(c) Legal Proceedings. No court or governmental or regulatory
authority of competent jurisdiction shall have enacted, issued, promulgated,
enforced, or entered by Law or Order (whether temporary, preliminary, or
permanent) or taken any other action which prohibits, restricts in any manner
reasonably deemed to be material by a party, or makes illegal consummation of
the transactions contemplated by this Agreement.
(d) Registration Statement. The Registration Statement shall
be effective under the 1933 Act, no stop orders suspending the effectiveness of
the Registration Statement shall have been issued, no action, suit, proceeding,
or investigation by the SEC to suspend the effectiveness thereof shall have been
initiated and be continuing, and all necessary approvals under state securities
Laws or the 1933 Act or 1934 Act relating to the issuance or trading of the
shares of Parent Common Stock issuable pursuant to the Merger shall have been
received.
(e) Exchange Listing. The shares of Parent Common Stock
issuable pursuant to the Merger shall have been approved for listing on the
NYSE, subject to official notice of issuance.
(f) Tax Matters. Parent shall have received a written opinion
of counsel from Wyatt, Tarrant & Combs, and Subject Company shall have received
a written opinion of counsel from Gerrish & McCreary, P.C., in form and
substance reasonably satisfactory to Parent and Subject Company, respectively,
dated as of the Closing Date, in each case substantially to the effect that (i)
the Merger will constitute a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code, (ii) Parent, Merger Subsidiary and Subject Company
will each be "a party to a reorganization" within the meaning of Section 368(b)
of the Internal Revenue Code; (iii) no gain or loss will be recognized by the
shareholders of Subject Company who exchange all of their Subject Company Common
Stock solely for Parent Common Stock pursuant to the Merger (except with respect
to cash received in lieu of a fractional share interest in Parent Common Stock),
(iv) the tax basis of the Parent Common Stock received by shareholders of
Subject Company who exchange Subject Company Common Stock solely for Parent
Common Stock in the Merger will be the same as the tax basis of the Subject
Company Common Stock surrendered in
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exchange therefor (reduced by any amount allocable to a fractional share
interest for which cash is received) (v) the holding period of the Parent Common
Stock received by shareholders of Subject Company in the Merger will include the
period during which the shares of Subject Company Common Stock surrendered in
exchange therefor were held, provided such Subject Company Common Stock was held
as a capital asset by the holder of such Subject Company Common Stock at the
Effective Time, and (vi) neither Subject Company nor Parent will recognize gain
or loss as a consequence of the Merger. In rendering such Tax Opinion, such
counsel shall require and be entitled to rely upon representations and covenants
of officers of Parent, Subject Company, shareholders of Subject Company and
others reasonably satisfactory in form and substance to such counsel.
9.2 Conditions to Obligations of Parent. The obligations of Parent to
perform this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following conditions,
unless waived by Parent pursuant to Section 11.6(a) of this Agreement:
(a) Representations and Warranties. For purposes of this
Section 9.2(a), the accuracy of the representations and warranties of Subject
Company set forth in this Agreement shall be assessed as of the date of this
Agreement and as of the Effective Time with the same effect as though all such
representations and warranties had been made immediately prior to the Effective
Time (provided that representations and warranties which are confined to a
specific date shall speak only as of such date). The representations and
warranties of Subject Company set forth in Sections 5.1, 5.2, 5.3, 5.19 and 5.20
of this Agreement shall each be true and correct in all material respects. There
shall not exist inaccuracies in the representations and warranties of Subject
Company set forth in this Agreement (including the representations and
warranties set forth in Sections 5.1, 5.2, 5.3, 5.19 and 5.20) such that the
aggregate effect of such inaccuracies has, or is reasonably likely to have, a
Material Adverse Effect on Subject Company, provided that, for purposes of this
sentence only, those representations and warranties which are qualified by
references to "material" or "Material Adverse Effect" or "Knowledge" shall be
deemed not to include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of
the agreements and covenants of Subject Company to be performed and complied
with pursuant to this Agreement and the other agreements contemplated hereby
prior to the Effective Time shall have been duly performed and complied with in
all material respects.
(c) Certificates. Subject Company shall have delivered to
Parent (i) a certificate, dated as of the Effective Time and signed on its
behalf by its chief executive officer and its secretary/treasurer, 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) Pooling Letter. Parent shall have received a letter, dated
as of the date of filing of the Registration Statement with the SEC and as of
the Closing Date, addressed to it and in a form reasonably acceptable to it,
from Price Waterhouse LLP to the effect that the Merger will qualify for
pooling-of-interests accounting treatment; provided, however, this shall not be
a condition precedent to Parent's obligation to perform this Agreement and
consummate the Merger and the other transactions contemplated hereby if Parent
takes actions which prevent the transactions contemplated by the Agreement,
including the Merger, from qualifying for such accounting treatment..
(e) Consents and Approvals. Subject Company shall have
obtained any and all Consents required to be obtained by it for consummation of
the Merger, or if applicable, the Bank Merger (other than those set forth in
Section 9.1(b) of this Agreement) or for the preventing of any Default under any
Contract or Permit of such Party which, if not obtained or made, is reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Subject Company or Parent.
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(f) Legal Opinion. Subject Company shall have delivered to
Parent an opinion of counsel, dated as of the Closing Date, addressed to and in
form and substance reasonably satisfactory to Parent, to the effect that:
(i) Subject Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Tennessee.
(ii) This Agreement, including the Plan of Merger
attached hereto as Exhibit 1, has been duly and validly authorized, executed and
delivered on behalf of Subject Company, and (assuming this Agreement is a
binding obligation of Parent and Merger Subsidiary) constitute a valid and
binding obligation of Subject Company, enforceable in accordance with its terms,
subject as to enforceability to applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and subject to the application of equitable
principles and judicial discretion;
(iii) The execution, delivery and performance of
this Agreement and the Plan of Merger, and the consummation of the transactions
contemplated herein and therein, including the Merger, have been duly and
validly authorized by all necessary corporate and shareholder action in respect
thereof on the part of Subject Company.
(g) Non-Compete Agreements. A majority of the directors of
Subject Company and the Bank, and the president and chief executive officer of
Bank, shall have entered into a Non-Compete Agreement with Parent, Merger
Subsidiary and Union Planters Bank, National Association substantially in the
form of Exhibit 3 attached hereto. Subject Company further agrees that it shall
use its good faith best efforts to cause each of Subject Company's and Bank's
directors to enter into such Non-Compete Agreements.
9.3 Conditions to Obligations of Subject Company. The obligations of
Subject Company to perform this Agreement and consummate the Merger and the
other transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by Subject Company pursuant to Section
11.6(b) of this Agreement.
(a) Representations and Warranties. For purposes of this
Section 9.3(a), the accuracy of the representations and warranties of Parent set
forth in this Agreement shall be assessed as of the date of this Agreement and
as of the Effective Time with the same effect as though all such representations
and warranties had been made immediately prior to the Effective Time (provided
that representations and warranties which are confined to a specified date shall
speak only as of such date). The representations and warranties of Parent set
forth in Sections 6.1, 6.2, 6.3 and 6.12 of this Agreement shall each be true
and correct in all material respects. There shall not exist inaccuracies in the
representations and warranties of Parent set forth in this Agreement (including
the representations and warranties set forth in Sections 6.1, 6.2, 6.3 and 6.12
such that the aggregate effect of such inaccuracies has, or is reasonably likely
to have, a Material Adverse Effect on Parent; provided that, for purposes of
this sentence only, those representations and warranties which are qualified by
references to "material" or "Material Adverse Effect" or "Knowledge" shall be
deemed not to include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of
the agreements and covenants of Parent and/or Merger Subsidiary to be performed
and complied with by Parent and/or Merger Subsidiary pursuant to this Agreement
and the other agreements contemplated hereby prior to the Effective Time shall
have been duly performed and complied with in all material respects.
(c) Certificates. Parent shall have delivered to Subject
Company (i) a certificate, dated as of the Effective Time and signed on its
behalf by its chief executive officer and its chief financial officer, to the
effect that the conditions of its obligations set forth in Sections 9.3(a) and
9.3(b) of this Agreement have been satisfied, and (ii) certified copies of
resolutions duly adopted by Parent's and Merger Subsidiary's Boards of Directors
and Parent's Shareholders evidencing the taking of all corporate action
necessary to authorize the execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated hereby, all in
such
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reasonable detail as Subject Company shall request.
(d) Consents and Approvals. Parent and/or Merger Subsidiary
shall have obtained any and all Consents required to be obtained by either of
them for consummation of the Merger (other than those set forth in Section
9.1(b) of this Agreement) or for the preventing of any Default under any
Contract or Permit of such Party which, if not obtained or made, is reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Parent.
(e) Legal Opinion. Parent and Merger Subsidiary shall have
delivered to Subject Company an opinion of counsel, dated as of the Closing
Date, addressed to and in form and substance reasonably satisfactory to Subject
Company, to the effect that:
(i) Parent and Merger Subsidiary each is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Tennessee.
(ii) This Agreement, including the Plan of Merger
attached hereto as Exhibit 1, has been duly and validly authorized, executed and
delivered on behalf of Parent and Merger Subsidiary, and (assuming this
Agreement is a binding obligation of Subject Company) constitute a valid and
binding obligation of Parent and Merger Subsidiary, enforceable in accordance
with its terms, subject as to enforceability to applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and subject to the application of equitable
principles and judicial discretion;
(iii) The execution, delivery and performance of this
Agreement and the Plan of Merger, and the consummation of the transactions
contemplated herein and therein, including the Merger, have been duly and
validly authorized by all necessary corporate and shareholder action in respect
thereof on the part of Parent and Merger Subsidiary.
(f) Fairness Opinion. Subject Company will have received, on
the date of this Agreement, an opinion of Mercer Capital Management to the
effect that the financial terms of the Merger are fair from a financial point of
view to the shareholders of Subject Company.
(g) Employment Agreements. Employment Agreements, in form
substantially similar to that attached as Exhibit 4, will have been duly
executed and delivered by Parent, Theodore B. Sloan, and Jerry L.
DuPriest.
ARTICLE 10
TERMINATION
10.1 Termination. Notwithstanding any other provision of this
Agreement, and notwithstanding the approval of this Agreement by the
shareholders of Subject Company, this Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time:
(a) By mutual consent of the respective Boards of Directors
of Parent and Subject Company; or
(b) By the Board of Directors of Parent or the Board of
Directors of Subject Company (provided that the terminating Party is not then in
breach of any representation or warranty contained in this Agreement under the
applicable standard set forth in Section 9.2(a) of this Agreement in the case of
Subject Company and Section 9.3(a) in the case of Parent or in material breach
of any covenant or other agreement contained in this Agreement) in the event of
an inaccuracy of any representation or warranty of the other Party contained in
this Agreement which cannot be or has not been cured within 30 days after the
giving of written notice to the breaching Party of such inaccuracy and which
inaccuracy would provide the terminating Party the ability to refuse to
consummate the Merger under the applicable standard set forth in Section 9.2(a)
of this Agreement in the case of Subject Company and
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Section 9.3(a) of this Agreement in the case of Parent; or
(c) By the Board of Directors of Parent or the Board of
Directors of Subject Company (provided that the terminating Party is not then in
breach of any representation or warranty contained in this Agreement under the
applicable standard set forth in Section 9.2(a) of this Agreement in the case of
Subject Company and Section 9.3(a) in the case of Parent or in material breach
of any covenant or other agreement contained in this Agreement) in the event of
a material breach by the other Party of any covenant or agreement contained in
this Agreement which cannot be or has not been cured within 30 days after the
giving of written notice to the breaching Party of such breach; or
(d) By the Board of Directors of Parent or the Board of
Directors of Subject Company in the event (i) any Consent of any Regulatory
Authority required for consummation of the Merger, or Bank Merger, if
applicable, 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 Subject Company Shareholders' Meeting where the transactions
were presented to such shareholders for approval and voted upon; or
(e) By the Board of Directors of Parent or the Board of
Directors of Subject Company in the event that the Merger shall not have been
consummated by June 1, 1999, 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);
(f) By the Board of Directors of Parent or the Board of
Directors of Subject Company in the event that any condition to Closing set
forth in Article 9 hereof cannot be met by June 1, 1999 and has not been waived
by each Party in whose favor such condition inures; provided that the inability
to satisfy such condition to Closing on or before June 1, 1999 is not caused by
any willful breach of this Agreement by the Party electing to terminate pursuant
to this Section 10.1(f); or
10.2 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 10.1 of this Agreement, this
Agreement and the Plan of Merger shall become void and have no effect, except
that (i) the provisions of this Section 10.2, Section 8.6(b), Section 8.8,
Section 11.2 and Section 11.3 of this Agreement shall survive any such
termination and abandonment, and (ii) a termination pursuant to the terms of
Sections 10.1(b) or 10.1(c) hereof shall not relieve the breaching Party from
Liability for an uncured breach of a representation, warranty, covenant, or
agreement.
10.3 Non-Survival of Representations and Covenants. The respective
representations, warranties, obligations, covenants, and agreements of the
Parties shall not survive the Effective Time except for those covenants and
agreements which by their terms apply in whole or in part after the Effective
Time.
ARTICLE 11
MISCELLANEOUS
11.1 Definitions. (a) Except as otherwise provided herein, the
capitalized terms set forth below shall have the following meanings:
"Acquisition Proposal" with respect to a Party shall mean any tender
offer or exchange offer or any proposal for a merger, acquisition of all of the
stock or assets of, or other business combination involving such Party or any of
its Subsidiaries or the acquisition of a substantial equity interest in, or a
substantial portion of the Assets of, such Party or any of its Subsidiaries.
"Affiliate" of a Person shall mean any other Person, directly or
indirectly through one or more
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intermediaries, controlling, controlled by, or under common control with such
Person.
"Agreement" shall mean this Agreement and the Exhibits delivered
pursuant hereto and incorporated herein by reference.
"Articles of Merger" shall mean the Articles of Merger and Certificate
of Merger to be executed by Parent, Merger Subsidiary and Subject Company and
filed with the Secretary of State of the State of Tennessee and the Secretary of
State of the State of Tennessee, respectively, relating to the Merger as
contemplated by Section 1.1 of this Agreement.
"Assets" of a Person shall mean all of the assets, properties,
businesses, and rights of such Person of every kind, nature, character and
description, whether real, personal or mixed, tangible or intangible, accrued or
contingent, or otherwise, wherever located.
"Bank" shall mean First State Bank of Covington.
"BHC Act" shall mean the federal Bank Holding Company Act of 1956, as
amended.
"Closing Date" shall mean the date on which the Closing occurs.
"Consent" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order or Permit.
"Contract" shall mean any legally binding written or oral agreement,
arrangement, authorization, commitment, contract, indenture, instrument, lease,
obligation, plan, practice, restriction, understanding, or undertaking of any
kind or character, or other document to which any Person is a party or that is
binding on any Person or its capital stock, Assets or business.
"Default" shall mean (i) any breach or violation of or default under
any Contract, Order, or Permit, (ii) any occurrence of any event that with the
passage of time or the giving of notice or both would constitute a breach or
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 Section 131 of the TBCA.
"Effective Time" shall have the meaning ascribed to such term in
Section 1.3 of this Agreement.
"Environmental Laws" shall mean all Laws relating to pollution or
protection of human health or the environment (including ambient air, surface
water, ground water, land surface or subsurface strata) and which are
administered, interpreted or enforced by the United States Environmental
Protection Agency and state and local agencies with jurisdiction over, and
including common law in respect of, pollution or protection of the environment,
including the Comprehensive Environmental Response Compensation and Liability
Act, as amended, 42 U.S.C. 9601 et seq. ("CERCLA"), the Resource Conservation
and Recovery Act, as amended, 42 U.S.C. 6901 et seq.("RCRA"), and other Laws
relating to emissions, discharges, releases, or threatened releases of any
Hazardous Material, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of any
Hazardous Material.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" shall mean any trade or business, whether or not
incorporated, that together with the
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entity under consideration would be deemed a "single employer" within the
meaning of section 4001(b) of ERISA.
"Exchange Agent" shall have the meaning ascribed to such term in
Section 4.1 of this Agreement.
"Exchange Ratio" shall have the meaning ascribed to such term in
Section 3.1(c) of this Agreement.
"Exhibits" shall mean the Exhibits so marked, copies of which are
attached to this Agreement. Such Exhibits are hereby incorporated by reference
herein and made a part hereof.
"FRB" shall mean the Board of Governors of the Federal Reserve System
or applicable Federal Reserve Bank.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"Hazardous Material" shall mean (i) any hazardous substance, hazardous
material, hazardous waste, regulated substance, or toxic substance (as those
terms are defined by any applicable Environmental Laws) and (ii) any chemicals,
pollutants, contaminants, petroleum, petroleum products, or oil (and
specifically shall include asbestos requiring abatement, removal, or
encapsulation pursuant to the requirements of governmental authorities and any
polychlorinated biphenyls).
"HSR Act" shall mean Section 7A of the Clayton Act, as added by Title
II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
the rules and regulations promulgated thereunder.
"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.
"TBCA" shall mean the Tennessee Business Corporation Law.
"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
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a Party or its Subsidiaries which are not yet delinquent, (ii) for depository
institution Subsidiaries of a Party, pledges to secure deposits, and other Liens
incurred in the ordinary course of banking business, (iii) minor imperfections
of title, and encumbrances, if any, which have arisen in the ordinary course of
business, which are not substantial in character, amount or extent and which do
not materially detract from the value of or interfere with the present or
contemplated use of any of the properties subject thereto or affected thereby or
otherwise materially impair the business operations conducted or contemplated by
a party, (iv) mortgages and encumbrances which secure indebtedness, which is
properly reflected in the Subject Company Financial Statements or Parent
Financial Statements delivered prior to the date of this Agreement, and (v)
liens arising as a matter of law in the ordinary course of business with respect
to obligations incurred after the date of such Subject Company Financial
Statements or Parent Financial Statements, provided that such obligations are
not delinquent or are being contested in good faith.
"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.
"TDFI" shall mean the Tennessee Department of Financial Institutions
"Material Adverse Effect" on a Party shall mean an event, change, or
occurrence which, individually or together with any other event, change, or
occurrence, has a material adverse impact on (i) the financial condition,
business, or results of operations of such Party and its Subsidiaries, taken as
a whole, or (ii) the ability of such Party to perform its obligations under this
Agreement or to consummate the Merger or the other transactions contemplated by
this Agreement in accordance with applicable Law, provided that "Material
Adverse Effect" and "material adverse impact" shall not be deemed to include the
impact of (a) changes in banking and similar Laws of general applicability or
interpretations thereof by courts or governmental authorities, (b) changes in
GAAP or regulatory accounting principles generally applicable to banks and their
holding companies, (c) actions or omissions of a Party (or any of its
Subsidiaries) taken with the prior written consent of the other Party, (d)
changes in economic conditions or interest rates generally affecting financial
institutions, (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) any Liability disclosed in the Subject Company
Disclosure Memorandum.
"Merger" shall mean the merger of Subject Company with and into Merger
Subsidiary.
"Merger Subsidiary" shall mean Union Planters Holding Corporation, a
wholly-owned subsidiary of Parent organized under the Laws of the State of
Tennessee.
"Merger Subsidiary Common Stock" shall mean the $1.00 par value common
stock of Merger Subsidiary.
"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
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or in which such Party or Subsidiary holds a security interest, and, where
required by the context, includes the owner or operator of such property, but
only with respect to such property.
"Order" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or writ
of any federal, state, local, or foreign or other court, arbitrator, mediator,
tribunal, administrative agency, or Regulatory Authority.
"Parent" shall mean Union Planters Corporation, a Tennessee
corporation.
"Parent Capital Stock" shall mean, collectively, the Parent Common
Stock, the Parent Preferred Stock and any other class or series of capital stock
of Parent.
"Parent Common Stock" shall mean the $5.00 par value common stock of
Parent.
"Parent Disclosure Memorandum" shall mean the written information
entitled "Parent Disclosure Memorandum" delivered prior to the date of this
Agreement to Subject Company describing in reasonable detail the matters
contained therein and, with respect to each disclosure made therein,
specifically referencing each Section of this Agreement under which such
disclosure is being made.
"Parent Financial Statements" shall mean (i) the consolidated balance
sheets (including related notes and schedules, if any) of Parent and related
statements of earnings, changes in stockholders' equity, and cash flows
(including related notes and schedules, if any), as of December 31, 1997 and for
each of the two years ended December 31, 1996 and 1995, 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 December 31, 1997.
"Parent Material Contracts" shall have the meaning ascribed to such
term in Section 6.13 of this Agreement.
"Parent Preferred Stock" shall mean the no par value preferred stock of
Parent and shall include the (i) Series A Preferred Stock and (ii) Series E 8%
Cumulative, Convertible Preferred Stock, of Parent ("Parent Series E Preferred
Stock").
"Parent Rights" shall mean the preferred stock purchase rights issued
pursuant to the Parent Rights Agreement.
"Parent Rights Agreement" shall mean that certain Rights Agreement,
dated January 19, 1989, between Parent and Union Planters Bank, National
Association, as Rights Agent.
"Parent Subsidiaries" shall mean the Subsidiaries of Parent and any
corporation, bank, or other organization acquired as a Subsidiary of Parent in
the future and owned by Parent at the Effective Time.
"Participation Facility" shall mean any facility or property in which
the Party in question or any of its Subsidiaries participates in the management
and, where required by the context, said term means the owner or operator of
such facility or property, but only with respect to such facility or property.
"Party" shall mean Subject Company, Merger Subsidiary, Parent, UPB or
Bank and "Parties" shall mean, collectively, Subject Company, Merger Subsidiary,
Parent, UPB, and Bank.
"Permit" shall mean any federal, state, local, and foreign governmental
approval, authorization, certificate, franchise, license, 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.
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"Person" shall mean a natural person or any legal, commercial, or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting in a
representative capacity.
"Plan of Merger" shall mean the Plan of Merger of even date herewith
entered into by Parent, Merger Subsidiary and Subject Company, in the form of
Exhibit 1.
"Registration Statement" shall mean the Registration Statement on Form
S-4, or other appropriate form, including any pre-effective or post-effective
amendments or supplements thereto, filed with the SEC by Parent under the 1933
Act with respect to the shares of Parent Common Stock to be issued to the
shareholders of Subject Company in connection with the transactions contemplated
by this Agreement.
"Regulatory Authorities" shall mean, collectively, the FRB, the
Department of Financial Institutions of the State of Tennessee, all state
regulatory agencies having jurisdiction over any of the Parties or their
respective Subsidiaries, the NYSE, the NASD, and the SEC.
"Representative" shall mean any investment banker, financial advisor,
attorney, accountant, consultant, or other representative of a Person.
"Rights" shall mean all arrangements, calls, commitments, Contracts,
options, rights to subscribe to, scrip, warrants, or other binding obligations
of any character whatsoever by which a Person is or may be bound to issue
additional shares of its capital stock or other rights, or securities or rights
convertible into or exchangeable for, shares of the capital stock of a Person.
"SEC" shall mean the Securities and Exchange Commission.
"SEC Documents" shall mean all forms, proxy statements, registration
statements, reports, schedules, and other documents filed, or required to be
filed, by a Party or any of its Subsidiaries with the SEC pursuant to the
Securities Laws.
"Securities Laws" shall mean the 1933 Act, the 1934 Act, the Investment
Company Act of 1940, as amended, the Investment Advisors Act of 1940, as
amended, the Trust Indenture Act of 1939, as amended, and the rules and
regulations of any Regulatory Authority promulgated thereunder.
"Significant Subsidiary" shall have the meaning ascribed such to such
term in Rule 1-02(w) of Regulation S-X promulgated under the Securities Laws.
"Subject Company" shall mean FSB, Inc., a Tennessee corporation.
"Subject Company Benefit Plans" shall have the meaning ascribed to such
term in Section 5.14(a) of this Agreement.
"Subject Company Common Stock" shall mean the common stock, $10.00 par
value per share, of Subject Company.
"Subject Company Contracts" shall have the meaning ascribed to such
term in Section 5.15 of this Agreement.
"Subject Company Disclosure Memorandum" shall mean the written
information entitled "Subject Company Disclosure Memorandum" delivered prior to
the date of this Agreement to Parent describing in reasonable detail the matters
contained therein and, with respect to each disclosure made therein,
specifically referencing each Section of this Agreement under which such
disclosure is being made.
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"Subject Company ERISA Plan" shall have the meaning ascribed to such
term in Section 5.14(a) of this Agreement.
"Subject Company Financial Statements" shall have the meaning ascribed
thereto in Section 5.5 of this Agreement.
"Subject Company Proxy Statement" shall mean the proxy statement used
by Subject Company to solicit the approval of its shareholders of the
transactions contemplated by this Agreement, which shall include the prospectus
of Parent relating to the issuance of the Parent Common Stock to holders of
Subject Company Common Stock.
"Subject Company Shareholders' Meeting" shall mean the meeting of the
shareholders of Subject Company to be held pursuant to Section 8.1 of this
Agreement, including any adjournment or adjournments thereof.
"Subject Company Subsidiaries" shall mean the Subsidiaries of Subject
Company, which shall include Subject Company Subsidiaries described in Section
5.4 of this Agreement and any corporation, bank, or other organization acquired
as a Subsidiary of Subject Company in the future and owned by Subject Company at
the Effective Time.
"Subsidiaries" shall mean all those corporations, banks, associations,
or other entities of which the entity in question owns or controls 10% or more
of the outstanding equity securities either directly or through an unbroken
chain of entities as to each of which 10% or more of the outstanding equity
securities is owned directly or indirectly by its parent; provided, there shall
not be included any such entity acquired through foreclosure or any such entity
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.
"Takeover Laws" shall have the meaning ascribed to such term in Section
5.20 of this Agreement.
"Tax" or "Taxes" shall mean all taxes, charges, fees, levies or other
assessments, including, without limitation, all net income, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits, license,
withholding, payroll, employment, excise, estimated, severance, stamp,
occupation, property or other taxes, customs duties, fees, assessments or
charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any taxing authority (domestic
or foreign).
"Tax Returns" shall mean all returns and reports of or with respect to
any Tax which are required to be filed by or with respect to the applicable
Party.
"TBCA" shall mean the Tennessee Business Corporation Act.
(b) Any singular term in this Agreement shall be deemed to include the
plural, and any plural term the singular. Whenever the words "include,"
"includes," or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation."
11.2 Expenses. (a) Except as otherwise provided in this Section 11.2
and in Section 8.8, each of the Parties shall bear and pay all direct costs and
expenses incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including filing, registration and application fees,
printing fees, and fees and expenses of its own financial or other consultants,
investment bankers, accountants, and counsel, except that each of the Parties
shall bear and pay the filing fees payable in connection with the Registration
Statement and the Subject Company Proxy Statement and printing and mailing costs
incurred in connection with the printing and mailing of the Registration
Statement and the Subject Company Proxy Statement in such proportion as the
parties shall agree
FSB, Inc. - Merger Agreement Page 36
<PAGE> 139
upon prior to filing the Registration Statement and the Subject Company Proxy
Statement.
(b) Nothing contained in this Section 11.2 shall constitute or
shall be deemed to constitute liquidated damages for the willful breach by a
Party of the terms of this Agreement or otherwise limit the rights of the
non-breaching Party.
11.3 Brokers and Finders. Each of the Parties represents and warrants
that neither it nor any of its officers, directors, employees, or Affiliates has
employed any broker or finder or incurred any Liability for any financial
advisory fees, investment bankers' fees, brokerage fees, commissions, or
finders' fees in connection with this Agreement or the transactions contemplated
hereby, except as disclosed in Section 11.3 of such Party's Disclosure
Memorandum. In the event of a claim by any broker or finder based upon his or
its representing or being retained by or allegedly representing or being
retained by Subject Company or Parent other than those disclosed in accordance
with 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, 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 8.11 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. Notwithstanding the
foregoing, the amount or nature of the consideration to be received by the
shareholders of Subject Company may not be amended at any time following the
date of the meeting of shareholders of Subject Company at which the Subject
Company shareholders vote as to approval of this Agreement.
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.
Notwithstanding the foregoing, the amount or nature of the consideration to be
received by the shareholders of Subject Company may not be waived at any time
following the date of the meeting of shareholders of Subject Company at which
the shareholders vote as to approval of this Agreement.
(b) Prior to or at the Effective Time, Subject Company, acting
through its Board of Directors, chief executive officer, or other authorized
officer, shall have the right to waive any Default in the performance of any
term of this Agreement by Parent and/or Merger Subsidiary, to waive or extend
the time for the compliance or fulfillment by Parent and/or Merger Subsidiary of
any and all of its obligations under this Agreement, and to waive any or all of
the conditions precedent to the obligations of Subject Company under this
Agreement, except any condition which, if not satisfied, would result in the
violation of any Law. No such waiver shall be effective unless in writing signed
by a duly authorized officer of Subject Company.
(c) The failure of any Party at any time or times to require
performance of any provision hereof shall in no manner affect the right of such
Party at a later time to enforce the same or any other provision of this
Agreement. No waiver of any condition or of the breach of any term contained in
this Agreement in one or more
FSB, Inc. - Merger Agreement Page 37
<PAGE> 140
instances shall be deemed to be or construed as a further or continuing waiver
of such condition or breach or a waiver of any other condition or of the breach
of any other term of this Agreement.
11.7 Assignment. Except in accordance with Section 1.4 of this
Agreement, neither this Agreement nor any of the rights, interests, or
obligations hereunder shall be assigned by any Party hereto (whether by
operation of Law or otherwise) without the prior written consent of the other
Party. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the Parties and their respective
successors and assigns.
11.8 Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, by registered or certified mail, postage prepaid, or by
courier or overnight carrier, to the person at the addresses set forth below (or
at such other address as may be provided hereunder), and shall be deemed to have
been delivered as of the date so delivered:
Subject Company: FSB, Inc.
P.O. Box 808
103 E. Pleasant Avenue
Covington, TN 38019
Attention: Theodore B. Sloan
Chairman& CEO
Telephone Number: (901) 475-5000
Telecopy Number: (504) 475-5014
Copy to Subject Company Counsel: Gerrish & McCreary, P.C.
700 Colonial Road
Memphis, Tennessee 38117
Attention: Jeffrey C. Gerrish, Esq. and
Ann W. Langston, Esq.
Telephone Number: (901) 767-0900
Telecopy Number: (901) 684-2339
Parent: Union Planters Corporation
7130 Goodlett Farms Parkway
Memphis, Tennessee 38018
Attention: Jackson W. Moore
President and COO
Telephone Number: (901) 580-6093
Telecopy Number: (901) 580-2939
FSB, Inc. - Merger Agreement Page 38
<PAGE> 141
Copy to Parent Counsel: Union Planters Corporation
7130 Goodlett Farms Parkway
Memphis, Tennessee 38018
Attention: E. James House, Jr., Esq.
Manager, Legal Division
Telephone Number: (901) 590-6596
Telecopy Number: (901) 580-2939
and
Wyatt, Tarrant & Combs
6075 Poplar Avenue, Suite 650
Memphis, Tennessee 38017
Attention: Virginia B. Wilson, Esq.
Telephone Number: (901)537-1000
Telecopy Number: (901) 537-1010
11.9 Governing Law. This Agreement shall be governed by and construed
in accordance with the Laws of the State of Tennessee, without regard to any
applicable conflicts of Laws.
11.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
11.11 Captions. The captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.
11.12 Interpretations. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against any Party, whether under
any rule of construction or otherwise. No Party to this Agreement shall be
considered the draftsman. The Parties acknowledge and agree that this Agreement
has been reviewed, negotiated, and accepted by all Parties and their attorneys
and shall be construed and interpreted according to the ordinary meaning of the
words used so as fairly to accomplish the purposes and intentions of all Parties
hereto.
11.13 Enforcement of Agreement. The Parties agree that time is of the
essence in the performance of their respective obligations under this Agreement.
The Parties hereto agree that irreparable damage would occur in the event that
any of the provisions of this Agreement was not performed in accordance with its
specific terms or was otherwise breached. It is accordingly agreed that the
Parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
11.14 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
FSB, Inc. - Merger Agreement Page 39
<PAGE> 142
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.
FSB, Inc.
By: /s/
------------------------------------
Theodore B. Sloan, Chairman and CEO
ATTEST:
By: /s/
---------------------------------
Rita Hubbard, Secretary
FIRST STATE BANK OF COVINGTON
By: /s/
------------------------------------
Theodore B. Sloan, Chairman and CEO
ATTEST:
By: /s/
--------------------------------
Rita Hubbard, Secretary
UNION PLANTERS CORPORATION
By: /s/
------------------------------------
Jackson W. Moore
President & Chief Operating Officer
ATTEST:
By: /s/
--------------------------------
E. James House, Jr., Secretary
UNION PLANTERS HOLDING CORPORATION
By: /s/
------------------------------------
Jackson W. Moore
President & Chief Operating Officer
FSB, Inc. - Merger Agreement Page 40
<PAGE> 143
ATTEST:
By: /s/
-------------------------------------
E. James House, Jr., Secretary
UNION PLANTERS BANK, NATIONAL ASSOCIATION
By: /s/
--------------------------------------
Jackson W. Moore
President & Chief Operating Officer
ATTEST:
FSB, Inc. - Merger Agreement Page 41
<PAGE> 144
APPENDIX B
Exhibit 1
PLAN OF MERGER
OF
FSB, Inc.
WITH AND INTO
UNION PLANTERS HOLDING CORPORATION
Pursuant to this Plan of Merger ("Plan of Merger"), FSB, Inc. ("Subject
Company"), a corporation organized and existing under the laws of the State of
Tennessee, shall be merged with and into Union Planters Holding Corporation
("Merger Subsidiary"), a corporation organized and existing under the laws of
the State of Tennessee and which is a wholly-owned subsidiary of Union Planters
Corporation ("Parent").
Except as otherwise provided herein, the capitalized terms set forth
below shall have the meanings ascribed thereto in that certain Agreement and
Plan of Merger dated as of July 31, 1998 between Parent, Merger Subsidiary, and
Subject Company (the "Agreement"), of which this Plan of Merger is Exhibit 1.
ARTICLE 1
TERMS OF MERGER
1.1 Merger. Subject to the terms and conditions of the Agreement and
this Plan of Merger, at the Effective Time, Subject Company shall be merged with
and into Merger Subsidiary in accordance with the provisions of Section
48-21-109 of the TBCA and with the effects 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 approved and adopted by the
respective Boards of Directors of Subject Company, Parent and Merger Subsidiary.
1.2 Time and Place of Closing. The Closing will take place at 9:00 A.M.
on the date on which the Effective Time is to occur (or the immediately
preceding day if the Effective Time is to be earlier than 9:00 A.M.), or at such
other time as the Parties, acting through their chief executive officers, may
mutually agree. The Closing shall be held at such place as may be mutually
agreed upon by the Parties.
1.3 Effective Time. The Merger and other transactions contemplated by
the Agreement and this Plan of Merger shall become effective at the time the
Articles of Merger reflecting the Merger shall become effective with the
Secretary of State of the States of Tennessee and 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 of Merger Subsidiary in effect immediately
prior to the Effective Time shall be the Charter of the Surviving Corporation
until otherwise amended or repealed.
2.2 Bylaws. The Bylaws of Merger Subsidiary in effect immediately prior
to the Effective Time shall be the Bylaws of the Surviving Corporation until
otherwise amended or repealed.
2.3 Directors and Officers. The directors of Merger Subsidiary in
office immediately prior to the Effective Time, together with such additional
persons as may thereafter be elected, shall serve as the directors of the
Surviving Corporation from and after the Effective Time in accordance with the
Bylaws of the Surviving Corporation. The officers
FSB, Inc. - Plan of Merger Page 1
<PAGE> 145
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 common stock of the Surviving
Corporation from and after the Effective Time.
(c) Except for Dissenting Shares, each share of Subject
Company Common Stock (excluding shares held by Subject Company, any Subject
Company Subsidiary, Parent or any Parent Subsidiary, in each case other than in
a fiduciary capacity or as a result of debts previously contracted) issued and
outstanding at the Effective Time shall cease to be outstanding and shall be
converted into and exchanged for the right to receive shares of Parent Common
Stock (subject to possible adjustment as set forth in Section 3.2 of the
Agreement, the "Exchange Ratio"). Pursuant to the Parent Rights Agreement, each
share of Parent Common Stock issued in connection with the Merger upon
conversion of Subject Company Common Stock shall be accompanied by a Parent
Right.
(d) Dissenting Shares shall not be converted pursuant to
Section 3.1(c) in the Merger but, at and after the Effective Time, shall
represent only the right to receive payment in accordance with the applicable
provisions of 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 Plan
of Merger and prior to the Effective Time as a result of a stock split, stock
dividend, subdivision, reclassification, conversion or similar recapitalization
with respect to such stock and the record date therefor (in the case of a stock
dividend) or the effective date thereof (in the case of a stock split,
subdivision, reclassification, conversion or similar recapitalization for which
a record date is not established) shall be prior to the Effective Time, the
Exchange Ratio shall be proportionately adjusted.
3.3 Shares Held by Subject Company or Parent. Each of the shares of
Subject Company Common Stock held by Subject Company, any Subject Company
Subsidiary, Parent or any Parent Subsidiary, in each case other than in a
fiduciary capacity or as a result of debts previously contracted, shall be
canceled and retired at the Effective Time and no consideration shall be issued
in exchange therefor.
3.4 Fractional Shares. Notwithstanding any other provision of this Plan
of Merger, 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 which, immediately prior to the Effective
Time, represented shares of Subject Company Common Stock (each a "Subject
Company Certificate")) 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 Parent Common Stock on the NYSE-Composite Transactions List
(as reported by The Wall Street Journal or, if not reported thereby, any other
authoritative source reasonably selected by Parent) on the last trading day
preceding the Effective Time. No such holder will be entitled to dividends,
voting rights, or any other
FSB, Inc. - Plan of Merger Page 2
<PAGE> 146
rights as a shareholder in respect of any fractional shares.
ARTICLE 4
EXCHANGE OF SHARES
4.1 Exchange Procedures. As soon as reasonably practicable after the
Effective Time, Parent and Subject Company shall cause the exchange agent
selected by Parent (the "Exchange Agent") to mail to each holder of record of a
Subject Company Certificate appropriate transmittal materials (which shall
specify that delivery shall be effected, and risk of loss and title to the
Subject Company Certificates shall pass, only upon proper delivery of such
Subject Company Certificates to the Exchange Agent). Subject Company shall have
the right to review and approve the transmittal materials. The Exchange Agent
may establish reasonable and customary rules and procedures in connection with
its duties, provided such rules and procedures do not have the effect of
unreasonably delaying or limiting or eliminating the obligation of Parent and/or
Merger Subsidiary to deliver the consideration contemplated by Article 3 of this
Plan of Merger. After the Effective Time, each holder of shares of Subject
Company Common Stock (other than Dissenting Shares or shares to be canceled
pursuant to Section 3.3 of this Plan of Merger) issued and outstanding at the
Effective Time shall surrender the certificate or certificates representing such
shares to the Exchange Agent and shall promptly upon surrender thereof receive
in exchange therefor the consideration provided in Section 3.1(c) of this Plan
of Merger, together with all undelivered dividends and other distributions, if
any, in respect of such shares (without interest thereon) pursuant to Section
4.2 of this Plan of Merger. To the extent required by Section 3.4 of this Plan
of Merger, each holder of shares of Subject Company Common Stock issued and
outstanding at the Effective Time also shall receive, upon surrender of the
certificate or certificates representing such shares, cash in lieu of any
fractional share of Parent Common Stock to which such holder may be otherwise
entitled (without interest). Parent shall not be obligated to deliver the
consideration to which any former holder of Subject Company Common Stock is
entitled as a result of the Merger until such holder surrenders such holder's
Subject Company Certificates for exchange as provided in this Section 4.1 or in
Section 4.2 hereof. The Subject Company Certificates so surrendered shall be
duly endorsed as the Exchange Agent may reasonably require. Any other provision
of the Agreement or this Plan of Merger notwithstanding, neither Parent, Merger
Subsidiary nor the Exchange Agent shall be liable to a holder of Subject Company
Common Stock for any amounts paid or property delivered in good faith to a
public official pursuant to any applicable abandoned property Law.
4.2 Rights of Former Subject Company Shareholders. At the Effective
Time, other than with respect to Dissenting Shares, the stock transfer books of
Subject Company shall be closed as to holders of Subject Company Common Stock
immediately prior to the Effective Time and no transfer of Subject Company
Common Stock by any such holder shall thereafter be made or recognized. Until
surrendered for exchange in accordance with the provisions of Section 4.1 of
this Plan of Merger, each certificate theretofore representing shares of Subject
Company Common Stock (other than Dissenting Shares or shares to be canceled
pursuant to Section 3.3 of this Plan of Merger) shall from and after the
Effective Time represent for all purposes only the right to receive the
consideration provided in Sections 3.1(c) and 3.4 of this Plan of Merger in
exchange therefor, subject, however, to the Surviving Corporation's obligations
to pay any dividends or make any other distributions with a record date prior to
the Effective Time which have been declared or made by Subject Company in
respect of such shares of Subject Company Common Stock in accordance with the
terms of this Plan of Merger and which remain unpaid at the Effective Time. In
addition, whenever a dividend or other distribution is declared by Parent on the
Parent Common Stock, the record date for which is at or after the Effective
Time, the declaration shall include dividends or other distributions on all
shares of Parent Common Stock issuable pursuant to this Plan of Merger, but no
dividend or other distribution payable to the holders of record of Parent Common
Stock as of any time subsequent to the Effective Time shall be delivered to the
holder of any certificate representing shares of Subject Company Common Stock
issued and outstanding at the Effective Time until such holder surrenders such
certificate for exchange as provided in Section 4.1 of this Plan of Merger.
However, upon surrender of such Subject Company Common Stock certificate, both a
Parent Common Stock certificate and any undelivered dividends and other
distributions payable hereunder (without interest) shall be delivered and paid
with respect to each share represented by such certificate. In the event any
Subject Company Common Stock certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such certificate to be lost, stolen or destroyed and, if reasonably required by
Parent, the posting by such person of a bond in such amount as Parent may
reasonably direct as indemnity against any claim that may be made against it
with respect to such certificate, the Exchange Agent shall issue in exchange for
such lost, stolen or destroyed certificate the shares of Parent Common Stock
FSB, Inc. - Plan of Merger Page 3
<PAGE> 147
and cash in lieu of fractional shares and dividends and other distributions
deliverable in respect thereof pursuant to this Plan of Merger.
ARTICLE 5
MISCELLANEOUS
5.1 Conditions Precedent. Consummation of the Merger by Merger
Subsidiary shall be conditioned on the satisfaction of or waiver by Parent of
the conditions precedent to the Merger set forth in Sections 9.1 and 9.2 of the
Agreement. Consummation of the Merger by Subject Company shall be conditioned on
the satisfaction of, or waiver by Subject Company of, 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 the amount or nature of the consideration to be
received by the shareholders of Subject Company may not be amended at any time
following the date of the meeting of shareholders of Subject Company at which
the shareholders vote as to approval of this Agreement.
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 Parties. 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.
FSB, Inc. - Plan of Merger Page 4
<PAGE> 148
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.
FSB, INC.
By:/s/ Theodore B. Sloan
-------------------------------------
Theodore B. Sloan, Chairman and CEO
ATTEST:
By:/s/ Rita Hubbard
-------------------------------------
Rita Hubbard, Secretary
UNION PLANTERS CORPORATION
By:/s/ Jackson W. Moore
------------------------------------
Jackson W. Moore
President & Chief Operating Officer
ATTEST:
By:/s/ E. James House, Jr.
-------------------------------------
E. James House, Jr., Secretary
UNION PLANTERS HOLDING CORPORATION
By:/s/ Jackson W. Moore
-------------------------------------
Jackson W. Moore
President & Chief Operating Officer
ATTEST:
By:/s/ E. James House, Jr.
-------------------------------------
E. James House, Jr., Secretary
FSB, Inc. - Plan of Merger Page 5
<PAGE> 149
Exhibit 2
AFFILIATE AGREEMENT
Union Planters Corporation
7130 Goodlett Farms Parkway
Memphis, Tennessee 38108
Attention: Jackson W. Moore, President
and Chief Operating Officer
Gentlemen:
The undersigned is a shareholder of FSB, Inc., ("Subject Company") a
corporation organized and existing under the laws of the State of Tennessee, and
will become a shareholder of Union Planters Corporation ("Parent") pursuant to
the transactions described in the Agreement and Plan of Merger, dated as of July
31, 1998 (the "Agreement"), by and between Parent, Union Planters Holding
Corporation ("Merger Subsidiary"), and Subject Company. Under the terms of the
Agreement, Subject Company will be merged with and into Merger Subsidiary (the
"Merger"), and shares of the $10.00 par value common stock of Subject Company
("Subject Company Common Stock") will be converted into and exchanged for shares
of the $5.00 par value common stock of Parent ("Parent Common Stock"). This
Affiliate Agreement represents an agreement between the undersigned and Parent
regarding rights and obligations of the undersigned in connection with the
shares of Parent Common Stock to be received by the undersigned as a result of
the Merger. Except as otherwise provided herein, capitalized terms set forth
below shall have the meanings ascribed thereto in the Agreement.
In consideration of the Merger and the mutual covenants contained
herein, the undersigned and Parent hereby agree as follows:
1. Affiliate Status. The undersigned understands and agrees that as to
Subject Company the undersigned may be deemed to be an "affiliate" under Rule
145(c) as defined in Rule 405 of the Rules and Regulations of the Securities and
Exchange Commission ("SEC") under the Securities Act of 1933, as amended ("1933
Act"), and the undersigned anticipates that the undersigned may be deemed to be
such an "affiliate" at the time of the Merger.
2. Initial Restriction on Disposition. The undersigned agrees that the
undersigned will not sell, transfer, or otherwise dispose of the undersigned's
interest in, or reduce the under-signed's risk relative to, any of the shares of
Parent Common Stock into which the undersigned's shares of Subject Company
Common Stock are converted upon consummation of the Merger until such time as
the requirements of SEC Accounting Series Release Nos. 130 and 135 ("ASR 130 and
135") have been met. The undersigned understands that ASR 130 and 135 relate to
publication of financial results of post-Merger combined operations of Parent
and Subject Company. Parent agrees that it will publish such results within 45
days after the end of the first fiscal quarter of Parent containing the required
period of post-Merger combined operations and that it will notify the
undersigned promptly following such publication.
3. Covenants and Warranties of Undersigned. The undersigned represents,
warrants, and agrees that:
(a) During the 30 days immediately preceding the Effective Time of the
Merger, the undersigned will not sell, transfer or otherwise dispose of the
undersigned's interest in, or reduce the undersigned's risk relative to, any of
the shares of Subject Company Common Stock beneficially owned by the undersigned
as of the date of the Subject Company Shareholders' Meeting held to approve the
Merger.
FSB, Inc. - Affiliate Agreement Page 1
<PAGE> 150
(b) The Parent Common Stock received by the undersigned as a result of
the Merger will be taken for the undersigned's own account and not for others,
directly or indirectly, in whole or in part.
(c) Parent has informed the undersigned that any distribution by the
undersigned of Parent Common Stock has not been registered under the 1933 Act
and that shares of Parent Common Stock received pursuant to the Merger can only
be sold by the undersigned (1) following registration under the 1933 Act, or (2)
in conformity with the volume and other requirements of Rule 145(d) promulgated
by the SEC as the same now exists or may hereafter be amended, or (3) to the
extent some other exemption from registration under the 1933 Act might be
available. The undersigned understands that, except as set forth in the
Agreement and in paragraph 6 hereof, Parent is under no obligation to file a
registration statement with the SEC covering the disposition of the
undersigned's shares of Parent Common Stock or to take any other action
necessary to make compliance with an exemption from such registration available.
(d) The undersigned will register, and will cause each of the other
parties whose shares may be deemed to be beneficially owned by the undersigned
pursuant to Section 8 hereof to have all shares of Subject Company Common Stock
beneficially owned by the undersigned registered in the name of the undersigned
or such parties, as applicable, prior to the Effective Date of the Merger and
not in the name of any bank, broker-dealer, nominee, or clearinghouse.
(e) The undersigned is aware that Parent intends to treat the Merger as
a tax-free reorganization under Section 368 of the Internal Revenue Code
("Code") for federal income tax purposes. The undersigned agrees to treat the
transaction in the same manner as Parent for federal income tax purposes. The
undersigned acknowledges that Section 1.368-1(b) of the Income Tax Regulations
requires "continuity of interest" in order for the Merger to be treated as
tax-free under Section 368 of the Code. This requirement is satisfied if, taking
into account those Subject Company shareholders who receive cash in exchange for
their stock, who receive cash in lieu of fractional shares, or who dissent from
the Merger, there is no plan or intention on the part of the Subject Company
shareholders to sell or otherwise dispose of the Parent Common Stock to be
received in the Merger.
4. Restrictions on Transfer. The undersigned understands and agrees
that stop order instructions with respect to the shares of Parent Common Stock
received by the undersigned pursuant to the Merger will be given to Parent's
transfer agent and that there will be placed on the certificates for such
shares, or shares issued in substitution thereof, a legend stating in substance:
"The shares represented by this certificate were issued pursuant to a
business combination which is accounted for as a "pooling-of-interests"
and may not be sold, nor may the owner thereof reduce his risks
relative thereto in any way, until such time as Union Planters
Corporation ("Parent") has published the financial results covering at
least 30 days of combined operations after the effective date of the
merger through which the business combination was effected. In
addition, the shares represented by this certificate may not be sold,
transferred, or otherwise disposed of except or unless (1) covered by
an effective registration statement under the Securities Act of 1933,
as amended, (2) in accordance with (i) Rule 145(d) (in the case of
shares issued to an individual who is not an affiliate of Parent) or
(ii) Rule 144 (in the case of shares issued to an individual who is an
affiliate of Parent) of the Rules and Regulations of such Act, or (3)
in accordance with a legal opinion satisfactory to counsel for Parent
that such sale or offer is otherwise exempt from the registration
requirements of such Act."
Such legend will also be placed on any certificate representing Parent
securities issued subsequent to the original issuance of the Parent Common Stock
pursuant to the Merger as a result of any exchange of such shares or any stock
dividend, stock split, or other recapitalization as long as the Parent Common
Stock issued to the undersigned pursuant to the Merger has not been transferred
in such manner to justify the removal of the legend therefrom. Upon the request
of the undersigned, Parent shall cause the certificates representing the shares
of Parent Common Stock issued to the undersigned in connection with the Merger
to be reissued free of any legend relating
FSB, Inc. - Affiliate Agreement Page 2
<PAGE> 151
to restrictions on transfer by virtue of ASR 130 and 135 as soon as practicable
after the requirements of ASR 130 and 135 have been met. In addition, if the
provisions of Rules 144 and 145 are amended to delete restrictions applicable to
the Parent Common Stock received by the undersigned pursuant to the Merger, or
at the expiration of the restrictive period set forth in Rule 145(d), Parent,
upon the request of the undersigned, will cause the certificates representing
the shares of Parent Common Stock issued to the undersigned in connection with
the Merger to be reissued free of any legend relating to the restrictions set
forth in Rules 144 and 145(d) upon receipt by Parent of an opinion of its
counsel to the effect that such legend may be removed.
5. Understanding of Restrictions on Dispositions. The undersigned has
carefully read the Agreement and this Affiliate Agreement and discussed their
requirements and impact upon his ability to sell, transfer, or otherwise dispose
of the shares of Parent Common Stock received by the undersigned, to the extent
he believes necessary, with his counsel or counsel for Subject Company.
6. Filing of Reports by Parent. Parent agrees, for a period of three
years after the Effective Time of the Merger, to file on a timely basis all
reports required to be filed by it pursuant to Section 13 of the Securities
Exchange Act of 1934, as amended, so that the public information provisions of
Rule 145(d) promulgated by the SEC as the same are presently in effect will be
available to the undersigned in the event the undersigned desires to transfer
any shares of Parent Common Stock issued to the undersigned pursuant to the
Merger.
7. Transfer Under Rule 145(d). If the undersigned desires to sell or
otherwise transfer the shares of Parent Common Stock received by him in
connection with the Merger at any time during the restrictive period set forth
in Rule 145(d), the undersigned will provide the necessary representation letter
to the transfer agent for Parent Common Stock together with such additional
information as the transfer agent for Parent Common Stock may reasonably
request. If Parent's counsel concludes that such proposed sale or transfer
complies with the requirements of Rule 145(d), Parent shall cause such counsel
to provide such opinions as may be necessary to Parent's transfer agent so that
the undersigned may complete the proposed sale or transfer.
8. Acknowledgments. The undersigned recognizes and agrees that the
foregoing provisions also apply to all shares of the capital stock of Subject
Company and Parent received by him in connection with the Merger that are deemed
to be beneficially owned by the undersigned pursuant to applicable federal
securities laws, which the undersigned agrees may include, without limitation,
shares owned or held in the name of (i) the undersigned's spouse, (ii) any
relative of the undersigned or of the undersigned's spouse who has the same home
as the undersigned, (iii) any trust or estate in which the undersigned, the
undersigned's spouse, and any such relative collectively own at least a 10%
beneficial interest or of which any of the foregoing serves as trustee,
executor, or in any similar capacity, and (iv) any corporation or other
organization in which the undersigned, the undersigned's spouse and any such
relative collectively own at least 10% of any class of equity securities or of
the equity interest. The undersigned further recognizes that, in the event that
the undersigned is a director or officer of Parent or becomes a director or
officer of Parent upon consummation of the Merger, among other things, any sale
of Parent Common Stock by the undersigned within a period of less than six
months following the Effective Time of the Merger may subject the undersigned to
liability pursuant to Section 16(b) of the Securities Exchange Act of 1934, as
amended.
9. Miscellaneous. This Affiliate Agreement is the complete agreement
between Parent and the undersigned concerning the subject matter hereof. Any
notice required to be sent to any party hereunder shall be sent by registered or
certified mail, return receipt requested, using the addresses set forth herein
or such other address as shall be furnished in writing by the parties. This
Affiliate Agreement shall be governed by the laws of the State of Tennessee.
FSB, Inc. - Affiliate Agreement Page 3
<PAGE> 152
This Affiliate Agreement is executed as of the 31st day of
July, 1998.
Very truly yours,
------------------------------
Affiliate Signature
Robert Donaldson
Printed Name
------------------------------
------------------------------
------------------------------
Add below the signatures of all registered owners of shares
which may be deemed to be beneficially owned by the Affiliate.
---------------------------------------
Name:
----------------------------------
---------------------------------------
Name:
----------------------------------
---------------------------------------
Name:
----------------------------------
AGREED TO AND ACCEPTED as of ______________________, 1998.
UNION PLANTERS CORPORATION
By: /s/
-----------------------------------
Jackson W. Moore
President & Chief Operating Officer
FSB, Inc. - Affiliate Agreement Page 4
<PAGE> 153
Exhibit 3
NONCOMPETITION AGREEMENT
This Non-Competition Agreement made and entered into as of the _ day
of____________, 1998, by and between Union Planters Corporation ("UPC"), a
Tennessee Corporation, having its principal offices located in Memphis,
Tennessee; First State Bank of Covington ("Bank"), a Tennessee banking
corporation with its main office located in Covington, Tennessee and
_______________________, an adult resident citizen of the State of Tennessee and
who serves as an executive officer or director of FSB, Inc., a Tennessee
corporation ("FSB"). For the purposes of this Noncompetition Agreement, First
State Bank of Covington or "Bank" shall be interpreted to include any successor
entity that may result from a future merger of Bank into a subsidiary of UPC.
WHEREAS, UPC, Union Planters Holding Corporation ("UP Holding") and FSB
have entered into that certain Agreement and Plan of Merger dated as of July 31,
1998 (the "Merger Agreement"), providing for the acquisition by UPC of all of
the outstanding common stock, $10.00 par value per share, of FSB ("FSB Common
Stock") through the merger of FSB with and into UP Holding, with UP Holding
surviving the merger (the "Merger"); and
WHEREAS, _____________________ was a shareholder as well as a director
or executive officer of {FSB and Bank} and has long been associated with {FSB
and Bank} and has developed a relationship with the customer base of {FSB and
Bank} and possesses confidential information regarding the direct and indirect
business operation of {FSB and Bank}; and
WHEREAS, as a condition precedent to the obligations of UPC and UP
Holding to consummate the proposed Merger, ___________________ has agreed to,
and does hereby, enter into this Non-Competition Agreement as set forth below.
NOW THEREFORE, for and in consideration of the cash consideration set
forth below, the receipt and sufficiency of which as consideration for this
Non-Competition Agreement is hereby acknowledged by _____________________, and
in consideration of UPC's agreement to acquire FSB pursuant to the Merger
Agreement, the parties hereto intending to be legally bound hereby agree as
follows:
1. Consideration. UPC shall pay to _______________ the sum of Ten
Dollars ($10.00) on the date hereof.
2. Covenant Not to Compete/Term. (a) UPC, UP Holding, and
_____________________ acknowledge and agree that: (i) various business
connections, clientele and customers of UPC and its subsidiaries, including but
not limited to, UP Holding and Bank (collectively, the "Union Planters
Companies"), have been established and are maintained at a great expense to the
Union Planters Companies; (ii) by virtue of his or her close relationship with,
and service as a member of the Board of Directors or executive officer of, {FSB
and/or Bank}, and in connection with the Merger, _____________________ has
become familiar with the names and lists, and the business needs of the
customers and clientele of certain of the Union Planters Companies, including,
but not limited to, {Bank}; (iii) __________________, through his or her
representation of or association with {FSB and Bank} and his or her business
dealings with {FSB or Bank} has become personally acquainted with such customers
and prospective customers of the Union Planters Companies; and (iv) UP Holding,
Bank and the other Union Planters Companies, will sustain great loss and damage
if _________________ violates the covenants and agreements hereinafter set
forth, for which loss and damage none of the Union Planters Companies has an
adequate remedy at law.
(b) Based on the foregoing, _____________ hereby expressly covenants
and agrees, which covenants and agreements are the essence of this
Non-Competition Agreement, that:
(i) for a period of two (2) years from the later of the date
hereof or the date ______________
FSB, Inc. - - Form of Noncompetition Agreement - - Page 5
<PAGE> 154
ceases to serve on the Board of Directors of, or as an officer of, or as a
consultant or advisory director for any of the Union Planters Companies,
including, but not limited to Bank, _________________ shall not, unless acting
with the prior written consent of UPC and Bank, directly or indirectly, own,
manage, operate, join, control, or finance any business engaged in the business
of banking, or that of managing or controlling a bank or banks (which term shall
include savings and loan associations), in Tipton County, Tennessee.
(ii) for a period of two (2) years from the later of the date
hereof or the date ______________ ceases to serve on the Board of Directors of,
or as an officer of, or as a consultant or advisory director for any of the
Union Planters Companies, including but not limited to Bank, _________________
shall not, unless acting with the prior written consent of UPC and Bank,
participate in the ownership, management operation or control of, or serve as a
director, officer, employee, or consultant, or become a partner or stockholder
of any business engaged in the business of banking, or that of managing or
controlling a bank or banks (which term shall include savings and loan
associations), in Tipton County, Tennessee.
(iii) The limitations stated above in paragraphs (i) and (ii)
shall not include any stock owned as of the date of this agreement, or
securities purchased in the market, solely as an investment, registered under
Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended, and
listed or admitted for trading on any United States national securities exchange
or quoted on the National Association of Securities Dealers Automated Quotations
System, or any similar automated system for the dissemination of securities
price quotations in common use, provided, however, that ______________ is not a
member of any control group (within the meaning of the rules and regulations of
the Securities and Exchange Commission or the Federal Reserve Board) of any
issuer of such securities.
(c) Further, ________________covenants and agrees that for the same
period of time described in paragraphs b(i) and b(ii), ______________ will not
solicit the business of any Person known by _____________ to be a customer of
Bank or any of the Union Planters Companies with respect to any products or
activities which compete in whole or in part with the products or activities of
Bank or the Union Planters Companies, in Tipton County, Tennessee.
(d) _________________ further acknowledges and agrees that during his
or her employment with and service on the Board of Directors or as an officer of
{FSB and or Bank} prior to the date hereof, as well as after the Effective Time
of the Merger with or for any of the Union Planters Companies, including but not
limited to Bank, that certain highly confidential information, including, but
not being limited to, customer lists, individual customer habits, and other
confidential customer and corporate information has been, and will be in the
event of continued employment or service, imparted to him or her. Due to the
highly confidential nature of said information, _______________ covenants and
agrees that he or she will not, during or for a period of one (1) year after the
term of his or her employment or service with or for any of the Union Planters
Companies, disclose any such confidential information to any person or entity
not employed by UPC, or any of the Union Planters Companies, and authorized by
UPC to receive such information. This provision shall not apply to the extent
that confidential information can be shown (i) to have been disclosed pursuant
to judicial or administrative process, (ii) to have been previously lawfully
known to _________, (iii) to be in the public domain through no fault of
_________, or (iv) to have been later acquired by ____ from other sources either
not subject to a confidentiality agreement or without violating any such
agreement.
(e) ________________ acknowledges and agrees that any violation by him
or her of the covenants set forth in this Non-Competition Agreement would cause
irreparable injury to the Union Planters Companies. _______________ further
acknowledges and agrees that in the event of a breach or threatened breach of
the provisions of this confidentiality covenant, _____________ or UPC shall be
entitled to injunctive relief against him or her by any court of competent
jurisdiction having the authority to grant such relief. Nothing herein, however,
shall be construed as prohibiting any of the Union Planters Companies from
pursuing any other remedies which may be available to them for such a breach or
threatened breach, including the recovery of damages from ______________ to any
other person or entity.
FSB, Inc. - - Form of Noncompetition Agreement - - Page 6
<PAGE> 155
(f) Notwithstanding anything to the contrary in this Agreement, it
shall not be a violation hereof for Walker Tipton to provide legal services to
banks or other financial institutions, wherever located.
3. Successors and Assigns. This Non-Competition Agreement shall inure
to the benefit of UPC, UP Holding, and Bank, and their respective successors and
assigns, including, without limitation, any corporation or agency which may
acquire all or substantially all of UPC's, UP Holding's, or Bank's assets and
businesses or with which UPC, UP Holding, or Bank may be consolidated or merged.
4. Entire Agreement. This Non-Competition Agreement contains the entire
understanding of the parties. It may not be changed orally but only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, notification or discharge is sought.
5. Severability. The invalidity or unenforceability of any provision
hereof in no way affects the validity or enforceability of any other provision.
6. Waiver of Breach. Failure to insist upon strict compliance with any
terms, covenants or conditions hereof shall not be deemed a waiver or
relinquishment of such right or power at any other time or times.
7. Applicable Law. This Non-Competition Agreement shall be governed by
the laws of the State of Tennessee.
UNION PLANTERS CORPORATION
By:/s/
--------------------------------------
Jackson W. Moore
President and Chief Operating Officer
FIRST STATE BANK OF COVINGTON
By:/s/
--------------------------------------
Theodore B. Sloan
Chairman and CEO
{OFFICER}
-----------------------------------------
FSB, Inc. - - Form of Noncompetition Agreement - - Page 7
<PAGE> 156
APPENDIX C
1
FSB, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CONDITION
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
------------ ----------------------
1998 1997 1996
------------ -------- --------
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
CASH AND DUE FROM BANKS .................................. $ 4,120 $ 4,659 $ 5,656
FEDERAL FUNDS SOLD ....................................... 5,249 4,100 3,900
--------- -------- --------
CASH AND CASH EQUIVALENTS ............................. 9,369 8,759 9,556
--------- -------- --------
INVESTMENT SECURITIES .................................... 29,353 36,149 38,671
--------- -------- --------
LOANS AND DISCOUNTS, net of unearned discounts and finance
charges ................................................. 103,948 98,063 84,912
Less reserve for possible loan losses ................. 1,163 1,021 964
--------- -------- --------
102,785 97,042 83,948
--------- -------- --------
BANK PREMISES AND EQUIPMENT, at cost, less accumulated
depreciation ............................................ 2,320 2,439 2,660
--------- -------- --------
OTHER ASSETS ............................................. 2,103 1,499 1,494
--------- -------- --------
TOTAL ASSETS ....................................... $ 145,930 $145,888 $136,329
========= ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS
Demand ................................................ $ 16,360 $ 18,076 $ 15,862
NOW accounts .......................................... 26,783 28,254 31,174
Savings ............................................... 7,501 7,201 6,766
Time, $100,000 and over ............................... 11,696 12,472 6,669
Other time ............................................ 52,499 50,296 49,651
--------- -------- --------
114,839 116,299 110,122
--------- -------- --------
OTHER LIABILITIES
Accrued interest ...................................... 478 419 487
Accrued taxes and other expenses ...................... 519 614 322
Federal and state income taxes ........................ (69) 90 78
Federal Home Loan Bank advances ....................... 10,519 9,454 9,827
Deferred federal and state income taxes ............... 1,033 1,233 681
--------- -------- --------
12,480 11,810 11,395
--------- -------- --------
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS' EQUITY
Common stock, par value $10 per share; shares
authorized, 2,500,000; shares issued and
outstanding, 563,610 at September 30, 1998,
557,357 at December 31, 1997 and 548,957 at
December 31, 1996..................................... 5,636 5,574 5,490
Capital surplus ....................................... 2,437 2,114 1,842
Undivided profits ..................................... 8,811 7,827 6,257
Valuation allowance for available for sale
securities............................................ 1,727 2,264 1,223
--------- -------- --------
18,611 17,779 14,812
--------- -------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY............................. $ 145,930 $145,888 $136,329
========= ======== ========
</TABLE>
See notes to consolidated financial statements
<PAGE> 157
2
FSB, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30 DECEMBER 31
------------ -----------------------
1998 1997 1996
------------ -------- --------
<S> <C> <C> <C>
(UNAUDITED)
INTEREST INCOME
Interest and fees on loans ............................... $ 7,282 $ 9,024 $ 8,175
Interest and dividends on investment securities
Taxable ............................................... 865 1,414 1,464
Exempt from federal taxes ............................. 438 714 761
Interest on federal funds sold ........................... 224 42 111
Interest on bank deposits ................................ 67 83 76
------- -------- --------
TOTAL INTEREST INCOME ............................... 8,876 11,277 10,587
------- -------- --------
INTEREST EXPENSE
Interest on deposits ..................................... 3,435 4,362 4,328
Interest on federal funds purchased ...................... 1 53 20
Other interest ........................................... 465 568 441
------- -------- --------
TOTAL INTEREST EXPENSE .............................. 3,901 4,983 4,789
------- -------- --------
NET INTEREST INCOME ......................................... 4,975 6,294 5,798
PROVISION FOR POSSIBLE LOAN LOSSES .......................... (273) (123) (93)
------- -------- --------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES ................................................. 4,702 6,171 5,705
------- -------- --------
OTHER INCOME
Service charges on deposits, collections, exchange charges
and fees ................................................ 700 909 874
Mortgage banking fees .................................... 432 337 320
Investment securities gains .............................. 23 25 3
Other .................................................... 99 123 100
------- -------- --------
TOTAL OTHER INCOME .................................. 1,254 1,394 1,297
------- -------- --------
OTHER EXPENSE
Salaries and wages ....................................... 1,409 1,787 1,715
Employee benefits ........................................ 424 532 507
Occupancy expense ........................................ 569 769 759
Other operating expenses ................................. 958 1,153 1,086
------- -------- --------
TOTAL OTHER EXPENSE ................................. 3,360 4,241 4,067
------- -------- --------
EARNINGS BEFORE INCOME TAXES ................................ 2,596 3,324 2,935
APPLICABLE INCOME TAXES ..................................... 819 1,007 844
------- -------- --------
NET EARNINGS ................................................ $ 1,777 $ 2,317 $ 2,091
======= ======== ========
EARNINGS PER SHARE .......................................... $ 3.16 $ 4.19 $ 3.79
======= ======== ========
</TABLE>
See notes to consolidated financial statements
<PAGE> 158
3
FSB, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
NET UNREALIZED
GAIN (LOSS) ON
COMMON STOCK AVAILABLE
------------------- CAPITAL UNDIVIDED FOR SALE
SHARES AMOUNT SURPLUS PROFITS SECURITIES TOTAL
------ ------- ------- --------- -------------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995 .................. 551 $ 5,514 $ 1,850 $ 4,811 $ 1,026 $ 13,201
Net earnings for the year .................. -- -- -- 2,091 -- 2,091
Cash dividends - $1.08 per share ........... -- -- -- (595) -- (595)
Purchase and retirement of common stock .... (2) (24) (8) (50) -- (82)
Change in valuation allowance for
available for sale securities ............. -- -- -- -- 197 197
--- ------- ------- ------- ------- --------
BALANCE AT DECEMBER 31, 1996 .................. 549 5,490 1,842 6,257 1,223 14,812
Net earnings for the year .................. -- -- -- 2,317 -- 2,317
Cash dividends - $1.30 per share ........... -- -- -- (718) -- (718)
Purchase and retirement of common stock ... (1) (9) (3) (29) -- (41)
Sale of common stock through dividend
reinvestment plan ......................... 9 93 275 -- -- 368
Change in valuation allowance for
available for sale securities ............. -- -- -- -- 1,041 1,041
--- ------- ------- ------- ------- --------
BALANCE AT DECEMBER 31, 1997 .................. 557 5,574 2,114 7,827 2,264 17,779
Net earnings for the year (unaudited) ...... -- -- -- 1,777 -- 1,777
Cash dividends - $1.32 per share (unaudited) -- -- -- (739) -- (739)
Purchase and retirement of common
stock (unaudited) ........................ (1) (10) (4) (54) -- (68)
Sale of common stock through dividend
reinvestment plan (unaudited) ............. 7 72 327 -- -- 399
Change in valuation allowance for
available for sale securities (unaudited) -- -- -- -- (537) (537)
--- ------- ------- ------- ------- --------
BALANCE AT SEPTEMBER 30,
1998 (UNAUDITED) ............................ 563 $ 5,636 $ 2,437 $ 8,811 $ 1,727 $ 18,611
=== ======= ======= ======= ======= ========
</TABLE>
See notes to consolidated financial statements
<PAGE> 159
4
FSB, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30 DECEMBER 31
------------ ---------------------------
1998 1997 1996
----------- -------- --------
<S> <C> <C> <C>
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Interest and dividends received ................................... $ 8,051 $ 10,637 $ 9,796
Fees and commissions received ..................................... 1,608 1,835 1,694
Interest paid ..................................................... (3,842) (5,052) (4,714)
Cash paid to suppliers and employees .............................. (3,188) (3,638) (3,555)
Income taxes paid ................................................. (1,022) (1,035) (813)
------- -------- --------
Net cash provided by (used in) operating activities ............ 1,607 2,747 2,408
------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of available for sale and equity securities ............. (3,657) (4,519) (8,095)
Proceeds from sales of available for sale and equity securities ... 7,266 4,190 --
Proceeds from maturities of available for sale securities ......... 2,255 5,652 10,081
Purchases of held to maturity securities .......................... (532) (1,481) (1,195)
Proceeds from maturities of held to maturity securities ........... 736 500 1,000
Net (increase) in customer loans .................................. (6,259) (13,252) (11,779)
Purchase of bank premises and equipment ........................... (139) (176) (183)
Proceeds from sale of equipment ................................... -- 8 33
Proceeds from sale of real estate owned other than
bank premises .................................................... 135 121 297
------- -------- --------
Net cash provided by (used in) investing activities ............ (195) (8,957) (9,841)
------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in demand deposits, NOW accounts
and savings accounts ............................................. (2,886) (271) (566)
Net increase in certificates of deposit ........................... 1,426 6,448 1,239
Repayments of Federal Home Loan Bank advances ..................... (936) (923) (1,189)
Proceeds from Federal Home Loan Bank advances ..................... 2,000 550 3,282
Purchase and retirement of the Company's common stock ............. (68) (42) (82)
Sale of the Company's common stock ................................ 400 368 --
Cash dividends paid ............................................... (738) (717) (595)
------- -------- --------
Net cash provided by (used in) financing activities ............ (802) 5,413 2,089
------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS ......................................................... 610 (797) (5,344)
------- -------- --------
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ....................... 8,759 9,556 14,900
------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR ............................. $ 9,369 $ 8,759 $ 9,556
======= ======== ========
</TABLE>
See notes to consolidated financial statements
<PAGE> 160
5
FSB, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30 DECEMBER 31
------------ -------------------------
1998 1997 1996
------------ ------- -------
<S> <C> <C> <C>
(UNAUDITED)
RECONCILIATION OF NET EARNINGS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
NET EARNINGS ............................................................ $ 1,777 $ 2,317 $ 2,091
ADJUSTMENTS TO RECONCILE NET EARNINGS TO
NET CASH PROVIDED BY OPERATING ACTIVITIES
Depreciation ......................................................... 258 396 412
Reserve for possible loan losses ..................................... 273 123 93
Discount accretion and premium amortization .......................... (119) (160) (339)
(Gain) loss on sale of securities .................................... (23) (25) --
(Gain) loss on sale of bank premises and equipment ................... -- (7) (7)
(Gain) loss on sale of real estate owned other than bank premises .... (20) (7) (1)
Deferred income taxes (credits) ...................................... -- (40) (18)
(Increase) decrease in assets
Other assets, excluding real estate owned other than
bank premises and deferred income taxes .......................... (345) (86) 58
Increase (decrease) in liabilities
Accrued interest .................................................. 59 (68) 75
Accrued taxes and other expenses .................................. (50) 292 42
Federal and state income taxes .................................... (203) 12 2
------- ------- -------
$ 1,607 $ 2,747 $ 2,408
======= ======= =======
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
ACTIVITIES
Real estate owned other than bank premises acquired through
satisfaction of loans .................................................. $ 164 $ 35 $ 410
======= ======= =======
</TABLE>
See notes to consolidated financial statements
<PAGE> 161
6
FSB, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS AND PRINCIPLES OF CONSOLIDATION - The consolidated
financial statements include the accounts of FSB, Inc. (the Company) and its
wholly-owned subsidiary, (First State Bank of Covington, Tennessee) (the Bank).
The consolidated financial statements also include the accounts of two
wholly-owned inactive subsidiaries that were purchased from FSB, Inc. by the
Bank in 1997. All significant inter-company transactions, profits and balances
have been eliminated in consolidation.
First State Bank of Covington, Tennessee provides a variety of banking services
to individuals and businesses in Tipton County and the surrounding area. Its
primary deposit products are demand deposits, NOW accounts and certificates of
deposits, and its primary lending products are commercial business, real estate
mortgage and installment loans.
USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
A material estimate that is particularly susceptible to significant change
relates to the determination of the allowance for losses on loans as discussed
in LOANS AND ALLOWANCE FOR LOAN LOSSES below.
INVESTMENT SECURITIES - In accordance with Statement of Financial Accounting
Standards No. 115, Accounting for Certain Investments in Debt and Equity
Securities, management of the Company has classified debt securities held as
available for sale or held to maturity. Debt securities and marketable equity
securities classified as available for sale are included at fair value in the
accompanying consolidated statements of condition. Unrealized gains or losses on
debt and marketable equity securities available for sale are recorded as a
separate component of stockholders' equity (net of applicable deferred income
taxes of $1,385,625 and $789,290 for debt securities at December 31, 1997 and
1996, respectively). Debt securities classified as held to maturity are stated
at cost adjusted for amortization of premiums and accretion of discounts,
computed by the interest method. Other equity securities are carried at the
lower of cost or estimated fair value at the balance sheet date. Realized gains
and losses on the sale of securities are recognized upon sale of the securities
and are computed on the basis of specific identification of the adjusted basis
of each security.
<PAGE> 162
7
FSB, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
LOANS AND ALLOWANCE FOR LOAN LOSSES - Loans are stated net of unearned discounts
and finance charges and are reduced by an allowance for loan losses. Unearned
discount on installment loans is recognized as income over the terms of the
loans by the Rule of 78's and interest methods. In the accompanying financial
statements, unearned discount is not materially different from that which would
be recognized had the interest method been used exclusively. Interest on other
loans is calculated by using the simple interest method on daily balances of the
principal amount outstanding.
The allowance for loan losses is maintained at a level which, in management's
judgment, is adequate to absorb credit losses inherent in the loan portfolio.
The amount of the allowance is based on management's evaluation of the
collectibility of the loan portfolio, including the nature of the portfolio,
credit concentrations, trends in historical loss experience, specific impaired
loans and economic conditions. Allowances for impaired loans are generally
determined based on collateral values or the present value of estimated cash
flows. The allowance is increased by a provision for loan losses, which is
charged to expense and reduced by charge-offs, net of recoveries. Changes in the
allowance relating to impaired loans are charged or credited to the provision
for loan losses. Because of uncertainties inherent in the estimation process,
management's estimate of credit losses inherent in the loan portfolio and the
related allowance may change in the near term.
Accrual of interest is discontinued on a loan when management believes, after
considering economic and business conditions and collection efforts, that the
borrowers' financial condition is such that collection of interest is doubtful
or when a loan is specifically determined to be impaired. Any unpaid interest
previously accrued on those loans is reversed from income. Interest income
generally is not recognized on specific impaired loans unless the likelihood of
further loss is remote. Interest payments received on such loans are applied as
a reduction of the loan principal balance. Interest income on other nonaccrual
loans is recognized only to the extent of interest payments received.
LOAN ORIGINATION FEES AND COSTS - Loan origination fees and certain direct
origination costs, if material, are deferred and amortized as a yield adjustment
over the lives of the related loans.
BANK PREMISES AND EQUIPMENT - Bank premises and equipment are stated at cost
less accumulated depreciation. Depreciation is computed using straight-line and
accelerated methods over the estimated useful lives of the various classes of
assets. Repairs and
<PAGE> 163
8
FSB, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
BANK PREMISES AND EQUIPMENT - CONTINUED
maintenance are charged to operations as incurred while expenditures for
renewals and betterments are capitalized. When property is sold or otherwise
disposed of, the cost and related accumulated depreciation are removed from the
respective accounts and the resulting gains or losses are reflected in
operations.
INCOME TAXES - Deferred income taxes have been provided in recognition of
temporary differences in the basis of certain balance sheet items for income tax
and financial accounting purposes.
EARNINGS PER SHARE - Earnings per share have been computed using the weighted
average number of common shares outstanding during each year -- 553,742 in 1997
and 551,019 in 1996.
OTHER - Other real estate (Note 6) acquired through partial or total
satisfaction of loans is carried at the lower of cost (the recorded balance
satisfied at date of acquisition) or fair value less estimated costs to sell and
is included in Other Assets. Any loss incurred at the date of acquisition is
charged to the Reserve for Possible Loan Losses. Subsequent gains or losses on
disposition of such assets and operating income and expenses relating to such
assets are reported in Other Income or Other Expenses, as appropriate.
STATEMENTS OF CASH FLOWS - For purposes of the Consolidated Statements of Cash
Flows, the Company's policy is to consider cash on hand, amounts due from banks
and federal funds sold as cash and cash equivalents. Generally, federal funds
are purchased and sold for one-day periods.
FAIR VALUES OF FINANCIAL INSTRUMENTS - Statement of Financial Accounting
Standards No. 107, Disclosures about Fair Value of Financial Instruments,
requires disclosure of fair value information about financial instruments,
whether or not recognized in the statements of financial condition. In cases
where quoted market prices are not available, fair values are based on estimates
using present value or other valuation techniques. Those techniques are
significantly affected by the assumptions used, including the discount rate and
estimates of future cash flows. In that regard, the derived fair value estimates
cannot be substantiated by comparison to independent markets and, in many cases,
could not be realized in immediate settlement of the instruments. Statement No.
107
<PAGE> 164
9
FSB, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
FAIR VALUES OF FINANCIAL INSTRUMENTS - CONTINUED
excludes certain financial instruments and all nonfinancial instruments from its
disclosure requirements. Accordingly, the aggregate fair value amounts presented
do not represent the underlying value of FSB, Inc. and Subsidiary.
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amounts reported in the statement
of condition for cash and cash equivalents approximate those assets' fair
values.
Investment securities (including mortgage-backed securities): Fair values
for investment securities are based on quoted market prices, where
available. If quoted market prices are not available, fair values are based
on quoted market prices of comparable instruments.
Loans: For variable-rate loans that reprice frequently and with no
significant change in credit risk, fair values are based on carrying
amounts. The fair values for other loans (for example, fixed rate
commercial real estate and rental property mortgage loans and commercial
and industrial loans) are estimated using discounted cash flow analysis,
based on interest rates currently being offered for loans with similar
terms to borrowers of similar credit quality. Loan fair value estimates
include judgments regarding future expected loss experience and risk
characteristics. The carrying amount of accrued interest receivable
approximates its fair value.
Deposits: The fair values disclosed for demand deposits (for example, NOW
accounts and passbook accounts) are, by definition, equal to the amount
payable on demand at the reporting date (that is, their carrying amounts).
The fair value for certificates of deposit are estimated using a discounted
cash flow calculation that applies interest rates currently being offered
on certificates to a schedule of aggregated contractual maturities on such
time deposits. The carrying amount of accrued interest payable approximates
fair value.
Federal Home Loan Bank Advances: Fair value for Federal Home Loan Bank
advances is estimated using discounted cash flow analysis, based on
interest rates currently available.
<PAGE> 165
10
FSB, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
FAIR VALUES OF FINANCIAL INSTRUMENTS - CONTINUED
Off-balance-sheet instruments: The Bank has commitments to extend credit
and standby letters of credit. These types of credit are made at market
rates; therefore, there would be no market risk associated with these
credits which would create a significant fair value liability for the Bank.
RECLASSIFICATIONS - For comparability, amounts for 1996 have been reclassified
where appropriate to conform to the 1997 financial statement presentation.
NOTE 2 - INVESTMENT SECURITIES
The amortized cost and fair values of investments in securities are as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
DECEMBER 31, 1997
AVAILABLE FOR SALE
U.S. Government obligations ...... $ 1,987,703 $ 12,922 $ -- $ 2,000,625
U.S. Government agency obligations 13,450,215 75,813 15,918 13,510,110
Obligations of states and other
political subdivisions .......... 8,333,862 227,017 3,239 8,557,640
Mortgage-backed securities ....... 2,240,251 22,510 15,543 2,247,218
Marketable equity securities ..... 1,092,377 3,346,663 -- 4,439,040
----------- ---------- ----------- -----------
27,104,408 3,684,925 34,700 30,754,633
----------- ---------- ----------- -----------
HELD TO MATURITY
Obligations of states and other
political subdivisions .......... 4,063,815 137,439 -- 4,201,254
----------- ---------- ----------- -----------
OTHER EQUITY SECURITIES ............. 1,330,117 160,988 -- 1,491,105
----------- ---------- ----------- -----------
$32,498,340 $3,983,352 $ 34,700 $36,446,992
=========== ========== =========== ===========
</TABLE>
<PAGE> 166
11
FSB, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 2 - INVESTMENT SECURITIES - CONTINUED
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
DECEMBER 31, 1996
AVAILABLE FOR SALE
U.S. Government obligations ...... $ 3,982,081 $ 35,984 $ -- $ 4,018,065
U.S. government agency obligations 14,722,068 69,780 43,383 14,748,465
Obligations of states and other
political subdivisions .......... 8,742,382 260,073 2,033 9,000,422
Mortgage-backed securities ....... 2,877,396 34,538 30,320 2,881,614
Marketable equity securities ..... 1,079,114 1,704,556 66,451 2,717,219
----------- ---------- ----------- -----------
31,403,041 2,104,931 142,187 33,365,785
----------- ---------- ----------- -----------
HELD TO MATURITY
Obligations of states and other
political subdivisions .......... 4,070,078 118,200 1,016 4,187,262
----------- ---------- ----------- -----------
OTHER EQUITY SECURITIES ............. 1,235,130 136,115 -- 1,371,245
----------- ---------- ----------- -----------
$36,708,249 $2,359,246 $ 143,203 $38,924,292
=========== ========== =========== ===========
</TABLE>
Carrying amounts on the consolidated statements of condition are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------
1997 1996
----------- -----------
<S> <C> <C>
Securities available for sale (fair value) .... $30,754,633 $33,365,785
Securities held to maturity and other equity
securities (amortized cost) .................. 5,393,932 5,305,208
----------- -----------
$36,148,565 $38,670,993
=========== ===========
</TABLE>
<PAGE> 167
12
FSB, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 2 - INVESTMENT SECURITIES - CONTINUED
The amortized cost and fair value of debt securities at December 31, 1997, by
contractual maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
AVAILABLE FOR SALE HELD TO MATURITY
------------------------------- ------------------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Due in one year or less ..................... $14,367,499 $14,405,809 $ 733,200 $ 743,980
Due after one year through five years ....... 7,807,802 7,974,709 2,520,615 2,626,959
Due after five years through ten years ...... 1,273,123 1,330,749 810,000 830,315
Due after 10 years .......................... 323,356 357,108 -- --
----------- ----------- ---------- ----------
23,771,780 24,068,375 4,063,815 4,201,254
Mortgage-backed securities .................. 2,240,251 2,247,218 -- --
----------- ----------- ---------- ----------
$26,012,031 $26,315,593 $4,063,815 $4,201,254
=========== =========== ========== ==========
</TABLE>
Proceeds from sales of available for sale securities were $3,553,466 in 1997.
There were gross realized gains of $54,591 and gross realized losses of $76,041
on those sales. There were no sales of available for sale securities in 1996.
Investment securities with a carrying amount of $18,089,444 and approximate
market value of $18,227,000 at December 31, 1997 ($21,178,033 carrying amount
and approximate market value of $21,296,000 at December 31, 1996) were pledged
to secure public deposits.
<PAGE> 168
13
FSB, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 3 - LOANS
Major classifications of loans are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
------------------------------------
1997 1996
------------- ------------
<S> <C> <C>
Commercial and industrial .... $ 9,320,796 $ 7,880,755
Real estate - construction ... 8,320,108 4,869,196
Real estate - other .......... 66,843,645 60,388,096
Farmers ...................... 2,808,119 2,300,346
Consumer installment ......... 10,057,726 9,478,980
Other ........................ 2,794,040 2,325,907
------------- ------------
100,144,434 87,243,280
Unearned discount ............ (2,080,964) (2,331,230)
------------- ------------
$ 98,063,470 $ 84,912,050
============= ============
</TABLE>
The Bank grants loans to customers located in Tipton County and the surrounding
area. It is the policy of the Bank to require adequate collateral for all loans,
as deemed necessary. Collateral held varies but may include accounts receivable,
inventory, property, plant and equipment and income producing commercial
properties.
There were no nonaccrual loans at December 31, 1997 or 1996.
Loans included $25,000 and $115,000 in participation loans at December 31, 1997
and 1996, respectively.
<PAGE> 169
14
FSB, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 4 - RESERVE FOR POSSIBLE LOAN LOSSES
Changes in the reserve for possible losses are summarized below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------
1997 1996
----------- ---------
<S> <C> <C>
Balance at beginning of year .............. $ 964,537 $ 980,666
Provision charged to operations ........... 123,000 93,000
Loans charged off, net of recoveries of
$56,128 in 1997 and $22,205 in 1996 ...... (66,048) (109,129)
----------- ---------
Balance at end of year .................... $ 1,021,489 $ 964,537
=========== =========
</TABLE>
NOTE 5 - BANK PREMISES AND EQUIPMENT
Investment in bank premises and equipment is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31
---------------------------------
1997 1996
----------- -----------
<S> <C> <C>
Land ......................... $ 192,757 $ 192,757
Buildings .................... 2,538,019 2,538,019
Furniture and fixtures ....... 2,061,596 1,898,189
----------- -----------
4,792,372 4,628,965
Accumulated depreciation ..... (2,352,882) (1,968,607)
----------- -----------
$ 2,439,490 $ 2,660,358
=========== ===========
</TABLE>
Depreciation expense, included in occupancy expense on the Consolidated
Statements of Earnings, amounted to $396,234 and $411,555 in 1997 and 1996,
respectively.
<PAGE> 170
15
FSB, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 6 - OTHER ASSETS
Other assets are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31
------------------------------
1997 1996
---------- ----------
<S> <C> <C>
Accrued interest receivable ........ $1,075,554 $1,075,325
Real estate owned other than bank
premises (Note 1) ................. 34,600 114,663
Other .............................. 389,523 304,046
---------- ----------
$1,499,677 $1,494,034
========== ==========
</TABLE>
NOTE 7 - DEPOSITS
At December 31, 1997, the scheduled maturities of certificates of deposit are as
follows:
<TABLE>
<S> <C>
1998 .................... $40,226,109
1999 .................... 20,552,948
2000 .................... 1,024,246
2001 .................... --
2002 .................... 965,224
-----------
$62,768,527
===========
</TABLE>
NOTE 8 - FEDERAL HOME LOAN BANK ADVANCES
The Bank has advances from the Federal Home Loan Bank of Cincinnati of
$9,454,476 and $9,827,201 at December 31, 1997 and 1996, respectively. The
advances have interest rates from 5.05% to 6.55% with maturity dates ranging
from September 25, 2002 to February 1, 2009. At December 31, 1997, the Bank had
pledged as collateral on these advances $14,265,326 of its loans secured by
mortgages on one-to-four family residential properties and 11,958 shares of
Federal Home Loan Bank stock with a carrying value (cost) of $1,195,800.
<PAGE> 171
16
FSB, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 8 - FEDERAL HOME LOAN BANK ADVANCES - CONTINUED
Future minimum payments related to Federal Home Loan Bank advances at December
31, 1997 are as follows:
<TABLE>
<S> <C>
1998.......................................... $3,919,175
1999.......................................... 736,271
2000.......................................... 781,179
2001.......................................... 828,504
2002.......................................... 1,404,371
Later years...................................... 1,784,976
----------
$9,454,476
==========
</TABLE>
NOTE 9 - EMPLOYEE STOCK OWNERSHIP PLAN
The Bank maintains the FSB Employee Stock Ownership Plan (with 401(k)
Provisions). Under the plan, both basic contributions and optional matching
contributions are determined annually by the Bank's Board of Directors.
Voluntary contributions by the participants are permitted. The plan covers
essentially all full-time employees of the Bank. Total compensation expense
related to this plan (included in employee benefits) was $156,000 in 1997 and
144,000 in 1996. The FSB Employee Stock Ownership Plan held 95,176 and 92,096
shares of the Company's common stock at December 31, 1997 and 1996,
respectively.
NOTE 10 - INCOME TAXES
Federal and state income taxes on earnings consist of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------
1997 1996
----------- ---------
<S> <C> <C>
Current
Federal ............................. $ 844,420 $ 682,055
State ............................... 202,225 179,755
----------- ---------
1,046,645 861,810
Deferred income tax expense (benefit) ... (40,020) (17,710)
----------- ---------
$ 1,006,625 $ 844,100
=========== =========
</TABLE>
<PAGE> 172
17
FSB, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 10 - INCOME TAXES - CONTINUED
Deferred federal and state income tax assets and liabilities arise from
temporary differences in the bases of certain balance sheet items for income tax
and financial reporting purposes. The differences relate principally to the
allowance for loan losses, bank premises and equipment, computer software and
the deferred compensation agreement liability.
At December 31, 1997, there was a net deferred federal and state income tax
liability of $1,233,610 composed of total deferred tax assets of $309,180 and
total deferred tax liabilities of $1,542,790.
At December 31, 1996, there is a net deferred federal and state income tax
liability of $680,700, composed of total deferred tax assets of $282,900 and
total deferred tax liabilities of $963,600.
The reasons for the differences in income tax expense on earnings before income
taxes and the amount computed by applying the statutory federal income tax rates
are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------------------------------
1997 1996
---------------------------- ---------------------------
% OF % OF
PRE-TAX PRE-TAX
AMOUNT EARNINGS AMOUNT EARNINGS
----------- -------- ----------- --------
<S> <C> <C> <C> <C>
Earnings before income taxes ........... $ 3,324,046 100% $ 2,935,202 100%
=========== === =========== ===
Tax expense at statutory rates ......... $ 1,130,176 34% $ 997,969 34%
Add (deduct)
State income taxes net of federal
tax benefit ....................... 128,423 4 116,236 4
Nondeductible expenses ............. 2,276 -- 1,277 --
Federal income tax benefit
arising from nontaxable
income (primarily interest) ....... (254,250) (8) (271,382) (9)
----------- --- ----------- ---
Total .......................... $ 1,006,625 30% $ 844,100 29%
=========== === =========== ===
</TABLE>
<PAGE> 173
18
FSB, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 11 - DIVIDEND RESTRICTIONS
Cash dividends are restricted to payment from undivided profits under applicable
state banking laws. Under state law, at least 10% of annual earnings of the Bank
must be transferred to capital surplus until capital surplus equals the par
value of outstanding common stock. Capital surplus of the bank was $1,132,300 in
excess of the par value of common stock of the Bank recorded as outstanding at
December 31, 1997 and 1996.
NOTE 12 - COMMITMENTS AND CONTINGENT LIABILITIES
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK - In the normal course of
business, the Bank makes various commitments and incurs certain liabilities that
are not presented in the accompanying consolidated financial statements. The
commitments and contingent liabilities include commitments to extend credit and
letters of credit.
Commitments to extend credit were approximately $7,800,000 and $5,735,000 at
December 31, 1997 and 1996, respectively. Substantially all commitments were at
variable interest rates. Letters of credit of approximately $333,000 and
$390,000 were outstanding at December 31, 1997 and 1996, respectively. In the
opinion of management, no material adverse effect on the consolidated financial
position or results of operations is anticipated as a result of these items.
Those instruments involve, to varying degrees, elements of credit risk in excess
of the amount recognized in the consolidated statement of condition. The
contract amounts of those instruments reflect the extent of involvement the Bank
has in particular classes of financial instruments.
The Bank's exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for commitments to extend credit and letters
of credit written is represented by the contractual notional amount of those
instruments. The Bank uses the same credit policies in making commitments and
conditional obligations as it does for on-balance-sheet financial instruments.
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
<PAGE> 174
19
FSB, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 12 - COMMITMENTS AND CONTINGENT LIABILITIES - CONTINUED
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK - CONTINUED
customer's creditworthiness on a case-by-case basis. The amount of collateral
obtained by the Bank upon extension of credit is based on management's credit
evaluation of the customer. Collateral held varies but may include accounts
receivable, inventory, property, plant and equipment and income producing
commercial properties.
Letters of credit written are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. Those guarantees are
primarily issued to support public and private borrowing arrangements. All
guarantees are considered short-term and expire within five years. The credit
risk involved in issuing letters of credit is essentially the same as that
involved in extending loans to customers.
CONCENTRATION OF CREDIT RISK - The Bank maintains its cash in bank deposit
accounts which, at times, may exceed federally insured limits. The Bank has not
experienced any losses in such accounts. The Bank believes it is not exposed to
any significant credit risk on cash and cash equivalents.
DEFERRED COMPENSATION AGREEMENT - On March 16, 1990, the Board of Directors
approved a deferred compensation agreement for the directors. Under the plan,
each director has elected to defer receipt of a portion of fees to be earned
during the deferral period (60 month period beginning January 1, 1990). Deferred
fees will be paid to the director in 120 monthly installments or as a lump sum
beginning on the first business day of the month following the latter of
completion of the deferral period or the date upon which the director attains
the age of 65, or upon the director's death if such shall occur first. Payments
of $8,097 and $6,034 were made to directors and former directors in 1997 and
1996, respectively. Included in accrued taxes and other expenses in the
accompanying consolidated statement of condition at December 31, 1997 is
approximately $118,200 for future payments required under this agreement
($97,900 at December 31, 1996).
SEVERANCE PAY AGREEMENTS - The Bank has entered into severance pay agreements
with certain of its officers to pay amounts in the event of certain terminations
of their employment after a change in control of the Bank.
OPERATING LEASE COMMITMENTS - The Bank leases vehicles under noncancelable
operating lease agreements. Lease expense under these agreements was $16,867 and
$1,493 for the years ended December 31, 1997 and 1996, respectively.
<PAGE> 175
20
FSB, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 12 - COMMITMENTS AND CONTINGENT LIABILITIES - CONTINUED
OPERATING LEASE COMMITMENTS - CONTINUED
Future minimum lease commitments are summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31 AMOUNT
----------------------- ------
<S> <C>
1997................................................. $18,226
1998................................................. 13,345
1999................................................. 1,359
-------
$32,930
=======
</TABLE>
NOTE 13 - FAIR VALUES OF FINANCIAL INSTRUMENTS
The estimated fair values (Note 1) of the Company's financial instruments are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
-------------------------------- -------------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents............... $ 8,758,552 $ 8,758,552 $ 9,556,310 $ 9,556,310
Investment securities................... 36,148,565 36,446,992 38,670,993 38,924,292
Loans, net of allowance................. 97,041,981 96,755,408 83,947,513 84,230,677
Financial liabilities:
Deposits................................ 116,299,157 116,534,336 110,122,062 110,137,647
Federal Home Loan Bank
advances............................... 9,454,476 9,534,484 9,827,201 9,681,739
</TABLE>
The carrying amounts in the preceding table are included in the Consolidated
Statements of Condition under the applicable captions.
<PAGE> 176
21
FSB, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 14 - RELATED PARTY TRANSACTIONS
In the ordinary course of business, the Bank makes loans to its principal
officers and directors and their associates. These loans are made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other borrowers. Loans
to such borrowers amounted to approximately $2,238,000 and $1,500,000 at
December 31, 1997 and 1996, respectively.
NOTE 15 - REGULATORY CAPITAL MATTERS
The Bank is subject to various regulatory capital requirements administered by
its primary federal regulator, the Federal Deposit Insurance Corporation (FDIC).
Failure to meet the minimum regulatory capital requirements can initiate certain
mandatory, and possibly additional discretionary actions by regulators, that if
undertaken, could have a direct material affect on the Bank's financial
statements. Under capital adequacy guidelines and the regulatory framework for
prompt corrective action, the Bank must meet specific capital guidelines that
involve quantitative measure of the Bank's assets, liabilities and certain off-
balance-sheet items as calculated under regulatory accounting practices. The
Bank's capital amounts and classifications are also subject to qualitative
judgments by the regulators about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (as set forth in the
table below) of total and Tier I capital to risk-weighted assets (all as defined
in the regulations), and of Tier I capital to average assets (as defined).
Management believes, as of December 31, 1997, that the Bank meets all the
capital adequacy requirements to which it is subject.
As of December 31, 1997 and 1996, the most recent notification from the FDIC
categorized the Bank as well capitalized under the regulatory framework for
prompt corrective action. To be categorized as well capitalized, the Bank must
maintain minimum total risk-based, Tier I risk-based and Tier I leverage ratios
as set forth in the table. There are no conditions or events since the most
recent notification that management believes have changed the Bank's prompt
corrective action category.
<PAGE> 177
22
FSB, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 15 - REGULATORY CAPITAL MATTERS - CONTINUED
The Bank's actual capital amounts and ratios as of December 31, 1997 and 1996,
are also presented in the table below.
<TABLE>
<CAPTION>
TO BE WELL
CAPITALIZED UNDER
FOR CAPITAL PROMPT CORRECTIVE
ACTUAL AGENCY PURPOSES ACTION PROVISIONS
--------------------- ---------------------- -----------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
--------- ----- ---------- -------- ---------- --------
(dollars in (dollars in (dollars in
thousands) thousands) thousands)
<S> <C> <C> <C> <C> <C> <C>
AS OF DECEMBER 31, 1997:
Total Capital (to
Risk-Weighted Assets).......... $ 15,122 16.48% >=$ 7,339 >= 8.00% >=$ 9,174 >= 10.00%
Tier I Capital (to
Risk-Weighted Assets).......... 14,100 15.37% >= 3,669 >= 4.00% >= 5,504 >= 6.00%
Tier I Capital (to
Average Assets)................ 14,100 10.14% >= 4,173 >= 3.00% >= 6,955 >= 5.00%
AS OF DECEMBER 31, 1996:
Total Capital (to
Risk-Weighted Assets).......... 13,947 17.12% >= 6,518 >= 8.00% >= 8,148 >= 10.00%
Tier I Capital (to
Risk-Weighted Assets).......... 12,982 15.93% >= 3,259 >= 4.00% >= 4,889 >= 6.00%
Tier I Capital (to
Average Assets)................ 12,982 10.01% >= 3,888 >= 3.00% >= 6,480 >= 5.00%
</TABLE>
<PAGE> 178
APPENDIX D
August 4, 1998
The Board of Directors
c/o Mr. Theodore B. Sloan
Chairman of the Board of Directors
FSB, Inc.
103 Pleasant Avenue
Covington, Tennessee 38019
Re: Preliminary Fairness Opinion regarding the Proposed Acquisition of FSB,
Inc., by Union Planters Corporation
Dear Directors:
Mercer Capital Management, Inc. ("Mercer Capital") has been retained by the
Board of Directors of FSB, Inc. ("FSB") to issue a fairness opinion regarding
the financial terms for the proposed merger between FSB and Union Planters
Corporation ("UPC"). The preliminary fairness opinion is issued from a
financial point of view on behalf of FSB shareholders.
Under the terms of the Agreement and Plan of Merger ("the Agreement") by and
among Union Planters Corporation, Union Planters Holding Corporation, Union
Planters Bank, FSB, Inc. and First State Bank of Covington, dated August 4,
1998, FSB shall be merged with and into Union Planters Holding Corporation, a
wholly owned subsidiary of UPC. At the Effective Time (as defined in the
Agreement), each outstanding FSB common share shall be converted into 1.61 UPC
common shares. The Exchange Ratio (as defined in the Agreement) is based upon a
negotiated value of $95.00 per share for FSB and the average closing price for
UPC for the twenty trading days ended August 3, 1998. The ultimate value of the
merger to FSB stockholders, however, will be contingent upon the market value
of UPC's Common Stock on the Effective Date.
We understand that the Merger is conditioned upon, among other things, receipt
of opinions to the effect that the Merger will qualify for treatment as a
tax-free reorganization and as a pooling of interests for accounting purposes.
<PAGE> 179
Mr. Theodore B. Sloan
August 4, 1998
Page 2
Mercer Capital, as part of its investment banking and general valuation
businesses, is engaged to assist financial institutions and businesses in
merging with and acquiring other entities, and to value businesses and their
securities in connection with mergers and acquisitions, private placements,
corporate reorganization, estate tax matters, and other purposes. We have acted
as FSB's Financial Advisor in connection with, and have participated in certain
negotiations leading to, the Agreement.
As part of the engagement, representatives of Mercer Capital visited with FSB
management in Covington, Tennessee and on prior occasions with UPC management
in Memphis, Tennessee.(1) Factors considered in rendering the opinion include:
1. The terms of the Agreement, dated August 4, 1998;
2. The process by which the Board solicited offers for FSB from various
regional bank holding companies and the subsequent arms' length
negotiations which occurred between representatives of FSB and UPC;
3. The valuation analysis of FSB presented by Mercer Capital to the Board
of Directors at the July 10, 1998 meeting;
4. An analysis of the estimated pro-forma changes in book value per
share, earnings per share, and dividends per share from the
perspective of the FSB shareholders;
5. A review of FSB's audited financial statements, internally prepared
financial statements, and certain regulatory financial data for the
fiscal years ended December 31, 1993, 1994, 1995, 1996, and 1997 and
the quarters ended March 31, 1998 and June 30;
6. A review of UPC's Annual Report to Shareholders and Annual Reports on
Form 10-K for each of the years ended December 31, 1995, 1996, and
1997 and quarterly financial information for the quarter ended March
31, 1998 on Form 10-Q;
7. A review of UPC's historical trading price and volume on an absolute
basis and on a relative basis in comparisons to companies deemed to be
comparable to UPC;
- -------------
(1) A representative of Mercer Capital will visit with UPC management prior to
the issuance of the updated opinion which will be included in the
proxy-prospects mailed to shareholders.
<PAGE> 180
Mr. Theodore B. Sloan
August 4, 1998
Page 3
8. A comparison of the financial terms, to the extent publicly
available, of certain acquisition transactions which we deemed to be
relevant for purposes of this opinion; and,
9. Tax consequences of the merger for FSB shareholders.
Mercer Capital neither compiled nor audited FSB's or UPC's financial
statements; nor have we independently verified the information reviewed. We
have relied upon such information as being complete and accurate in all
material respects. We have not made an independent valuation of the loan
portfolio, adequacy of the loan loss reserve or other assets or liabilities of
either institution.
Our opinion does not constitute a recommendation to any shareholder as to how
the shareholder should vote on the proposed merger; nor have we expressed any
opinion as to the prices at which any security of UPC or FSB might trade in the
future. The opinion is necessarily based on economic, market, financial and
other conditions as they exist on, and on the information made available to us,
as of the date of this letter. Although it is anticipated that an updated
opinion will be provided to coincide with the mailing of the proxy-prospectus
to shareholders, Mercer Capital is not obligated to provide such an opinion.
Based upon our analysis of the proposed transaction, it is our opinion as of
the date hereof that the Exchange Ratio is fair from a financial point of view
to the common shareholders of FSB.
Sincerely yours,
MERCER CAPITAL MANAGEMENTS, INC.
Jeff K. Davis, CFA, ASA
Vice President
<PAGE> 181
APPENDIX E
CHAPTER 23
DISSENTERS' RIGHTS
SECTION
PART 1--RIGHT TO DISSENT AND
OBTAIN PAYMENT FOR SHARES
48-23-101. Definitions.
48-23-102. Right to dissent.
48-23-103. Dissent by nominees and beneficial
owners.
PART 2--PROCEDURE FOR EXERCISE OF
DISSENTERS' RIGHTS
48-23-201. Notice of dissenters' rights.
48-23-202. Notice of intent to demand payment.
SECTION
48-23-203. Dissenters' notice.
48-23-204. Duty to demand payment.
48-23-205. Share restrictions.
48-23-206. Payment.
48-23-207. Failure to take action.
48-23-208. After-acquired shares.
48-23-209. Procedure if shareholder dissatisfied
with payment or offer.
PART 3--JUDICIAL APPRAISAL OF SHARES
48-23-301. Court action.
48-23-302. Court costs and counsel fees.
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
(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;
<PAGE> 182
(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.
(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:
<PAGE> 183
(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.]
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;
<PAGE> 184
(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 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
<PAGE> 185
question of fair value. The appraisers have the powers described in the order
appointing them, or in any amendment to it. The dissenters are entitled to the
same discovery rights as parties in other civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled to judgment:
(1) For the amount, if any, by which the court finds the fair value of the
dissenter's shares, plus accrued interest, exceeds the amount paid by the
corporation; or
(2) For the fair value, plus accrued interest, of the dissenter's
after-acquired shares for which the corporation elected to withhold payment
under ss. 48-23-208. [Acts 1986, ch. 887, ss. 13.30.]
48-23-302. COURT COSTS AND COUNSEL FEES.--(a) The court in an appraisal
proceeding commenced under ss. 48-23-301 shall determine all costs of the
proceeding, including the reasonable compensation and expenses of appraisers
appointed by the court. The court shall assess the costs against the
corporation, except that the court may assess costs against all or some of the
dissenters, in amounts the court finds equitable, to the extent the court finds
the dissenters acted arbitrarily, vexatiously, or not in good faith in demanding
payment under ss. 48-23-209.
(b) The court may also assess the fees and expenses of counsel and experts for
the respective parties, in amounts the court finds equitable against:
(1) The corporation and in favor of any or all dissenters if the court finds
the corporation did not substantially comply with the requirements of Part 2 of
this chapter; or
(2) Either the corporation or a dissenter, in favor of any other party, if the
court finds that the party against whom the fees and expenses are assessed acted
arbitrarily, vexatiously, or not in good faith with respect to the rights
provided by this chapter.
(c) If the court finds that the services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded to
the dissenters who were benefited.
[Acts 1986, ch. 887, 13.31.]
<PAGE> 186
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Restated Charter of the Registrant provides as follows:
TWELFTH: INDEMNIFICATION OF CERTAIN PERSONS:
To the fullest extent permitted by Tennessee law, the Corporation may
indemnify or purchase and maintain insurance to indemnify any of its directors,
officers, employees or agents and any persons who may serve at the request of
the Corporation as directors, officers, employees, trustees or agents of any
other corporation, firm, association, national banking association,
state-chartered bank, trust company, business trust, organization or any other
type of entity whether or not the Corporation shall have any ownership interest
in such entity. Such indemnification(s) may be provided for in the Bylaws, or by
resolution of the Board of Directors or by appropriate contract with the person
involved.
Article V, INDEMNIFICATION, of the Registrant's Amended and Restated Bylaws
provides as follows:
The Corporation does hereby indemnify its directors and officers to the
fullest extent permitted by the laws of the State of Tennessee and by ARTICLE
TWELFTH of its Charter. The Corporation may indemnify any other person to the
extent permitted by the Charter and by applicable law.
Indemnification of corporate directors and officers is governed by
Sections 48-18-501 through 48-18-509 of the Tennessee Business Corporation Act
(the "Act"). Under the Act, a person may be indemnified by a corporation against
judgments, fines, amounts paid in settlement and reasonable expenses (including
attorneys' fees) actually and necessarily incurred by him in connection with any
threatened or pending suit or proceeding or any appeal thereof (other than an
action by or in the right of the corporation), whether civil or criminal, by
reason of the fact that he is or was a director or officer of the corporation or
is or was serving at the request of the corporation as a director or officer,
employee or agent of another corporation of any type or kind, domestic or
foreign, if such director or officer acted in good faith for a purpose which he
reasonably believed to be in the best interest of the corporation and, in
criminal actions or proceedings only, in addition, had no reasonable cause to
believe that his conduct was unlawful. A Tennessee corporation may indemnify a
director or officer thereof in a suit by or in the right of the corporation
against amounts paid in settlement and reasonable expenses, including attorneys'
fees, actually and necessarily incurred as a result of such suit unless such
director or officer did not act in good faith or with the degree of diligence,
care and skill which ordinarily prudent men exercise under similar circumstances
and in like positions.
A person who has been wholly successful, on the merits or otherwise, in
the defense of any of the foregoing types of suits or proceedings is entitled to
indemnification for the foregoing amounts. A person who has not been wholly
successful in any such suit or proceeding may be indemnified only upon the order
of a court or a finding that the director or officer met the required statutory
standard of conduct by (i) a majority vote of a disinterested quorum of the
<PAGE> 187
Board of Directors, (ii) the Board of Directors based upon the written opinion
of independent legal counsel to such effect, or (iii) a vote of the
shareholders.
ITEM 21. EXHIBITS.
The following exhibits are filed herein or have been, as noted,
previously filed:
<TABLE>
<CAPTION>
Exhibit
No. Description
- -------------------------------------------------------------------------------
<S> <C>
2.1 Agreement and Plan of Merger, dated as of August 4,
1998, by and between Union Planters Corporation, Union
Planters Holding Corporation and FSB, Inc. (Included as
Appendix A to the Proxy Statement included as part of
this Registration Statement.)
2.2 Plan of Merger of FSB, Inc. into and with Union Planters
Holding Corporation. (Included as Appendix B to the Proxy
Statement included as part of this Registration Statement.)
4.1 Restated Charter of Union Planters Corporation.
(Incorporated by reference to Exhibit 3(a) to the Quarterly
Report on Form 10-Q of UPC for the fiscal quarter ended
March 31, 1998.)
4.2 Amended and Restated Bylaws of Union Planters
Corporation. (Incorporated by reference to Exhibit 3(d) to the
Annual Report on Form 10-K of UPC for the fiscal year
ended December 31, 1996 (File No. 0-6919).)
5.1 Opinion of E. James House, Jr., Secretary and Manager of the
Legal Department of Union Planters Corporation, as to the
validity of the shares of UPC Common Stock.
8.1 Opinion of Wyatt, Tarrant & Combs as to federal income tax
consequences.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Whitehorn Tankersley & Co., PLLC, independent
auditors for FSB, Inc.
23.3 Consent of Mercer Capital Management Inc.
23.4 Consent of E. James House, Jr., Secretary and Manager of the
Legal Department of Union Planters Corporation (included in
Exhibit 5.1).
23.5 Consent of Wyatt Tarrant & Combs (included in Exhibit 8.1).
24.1 Power of Attorney (contained on the signature page hereof).
99.1 Form Proxy Appointment Card of FSB, Inc.
</TABLE>
<PAGE> 188
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report pursuant
to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(2) That for purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(3) That for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(5) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form
S-4, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means. This
includes information contained in documents filed subsequent to the effective
date of the registration statement through the date of responding to the
request.
(6) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the registration statement when it became
effective.
(7) That prior to any public reoffering of the securities registered
hereunder through the use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus
will contain the information called for by the applicable registration
<PAGE> 189
form with respect to reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
form.
(8) That every prospectus: (i) that is filed pursuant to Paragraph (7)
immediately preceding, or (ii) that purports to meet the requirements of Section
10(a)(3) of the Act and is used in connection with an offering of securities
subject to Rule 415, will be filed as a part of an amendment to the registration
statement and will not be used until such amendment is effective, and that, for
purposes of determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
<PAGE> 190
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Memphis,
State of Tennessee on this the 17th day of October, 1998.
REGISTRANT
UNION PLANTERS CORPORATION
By: /s/ Benjamin W. Rawlins, Jr.
-------------------------------
Benjamin W. Rawlins, Jr.
Chairman of the Board and Chief
Executive Officer
We, the undersigned directors and officers of Union Planters
Corporation do hereby constitute and appoint E. James House, Jr. and M. Kirk
Walters, and each of them, our true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for us and in our name,
place and stead, in any and all capacities, to sign any and all amendments to
this Registration Statement and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and we do hereby ratify and confirm all that said attorneys-in-fact
and agents, or their substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed below by the following persons in
the capacities and at the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ Benjamin W. Rawlins, Jr. Chairman of the Board, October 15, 1998
- ------------------------------------ Chief Executive Officer, Director
Benjamin W. Rawlins, Jr. (Principal Executive Officer)
/s/ Jackson W. Moore President, Chief Operating Officer, October 15, 1998
- ------------------------------------ Director
Jackson W. Moore
/s/ John W. Parker Executive Vice President and October 15, 1998
- ------------------------------------ Chief Financial Officer
John W. Parker (Principal Financial Officer)
/s/ M. Kirk Walters Senior Vice President, Treasurer, October 15, 1998
- ------------------------------------ and Chief Accounting Officer
M. Kirk Walters
</TABLE>
<PAGE> 191
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ---------- ----- ----
<S> <C> <C>
Director
- ------------------------------------
Albert M. Austin
/s/ Marvin E. Bruce Director October 15, 1998
- ------------------------------------
Marvin E. Bruce
/s/ George W. Bryan Director October 15, 1998
- ------------------------------------
George W. Bryan
/s/ James E. Harwood Director October 15, 1998
- ------------------------------------
James E. Harwood
/s/ Parnell S. Lewis, Jr. Director October 15, 1998
- ------------------------------------
Parnell S. Lewis, Jr.
/s/ C.J. Lowrance, III Director October 15, 1998
- ------------------------------------
C.J. Lowrance, III
/s/ Stanley D. Overton Director October 15, 1998
- ------------------------------------
Stanley D. Overton
/s/ Dr. V. Lane Rawlins Director October 15, 1998
- ------------------------------------
Dr. V. Lane Rawlins
/s/ Donald F. Schuppe Director October 15, 1998
- ------------------------------------
Donald F. Schuppe
</TABLE>
<PAGE> 192
<TABLE>
<S> <C> <C>
/s/ David M. Thomas Director October 15, 1998
- ------------------------------------
David M. Thomas
Director
- ------------------------------------
Richard A. Trippeer, Jr.
/s/ Spence L. Wilson Director October 15, 1998
- ------------------------------------
Spence L. Wilson
</TABLE>
<PAGE> 193
EXHIBIT INDEX
The following exhibits are filed herein or have been, as noted, previously
filed:
<TABLE>
<CAPTION>
Exhibit Description
No.
- ------------- ------------------------------------------------------------------------
<S> <C>
2.1 Agreement and Plan of Merger, dated as of August 4, 1998,
by and between Union Planters Corporation, Union Planters
Holding Corporation and FSB, Inc. (Included as Appendix A
to the Proxy Statement included as part of this
Registration Statement.)
2.2 Plan of Merger of FSB, Inc. into and with Union Planters
Holding Corporation. (Included as Appendix B to the Proxy
Statement included as part of this Registration Statement.)
4.1 Restated Charter of Union Planters Corporation. (Incorporated by
reference to Exhibit 3(a) to the Quarterly Report on Form 10-Q of UPC
for the fiscal quarter ended March 31, 1998.)
4.2 Amended and Restated Bylaws of Union Planters Corporation.
(Incorporated by reference to Exhibit 3(d) to the Annual
Report on Form 10-Q of UPC for the quarter ended March 31,
1998 (File No. 0-6919).
5.1 Opinion of E. James House, Jr., Secretary and Manager of the Legal
Department of Union Planters Corporation, as to the validity of the
shares of UPC Common Stock.
8.1 Opinion of Wyatt, Tarrant & Combs as to federal income tax
consequences.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Whitehorn Tankersley & Co., PLLC, independent auditors
for FSB, Inc.
23.3 Consent of Mercer Capital Management Inc.
23.4 Consent of E. James House, Jr., Secretary and Manager of the Legal
Department of Union Planters Corporation (included in Exhibit 5.1).
23.5 Consent of Wyatt Tarrant & Combs (included in Exhibit 8.1).
24.1 Power of Attorney (contained on the signature page hereof).
99.1 Form Proxy Appoint Card of FSB, Inc.
</TABLE>
<PAGE> 1
EXHIBIT 5.1
OPINION OF E. JAMES HOUSE, JR.
AS TO VALIDITY OF SHARES
October 17, 1998
Union Planters Corporation
7130 Goodlett Farms Parkway
Memphis, Tennessee 38018
Re: _______________ Shares of the Common Stock, $5.00 Par Value Per Share
of Union Planters Corporation, a Tennessee Corporation ("UPC")
Gentlemen:
The undersigned has participated in the preparation of a registration
statement on Form S-4 (the "Registration Statement") for filing with the
Securities and Exchange Commission in respect to not more than _________________
shares of UPC's common stock, $5.00 par value per share ("UPC Common Stock")
which may be issued by UPC pursuant to an Agreement and Plan of Merger dated as
of August 4, 1998, by and among UPC, Union Planters Holding Corporation ("UP
Holding") and FSB, Inc. ("FSB") (the "Agreement").
For purposes of rendering the opinion expressed herein, the undersigned
has examined UPC's corporate charter and all amendments thereto; UPC's bylaws
and amendments thereto; the Agreement and such of UPC's corporate records as the
undersigned has deemed necessary and material to rendering the undersigned's
opinion. The undersigned has relied upon certificates of public officials and
representations of UPC officials, and has assumed that all documents examined by
the undersigned as originals are authentic, that all documents submitted to the
undersigned as photocopies are exact duplicates of original documents, and that
all signatures on all documents are genuine.
Further, the undersigned is familiar with and has supervised all
corporate action taken in connection with the authorization of the issuance and
offering of the subject securities.
<PAGE> 2
Based upon and subject to the foregoing and subsequent assumptions,
qualifications and exceptions, it is the undersigned's opinion that:
1. UPC is a duly organized and validly existing corporation in
good standing under the laws of the State of Tennessee and has all
requisite power and authority to issue, sell and deliver the subject
securities, and to carry on its business and own its property; and
2. The shares of UPC Common Stock to be issued by UPC pursuant
to the Merger have been duly authorized and when issued by UPC in
accordance therewith, such shares of UPC Common Stock will be fully
paid and nonassessable.
The opinion expressed above is limited by the following assumptions,
qualifications and exceptions.
(a) The undersigned is licensed to practice law only in the
State of Tennessee and expresses no opinion with respect to the effect
of any laws other than those of the State of Tennessee and of the
United States of America.
(b) The opinion stated herein is based upon statutes,
regulations, rules, court decisions and other authorities existing and
effective as of the date of this opinion, and the undersigned
undertakes no responsibility to update or supplement said opinion in
the event of or in response to any subsequent changes in the law or
said authorities, or upon the occurrence after the date hereof of
events or circumstances that, if occurring prior to the date hereof,
might have resulted in a different opinion.
(c) This opinion is limited to the legal matters expressly set
forth herein, and no opinion is to be implied or inferred beyond the
legal matters expressly so addressed.
The undersigned hereby consents to the undersigned being named as a
party rendering a legal opinion under the caption "Opinions" in the Prospectus
constituting part of the Registration Statement and to the filing of this
opinion with the Securities and Exchange Commission as well as all state
regulatory bodies and jurisdictions where qualification is sought for the sale
of the subject securities.
<PAGE> 3
The undersigned is an officer of, and receives compensation from UPC
and therefore is not independent from UPC.
Very truly yours,
UNION PLANTERS CORPORATION
By: /s/ E. James House, Jr.
----------------------------
E. James House, Jr.
<PAGE> 1
EXHIBIT 8.1
TAX OPINION
[WYATT, TARRANT & COMBS LETTERHEAD]
November 19, 1998
Board of Directors
Union Planters Corporation
7130 Goodlett Farms Parkway
Memphis, Tennessee 38018
Gentlemen:
We have acted as counsel to Union Planters Corporation, a
Tennessee corporation ("Union Planters"), in connection with (i) the proposed
merger (the "Merger") of FSB a Tennessee corporation ("FSB"), with and into
Union Planters Holding Corporation, a Tennessee corporation and a wholly-owned
subsidiary of Union Planters ("UP Holdings"), pursuant to the terms of the
Agreement and Plan of Merger by and between Union Planters, UP Holdings and FSB
dated August 4, 1998 (the "Merger Agreement") and related Plan of Merger between
Union Planters, UP Holdings and FSB (collectively, the "Plan of
Reorganization"), and (ii) the filing of the registration statement by Union
Planters on Form S-4 (together with all amendments and exhibits thereto through
the date hereof, the "Registration Statement"), under the Securities Act of
1933, as amended (the "Act"), covering the shares of Union Planters common stock
("Union Planters Common Stock") to be issued pursuant to the Plan of
Reorganization. Capitalized terms used but not defined herein shall have the
meanings assigned to them in the Registration Statement.
In rendering this opinion we have examined such documents as we
have deemed relevant or necessary, including without limitation, the Plan of
Reorganization and the Registration Statement. In our examination, we have
assumed the genuineness of all signatures, the due execution and delivery of all
documents, the legal capacity of all natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified, conformed or copies, and the
authenticity of the originals of such copies.
As to factual matters, in rendering this opinion, we have relied
solely on and have assumed the present and continuing truth and accuracy of (i)
the description of the facts relating to the Merger contained in the Plan of
Reorganization and Registration Statement, (ii) the factual representations and
warranties contained in the Plan of Reorganization and Registration Statement
and related documents and agreements, and (iii) the factual matters addressed by
representations from certain executive
<PAGE> 2
officers of Union Planters, UP Holdings and FSB contained in letters to us
dated November 18, 1998 and November 19, 1998 (the "Representation Letters").
The Representation Letters address various factual matters relevant to the
qualification of the Merger as a tax-deferred reorganization under Section
368(a) of the Internal Revenue Code of 1986, as amended. The initial and
continuing truth and accuracy of all such factual matters constitutes an
integral basis for, and a material condition to, this opinion.
The scope of this opinion is limited strictly to the matters set
forth below and no other opinion may be implied or inferred beyond such matters.
Without limiting the foregoing sentence, we express no opinion as to (i) any of
the local, state, foreign or other federal tax consequences resulting from the
Merger, (ii) the federal income tax consequences to shareholders of FSB subject
to special rules under the Internal Revenue Code, such as foreign persons,
tax-exempt organizations, insurance companies, financial institutions, dealers
in stocks and securities, and persons who do not own such stock as a capital
asset, (iii) the federal income tax consequences affecting shares of FSB common
stock ("FSB Common Stock") acquired upon exercise of stock options, stock
purchase plan rights or otherwise as compensation; (iv) the tax consequences to
holders of warrants, options or other rights to acquire shares of FSB Common
Stock; (v) the tax consequences of the parties to the Merger Agreement of the
inclusion in income of the amount of the bad-debt reserve maintained by FSB
and/or its subsidiaries and any other amounts resulting from any required change
in accounting methods; and (vi) the tax consequences of the parties to the
Merger Agreement of any income and deferred gain recognized pursuant to Treasury
Regulations issued under Section 1502 of the Internal Revenue Code.
Subject to the qualifications, assumptions and conditions
provided herein, we are of the opinion that:
1. The acquisition by UP Holdings of substantially all of the
assets of FSB in exchange for shares of Union Planters Common Stock and the
assumption of liabilities of FSB pursuant to the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code.
2. FSB, Union Planters and UP Holdings will each be "a party to
a reorganization" within the meaning of Section 368(b) of the Internal Revenue
Code.
3. No gain or loss will be recognized by FSB as a result
of the Merger.
4. No gain or loss will be recognized by UP Holdings or Union
Planters as a result of the Merger.
5. No gain or loss will be recognized by the shareholders of FSB
as a result of the exchange of FSB Common Stock for Union Planters Common Stock
pursuant to the Merger, except that a gain or loss will be recognized on the
receipt of any cash in lieu of a fractional share. Assuming that the FSB Common
Stock is a capital asset in the hands of the respective FSB shareholders, any
gain or loss recognized as a result of the receipt of cash in lieu of a
fractional share will be a capital gain or loss equal to the difference between
the cash received and that portion of the holder's tax basis in the FSB Common
Stock allocable to the fractional share.
-2-
<PAGE> 3
6. The tax basis of Union Planters Common Stock to be received
by the shareholders of FSB will be the same as the tax basis of the FSB Common
Stock surrendered in exchange therefor (reduced by any amount allocable to a
fractional share interest for which cash is received).
7. The holding period of the Union Planters Common Stock to be
received by shareholders of FSB will include the holding period of the FSB
Common Stock surrendered in exchange therefor, provided the FSB shares were held
as a capital asset by the shareholders of FSB on the date of the exchange.
8. A shareholder of FSB who perfects his dissenter's rights and
who receives payment of the fair market value of his shares of FSB Common Stock
will be treated as having received such payment in redemption of such stock.
Such redemption will be subject to the conditions and limitations of Section 302
of the Internal Revenue Code.
This opinion is based on the Internal Revenue Code, the Treasury
Regulations promulgated thereunder, judicial decisions and administrative
pronouncements of the Internal Revenue Service ("IRS"), all existing and in
effect on the date of this opinion and all of which are subject to change at any
time, possibly retroactively. Any such change could materially alter the
conclusions reached in this opinion. We undertake no obligation to you or any
other person to give notice of any such change. As noted above, this opinion is
limited strictly to the matters expressly stated herein and no other opinion may
be implied or inferred beyond such matters. You should realize that this opinion
is not binding on the IRS or the courts.
This opinion is provided to you solely for purposes of complying
with the requirements of Item 21(a) of Form S-4 under the Act and Section 9.1(f)
of the Merger Agreement. We hereby consent to the use of this opinion as an
exhibit to the Registration Statement, to the disclosure and summarization of
the opinion in the Registration Statement, including in the proxy
statement/prospectus included therein, and to the reference to this Firm in the
Registration Statement under the caption "Legal Matters." In giving this consent
we do not thereby admit that we come within the category of persons whose
consent is required under Section 7 of the Act or the rules and regulations of
the Securities and Exchange Commission promulgated thereunder.
Very truly yours,
/s/ Wyatt, Tarrant & Combs
WYATT, TARRANT & COMBS
-3-
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Proxy
Statement/Prospectus constituting part of this Registration Statement on Form
S-4 of Union Planters Corporation of our report dated October 15, 1998, which
appears on page B-2 of Exhibit 99.1 in the Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998 of Union Planters Corporation. We also consent
to the reference to us under the heading "EXPERTS" in such Proxy
Statement/Prospectus.
/s/ PricewaterhouseCoopers LLP
Memphis, Tennessee
November 20, 1998
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Union Planters
Corporation on Form S-4 of our report dated January 23, 1998 relating to the
consolidated financial statements of FSB, Inc., which appears in the Proxy
Statement/Prospectus, which is part of this Registration Statement. We also
consent to the references to us under the heading "Experts" in such Proxy
Statement/Prospectus.
/s/ WHITEHORN TANKERSLEY & CO., PLLC
Memphis, Tennessee
November 18, 1998
<PAGE> 1
[Mercer Capital Letterhead]
EX-23.3
November 19, 1998
CONSENT OF FINANCIAL ADVISOR
We hereby consent to the inclusion of our fairness opinion and references to
our firm in the Proxy Statement/Prospectus included in Union Planters
Corporation's Registration Statement on Form S-4.
Mercer Capital Management, Inc.
By: /s/ JEFF K. DAVIS, CFA, ASA
-----------------------------
Vice President
<PAGE> 1
EXHIBIT 99.1
FSB, INC.
The undersigned hereby constitutes and appoints _______________ and
_________________, or either of them, as proxies, each with full power of
substitution, to vote the number of shares of common stock of FSB, Inc. ("FSB")
which the undersigned would be entitled to vote if personally present at the
Special Meeting of the shareholders of FSB to be held at
_______________________________, at ____ _.m., local time, on ________, 1998,
and at any adjournment or postponement thereof (the "Special Meeting") upon the
proposals described in the Proxy Statement/Prospectus and the Notice of Special
Meeting of Shareholders, both dated ________, 1998, the receipt of which is
acknowledged in the manner specified below.
1. MERGER. To consider and vote upon a proposal to approve an Agreement and Plan
of Merger, dated as of August 4, 1998 (the "Agreement"), by and between FSB,
Union Planters Corporation, a Tennessee corporation ("UPC"), and Union Planters
Holding Corporation ("UPHC"), a wholly-owned subsidiary or UPC, and the related
Plan of Merger (the "Plan of Merger"), by and between FSB and UPHC, pursuant to
which (i) FSB will merge (the "Merger") with and into UPHC, with the effect that
UPHC shall be the corporation surviving from the Merger, and (ii) each share of
the ___ par value common stock of FSB ("FSB Common Stock") issued and
outstanding at the effective time of the Merger will be converted into _____
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), and
cash in lieu of any fractional share, all as more fully described in the
accompanying Proxy Statement/Prospectus.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Special Meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSAL 1 ABOVE.
Please sign exactly as name appears below. When shares are held jointly, both
should sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. If a corporation, please sign in full
corporate name by President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
DATED: ____________________, 1998
---------------------------------
Signature
---------------------------------
Signature if held jointly
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF
FSB, INC.
AND MAY BE REVOKED PRIOR TO ITS EXERCISE.
