<PAGE> 1
As filed with the Securities and Exchange Commission on April 8, 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 (I.R.S. Employer
Incorporation or Organization) Industrial Identification No.)
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)
COPIES TO:
R. NASH NEYLAND, ESQ. MICHAEL D. WATERS, ESQ.
Wyatt, Tarrant & Combs Balch & Bingham LLP
6075 Poplar Avenue, Suite 650 The Winter Building
Memphis, Tennessee 38119 2 Dexter Avenue
(901) 537-1000 Montgomery, Alabama 36104
(334) 269-3121
Approximate date of commencement of proposed sale of the 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, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF SECURITIES TO BE AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
REGISTERED REGISTERED (1) OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION FEE
UNIT (2) PRICE (2)
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Common Stock, $5.00, par value per share, 835,800 $ 28.6816 $ 23,972,081.28 $ 7,071.76
(and associated Preferred Share Rights) Shares (with
Preferred Share
Rights)
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(1) This Registration Statement covers the maximum number of shares of
common stock of the Registrant which is expected to be issued in
connection with the merger described herein.
(2) Estimated solely for the purpose of calculating the registration fee
and based, pursuant to Rule 457(f)(2) under the Securities Act on the
book value per share of the Common Stock of First National Bancshares
of Wetumpka, Inc. as of the latest practicable date prior to filing
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
FIRST NATIONAL BANCSHARES OF WETUMPKA, INC.
408 S.E. MAIN STREET
WETUMPKA, ALABAMA 36092
TO THE SHAREHOLDERS OF FIRST NATIONAL BANCSHARES OF
WETUMPKA, INC. April _, 1998
You are cordially invited to attend a special meeting of the
shareholders (the "Special Meeting") of First National Bancshares of Wetumpka,
Inc. ("FNB") to be held at FNB's offices located at 408 S.E. Main Street,
Wetumpka, Alabama, at 1:00 p.m., local time, on _______________, 1998, notice
of which is enclosed.
At the Special Meeting, you will be asked to consider and vote on a
proposal to approve the Agreement and Plan of Merger (the "Agreement") and a
related Plan of Merger (the "Plan of Merger") by and between FNB, Union
Planters Corporation, a Tennessee corporation ("UPC"), and Union Planters
Holding Corporation ("UP Holding"), a Tennessee corporation which is a
wholly-owned subsidiary of UPC. Pursuant to the Agreement and the Plan of
Merger, FNB will merge (the "Merger") with and into UP Holding, with the effect
that UP Holding will be the surviving corporation resulting from the Merger.
Upon consummation of the Merger, each share of FNB common stock issued and
outstanding (excluding shares held by FNB or UPC, or their respective
subsidiaries, in each case other than shares held in a fiduciary capacity or as
a result of debts previously contracted) will be converted into and exchanged
for the right to receive 4.179 shares of UPC common stock and the associated
"Preferred Share Rights" (as defined in the accompanying Proxy
Statement/Prospectus), subject to possible adjustment as described in the
accompanying Proxy Statement/Prospectus, with cash being paid in lieu of
issuing fractional shares.
Enclosed are the (i) Notice of Special Meeting, (ii) Proxy
Statement/Prospectus, (iii) proxy card for the Special Meeting and (iv)
pre-addressed return envelope for the proxy card. The Proxy
Statement/Prospectus describes in more detail the Agreement, the Plan of Merger
and the proposed Merger, including a description of your rights as a
shareholder of FNB to exercise statutory dissenters' rights, the conditions to
consummation of the Merger and the effects of the Merger on the rights of FNB's
shareholders. Please read these materials carefully and consider thoughtfully
the information set forth in them.
T. Steven Johnson & Associates, FNB's financial advisor, has issued
its opinion to your Board of Directors regarding the fairness, from a financial
point of view, of the consideration to be paid by UPC pursuant to the
Agreement. A copy of the opinion is attached as Appendix C to the Proxy
Statement/Prospectus.
THE BOARD OF DIRECTORS OF FNB HAS UNANIMOUSLY APPROVED AND ADOPTED
(WITH ONE DIRECTOR ABSENT) THE AGREEMENT AND THE PLAN OF MERGER AND
CONSUMMATION OF THE MERGER CONTEMPLATED THEREBY, AND RECOMMENDS THAT YOU VOTE
FOR APPROVAL OF THE AGREEMENT AND THE PLAN OF MERGER.
Approval of the Agreement and the Plan of Merger will require the
affirmative vote of the holders of at least a majority of the issued and
outstanding shares of FNB Common Stock entitled to be voted at the Special
Meeting. Whether or not you plan to attend the Special Meeting, you are urged
to complete, sign, and return promptly the enclosed proxy card. If you attend
the Special Meeting, you may vote in person even if you previously returned
your proxy card. The proposed Merger with UPC is a significant step for FNB and
your vote on this matter is of great importance.
ON BEHALF OF THE BOARD OF DIRECTORS, I URGE YOU TO VOTE FOR ADOPTION
OF THE AGREEMENT AND THE PLAN OF MERGER BY MARKING THE ENCLOSED PROXY CARD
"FOR" ITEM ONE.
I look forward to seeing you at the Special Meeting.
Sincerely,
Robert M. Barrett
Chairman of the Board, President and
Chief Executive Officer
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FIRST NATIONAL BANCSHARES OF WETUMPKA, INC.
408 S.E. MAIN STREET
WETUMPKA, ALABAMA 36092
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD AT 1:00 P.M. ON _________________, 1998
NOTICE IS HEREBY GIVEN that a special meeting of the shareholders (the
"Special Meeting") of First National Bancshares of Wetumpka, Inc. ("FNB") will
be held at FNB's offices located at 408 S.E. Main Street, Wetumpka, Alabama, on
_________________, 1998, at 1:00 p.m., local time, for the following purposes:
1. MERGER. To consider and vote upon a proposal to approve the
Agreement and Plan of Merger, dated as of December 30, 1997 (the "Agreement"),
and the related Plan of Merger (the "Plan of Merger"), by and between FNB,
Union Planters Corporation, a Tennessee corporation ("UPC"), and Union Planters
Holding Corporation, a Tennessee corporation which is a wholly-owned subsidiary
of UPC ("UP Holding"), pursuant to which (i) FNB will merge (the "Merger") with
and into UP Holding, with the effect that UP Holding will be the surviving
corporation resulting from the Merger, and (ii) each share of the $1.00 par
value common stock of FNB ("FNB Common Stock") issued and outstanding at the
effective time of the Merger (excluding shares held by FNB or UPC, or their
respective subsidiaries, in each case other than shares held in a fiduciary
capacity or as a result of debts previously contracted) will be converted into
and exchanged for the right to receive 4.179 shares of the $5.00 par value
common stock of UPC, and the associated "Preferred Share Rights" (as defined in
the accompanying Proxy Statement/Prospectus), subject to possible adjustment,
and cash in lieu of issuing any fractional share. A copy of each of the
Agreement and the Plan of Merger is set forth as Appendix A and Appendix B,
respectively, to the accompanying Proxy Statement/Prospectus and is
incorporated by reference therein.
2. OTHER BUSINESS. To transact such other business as may come
properly before the Special Meeting or any adjournments or postponements of the
Special Meeting.
Only shareholders of record at the close of business on April 1, 1998
will be entitled to receive notice of and to vote at the Special Meeting or any
adjournment or postponement thereof. APPROVAL OF THE AGREEMENT AND THE PLAN OF
MERGER REQUIRES THE AFFIRMATIVE VOTE OF THE HOLDERS OF AT LEAST A MAJORITY OF
THE ISSUED AND OUTSTANDING SHARES OF FNB COMMON STOCK ENTITLED TO BE VOTED AT
THE SPECIAL MEETING.
FNB shareholders have the right to dissent from the Merger and to
receive the "fair value" of their shares of FNB Common Stock in cash, provided
the proper steps are taken to properly "perfect" statutory dissenters' rights.
Statutory dissenters' rights are more fully discussed in various sections of
the accompanying Proxy Statement/Prospectus, and a copy of Section 262 of the
Delaware statutes governing statutory dissenters' rights is attached thereto as
Appendix D. FNB shareholders considering the exercise of their dissenters'
rights should carefully review these materials and information before voting
with respect to the Agreement and the Plan of Merger.
THE BOARD OF DIRECTORS OF FNB UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS
VOTE FOR APPROVAL OF THE AGREEMENT AND THE PLAN OF MERGER.
BY ORDER OF THE BOARD OF DIRECTORS
Travis Cosby, III
Secretary
April __, 1998
Wetumpka, Alabama
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, DATE,
AND SIGN THE ENCLOSED FORM OF PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
POSTAGE PAID RETURN ENVELOPE IN ORDER TO ENSURE THAT YOUR SHARES WILL BE
REPRESENTED AT THE SPECIAL MEETING.
<PAGE> 4
PROSPECTUS
COMMON STOCK, $5.00 PAR VALUE
UNION PLANTERS CORPORATION
PROXY STATEMENT
FOR SPECIAL MEETING OF SHAREHOLDERS OF
FIRST NATIONAL BANCSHARES OF WETUMPKA, INC.
This Prospectus of Union Planters Corporation, a bank holding company
organized and existing under the laws of the State of Tennessee ("UPC"),
relates to the issuance of 835,800 shares of common stock, $5.00 par value, of
UPC (together with associated "Preferred Share Rights" (as defined herein) "UPC
Common Stock"), which are issuable to the shareholders of First National
Bancshares of Wetumpka, Inc., a corporation organized and existing under the
laws of the State of Delaware ("FNB"), upon consummation of the proposed merger
(the "Merger") of FNB with and into Union Planters Holding Corporation, ("UP
Holding") a corporation organized under the laws of the State of Tennessee,
which is as a wholly-owned subsidiary of UPC, with the effect that UP Holding
will be the surviving corporation of the Merger. The Merger will be consummated
pursuant to the terms of the Agreement and Plan of Merger, dated as of December
30, 1997 (the "Agreement"), and the related Plan of Merger (the "Plan of
Merger"), by and between UPC, FNB and UP Holding. At the effective time of the
Merger (the "Effective Time"), except as described herein, each issued and
outstanding share of common stock, par value $1.00 per share, of FNB ("FNB
Common Stock") will be converted into and exchanged for the right to receive
4.179 shares of UPC Common Stock, subject to certain possible adjustments
described herein ("Exchange Ratio"). Cash (without interest) will be paid in
lieu of the issuance of any fractional shares of UPC Common Stock.
The Exchange Ratio is adjustable upward only if certain conditions are
met concerning the quoted price of UPC Common Stock. The Board of Directors of
FNB (the "FNB Board"), would likely invoke the adjustment mechanism in the
Agreement if the conditions permit by giving notice of its election to
terminate, in which case UPC must determine whether to proceed with the Merger
at a higher Exchange Ratio and avoid termination. In making this determination,
the principal factors UPC will consider include the projected effect of the
Merger on UPC's pro forma earnings per share and whether UPC's assessment of
FNB's earning potential as part of UPC justifies the issuance of an increased
number of shares of UPC Common Stock. If UPC declines to adjust the Exchange
Ratio, FNB may elect to proceed without the adjustment by withdrawing its
election to terminate, although it has no intention to so elect without
resoliciting the approval of FNB's shareholders. In making such determination,
the FNB Board will consider whether the Merger remains in the best interest of
FNB and its shareholders, despite a decline in the price of UPC Common Stock,
and whether the consideration to be received by the holders of FNB Common Stock
remains fair from a financial point of view. See "DESCRIPTION OF TRANSACTION
Possible Adjustment of Exchange Ratio."
This Prospectus also serves as the Proxy Statement of FNB, and is
being furnished to the shareholders of FNB in connection with the solicitation
of proxies by the FNB Board for use at its special meeting of shareholders
(including any adjournment or postponement thereof, the "Special Meeting"), to
be held on _________________, 1998, to consider and vote upon the Agreement and
the Plan of Merger and the transactions contemplated therein. This Proxy
Statement/Prospectus ("Proxy Statement") and related materials enclosed
herewith are being mailed to shareholders of FNB on or about April __, 1998.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS, SAVINGS ACCOUNTS, OR OTHER
OBLIGATIONS OF A DEPOSITORY INSTITUTION AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
---------------
The date of this Proxy Statement is April __, 1998.
<PAGE> 5
AVAILABLE INFORMATION
UPC is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, is required to file reports, proxy and information statements, and
other information with the Securities and Exchange Commission (the "SEC").
Copies of such reports, proxy and information statements, and other information
can be obtained, at prescribed rates, from the SEC by addressing written
requests for such copies to the Public Reference Section at the SEC at 450
Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. In addition, such
reports, proxy and information statements, and other information can be
inspected and copied at the public reference facilities referred to above and
at the regional offices of the SEC at 7 World Trade Center, 13th Floor, New
York, New York 10048 and Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. The SEC also maintains a site on the World
Wide Web at http://www.sec.gov that contains reports, proxy and information
statements, and other information regarding registrants that file
electronically with the SEC. The shares of UPC Common Stock are listed and
traded on the New York Stock Exchange (the "NYSE") under the symbol "UPC," and
reports, proxy and information statements, and other information concerning UPC
also may be inspected at the offices of the NYSE, 20 Broad Street, New York,
New York 10005.
The shares of FNB Common Stock are not traded on any exchange or
system and FNB is not required to, and does not, file reports or information
with the SEC or any securities exchange or system.
This Proxy Statement constitutes part of the Registration Statement on
Form S-4 of UPC (including any exhibits and amendments thereto, the
"Registration Statement") filed with the SEC under the Securities Act of 1933,
as amended (the "Securities Act"), relating to the securities offered hereby.
This Proxy Statement does not include all of the information in the
Registration Statement, certain portions of which have been omitted pursuant to
the rules and regulations of the SEC. For further information about UPC, FNB
and the securities offered hereby, reference is made to the Registration
Statement. The Registration Statement may be inspected and copied, at
prescribed rates, at the SEC's public reference facilities at the addresses set
forth above.
All information contained in this Proxy Statement or incorporated
herein by reference with respect to UPC was supplied by UPC, and all
information contained in this Proxy Statement with respect to FNB was supplied
by FNB.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROXY STATEMENT DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, THE
SECURITIES OFFERED BY THIS PROXY STATEMENT IN ANY JURISDICTION TO OR FROM ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY STATEMENT NOR ANY DISTRIBUTION
OF THE SECURITIES BEING OFFERED PURSUANT TO THIS PROXY STATEMENT SHALL, UNDER
ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF UPC OR FNB OR THE INFORMATION SET FORTH OR INCORPORATED BY REFERENCE
HEREIN SINCE THE DATE OF THIS PROXY STATEMENT.
THIS PROXY STATEMENT CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WITH
RESPECT TO THE FINANCIAL CONDITION, RESULTS OF OPERATIONS, AND BUSINESS OF UPC
FOLLOWING THE CONSUMMATION OF THE MERGER AND THE OTHER ACQUISITIONS (AS DEFINED
UNDER "BUSINESS OF UPC -- RECENT DEVELOPMENTS"), INCLUDING STATEMENTS RELATING
TO THE COST SAVINGS AND REVENUE ENHANCEMENTS THAT ARE EXPECTED TO BE REALIZED
FROM THE MERGER AND THE OTHER ACQUISITIONS AND THE EXPECTED IMPACT OF THE
MERGER AND THE OTHER ACQUISITIONS ON UPC'S FINANCIAL PERFORMANCE. THESE
FORWARD-LOOKING STATEMENTS INVOLVE CERTAIN RISKS AND UNCERTAINTIES. FACTORS
THAT MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY
SUCH FORWARD-LOOKING STATEMENTS INCLUDE, AMONG OTHER THINGS, THE FOLLOWING
POSSIBILITIES: (I) EXPECTED COST SAVINGS FROM THE MERGER AND THE OTHER
ACQUISITIONS CANNOT BE FULLY REALIZED; (II) DEPOSIT ATTRITION, CUSTOMER LOSS,
OR REVENUE LOSS FOLLOWING THE MERGER AND THE OTHER ACQUISITIONS IS GREATER THAN
EXPECTED; (III) COMPETITIVE PRESSURE IN THE BANKING INDUSTRY INCREASES
SIGNIFICANTLY; (IV) COSTS OR DIFFICULTIES RELATED TO THE INTEGRATION OF THE
BUSINESSES
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OF UPC AND THE INSTITUTIONS TO BE ACQUIRED ARE GREATER THAN EXPECTED; (V)
CHANGES IN THE INTEREST RATE ENVIRONMENT REDUCE MARGINS; (VI) GENERAL ECONOMIC
CONDITIONS, EITHER NATIONALLY OR REGIONALLY, ARE LESS FAVORABLE THAN EXPECTED,
RESULTING IN, AMONG OTHER THINGS, A DETERIORATION IN CREDIT QUALITY; (VII)
CHANGES OCCUR IN THE REGULATORY ENVIRONMENT; (VIII) CHANGES OCCUR IN BUSINESS
CONDITIONS AND INFLATION; (IX) CHANGES OCCUR IN THE SECURITIES MARKETS; AND (X)
DISRUPTIONS OF THE OPERATIONS OF UPC OR ANY OF ITS SUBSIDIARIES, OR ANY OTHER
GOVERNMENTAL OR PRIVATE ENTITY AS A RESULT OF THE "YEAR 2000 PROBLEM." THE
FORWARD-LOOKING EARNINGS ESTIMATES INCLUDED IN THIS PROXY STATEMENT HAVE NOT
BEEN EXAMINED OR COMPILED BY THE INDEPENDENT PUBLIC ACCOUNTANTS OF UPC OR FNB,
NOR HAVE SUCH ACCOUNTANTS APPLIED ANY PROCEDURES THERETO. ACCORDINGLY, SUCH
ACCOUNTANTS DO NOT EXPRESS AN OPINION OR ANY OTHER FORM OF ASSURANCE ON THEM.
FURTHER INFORMATION ON OTHER FACTORS THAT COULD AFFECT THE FINANCIAL RESULTS OF
UPC AFTER THE MERGER AND THE OTHER ACQUISITIONS IS INCLUDED IN THE SEC FILINGS
INCORPORATED BY REFERENCE HEREIN.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents previously filed with the SEC by UPC pursuant
to the Exchange Act are hereby incorporated by reference herein (SEC File No.
1-10160):
(a) UPC's Annual Report on Form 10-K for the year ended December 31,
1997 (provided that any information included or incorporated by
reference in response to Items 402(a)(8), (i), (k), or (1) of
Regulation S-K of the SEC shall not be deemed to be incorporated
herein and is not part of the Registration Statement)(the "UPC
1997 Form 10-K");
(b) UPC's Current Reports on Form 8-K dated January 15, 1998,
February 23, 1998, April __, 1998 and April __, 1998.
(c) The description of the current management and Board of Directors
of UPC contained in the Proxy Statement of UPC filed pursuant to
Section 14(a) of the Exchange Act with respect to UPC's Annual
Meeting of Shareholders to be held on April 16, 1998;
(d) UPC's Registration Statement on Form 8-A dated January 19, 1989,
filed on February 1, 1989; (SEC File No. 0-6919) in connection
with UPC's designation and authorization of its Series A
Preferred Stock; and
(e) The description of the UPC Common Stock contained in UPC's
Registration Statement under Section 12(b) of the Exchange Act
and any amendment or report filed for the purpose of updating
such description.
All documents filed by UPC pursuant to Sections 13(a), 13(c), 14, or
15(d) of the Exchange Act after the date of this Proxy Statement and prior to
final adjournment of the Special Meeting shall be deemed to be incorporated by
reference in this Proxy Statement and to be a part hereof from the date of
filing of such documents. Any statement contained herein or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes hereof to the extent that a statement
contained herein or in any subsequently filed document which also is, or is
deemed to be, incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed to
constitute a part hereof, except as so modified or superseded.
UPC will provide without charge, upon the written or oral request of
any person, including any beneficial owner, to whom this Proxy Statement is
delivered, a copy of any and all information (excluding certain exhibits)
relating to UPC that has been incorporated by reference in the Registration
Statement. Such requests should be directed to E. James House, Jr., Secretary
and Manager of the Legal Department, Union Planters Corporation, 7130 Goodlett
Farms Parkway, Memphis, Tennessee 38018 (telephone (901) 580-6584). In order to
ensure timely delivery of the documents, any request should be made by _____,
1998.
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TABLE OF CONTENTS
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SUMMARY...................................................................................................1
THE PARTIES..........................................................................................1
MEETING OF SHAREHOLDERS..............................................................................2
THE MERGER...........................................................................................3
COMPARATIVE MARKET PRICES OF COMMON STOCK............................................................6
HISTORICAL AND PRO FORMA COMPARATIVE PER SHARE DATA..................................................7
SELECTED FINANCIAL DATA..............................................................................9
SPECIAL MEETING OF FNB SHAREHOLDERS.......................................................................13
DATE, PLACE, TIME, AND PURPOSE.......................................................................13
RECORD DATE, VOTING RIGHTS, REQUIRED VOTE, AND REVOCABILITY OF PROXIES...............................13
SOLICITATION OF PROXIES..............................................................................14
DISSENTERS' RIGHTS...................................................................................14
RECOMMENDATION.......................................................................................15
DESCRIPTION OF TRANSACTION................................................................................15
GENERAL..............................................................................................15
POSSIBLE ADJUSTMENT OF EXCHANGE RATIO................................................................16
BACKGROUND OF AND REASONS FOR THE MERGER.............................................................18
OPINION OF FNB'S FINANCIAL ADVISOR...................................................................21
EFFECTIVE TIME OF THE MERGER.........................................................................22
DISSENTERS' RIGHTS...................................................................................23
DISTRIBUTION OF UPC STOCK CERTIFICATES...............................................................24
LIMITATION ON NEGOTIATIONS...........................................................................25
CONDITIONS TO CONSUMMATION OF THE MERGER.............................................................25
REGULATORY APPROVAL..................................................................................26
WAIVER, AMENDMENT, AND TERMINATION...................................................................26
CONDUCT OF BUSINESS PENDING THE MERGER...............................................................27
MANAGEMENT AND OPERATIONS AFTER THE MERGER...........................................................29
INTERESTS OF CERTAIN PERSONS IN THE MERGER...........................................................29
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER................................................30
ACCOUNTING TREATMENT.................................................................................32
EXPENSES AND FEES....................................................................................32
RESALES OF UPC COMMON STOCK..........................................................................33
EFFECT OF THE MERGER ON RIGHTS OF SHAREHOLDERS............................................................33
ANTI-TAKEOVER PROVISIONS GENERALLY...................................................................34
AUTHORIZED CAPITAL STOCK.............................................................................34
AMENDMENT OF CHARTER AND BYLAWS......................................................................35
CLASSIFIED BOARD OF DIRECTORS AND ABSENCE OF CUMULATIVE VOTING.......................................36
DIRECTOR REMOVAL AND VACANCIES.......................................................................36
LIMITATIONS ON DIRECTOR LIABILITY....................................................................37
INDEMNIFICATION......................................................................................37
SPECIAL MEETINGS OF SHAREHOLDERS.....................................................................38
ACTIONS BY SHAREHOLDERS WITHOUT A MEETING............................................................38
SHAREHOLDER NOMINATIONS AND PROPOSALS................................................................39
BUSINESS COMBINATIONS................................................................................39
LIMITATIONS ON ABILITY TO VOTE STOCK.................................................................41
DISSENTERS' RIGHTS OF APPRAISAL......................................................................41
SHAREHOLDERS' RIGHTS TO EXAMINE BOOKS AND RECORDS....................................................42
DIVIDENDS............................................................................................42
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COMPARATIVE MARKET PRICES AND DIVIDENDS.......................................43
BUSINESS OF UPC...............................................................44
GENERAL..................................................................44
RECENT DEVELOPMENTS......................................................46
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION........................48
BUSINESS OF FNB...............................................................51
FIRST NATIONAL BANK OF WETUMPKA..........................................51
PRIMARY SERVICE AREA.....................................................52
OFFICES..................................................................52
COMPETITION..............................................................52
EMPLOYEES................................................................53
LEGAL PROCEEDINGS........................................................53
PRINCIPAL HOLDERS OF COMMON STOCK........................................53
COMMON STOCK OWNED BY MANAGEMENT.........................................54
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF FNB.............................................55
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION...............55
OVERVIEW.................................................................55
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996.....55
FINANCIAL CONDITION......................................................57
LIQUIDITY AND ASSET/LIABILITY MANAGEMENT.................................59
SOURCES AND USES OF FUNDS................................................59
REGULATORY ASSESSMENTS...................................................60
EFFECTS OF INFLATION.....................................................60
IMPACT OF ACCOUNTING STANDARDS TO BE ADOPTED.............................60
YEAR 2000 (Y2K) ISSUES...................................................60
CERTAIN REGULATORY CONSIDERATIONS.............................................64
GENERAL..................................................................64
PAYMENT OF DIVIDENDS.....................................................65
CAPITAL ADEQUACY.........................................................66
SUPPORT OF SUBSIDIARY INSTITUTIONS.......................................67
PROMPT CORRECTIVE ACTION.................................................67
DESCRIPTION OF UPC CAPITAL STOCK..............................................68
UPC COMMON STOCK.........................................................69
UPC PREFERRED STOCK......................................................70
OTHER MATTERS.................................................................70
SHAREHOLDER PROPOSALS.........................................................70
EXPERTS.......................................................................70
OPINIONS......................................................................71
</TABLE>
APPENDICES:
APPENDIX A -- AGREEMENT AND PLAN OF MERGER, DATED AS OF DECEMBER 30, 1997, BY
AND BETWEEN UNION PLANTERS CORPORATION, UNION PLANTERS HOLDING
CORPORATION AND FIRST NATIONAL BANCSHARES OF WETUMPKA, INC.
APPENDIX B -- PLAN OF MERGER OF FIRST NATIONAL BANCSHARES OF WETUMPKA, INC.
INTO AND WITH UNION PLANTERS HOLDING CORPORATION
APPENDIX C -- FAIRNESS OPINION OF T. STEVEN JOHNSON & ASSOCIATES, INC.
APPENDIX D -- COPY OF SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
REGARDING DISSENTER'S RIGHTS
APPENDIX E -- AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF FIRST NATIONAL
BANCSHARES OF WETUMPKA, INC. AS OF AND FOR THE YEARS ENDED
DECEMBER 31, 1997 AND 1996 (AND NOTES THERETO)
- iv -
<PAGE> 9
SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED IN THIS
PROXY STATEMENT AND THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE. THIS
SUMMARY IS NOT INTENDED TO BE A COMPLETE DESCRIPTION OF THE MATTERS COVERED IN
THIS PROXY STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION APPEARING ELSEWHERE OR INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT. SHAREHOLDERS ARE URGED TO READ CAREFULLY THE ENTIRE PROXY STATEMENT,
INCLUDING THE APPENDICES. AS USED IN THIS PROXY STATEMENT, THE TERMS "UPC" AND
"FNB" REFER TO UNION PLANTERS CORPORATION AND FIRST NATIONAL BANCSHARES OF
WETUMPKA, INC., RESPECTIVELY, AND, WHERE THE CONTEXT REQUIRES, TO THOSE
ENTITIES AND THEIR RESPECTIVE SUBSIDIARIES.
THE PARTIES
FNB. FNB, a Delaware corporation, is a bank holding company registered
with the Board of Governors of the Federal Reserve System (the "Federal
Reserve") under the Bank Holding Company Act of 1956, as amended (the "BHC
Act"). As of December 31, 1997, FNB had total consolidated assets of
approximately $211 million, total consolidated loans of approximately $127
million, total consolidated deposits of approximately $170 million, and total
consolidated shareholders' equity of approximately $24 million.
FNB conducts its business activities through its wholly-owned bank
subsidiary, The First National Bank of Wetumpka ("First National Bank") which
was organized in 1905 as a commercial bank chartered under the laws of the
United States. First National Bank operates from its main office in Wetumpka,
Alabama and at four branch offices located in Elmore County.
The principal executive offices of FNB are located at 408 S.E. Main
Street, Wetumpka, Alabama 36092, and its telephone number at such address is
(334) 567-5141. Additional information with respect to FNB and its subsidiaries
is included elsewhere herein under various headings, including, but not limited
to, "BUSINESS OF FNB" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF FNB," and in the audited consolidated
financial statements of FNB and its subsidiaries for the years ended December
31, 1997 and 1996 (and notes thereto), a copy of which is attached as Appendix
E.
UPC. UPC, a Tennessee corporation, is a bank holding company
registered with the Federal Reserve under the BHC Act. As of December 31, 1997,
UPC had total consolidated assets of approximately $18.1 billion, total
consolidated loans of approximately $12.7 billion, total consolidated deposits
of approximately $13.4 billion, and total consolidated shareholders' equity of
approximately $1.7 billion.
UPC conducts its business activities through its principal bank
subsidiary, the $15.5 billion asset Union Planters Bank, National Association
("UPB"), a multi-state national banking association headquartered in Memphis,
Tennessee with branches in Tennessee, Arkansas, Missouri, Kentucky, Alabama,
Mississippi and Louisiana, one savings association headquartered in Tennessee,
two other Tennessee chartered banks headquartered in Tennessee and one Florida
chartered bank headquartered in Miami, Florida (collectively with UPB, the "UPC
Banking Subsidiaries"). Through the UPC Banking Subsidiaries, UPC provides a
diversified range of financial services in the communities in which it operates
and maintains approximately 514 banking offices and 651 automated teller
machines ("ATMs"). UPC's total assets at December 31, 1997 are allocable by
state (before consolidating adjustments) approximately as follows: $9.8 billion
in Tennessee; $3.5 billion in Mississippi; $2.2 billion in Florida; $1.2
billion in Missouri; $806 million in Arkansas; $698 million in Louisiana; $449
million in Alabama; and $115 million in Kentucky.
Acquisitions have been, and are expected to continue to be, an
important part of the expansion of UPC's business strategy. UPC completed 13
acquisitions in 1994, three in 1995, seven in 1996, and six in 1997, adding
approximately $3.8 billion in total assets in 1994, $1.3 billion in 1995, $4.2
billion in 1996 and $3.6 billion in 1997. Through April 1, 1998, UPC has
completed the acquisition of two institutions with approximately $539 million in
aggregate total assets (the "Recently Completed Acquisitions"). As of the date
of this Proxy Statement, UPC is a party to definitive agreements to acquire ten
financial institutions, in addition to FNB, and to purchase certain branch
locations and assume deposit liabilities of another institution (the "CalFed
Branch Purchase")(collectively referred to herein as the "Other Pending
Acquisition"). The Other Pending Acquisitions had aggregate total assets of
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<PAGE> 10
approximately $12.4 billion at December 31, 1997. For purposes of this Proxy
Statement, the Recently Completed Acquisitions and the Other Pending
Acquisitions are collectively referred to herein as the "Other Acquisitions".
The largest of the Other Pending Acquisitions is UPC's pending acquisition of
Magna Group, Inc., ("MGR"), St Louis, Missouri, which had total consolidated
assets of approximately $7.1 billion at December 31, 1997. MGR has entered into
a definitive agreement to acquire Charter Financial, Inc., and its subsidiary,
Charter Bank, S.B. (the "Charter Acquisition") which MGR considers probable of
consummation. Charter is located in Sparta, Illinois and had at December 31,
1997, total assets of approximately $382 million, total deposits of
approximately $276 million, and total stockholders' equity of approximately
$58.4 million. The Charter Acquisition is expected to be accounted for as a
purchase. For purposes of this Proxy Statement, including the historical and
equivalent pro forma data, the terms "Other Acquisitions" and "Other Pending
Acquisitions" include the Charter Acquisition. For additional information, see
"BUSINESS OF UPC -- Recent Developments and "PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION."
UPC expects to continue to take advantage of the consolidation of the
financial services industry by further developing its franchise through the
acquisition of financial institutions and other entities engaged in lines of
business permissible for banks and bank holding companies. Future acquisitions
may entail the payment by UPC of consideration in excess of the book value of
the underlying net assets acquired, may result in the issuance of additional
shares of UPC Common Stock or the incurring of additional indebtedness by UPC,
and could have a dilutive effect on the earnings or book value per share of UPC
Common Stock. Moreover, significant charges against earnings are sometimes
required incidental to acquisitions.
For a discussion of UPC's acquisition program, including a discussion
of the significant charges UPC has incurred incidental to acquisitions in the
past three fiscal years, see the caption "Acquisitions" (on page 10) in UPC's
Annual Report to Shareholders and Note 2 to UPC's audited consolidated
financial statements for the years ended December 31, 1997, 1996, and 1995 (on
pages 49 and 50) contained in such Annual Report to Shareholders. UPC's Annual
Report to Shareholders is included as Exhibit 13 to the UPC 1997 Form 10-K and
Exhibit 13 is incorporated by reference herein to the extent indicated herein.
The principal executive offices of UPC are located at 7130 Goodlett
Farms Parkway, Memphis, Tennessee 38018, and its telephone number at such
address is (901) 580-6000. Additional information with respect to UPC and its
subsidiaries is included elsewhere herein and in documents incorporated by
reference in this Proxy Statement. See "AVAILABLE INFORMATION," "DOCUMENTS
INCORPORATED BY REFERENCE," and "BUSINESS OF UPC."
UP HOLDING. UP Holding, a Tennessee corporation, is a wholly-owned
subsidiary of UPC. UP Holding is a bank holding company itself which owns all of
the common stock of UPB and other permissible investments. Certain of the
directors and officers of UP Holding are executive officers of UPC.
MEETING OF SHAREHOLDERS
This Proxy Statement is being furnished to the holders of FNB Common
Stock in connection with the solicitation by the FNB Board of proxies for use at
the Special Meeting at which FNB shareholders will be asked to vote upon (i) a
proposal to approve the Agreement and the Plan of Merger and (ii) such other
business as may properly come before the Special Meeting but which is not now
anticipated. The Special Meeting will be held at FNB's offices, located at 408
S.E. Main Street, Wetumpka, Alabama, at 1:00 p.m., local time, on ________,
1998. See "SPECIAL MEETING OF FNB SHAREHOLDERS -- Date, Place, Time, and
Purpose."
The FNB Board has fixed the close of business on April 1, 1998, as the
record date (the "FNB Record Date") for determination of the shareholders
entitled to notice of and to vote at the Special Meeting. Only holders of
record of shares of FNB Common Stock on the FNB Record Date will be entitled to
notice of and to vote at the Special Meeting. Each share of FNB Common Stock is
entitled to one vote. On the FNB Record Date, there were 200,000 shares of FNB
Common Stock outstanding. See "SPECIAL MEETING OF FNB SHAREHOLDERS -- Record
Date, Voting Rights, Required Vote, and Revocability of Proxies."
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<PAGE> 11
Approval of the Agreement and the Plan of Merger and the transactions
contemplated thereby requires the affirmative vote of the holders of at least a
majority of the issued and outstanding shares of FNB Common Stock entitled to
be voted at the Special Meeting. The directors and executive officers of FNB
(including immediate family members and affiliated entities) owned, as of the
FNB Record Date, 74,408 shares or approximately 37.2% of the outstanding shares
of FNB Common Stock.
The directors and executive officers of UPC owned, as of the FNB
Record Date, no shares of FNB Common Stock. As of the FNB Record Date, UPC held
no shares of FNB Common Stock in a fiduciary capacity for others, or as a
result of debts previously contracted, and FNB held no shares of FNB Common
Stock in a fiduciary capacity for others. See "SPECIAL MEETING OF FNB
SHAREHOLDERS -- Record Date, Voting Rights, Required Vote, and Revocability of
Proxies."
For information with respect to the number and percentage of shares of
FNB Common Stock owned by directors and executive officers of FNB, as well as
beneficial owners of 5% or more of the outstanding shares of FNB Common Stock,
see "BUSINESS OF FNB -- Principal Holders of Common Stock."
THE MERGER
GENERAL. The Agreement provides for the acquisition of FNB by UPC
pursuant to the merger of FNB with and into UP Holding, a wholly-owned
subsidiary of UPC, with the effect that UP Holding will be the surviving
corporation resulting from the Merger. At the Effective Time, each share of FNB
Common Stock then issued and outstanding (excluding shares held by FNB, UPC, or
their respective subsidiaries, in each case 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 4.179 shares of UPC
Common Stock, subject to possible adjustment as described below (the "Exchange
Ratio").
In the event both of the following conditions are satisfied, (i) the
"Average Closing Price" (defined in the Agreement as the average of the daily
last sale prices of UPC Common Stock quoted on the NYSE-Composite Transactions
List (as reported by The Wall Street Journal or, if not reported thereby,
another authoritative source as reasonably selected by UPC) for the 20
consecutive full trading days on which such shares are traded on the NYSE
ending at the close of trading on the later of the date of the Special Meeting
and the date on which the last required consent of any regulatory authority
required for the Merger shall be received and any required waiting periods
shall have expired (the "Determination Date")) is less than $50.80 and (ii) (1)
the quotient obtained by dividing the Average Closing Price by $63.50 (such
quotient being the "UPC Ratio") is less than (2) the quotient obtained by
dividing the weighted average of the closing prices (the "Index Price") of 15
bank holding companies designated in the Agreement (the "Index Group") on the
Determination Date by the Index Price on January 7, 1998, less 20% (such
quotient being the "Index Ratio"), then FNB will have the right to terminate
the Agreement unless UPC elects to adjust the Exchange Ratio in the manner
described under "DESCRIPTION OF TRANSACTION -- Possible Adjustment of Exchange
Ratio." Under no circumstances would the Exchange Ratio be less than 4.179
shares of UPC Common Stock for each share of FNB Common Stock. The possible
upward adjustment of the Exchange Ratio depends on the factors mentioned above
and is not subject to a contractual limit. See "DESCRIPTION OF TRANSACTION -
Possible Adjustment of Exchange Ratio."
No fractional shares of UPC Common Stock will be issued. Rather, cash
(without interest) will be paid in lieu of any fractional share interest to
which any FNB shareholder would otherwise be entitled upon consummation of the
Merger, in an amount equal to such fractional part of a share of UPC Common
Stock multiplied by the closing price of one share of UPC Common Stock on the
NYSE (as reported by The Wall Street Journal or, if not reported thereby,
another authoritative source as reasonably selected by UPC) on the last trading
day preceding the Effective Time. See "DESCRIPTION OF TRANSACTION -- General."
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARD OF DIRECTORS OF
FNB. The FNB Board believes that the Agreement and the Merger are in the best
interests of FNB and its shareholders. THE FNB BOARD UNANIMOUSLY RECOMMENDS
THAT FNB SHAREHOLDERS VOTE FOR APPROVAL OF THE AGREEMENT AND THE PLAN OF
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<PAGE> 12
MERGER. Among other things, the FNB Board believes that the Merger will result
in a company with expanded opportunities for profitable growth and that the
combined resources of FNB and UPC will provide an enhanced ability to compete
in the changing and competitive financial services industry. Furthermore, the
UPC Common Stock is traded on the NYSE, and, accordingly, is more readily
marketable than the FNB Common Stock. See "DESCRIPTION OF TRANSACTION --
Background of and Reasons for the Merger."
In approving the Agreement and the Plan of Merger, FNB's directors
considered, among other things, FNB's and UPC's financial condition, the
financial terms and income tax consequences of the Merger, the likelihood of
the Merger being approved by regulatory authorities without undue conditions or
delay. See "DESCRIPTION OF TRANSACTION -- Background of and Reasons for the
Merger."
OPINION OF FINANCIAL ADVISOR. T. Steven Johnson & Associates, Inc.,
has rendered an opinion to the FNB Board that, based on and subject to the
procedures, matters, and limitations described in its opinion and such other
matters as it considered relevant, as of the date of its opinion, the Exchange
Ratio is fair, from a financial point of view, to the shareholders of FNB. The
opinion of T. Steven Johnson & Associates, Inc. dated as of the date of this
Proxy Statement is attached as Appendix C to this Proxy Statement. FNB
shareholders are urged to read the T. Steven Johnson & Associates, Inc.
fairness opinion in its entirety for a description of the procedures followed,
matters considered, and limitations on the reviews undertaken in connection
therewith. See "DESCRIPTION OF TRANSACTION -- Opinion of FNB's Financial
Advisor."
EFFECTIVE TIME. Subject to the conditions to the obligations of the
parties to effect the Merger, the Effective Time will occur on the date and at
the time that the Delaware Articles of Merger become effective with the
Secretary of State of the State of Delaware and the Tennessee Articles of
Merger become effective with the Secretary of State of the State of Tennessee.
Subject to the terms and conditions of the Agreement, unless otherwise agreed
upon by FNB and UPC, the parties will use their reasonable efforts to cause the
Effective Time to occur on such date as may be designated by UPC within 30 days
following the last to occur of (i) the effective date of the last consent of
any regulatory authority having authority over and approving or exempting the
Merger, (ii) the date on which the shareholders of FNB approve the Agreement
and the Plan of Merger, and (iii) the date on which all other conditions
precedent (other than those conditions which relate to actions to be taken at
the Closing) to each party's obligations under the Agreement have been
satisfied or waived (to the extent waivable by such party). See "DESCRIPTION OF
TRANSACTION -- Effective Time of the Merger," "-- Conditions to Consummation of
the Merger," and "-- Waiver, Amendment, and Termination."
NO ASSURANCE CAN BE PROVIDED THAT THE NECESSARY SHAREHOLDER AND
REGULATORY APPROVALS CAN BE OBTAINED OR THAT THE OTHER CONDITIONS PRECEDENT TO
THE MERGER CAN OR WILL BE SATISFIED. FNB AND UPC ANTICIPATE THAT ALL CONDITIONS
TO THE CONSUMMATION OF THE MERGER WILL BE SATISFIED SO THAT THE MERGER CAN BE
CONSUMMATED ON OR ABOUT MAY 31, 1998. HOWEVER, DELAYS IN THE CONSUMMATION OF
THE MERGER COULD OCCUR.
EXCHANGE OF STOCK CERTIFICATES. Promptly after the Effective Time, UPC
will cause UPB, acting in its capacity as exchange agent for UPC (the "Exchange
Agent"), to mail to each holder of record of a certificate or certificates
(collectively, the "Certificates") which, immediately prior to the Effective
Time, represented outstanding shares of FNB Common Stock, a letter of
transmittal and instructions for use in effecting the surrender and
cancellation of the Certificates in exchange for certificates representing
shares of UPC Common Stock. Cash will be paid to the holders of FNB Common
Stock in lieu of issuing any fractional shares of UPC Common Stock. In no event
will the holder of any surrendered Certificate(s) be entitled to receive
interest on any cash to be issued to such holder, and in no event will FNB,
UPC, or the Exchange Agent be liable to any holder of FNB Common Stock for any
UPC Common Stock or dividends thereon or cash delivered in good faith to a
public official pursuant to any applicable abandoned property, escheat, or
similar law.
REGULATORY APPROVAL AND OTHER CONDITIONS. The Merger is subject to the
prior approval of the Board of Governors of the Federal Reserve System (the
"Federal Reserve") and of the Alabama State Banking Department (the "Alabama
Department"). An application has been filed with each of these regulatory
authorities to seek the requisite approvals. By letter dated March 11, 1998,
the Federal Reserve advised UPC that the Merger had been
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<PAGE> 13
approved. THERE CAN BE NO ASSURANCE THAT ADDITIONAL REGULATORY APPROVALS WILL
BE OBTAINED OR AS TO THE TIMING OF ANY SUCH APPROVALS.
Consummation of the Merger is subject to various other conditions,
including receipt of the required approval of the FNB shareholders, receipt of
an opinion of counsel as to the tax-free nature of certain aspects of the
Merger, and certain other conditions. See "DESCRIPTION OF TRANSACTION --
Regulatory Approval" and "-- Conditions to Consummation of the Merger."
WAIVER, AMENDMENT, AND TERMINATION. The Agreement may be terminated
and the Merger abandoned at any time prior to the Effective Time by mutual
consent of the FNB Board and the Board of Directors of UPC (the "UPC Board"),
or by the action of the Board of Directors of either company under certain
circumstances, including, but not limited to, (i) if the Merger is not
consummated by September 30, 1998, unless the failure to consummate by such
date is due to a willful breach of the Agreement by the party seeking to
terminate and (ii) by the FNB Board, in certain circumstances, if an adjustment
is not made to the Exchange Ratio. To the extent permitted by law, the
Agreement may be amended upon the written agreement of UPC and FNB without the
approval of shareholders, whether before or after approval of the Agreement and
the Plan of Merger by FNB shareholders; provided, that after such approval,
there shall be made no amendment that modifies in any material respect the
consideration to be received by FNB shareholders without further approval of
holders of FNB Common Stock. See "DESCRIPTION OF TRANSACTION -- Possible
Adjustment of Exchange Ratio" and "-- Waiver, Amendment, and Termination."
DISSENTERS' RIGHTS. Holders of FNB Common Stock have the right under
Section 262 of the Delaware General Corporation Law ("DGCL") to dissent to the
Merger and, upon consummation of the Merger and such holders' further
compliance with Section 262 of the DGCL, to be paid in cash for their shares of
FNB Common Stock. See "DESCRIPTION OF TRANSACTION -- Dissenters' Rights", and
Appendix D hereto, which is a copy of Section 262 of the DGCL.
INTERESTS OF CERTAIN PERSONS IN THE MERGER. Certain members of FNB's
management and the FNB Board have interests in the Merger in addition to their
interests as shareholders of FNB generally. These interests relate to: (i) the
receipt by certain executive officers of FNB of new employment contracts with
First National Bank after the Merger; (ii) the receipt by certain executive
officers of restricted stock grants from UPC; (iii) the receipt by certain
directors and executive officers of FNB of payments upon cancellation of FNB's
phantom stock plan; and (iv) the continued indemnification by UPC of the former
directors, officers, employees, and agents of FNB and its subsidiaries
following consummation of the Merger. See "DESCRIPTION OF TRANSACTION --
Interests of Certain Persons in the Merger."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER. It is intended
that the Merger will be treated as a reorganization within the meaning of
Section 368 of the Internal Revenue Code of 1986, as amended (the "Code").
Accordingly, for federal income tax purposes, no gain or loss will be
recognized by an FNB shareholder upon the exchange of all of such shareholder's
shares of FNB Common Stock solely for shares of UPC Common Stock (except with
respect to cash received in lieu of a fractional share of UPC Common Stock).
Consummation of the Merger is conditioned upon receipt by UPC of an opinion of
Wyatt, Tarrant & Combs and upon receipt by FNB of an opinion of Balch &
Bingham, LLP substantially to this effect. TAX CONSEQUENCES OF THE MERGER FOR
INDIVIDUAL TAXPAYERS CAN VARY, HOWEVER, AND ALL FNB SHAREHOLDERS ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE EFFECT OF THE MERGER ON THEM
UNDER FEDERAL, STATE, LOCAL, AND FOREIGN TAX LAWS. For a further discussion of
the federal income tax consequences of the Merger, see "DESCRIPTION OF
TRANSACTION -- Certain Federal Income Tax Consequences of the Merger."
ACCOUNTING TREATMENT. It is intended that the Merger will be accounted
for as a pooling of interests transaction for accounting and financial
reporting purposes. See "DESCRIPTION OF TRANSACTION -- Accounting Treatment."
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<PAGE> 14
CERTAIN DIFFERENCES IN SHAREHOLDERS' RIGHTS. At the Effective Time,
FNB shareholders, whose rights are governed by FNB's Certificate of
Incorporation, as amended, (the "Charter"), Bylaws (the "Bylaws"), and by the
DGCL, will automatically become UPC shareholders, and their rights as UPC
shareholders will be governed by UPC's Restated Charter (the "Charter"), Bylaws
("the Bylaws"), and the Tennessee Business Corporation Act (the "TBCA"). The
rights of UPC shareholders differ from the rights of FNB shareholders in
certain important respects, including with respect to certain anti-takeover
provisions provided for in UPC's Charter and Bylaws.
See "EFFECT OF THE MERGER ON RIGHTS OF SHAREHOLDERS."
LIMITATION ON NEGOTIATIONS. Pursuant to Section 8.8 of the Agreement,
FNB is prohibited from soliciting or knowingly encouraging any "Acquisition
Proposal" (defined generally as any tender offer, exchange offer or other
proposal for a merger, consolidation, acquisition of all the stock, assets or
earning power of, or other business combination involving FNB). As protection
against possible violation of this limitation, FNB has agreed, under certain
cirsumstances, to pay to UPC the sum of $2,700,000 in immediately available
funds in the event and at the time that FNB enters into a letter of intent or
agreement with respect to an Acquisition Proposal or supports or indicates an
intent to support an Acquisition Proposal other than pursuant to the Agreement.
This provision would survive the termination of the Agreement under certain
circumstances. See "DESCRIPTION OF TRANSACTION -- Limitation on Negotiations".
CONDUCT OF BUSINESS PENDING THE MERGER. Each party has agreed in the
Agreement to, among other things, operate its business and to take no action
that would materially adversely affect the ability of any party to perform its
covenants and agreements under the Agreement. In addition, FNB has agreed not
to take certain actions relating to the operation of FNB pending consummation
of the Merger without the prior written consent of UPC, except as otherwise
permitted by the Agreement, including, among other things: (i) becoming
responsible for any obligation for borrowed money in excess of an aggregate of
$50,000, except in the ordinary course of business consistent with past
practices; (ii) paying any dividends, except as permitted by the Agreement in
accordance with past practices, or exchanging any shares of its capital stock,
issuing any additional shares of its capital stock, or giving any person the
right to acquire any such shares; (iii) acquiring control over any other
entity; (iv) subject to certain exceptions, granting any increase in
compensation or benefits, or paying any bonus, to any of its directors,
officers, or employees; or (v) except as previously disclosed to UPC or
permitted by the Agreement, modifying or adopting any employee benefit plans,
including any employment contract. See "DESCRIPTION OF TRANSACTION -- Conduct
of Business Pending the Merger."
COMPARATIVE MARKET PRICES OF COMMON STOCK
Shares of UPC Common Stock are traded on the NYSE under the symbol
"UPC." Shares of FNB Common Stock are not traded on any exchange or in the
over-the-counter market. Management of FNB is aware of only a few transfers of
FNB Common Stock since January 1, 1996. In many instances, when shares of FNB
Common Stock are sold, management of FNB is not made aware of the price per
share at which the FNB Common Stock did in fact trade. As to transactions of
which FNB management is aware, the purchase price per share of FNB Common Stock
has been in a range of from $114 to $130 per share.
The following table sets forth the reported closing sale prices per
share for UPC Common Stock and the equivalent per share prices giving effect to
the Merger (as explained below) for FNB Common Stock on (i) December 30, 1997,
the last trading day preceding the public announcement of the execution of the
Agreement, and (ii) April __, 1998, the latest practicable date prior to the
mailing of this Proxy Statement.
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<PAGE> 15
<TABLE>
<CAPTION>
UPC Equivalent Price
Common Stock Per FNB Share (1)
------------ -----------------
<S> <C> <C>
December 30, 1997 $66.68 $278.66
April __, 1998
</TABLE>
(1) The equivalent price per share of FNB Common Stock at each specified
date represents the closing sale price of a share of UPC Common Stock
on such date multiplied by an Exchange Ratio of 4.179. See
"COMPARATIVE MARKET PRICES AND DIVIDENDS."
There can be no assurance as to what the market price of the UPC
Common Stock will be if and when the Merger is consummated, or anytime
thereafter.
HISTORICAL AND PRO FORMA COMPARATIVE PER SHARE DATA
The following table sets forth certain comparative per share data
relating to earnings before extraordinary items and accounting changes, cash
dividends, and book value on: (i) a historical basis for UPC and FNB; (ii) a pro
forma combined basis per share of UPC Common Stock, giving effect to the Merger
and the Other Acquisitions; (iii) an equivalent pro forma basis per share of FNB
Common Stock, giving effect to UPC only, and (iv) an equivalent pro forma basis
per share of FNB Common Stock, giving effect to the Merger and the Other
Acquisitions. The UPC pro forma combined information and the FNB equivalent pro
forma information give effect to the Merger and the Other Acquisitions and
reflect an Exchange Ratio of 4.179 shares of UPC Common Stock for each
outstanding share of FNB Common Stock. The Merger and each of the Other Pending
Acquisitions (with the exception of the acquisitions of Duck Hill Bank, the
Charter Acquisition and the CalFed Branch Purchase) are expected to be and the
Recently Completed Acquisition of Security Bancshares, Inc. was accounted for
using the pooling of interests method of accounting. The Recently Completed
Acquisition of Sho-Me Financial Corp. was and the Other Pending Acquisitions
of Duck Hill Bank, the Charter Acquisition and the CalFed Branch Purchase are
expected to be accounted for using the purchase method of accounting. The pro
forma information for 1997 reflects the acquisition of FNB and the Other
Acquisitions as of January 1, 1997. The pro forma information for 1996 and 1995
reflects only the acquisitions of MGR, Merchants Bancshares, Inc. ("Merchants")
Peoples First Corporation ("Peoples") and AMBANC Corp. ("AMBANC") because FNB
and the Other Acquisitions (other than MGR, Merchants, Peoples and AMBANC) are
not individually or in the aggregate, considered to be material to UPC from a
financial statement presentation standpoint. Furthermore, the pro forma impact
of the CalFed Branch Purchase on the pro forma statement of earnings for each of
the three years presented has been excluded due to the lack of information
available for operation of the branches on a historical basis. See, "BUSINESS of
UPC - Recent Developments" and "PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
INFORMATION." The pro forma data are presented for informational purposes only
and are not necessarily indicative of the results of operations or combined
financial position that would have resulted had the Merger or each of the Other
Acquisitions been consummated at the dates or during the periods indicated, nor
are they necessarily indicative of future results of operations or combined
financial position. The pro forma data does not reflect preliminary estimates by
UPC of acquisition-related charges to be incurred in connection with
consummation of the Merger and the Other Acquisitions. For additional
information with respect to the estimated charges UPC anticipates it would incur
in connection with the Merger and the Other Acquisitions, see "BUSINESS OF UPC
- -- Recent Developments." For a discussion of UPC's acquisition program,
including a discussion of the significant charges UPC has incurred incidental to
its acquisition program over the past three fiscal years, see the caption
"Acquisitions" (on page 10) in UPC's 1997 Annual Report to Shareholders and Note
2 to UPC's audited consolidated financial statements for the years ended
December 31, 1997, 1996, and 1995 (on pages 49 and 50) contained in the UPC 1997
Annual Report to Shareholders. UPC's 1997 Annual Report to Shareholders is
included as Exhibit 13 to the UPC 1997 Form 10-K, and Exhibit 13 is incorporated
by reference herein to the extent indicated herein. See "DOCUMENTS INCORPORATED
BY REFERENCE."
The information shown below should be read in conjunction with, and is
qualified in its entirety by, the historical consolidated financial statements
of UPC, including the notes thereto, incorporated by reference herein, and the
consolidated financial statements of FNB and its subsidiaries for the years
ended December 31, 1997 and 1996 (and notes thereto), a copy of which is
attached hereto as Appendix E. See "DOCUMENTS INCORPORATED BY
7
<PAGE> 16
REFERENCE," "-- Selected Financial Data," "BUSINESS OF UPC -- Recent
Developments," "PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION,"
"BUSINESS OF FNB" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION OF FNB."
UNION PLANTERS CORPORATION
AND FNB
HISTORICAL AND PRO FORMA COMPARATIVE PER SHARE DATA
<TABLE>
<CAPTION>
Years Ended December 31, (1)
------------------------------------------
1997 1996 1995
------ -------- ---------
<S> <C> <C> <C>
EARNINGS BEFORE EXTRAORDINARY ITEMS
AND ACCOUNTING CHANGES
UPC
Basic.............................................. $ 2.54 $ 2.13 $ 2.79
Diluted............................................ 2.45 2.05 2.66
FNB
Earnings per common share.......................... 12.90 15.21 12.15
UPC pro forma (all Other Acquisitions, including FNB)
Basic.............................................. 2.52 2.24 2.56
Diluted............................................ 2.45 2.17 2.46
FNB equivalent pro forma (UPC only) (1)
Basic.............................................. 10.61 8.90 11.66
Diluted............................................ 10.24 8.57 11.12
FNB equivalent pro forma (all Other Acquisitions,
including FNB (1)
Basic.............................................. 10.53 9.36 10.70
Diluted............................................ 10.24 9.07 10.28
CASH DIVIDENDS PER SHARE
UPC................................................... 1.495 1.08 .98
FNB................................................... 9.00 8.25 6.25
FNB equivalent pro forma (1).......................... 6.25 4.51 4.10
</TABLE>
<TABLE>
<CAPTION>
December 31,
1997
-------------
<S> <C>
BOOK VALUE PER COMMON SHARE
UPC.................................................. $ 20.72
FNB 117.58
UPC pro forma (all Other Acquisitions
and FNB)........................................... 21.73
FNB equivalent pro forma (UPC only) (1) 86.59
FNB equivalent pro forma (all Other
Acquisitions and FNB (1) 90.81
</TABLE>
- ---------------------------------------------
(1) The equivalent pro forma per share data for FNB is computed by
multiplying UPC's pro forma information by an Exchange Ratio of 4.179
8
<PAGE> 17
SELECTED FINANCIAL DATA
The following tables present selected consolidated financial data for
UPC and FNB for the five-year period ended December 31, 1997. The information
for UPC has been derived from the consolidated financial statements of UPC,
including the audited consolidated financial statements of UPC incorporated
in this Proxy Statement by reference to the UPC 1997 Form 10-K, and should be
read in conjunction therewith and with the notes thereto. See "DOCUMENTS
INCORPORATED BY REFERENCE." The information for FNB has been derived from the
consolidated financial statements of FNB, including the audited consolidated
financial statements of FNB and its subsidiaries for the two years ended
December 31, 1997 and 1996 (and notes thereto), a copy of which is attached
to this Proxy Statement as Appendix E, and should be read in conjunction
therewith and with the notes thereto. Historical results are not necessarily
indicative of results to be expected for any future period. For additional
information concerning UPC's Other Acquisitions, see "BUSINESS OF UPC --
Recent Developments" and "PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
INFORMATION."
9
<PAGE> 18
UNION PLANTERS CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, (1)
---------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net interest income $ 770,385 $ 744,852 $ 669,451 $ 627,439 $ 558,036
Provision for losses on loans 113,633 68,948 33,917 15,989 35,235
Investment securities gains (losses) 2,104 4,099 1,433 (21,302) 6,686
Other noninterest income 359,506 316,403 292,277 237,129 228,996
Noninterest expense 697,704 731,817 607,189 634,965 550,045
----------- ----------- ----------- ----------- -----------
Earnings before income taxes, extraordinary item,
and accounting changes 320,658 264,589 322,055 192,312 208,438
Applicable income taxes 111,897 93,115 110,799 63,058 66,570
----------- ----------- ----------- ----------- -----------
Earnings before extraordinary item and accounting changes 208,761 171,474 211,256 129,254 141,868
Extraordinary item and accounting changes, net of taxes - - - - 4,505
----------- ----------- ----------- ----------- -----------
Net earnings $ 208,761 $ 171,474 $ 211,256 $ 129,254 $ 146,373
=========== =========== =========== =========== ===========
PER COMMON SHARE DATA (2)
Basic
Earnings before extraordinary item and accounting changes $ 2.54 $ 2.13 $ 2.79 $ 1.67 $ 2.19
Net earnings 2.54 2.13 2.79 1.67 2.27
Diluted
Earnings before extraordinary item and accounting changes 2.45 2.05 2.66 1.63 2.13
Net earnings 2.45 2.05 2.66 1.63 2.21
Cash dividends 1.495 1.08 .98 .88 .72
Book value 20.72 19.57 18.34 15.26 14.50
BALANCE SHEET DATA (AT PERIOD END)
Total assets $18,105,079 $18,330,588 $17,182,861 $15,893,162 $14,180,524
Loans, net of unearned income 12,658,564 12,578,571 10,917,307 10,074,458 8,077,152
Allowance for losses on loans 225,389 189,118 179,968 174,604 172,330
Investment securities 3,247,680 3,387,217 3,970,036 4,016,506 4,124,679
Total deposits 13,440,269 13,514,144 13,047,488 12,506,212 11,732,707
Short-term borrowings 831,627 961,051 974,416 887,074 392,980
Long-term debt (3)
Parent company 373,746 373,459 214,758 114,790 114,729
Subsidiary banks 1,176,158 1,332,534 1,087,273 819,982 481,193
Total shareholders' equity 1,746,866 1,618,883 1,450,546 1,202,686 1,111,158
Average assets 17,991,160 18,202,355 16,263,164 15,472,568 13,823,185
Average shareholders' equity 1,690,992 1,533,348 1,334,995 1,226,852 973,087
Average shares outstanding (in thousands) (2)
Basic 80,336 77,240 72,512 71,678 56,169
Diluted 85,195 83,542 78,798 77,579 60,832
PROFITABILITY AND CAPITAL RATIOS
Return on average assets 1.16% .94% 1.30% .84% 1.06%
Return on average common equity 12.54 11.38 16.56 10.74 15.88
Net interest income (taxable-equivalent)/
average earning assets (4) 4.79 4.56 4.60 4.56 4.58
Loans/deposits 94.18 93.08 83.67 80.56 68.84
Common and preferred dividend payout ratio 54.96 44.57 29.25 35.03 24.42
Equity/assets (period end) 9.65 8.83 8.44 7.57 7.84
Average shareholders' equity/average total assets 9.40 8.42 8.21 7.93 7.04
Leverage ratio 10.48 9.50 8.11 7.56 7.73
Tier 1 capital/risk-weighted assets 15.51 14.92 13.28 12.58 13.65
Total capital/risk-weighted assets 18.12 17.60 16.21 14.67 15.92
CREDIT QUALITY RATIOS (5)
Allowance/period end loans 1.99% 1.72% 1.82% 1.87% 2.27%
Nonperforming loans/total loans .92 .91 .85 .74 1.18
Allowance/nonperforming loans 215 188 213 252 193
Nonperforming assets/loans and foreclosed properties 1.13 1.21 1.09 1.08 1.76
Provision/average loans 1.01 .65 .35 .19 .47
Net charge-offs/average loans .72 .61 .32 .27 .34
</TABLE>
10
<PAGE> 19
(1) Reference is made to "Basis of Presentation" in Note 1 to UPC's
audited consolidated financial statements contained in the 1997 Annual
Report to Shareholders, which is incorporated by reference. See
"DOCUMENTS INCORPORATED BY REFERENCE."
(2) Share and per share amounts have been retroactively restated for
significant acquisitions accounted for as pooling of interests and to
reflect the change in presentation of earnings per share as discussed
in Notes 2 and 16 to the audited consolidated financial statements
contained in the UPC 1997 Annual Report to Shareholders, which is
incorporated by reference. See "DOCUMENTS INCORPORATED BY REFERENCE."
(3) Long-term debt includes Medium-Term Bank Notes, Federal Home Loan Bank
("FHLB") advances, Trust Preferred Securities, variable rate
asset-backed certificates, subordinated notes and debentures,
obligations under capital leases, mortgage indebtedness, and notes
payable with maturities greater than one year.
(4) Average balances and calculations do not include the impact of the net
unrealized gain or loss on available for sale securities.
(5) FHA/VA government-insured/guaranteed loans have been excluded, because
they represent minimal credit risk to UPC.
11
<PAGE> 20
FNB
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
Years Ended December 31,
---------------------------------------------------------------------------
1997 1996 1995 1994 1993
------------- ------------ ------------- ------------- -----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net interest income $ 7,813 $ 7,309 $ 6,689 $ 7,124 $ 7,013
Provision for loan losses 215 200 225 180 250
Noninterest income 1,085 1,037 879 887 869
Securities gains (losses), net 25 - 53 (36) 860
Other gains - 365 17 - -
Noninterest expense 5,144 4,148 4,082 4,185 4,137
------------- ------------ ------------- ------------- -----------
Earnings before income taxes 3,564 4,363 3,331 3,610 4,355
Income taxes 984 1,322 900 959 1,304
------------- ------------ ------------- ------------- -----------
Net earnings $ 2,580 $ 3,041 $ 2,431 $ 2,651 $ 3,051
============= ============ ============= ============= ===========
PER COMMON SHARE DATA
Net earnings $ 12.90 $ 15.21 $ 12.15 $ 13.27 $ 15.33
Cash dividends 9.00 8.25 6.25 4.50 4.25
Book value 117.58 113.36 106.48 100.18 91.85
BALANCE SHEET DATA (AT PERIOD END)
Total assets $ 211,168 $ 191,488 $ 174,602 $ 166,658 $ 154,646
Loans, net of unearned income 128,682 114,338 107,315 101,237 90,950
Allowance for loan losses 1,411 1,359 1,284 1,196 1,147
Securities 69,994 66,299 56,856 56,197 56,857
Deposits 169,623 156,994 150,879 139,848 134,699
Total stockholders' equity 23,516 22,673 21,296 20,019 18,281
Average assets 204,060 186,570 169,811 163,921 152,163
Average stockholders' equity 23,387 22,165 20,966 19,515 17,790
Average shares outstanding 200,000 200,000 200,000 199,841 199,027
PROFITABILITY AND CAPITAL RATIOS
Return on average assets 1.26% 1.63% 1.43% 1.62% 2.00%
Return on average stockholders' equity 11.03 13.72 11.59 13.58 17.15
Loans/deposits 75.86 72.83 71.13 72.39 67.52
Common dividend payout ratio 69.76 54.25 51.37 33.85 27.65
Equity/assets (period end) 11.14 11.84 12.20 12.01 11.82
Average stockholders' equity/
average total assets 11.46 11.88 12.35 11.91 11.69
Leverage ratio (1) 11.22 11.79 12.11 11.78 12.08
Tier 1 capital to risk-weighted assets (1) 19.15 19.65 19.83 19.28 22.25
Total capital to risk-weighted assets (1) 20.30 20.83 21.07 20.46 23.64
ASSET QUALITY RATIOS
Allowance/period end loans 1.10 1.19 1.20 1.18 1.26
Nonperforming loans/loans 0.07 0.23 0.15 0.10 0.17
Nonperforming assets/loans and
foreclosed property (2) 0.39 0.40 0.41 0.42 0.49
Provision/average loans 0.18 0.18 0.21 0.19 0.29
Net charge-offs/average loans 0.13 0.11 0.13 0.14 0.14
</TABLE>
(1) The risk-based capital ratios are based upon capital guidelines presented
by federal regulatory authorities. Under those guidelines, the required
minimum Tier 1 and Total capital to risk-weighted assets are 4% and 8%,
respectively. The required minimum leverage ratio of Tier 1 capital to
total adjusted assets is 3% to 5%.
(2) Nonperforming assets include nonaccrual loans plus foreclosed assets.
12
<PAGE> 21
SPECIAL MEETING OF FNB SHAREHOLDERS
DATE, PLACE, TIME, AND PURPOSE
This Proxy Statement is being furnished to the holders of FNB Common
Stock in connection with the solicitation by the FNB Board of proxies for use
at the Special Meeting and at any adjournments or postponements thereof at
which FNB shareholders will be asked to vote upon a proposal to approve the
Agreement and the Plan of Merger. The Special Meeting will be held at FNB's
offices, located at 408 S.E. Main Street, Wetumpka, Alabama, at 1:00 p.m.,
local time, on _________________, 1998. See "DESCRIPTION OF TRANSACTION."
RECORD DATE, VOTING RIGHTS, REQUIRED VOTE, AND REVOCABILITY OF PROXIES
The close of business on April 1, 1998, has been fixed as the FNB
Record Date for determining holders of outstanding shares of FNB Common Stock
entitled to notice of and to vote at the Special Meeting. Only holders of FNB
Common Stock of record on the books of FNB at the close of business on the FNB
Record Date are entitled to notice of and to vote at the Special Meeting. As of
the FNB Record Date, there were 200,000 shares of FNB Common Stock issued and
outstanding held by approximately 116 holders of record.
Each holder of record of shares of FNB Common Stock on the FNB Record
Date is entitled to cast one vote per share on the proposal to approve the
Agreement and the Plan of Merger, and on any other matter properly submitted
for the vote of the FNB shareholders at the Special Meeting. The presence,
either in person or by properly executed proxy, of the holders of a majority of
the outstanding shares of FNB Common Stock entitled to vote at the Special
Meeting is necessary to constitute a quorum at the Special Meeting.
FNB intends to count shares of FNB Common Stock present in person at
the Special Meeting but not voting, and shares of FNB Common Stock for which it
has received proxies but with respect to which holders of shares have abstained
on any matter, as present at the Special Meeting for purposes of determining
the presence or absence of a quorum for the transaction of business. Approval
of the Agreement and the Plan of Merger requires the affirmative vote of the
holders of at least a majority of the issued and outstanding shares of FNB
Common Stock entitled to vote at the Special Meeting. Brokers who hold shares
in street name for customers who are the beneficial owners of such shares are
prohibited from giving a proxy to vote shares held for such customers on the
approval of the Agreement and the Plan of Merger without specific instructions
from such customers. Given that the approval of the Agreement and the Plan of
Merger requires the affirmative vote of the holders of at least a majority of
the outstanding shares of FNB Common Stock entitled to vote thereon, any
abstention, non-voting share or "broker non-vote" with respect to such shares
of FNB Common Stock will have the same effect as a vote AGAINST the approval of
the Agreement and the Plan of Merger.
Shares of FNB Common Stock represented by properly executed proxies,
if such proxies are received prior to or at the Special Meeting and not
revoked, will be voted in accordance with the instructions indicated on the
proxies. IF NO INSTRUCTIONS ARE INDICATED, SUCH PROXIES WILL BE VOTED FOR THE
PROPOSAL TO APPROVE THE AGREEMENT AND THE PLAN OF MERGER AND IN THE DISCRETION
OF THE PROXYHOLDER AS TO ANY OTHER MATTER WHICH MAY COME PROPERLY BEFORE THE
SPECIAL MEETING. IF NECESSARY, THE PROXYHOLDER MAY VOTE IN FAVOR OF A PROPOSAL
TO ADJOURN THE SPECIAL MEETING IN ORDER TO PERMIT FURTHER SOLICITATION OF
PROXIES IN THE EVENT THERE ARE NOT SUFFICIENT VOTES TO APPROVE THE FOREGOING
PROPOSAL AT THE TIME OF THE SPECIAL MEETING. HOWEVER, NO PROXYHOLDER WILL VOTE
ANY PROXIES VOTED AGAINST APPROVAL OF THE AGREEMENT AND THE PLAN OF MERGER FOR
A PROPOSAL TO ADJOURN THE SPECIAL MEETING.
An FNB shareholder who has given a proxy solicited by the FNB Board
may revoke it at any time prior to its exercise at the Special Meeting by
either (i) giving written notice of revocation to the Corporate Secretary of
FNB, (ii) properly submitting to FNB a duly executed proxy bearing a later
date, or (iii) attending the Special Meeting and voting in person. All written
notices of revocation and other communications with respect to
13
<PAGE> 22
revocation of proxies should be addressed as follows: First National Bancshares
of Wetumpka, Inc., 408 S.E. Main Street, Wetumpka, Alabama 36092; Attention:
Travis Cosby, III, Secretary.
The directors and executive officers of FNB (including immediate
family members and affiliated entities) owned, as of the FNB Record Date,
74,408 shares, or approximately 37.2% of the outstanding shares of FNB Common
Stock. The directors and executive officers of FNB have indicated their intent
to vote for approval of the agreement and Plan of Merger. Assuming that occurs
then 25,593 (20.4%) of the remaining 125,592 outstanding shares of FNB Common
Stock must be voted FOR the approval of the Agreement and the Plan of Merger in
order to obtain the requisite shareholder approval.
The directors and executive officers of UPC owned, as of the FNB
Record Date, no shares of FNB Common Stock. As of the FNB Record Date, UPC held
no shares of FNB Common Stock in a fiduciary capacity for others, or as a
result of debts previously contracted, and FNB held no shares of FNB Common
Stock in a fiduciary capacity for others.
For information with respect to beneficial owners of 5% or more of the
outstanding shares of FNB Common Stock, and information with respect to the
number and percentage of outstanding shares of FNB Common Stock beneficially
owned by the directors and executive officers of FNB, see "BUSINESS OF FNB --
Principal Holders of Common Stock."
SOLICITATION OF PROXIES
Proxies may be solicited by the directors, officers, and employees of
FNB by mail, in person, or by telephone or telegraph. Such persons will receive
no additional compensation for such services. FNB may make arrangements with
brokerage firms and other custodians, nominees, and fiduciaries, if any, for
the forwarding of solicitation materials to the beneficial owners of FNB Common
Stock held of record by such persons. Any such brokers, custodians, nominees,
and fiduciaries will be reimbursed for the reasonable out-of-pocket expenses
incurred by them for such services. All expenses associated with the
solicitation of proxies, other expenses associated with the Special Meeting and
expenses related to the printing and mailing of this Proxy Statement will be
shared by UPC and FNB as provided in the Agreement. See "DESCRIPTION OF
TRANSACTION -- Expenses and Fees."
DISSENTERS' RIGHTS
Holders of FNB Common Stock have the right to dissent from the Merger
and, assuming the Merger is consummated, to receive in cash an amount
determined to be the "fair value" of their shares of FNB Common Stock. In order
to be entitled to fully exercise dissenters' rights, an FNB shareholder
choosing to dissent (a "Dissenting Shareholder") must NOT vote FOR approval of
the Agreement and the Plan of Merger and must take certain other procedural
steps to "perfect" such Dissenting Shareholder's rights under Section 262 of
the DGCL. See "DESCRIPTION OF TRANSACTION - Dissenters' Rights" and Appendix D
hereto, which is a copy of Section 262 of the DGCL governing statutory
dissenters' rights.
It is not necessary for a FNB shareholder to vote against consummation
of the Merger in order to perfect his or her right to dissent and demand
appraisal. However, no such shareholder may vote for approval and adoption of
the Agreement and the Plan of Merger and thereafter demand his or her appraisal
rights. Because all proxies submitted which do not specify how such proxy is to
be voted will be voted in favor of the adoption and approval of the Agreement
and the Plan of Merger a FNB shareholder who desires to dissent from approval
of the Merger should not submit such a proxy. A FNB shareholder who votes for
approval and adoption of the Agreement and the Plan of Merger or who submits a
proxy which does not specify how such proxy is to be voted will waive any
rights of dissent and appraisal. A vote against consummation of the Merger will
not satisfy the statutory requirement that a FNB shareholder give notice of his
or her intention to dissent and make demand for payment of his or her shares of
FNB Common Stock.
14
<PAGE> 23
RECOMMENDATION
THE FNB BOARD HAS UNANIMOUSLY APPROVED (WITH ONE DIRECTOR ABSENT) THE
AGREEMENT, THE PLAN OF MERGER, AND THE MERGER CONTEMPLATED THEREBY, BELIEVES
THAT THE PROPOSAL TO APPROVE THE AGREEMENT AND THE PLAN OF MERGER IS IN THE
BEST INTERESTS OF FNB AND ITS SHAREHOLDERS, AND RECOMMENDS THAT THE FNB
SHAREHOLDERS VOTE FOR APPROVAL OF THE AGREEMENT AND THE PLAN OF MERGER. THE
DIRECTOR WHO WAS ABSENT WHEN THE AGREEMENT, THE PLAN OF MERGER AND THE MERGER
WERE APPROVED HAS STATED TO MANAGEMENT OF FNB HIS APPROVAL OF AND CONCURRANCE
WITH THE FOREGOING.
DESCRIPTION OF TRANSACTION
The following information describes material aspects of the Merger.
This description does not purport to be complete and is qualified in its
entirety by reference to the Appendices hereto, including the Agreement and the
Plan of Merger, which are attached as Appendices A and B, respectively, to this
Proxy Statement and incorporated herein by reference. All shareholders are
urged to read the Appendices in their entirety.
GENERAL
The Agreement provides for the acquisition of FNB by UPC pursuant to
the merger of FNB with and into UP Holding, a wholly-owned subsidiary of UPC
organized under the laws of the State of Tennessee, with the effect that UP
Holding will be the surviving corporation resulting from the Merger. At the
Effective Time, each share of FNB Common Stock then issued and outstanding
(excluding shares held by FNB, UPC, or their respective subsidiaries, in each
case other than shares held in a fiduciary capacity or as a result of debts
previously contracted and shares held by dissenting shareholders) will be
converted into and exchanged for the right to receive 4.179 shares of UPC
Common Stock, subject to possible adjustment as described below (the "Exchange
Ratio").
No fractional shares of UPC Common Stock will be issued. Rather, cash
(without interest) will be paid in lieu of any fractional share to which any
FNB shareholder would be entitled upon consummation of the Merger, in an amount
equal to such fractional part of a share of UPC Common Stock multiplied by the
closing price of such common stock on the NYSE (as reported by The Wall Street
Journal or, if not reported thereby, another authoritative source as reasonably
selected by UPC) on the last trading day preceding the Effective Time.
As of the FNB Record Date, FNB had 200,000 shares of FNB Common Stock
outstanding. Based upon the Exchange Ratio, upon consummation of the Merger, UPC
will issue approximately 835,800 shares of UPC Common Stock. Accordingly, UPC
would then have outstanding approximately 84,700,983 shares of UPC Common Stock
outstanding based on the number of shares of UPC Common Stock outstanding on
March 31, 1998 (and excluding shares to be issued pursuant to Other Pending
Acquisitions and shares to be issued pursuant to the exercise of stock options
and for other purposes).
15
<PAGE> 24
POSSIBLE ADJUSTMENT OF EXCHANGE RATIO
Under certain circumstances described below, the Exchange Ratio could
be adjusted pursuant to certain provisions of the Agreement. UNDER NO
CIRCUMSTANCES WOULD THE EXCHANGE RATIO BE LESS THAN 4.179 SHARES OF UPC COMMON
STOCK FOR EACH SHARE OF FNB COMMON STOCK. An adjustment could occur if the FNB
Board elects to terminate the Agreement pursuant to the provisions of the
Agreement described below, and if UPC then elects to avoid termination of the
Agreement by increasing the Exchange Ratio.
FNB is not obligated to consummate the Merger with UPC if both:
(a) the average of the daily last sales prices (the "Average Closing
Price") of UPC Common Stock (as reported on the NYSE Composite
Transactions List) for the 20 consecutive full trading days ending on
the later of the date on which the Special Meeting is held and the
date on which the last required consent of the regulatory authorities
is received, and all required waiting periods have expired (the
"Determination Date") is less than $50.80, which represents a 20%
decline from $63.50 (the "Starting Price"), the price per share of UPC
Common Stock at the close of business on January 7, 1998, the fourth
full trading day after the announcement by press release of the Merger
(the "Starting Date");
and
(b) (i) the quotient (the "UPC Ratio") obtained by dividing the Average
Closing Price by $63.50, the Starting Price, is less than (ii) the
quotient (the "Index Ratio") obtained by dividing the weighted average
of the closing prices of the common stock of the bank holding
companies defined as the "Index Group" in the Agreement (the "Index
Price") on the Determination Date by the Index Price on January 7,
1998, the Starting Date, less 20%.
In such case, FNB has the right to terminate the Agreement during the
ten-day period commencing two days after the Determination Date by giving UPC
prompt notice of that decision. FNB may withdraw its termination notice at any
time during that ten-day period. During the five-day period after receipt of
such notice, UPC has the option to increase the consideration payable to FNB
shareholders by adjusting the Exchange Ratio in the manner described below. UPC
IS UNDER NO OBLIGATION TO ADJUST THE EXCHANGE RATIO. Should UPC elect to adjust
the Exchange Ratio, it must give FNB prompt notice of that election and of the
adjusted Exchange Ratio, in which case no termination shall have occurred
pursuant to such right of termination.
These conditions reflect the parties' agreement that FNB shareholders
will assume the risk of declines in the value of UPC Common Stock to $50.80.
Any adjustment of the Exchange Ratio below a decline in the price of UPC Common
Stock to $50.80 would be dependent on whether the Average Closing Price of UPC
Common Stock lags behind the relative performance of the common stocks of the
Index Group by more than 20%.
If the Average Closing Price is less than $50.80 per share and the UPC
Ratio is less than the Index Ratio, the FNB Board would likey elect to
terminate the Agreement so as to require UPC to consider increasing the
Exchange Ratio. If the FNB Board elects to terminate the Agreement, UPC would
then determine whether to proceed with the Merger at the higher Exchange Ratio.
In making this determination, the principal factors UPC will consider include
the projected effect of the Merger on UPC's pro forma earnings per share and
whether UPC's assessment of FNB's earning potential as part of UPC justifies
the issuance of an increased number of shares of UPC Common Stock. If UPC
declines to adjust the Exchange Ratio, FNB may elect to proceed without the
adjustment, provided it does so within 12 days of the Determination Date,
although it has no current intention to so elect without resoliciting the
approval of the FNB shareholders. In making such determination, the FNB Board
will take into account, consistent with its fiduciary duties, all relevant
facts and circumstances that exist at such time, including, without limitation,
information concerning the business, financial condition, results of operations
and prospects of UPC (including the recent performance of UPC Common Stock, the
historical financial data of UPC, customary statistical measurements of UPC's
financial performance and the future prospects for UPC Common Stock following
the Merger), the business, financial condition, results of operations and
prospects of
16
<PAGE> 25
FNB, developments in the banking industry and the advice of its financial
advisor and legal counsel. UPC IS UNDER NO OBLIGATION TO ADJUST THE EXCHANGE
RATIO.
The operation of the adjustment mechanism can be illustrated by three
scenarios. (For purposes of the scenarios, it has been assumed that the initial
Exchange Ratio is 4.179, the Starting Price of UPC Common Stock is $63.50, and
the Index Price, as of the Starting Date, is $100).
(1) The first scenario occurs if the Average Closing Price is not less
than $50.80. Under this scenario, regardless of any comparison between
the UPC Ratio and the Index Ratio, there would be no possible
adjustment to the Exchange Ratio, even though the value of the
consideration to be received by FNB shareholders could have fallen
from a pro forma $265.36 per share of FNB Common Stock as of the
Starting Date (4.179 multiplied by $63.50), to as low as $212.29 per
share of FNB Common Stock, as of the Determination Date (4.179
multipied by $50.80).
(2) The second scenario occurs if the Average Closing Price is less than
$50.80, but does not represent a decline from the Starting Price of
significantly more (i.e. more than 20%) than the decline of the common
stock prices of the Index Group. Under this scenario, there also would
be no possible adjustment to the Exchange Ratio, even though the value
of the consideration to be received by FNB shareholders would have
fallen from a pro forma $265.36 per share of FNB Common Stock as of
the Starting Date, to an amount based on the then lower Average
Closing Price of UPC Common Stock, as of the Determination Date.
(3) The third scenario occurs if both the Average Closing Price declines
below $50.80 and the UPC Ratio is below the Index Ratio (i.e., UPC's
stock price has declined by more than 20% relative to the price of
shares of the Index Group). Under this scenario, the adjustment in the
Exchange Ratio is designed to ensure that the FNB shareholders receive
shares of UPC Common Stock having a value (based upon the Average
Closing Price) that corresponds to at least $50.80 or a 20% decline
from the stock price performance reflected by the Index Group,
whichever is the lesser amount.
For example, if the Average Closing Price were $45.00, and the ending
Index Price, as of the Determination Date, were $95, the UPC Ratio
(.7086) [the result of dividing $45.00 by $63.50] would be below the
Index Ratio (.75) [the result of dividing $95 by $100 =.95, less .20],
FNB could terminate the Agreement unless UPC elected within five days
to increase the Exchange Ratio to equal 4.423, which represents the
lesser of (a) 4.7175 [the result of dividing $212.29 (the product of
$50.80 and the 4.179 Exchange Ratio) by the Average Closing Price
($45.00), rounded to the nearest thousandth] and (b) 4.423 [the result
of dividing 3.1342 (the product of the Index Ratio (.75) and 4.179) by
the UPC Ratio (.7086), rounded to the nearest thousandth]. Based upon
the assumed $45.00 Average Closing Price, the new Exchange Ratio would
represent a value to the FNB shareholders of $199.035 per share of FNB
Common Stock.
If, on the other hand, the Average Closing Price were $45.00, and the
ending Index Price, as of the Determination Date, were $100, the UPC
Ratio (.7086) would be below the Index Ratio (.80) [the result of
dividing $100 by $100 or 1.00, less .20). FNB could terminate the
Agreement unless UPC elected within five days after its receipt from
FNB of notice of intent to terminate, to increase the Exchange Ratio
to equal 4.7175, which represents the lesser of (a) 4.7175 [the result
of dividing $212.29 (the product of $50.80 and the 4.179 Exchange
Ratio) by the Average Closing Price ($45.00), rounded to the nearest
thousandth] and (b) 4.7180 [the result of dividing 3.3432 (the product
of the Index Ratio (.80) and 4.179) by the UPC Ratio (.7086), rounded
to the nearest thousandth]. Based upon the assumed $45.00 Average
Closing Price, the new Exchange Ratio would represent a value to the
FNB shareholders of $212.89 per share of FNB Common Stock.
The actual market value of a share of UPC Common Stock at the
Effective Time, at the time certificates for those shares are delivered
following surrender and exchange of Certificates for shares of FNB Common Stock
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and at any time thereafter, may be more or less than the Average Closing Price.
FNB shareholders are urged to obtain current market quotations for UPC Common
Stock. See "COMPARATIVE MARKET PRICES AND DIVIDENDS."
BACKGROUND OF AND REASONS FOR THE MERGER
BACKGROUND OF THE MERGER. During the last 15 years, a large number of
banks in the State of Alabama have been acquired by larger bank holding
companies both within and outside the State. The ability of banks to be
acquired by financial institutions in other states (i.e., interstate banking)
has prompted much of this recent acquisition activity. With the increase in the
consolidation of the banking industry in Alabama and in the southeast,
"independent" or community banks face greater competition from larger banking
institutions and increasingly confront the possibility that if the banking
industry continues to consolidate, the attractiveness of independent or
community banks to larger institutions could be diminished.
From time to time since 1991, the FNB Board has considered the
acquisition of FNB by another financial institution. In 1991, the CEO of FNB
conducted negotiations with a large banking institution in the State of Alabama
regarding such an acquisition. FNB retained a financial institutions consultant
to advise it in these negotiations. After serious discussions, however, FNB
terminated negotiations because the price discussed by the acquiror was deemed
insufficient by FNB's Board. The executive committee of FNB's Board, however,
advised the CEO to keep it informed of other potential transactions should the
CEO be approached by other financial institutions.
In 1995, the same financial institution that had contacted FNB in 1991
again approached FNB regarding an acquisition. At that point, the CEO, at the
request of FNB's Board, contacted five additional banking institutions of
substantial size both within and outside the State of Alabama to determine
whether such institutions would have an interest in considering an acquisition
of FNB. Of those contacted, two expressed some interest and recommended a price
for discussion, but in each case the price suggested was below the price
recommended by the financial institution that had made the initial contact.
Accordingly, FNB began negotiations with that institution. FNB management
conducted a survey of what that institution had paid for other banks in several
transactions and determined that the price under consideration for FNB was
significantly below what the institution had previously paid in those other
transactions. Also, the financial institution informed FNB that its approach to
acquisitions was to consolidate and centralize as many operations as possible,
to consider the reduction of employees and the elimination of some banking
offices, and, thus, possibly to reduce the services provided by First National
Bank in Wetumpka and Elmore County. Based on these considerations, and the fact
that the financial institution would not increase its negotiating price to a
level comparable to that paid by it in other transactions, FNB terminated
negotiations.
The FNB Board then decided that management of FNB should concentrate
on positioning FNB for a possible acquisition at some time in the future and,
in particular, to concentrate on increasing earnings, but, in the meantime, to
remain independent and provide quality service to its banking customers and the
community.
In the summer of 1997, a bank consulting firm, First Capital Group,
L.L.C., Memphis, Tennessee, through its representative contacted the CEO of FNB
to inquire whether FNB would have an interest in discussing a possible
acquisition by UPC. Although such firm was not acting on behalf of UPC, it
suggested an acquisition price based on market value of UPC common stock that
it believed could be achieved. FNB declined to pursue discussions because it
considered this price, which was comparable to the price discussed by the other
financial institution in 1995, to be inadequate.
In the fall of 1997, the CEO of FNB was again contacted by the same
representative of First Capital Group who stated that he thought that UPC might
be willing to discuss a higher price than previously indicated. The executive
committee of the FNB Board instructed FNB's CEO to discuss with UPC the level
of interest UPC might have in FNB. In October, after preliminary telephone
conferences between UPC and FNB, the President and the Chairman of UPC met with
FNB's CEO and its executive vice president at FNB's office in Wetumpka to
discuss a possible acquisition. FNB considered UPC to be an attractive
acquisition possibility because UPC did not operate banking offices in central
Alabama and an acquisition of FNB by UPC would represent UPC's first banking
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<PAGE> 27
presence in FNB's market area. UPC indicated that it wished to expand the First
National Bank's operations in Wetumpka and Elmore County and to operate First
National Bank with substantial local control, which FNB understood was its
operating philosophy for banks it acquired.
Several telephone conversations between representatives of UPC and FNB
ensued. During this time, the executive committee of the board, together with
FNB's executive vice president, met with the representative of First Capital
Group who reviewed with the executive committee previous acquisitions of banks
by both UPC and other financial institutions in the southeast, including the
terms and purchase prices in such transactions. The representative of First
Capital distributed to the executive committee a written analysis of such
transactions and advised the executive committee informally that, in his
opinion, the purchase price being discussed by UPC was favorable to FNB and its
shareholders. FNB's CEO continued to consult with First Capital after this
meeting, and prior to the signing of a letter of interest, and FNB agreed to
pay First Capital a fee of $125,000, 75 percent of which is only to be paid if
the Merger is successfully completed, plus $2,000 for expenses.
FNB's CEO and executive vice president met with UPC representatives in
Memphis on December 12, 1997. At that meeting, extensive discussions were held
regarding UPC's offer of a purchase price for FNB based upon a multiple of 17
times 1997 estimated earnings. FNB's CEO stated that unless UPC would negotiate
further based upon a multiple of 18 times earnings, FNB could not negotiate
further. After some discussion, UPC agreed to the 18 multiple. Based upon the
market value at that time of the number of shares UPC would issue in an
acquisition of FNB, the proposed transaction had a market value of
approximately $54 million and a multiple of 18 times estimated 1997 earnings.
This price was substantially higher than any price previously discussed between
FNB and any of the other financial institutions with whom FNB had contact.
On December 16, UPC distributed a draft letter of interest outlining
an acquisition on the basic terms, including price, discussed in this Proxy
Statement.
On December 18, 1997, the FNB Board, with one director absent, met to
consider the UPC proposal. Counsel to FNB was also present at that meeting to
discuss the proposal and the financial institution acquisition process
generally. The board unanimously approved the letter of interest, and it was
decided that the board would meet again on December 30 to consider the status
of negotiations and the possible signing of a definitive agreement.
Prior to December 30, representatives of FNB, including counsel,
negotiated the terms of a proposed definitive agreement. A draft of the
definitive agreement was distributed to each member of FNB's Board on December
22. Following discussions between December 18 and December 30, a definitive
agreement was negotiated on the terms set forth in the Agreement and the Plan
of Merger.
On December 30, 1997, the FNB Board, with one director absent, met to
consider the definitive agreement. After a discussion of the progress of the
negotiations since December 18 and a review by counsel of the terms of the
proposed agreement, the FNB Board voted unanimously to approve the Agreement,
and a press release announcing the Merger was issued by FNB. The Agreement
contains a provision requested by the FNB Board that it is a condition to
consummation of the Merger that FNB receive for inclusion in this Proxy
Statement an opinion of a financial adviser that the terms of the Merger are
fair to the shareholders of FNB from a financial point of view. See "--Opinion
of FNB's Financial Adviser." On the date the Agreement was signed, the number
of shares of UPC common stock to be distributed in the Merger had a market
value of $55.7 million which represented a multiple of 18.58 times 1997
estimated earnings.
REASONS FOR THE MERGER. The FNB Board believes that the Merger is fair
to, and in the best interests of, FNB and its shareholders. Accordingly, the
FNB Board, with one director absent, unanimously approved the Agreement and it
recommends that the holders of FNB common stock vote FOR the approval of the
Agreement. The director who was absent during the votes on the transaction has
since advised FNB management that he supports the Agreement and concurs in the
recommendation to FNB shareholders. See"--BACKGROUND OF AND REASONS FOR THE
MERGER-Background of the Merger" and "--Opinion of FNB's Financial Advisor."
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The terms of the Merger, including the Exchange Ratio, are the result
of arm's-length negotiations between representatives of FNB and UPC. The FNB
Board did not assign any relative or specific weight to any factor it
considered in deciding to approve the Agreement. In reaching its decision,
however, FNB's Board consulted with counsel regarding the terms of the
transaction and with management of FNB. It also considered the advice the
executive committee had received during the negotiations from First Capital
Group, the history of FNB in negotiating possible acquisitions in the past, and
the condition in the Agreement regarding the receipt of an opinion of a
financial advisor regarding the fairness of the Merger to the shareholders of
FNB from a financial point of view. The FNB Board also considered the factors
and circumstances set forth in "-BACKGROUND OF AND REASONS FOR THE MERGER -
Background of the Merger," and the following:
(a) The alternatives to the Merger, including remaining an independent
institution in light of the current economic conditions of the market and the
competitive disadvantages to smaller institutions as compared to the larger
financial institutions operating in the market;
(b) The value of the consideration to be received by FNB's
shareholders relative to the book value and earnings per share of FNB common
stock;
(c) The financial condition and results of operations of UPC;
(d) The financial terms of recent business combinations in the
financial services industry in the southeast and a comparison of the multiples
of selected combinations with the terms of the Merger;
(e) The marketability of UPC common stock, including the fact that the
Merger will enable the shareholders of FNB to exchange their shares of common
stock for shares of common stock of a larger and more diversified entity, the
stock of which is more widely held and more actively traded;
(f) The competitive and regulatory environment for financial
institutions generally;
(g) The tax free nature of the Merger to stockholders of FNB;
(h) The operating philosophy of UPC and the ability of UPC to provide
comprehensive financial services to its markets; and
(i) The general consolidation in the banking industry and the
possibility that as banking institutions consolidate, the number of potential
acquirors may be diminished, thus reducing future opportunities for
acquisitions.
ACCORDINGLY, THE BOARD OF DIRECTORS OF FNB UNANIMOUSLY
RECOMMENDS THAT YOU EXECUTE THE ENCLOSED PROXY AND THAT YOU VOTE FOR APPROVAL
OF THE AGREEMENT AND THE PLAN OF MERGER.
UPC'S REASONS FOR THE MERGER. In adopting the Agreement, the Plan of
Merger, and the Merger, the UPC Board considered a number of additional factors
concerning the benefits of the Merger. Without assigning any relative or
specific weights to the factors, the UPC Board considered the following
additional material factors:
(a) review, based in part on a presentation by UPC's management, of
(i) the business, operations, earnings, and financial condition, including the
FNB levels and asset quality, of FNB on a historical, prospective, and pro
forma basis and in comparison to other financial institutions in the area, (ii)
the demographic, economic, and financial characteristics of the markets in
which FNB operates, including existing competition, history of the market areas
with respect to financial institutions, and average demand for credit, on a
historical and prospective basis, and (iii) the results of UPC's due diligence
review of FNB; and
(b) a variety of factors affecting and relating to the overall
strategic focus of UPC, including UPC's desire to expand into markets in
Alabama served by FNB.
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OPINION OF FNB'S FINANCIAL ADVISOR
After the Agreement and the Plan of Merger had been negotiated and
executed and in order to satisy a condition precedent to FNB's obligation to
consummate the Merger that the FNB Board shall have received an opinion that
the consideration to be received by FNB shareholders as a result of the Merger
is fair to them from a financial point of view, the FNB Board retained T.
Steven Johnson & Associates, Inc., Marietta, Georgia, to act as an independent
financial advisor to FNB in connection with the Merger.
T. Stephen Johnson & Associates, Inc. (the "Advisor") is an investment
banking and financial services firm located in Atlanta, Georgia. As part of its
investment banking business, Advisor engages in the review of the fairness of
bank acquisition transactions from a financial perspective and in the valuation
of banks and other businesses and their securities in connection with mergers,
acquisitions and other transactions. Neither Advisor nor any of its affiliates
has a material financial interest in FNB or UPC. Advisor was selected to advise
FNB's Board based upon its familiarity with FNB, the regional community banking
industry and its knowledge of the banking industry as a whole. No instructions
were given or limitations imposed by the FNB Board upon Advisor regarding the
scope of its investigation or the procedures it followed in rendering its
opinion.
Advisor has rendered its opinion (the "Fairness Opinion") to the FNB
Board that the consideration to be paid the holders of FNB Common Stock upon
consummation of the Merger is fair to such shareholders from a financial point
of view. A copy of the Fairness Opinion, which sets forth certain assumptions
made, matters considered and limitations on the review undertaken, is attached
as Appendix C to this Proxy Statement and should be read in its entirety. The
summary of the Fairness Opinion set forth herein is qualified in its entirety
by reference to the text of the Fairness Opinion.
In arriving at its Fairness Opinion, Advisor performed merger analyses
described below. Advisor reviewed certain publicly available business and
financial information relating to FNB and UPC. Advisor also considered certain
financial and stock market data of FNB and UPC, compared that data with similar
data for certain other publicly-held banks and bank holding companies in the
southeastern United States and considered the financial terms of certain other
recent comparable community bank acquisition transactions in the southeastern
United States, as further discussed below. Advisor also considered such other
information, financial studies, analyses and investigations and financial,
economic and market criteria that it deemed relevant. In connection with its
review, Advisor did not independently verify the foregoing information and
relied on such information as being complete and accurate in all material
respects. Financial forecasts prepared by FNB management and submitted to
Advisor were based on assumptions believed by Advisor to be reasonable and to
reflect currently available information, but Advisor did not independently
verify such information. Advisor did not make an independent evaluation or
appraisal of the assets of FNB or UPC.
In connection with rendering the Fairness Opinion, Advisor performed a
variety of financial analyses, including those summarized below. The summary
set forth below does not purport to be a complete description of the analyses
performed by Advisor in this regard. The preparation of a fairness opinion
involves various determinations as to the most appropriate and relevant methods
of financial analysis and the application of these methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
summary description. Accordingly, notwithstanding the separate factors
summarized below, Advisor believes that its analyses must be considered as a
whole and that selecting portions of its analyses and the factors considered by
it, without considering all analyses and factors, could create an incomplete
view of the evaluation process underlying its opinion. In performing its
analyses, Advisor made numerous assumptions with respect to industry
performance, business and economic conditions and other matters, many of which
are beyond FNB's or UPC's control. The analyses performed by Advisor are not
necessarily indicative of actual values or future results, which may be
significantly more or less favorable than suggested by such analyses. No
company or transaction considered as a comparison in the analyses is identical
to FNB, UPC or the Merger. Accordingly, an analysis of the results of such
comparisons is not mathematical; rather, it involves complex considerations and
judgments concerning differences in financial and operating characteristics of
companies and other factors that could affect the public trading value of the
companies involved in such comparisons. In addition, the analyses do not
purport to be appraisals or reflect
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the process by which or the prices at which businesses actually may be sold or
the prices at which any securities may trade at the present time or at any time
in the future.
Merger Analysis: The merger consideration to be received by FNB
shareholders is based on a set exchange ratio for UPC common shares. The value
of the shares to be received is the current market value of UPC Common Stock
that currently trades on the NYSE. The March 11, 1998 closing price for UPC
Common Stock was $62.25 per share. Based on this closing price, the transaction
value of each of the 200,000 FNB Common Stock would be $260.14. This
transaction value equals 2.168 times December 31, 1997 book value and 17.103
times 1997 earnings per share.
Comparable Transactions Analysis: The Advisor reviewed the Merger as
of March 11, 1998, for the purpose of determining purchase premiums that could
be used in comparing the Merger with other announced transactions. The Advisor
reviewed the purchase premiums paid in 44 transactions that were announced
between January 1, 1997 and March 9, 1998 involving selling institutions with
total assets between $100 million and $300 million headquartered in the
southeastern United States. Of these transactions, 13 involved selling
institutions that have been determined to be comparable transactions. They
include institutions representing commercial bank institutions with total
equity greater than 10.00 percent of total assets. A listing of these
transactions is included as part of the Fairness Opinion text included as
Appendix C.
Historical/Projected Earnings Growth and Dividends: The Advisor
reviewed historical earnings growth and dividend payouts in an effort to
project future earnings growth and dividend payouts. It was determined that FNB
shareholders will receive an equivalent annual dividend of $8.36 per share
after the merger, compared to $9.00 per share paid in 1997, a 7.2 percent
reduction. However, UPC has experienced significantly higher earnings growth
and assuming continued earnings growth, the post merger dividend yield should
increase faster, offsetting the initial reduction.
FNB has agreed to pay a fee to the Advisor in the amount of $25,000,
payable at the Effective Time.
EFFECTIVE TIME OF THE MERGER
Subject to the conditions to the obligations of the parties to effect
the Merger, the Effective Time will occur on the date and at the time that the
Delaware Articles of Merger reflecting the Merger become effective with the
Secretary of State of the State of Delaware and the Tennessee Articles of
Merger become effective with the Secretary of State of the State of Tennessee.
Subject to the terms and conditions of the Agreement, unless otherwise agreed
upon in writing by UPC and FNB, the parties will use their reasonable efforts
to cause the Effective Time to occur on such date as may be designated by UPC
within 30 days following the last to occur of (i) the effective date of the
last required consent of any regulatory authority having authority over and
approving or exempting the Merger (including any requisite waiting period in
respect thereof), (ii) the date on which the shareholders of FNB approve the
Agreement and the Plan of Merger, and (iii) the date on which all other
conditions precedent (other than those conditions which relate to actions to be
taken at the Closing) to each party's obligations under the Agreement have been
satisfied or waived (to the extent waivable by such party).
No assurance can be provided that the necessary shareholder and
regulatory approvals can be obtained or that other conditions precedent to the
Merger can or will be satisfied. FNB and UPC anticipate that all conditions to
consummation of the Merger will be satisfied so that the Merger can be
consummated on or about May 31, 1998. However, delays in the consummation of
the Merger could occur.
The Board of Directors of either FNB or UPC generally may terminate
the Agreement and the Plan of Merger if the Merger is not consummated by
September 30, 1998, unless the failure to consummate the transactions
contemplated by the Agreement on or before such date is caused by any willful
breach of the Agreement by the party seeking termination or certain other
specific conditions exist. See "-- Conditions to Consummation of the Merger"
and "-- Waiver, Amendment, and Termination."
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DISSENTERS' RIGHTS
Holders of record of FNB Common Stock who follow the procedures
specified by Section 262 of the DGCL ("Section 262") will be entitled to
appraisal by the Delaware Court of Chancery and payment of the "fair value" of
their FNB Common Stock at the Effective Time, excluding value resulting from
the accomplishment or expectation of the Merger but including "a fair rate of
interest" thereon.
THE FOLLOWING SUMMARY OF THE PROVISIONS OF SECTION 262 IS NOT INTENDED
TO BE A COMPLETE STATEMENT OF SUCH PROVISIONS, THE FULL TEXT OF WHICH FOLLOWS
IN APPENDIX D, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE THERETO.
A holder of record of FNB Common Stock electing to exercise appraisal
rights (1) must deliver to FNB, before the vote at the FNB Special Meeting, a
written demand for appraisal of such shares of common stock made by or on
behalf of the record holder reasonably informing FNB of the identity of such
holder and of such holder's intention to demand the appraisal of such holder's
FNB Common Stock and (2) must not vote in favor of the agreement and the Plan
of Merger which provide for the Merger. The requirement of such written demand
is in addition to and separate from the requirement that such shares not be
voted in favor of the Agreement and the Plan of Merger, and the requirement of
such written demand is not satisfied by voting against the Agreement and the
Plan of Merger either in person or by proxy. The requirement that such shares
not be voted in favor of the Agreement and the Plan of Merger will be satisfied
if no proxy is returned and such shares are not voted in person. Because a
properly executed and delivered proxy which is left blank will, unless revoked,
be voted FOR approval of the Agreement and the Plan of Merger, in order to be
assured that such holder's FNB Common Stock are not voted in favor of the
Agreement and the Plan of Merger, a holder of FNB Common Stock electing to
exercise appraisal rights who votes by proxy must not leave the proxy blank but
must (i) vote AGAINST the approval of the Agreement and the Plan of Merger or
(ii) ABSTAIN from voting. NEITHER A VOTE AGAINST APPROVAL OF THE AGREEMENT AND
THE PLAN OF MERGER NOR AN ABSTENTION WILL SATISFY THE REQUIREMENT THAT A
WRITTEN DEMAND FOR APPRAISAL BE DELIVERED TO FNB BEFORE THE VOTE ON THE
AGREEMENT AND THE PLAN OF MERGER AT THE SPECIAL MEETING.
Only a holder of record of FNB Common Stock is entitled to assert
appraisal rights for the shares registered in the holder's name. The appraisal
rights may be asserted with respect to all or less than all of the FNB Common
Stock held by such holder. The demand should be executed by or for the holder
of record, fully and correctly, as the holder's name appears on the holder's
FNB Common Stock certificates. If the shares are owned of record in a fiduciary
capacity, such as by a trustee, guardian or custodian, execution of the demand
should be made in that capacity, and if the shares are owned of record by more
than one person, as in a joint tenancy or tenancy in common, the demand should
be executed by or for all joint owners. An authorized agent, including one of
two or more joint owners, may execute the demand for appraisal for a holder of
record; however, the agent must identify the record holder or holders and
expressly disclose the fact that, in executing the demand, the agent is acting
as agent for the record holder. A record holder, such as a broker, who holds
FNB Common Stock as nominee for the beneficial owner may exercise appraisal
rights with respect to the shares held for one or more beneficial owners while
not exercising such rights for other beneficial owners. In such case, the
written demand should set forth the number of shares covered by it. WHERE NO
NUMBER OF SHARES OF FNB COMMON STOCK IS EXPRESSLY MENTIONED, THE DEMAND WILL BE
PRESUMED TO COVER ALL SHARES HELD IN THE NAME OF THE RECORD HOLDER.
Within 10 days after the Effective Time, UP Holding, as the surviving
corporation in the Merger, will send notice of the effectiveness of the Merger
to each holder of record of FNB Common Stock at the Effective Time who duly
filed with FNB a written demand for appraisal in accordance with the foregoing.
Within 120 days after the Effective Time, UP Holding or any former holder of
FNB Common Stock who has satisfied the foregoing provisions may file a petition
in the Delaware Court of Chancery demanding a determination of the "fair value"
of the FNB Common Stock at the Effective Time. Shareholders seeking to exercise
appraisal rights should not assume that UP Holding will file a petition with
respect to the appraisal of the value of their shares of FNB Common Stock or
that UP Holding will initiate any negotiations with respect to the "fair value"
of such FNB Common Stock. IT IS THE OBLIGATION OF THE HOLDERS OF FNB COMMON
STOCK TO INITIATE ALL NECESSARY ACTION TO
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PERFECT THEIR APPRAISAL RIGHTS WITHIN THE TIME PERIODS PRESCRIBED IN SECTION
262. IF NO PETITION IS TIMELY FILED BY EITHER UP HOLDING OR A HOLDER OF FNB
COMMON STOCK, ALL APPRAISAL RIGHTS WILL BE LOST, NOTWITHSTANDING ANY PREVIOUSLY
SUBMITTED WRITTEN DEMAND FOR APPRAISAL.
Within 120 days after the Effective Time, any former holder of FNB
Common Stock who has complied with the requirements for the exercise of
appraisal rights, as discussed above, is entitled, upon written request, to
receive from UP Holding a statement setting forth the aggregate number of
shares of FNB Common Stock not voted in favor of the Merger and with respect to
which demands for appraisal have been made and the aggregate number of holders
of such dissenting shares. Such statement must be mailed within 10 days after
the written request therefor has been received by FNB.
If a petition for appraisal is timely filed, at the hearing of such
petition the Court will determine the stockholders who have become entitled to
appraisal rights and will appraise the FNB Common Stock owned by such
stockholders, determining the fair value exclusive of any element of value
arising from the accomplishment or expectation of the Merger, together with a
fair rate of interest, if any, to be paid upon the amount determined to be the
fair value. In determining fair value, the Court will take into account all
relevant factors. The costs of the appraisal proceeding may be assessed against
one or more parties to the proceeding as the court may consider equitable. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding (including, without limitation, reasonable attorney's fees and the
fees and expenses of experts) to be charged pro rata against the value of all
FNB Common Stock entitled to an appraisal.
From and after the Effective Time, any holder of FNB Common Stock who
has properly demanded an appraisal in compliance with Section 262 will not
thereafter be entitled to vote his or her shares for any purpose or to receive
payment of dividends or other distributions on his or her shares (other than
those payable to stockholders of record as of a date prior to the Effective
Time). If no petition for an appraisal is filed within the time provided by
Section 262, or if a stockholder delivers to UP Holding a written withdrawal of
his or her demand for an appraisal and an acceptance of the Merger, either
within 60 days after the Effective Time or thereafter with the written approval
of UP Holding, then the right of such stockholder to an appraisal will cease.
FAILURE TO FOLLOW PROPERLY ALL PROCEDURES SPECIFIED IN SECTION 262
WILL RESULT IN A LOSS OF STOCKHOLDER'S APPRAISAL RIGHTS.
For a discussion of the Federal income tax consequences of a receipt
of cash for shares of FNB Common Stock, see "DESCRIPTION OF TRANSACTION -
Certain Income Tax Consequences."
DISTRIBUTION OF UPC STOCK CERTIFICATES
Promptly after the Effective Time, UPC and FNB will cause UPB, acting
in its capacity as Exchange Agent, to mail to the former shareholders of FNB a
letter of transmittal, together with instructions for the exchange of the
Certificates representing shares of FNB Common Stock for certificates
representing shares of UPC Common Stock.
FNB SHAREHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY
RECEIVE THE LETTER OF TRANSMITTAL AND INSTRUCTIONS.
Upon surrender to the Exchange Agent of Certificates for FNB Common
Stock, together with a properly completed letter of transmittal, there will be
issued and mailed to each holder of FNB Common Stock surrendering such items a
certificate or certificates representing the number of shares of UPC Common
Stock to which such holder is entitled and a check for the amount to be paid in
lieu of any fractional share (without interest), if any, together with all
undelivered dividends or distributions in respect of such shares (without
interest thereon), if any. UPC will not be obligated to deliver the
consideration to which any former holder of FNB Common Stock is entitled as a
result of the Merger until the holder surrenders such holder's Certificates
representing the shares of FNB Common Stock. Whenever a dividend or other
distribution is declared by UPC on UPC Common Stock, the
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record date for which is at or after the Effective Time, the declaration will
include dividends or other distributions on all shares issuable pursuant to the
Agreement, but beginning 30 days after the Effective Time, no dividend or other
distribution payable after the Effective Time with respect to UPC Common Stock
will be paid to the holder of any unsurrendered FNB Common Stock Certificate
until the holder duly surrenders such Certificate. Upon surrender of such FNB
Common Stock Certificate, however, both the UPC Common Stock certificate,
together with all undelivered dividends or other distributions (without
interest) and any undelivered cash payment to be paid in lieu of a fractional
share (without interest), will be delivered and paid with respect to the shares
represented by such Certificate. In the event any FNB Common Stock Certificate
has been lost, stolen, or destroyed, upon the making of an affidavit of that
fact by the person claiming the Certificate to be lost, stolen, or destroyed
and, if required by UPC, the posting by such person of a bond in such amount as
UPC may reasonably direct as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent will issue in
exchange for such lost, stolen, or destroyed Certificate the shares of UPC
Common Stock and cash in lieu of fractional shares deliverable in respect
thereof pursuant to the Agreement.
At the Effective Time, other than with respect to holders of shares of
FNB Common Stock who dissent from the Merger pursuant to Section 262 of the
DGCL, the stock transfer books of FNB will be closed to holders of FNB Common
Stock and no transfer of shares of FNB Common Stock by any such holder will
thereafter be made or recognized. If Certificates representing shares of FNB
Common Stock are presented for transfer after the Effective Time, they will be
canceled and exchanged for shares of UPC Common Stock and a check for the
amount due in lieu of fractional shares and undelivered dividends, if any,
deliverable in respect thereof.
LIMITATION ON NEGOTIATIONS
Section 8.8 of the Agreement provides that FNB shall not solicit or
knowingly encourage any Acquisition Proposal by any person. Furthermore, except
to the extent necessary to comply with the fiduciary duties of the FNB Board,
as advised by legal counsel, FNB is prohibited from furnishing any non-public
information that it is not legally obligated to furnish, negotiating with
respect to or entering into any agreement with respect to, any Acquisition
Proposal. FNB must promptly notify UPC immediately following receipt of any
Acquisition Proposal. As protection against possible violation of this
limitation, FNB has agreed, under certain circumstances, to pay to UPC the sum
of $2,700,000 in immediately available funds in the event and at the time that
FNB enters into a letter of intent or agreement with respect to an Acquisisiton
Proposal or supports or indicates an intent to support an Acquisition Proposal
other than pursuant to the Agreement. The limitation would survive termination
of the Agreement in certain circumstances. This provision may have, or may have
had, the effect of discouraging competing offers to acquire or merge with FNB.
CONDITIONS TO CONSUMMATION OF THE MERGER
Consummation of the Merger is subject to various conditions, including
(i) receipt of the approval of the shareholders of FNB of the Agreement and the
Plan of Merger, and the consummation of the transactions contemplated thereby,
including the Merger, as and to the extent required by the law or by the
provisions of any governing instrument (ii) receipt of certain regulatory
approvals required for consummation of the Merger, (iii) receipt by UPC of a
written opinion of counsel from Wyatt, Tarrant & Combs and by FNB of a written
opinion of counsel from Balch & Bingham, LLP as to the tax-free nature of the
Merger (except to the extent of cash received), (iv) receipt of approval of the
shares of UPC Common Stock issuable pursuant to the Merger for listing on the
NYSE, subject to official notice of issuance, (v) the Registration Statement
being declared effective under the Securities Act, (vi) the accuracy, as of the
date of the Agreement and as of the Effective Time, of the representations and
warranties of FNB and UPC as set forth in the Agreement, (vii) the performance
of all agreements and the compliance with all covenants of FNB and UPC as set
forth in the Agreement, (viii) receipt of all consents required for consummation
of the Merger or for the preventing of any default under any contract or permit
which, if not obtained or made, is reasonably likely to have, individually or in
the aggregate, a material adverse effect on FNB or UPC, (ix) receipt by UPC of a
letter from Price Waterhouse LLP, its independent accountants, to the effect
that the Merger will qualify for pooling-of-interests accounting treatment, (x)
the absence of any law or order or any action taken by any court, governmental,
or regulatory authority of competent
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jurisdiction prohibiting, restricting, or making illegal the consummation of
the transactions contemplated by the Agreement, (xi) receipt by UPC of
agreements from each affiliate of FNB (xii) receipt by FNB of an opinion of a
financial advisor that the consideration to be received by the shareholders of
FNB in the Merger is fair from a financial point of view; and (xiii)
satisfaction of certain other conditions, including the receipt of various
certificates from the officers of FNB and UPC. See "-- Regulatory Approval" and
"-- Waiver, Amendment, and Termination."
No assurance can be provided as to when or if all of the conditions
precedent to the Merger can or will be satisfied or waived by the party
permitted to do so. Except in limited circumstances, in the event the Merger is
not effected on or before September 30, 1998, the Agreement may be terminated
and the Merger abandoned by the Board of Directors of either FNB or UPC. See
"-- Waiver, Amendment, and Termination."
REGULATORY APPROVAL
THE MERGER MAY NOT PROCEED IN THE ABSENCE OF RECEIPT OF THE REQUISITE
REGULATORY APPROVAL. THERE CAN BE NO ASSURANCE THAT SUCH REGULATORY APPROVAL
WILL BE OBTAINED OR AS TO THE TIMING OF SUCH APPROVAL. APPLICATIONS FOR THE
APPROVAL DESCRIBED BELOW HAVE BEEN SUBMITTED TO THE APPROPRIATE REGULATORY
AUTHORITIES.
It is a condition to the consummation of the Merger that UPC and FNB
shall have received all applicable regulatory approvals to consummate the
transactions contemplated by the Agreement. There can be no assurance that such
approvals will not contain terms, conditions or requirements which cause such
approvals to fail to satisfy such condition to the consummation of the Merger.
Neither FNB nor UPC are aware of any material governmental approvals
or actions that are required for consummation of the Merger, except as
described below. Should any other approval or action be required, it is
presently is contemplated that such approval or action would be sought.
The Merger is subject to the prior approval of the Federal Reserve,
pursuant to Section 3 of the BHC Act. In evaluating the Merger, the Federal
Reserve must consider, among other factors, the financial and managerial
resources and future prospects of the institutions and the convenience and
needs of the communities to be served. The relevant statutes prohibit the
Federal Reserve from approving the Merger if (i) it would result in a monopoly
or be in furtherance of any combination or conspiracy to monopolize or attempt
to monopolize the business of banking in any part of the United States or (ii)
its effect in any section of the country could be to substantially lessen
competition or to tend to create a monopoly, or if it would result in a
restraint of trade in any other manner, unless the Federal Reserve should find
that any anticompetitive effects are outweighed clearly by the public interest
and the probable effect of the transaction in meeting the convenience and needs
of the communities to be served. The Merger may not be consummated until the
30th day (which the Federal Reserve may reduce to 15 days) following the date
of the Federal Reserve approval, during which time the United States Department
of Justice would be afforded the opportunity to challenge the transaction on
antitrust grounds. The commencement of any antitrust action would stay the
effectiveness of the approval of the agencies, unless a court of competent
jurisdiction should specifically order otherwise. By letter dated March 11,
1998, the Federal Reserve advised UPC that the Merger had been approved.
The Merger also is subject to the approval of the Alabama Department.
In its evaluation, this regulatory authority will take into account
considerations similar to those applied by the Federal Reserve.
WAIVER, AMENDMENT, AND TERMINATION
To the extent permitted by law, the Agreement may be amended by a
subsequent writing signed by each of the parties upon the approval of the Board
of Directors of each of the parties, whether before or after shareholder
approval of the Agreement and the Plan of Merger has been obtained; provided
however, that after any such approval by the holders of FNB Common Stock,
except as contemplated by the Agreement, there shall be made no amendment that
modifies in any material respect the consideration to be received by FNB
shareholders in the
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Merger without the further approval of the holders of FNB Common Stock. In
addition, prior to or at the Effective Time, either FNB or UPC, or both, acting
through their respective Boards of Directors, chief executive officers, or
other authorized officers, may waive any default in the performance of any term
of the Agreement by the other party, may waive or extend the time for the
compliance or fulfillment by the other party of any and all of its obligations
under the Agreement, and may waive any of the conditions precedent to the
obligations of such party under the Agreement, except any condition that, if
not satisfied, would result in the violation of any applicable law or
governmental regulation. No such waiver will be effective unless written and
unless executed by a duly authorized officer of FNB or UPC, as the case may be.
The Agreement and the Plan of Merger may be terminated and the Merger
abandoned at any time prior to the Effective Time (i) by the mutual consent of
the Boards of Directors of FNB and UPC; (ii) by the FNB Board or the UPC Board
(a) in the event of any inaccuracy of any representation or warranty of the
other party contained in the Agreement which cannot be or has not been cured
within 30 days after giving written notice to the breaching party of such
inaccuracy and which inaccuracy would provide the terminating party the ability
to refuse to consummate the Merger under the applicable standards set forth in
the Agreement (provided that the terminating party is not then in breach of any
representation or warranty contained in the Agreement under the applicable
standards set forth in the Agreement or in material breach of any covenant or
other agreement contained in the Agreement), (b) in the event of a material
breach by the other party of any covenant or agreement contained in the
Agreement which cannot be or has not been cured within 30 days after the giving
of written notice to the breaching party of such breach (provided that the
terminating party is not then in breach of any representation or warranty
contained in the Agreement under the applicable standards set forth in the
Agreement or in material breach of any covenant or other agreement contained in
the Agreement), (c) if (1) any consent of any regulatory authority required for
consummation of the Merger and the other transactions contemplated by the
Agreement has been denied by final nonappealable action, or if any action taken
by such authority is not appealed within the time limit for appeal or (2) the
shareholders of FNB fail to vote their approval of the Agreement and the
transactions contemplated thereby as required by the DGCL and the Agreement at
the Special Meeting, or (d) if the Merger is not consummated by September 30,
1998, provided that the failure to consummate is not caused by any willful
breach of the Agreement by the party electing to terminate, or certain other
events arise which prevent consummation by such date, such as litigation arising
in connection with an Acquisition Proposal by a third party; or (iii) by the FNB
Board pursuant to the relevant provisions of the Agreement described in "--
Possible Adjustment of Exchange Ratio."
If the Merger is terminated as described above, the Agreement and the
Plan of Merger will become void and have no effect, except that certain
provisions of the Agreement, including those relating to the obligations to
share certain expenses, maintain the confidentiality of certain information
obtained, and return all documents obtained from the other party under the
Agreement, will survive. In addition, termination of the Agreement will not
relieve any breaching party from liability for any uncured willful breach of a
representation, warranty, covenant, or agreement giving rise to such
termination. See "-- Expenses and Fees."
CONDUCT OF BUSINESS PENDING THE MERGER
Pursuant to the Agreement, FNB has agreed that unless the prior
written consent of UPC has been obtained, and except as otherwise expressly
contemplated in the Agreement, each of FNB and its subsidiaries will (i)
operate its business only in the usual, regular, and ordinary course, (ii) use
reasonable efforts to preserve intact its business organization and assets and
maintain its rights and franchises, and (iii) take no action which would (a)
materially adversely affect the ability of any party to obtain any consents
required for the transactions contemplated by the Agreement or prevent the
transactions contemplated by the Agreement, including the Merger, from
qualifying for pooling-of-interests accounting treatment or as a reorganization
within the meaning of Section 368(a) of the Code (see "-- Certain Federal
Income Tax Consequences of the Merger"), or (b) materially adversely affect the
ability of any party to perform its covenants and agreements under the
Agreement.
In addition, FNB has agreed that, except as specifically permitted by
the Agreement or other documents or instruments executed in connection with the
Agreement, prior to the earlier of the Effective Time or termination of
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the Agreement, FNB will not, except with the prior written consent of the chief
executive officer, president, or chief financial officer of UPC (which consent
shall not be unreasonably withheld), agree or commit to do, or permit any of
its subsidiaries to agree or commit to do, any of the following: (i) amend the
Charter, Bylaws, or other governing instruments of FNB or any FNB subsidiary
(each a "FNB company" and together, the "FNB companies"); (ii) incur any
additional debt obligation or other obligation for borrowed money (other than
indebtedness of an FNB company to another FNB company) in excess of an
aggregate of $50,000 (for the FNB companies on a consolidated basis) except in
the ordinary course of business of the FNB subsidiaries consistent with past
practices (which shall include, for First National Bank, the creation of
deposit liabilities, purchases of federal funds, advances from the Federal
Reserve Bank or the Federal Home Loan Bank, and entry into repurchase
agreements fully secured by U.S. government or agency securities), or impose,
or suffer the imposition, on any material asset of any FNB company of any lien
or permit any such lien to exist (other than in connection with deposits,
repurchase agreements, bankers acceptances, "treasury tax and loan" accounts
established in the ordinary course of business, the satisfaction of legal
requirements in the exercise of trust powers, and liens in effect as of the
date of the Agreement that were previously disclosed to UPC by FNB); (iii)
repurchase, redeem, or otherwise acquire or exchange (other than exchanges in
the ordinary course under employee benefit plans), directly or indirectly, any
shares, or any securities convertible into any shares, of the FNB stock of any
FNB company, or declare or pay any dividend or make any other distribution in
respect of any FNB Common stock, provided that FNB may (to the extent legally
and contractually permitted to do so), but shall not be obligated to, declare
and pay regular quarterly cash dividends on the shares of FNB Common Stock at a
rate not in excess of $2.25 per share, with usual and regular record and
payment dates in accordance with past practice, provided, that, notwithstanding
the provisions of the Agreement, the parties shall cooperate in selecting the
Effective Time to ensure that, with respect to the quarterly period in which
the Effective Time occurs, the holders of FNB Common Stock do not become
entitled to receive both a dividend in respect of their FNB Common Stock and a
dividend in respect of UPC Common Stock or fail to be entitled to receive any
dividend; (iv) except for the Agreement, issue, sell, pledge, encumber,
authorize the issuance of, enter into any contract to issue, sell, pledge,
encumber, or authorize the issuance of, or otherwise permit to become
outstanding, any additional shares of FNB Common Stock, or any other capital
stock, or any stock appreciation rights, or any option, warrant, conversion, or
other right to acquire any such stock, or any security convertible into any
such stock; (v) adjust, split, combine, or reclassify any capital stock of any
FNB company or issue or authorize the issuance of any other securities in
respect of or in substitution for shares of FNB Common Stock, or sell, lease,
mortgage, or otherwise dispose of or otherwise encumber any shares of capital
stock of any FNB company (unless any such shares of stock are sold or otherwise
transferred to another FNB company) or any assets having a book value in excess
of $50,000 other than in the ordinary course of business for reasonable and
adequate consideration; (vi) except for purchases of investment securities
acquired in the ordinary course of business consistent with past practices,
purchase any securities or make any material investment, either by purchase of
stock or securities, contributions to FNB, asset transfers, or purchase of any
assets, in any person other than a wholly-owned FNB subsidiary, or otherwise
acquire direct or indirect control over any person, with certain exceptions;
(vii) grant any increase in compensation or benefits to the employees or
officers of any FNB company, except in the ordinary course of business
consistent with past practices as previously disclosed to UPC by FNB or as
required by law; pay any severance or termination pay or any bonus other than
pursuant to written policies or written contracts in effect on the date of the
Agreement and previously disclosed to UPC by FNB; enter into or amend any
severance agreements with officers of any FNB company; grant any material
increase in fees or other increases in compensation or other benefits to
directors of any FNB company or voluntarily accelerate the vesting of any stock
options or other stock-based compensation or employee benefits (other than the
acceleration of vesting which occurs under a benefit plan upon a change of
control of FNB); (viii) enter into or amend any employment contract between any
FNB company and any person (unless such amendment is required by law) that the
FNB company does not have the unconditional right to terminate without
liability (other than liability for services already rendered), at any time on
or after the Effective Time; (ix) adopt any new employee benefit plan of any
FNB company or terminate or withdraw from, or make any material change in or
to, any existing employee benefit plans of any FNB company other than any such
change that is required by law or that, in the opinion of counsel, is necessary
or advisable to maintain the tax qualified status of any such plan, or make any
distribution from such employee benefit plans, except as required by law or the
terms of the plans, or in a manner consistent with past practices; (x) make any
material change in any tax or accounting methods or systems of internal
accounting controls, except as may be appropriate to conform to changes in tax
laws or regulatory accounting requirements or generally accepted accounting
principles; (xi) commence any litigation
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other than in accordance with past practice or settle any litigation involving
any liability of any FNB company for material money damages or restrictions
upon the operations of any FNB company; or (xii) except in the ordinary course
consistent with past practice, enter into, modify, amend, or terminate any
material contract (excluding any loan contract) or waive, release, compromise,
or assign any material rights or claims.
FNB has also agreed that, except with respect to the Agreement, the
Plan of Merger, and the transactions contemplated thereby, no FNB company or
any representatives thereof shall directly or indirectly solicit any
Acquisition Proposal or, except to the extent necessary to comply with the
fiduciary duties of the FNB Board as advised by counsel, furnish any non-public
information that it is not legally obligated to furnish, negotiate with respect
to, or enter into any contract with respect to, any Acquisition Proposal, but
FNB 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. See "-- Limitation on
Negotiations."
The Agreement also provides that from the date of the Agreement until
the earlier of the Effective Time or the termination of the Agreement, UPC
covenants and agrees that it will (i) continue to conduct its business and the
business of its subsidiaries in a manner designed, in its reasonable judgment,
to enhance the long-term value of the UPC Common Stock and the business
prospects of UPC and its subsidiaries and (ii) take no action which would (a)
materially adversely affect the ability of any party to obtain any consents
required for the transactions contemplated by the Agreement or prevent the
transactions contemplated by the Agreement, including the Merger, from
qualifying for pooling-of-interests accounting treatment or as a reorganization
within the meaning of Section 368(a) of the Code (see "-- Certain Federal Income
Tax Consequences of the Merger"), (b) materially adversely affect the ability of
any party to perform its covenants and agreements under the Agreement, or (c)
result in UPC entering into an agreement with respect to an Acquisition
Proposal, with a third party which could be reasonably expected to result in the
Merger not being consummated; provided, that the foregoing shall not prevent UPC
or any UPC subsidiary from acquiring any other assets or businesses or from
discontinuing or disposing of any of its assets or business if such action is,
in the reasonable judgment of UPC, desirable in the conduct of the business of
UPC and the UPC subsidiaries and would not, in the reasonable judgment of UPC,
likely delay the Effective Time to a date subsequent to September 30, 1998.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
Consummation of the Merger will not alter the present Board of
Directors or management team of UPC or UP Holding immediately after the Merger
is consummated. The current officers and directors of First National Bank will
continue to serve in their respective capacities on behalf of First National
Bank. UP Holding, as sole shareholder of First National Bank at that time, may
alter the composition of the Board of Directors of First National Bank. First
National Bank would continue to be operated as a separate bank subsidiary of UP
Holding until such time as it is merged with and into UPB, which is currently
expected to occur prior to year-end 1998. At that time executive officers of
First National Bank would most likely become regional officers of UPB and
directors of First National Bank could be offered positions as advisory
directors of UPB. Information concerning the management of UPC is included in
the documents incorporated herein by reference. See "DOCUMENTS INCORPORATED BY
REFERENCE." For additional information regarding the interests of certain
persons in the Merger, see "-- Interests of Certain Persons in the Merger."
UP Holding will be the surviving corporation resulting from the Merger
and shall continue to be governed by the laws of the State of Tennessee and
operate in accordance with its Charter and Bylaws.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
GENERAL. Certain members of FNB's management and the FNB Board may be
deemed to have interests in the Merger that are in addition to their interests
as shareholders of FNB generally. The FNB Board was aware of these interests
and considered them, among other matters, in approving the Agreement and the
transactions contemplated thereby.
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EMPLOYMENT AGREEMENTS. Mr. Robert M. Barrett, Mr. Travis Cosby III and
Mr. Michael R. Morgan will be offered employment agreements with First National
Bank after consummation of the Merger. The employment agreements will provide
for a three year employment term which can be renewed automatically for one
year at the end of the third year. The employment agreements will provide these
executives with a base salary in an amount commensurate with salaries of
similarly situated employees of UPC, and these executives will be entitled to
participate in the various employee benefit plans offered by UPC. The
employment agreements will provide that if the executive is terminated without
cause anytime during the three year term, he will be paid an amount equal to
the greater of (i) his base salary for the remainder of the term, or (ii) 6
months base salary. Furthermore, if the executive is terminated without cause
within one year after a change in control of UPC, he would be paid an amount
equal to the greater of (i) his base salary for the remainder of the term, or
(ii) 12 months base salary. The employment agreements will also contain
provisions prohibiting such executives from competing with First National Bank
or UPC for one year after their termination of employment under certain
conditions.
RESTRICTED STOCK GRANTS. UPC has agreed to make restricted stock
grants under UPC's 1992 Stock Incenitive Plan for 4,000 shares of restricted
UPC Common Stock to Mr. Robert M. Barrett and Mr. Travis Cosby, III and 2,000
shares to Mr. Michael R. Morgan upon consummation of the Merger. These UPC
restricted stock grants would vest 25% on the date the Merger is consummated
and on each of the first three anniversary dates of the Effective Time of the
Merger, provided the recipient was still employed by UPC or one of its
subsidiaries. The restricted stock grants would fully vest in the event of a
change of control of UPC, should the recipient die, or should the recipients's
employment be terminated other than for cause. Pursuant to UPC's 1992 Incentive
Stock Plan, shares of UPC Common Stock may be granted to an employee, at no
cost to the employee, but they are subject to restrictions on the sale,
transfer, exchange, hypothication, pledge or other encumbrance of such shares
of restricted stock, the right to vote such stock or the right to receive
dividends on such stock. However, the recipient would retain the right to
receive dividends on the vested portion of such stock and to vote the vested
portion of such stock. The recipient would also be entitled to other rights of
shareholders of UPC Common Stock (except as noted above) including the right to
compensation for such shares in the event UPC is acquired.
TERMINATION OF FNB PHANTOM STOCK PLAN. Immediately prior to the
Effective Time, FNB will terminate its existing Phantom Stock Plan pursuant to
which it has granted 2,000 "Performance Units" to each of Mr. Barrett and Mr.
Cosby. As a result of the termination of such Phantom Stock Plan, Mr. Barrett
would be paid approximately $356,540 and Mr. Cosby would be paid approximately
$356,540.
INDEMNIFICATION; DIRECTORS AND OFFICERS INSURANCE. The Agreement
provides that UPC will, subject to the conditions set forth therein, indemnify
the present and former directors, officers, employees, and agents of FNB and
its subsidiaries against all Liabilities (as defined in the Agreement) arising
out of actions or omissions occurring at or prior to the Effective Time
(including the transactions contemplated by the Agreement) to the full extent
permitted under Tennessee law, FNB's Charter and Bylaws, and any indemnity
agreements previously entered into by FNB or any of its subsidiaries and any
director, officer, employee, or agent of FNB or any of its subsidiaries. This
provision of the Agreement is consistently included in UPC's standard form
merger agreement and is not intended to broaden in any manner the scope of
indemnification to which the present and former directors, officers, employees,
and agents of FNB and its subsidiaries are entitled, but serves to ratify the
legal obligations of FNB and its subsidiaries (to be assumed by UP Holding upon
consummation of the Merger) to provide indemnification in accordance with
Delaware law, FNB's Charter and Bylaws, and any indemnification agreements to
which FNB or its subsidiaries is a party with an indemnified person. The
indemnification provided under the provisions of such instruments will be
subject to the same standards that are currently applicable for determining
whether indemnified parties are entitled to indemnification under such
instruments.
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 FNB SHAREHOLDERS WHO HOLD THEIR FNB 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; IT DOES NOT TAKE INTO ACCOUNT POSSIBLE CHANGES IN SUCH
LAWS OR INTERPRETATIONS, INCLUDING
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AMENDMENTS TO APPLICABLE STATUTES OR REGULATIONS OR CHANGES IN JUDICIAL OR
ADMINISTRATIVE RULINGS, SOME OF WHICH MAY HAVE RETROACTIVE EFFECT. THIS SUMMARY
DOES NOT PURPORT TO ADDRESS ALL ASPECTS OF THE POSSIBLE FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER AND IS NOT INTENDED AS TAX ADVICE TO ANY PERSON. IN
PARTICULAR, AND WITHOUT LIMITING THE FOREGOING, THIS SUMMARY DOES NOT ADDRESS
THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO FNB SHAREHOLDERS IN LIGHT
OF THEIR PARTICULAR CIRCUMSTANCES OR STATUS (INCLUDING, FOR EXAMPLE, FOREIGN
PERSONS, TAX-EXEMPT ENTITIES, DEALERS IN SECURITIES, INSURANCE COMPANIES,
CORPORATIONS, HOLDERS WHO ACQUIRED FNB COMMON STOCK PURSUANT TO THE EXERCISE OF
AN EMPLOYEE STOCK OPTION OR RIGHT OR OTHERWISE AS COMPENSATION, AND HOLDERS WHO
HOLD FNB COMMON STOCK AS PART OF A HEDGE, STRADDLE, OR CONVERSION TRANSACTION).
NOR DOES THIS SUMMARY ADDRESS ANY CONSEQUENCES OF THE MERGER UNDER ANY STATE,
LOCAL, ESTATE, OR FOREIGN TAX LAWS. FNB SHAREHOLDERS, THEREFORE, ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF
THE MERGER, INCLUDING TAX RETURN REPORTING REQUIREMENTS, THE APPLICATION AND
EFFECT OF FEDERAL, FOREIGN, STATE, LOCAL, AND OTHER TAX LAWS, AND THE
IMPLICATIONS OF ANY PROPOSED CHANGES IN THE TAX LAWS.
Each party's obligation to consummate the Merger is conditioned upon
the receipt by UPC of the opinion of Wyatt, Tarrant & Combs, counsel to UPC,
and upon the receipt by FNB of the opinion of Balch & Bingham, LLP, counsel to
FNB (collectively, the "Tax Opinions"), each dated the Effective Time, in form
and substance reasonably satisfactory to its client, on the basis of facts,
representations and assumptions set forth or referred to in such opinions which
are consistent with the state of facts existing at the Effective Time,
substantially to the effect that the Merger will be treated for federal income
tax purposes as a reorganization within the meaning of Section 368(a) of the
Code, and, accordingly, for federal income tax purposes:
(a) No gain or loss will be recognized by the FNB shareholders
who exchange all of their FNB Common Stock solely for UPC
Common Stock pursuant to the Merger (except with respect to
cash received in lieu of a fractional share interest in UPC
Common Stock);
(b) The aggregate tax basis of the UPC Common Stock received by
FNB shareholders who exchange all of their FNB Common Stock
solely for UPC Common Stock pursuant to the Merger will be
the same as the aggregate tax basis of the FNB Common Stock
surrendered in exchange therefor (reduced by any amount
allocable to the fractional share interest in UPC Common
Stock for which cash is received);
(c) The holding period of UPC Common Stock received by FNB
shareholders in the Merger will include the period during
which the shares of FNB Common Stock surrendered in exchange
therefor were held, provided that the FNB Common Stock was
held as a capital asset at the Effective Time; and
(d) Neither FNB, UPC nor UP Holding will recognize gain or loss
as a consequence of the Merger.
In rendering the Tax Opinions, such counsel shall require and be
entitled to rely upon representations and covenants contained in certificates
of officers of FNB, UPC, and others. The Tax Opinions do not address any state,
local, or other tax consequences of the Merger. In addition, the Tax Opinions
do not bind the Internal Revenue Service (the "IRS") nor preclude the IRS from
adopting a contrary position.
Based upon the current ruling position of the IRS, cash received by a
holder of FNB Common Stock in lieu of a fractional share interest in UPC Common
Stock will be treated as received in exchange for such fractional share
interest, and gain or loss will be recognized for federal income tax purposes
measured by the difference between the amount of cash received and the portion
of the basis of the share of FNB Common Stock allocable to such fractional
share interest. Such gain or loss will constitute capital gain or loss if FNB
Common Stock was held as a capital asset at the Effective Time, and will be a
long-term capital gain or loss if the holding period for such shares was
greater than one year at the Effective Time. Any capital gain recognized as a
result of the Merger will be taxed at rates applicable to capital gains. The
tax rate applicable to capital gains of an individual taxpayer varies depending
on the taxpayer's holding period for such shares. Pursuant to recently enacted
legislation, in the
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case of an individual, any such capital gain will be subject to a maximum
federal income tax rate of (A) 20% if the holder's holding period in such stock
was more than 18 months on the date of the Effective Time and (B) 28% if the
holder's holding period was more than one year but not more than 18 months on
the date of the Effective Time. The deductibility of capital losses is subject
to limitations for both individuals and corporations.
A Dissenting Shareholder will recognize gain or loss measured by the
difference between the value received by such shareholder of his or her shares
of FNB Common Stock and his or her tax basis in such stock.
ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for as a pooling
of interests. Under the pooling-of-interests method of accounting, the recorded
amounts of the assets and liabilities of FNB will be carried forward at their
previously recorded amounts. Since the Merger is not considered material to UPC
from a financial statement presentation standpoint, the operating results of
FNB will be included in UPC's results from the Effective Time of the Merger
forward.
In order for the Merger to qualify for pooling-of-interests accounting
treatment, substantially all (90% or more) of the outstanding FNB Common Stock
must be exchanged for UPC Common Stock with substantially similar terms. There
are certain other criteria that must be satisfied in order for the Merger to
qualify as a pooling of interests, some of which cannot be satisfied until
after the Effective Time. In addition, it is a condition to closing that Price
Waterhouse LLP deliver a letter to UPC to the effect the Merger will qualify
for pooling-of-interests accounting treatment.
For information concerning certain conditions to be imposed on the
exchange of FNB Common Stock for UPC Common Stock in the Merger by affiliates
of FNB and certain restrictions to be imposed on the transferability of the UPC
Common Stock received by those affiliates in the Merger in order, among other
things, to ensure the availability of pooling-of-interests accounting
treatment, see "--Resales of UPC Common Stock."
EXPENSES AND FEES
The Agreement provides that each of the parties will bear and pay its
own expenses in connection with the transactions contemplated by the Agreement,
including fees and expenses of its own financial or other consultants,
investment bankers, accountants, and counsel, except that each of UPC and FNB
will bear and pay the filing fees payable in connection with the Registration
Statement and this Proxy Statement and the printing costs and certain other
third-party costs in connection with the Registration Statement and this Proxy
Statement based on the relative asset sizes of the parties at December 31,
1997.
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RESALES OF UPC COMMON STOCK
UPC Common Stock to be issued to shareholders of FNB in connection
with the Merger will be registered under the Securities Act. All shares of UPC
Common Stock received by holders of FNB Common Stock and all shares of UPC
Common Stock issued and outstanding immediately prior to the Effective Time
will be freely transferable upon consummation of the Merger by those
shareholders of FNB not deemed to be "Affiliates" of FNB or UPC. "Affiliates"
generally are defined as persons or entities who control, are controlled by, or
are under common control with FNB or UPC at the time of the Special Meeting
(generally, executive officers, directors, and 10% or greater shareholders).
Rule 145 promulgated under the Securities Act restricts the sale of
UPC Common Stock received in the Merger by Affiliates and certain of their
family members and related interests. Under the rule, during the one year
period following the Effective Time, Affiliates of FNB or UPC may resell
publicly the UPC Common Stock received by them in the Merger within certain
limitations as to the amount of UPC Common Stock sold in any three-month period
and as to the manner of sale. After the one-year period, such Affiliates of FNB
who are not Affiliates of UPC may resell their shares without restriction. The
ability of Affiliates to resell shares of UPC Common Stock received in the
Merger under Rule 145 will be subject to UPC having satisfied its Exchange Act
reporting requirements for specified periods prior to the time of sale.
Affiliates will receive additional information regarding the effect of Rule 145
on their ability to resell UPC Common Stock received in the Merger. Affiliates
also would be permitted to resell UPC Common Stock received in the Merger
pursuant to an effective registration statement under the Securities Act or an
available exemption from the Securities Act registration requirements. This
Proxy Statement does not cover any resales of UPC Common Stock received by
persons who may be deemed to be Affiliates of FNB or UPC.
FNB has agreed to use its reasonable efforts to cause each person who
may be deemed to be an Affiliate of FNB to execute and deliver to UPC not later
than 30 days prior to the Effective Time, an agreement (each, an "Affiliate
Agreement") providing that such Affiliate will not sell, pledge, transfer, or
otherwise dispose of any FNB Common Stock held by such Affiliate except as
contemplated by the Agreement or the Affiliate Agreement, and will not sell,
pledge, transfer or otherwise dispose of any UPC Common Stock received by such
Affiliate upon consummation of the Merger (i) except in compliance with the
Securities Act and the rules and regulations thereunder and (ii) until such time
as financial results covering 30 days of combined operations of UPC and FNB have
been published. Shares of UPC Common Stock issued to such Affiliates of FNB in
exchange for shares of FNB Common Stock will not be transferable until such time
as financial results covering at least 30 days of combined operations of UPC and
FNB have been published, regardless of whether each such Affiliate has provided
an Affiliate Agreement (and UPC shall be entitled to place restrictive legends
upon certificates for shares of UPC Common Stock issued to Affiliates of FNB).
Certificates representing shares of FNB Common Stock surrendered for exchange by
any person who is an Affiliate of FNB for purposes of Rule 145(c) under the
Securities Act shall be exchanged for certificates representing shares of UPC
Common Stock as described under "--Distribution of UPC Stock Certificates," with
the certificate representing such shares of UPC Common Stock containing a legend
summarizing the foregoing restrictions. Prior to publication of such results,
UPC will not transfer on its books any shares of UPC Common Stock received by an
Affiliate pursuant to the Merger. See "-- Conditions to Consummation of the
Merger."
EFFECT OF THE MERGER ON RIGHTS OF SHAREHOLDERS
As a result of the Merger, holders of FNB Common Stock will be
exchanging their shares of a Delaware corporation governed by the DGCL and
FNB's Charter and Bylaws, for shares of UPC, a Tennessee corporation governed
by the TBCA and UPC's Charter and Bylaws. Certain significant differences exist
between the rights of FNB shareholders and those of UPC shareholders. In
particular, UPC's Charter and Bylaws contain several provisions that may be
deemed to have an anti-takeover effect in that they could impede or prevent an
acquisition of UPC unless the potential acquirer has obtained the approval of
the UPC Board. The following discussion is necessarily general; it is not
intended to be a complete statement of all differences affecting the rights of
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shareholders and their respective entities, and it is qualified in its entirety
by reference to the DGCL and the TBCA as well as to UPC's Charter and Bylaws
and FNB's Charter and Bylaws.
ANTI-TAKEOVER PROVISIONS GENERALLY
The provisions of UPC's Charter and Bylaws described below under the
headings, "-- Authorized Capital Stock," "-- Amendment of Charter and Bylaws,"
"-- Classified Board of Directors and Absence of Cumulative Voting," "--
Director Removal and Vacancies," "-- Limitations on Director Liability," "--
Indemnification," "-- Special Meeting of Shareholders," "-- Actions by
Shareholders Without a Meeting," "-- Shareholder Nominations and Proposals" and
"-- Business Combinations" are referred to herein as the "Protective
Provisions." In general, one purpose of the Protective Provisions is to assist
the UPC Board in playing a role if any group or person attempts to acquire
control of UPC, so that the UPC Board can further protect the interests of UPC
and its shareholders as appropriate under the circumstances, including, if the
UPC Board determines that a sale of control is in the best interests of UPC's
shareholders, by enhancing the UPC Board's ability to maximize the value to be
received by the shareholders upon such a sale.
Although UPC's management believes the Protective Provisions are,
therefore, beneficial to UPC's shareholders, the Protective Provisions also may
tend to discourage some takeover bids. As a result, UPC's shareholders may be
deprived of opportunities to sell some or all of their shares at prices that
represent a premium over prevailing market prices. On the other hand, defeating
undesirable acquisition offers can be a very expensive and time-consuming
process. To the extent that the Protective Provisions discourage undesirable
proposals, UPC may be able to avoid those expenditures of time and money.
The Protective Provisions also may discourage open market purchases by
a potential acquirer. Such purchases may increase the market price of UPC
Common Stock temporarily, enabling shareholders to sell their shares at a price
higher than that which otherwise would prevail. In addition, the Protective
Provisions may decrease the market price of UPC Common Stock by making the
stock less attractive to persons who invest in securities in anticipation of
price increases from potential acquisition attempts. The Protective Provisions
also may make it more difficult and time consuming for a potential acquirer to
obtain control of UPC through replacing the Board of Directors and management.
Furthermore, the Protective Provisions may make it more difficult for UPC's
shareholders to replace the Board of Directors or management, even if a
majority of the shareholders believe such replacement is in the best interests
of UPC. As a result, the Protective Provisions may tend to perpetuate the
incumbent Board of Directors and management.
AUTHORIZED CAPITAL STOCK
UPC. UPC's Charter currently authorizes the issuance of up to (i)
[300,000,000] shares of UPC Common Stock, of which 83,865,183 shares were
outstanding as of March 31, 1998, and (ii) 10,000,000 shares of no par value
preferred stock ("UPC Preferred Stock" and, together with the UPC Common Stock,
"UPC Capital Stock"), of which no shares of UPC Series A Preferred Stock, and
1,478,888 shares of UPC Series E Preferred Stock were issued and outstanding as
of March 31, 1998. [At the 1998 annual meeting of shareholders of UPC, the UPC
shareholders approved an amendment to the UPC Charter to increase the number of
authorized shares of UPC Common Stock from 100,000,000 to 300,000,000 shares.
Accordingly, UPC has sufficient authorized shares of UPC Common Stock to
consummate the Merger and all Other Pending Acquisitions.]
The UPC Board may authorize the issuance of additional authorized
shares of UPC Common Stock without further action by UPC's shareholders, unless
such action is required in a particular case by applicable laws or regulations
or by any stock exchange upon which UPC Common Stock may be listed.
With certain exceptions, the UPC Board may issue, without any further
action by the shareholders, shares of UPC Preferred Stock, in one or more
classes or series, with such voting, conversion, dividend, and liquidation
rights specified in UPC's Charter. In providing for the issuance of such
shares, the UPC Board may determine, among other things, the distinctive
designation and number of shares comprising a series of preferred stock, the
dividend rate or rates on the shares of such series and the relation of such
dividends to the dividends payable on other classes of stock, whether the
shares of such series shall be convertible into or exchangeable for shares of
any
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other class or series of UPC Capital Stock, the voting powers if any of such
series, and any other preferences, privileges, and powers of such series.
In the event of the voluntary or involuntary liquidation, dissolution,
distribution of assets, or winding up of UPC, the holders of any series of UPC
Preferred Stock will have priority over holders of UPC Common Stock.
The authority to issue additional authorized shares of UPC Common
Stock or UPC Preferred Stock provides UPC with the flexibility necessary to
meet its future needs without the delay resulting from seeking shareholder
approval. The authorized but unissued shares of UPC Common Stock and UPC
Preferred Stock will be issuable from time to time for any corporate purpose,
including, without limitation, stock splits, stock dividends, employee benefit
and compensation plans, acquisitions, and public or private sales for cash as a
means of raising capital. Such shares could be used to dilute the stock
ownership of persons seeking to obtain control of UPC. In addition, the sale of
a substantial number of shares of UPC voting stock to persons who have an
understanding with UPC concerning the voting of such shares, or the
distribution or declaration of a dividend of shares of UPC voting stock (or the
right to receive UPC voting stock) to UPC shareholders, may have the effect of
discouraging or increasing the cost of unsolicited attempts to acquire control
of UPC.
In 1989, the UPC Board adopted a Share Purchase Rights Plan
("Preferred Share Rights Plan") and distributed a dividend of one Preferred
Share Unit Purchase Right ("Preferred Share Right") for each outstanding share
of UPC Common Stock. In addition, under the Preferred Share Rights Plan, one
Preferred Share Right is to be automatically, and without further action by
UPC, distributed in respect to each share of UPC Common Stock issued after
adoption of the Preferred Share Rights Plan. The Preferred Share Rights are
generally designed to deter coercive takeover tactics and to encourage all
persons interested in potentially acquiring control of UPC to treat each
shareholder on a fair and equal basis. Each Preferred Share Right trades in
tandem with the share of UPC Common Stock to which it relates until the
occurrence of certain events indicating a potential change in control of UPC.
Upon the occurrence of such an event, the Preferred Share Rights would separate
from UPC Common Stock and each holder of a Preferred Share Right (other than
the potential acquiror) would be entitled to purchase certain equity securities
of UPC at prices below their market value. UPC has authorized 750,000 shares of
Series A Preferred Stock for issuance under the Preferred Share Rights Plan and
no shares have been issued as of the date of this Proxy Statement. Until a
Preferred Share Right is exercised, the holder thereof, as such, has no rights
of a shareholder of UPC, including the right to vote or receive dividends.
FNB. FNB's Charter authorizes the issuance of up to 200,000
shares of Common Stock, par value $1.00 per share, of which 200,000 shares were
issued and outstanding as of the Record Date. These are the only voting
securities of FNB authorized to be issued.
AMENDMENT OF CHARTER AND BYLAWS
UPC. The UPC Charter generally provides that amendments thereto may be
adopted in any manner permitted by the TBCA. The TBCA provides that a
corporation's charter may be amended by a majority of votes entitled to be cast
on the amendment, subject to any condition the Board of Directors may place on
its submission of the amendment to the shareholders. The UPC Charter requires a
vote of two-thirds or more of the shares of capital stock entitled to vote in an
election of directors to amend the articles of the Charter governing directors
and to remove a director from office whether with or without cause. A two-thirds
vote is also required to amend, alter, or repeal the article of the Charter
relating to business combinations.
The UPC Board may adopt, amend, or repeal the Bylaws by a majority
vote of the entire Board of Directors. The Bylaws may also be amended or
repealed by action of UPC's shareholders.
UPC's Charter provides that all corporate powers of UPC shall be
exercised by the Board of Directors except as otherwise provided by law. The
Board of Directors may designate an executive committee consisting of five or
more directors and may authorize such committee to exercise all of the
authority of the Board of Directors, including the authority to adopt, amend
and repeal the Bylaws, to submit any action to the shareholders, to fill
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vacancies on the Board of Directors or any committee, to declare dividends or
other corporate distributions, and to issue or reissue any capital stock or any
warrant, right or option to acquire capital stock of the corporation.
FNB. Under the DGCL generally, any amendment, repeal, exchange, or
alteration of any of the provisions of the Charter requires the affirmative
vote of not less than a majority of the outstanding shares of FNB Common Stock.
Under FNB's Charter, however, amendments relating to provisions in the Charter
addressing election, classification and removal of directors, director
vacancies, director nominations, director decisions on business combinations
and the call of special meetings of stockholders require the affirmative votes
of (1) two-thirds of the whole Board of Directors and two-thirds of the
Continuing Board of Directors and (2) 75 percent of the outstanding shares of
FNB Common Stock and an Independent Majority of Shareholders. For definitions
used in the foregoing clauses (1) and (2), see the terms described below at
"Business Combinations - FNB."
The power to amend, alter or repeal FNB's Bylaws, and to adopt new
Bylaws, is vested in FNB's shareholders. The Bylaws generally may be amended by
a majority vote of the shareholders.
CLASSIFIED BOARD OF DIRECTORS AND ABSENCE OF CUMULATIVE VOTING
UPC. The Charter of UPC provides that the UPC Board is divided into
three classes, with each class to be as nearly equal in number as possible. The
directors in each class serve three-year terms of office. The effect of UPC's
having a classified Board of Directors is that only approximately one-third of
the members of the Board are elected each year, which effectively requires two
annual meetings for UPC's shareholders to change a majority of the members of
the Board. The purpose of dividing the UPC Board into classes is to facilitate
continuity and stability of leadership of UPC by ensuring that experienced
personnel familiar with UPC will be represented on the UPC Board at all times,
and to permit UPC's management to plan for the future for a reasonable amount
of time. However, by potentially delaying the time within which an acquiror
could obtain working control of the UPC Board, this provision may discourage
some potential mergers, tender offers, or takeover attempts.
Pursuant to the Charter of UPC, each shareholder is entitled to one
vote for each share of UPC Common Stock held and is not entitled to cumulative
voting rights in the election of directors. With cumulative voting, a
shareholder has the right to cast a number of votes equal to the total number
of such holder's shares multiplied by the number of directors to be elected.
The shareholder has the right to distribute all of his votes in any manner
among any number of candidates or to accumulate such shares in favor of one
candidate. Directors are elected by a plurality of the total votes cast by all
shareholders. With cumulative voting, it may be possible for minority
shareholders to obtain representation on the Board of Directors. Without
cumulative voting, the holders of more than 50% of the shares of UPC Common
Stock generally have the ability to elect 100% of the directors. As a result,
the holders of the remaining UPC voting capital stock effectively may not be
able to elect any person to the Board of Directors. The absence of cumulative
voting thus could make it more difficult for a shareholder who acquires less
than a majority of the shares of UPC Common Stock to obtain representation on
the UPC Board.
FNB. FNB's Charter also provides for a classified Board of Directors
of 12 members, unless the number is changed in accordance with procedures
specified in the Charter. Each director serves for a term of three years and
approximately one-third of the Board is elected annually. There is no
cumulative voting in the election of directors.
DIRECTOR REMOVAL AND VACANCIES
UPC. UPC's Charter provides that a director may be removed by the
shareholders only upon the affirmative vote of the holders of at least
two-thirds of the voting power of all shares of capital stock entitled to vote
generally in the election of directors. The purpose of this provision is to
prevent a majority shareholder from circumventing the classified board system
by removing directors and filling the vacancies with new individuals selected
by that shareholder. Accordingly, the provision may have the effect of impeding
efforts to gain control of the Board of Directors by anyone who obtains a
controlling interest in UPC Common Stock. Vacancies on the Board of Directors
may be filled by the Board of Directors or shareholders, as provided under the
UPC Bylaws and
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the TBCA. The term of a director appointed to fill a vacancy expires at the
next meeting of shareholders at which directors are elected.
FNB. FNB's Charter provides that the affirmative vote of not less than
75 percent of the holders of the outstanding Common Stock and an Independent
Majority of Shareholders (as defined below at "Business Combinations - FNB") is
required to remove a director, or the entire board, with or without cause.
Vacancies on the Board may be filled by the vote of at least two-third's of the
Whole Board of Directors (as defined below at "Business Combinations - FNB")
and a majority of the Continuing Directors (as defined below at "Business
Combinations - FNB"). The term of a director appointed to fill a vacancy
expires at the expiration of the term to which the predecessor director was
elected.
LIMITATIONS ON DIRECTOR LIABILITY
UPC. UPC's Charter does not address the issue of director liability to
the corporation.
FNB. FNB's Charter provides that FNB's Board of Directors, when
evaluating any offer by another person to make a tender or exchange offer for
any voting shares, securities or evidences of indebtedness of FNB or to enter
into a business combination, or to engage in any transaction similar to, or
having similar effects as, any of the foregoing transactions, in addition to
considering the adequacy of the consideration, shall consider what is in the
best interests of FNB and its shareholders, giving due consideration to all
relevant factors, including, without limit, the social and economic effects of
the proposed transaction on the depositors, officers, employees, suppliers,
customers and other constituents of FNB and its subsidiaries and on the
communities in which FNB and its subsidiaries operate or are located; the
business condition, earnings prospects and reputation of the other person; the
Board of Directors' evaluation of the then value of FNB in a freely negotiated
sale; and FNB's future prospects as an independent entity.
INDEMNIFICATION
UPC. Under the TBCA, subject to certain exceptions, a Tennessee
corporation may indemnify an individual made a party to a proceeding, because
he or she is or was a director, against liability incurred in the proceeding if
(i) he or she conducted himself or herself in good faith; (ii) he or she
reasonably believed (a) in the case of conduct in his or her official capacity
with the corporation, that his or her conduct was in the best interests of the
corporation, and (b) in all other cases, that his or her conduct was at least
not opposed to the corporation's best interests; and (iii) in the case of any
criminal proceeding, he or she had no reasonable cause to believe his or her
conduct was unlawful (the "Standard of Conduct"). Moreover, unless limited by
its charter of incorporation, a Tennessee corporation must indemnify a director
who was wholly successful, on the merits or otherwise, in the defense of any
proceeding to which he or she was a party because he or she is or was a
director of the corporation against reasonable expenses incurred by him or her
in connection with the proceeding. Expenses incurred by a director in defending
a proceeding may be paid by the corporation in advance of the final disposition
of such proceeding upon receipt of a written affirmation by the director of his
or her good faith belief that he or she has met the Standard of Conduct, a
written undertaking by or on behalf of a director to repay such amount if it
shall ultimately be determined that he or she is entitled to be indemnified by
the corporation against such expenses and a determination is made that the
facts known to those making the determination would preclude indemnification.
Before any such indemnification is made, it must be determined that such
indemnification would not be precluded by the TBCA.
A director of a Tennessee corporation may also apply for court-ordered
indemnification under certain circumstances. Unless a Tennessee corporation's
charter of incorporation provides otherwise, (i) an officer of a corporation is
entitled to mandatory indemnification and is entitled to apply for
court-ordered indemnification to the same extent as a director; (ii) the
corporation may indemnify and advance expenses to an officer, employee, or
agent of the corporation to the same extent as to a director; and (iii) a
corporation may also indemnify and advance expenses to an officer, employee, or
agent who is not a director to the extent, consistent with public policy, that
may be provided by its charter of incorporation, bylaws, general or specific
action of its board of directors, or contract.
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UPC's Charter and Bylaws provide for the indemnification of its
directors and officers, to the fullest extent permitted by Tennessee law.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, or persons controlling
UPC pursuant to the foregoing provisions, UPC has been informed that, in the
opinion of the SEC, such indemnification is against public policy as expressed
in the Securities Act and is therefore unenforceable.
FNB. Section 145 of the DGCL contains detailed and comprehensive
provisions providing for indemnification of directors and officers of Delaware
corporations against expenses, judgments, fines and settlement in connection
with litigation. Under the DGCL, other than an action brought by or in the
right of FNB, such indemnification is available if it is determined that the
proposed indemnitee acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of FNB, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his or her conduct was unlawful. In actions brought by or in the right
of FNB, such indemnification is limited to expenses (including attorneys' fees)
actually and reasonably incurred in the defense or settlement of such action if
the indemnitee acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of FNB, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person has been adjudged to be liable to FNB unless and only to the
extent that the Delaware Court of Chancery or the court in which the action was
brought determines upon application that in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses as the court deems proper.
To the extent that the proposed indemnitee has been successful on the
merits or otherwise in defense of any action, suit or proceeding (or any claim,
issue or matter therein) he or she must be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
FNB's Charter contains indemnification provisions consistent with
Section 145 of the DGCL. See "DESCRIPTION OF TRANSACTION -- Interests of Certain
Persons in the Merger - Indemnification; Directors and Officers Insurance."
SPECIAL MEETINGS OF SHAREHOLDERS
UPC. UPC's Bylaws provide that special meetings of shareholders may be
called, unless otherwise prescribed by law, for any purpose or purposes
whatever at any time by the 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.
FNB. FNB's Charter and Bylaws provide that special meetings of
shareholders may be called for any purpose at any time by a vote of the
majority of Board of Directors of FNB then in office, the President, or by the
written request of shareholders having the right to vote, in the aggregate, not
less than one-tenth of FNB's Common Stock.
ACTIONS BY SHAREHOLDERS WITHOUT A MEETING
UPC. UPC's Charter and Bylaws provide that any action required or
permitted to be taken by UPC shareholders at a duly called meeting of
shareholders may be effected by the unanimous written consent of the
shareholders entitled to vote on such action.
FNB. FNB's Charter states that any action required or permitted to be
taken by the shareholders may be taken without a meeting, without prior notice,
and without a vote, if a written consent to such action is signed by the
holders of all of the outstanding shares of Common Stock.
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SHAREHOLDER NOMINATIONS AND PROPOSALS
UPC. UPC's Charter and Bylaws do not address whether a shareholder may
nominate members of the Board of Directors.
Holders of UPC Common Stock are entitled to submit proposals to be
presented at an annual meeting of shareholders. UPC's Bylaws provide that any
proposal of a shareholder which is to be presented at any annual meeting of
shareholders shall be sent so as to be received by UPC not less than 120 days
in advance of the date of the proxy statement issued in connection with the
previous year's annual meeting.
FNB. FNB's Charter generally provides that any shareholder of FNB
entitled to vote for the election of directors may nominate persons for
election to the Board of Directors. The shareholder must provide written notice
of such nomination to the Secretary of FNB not less than 30 days but not more
than 60 days prior to the date of the meeting at which the election of
directors is to be held. The shareholder's notice must set forth certain
biographical information relating to the person whom the shareholder proposes
to nominate, and the shareholder making the nomination must be present at the
shareholder meeting, in person or by proxy.
BUSINESS COMBINATIONS
UPC. UPC's Charter requires the affirmative vote of the holders of
two-thirds or more of the outstanding UPC Common Stock for approval of a
merger, consolidation, or a sale or lease of all or substantially all of the
assets of UPC if the other party to the transaction is a beneficial owner of
10% or more of the outstanding shares of UPC. A two-thirds vote is not required
for any merger or consolidation of UPC with or into any corporation or entity
of which a majority of the outstanding shares of all classes of capital stock
entitled to vote in the election of directors is owned by UPC or any UPC
company.
The requirement of a supermajority vote of shareholders to approve
certain business transactions, as described above, may discourage a change in
control of UPC by allowing a minority of UPC's shareholders to prevent a
transaction favored by the majority of the shareholders. Also, in some
circumstances, the Board of Directors could cause a majority vote to be required
to approve a transaction thereby enabling management to retain control over the
affairs of UPC and their positions with UPC. The primary purpose of the
supermajority vote requirement, however, is to encourage negotiations with UPC's
management by groups or corporations interested in acquiring control of UPC and
to reduce the danger of a forced merger or sale of assets.
As a Tennessee corporation, UPC is or could be subject to various
legislative acts set forth in Chapter 35 of Title 48 of the Tennessee Code,
which impose certain restrictions on business combinations, including, but not
limited to, combinations with interested shareholders similar to those
described above.
The TBCA generally prohibits a "business combination" (generally
defined to include mergers, share exchanges, sales and leases of assets,
issuances of securities, and similar transactions) by UPC or a subsidiary with
an "interested shareholder" (generally defined as any person or entity which
beneficially owns 10% or more of the voting power of any class or series of
UPC's stock then outstanding) within five years after the person or entity
becomes an interested shareholder, unless the business combination or the
transaction pursuant to which the interested shareholder became such was
approved by the UPC Board before the interested shareholder became such, and
the business combination satisfies any other applicable requirements imposed by
law or by UPC's Charter or Bylaws. The TBCA also severely limits the extent to
which UPC or any of its officers or directors could be held liable for
resisting any business combination.
The Tennessee Control Share Acquisition Act (the "Tennessee CSAA")
generally provides that any person or group of persons that acquires the power
to vote more than specified levels (one-fifth, one-third, or a majority) of the
shares of certain Tennessee corporations will not have the right to vote such
shares unless granted voting rights by the holders of a majority of the votes
entitled to be cast, excluding "interested shares." Interested shares are those
shares held by the acquiring person, officers of the corporation, and employees
of the corporation who are also directors of the corporation. If approval of
voting power for the shares is obtained at one of the specified levels,
additional shareholder approval is required when a shareholder seeks to acquire
the power to vote shares at the next level. In the absence of such approval,
the additional shares acquired by the shareholder may not be voted until they
are transferred to another person in a transaction other than a control share
acquisition. The Tennessee CSAA applies only to those Tennessee corporations
whose charters or bylaws contain an express declaration that
39
<PAGE> 48
control share acquisitions in respect of the shares of such corporations are
governed by and subject to the provisions of such act. UPC's Charter and Bylaws
do not currently contain such an express declaration.
The Tennessee Greenmail Act ("Tennessee GA") prohibits a Tennessee
corporation having a class of voting stock registered or traded on a national
securities exchange or registered with the SEC pursuant to Section 12(g) of the
Exchange Act from purchasing, directly or indirectly, any of its shares at a
price above the market value of such shares (defined as the average of the
highest and lowest closing market price of such shares during the 30 trading
days preceding the purchase or preceding the commencement or announcement of a
tender offer if the seller of such shares has commenced a tender offer or
announced an intention to seek control of the corporation) from any person who
holds more than 3% of the class of securities to be purchased if such person
has held such shares for less than two years, unless the purchase has been
approved by the affirmative vote of a majority of the outstanding shares of
each class of voting stock issued by such corporation or the corporation makes
an offer, of at least equal value per share, to all holders of shares of such
class.
The TBCA provides that no Tennessee corporation having any class of
voting stock registered or traded on a national securities exchange or
registered with the SEC pursuant to Section 12(g) of the Exchange Act or any of
its officers or directors may be held liable at law or in equity for either
having failed to approve the acquisition of shares by an interested shareholder
on or before such interested shareholder's share acquisition date, or for
seeking to enforce or implement the provisions of the TBCA or the Tennessee
CSAA, or for failing to adopt or recommend any charter or bylaw amendment or
provision in respect of any one or more of these acts or the Tennessee GA, or
for opposing any merger, exchange, tender offer, or significant disposition of
the assets of the resident domestic corporation or any subsidiary of such
corporation because of a good faith belief that such merger, exchange, tender
offer, or significant disposition of assets would adversely affect the
corporation's employees, customers, suppliers, the communities in which the
corporation or its subsidiaries operate or are located or any other relevant
factor if such factors are permitted to be considered by the board of directors
under the corporation's charter in connection with the merger, exchange, tender
offer or significant disposition of assets.
The acts described above along with the provisions of UPC's Charter
regarding business combinations might be deemed to make UPC less attractive as
a candidate for acquisition by another company than would otherwise be the case
in the absence of such provisions. For example, if another company should seek
to acquire a controlling interest of less than 66-2/3% of the outstanding
shares of UPC Common Stock, the acquiror would not thereby obtain the ability
to replace a majority of the UPC Board until at least the second annual meeting
of shareholders following the acquisition, and furthermore the acquiror would
not obtain the ability immediately to effect a merger, consolidation, or other
similar business combination unless the described conditions were met.
As a result, UPC's shareholders may be deprived of opportunities to
sell some or all of their shares at prices that represent a premium over
prevailing market prices in a takeover context. The provisions described above
also may make it more difficult for UPC's shareholders to replace the UPC Board
or management, even if the holders of a majority of the UPC Common Stock should
believe that such replacement is in the interests of UPC. As a result, such
provisions may tend to perpetuate the incumbent UPC Board and management.
FNB. Under FNB's Charter, certain "Business Combinations" of
FNB with a "Related Person" may only be undertaken with the affirmative vote of
at least 75% of the outstanding shares of voting stock, plus the affirmative
vote of an Independent Majority of Shareholders, not counting shares owned by
the Related Person, unless the Business Combination is approved either (A) by a
two-third's vote of the Whole Board of Directors at any time at which the
person involved was not a Related Person or (B) two-third's of the continuing
directors and 75 percent of the Whole Board of Directors at any time after the
person involved became a Related Person.
A "Related Person" is a person, or group, who owns or acquires 5
percent or more of the outstanding shares of FNB Common Stock.
A "Continuing Director" is a director who was a member of the Board of
Directors immediately prior to the time a person acquired Beneficial Ownership
of more than 10 percent of FNB's Common Stock.
40
<PAGE> 49
"Independent Majority of Shareholders" means the holders of a majority
of the outstanding shares of Common Stock that are not Beneficially Owned by a
Related Person.
"Whole Board of Directors" means the total number of directors which
FNB would have if there were no vacancies.
A "Business Combination" is, among other things, a merger, sale of
assets, reclassification or reorganization between FNB or any of its
subsidiaries and a Related Person or any person or corporation controlled by a
Related Person.
"Beneficial Owner" means shares over which a person has voting or
investment power or the right to acquire voting or investment power pursuant to
any option, agreement or otherwise.
These provisions may not be amended without the affirmative vote of
the holders of (1) two-thirds of the Whole Board of Directors and two-thirds of
the Continuing Board of Directors and (2) 75 percent of FNB's voting stock and
an Independent Majority of Shareholders.
If a proposed business Combination is approved by FNB's Board of
Directors, by a two-thirds vote, prior to the time the party to the transaction
becomes a Related Person, then the transaction requires the approval of at
least a majority of the shares of FNB Common Stock outstanding.
Subject to some exceptions, the DGCL prohibits FNB from entering into
certain "business combinations" (as defined in the DGCL) involving persons
beneficially owning 15% or more of the outstanding Common Stock of FNB (or who
is an affiliate of FNB and has over the past three years beneficially owned 15%
or more of such stock) (either, for the purpose of this paragraph, an
"Interested Stockholder"), unless FNB's Board of Directors has approved either
(i) the business combination, or (ii) prior to the stock acquisition by which
such person's beneficial ownership interest reached 15% (a "Stock
Acquisition"), the Stock Acquisition. The prohibition lasts for three years
from the date of the Stock Acquisition. Notwithstanding the preceding, Delaware
law allows FNB to enter into a business combination with an Interested
Stockholder if (i) the business combination is approved by FNB's Board of
Directors and authorized by an affirmative vote of at least 66 2/3% of the
outstanding voting stock of FNB which is not owned by the Interested
Stockholder or (ii) upon consummation of the transaction which resulted in the
stockholder becoming an Interested Stockholder, such stockholder owned at least
85% of the outstanding stock of FNB (excluding stock held by officers and
directors of FNB or by certain FNB stock plans).
LIMITATIONS ON ABILITY TO VOTE STOCK
UPC. UPC's Charter and Bylaws do not contain any provision restricting
a shareholder's ability to vote shares of UPC voting stock.
FNB. FNB's Charter and Bylaws also do not contain any provision
restricting a shareholder's ability to vote shares of Common Stock, except as
set forth above at "Business Combinations" regarding approval of certain
Business Combinations and at "Amendment of Charter and Bylaws" and "Business
Combinations" regarding amendment of the Charter.
DISSENTERS' RIGHTS OF APPRAISAL
UPC. Under the TBCA, a shareholder is generally entitled to dissent
from a corporate action, and obtain payment of the fair value of his or her
shares in the event of: (i) consummation of a plan of merger to which the
corporation is a party, unless shareholder approval is not required by the
TBCA; (ii) consummation of a plan of share exchange to which the corporation is
a party as the corporation whose shares will be acquired if the shareholder is
entitled to vote on the plan; (iii) consummation of a sale or exchange of
substantially all of the corporation's property other than in the usual and
regular course of business, if the shareholder is entitled to vote on the sale
or exchange, including a sale in dissolution, but not including a sale pursuant
to court order or to a plan
41
<PAGE> 50
by which substantially all of the net proceeds of the sale will be distributed
in cash to the shareholders within one year after the date of sale; (iv) an
amendment of the charter that materially and adversely affects rights in
respect of a dissenter's shares because it (a) alters or abolishes a
preferential right of the shares, (b) creates, alters, or abolishes a right in
respect of redemption of the shares, including a provision respecting a sinking
fund for the redemption or repurchase of the shares, (c) alters or abolishes a
preemptive right of the holder of the shares to acquire shares or other
securities, (d) excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution through
issuance of shares or other securities with similar voting rights, or (e)
reduces the number of shares owned by the shareholder to a fraction of a share
if the fractional share so created is to be acquired for cash under the TBCA;
or (v) any corporate action taken pursuant to a shareholder vote, to the extent
the charter, bylaws, or a resolution of the board of directors provide that
voting or nonvoting shareholders are entitled to dissent and obtain payment for
their shares. UPC's Charter and Bylaws do not provide for any such additional
dissenters' rights.
FNB. Under the DGCL, a stockholder has the right, in certain
circumstances, to dissent from certain corporate transactions and receive the
fair value of his or her shares in cash in lieu of the consideration he or she
otherwise would have received in the transaction. For this purpose, "fair
value" may be determined by all generally accepted techniques of valuation used
in the financial community, excluding any element of value arising from the
accomplishment or expectation of the transaction, but including elements of
future value that are known or susceptible of proof. Such fair value is
determined by the Delaware Court of Chancery if a petition for appraisal is
timely filed. Appraisal rights are not available however to stockholders of a
corporation (i) if the shares are listed on a national securities exchange or
quoted on the NASDAQ National Market System, or held of record by more than
2,000 stockholders, and (ii) stockholders are permitted by the terms of the
merger or consolidation to accept in exchange for their shares (a) shares of
stock of the surviving or resulting corporation, (b) shares of stock of another
corporation listed on a national securities exchange or held of record by more
than 2,000 stockholders, (c) cash in lieu of fractional shares of such stock,
or (d) any combination thereof. Stockholders are not permitted appraisal rights
in a merger if such corporation is the surviving corporation and no vote of its
stockholders is required. FNB's Charter and Bylaws do not provide for any
additional dissenters' rights. Dissenters' rights are available to the FNB
shareholders in the Merger. See "DESCRIPTION OF TRANSACTION - Dissenters'
Rights."
SHAREHOLDERS' RIGHTS TO EXAMINE BOOKS AND RECORDS
UPC. The TBCA provides that a shareholder of a Tennessee corporation
may inspect and copy books and records during regular business hours, if he or
she gives the corporation written notice of his or her demand at least five
business days before the date of the inspection. In order to inspect certain
records, written demand must also be made in good faith and for a proper
purpose and must describe with reasonable particularity the purpose of the
request and the records the shareholder desires to inspect.
FNB. The DGCL similarly provides that a shareholder may inspect
certain books and records if he or she gives the corporation written demand
stating the purpose of the inspection at least five business days before the
date he or she wishes to inspect the books and records. Under certain
instances, the demand must be made in good faith and for a proper purpose and
the records he or she desires to inspect must be reasonably related to the
stated purpose of such holder's inspection.
DIVIDENDS
UPC. UPC's ability to pay dividends on UPC Capital Stock is governed
by Tennessee corporate law. Under Tennessee corporate law, dividends may be
paid so long as the corporation would be able to pay its debts as they become
due in the ordinary course of business and the corporation's total assets would
not be less than the sum of its total liabilities plus the amount that would be
needed, if the corporation were to be dissolved at the time of the
distribution, to satisfy the preferential rights upon dissolution to
shareholders whose preferential rights are superior to those receiving the
distribution.
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<PAGE> 51
There are various statutory limitations on the ability of the FNB and
UPC banking subsidiaries to pay dividends to FNB and UPC, as the case may be.
See "CERTAIN REGULATORY CONSIDERATIONS -- Payment of Dividends."
FNB. The DGCL provides that, subject to any restrictions in the
corporation's certificate of incorporation, and other customary restrictions
similar to those contained in the TBCA, a Delaware corporation may make
distributions to its shareholders. Substantially all of the funds available for
the payment of dividends by FNB are derived from its subsidiary depository
institution, First National Bank. There are various statutory limitations on
the ability of First National Bank to pay dividends to FNB.
COMPARATIVE MARKET PRICES AND DIVIDENDS
UPC Common Stock is traded on the NYSE under the symbol "UPC." FNB
Common Stock is not traded on any exchange or quoted on any market system. The
shares of FNB Common Stock are not actively traded, and such trading activity,
as it occurs, takes place in privately negotiated transactions. Management of
FNB is aware of certain transactions in shares of Common Stock of FNB that have
occurred since January 1, 1996, although the prices of all stock transactions
are not known. During that time, management of FNB is aware that approximately
685 shares have changed hands in privately negotiated sales at prices ranging
from $114 to $130 per share. The most recent sale of which management is aware
took place on November 17, 1997 when 8 shares were sold at $130 per share.
Dividends, when paid by FNB, are normaly paid in January, April, July
and October for the previous quarter. During 1996, FNB paid quarterly cash
dividends of $2.00 per share. In 1997 the dividend increased to $2.25 per share
per quarter. FNB paid cash dividends of $2.25 per share for the first quarter
of 1998, as permitted under the Agreement.
The following table sets forth, for the indicated periods, the high and
low closing sale prices for the UPC Common Stock as reported by the NYSE, and
the cash dividends declared per share of UPC Common Stock for the indicated
periods. The stock prices do not include retail mark-ups, mark-downs or
commissions.
43
<PAGE> 52
<TABLE>
<CAPTION>
UPC
-----------------------------------
Cash
Price Range Dividends
---------------------- Declared
Per
High Low Share
---------------------------- ----------- ---------- -----------
<S> <C> <C> <C>
1998
----------------------------
First Quarter ............ $67.31 $58.38 $ .50
Second Quarter (through
April __, 1998)........... $--.-- $--.-- $ .00
-------
Total..................... $ .50
-------------------------- =======
1997
----------------------------
First Quarter............. $47.75 $38.38 $ .320
Second Quarter ........... 52.13 41.25 .375
Third Quarter............. 56.50 49.25 .400
Fourth Quarter............ 67.88 57.00 .400
--------
Total................... $ 1.495
========
1996
----------------------------
First Quarter............. $31.75 $29.00 $ .27
Second Quarter............ 31.25 29.63 .27
Third Quarter............. 36.25 28.63 .27
Fourth Quarter............ 41.38 34.63 .27
--------
Total................... $ 1.08
========
</TABLE>
On April __, 1998, the last sale price of UPC Common Stock as reported
on the NYSE was $_______ per share. On December 30, 1997, the last business day
prior to public announcement of the Merger, the last sale price of the UPC
Common Stock as reported by the NYSE was $66.68.
The holders of UPC Common Stock are entitled to receive dividends when
and if declared by the Board of Directors out of funds legally available
therefor. Although UPC currently intends to continue to pay quarterly cash
dividends on the UPC Common Stock, there can be no assurance that UPC's
dividend policy will remain unchanged after completion of the Merger. The
declaration and payment of dividends thereafter will depend upon business
conditions, operating results, capital and reserve requirements, and the UPC
Board's consideration of other relevant factors. The Agreement provides that
FNB may not declare and pay cash dividends, other than regular quarterly cash
dividends, on the shares of FNB Common Stock in an amount not to exceed $2.25
per share prior to the Effective Time or the termination of the Agreement.
There is no assurance that FNB will pay any dividends at any time, or if it
does, the amount of dividends it would declare.
UPC and FNB 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. UPC's and FNB's
subsidiary depository institutions are subject to certain legal restrictions on
the amount of dividends they are permitted to pay. See "CERTAIN REGULATORY
CONSIDERATIONS -- Payment of Dividends."
BUSINESS OF UPC
GENERAL
UPC, a Tennessee corporation, is a bank holding company registered
with the Federal Reserve under the BHC Act. As of December 31, 1997, UPC had
total consolidated assets of approximately $18.1 billion, total consolidated
loans of approximately $12.7 billion, total consolidated deposits of
approximately $13.4 billion, and total consolidated shareholders' equity of
approximately $1.7 billion.
44
<PAGE> 53
UPC conducts its business activities through its principal bank
subsidiary, the $15.5 billion asset Union Planters Bank, founded in 1869,
headquartered in Memphis, Tennessee, with branches in Tennessee, Mississippi,
Missouri, Arkansas, Louisiana, Alabama, and Kentucky. UPC also had, as of
January 1, 1998, four other financial institution subsidiaries, the largest of
which being Union Planters Bank of Florida, Miami, Florida, which had total
consolidated assets as of December 31, 1997 of approximately $2.2 billion. UPC
undertook a corporate reorganization plan in the fourth quarter of 1997, the
primary purpose of which was to consolidate substantially all of its bank
subsidiaries into UPB. This corporate reorganization was completed January 1,
1998. It is likely that UPC will continue to consolidate its various bank
subsidiaries into UPB in the future, to the extent allowed by law. Through the
UPC Banking Subsidiaries, UPC provides a diversified range of financial
services in the communities in which it operates and maintains approximately
514 banking offices and 651 ATMs. UPC's total assets at December 31, 1997 are
allocable by state to its banking offices (before consolidating adjustments)
approximately as follows: $9.8 billion in Tennessee; $3.5 billion in
Mississippi; $2.2 billion in Florida; $1.2 billion in Missouri; $806 million in
Arkansas; $698 million in Louisiana; $449 million in Alabama; and $115 million
in Kentucky.
Acquisitions have been, and are expected to continue to be, an
important part of the expansion of UPC's business. UPC completed three
acquisitions in 1995, seven in 1996, and six in 1997, adding approximately $1.3
billion in total assets in 1995, $4.2 billion in 1996 and $3.6 billion in 1997.
Through April 1, 1998, UPC has completed the acquisitions of two institutions
with approximately $539 million in aggregate total assets (the "Recently
Completed Acquisitions"). UPC is currently a party to definitive agreements to
acquire ten financial institutions, in addition to FNB, and the proposed
purchase of 24 branch locations and assumption of $1.5 billion of deposits of
California Federal Bank, a Federal Savings Bank, located in Florida (the "CalFed
Branch Purchase") (collectively, the "Other Pending Acquisitions"). The Other
Pending Acquisitions had aggregate total assets of approximately $12.4 billion
at December 31, 1997. Collectively the Recently Completed Acquisitions and the
Other Pending Acquisitions are referred to herein as the "Other Acquisitions."
The largest of the Other Pending Acquisitions is UPC's proposed acquisition of
Magna Group, Inc., ("MGR"), St Louis, Missouri, which had total consolidated
assets of approximately $7.1 billion at December 31, 1997. MGR has entered into
a definitive agreement to acquire Charter Financial, Inc., and its subsidiary,
Charter Bank, S.B. (the "Charter Acquisition") which MGR considers probable of
consummation. Charter is located in Sparta, Illinois and had at December 31,
1997, total assets of approximately $382 million, total deposits of
approximately $276 million, and total stockholders' equity of approximately
$58.4 million. The Charter Acquisition is expected to be accounted for as a
purchase. For purposes of this Proxy Statement, including the historical and
equivalent pro forma data, the term "Other Acquisitions" and "Other Pending
Acquisitions" include the Charter Acquisition. For information with respect to
these Other Acquisitions, see "-- Recent Developments" and "PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION." For a discussion of UPC's acquisition
program, see the caption "Acquisitions" (on page 10) in UPC's Annual Report to
Shareholders and Note 2 to UPC's audited consolidated financial statements for
the years ended December 31, 1997, 1996, and 1995 (on pages 49 and 50) contained
in such Annual Report to Shareholders. UPC's Annual Report to Shareholders is
included as Exhibit 13 to the UPC 1997 Form 10-K and Exhibit 13 is incorporated
by reference herein to the extent indicated herein.
UPC expects to continue to take advantage of the consolidation of the
financial services industry by further developing its franchise through the
acquisition of financial institutions and other entities engaged in lines of
business permissible for banks and bank holding companies. Future acquisitions
may entail the payment by UPC of consideration in excess of the book value of
the underlying net assets acquired, may result in the issuance of additional
shares of UPC capital stock or the incurring of additional indebtedness by UPC,
and could have a dilutive effect on the earnings or book value per share of UPC
Common Stock. Moreover, significant charges against 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 UPC are located at 7130 Goodlett
Farms Parkway, Memphis, Tennessee 38018, and its telephone number at such
address is (901) 580-6000. Additional information with respect to UPC and its
subsidiary is included in documents incorporated by reference in this Proxy
Statement. See "AVAILABLE INFORMATION" and "DOCUMENTS INCORPORATED BY
REFERENCE."
45
<PAGE> 54
RECENT DEVELOPMENTS
RECENTLY COMPLETED ACQUISITIONS. Since December 31, 1997, UPC has
completed the acquisition of the following two institutions (the "Recently
Completed Acquisitions").
<TABLE>
<CAPTION>
Asset Size
Institution (In Millions) Type of Consideration
-------------------------------------------- -------------- -----------------------------
<S> <C> <C>
Security Bancshares, Inc., Des Arc, $ 165 Approximately 490,858 shares
Arkansas, and its subsidiaries Farmers and of UPC Common Stock
Merchants Bank, Des Arc, Arkansas and
Merchants and Farmers Bank, West Helena,
Arkansas
Sho-Me Financial Corp, Mt. Vernon, Missouri, 374 Approximately 1,153,459
and its subsidiary, 1st Savings Bank, f.s.b. shares of UPC Common Stock
------
Total $ 539
======
</TABLE>
OTHER PENDING ACQUISITIONS. UPC has entered into definitive agreements
to acquire the following financial institutions in addition to FNB
(collectively, the Other Pending Acquisitions) which UPC's management considers
probable of consummation and which are expected to close in 1998. For purposes
of this Proxy Statement, including the pro forma financial information included
herein, the term "Other Pending Acquisitions" includes the Charter Acquisition.
46
<PAGE> 55
<TABLE>
<CAPTION>
Asset Size
Institution (In Projected
------------------------------------------- Millions)(1) Type of Consideration(2) Closing Date
------------ ------------------------- ----------------
<S> <C> <C> <C>
Magna Group, Inc., St. Louis, Missouri, Approximately 35,446,000 3rd Quarter
and its subsidiaries including Magna $ 7,075 shares of UPC Common 1998
Bank, N.A., St. Louis, Missouri Stock
Peoples First Corporation, Paducah, Approximately 6,338,000 2nd Quarter
Kentucky and its subsidiaries, including 1,501 shares of UPC Common 1998
Peoples First National Bank, Paducah, Stock
Kentucky
Purchase of 24 branches and $1.5 billion of 1,465 $110 million deposit 3rd Quarter
deposits of California Federal Bank in premium in cash 1998
Florida ("CalFed Branch Purchase").
AMBANC Corp., Vincennes, Indiana, and 759 Approximately 3,398,000 3rd Quarter
its subsidiaries, AMBANC Illinois, N.A., shares of UPC Common 1998
AMBANC Indiana, and American National Stock
Realty Corp.
Merchants Bancshares, Inc., Houston, Approximately 1,952,000 2nd Quarter
Texas, and its subsidiaries, including 546 shares of UPC Common 1998
Merchants Bank, Houston, Texas Stock
Transflorida Bank in Boca Raton, Florida 316 Approximately 1,655,000 3rd Quarter
shares of UPC Common 1998
Stock
CB & T, Inc., McMinnville, Tennessee, Approximately 1,450,000 2nd Quarter
and its subsidiary, City Bank & Trust 268 shares of UPC Common 1998
Company, McMinnville, Tennessee Stock
Capital Savings Bancorp, Inc., Jefferson Approximately 801,000 2nd Quarter
City, Missouri, and its subsidiary, Capital 242 shares of UPC Common 1998
Savings Bank, FSB, Jefferson City, Stock
Missouri
Alvin Bancshares, Inc., Alvin, Texas, and 140 Approximately 424,000 3rd Quarter
its subsidiaries, including Alvin State shares of UPC Common
Bank, Alvin, Texas Stock
First Community Bancshares, Inc., Approximately 124,000 2nd Quarter
Middleton, TN, and its subsidiary, Bank of 41 shares of UPC Common 1998
Middleton, Middleton, Tennessee Stock
Duck Hill Bank, Duck Hill, Mississippi 21 Approximately 42,000 shares 3rd Quarter
of UPC Common Stock 1998
--------
TOTALS $ 12,374
========
</TABLE>
- --------------------
(1) Approximate total assets at December 31, 1997.
(2) Assumes no adjustment to shares pursuant to exchange ratio
adjustment mechanisms.
EARNINGS CONSIDERATIONS RELATED TO THE MERGER AND THE OTHER
ACQUISITIONS. It is expected that either UPC or the institutions to be acquired
in connection with the Merger and the Other Acquisitions will incur charges
arising from such acquisitions and from the assimilation of those institutions
into the UPC organization. Most of the charges are expected to relate to the
MGR and Peoples acquisitions. Anticipated charges would normally arise from
matters such as, but not limited to, legal and accounting fees, financial
advisory fees, consulting fees, payment of contractual benefits triggered by a
change of control, early retirement and involuntary separation and related
benefits, costs associated with elimination of duplicate facilities and branch
consolidations, data processing charges, cancellation of vendor contracts, and
the potential for additional provisions for loan losses and other contingencies
and similar costs which normally arise from the consolidation of operational
activities.
47
<PAGE> 56
For a discussion of the significant charges UPC has incurred over the
past three years incidental to its acquisition program, see the caption
"Acquisitions" (on page 10) in UPC's Annual Report to Shareholders and note 2
to UPC's audited consolidated financial statements for the years ended December
31, 1997, 1996 and 1995 (on pages 49 and 50) contained in such Annual Report to
Shareholders. UPC's Annual Report to Shareholders is included as Exhibit 13 to
UPC's 1997 Form 10-K and Exhibit 13 is incorporated by reference herein to the
extent indicated herein.
The Merger and each of the Other Pending Acquisitions (other than the
acquisition of Duck Hill Bank, the Charter Acquisition and the CalFed Branch
Purchase) are expected to be, and the Recently Completed Acquisition of Security
Bancshares, Inc., was, accounted for as a pooling of interests. The Recently
Completed Acquisition of Sho-Me Financial Corp. was, and the Other Pending
Acquisitions of Duck Hill Bank, the Charter Acquisition and the CalFed Branch
Purchase are expected to be, accounted for as purchases. UPC currently
estimates incurring aggregate pretax charges in the range of $160 million to
$175 million in connection with the consummation of the Merger and the Other
Acquisitions. To the extent that UPC's recognition of these acquisition-related
charges is contingent upon consummation of a particular transaction, those
charges would be recognized in the period in which such transaction closes.
The range of anticipated charges to be incurred in connection with
consummating the Merger and the Other Acquisitions is a preliminary estimate of
the significant charges which may, in the aggregate, be required and should be
viewed accordingly. These charges are not reflected in the pro forma
consolidated data included in this Proxy Statement. Moreover, this range has
been based on the due diligence that has been performed to date in connection
with the Merger and the Other Acquisitions and the range may be subject to
change and the actual charges incurred may be higher or lower than what is
currently contemplated, once these institutions are assimilated from an
operational perspective and various contingencies are either satisfied or
eliminated. Furthermore, the range of anticipated charges will change if
additional entities are acquired. UPC regularly evaluates the potential
acquisition of, and holds discussions with, various potential acquisition
candidates. As a general rule, UPC will publicly announce such acquisitions
only after a definitive agreement has been reached, and only then if UPC
considers the acquisition to be of such size as to be a significant acquisition.
Since the range of anticipated acquisition-related charges is likely to change
with additional acquisitions, and since UPC frequently engages in acquisitions,
such range could change, and FNB's shareholders should view such information
accordingly.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following tables contain unaudited pro forma condensed consolidated
financial statements including a balance sheet as of December 31, 1997 and
statements of earnings for the years ended December 31, 1997, 1996, and 1995.
These statements present on a pro forma basis historical results for (i) UPC for
all periods, (ii) UPC and Magna for all periods, (iii) UPC, Magna, and the Other
Acquisitions for the year ended December 31, 1997, and (iv) UPC, Magna, Peoples
AMBANC, and Merchants for the years ended December 31, 1996 and 1995 (see
"BUSINESS OF UPC -- Recent Developments").
The Merger and all but four of the Other Acquisitions are expected to be
accounted for using the pooling of interests method of accounting. The pro forma
information as of December 31, 1997 and for the year ended December 31, 1997,
reflect the acquisition of Magna and the Other Acquisitions as of January 1,
1997. The pro forma information for the years ended December 31, 1996 and 1995,
reflect only the acquisition of Magna, Peoples, AMBANC, and Merchants because
the Other Acquisitions (other than Magna, Peoples, AMBANC, and Merchants) are
not individually or in the aggregate, considered material to UPC from a
financial statement presentation standpoint. Furthermore, the pro forma impact
of the CalFed Branch Purchase on the pro forma statement of earnings for each of
the three years presented has been excluded due to the lack of information
available for operation of the branches on a historical basis. Pro forma
financial information are presented for information purposes only and are not
necessarily indicative of the results of operations or combined financial
position that would have resulted had the Merger or the Other Acquisitions been
consummated at the dates or during the periods indicated, nor are they
necessarily indicative of future results of operations or combined financial
position. The pro forma financial information does not reflect preliminary
estimates by UPC of acquisition-related charges to be incurred in connection
with consummation of the Merger and the Other Acquisitions. For additional
information with respect to the estimated charges UPC anticipates it would incur
in connection with the Merger and the Other Acquisitions, see "BUSINESS OF UPC
- -- Recent Developments." For a discussion of UPC's acquisition program,
including a discussion of the significant charges UPC has incurred incidental to
acquisitions over the past three fiscal years, see the caption "Acquisitions"
(on page 10) in UPC's 1997 Annual Report to Shareholders and Note 2 to UPC's
audited consolidated financial statements for the years ended December 31, 1997,
1996, and 1995 (on pages 49 and 50) contained in UPC's 1997 Annual Report to
Shareholders. UPC's 1997 Annual Report to Shareholders is included as Exhibit 13
to UPC's 1997 Form 10-K, and Exhibit 13 is incorporated by reference herein to
the extent indicated herein. See "DOCUMENTS INCORPORATED BY REFERENCE."
The unaudited pro forma condensed consolidated financial statements should
be read in conjunction with the consolidated historical financial statements of
UPC which are incorporated by reference herein. Pro forma results are not
necessarily indicative of future operating results. Certain nonrecurring charges
as discussed in "BUSINESS OF UPC -- Recent Developments -- Earnings
Considerations Related to Pending Acquisitions" have not been included in the
unaudited pro forma condensed consolidated financial statements. See "DOCUMENTS
INCORPORATED BY REFERENCE."
48
<PAGE> 57
UNION PLANTERS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
<TABLE>
<CAPTION>
UPC, MAGNA,
UPC AND
AND OTHER
UPC MAGNA ACQUISITIONS
----------- ----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Cash and due from banks............................... $ 816,472 $ 1,064,404 $ 1,242,983
Interest-bearing deposits at financial institutions... 24,490 24,490 33,944
Federal funds sold and securities purchased under
agreements to resell................................ 109,192 157,394 249,017
Trading account assets................................ 187,419 187,419 187,419
Loans held for resale................................. 170,742 170,742 175,325
Available for sale securities, at fair value.......... 3,247,680 5,239,794 7,621,521
Loans................................................. 12,687,089 17,171,055 20,642,776
Less: Unearned income........................... (28,525) (28,679) (36,230)
Allowance for losses on loans............. (225,389) (284,828) (323,066)
----------- ----------- -----------
Net loans........................................ 12,433,175 16,857,548 20,283,480
Premises and equipment................................ 330,703 449,290 534,679
Accrued interest receivable........................... 204,504 251,240 281,558
FHA/VA claims receivable.............................. 134,112 134,112 134,112
Mortgage servicing rights............................. 61,346 61,346 61,346
Goodwill and other intangibles........................ 52,655 174,472 376,146
Other assets.......................................... 332,589 409,927 451,723
----------- ----------- -----------
Total assets................................ $18,105,079 $25,182,178 $31,633,253
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest-bearing.............................. $ 2,323,367 $ 3,034,530 $ 3,839,096
Certificates of deposit of $100,000 and over..... 1,426,751 2,166,011 2,625,003
Other interest-bearing........................... 9,690,151 13,675,723 17,830,188
----------- ----------- -----------
Total deposits.............................. 13,440,269 18,876,264 24,294,287
Short-term borrowings................................. 831,627 1,677,230 1,875,613
Medium-term bank notes................................ 135,000 135,000 135,000
Federal Home Loan Bank advances....................... 703,996 703,996 930,738
Other long-term debt.................................. 710,908 802,964 852,325
Accrued interest, expenses and taxes.................. 145,452 194,499 212,821
Other liabilities..................................... 390,961 416,876 443,918
----------- ----------- -----------
Total liabilities........................... 16,358,213 22,806,829 28,744,702
----------- ----------- -----------
Shareholders' equity
Convertible preferred stock...................... 54,709 54,749 54,749
Common stock..................................... 408,255 567,406 652,197
Additional paid-in capital....................... 193,032 405,322 590,014
Retained earnings................................ 1,061,670 1,318,281 1,548,858
Unearned compensation............................ (9,529) (14,364) (9,554)
Net unrealized gain on available for sale
securities..................................... 38,729 43,955 52,287
----------- ----------- -----------
Total shareholders' equity.................. 1,746,866 2,375,349 2,888,551
----------- ----------- -----------
Total liabilities and shareholders'
equity.................................... $18,105,079 $25,182,178 $31,633,253
=========== =========== ===========
</TABLE>
UNION PLANTERS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
UPC, MAGNA,
UPC AND
AND OTHER
UPC MAGNA ACQUISITIONS
------------- ------------- ---------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Interest income
Interest and fees on loans.......................... $1,165,925 $1,536,829 $1,839,742
Interest on investment securities
Taxable........................................ 187,221 290,351 343,598
Tax-exempt..................................... 29,032 40,516 52,133
Interest on deposits at financial institutions...... 2,627 2,627 3,179
Interest on federal funds sold and securities
purchased under agreements to resell.............. 9,114 13,760 18,554
Interest on trading account assets.................. 14,956 14,956 14,956
Interest on loans held for resale................... 7,819 7,819 7,982
---------- ---------- ----------
Total interest income..................... 1,416,694 1,906,858 2,280,144
---------- ---------- ----------
Interest expense
Interest on deposits................................ 494,517 698,778 860,526
Interest on short-term borrowings................... 41,280 81,980 104,620
Interest on long-term debt.......................... 110,512 116,687 120,184
---------- ---------- ----------
Total interest expense.................... 646,309 897,445 1,085,330
---------- ---------- ----------
Net interest income....................... 770,385 1,009,413 1,194,814
Provision for losses on loans............................ 113,633 142,580 154,163
---------- ---------- ----------
Net interest income after provision for
losses on loans......................... 656,752 866,833 1,040,651
Noninterest income
Service charges on deposit accounts................. 107,248 133,352 151,454
Mortgage servicing income........................... 57,265 57,265 58,051
Bank card income.................................... 31,317 38,544 39,239
Factoring commissions............................... 30,140 30,140 30,140
Trust service income................................ 9,020 21,663 24,355
Profits and commissions from trading activities..... 7,295 7,295 7,295
Investment securities gains......................... 2,104 4,688 5,481
Other income........................................ 117,221 139,945 153,075
---------- ---------- ----------
</TABLE>
49
<PAGE> 58
<TABLE>
<S> <C> <C> <C>
Total noninterest income.................. 361,610 432,892 469,090
---------- ---------- ----------
Noninterest expense
Salaries and employee benefits...................... 284,648 372,959 440,212
Net occupancy expense............................... 44,813 64,140 73,676
Equipment expense................................... 43,812 53,579 62,466
Other expense....................................... 324,431 379,663 430,225
---------- ---------- ----------
Total noninterest expense................. 697,704 870,341 1,006,579
---------- ---------- ----------
Earnings before income taxes.............. 320,658 429,384 503,162
Applicable income taxes.................................. 111,897 147,948 173,787
---------- ---------- ----------
Net earnings.............................. $ 208,761 $ 281,436 $ 329,375
========== ========== ==========
Earnings per common share
Basic............................................... $ 2.54 $ 2.48 $ 2.52
Diluted............................................. 2.45 2.40 2.45
Weighted average shares outstanding (in thousands)
Basic............................................... 80,336 111,418 128,555
Diluted............................................. 85,195 117,884 135,180
</TABLE>
UNION PLANTERS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
UPC UPC, MAGNA,
AND PEOPLES, AMBANC
UPC MAGNA AND MERCHANTS
------------- ------------- ---------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Interest income
Interest and fees on loans.......................... $1,095,148 $1,380,299 $1,535,342
Interest on investment securities
Taxable........................................ 247,716 340,745 372,233
Tax-exempt..................................... 30,839 37,980 45,560
Interest on deposits at financial institutions...... 1,593 1,593 1,910
Interest on federal funds sold and securities
purchased under agreements to resell.............. 16,948 19,462 21,664
Interest on trading account assets.................. 13,895 13,895 13,895
Interest on loans held for resale................... 6,852 6,852 7,241
---------- ---------- ----------
Total interest income..................... 1,412,991 1,800,826 1,997,845
---------- ---------- ----------
Interest expense
Interest on deposits................................ 512,668 670,856 755,680
Interest on short-term borrowings................... 64,689 93,501 100,543
Interest on long-term debt.......................... 90,782 97,530 97,680
---------- ---------- ----------
Total interest expense.................... 668,139 861,887 953,903
---------- ---------- ----------
Net interest income....................... 744,852 938,939 1,043,942
Provision for losses on loans............................ 68,948 79,228 84,198
---------- ---------- ----------
Net interest income after provision for
losses on loans......................... 675,904 859,711 959,744
Noninterest income
Service charges on deposit accounts................. 107,535 130,978 141,119
Mortgage servicing income........................... 63,003 63,003 63,003
Bank card income.................................... 24,975 30,988 31,636
Factoring commissions............................... 26,066 26,066 26,066
Trust service income................................ 10,130 19,512 21,496
Profits and commissions from trading activities..... 5,765 5,765 5,765
Investment securities gains......................... 4,099 4,916 4,942
Other income........................................ 78,929 89,632 94,739
---------- ---------- ----------
Total noninterest income.................. 320,502 370,860 388,766
---------- ---------- ----------
Noninterest expense
Salaries and employee benefits...................... 282,726 351,868 388,972
Net occupancy expense............................... 47,215 65,195 70,142
Equipment expense................................... 44,418 53,149 60,704
Other expense....................................... 357,458 399,991 422,915
---------- ---------- ----------
Total noninterest expense................. 731,817 870,203 942,733
---------- ---------- ----------
Earnings before income taxes.............. 264,589 360,368 405,777
Applicable income taxes.................................. 93,115 125,755 139,649
---------- ---------- ----------
Net earnings.............................. $ 171,474 $ 234,613 $ 266,128
========== ========== ==========
Earnings per common share
Basic............................................... $ 2.13 $ 2.18 $ 2.24
Diluted............................................. 2.05 2.11 2.17
Weighted average shares outstanding (in thousands)
Basic............................................... 77,240 104,539 115,726
Diluted............................................. 83,542 112,425 123,714
</TABLE>
50
<PAGE> 59
UNION PLANTERS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
UPC UPC, MAGNA,
AND PEOPLES, AMBANC
UPC MAGNA AND MERCHANTS
------------- ------------- ---------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Interest income
Interest and fees on loans.......................... $ 986,230 $1,252,376 $1,388,252
Interest on investment securities
Taxable........................................ 202,890 274,743 304,771
Tax-exempt..................................... 32,400 39,666 47,200
Interest on deposits at financial institutions...... 5,284 5,284 6,153
Interest on federal funds sold and securities
purchased under agreements to resell.............. 19,965 21,868 24,547
Interest on trading account assets.................. 14,191 14,191 14,191
Interest on loans held for resale................... 4,858 4,858 5,184
---------- ---------- ----------
Total interest income..................... 1,265,818 1,612,986 1,790,298
---------- ---------- ----------
Interest expense
Interest on deposits................................ 478,641 616,666 695,224
Interest on short-term borrowings................... 44,492 64,725 70,706
Interest on long-term debt.......................... 73,234 79,293 79,674
---------- ---------- ----------
Total interest expense.................... 596,367 760,684 845,604
---------- ---------- ----------
Net interest income....................... 669,451 852,302 944,694
Provision for losses on loans............................ 33,917 43,909 47,393
---------- ---------- ----------
Net interest income after provision for
losses on loans......................... 635,534 808,393 897,301
Noninterest income
Service charges on deposit accounts................. 102,932 125,419 134,243
Mortgage servicing income........................... 55,903 55,903 55,903
Bank card income.................................... 20,758 26,559 27,124
Factoring commissions............................... 19,519 19,519 19,519
Trust service income................................ 8,326 16,964 18,786
Profits and commissions from trading activities..... 12,362 12,362 12,362
Investment securities gains......................... 1,433 1,789 2,008
Other income........................................ 72,477 83,058 87,381
---------- ---------- ----------
Total noninterest income.................. 293,710 341,573 357,326
---------- ---------- ----------
Noninterest expense
Salaries and employee benefits...................... 264,663 337,656 371,136
Net occupancy expense............................... 44,061 61,738 66,224
Equipment expense................................... 42,251 51,218 57,289
Other expense....................................... 256,214 302,794 324,295
---------- ---------- ----------
Total noninterest expense................. 607,189 753,406 818,944
---------- ---------- ----------
Earnings before income taxes.............. 322,055 396,560 435,683
Applicable income taxes.................................. 110,799 134,082 145,486
---------- ---------- ----------
Net earnings.............................. $ 211,256 $ 262,478 $ 290,197
========== ========== ==========
Earnings per common share
Basic............................................... $ 2.79 $ 2.56 $ 2.56
Diluted............................................. 2.66 2.46 2.46
Weighted average shares outstanding (in thousands)
Basic............................................... 72,512 99,346 110,196
Diluted............................................. 78,798 106,632 117,604
</TABLE>
BUSINESS OF FNB
FNB is a bank holding company that was organized as a Delaware
corporation in 1986 for the purpose of acquiring all of the outstanding capital
stock of First National Bank. First National Bank is the only subsidiary of
FNB. The directors and executive officers of First National Bank also serve as
directors and executive officers of FNB, and no compensation is paid to
directors or officers of FNB. Instead, all compensation paid to FNB's directors
and officers is paid to them in their capacities with First National Bank.
Substantially all of the income of FNB is derived from dividends
received from First National Bank. The amount of these dividends is directly
related to expenses incurred by First National Bank and is subject to various
regulatory restrictions. See "CERTAIN REGULATORY CONSIDERATIONS." As of
December 31, 1997, FNB had total consolidated assets of approximately $211
million, total consolidated loans of approximately $127 million, total
consolidated deposits of approximately $170 million, and total consolidated
shareholders' equity of approximately $24 million.
FIRST NATIONAL BANK OF WETUMPKA
First National Bank was founded in 1905. First National Bank is a
national bank and is regulated by the Office of the Comptroller of the
Currency, Washington, D.C. It provides banking services primarily to the
residents of Elmore County, Alabama. First National Bank attempts to attract
business from customers who like to conduct banking business with a financial
institution which provides a high level of personal service and responsiveness
and a demonstrated commitment to the local community.
51
<PAGE> 60
First National Bank offers a wide range of banking services to
individuals and businesses located in its primary service area. First National
Bank is actively engaged in the business of seeking deposits from the public
and making real estate, commercial and consumer loans. First National Bank
offers a variety of deposit accounts to its individual and commercial
customers, as well as related banking services. These services include interest
bearing checking accounts, savings accounts, certificates of deposit, ATM
cards, commercial checking accounts, individual retirement accounts, safe
deposit boxes, bank-by-mail service, drive-up teller service, extended lobby
and drive-in hours and extended daily cut-off time, letters of credit, draft
collection and direct deposit. The bank does not offer trust services.
First National Bank's principal sources of income are interest on
loans and investments and service fees. Its principal expenses are interest
paid on deposits and general operating expenses.
PRIMARY SERVICE AREA
First National Bank's primary service area is Elmore County, Alabama,
which is adjacent to Montgomery County, Alabama, the third largest county in
Alabama and the site of the State Capitol. Elmore County has a population of
approximately 59,000 and Montgomery County has a population of approximately
222,000. A large number of citizens of Elmore County work in the City of
Montgomery which is 16 miles from Wetumpka. To some extent, First National Bank
competes with banks and financial institutions in Montgomery County.
OFFICES
The corporate offices of FNB and the main banking office of First
National Bank are located at 408 Southeast Main Street, Wetumpka, in a
two-story building consisting of 21,000 square feet. This building is owned by
First National Bank. In addition to its main banking office, First National
Bank operates full service branch banking offices at four other locations in
Elmore County, each of which is owned by First National Bank.
COMPETITION
All phases of First National Bank's business are highly competitive.
First National Bank competes with other commercial banks, credit unions and
savings and loan associations, many of which have assets, capital and lending
limits larger than First National Bank. First National Bank is one of 7
commercial banks that have 16 offices located within Elmore County. First
National Bank, along with other commercial banks, also competes with respect to
its lending activities, as well as in attracting demand deposits, with savings
banks, savings and loan associations, insurance companies, regulated small loan
companies, credit unions and with the issuers of commercial paper and other
securities, such as money market funds, a number of which are located in
Montgomery County but which conduct business in Elmore County. Among the
advantages larger institutions have over First National Bank are their ability
to finance wide ranging advertising campaigns and to allocate their investment
assets to products of highest yields and demand. By virtue of their greater
total capital, such institutions have substantially higher lending limits than
First National Bank (legal lending limits to an individual customer being
limited to a percentage of a bank's total capital accounts). FNB expects that
if the Merger is consummated, these advantages will render First National Bank
more competitive and benefit its continued growth and profitability. It will,
in that event, continue to focus on the small commercial customer because this
segment appears to offer the greatest concentration of potential business and
historically has tended to demonstrate a higher degree of loyalty in its
banking relations. Following the Merger, First National Bank may also be better
able to compete with financial institutions in Montgomery County. See
"DESCRIPTION OF TRANSACTION - Background and Reasons for the Merger."
52
<PAGE> 61
EMPLOYEES
First National Bank has 86 full-time employees.
LEGAL PROCEEDINGS
Neither FNB nor First National Bank is a party to any material pending
legal proceedings, other than routine litigation incidental to its banking
business.
PRINCIPAL HOLDERS OF COMMON STOCK
The following table sets forth, as of February 28, 1998, the persons
known by FNB to be beneficial owners of more than 5 percent of the outstanding
shares of Company Common Stock.
<TABLE>
<CAPTION>
Name and Address Number of Shares Percentage of Class
of Beneficial Owner Beneficially Owned (1) -------------------
------------------- ----------------------
<S> <C> <C>
Dr. W.F. Little (2) 24,928 12.5%
3005 Boxwood Drive
Montgomery, Alabama 36111
Sarah Martin McShan (3) 18,595 9.3%
1106 12th Street N
Columbus, Mississippi 39701
Dianne M. Green (3) 18,595 9.3%
2000 Cromer Lane
Newberry, South Carolina 29108
Frederick T. Enslen, Jr. (4) 12,334 6.2%
Post Office Box 240848
Montgomery, AL 36124-0848
John E. Enslen (4) 12,213 6.1%
9713 Rosalie Drive
Montgomery, Alabama 36117
Robert G. Enslen (4) 12,113 6.1%
6719 Taylor Circle
Montgomery, Alabama 36117
</TABLE>
(1) "Beneficial ownership" includes shares for which an individual,
directly or indirectly, has or shares voting or investment power or
both, including the right to acquire beneficial ownership within 60
days. All of the listed persons above have sole voting and investment
power over the shares listed opposite their names unless otherwise
indicated in additional notes to this table. Beneficial ownership as
reported in the above table has been determined in accordance with
Rule 13d-3 of the Securities Exchange Act of 1934, as amended. The
percentages are based upon 200,000 shares outstanding plus for each
person listed the number of shares of FNB Common Stock which such
person has a right to acquire within 60 days, if any. There are no
options respecting FNB's shares outstanding.
(2) Dr. Little is the father-in-law of Harvey N. Clapp, a director.
(3) Ms. McShan and Ms. Green are sisters.
(4) Frederick, John and Robert Enslen are brothers. In addition, their
mother owns 4,000 shares over which they disclaim beneficial
ownership.
53
<PAGE> 62
COMMON STOCK OWNED BY MANAGEMENT
The following table sets forth, as of February 28, 1998, the number of
shares of FNB's Common Stock beneficially owned by each director and executive
officer of FNB and all directors and executive officers of FNB as a group.
<TABLE>
<CAPTION>
Positions with FNB and Number of Shares
Name First National Bank Beneficially Owned (1)(2) Percentage of Class
---- ------------------- ------------------------- -------------------
<S> <C> <C> <C>
Ellis Austin, Jr. Director 3,360 (3) 1.7%
Ben H. Barrett Director 160 *
Robert M. Barrett Director, Chairman, 6,786 (4) 3.4%
President and CEO
Harvey N. Clapp Director 4,026 (5) 2.0%
Dr. Spencer J. Coleman Director 100 *
Travis Cosby, III Director, Executive 486 *
Vice President
James O. Dozier Director 1,633 *
Dr. Julius E. Dunn, Jr. Director 1,000 *
Frederick T. Enslen, Jr. Director 12,334 6.2%
Dr. W.F. Little Director 24,928 12.5%
Sarah Martin McShan Director 18,595 9.3%
S.C. Turner Director 1,000 *
All Directors and Executive 74,408 37.2%
Officers as a Group (12
Persons)
</TABLE>
- --------------
* Less than one percent.
(1) See footnote (1) to the table above at "Principal Holders of Common
Stock."
(2) See footnotes (2) through (4) to the table above at "Principal Holders
of Common Stock" for an identification of certain family relationships among
directors and principal stockholders. Also, Ben H. Barrett and Robert M.
Barrett, directors, are first cousins.
(3) Includes 80 shares owned by Mr. Austin's wife.
(4) Includes 100 shares owned by Mr. Barrett's wife.
(5) Includes 3,926 shares owned by Mr. Clapp's wife.
54
<PAGE> 63
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF FNB
The following narrative discussion and tabular data provide an
analysis of major factors and trends regarding the consolidated financial
condition of FNB as of December 31, 1997 and 1996, and the consolidated results
of operations of FNB for each of the years ended December 31, 1997 and 1996.
This discussion should be read in conjunction with the audited consolidated
financial statements of FNB, and the notes thereto, as of and for the year
ended December 31, 1997 and 1996, which are included with this Proxy Statement.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This Proxy Statement contains forward-looking statements with respect
to FNB in addition to historical FNB information. FNB cautions that there are
various important factors that could cause actual results to differ materially
from those indicated in the forward-looking statements; accordingly, there can
be no assurance that such indicated results will be realized. These factors
include legislative and regulatory initiatives regarding deregulation and
restructuring of the banking industry; the extent and timing of the entry of
additional competition in FNB's markets; potential business strategies,
including acquisitions or dispositions of assets or internal restructuring that
may be pursued by FNB; state and Federal banking regulations; changes in or
application of environmental and other laws and regulations to which FNB is
subject; political, legal and economic conditions and developments; financial
market conditions and the results of financing efforts; changes in commodity
prices and interest rates; weather, natural disasters and other catastrophic
events; and other factors discussed herein. The words "believe," "expect,"
"anticipate," "project" and similar expressions signify forward-looking
statements. FNB shareholders are cautioned not to place undue reliance on any
forward-looking statements made by or on behalf of FNB. Any such statement
speaks only as of the date the statement was made.
FNB undertakes no obligation to update or revise any forward-looking
statements.
OVERVIEW
For a summary of selected consolidated financial data as of and for
the years ended December 31, 1993 through 1997, see page 13 of this Proxy
Statement. Since December 31, 1993, FNB's total assets have grown from $154.6
million to $211.2 million at December 31, 1997.
FNB's net earnings for the year ended December 31, 1997 were
$2,580,000, representing continued stable earnings for the five year period
ended December 31, 1997. Net earnings were $3,041,000 for the year ended
December 31, 1996, which represents an increasing trend during this period.
Earnings for the year ended December 31, 1993 were $3,051,000 but included
securities gains on the sale of municipal securities of $860,000.
Management expects modest growth to continue in both assets and
earnings; however, such growth is dependent upon the economies of the markets
served by FNB, its relative competitiveness in its local market, and other
factors which are discussed below.
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NET EARNINGS. Net earnings for 1997 were $2,580,000, a decrease of
$461,000 over 1996 net earnings of $3,041,000. 1996 earnings increased $610,000
as compared to 1995. Earnings per share were $12.90 in 1997, compared to $15.21
in 1996 and $12.16 in 1995. A more detailed analysis of the components of net
earnings and the changes in such components is included under the appropriate
captions below.
The return on average assets for the year ended December 31, 1997 was
1.26% compared to 1.63% for 1996 and 1.43% for 1995. The return on average
stockholders' equity for 1997 was 11.03% compared to 13.72% for the year ended
December 31, 1996 and 11.59% for the year ended December 31, 1995. FNB declared
and paid
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<PAGE> 64
dividends to stockholders of $9.00, $8.25, and $6.25 per share for each of the
years ended December 31, 1997, 1996, and 1995, respectively.
NET INTEREST INCOME. Net interest income, the major component of FNB's
income, is the amount by which interest and fees generated by earning assets
exceeds the total interest cost of funds used to carry them. Net interest
income is affected by a number of factors including the level, pricing, mix,
and maturity of earning assets and liabilities; interest rate fluctuations; and
asset quality. Net interest income was $7.8 million for the year ended December
31, 1997 compared to $7.3 million for the year ended December 31, 1996 and $6.7
million for the year ended December 31, 1995. The improvement in 1997 as
compared to 1996 is primarily attributable to loan growth. The net interest
margin decreased from 4.11% in 1996 to 4.02% in 1997. The increase in net
interest income in 1996 as compared to 1995 is also primarily a result of loan
growth. The net interest margin decreased slightly from 4.15% in 1995 to 4.11%
in 1996.
PROVISION FOR LOSSES ON LOANS. The allowance for losses on loans has
been, in the opinion of management, maintained at a level sufficient to provide
for losses inherent in the loan portfolio. The level of provisions for losses
on loans is based on past loan experience, growth, and composition of the loan
portfolio, as well as current economic conditions. FNB recorded provisions for
losses on loans in the amount of $215,000 for the year ended December 31, 1997,
$200,000 for the year ended December 31, 1996, and $225,000 for the year ended
December 31, 1995. The current year provision is a result of overall growth in
the loan portfolio. Only modest provisions consistent with 1993 through 1997
are expected in the near future. FNB experienced net charge-offs of $163,000,
$125,000, and $136,000 for the years ended December 31, 1997, 1996, and 1995,
respectively. See "Allowance for Losses on Loans" for additional information
regarding the provision for losses on loans.
Table 2, which follows this discussion, presents a Summary of Loan
Loss Experience for the years ended December 31, 1993 through 1997 while Table
1 presents Nonperforming Assets for each of the years ending December 31, 1993
through 1997. The loan-to-deposit ratio increased from 67.5% in 1993 to 75.9%
in 1997 as the demand for quality loans increased. Management expects future
loan demand to remain fairly constant at current levels. Future provisions for
losses on loans are dependent upon various factors, including the economy, loan
growth and composition, levels of nonperforming assets, and loan loss
experience. The amounts of nonperforming loans represent risks in the loan
portfolio; however, a major portion of such loans are collateralized to various
degrees and should not be interpreted as losses.
NONINTEREST INCOME. Noninterest income is primarily related to service
charges on deposits and other fees for services as well as net gains on sales
of securities and other assets. Total noninterest income for 1997 was
$1,109,000, a $292,000 decrease from the $1,401,000 reported for 1996. The
decrease is primarily attributed to gains on sales of other real estate and
fixed assets of $365,000 recognized in 1996. 1996 noninterest income
represented a $453,000 increase from $949,000 during 1995. Other changes in
noninterest income from 1995 to 1996 were attributable to the gains of $365,000
and increased service charges on deposits of $164,000.
Management continues to seek new sources of noninterest income;
however, no significant growth or the maintenance of current levels of
noninterest income can be assured.
NONINTEREST EXPENSE. Total noninterest expense for 1997 was $5.14
million or $996,000 more than the $4.15 million reported for 1996. Noninterest
expense for 1996 represents a $66,000 increase from $4.08 million in 1995. The
increase in 1997 is due primarily to recognition of deferred compensation
liabilities of $713,000 as discussed in the following paragraph. The increase
in 1996 is not attributable to any significant individual items.
Salaries, wages, and benefits totaled $3.28 million for the year ended
December 31, 1997 compared to $2.40 million and $2.36 million for the years
ended December 31, 1996 and 1995, respectively. FNB has deferred compensation
arrangements for two of its key executives which accelerate the payment of the
compensation should there be a change in control of FNB. Accordingly, the
entire amount due under the arrangements of $713,000 has been recorded as an
expense. Other than the effect of the recognition of these deferred
compensation liabilities, management does not project any other significant
changes in the amounts of these expenses.
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<PAGE> 65
Occupancy and equipment expense has remained fairly constant for the
last three years. Occupancy and equipment expense totaled $667,000 for the year
ended December 31, 1997 compared to $614,000 and $571,000 for the years ended
December 31, 1996 and 1995, respectively. The changes from 1995 to 1997 are not
attributable to any significant individual items. Capital expenditures for
branch expansion in 1997 of $1,184,000 will increase occupancy expenses in the
future. Management does not expect any other significant increases for capital
expenditures.
Management continues to monitor the level of noninterest expense and
identify cost reductions where applicable; however, no significant reductions
are expected.
INCOME TAXES. Income tax expense totaled $984,000, $1,321,000 and
$900,000 for the years ended December 31, 1997, 1996, and 1995, respectively.
These amounts represent effective tax rates of 28%, 30%, and 27% for the years
ended December 31, 1997, 1996, and 1995, respectively. The decrease in the
effective tax rate for 1997 is a result of increased levels of investment
securities which generate tax-exempt income. Management expects that future
effective tax rates will remain at levels commensurate with that of 1997.
FINANCIAL CONDITION
Total assets have increased from $191.4 million at December 31, 1996
to $211.1 million at December 31, 1997. This increase was funded by an increase
in deposits of $12.6 million to $169.6 million at December 31, 1997 as compared
to $157.0 million at December 31, 1996 and $150.9 million at December 31, 1995.
Total assets were $174.6 million at December 31, 1995.
LOANS. Total loans at December 31, 1997 were $127.2 million, an
increase of $14.3 million as compared to $112.9 million at December 31, 1996.
This increase is attributable to fluctuations in the overall loan demand for
single-family mortgage loans and commercial loans and increased local
competition. Total loans at December 31, 1995 were $106.0 million. The
composition of the portfolio continues to be focused on single-family mortgage
loans and consumer loans. Management expects loan growth to increase at
moderate levels.
Table 1 - Nonperforming Assets sets forth information on the
nonperforming loans within the loan portfolio as of December 31, 1997 and 1996
and for the years ended December 31, 1993 through 1995. Although the amounts
shown represent risks in the loan portfolio, the major portion of the loans are
collateralized to various degrees and should not be interpreted as losses.
All potential problem loans have been disclosed in Table 1. Potential
problem loans are those loans for which management has obtained information of
possible credit problems of the borrower, resulting in serious doubts as to the
ability of the borrower to comply with the present loan repayment terms.
ALLOWANCE FOR LOSSES ON LOANS. In determining the amount of the
provisions for losses on loans and allowance for losses on loans, management
considers past loan charge-offs, the level of past due and nonaccrual loans,
the size and mix of the portfolio, loan growth trends, adverse classifications
at recent regulatory examinations, general economic conditions in the market
area, and a review of individual loans to identify potential credit problems.
The allowance for losses on loans is maintained at a level considered adequate
by management to provide for potential losses in the existing loan portfolio.
In evaluating the adequacy of the allowance, management makes certain estimates
and assumptions which are susceptible to change in the near term. While
management uses available information to recognize losses on loans, future
additions to the allowance may be necessary based upon changes in economic
conditions. Management believes the level of the allowance for losses on loans
is adequate in relation to the size, mix, and quality of the loan portfolio at
December 31, 1997.
Table 4 - Composition of Loan Portfolio details the types of loans in
the loan portfolio for each of the years ended December 31, 1993 through 1997.
Table 3 - Allocation of the Allowance for Losses on Loans sets forth the
breakdown of the allowance for losses on loans by loan category for each of the
years ending December 31, 1993 through 1997. Management believes that the
allowance can be allocated by category only on an
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<PAGE> 66
approximate basis. The allocation of the allowance to each category is not
necessarily indicative of future losses and does not restrict the use of the
allowance to absorb losses in any category.
During 1995, FNB adopted the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 114, Accounting by Creditors for Impairment
of a Loan (effective for fiscal years beginning after December 15, 1994), as
amended by SFAS No. 118, Accounting by Creditors for Impairment of a Loan -
Income Recognition and Disclosures. This standard prescribes a valuation
methodology for impaired loans as defined by the standard. Generally, a loan is
considered impaired if management believes that it is probable that all amounts
due will not be collected according to the contractual terms stipulated in the
loan agreement. An impaired loan must be valued using the present value of
expected future cash flows discounted at the loan's effective interest rate,
the loan's observable market price or fair value of the loan's underlying
collateral. FNB adopted the provisions of SFAS No. 114 prospectively in 1995.
The adoption of SFAS No. 114 did not have a material effect on FNB's financial
condition, results of operations, or liquidity.
INVESTMENT SECURITIES. Investment securities totaled $70.0 million at
December 31, 1997, compared to $66.3 million and $56.9 million at December 31,
1996 and 1995, respectively. Investments in securities are generally made as an
alternative deployment of available funds. Accordingly, the level of investment
securities in the future and their classification as available-for-sale or
held-to-maturity will depend on various factors, including loan demand and
management's ability to attract loans and deposits. The contractual maturities
and amortized cost and fair value by investment category of the investment
securities portfolio are presented in Note 2 to the consolidated financial
statements as of December 31, 1997 and 1996.
Investment securities classified as available-for-sale are carried at
fair value, and held-to-maturity securities are carried at amortized cost. As
of December 31, 1997, the fair value of total investment securities exceeded
the amortized cost by $953,000 or 1.36%.
MONEY MARKET ASSETS. Federal funds sold totaled $1.27 million at
December 31, 1997, compared to $4.45 million at December 31, 1996, a decrease
of $3.18 million. The level of federal funds sold is a function of FNB's
liquidity position and the overall level of loan demand.
FORECLOSED ASSETS. Foreclosed assets at December 31, 1997 totaled
$414,000, as compared to $189,000 at December 31, 1996 and $275,000 at December
31, 1995.
DEPOSITS. Customer deposits totaled $169.6 million as of December 31,
1997, a $12.6 million increase over total deposits of $157.0 million as of
December 31, 1996. Total deposits at December 31, 1995 were $150.9 million.
While the level of deposits fluctuates daily, management expects the level of
deposits to continue to increase at moderate levels.
Included in deposits are $31.6 million of time deposits greater than
or equal to $100,000 at December 31, 1997 and $29.7 million and $27.6 million
at December 31, 1996 and 1995, respectively. At December 31, 1997, FNB's loan
to deposit ratio was 75.9%, compared to 72.8% and 71.1% at December 31, 1996
and 1995, respectively.
OTHER BORROWINGS. As an additional loan funding mechanism, FNB has
borrowed money from the Federal Home Loan Bank at rates commensurate with that
of time deposits. At December 31, 1997 and 1996, FNB had outstanding borrowings
of $15.0 and $10.0 million, respectively.
CAPITAL. Total shareholders' equity as of December 31, 1997 was $23.51
million, compared to $22.67 million at December 31, 1996 and $21.30 million at
December 31, 1995. The 1997 net increase is due to net earnings of $2,580,000
offset by dividends of $1.80 million. Net earnings for the year ended December
31, 1996 were $3,041,000, compared to $2,431,000 for 1995. Dividends declared
and paid to shareholders during 1996 totaled $1,650,000 and $1,249,000 in 1995.
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The key to the continued growth and profitability of FNB is to
maintain adequate levels of capital. The capital adequacy of a bank is
determined based upon the level of capital, as well as asset quality,
liquidity, asset mix, earnings history, and economic conditions. Management's
goal is to maintain its bank in the "well-capitalized" category for regulatory
capital. At December 31, 1997, FNB was in this category.
The regulatory capital guidelines divide capital into two tiers, Tier
1 capital and Tier 2 capital. Tier 1 capital of FNB consists of stockholders'
equity, excluding the unrealized loss on available-for-sale investment
securities. Tier 2 capital includes the allowance for losses on loans, with
certain limitations. In determining the risk-based capital requirements, assets
are assigned risk weights of zero to 100 percent, depending upon the regulatory
assigned levels of credit risk associated with such assets. Off-balance-sheet
items are included in the calculation of risk-adjusted assets through
conversion factors established by regulatory agencies.
FNB's Tier 1 and total capital risk-weighted assets ratios were 19.15%
and 20.30%, respectively at December 31, 1997. At December 31, 1996, FNB's Tier
1 and total capital to risk-weighted assets ratios were 19.65% and 20.83%,
respectively, compared to 19.83% and 21.07%, respectively at year end 1995. The
regulatory agencies require "well-capitalized" institutions to have Tier 1 and
total capital ratios of 6% and 10%, respectively.
In addition to the risk-based capital requirements, the regulatory
agencies have established leverage capital requirements. This ratio is computed
by dividing Tier 1 capital by unadjusted (not risk-weighted) average total
assets. FNB's leverage ratio at December 31, 1997 was 11.46% compared to 11.79%
and 12.11% at December 31, 1996 and 1995, respectively, as compared to the
regulatory guideline of 5% for "well-capitalized" institutions.
LIQUIDITY AND ASSET/LIABILITY MANAGEMENT
FNB views liquidity and asset/liability management as the ability to
assure that funds are available to support bank requirements; that is, the
ability to allow depositors ready access to their monies and credit customers
available funds to meet their credit needs. It is also the process by which FNB
monitors and attempts to control the mix and maturities of its assets and
liabilities in order to maximize net interest income. Management maintains
balances of federal funds sold and available-for-sale investment securities in
amounts it believes necessary to meet FNB's daily cash needs. With the
available-for-sale investment securities portfolio, management can, at its
discretion, manage the liquidity and interest rate risk of FNB. Management does
not foresee any particular matters which might immediately threaten its ability
to remain liquid.
SOURCES AND USES OF FUNDS
FNB's primary source of funds has historically been the taking of
deposits from customers, both individual and business. FNB's deposit
acquisition strategy is to rely on a core deposit base of demand deposits, as
well as savings and time deposits under $100,000. Next, FNB utilizes time
deposits $100,000 and over and public deposits for additional sources of funds.
At December 31, 1997, the percentage of time deposits $100,000 and over to
total deposits was 18.7%. At December 31, 1996, the percentage of time deposits
$100,000 and over to total deposits was 18.9% compared to 18.3% at December 31,
1995. The acquisition of deposits are primarily from customers, individuals,
and businesses within FNB's market area. Management believes that the rates
offered for deposits are competitive with other financial institutions in FNB's
market area. At December 31, 1997, FNB had brokered deposits of $4.2 million.
At December 31, 1996 and 1995, FNB had brokered deposits of $1.2 million. These
brokered deposits are not a significant source of funds to FNB.
FNB's primary use of funds is the making of loans to customers. The
loan-to-deposit ratio of 75.9% at December 31, 1997 represented a 3.1% increase
in the loan-to-deposit ratio of 72.8% at December 31, 1996. The loan-to-deposit
ratio was 71.1% at December 31, 1995. The table of FNB Selected Consolidated
Financial Data on page 13 indicates that FNB's overall relative loan portfolio
size has tended to increase, as evidenced by the trend of increases in the
loan-to-deposit ratio. FNB's loan portfolio is comprised of loans to
individuals and businesses secured by various collateral, and in certain
circumstances the loans are extended on an unsecured basis. The
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composition of the loan portfolio is presented in Note 3 to the consolidated
financial statements at December 31, 1997, which are presented in Appendix E.
A secondary use of funds is the purchasing of debt securities for
investment purposes. At December 31, 1997, the investment portfolio represented
35.0% of total earnings assets. During 1997, the investment portfolio averaged
36.1% of total earning assets compared to 34.4% in 1996. The composition of the
investment securities portfolio at December 31, 1997 is presented in Note 2 to
the consolidated financial statements presented in Appendix E. The portfolio is
comprised of obligations of U.S. Government Agencies and obligations of states
and local governments. While FNB may continue to upgrade or reposition the
portfolio, management has not in the past, nor does it intend to in the future,
trade securities for profit or to depend upon securities gains as a regular
source of income. At December 31, 1997, the fair value of the investment
portfolio exceeded the amortized cost by approximately $953,000. In comparison,
the fair value exceeded the amortized cost by approximately $442,000 at
December 31, 1996 and $661,000 at December 31, 1995.
REGULATORY ASSESSMENTS
FNB is required to pay certain fees to the FDIC. The FDIC monitors
risk-based capital requirements and requires weaker institutions to pay higher
deposit insurance premiums, while allowing well-capitalized institutions to pay
less. The deposit insurance assessments currently range from zero for
"well-capitalized" institutions to 23 cents per $100 of deposits for the
weakest institutions. For 1997 and 1996, FNB paid $23,000 and $2,000,
respectively, for FDIC deposit insurance. FNB had $170 million of insured
deposits as of December 31, 1997.
FDIC deposit insurance and regulatory assessments totaled $82,000 and
$58,000 for the years ended December 31, 1997 and 1996, respectively.
EFFECTS OF INFLATION
A bank's asset and liability structure is primarily monetary in
nature, that is, fixed in terms of monetary amounts. Consequently, the impact
of inflation on a bank differs significantly from an industrial company.
Factors such as interest rates have a more significant impact on a bank's
performance than does general inflation. Interest rates do not necessarily move
in the same direction, or at the same magnitude, as the prices of other goods
and services.
IMPACT OF ACCOUNTING STANDARDS TO BE ADOPTED
SFAS NO. 123. During 1996, the FASB issued SFAS No. 123, Accounting
for Stock-Based Compensation, which is effective for fiscal years beginning
after December 15, 1995. The Company has no stock-based compensation plans;
accordingly, the disclosure provisions of SFAS No. 123 do not apply.
SFAS NO. 125. During 1996, the FASB issued SFAS No. 125, Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities, which is effective for transfers and servicing of financial assets
and extinguishments of liabilities occurring after December 31, 1996, and shall
be applied prospectively. The Company adopted the provisions of SFAS No. 125
during 1997, which had no material impact on the Company's financial position,
results of operations, or liquidity.
SFAS NO. 128. During 1997, the FASB issued SFAS No. 128, Earnings Per
Share. The adoption of this statement did not have a significant impact on the
Company's computation of earnings per share. The Company has a simple capital
structure consisting only of common stock.
YEAR 2000 (Y2K) ISSUES
FNB is adhering to the 5 step approach to the Y2K issue. Those steps
being: Awareness, Assessment, Renovation, Validation, and Implementation. FNB
is aware of the possible problems Y2K may provide for First
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National Bank as well as its customers. FNB is collecting information from the
regulatory agencies and the vendors unique to FNB. FNB has letters of
certification and compliance from the software and hardware vendors for the
main data processing systems of First National Bank. Other support product
vendors have been contacted and many have informed FNB that they are in the
process of modifying their respective products to become Y2K compliant. Some
equipment, such as extremely old personal computers, will be retired. Personal
computers are not a critical component to the operations of First National
Bank, but the newer are Y2K compliant. FNB's vendors have already tested FNB's
core data processing systems and they are Y2K compliant. FNB will not complete
its entire Y2K testing until later in 1998. Implementation of all products and
support will be put into place as they become available prior to 1999.
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TABLE 1
NONPERFORMING ASSETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Years Ended December 31,
------------------------------------------------------------------------------
1997 1996 1995 1994 1993
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $ 96 $ 268 $ 165 $ 98 $ 156
Other real estate and foreclosed assets 414 189 275 334 289
-------------- -------------- -------------- -------------- --------------
Total nonperforming assets $ 510 $ 457 $ 440 $ 432 $ 445
Loans past due 90 days or more and
Still accruing $ 32 $ 219 $ 82 $ 83 $ 27
</TABLE>
TABLE 2
SUMMARY OF LOAN LOSS EXPERIENCE
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Years Ended December 31,
------------------------------------------------------------------------------
1997 1996 1995 1994 1993
------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Balance, January 1 $ 1,359 $ 1,284 $ 1,196 $ 1,147 $ 1,018
Provisions 215 200 225 180 250
Loans Charged-off (389) (320) (315) (329) (363)
Recoveries 226 195 178 198 242
------------- ------------- ------------- ------------- --------------
Net charge-offs (163) (125) (137) (131) (121)
------------- ------------- ------------- ------------- --------------
Balance, end of period $ 1,411 $ 1,359 $ 1,284 $ 1,196 $ 1,147
============= ============= ============= ============= ==============
Loans, net of unearned income:
Year end $ 128,682 $ 114,338 $ 107,315 $ 101,237 $ 90,950
Average during year 122,511 110,510 104,758 95,779 87,695
Allowance for loan losses on loans
To period end loans, net of
Unearned interest 1.10% 1.19% 1.20% 1.18% 1.26%
Allowance for losses on loans
To average loans, net of unearned
Interest 1.15% 1.23% 1.22% 1.25% 1.31%
Net charge-offs to average loans,
Net of unearned interest 0.13% 0.11% 0.13% 0.14% 0.14%
</TABLE>
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TABLE 3
ALLOCATION OF THE ALLOWANCE LOSSES ON LOANS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
------------------------------------------
Years Ended December 31,
------------------------------------------
1997 1996
---- ----
Amount % Amount %
-------- ------ -------- ------
<S> <C> <C> <C> <C>
Commercial, financial, and agricultural $ 123 8.73% $ 116 8.57%
Real estate-mortgage 999 70.79% 983 72.32%
Real estate-construction 27 1.92% 11 0.77%
Consumer and other 262 18.56% 249 18.34%
-------- ------ ------- ------
Total $ 1,411 100.00% $ 1,359 100.00%
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------
Years Ended December 31,
---------------------------------------------------------------------
1995 1994 1993
---- ---- ----
Amount % Amount % Amount %
--------- ------ --------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial, and agricultural $ 118 9.20% $ 113 9.42% $ 99 8.60%
Real estate-mortgage 887 69.02% 838 67.56% 777 67.72%
Real estate-construction 33 2.60% 0 2.51% 29 2.51%
Consumer and other 246 19.18% 245 20.51% 242 21.17%
------- ------ ------ ------ ------ ------
Total $ 1,284 100.00% $1,196 100.00% $1,147 100.00%
</TABLE>
TABLE 4
COMPOSITION OF LOAN PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
----------------------------------------------------------------------
Years Ended December 31,
----------------------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Commercial, financial and agricultural $ 11,235 $ 9,797 $ 9,872 $ 9,537 $ 7,822
Real estate-mortgage 91,092 82,686 74,076 68,395 61,588
Real estate-construction 2,475 886 2,787 2,540 2,282
Consumer and other 23,880 20,969 20,580 20,764 19,258
-------- -------- -------- -------- --------
Total Loans $128,682 $114,338 $107,315 $101,236 $ 90,950
</TABLE>
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<PAGE> 72
CERTAIN REGULATORY CONSIDERATIONS
The following discussion sets forth certain of the material elements
of the regulatory framework applicable to banks and bank holding companies and
provides certain specific information related to UPC and FNB. A more complete
discussion regarding UPC is included in UPC's Annual Report on Form 10-K for
the fiscal year ended December 31, 1997. See "AVAILABLE INFORMATION" and
"DOCUMENTS INCORPORATED BY REFERENCE."
GENERAL
UPC and FNB are both bank holding companies and each is registered
with the Federal Reserve under the BHC Act. As such, both UPC and FNB, and
their respective non-bank subsidiaries, are subject to the supervision,
examination, and reporting requirements of the BHC Act and the regulations of
the Federal Reserve.
The BHC Act requires every bank holding company to obtain the prior
approval of the Federal Reserve before: (i) it may acquire direct or indirect
ownership or control of any voting shares of any bank if, after such
acquisition, the bank holding company will directly or indirectly own or
control more than 5% of the voting shares of the bank; (ii) it or any of its
subsidiaries, other than a bank, may acquire all or substantially all of the
assets of any bank; or (iii) it may merge or consolidate with any other bank
holding company.
The BHC Act further provides that the Federal Reserve may not approve
any transaction that would result in a monopoly or would be in furtherance of
any combination or conspiracy to monopolize or attempt to monopolize the
business of banking in any section of the United States, or the effect of which
may be substantially to lessen competition or to tend to create a monopoly in
any section of the country, or that in any other manner would be in restraint
of trade, unless the anticompetitive effects of the proposed transaction are
clearly outweighed by the public interest in meeting the convenience and needs
of the community to be served. The Federal Reserve is also required to consider
the financial and managerial resources and future prospects of the bank holding
companies and banks concerned and the convenience and needs of the community to
be served. Consideration of financial resources generally focuses on capital
adequacy which is discussed below, and consideration of convenience and needs
issues includes the parties' performance under the Community Reinvestment Act
of 1977.
The BHC Act, as amended by the interstate banking provisions of the
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
("Interstate Banking Act"), which became effective in September 1995, repealed
the prior statutory restrictions on interstate acquisitions of banks by bank
holding companies, such that UPC and FNB may now acquire a bank located in any
state other than their respective home states, and any bank holding company
located outside Tennessee or Alabama may lawfully acquire UPC or FNB, as the
case may be, regardless of state law to the contrary, subject to certain
deposit-percentage limitations, aging requirements and other restrictions. The
Interstate Banking Act also generally provides that, after June 1, 1997,
national and state-chartered banks may branch interstate through acquisitions
of banks in other states. By adopting legislation prior to that date, a state
has the ability either to "opt in" and accelerate the date after which
interstate branching is permissible or "opt out" and prohibit interstate
branching altogether. None of the states in which the current UPC Banking
Subsidiaries are located, including but not limited to, Alabama, has elected to
"opt out." UPC utilized the provisions of the Interstate Banking Act at the end
of 1997 to merge substantially all of UPC's Banking Subsidiaries with and into
UPB. As a result of such consolidation, UPB is now a multi-state national bank
with branches in Tennessee, Alabama, Mississippi, Louisiana, Arkansas, Missouri
and Kentucky.
The BHC Act generally prohibits bank holding companies from engaging
in activities other than banking or managing or controlling banks or other
permissible subsidiaries and from acquiring or retaining direct or indirect
control of any company engaged in any activities other than those activities
determined by the Federal Reserve to be so closely related to banking or
managing or controlling banks as to be a proper incident thereto. In
determining whether a particular activity is permissible, the Federal Reserve
must consider whether the performance of such an activity reasonably can be
expected to produce benefits to the public, such as greater convenience,
increased competition, or gains in efficiency, that outweigh possible adverse
effects, such as undue
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<PAGE> 73
concentration of resources, decreased or unfair competition, conflicts of
interest, or unsound banking practices. For example, factoring accounts
receivable, acquiring or servicing loans, leasing personal property, conducting
discount securities brokerage activities, performing certain data processing
services, acting as agent or broker in selling credit life insurance and
certain other types of insurance in connection with credit transactions, and
performing certain insurance underwriting activities all have been determined
by the Federal Reserve to be permissible activities of bank holding companies.
The BHC Act does not place territorial limitations on permissible nonbanking
activities of bank holding companies. Despite prior approval, the Federal
Reserve has the power to order a holding company or its subsidiaries to
terminate any activity or to terminate its ownership or control of any
subsidiary when it has reasonable cause to believe that continuation of such
activity or such ownership or control constitutes a serious risk to the
financial safety, soundness, or stability of any bank subsidiary of that bank
holding company.
Each of the bank subsidiaries of UPC and FNB is a member of the
Federal Deposit Insurance Corporation (the "FDIC"), and as such, its deposits
are insured by the FDIC to the extent provided by law. Each such subsidiary is
also subject to numerous state and federal statutes and regulations that affect
is business, activities, and operations, and each is supervised and examined by
one or more state or federal bank regulatory agencies.
The regulatory agencies having supervisory jurisdiction over the
respective bank subsidiaries of UPC and FNB (the FDIC and the applicable state
authority in the case of state-chartered nonmember banks, the Office of Thrift
Supervision ("OTS") in the case of federally chartered thrift institutions, the
Federal Reserve in the case of state-chartered member banks, and the Office of
the Comptroller of the Currency ("OCC") in the case of national banks)
regularly examine the operations of such institutions and have authority to
approve or disapprove mergers, consolidations, the establishment of branches,
and similar corporate actions. The federal and state banking regulators also
have the power to prevent the continuance or development of unsafe or unsound
banking practices or other violations of law.
PAYMENT OF DIVIDENDS
UPC and FNB is each a legal entity separate and distinct from its
banking, thrift, and other subsidiaries. The principal sources of cash flow of
UPC and FNB, including cash flow to pay dividends to its shareholders, are
dividends from its subsidiary depository institutions. There are statutory and
regulatory limitations on the payment of dividends by these subsidiary
depository institutions to UPC or FNB, as the case may be, as well as by UPC or
FNB to their respective shareholders.
As to the payment of dividends, each of UPC's state-chartered banking
subsidiaries is subject to the respective laws and regulations of the state in
which such bank is located, and to the regulations of the bank's primary
federal regulator. UPC's subsidiary that is a thrift institution is subject to
the OTS' dividend distributions regulation, and those bank subsidiaries of UPC
and FNB that are national banks are subject to the regulations of the OCC.
If, in the opinion of the federal banking regulator, a depository
institution under its jurisdiction is engaged in or is about to engage in an
unsafe or unsound practice (which, depending on the financial condition of the
depository institution, could include the payment of dividends), such agency
may require, after notice and hearing, that such institution cease and desist
from such practice. The federal banking agencies have indicated that paying
dividends that deplete a depository institution's capital base to an inadequate
level would be an unsafe and unsound banking practice. Under the Federal
Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"), a depository
institution may not pay any dividend if payment would cause it to become
undercapitalized or if it already is undercapitalized. See "-- Prompt
Corrective Action." Moreover, the federal agencies have issued policy
statements that provide that bank holding companies and insured banks should
generally only pay dividends out of current operating earnings.
At January 1, 1998, under dividend restrictions imposed under federal
and state laws, the UPC Banking Subsidiaries, without obtaining governmental
approvals, could declare aggregate dividends to UPC of
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approximately $103 million, and First National Bank, without obtaining
governmental approval, could declare aggregate dividends to FNB of
approximately $3.3 million.
The payment of dividends by UPC and FNB, and their respective banking
subsidiaries may also be affected or limited by other factors, such as the
requirement to maintain adequate capital above regulatory guidelines.
CAPITAL ADEQUACY
UPC and FNB and their respective banking subsidiaries are required to
comply with the capital adequacy standards established by the Federal Reserve
in the case of UPC and FNB, and the appropriate federal banking regulator in
the case of each of the banking subsidiaries. There are two basic measures of
capital adequacy for bank holding companies and their subsidiary depository
institutions that have been promulgated by the Federal Reserve and each of the
federal bank regulatory agencies: a risk-based measure and a leverage measure.
All applicable capital standards must be satisfied for a bank holding company
to be considered in compliance.
The risk-based capital standards are designed to make regulatory
capital requirements more sensitive to differences in risk profile among
depository institutions and bank holding companies, to account for
off-balance-sheet exposure, and to minimize disincentives for holding liquid
assets. Assets and off-balance-sheet items are assigned to broad risk
categories, each with appropriate weights. The resulting capital ratios
represent capital as a percentage of total risk-weighted assets and
off-balance-sheet items.
The minimum guideline for the ratio ("Total Capital Ratio") of total
capital ("Total Capital") to risk-weighted assets (including certain
off-balance-sheet items, such as standby letters of credit) is 8%. 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 December 31, 1997, UPC's consolidated Total Capital Ratio and its Tier 1
Capital Ratio (i.e., the ratio of Tier 1 Capital to risk-weighted assets) were
18.12% and 15.51 respectively, and FNB's Total Capital Ratio and Tier 1 Capital
Ratio were 20.30% and 19.15%, 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% for bank holding companies
that meet certain specified criteria, including having the highest regulatory
rating. All other bank holding companies generally are required to maintain a
Leverage Ratio of at least 3%, plus an additional cushion of 100 to 200 basis
points. UPC's Leverage Ratio at December 31, 1997, was 10.48% and FNB's
Leverage Ratio at December 31, 1997 was 11.22%. The guidelines also provide
that bank holding companies experiencing internal growth or making acquisitions
will be expected to maintain strong capital positions substantially above the
minimum supervisory levels without significant reliance on intangible assets.
Furthermore, the Federal Reserve has indicated that it will consider a
"Tangible Tier 1 Capital Leverage Ratio" (deducting all intangibles) and other
indicia of capital strength in evaluating proposals for expansion or new
activities.
Each of the banking subsidiaries of UPC and FNB is subject to
risk-based and leverage capital requirements adopted by its federal banking
regulator, which are substantially similar to those adopted by the Federal
Reserve for bank holding companies. Each of the banking subsidiaries of UPC and
FNB was in compliance with applicable minimum capital requirements as of
December 31, 1997. Neither UPC, FNB, nor any of their respective banking
subsidiaries has been advised by any federal banking agency of any specific
minimum capital ratio requirement applicable to it.
Failure to meet capital guidelines could subject a bank or thrift to a
variety of enforcement remedies, including issuance of a capital directive, the
termination of deposit insurance by the FDIC, a prohibition on the taking of
brokered deposits, and certain other restrictions on its business. As described
below, substantial
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additional restrictions can be imposed upon FDIC-insured depository
institutions that fail to meet applicable capital requirements. See "-- Prompt
Corrective Action."
The federal bank regulators continue to indicate their desire to raise
capital requirements applicable to banking organizations beyond their current
levels. In this regard, the Federal Reserve, the FDIC, and the OCC have,
pursuant to FDICIA, proposed an amendment to the risk-based capital standards
that would calculate the change in an institution's net economic value
attributable to increases and decreases in market interest rates and would
require banks with excessive interest rate risk exposure to hold additional
amounts of capital against such exposures. The OTS has already included an
interest-rate risk component in its risk-based capital guidelines for savings
associations that it regulates.
SUPPORT OF SUBSIDIARY INSTITUTIONS
Under Federal Reserve policy, UPC and FNB are expected to act as a
source of financial strength for, and to commit resources to support, each of
their respective banking subsidiaries. This support may be required at times
when, absent such Federal Reserve policy, UPC or FNB, as the case may be, may
not be inclined to provide it. In addition, any capital loans by a bank holding
company to any of its banking subsidiaries are subordinate in right of payment
to deposits and to certain other indebtedness of such banks. In the event of a
bank holding company's bankruptcy, any commitment by the bank holding company
to a federal bank regulatory agency to maintain the capital of a banking
subsidiary will be assumed by the bankruptcy trustee and entitled to a priority
of payment.
Under the Federal Deposit Insurance Act (the "FDIA"), a depository
institution insured by the FDIC can be held liable for any loss incurred by, or
reasonably expected to be incurred by, the FDIC after August 9, 1989, in
connection with (i) the default of a commonly controlled FDIC-insured
depository institution or (ii) any assistance provided by the FDIC to any
commonly controlled FDIC-insured depository institution "in danger of default."
"Default" is defined generally as the appointment of a conservator or receiver,
and "in danger of default" is defined generally as the existence of certain
conditions indicating that a default is likely to occur in the absence of
regulatory assistance. The FDIC's claim for damages is superior to claims of
shareholders of the insured depository institution or its holding company, but
is subordinate to claims of depositors, secured creditors, and holders of
subordinated debt (other than affiliates) of the commonly controlled insured
depository institution. The UPC Banking Subsidiaries are subject to these
cross-guarantee provisions. As a result, any loss suffered by the FDIC in
respect of any of these subsidiaries would likely result in assertion of the
cross-guarantee provisions, the assessment of such estimated losses against the
depository institution's banking or thrift affiliates, and a potential loss of
UPC's respective investments in such other subsidiary depository institutions.
PROMPT CORRECTIVE ACTION
FDICIA establishes a system of prompt corrective action to resolve the
problems of undercapitalized institutions. Under this system, which became
effective in December 1992, the federal banking regulators are required to
establish five capital categories (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, and critically
undercapitalized) and to take certain mandatory supervisory actions, and are
authorized to take other discretionary actions, with respect to institutions in
the three undercapitalized categories, the severity of which will depend upon
the capital category in which the institution is placed. Generally, subject to
a narrow exception, FDICIA requires the banking regulator to appoint a receiver
or conservator for an institution that is critically undercapitalized. The
federal banking agencies have specified by regulation the relevant capital
level for each category.
Under the final agency rules implementing the prompt corrective action
provisions, an institution that (i) has a Total Capital Ratio of 10% or
greater, a Tier 1 Capital Ratio of 6% or greater, and a Leverage Ratio of 5% or
greater and (ii) is not subject to any written agreement, order, capital
directive, or prompt corrective action directive issued by the appropriate
federal banking agency is deemed to be well capitalized. An institution with a
Total Capital Ratio of 8% or greater, a Tier 1 Capital Ratio of 4% or greater,
and a Leverage Ratio of 4% or greater is considered to be adequately
capitalized. A depository institution that has a Total Capital Ratio of less
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than 8%, a Tier 1 Capital Ratio of less than 4%, or a Leverage Ratio of less
than 4% is considered to be undercapitalized. A depository institution that has
a Total Capital Ratio of less than 6%, a Tier 1 Capital Ratio of less than 3%,
or a Leverage Ratio of less than 3% is considered to be significantly
undercapitalized, and an institution that has a tangible equity capital to
assets ratio equal to or less than 2% is deemed to be critically
undercapitalized. For purposes of the regulation, the term "tangible equity"
includes core capital elements counted as Tier 1 Capital for purposes of the
risk-based capital standards, plus the amount of outstanding cumulative
perpetual preferred stock (including related surplus), minus all intangible
assets with certain exceptions. A depository institution may be deemed to be in
a capitalization category that is lower than is indicated by its actual capital
position if it receives an unsatisfactory examination rating.
An institution that is categorized as undercapitalized, significantly
undercapitalized, or critically undercapitalized is required to submit an
acceptable capital restoration plan to its appropriate federal banking agency.
Under FDICIA, a bank holding company must guarantee that a subsidiary
depository institution meet its capital restoration plan, subject to certain
limitations. The obligation of a controlling bank holding company under FDICIA
to fund a capital restoration plan is limited to the lesser of 5% of an
undercapitalized subsidiary's assets or the amount required to meet regulatory
capital requirements. An undercapitalized institution is also generally
prohibited from increasing its average total assets, making acquisitions,
establishing any branches, or engaging in any new line of business, except in
accordance with an accepted capital restoration plan or with the approval of
the FDIC. In addition, the appropriate federal banking agency is given
authority with respect to any undercapitalized depository institution to take
any of the actions it is required to or may take with respect to a
significantly undercapitalized institution as described below if it determines
"that those actions are necessary to carry out the purpose" of FDICIA.
For those institutions that are significantly undercapitalized or
undercapitalized and either fail to submit an acceptable capital restoration
plan or fail to implement an approved capital restoration plan, the appropriate
federal banking agency must require the institution to take one or more of the
following actions: (i) sell enough shares, including voting shares, to become
adequately capitalized; (ii) merge with (or be sold to) another institution (or
holding company), but only if grounds exist for appointing a conservator or
receiver; (iii) restrict certain transactions with banking affiliates as if the
"sister bank" exception to the requirements of Section 23A of the Federal
Reserve Act did not exist; (iv) otherwise restrict transactions with bank or
non-bank affiliates; (v) restrict interest rates that the institution pays on
deposits to "prevailing rates" in the institution's "region;" (vi) restrict
asset growth or reduce total assets; (vii) alter, reduce, or terminate
activities; (viii) hold a new election of directors; (ix) dismiss any director
or senior executive officer who held office for more than 180 days immediately
before the institution became undercapitalized, provided that in requiring
dismissal of a director or senior officer, the agency must comply with certain
procedural requirements, including the opportunity for an appeal in which the
director or officer will have the burden of proving his or her value to the
institution; (x) employ "qualified" senior executive officers; (xi) cease
accepting deposits from correspondent depository institutions; (xii) divest
certain nondepository affiliates which pose a danger to the institution; or
(xiii) be divested by a parent holding company. In addition, without the prior
approval of the appropriate federal banking agency, a significantly
undercapitalized institution may not pay any bonus to any senior executive
officer or increase the rate of compensation for such an officer.
At December 31, 1997, each of the banking subsidiaries of UPC and FNB
had the requisite capital levels to qualify as well capitalized. An
institution's captial category is determined solely for the purposes of
applying the prompt corrective action law and it may not constitute an accurate
representation of an institution's overall financial condition or prospects.
DESCRIPTION OF UPC CAPITAL STOCK
UPC's Charter currently authorizes the issuance of [300,000,000] shares
of UPC Common Stock and 10,000,000 shares of UPC Preferred Stock. As of March
31, 1998, 83,865,183 shares of UPC Common Stock were outstanding and
approximately 8,548,615 shares were earmarked for issuance with currently
outstanding UPC stock options, UPC's dividend reinvestment plan, and with
respect to conversion rights of currently outstanding UPC Series E Preferred
Stock [defined next]. In addition, as of March 31, 1998,
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1,478,888 shares of UPC's 8% Cumulative, Convertible Preferred Stock, Series E
(the "Series E Preferred Stock") were outstanding. As of March 31, 1998,
none of UPC's 750,000 authorized shares of Series A Preferred Stock were issued
and outstanding nor is management aware of the existence of circumstances from
which it may be inferred that such issuance is imminent. THE CAPITAL STOCK OF
UPC DOES NOT REPRESENT OR CONSTITUTE A DEPOSIT ACCOUNT AND IS NOT INSURED BY
THE FDIC, THE BANK INSURANCE FUND, THE SAVINGS ASSOCIATION INSURANCE FUND, OR
ANY GOVERNMENTAL AGENCY.
UPC COMMON STOCK
GENERAL. Shares of UPC Common Stock may be issued at such time or
times and for such consideration (not less than the par value thereof) as the
UPC Board may deem advisable, subject to such limitations as may be set forth
in the laws of the State of Tennessee, UPC's Charter or Bylaws or the rules of
the NYSE. Union Planters Bank National Association, a subsidiary of UPC, is the
Registrar, Transfer Agent and Dividend Disbursing Agent for shares of UPC
Common Stock. Its address is Union Planters Bank, National Association,
Corporate Trust Department, 6200 Poplar Avenue, Third Floor, Memphis, Tennessee
38119. Its mailing address is P.O. Box 387, Memphis, Tennessee 38147.
DIVIDENDS. Subject to the preferential dividend rights applicable to
outstanding shares of the UPC Preferred Stock and subject to applicable
requirements, if any, with respect to the setting aside of sums for purchase,
retirement, or sinking funds, if any, for all outstanding UPC Preferred Stock,
the holders of the UPC Common Stock are entitled to receive, to the extent
permitted by law, only such dividends as may be declared from time to time by
the UPC Board.
UPC has the right to, and may from time to time, enter into borrowing
arrangements or issue other debt instruments, the provisions of which may
contain restrictions on payment of dividends and other distributions on UPC
Common Stock and UPC Preferred Stock. In December, 1996, UPC caused to be
issued $200,000,000 in aggregate liquidation amount of 8.20% Capital Trust Pass
- - through Securities ("UPC Capital Securities") through a Delaware trust
subsidiary. Pursuant to the terms of the governing instruments, UPC would be
prohibited from paying dividends on any UPC Capital Stock if all quarterly
payments on the UPC Capital Securities had not been paid in full. The UPC
Capital Securities mature in 2026 and may be redeemed under certain
circumstances prior to maturity.
LIQUIDATION RIGHTS. In the event of the voluntary or involuntary
liquidation, dissolution, distribution of assets, or winding-up of UPC, after
distribution in full of the preferential amounts required to be distributed to
the holders of UPC Preferred Stock, holders of UPC Common Stock will be
entitled to receive all of the remaining assets of UPC, of whatever kind,
available for distribution to shareholders ratably in proportion to the number
of shares of UPC Common Stock held. The UPC Board may distribute in kind to the
holders of UPC Common Stock such remaining assets of UPC or may sell, transfer,
or otherwise dispose of all or any part of such remaining assets to any other
person or entity and receive payment therefor in cash, stock, or obligations of
such other person or entity, and may sell all or any part of the consideration
so received and distribute any balance thereof in kind to holders of UPC Common
Stock. Neither the merger or consolidation of UPC into or with any other
corporation, nor the merger of any other corporation into UPC, nor any purchase
or redemption of shares of stock of UPC of any class, shall be deemed to be a
dissolution, liquidation, or winding-up of UPC for purposes of this paragraph.
Because UPC is a holding company, its right and the rights of its
creditors and shareholders, including the holders of UPC Preferred Stock and
UPC Common Stock, to participate in the distribution of assets of a subsidiary
on its liquidation or recapitalization may be subject to prior claims of such
subsidiary's creditors except to the extent that UPC itself may be a creditor
having recognized claims against such subsidiary.
For a further description of UPC Common Stock, see "EFFECT OF THE
MERGER ON RIGHTS OF SHAREHOLDERS."
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UPC PREFERRED STOCK
SERIES A PREFERRED STOCK. UPC's Charter provides for the issuance of
up to 750,000 shares (subject to adjustment by action of the UPC Board) of
Series A Preferred Stock under certain circumstances involving a potential
change in control of UPC. None of such shares are outstanding and management is
aware of no facts suggesting that issuance of such shares may be imminent. The
Series A Preferred Stock is described in more detail in UPC's Registration
Statement on Form 8-A, dated January 19, 1989, and filed February 1, 1989 (SEC
File No. 0-6919) which is incorporated by reference herein.
SERIES E PREFERRED STOCK. 1,478,888 shares of Series E Preferred Stock
were outstanding as of March 31, 1998. All shares of Series E Preferred
Stock have a stated value of $25.00 per share. Dividends are payable at the
rate of $0.50 per share per quarter and are cumulative. The Series E Preferred
Stock is convertible at the rate of 1.25 shares of UPC Common Stock for each
share of Series E Preferred Stock. The Series E Preferred Stock is not subject
to any sinking fund provisions and has no preemptive rights. Such shares have a
liquidation preference of $25.00 per share plus unpaid dividends accrued
thereon and, at UPC's option and with the prior approval of the Federal
Reserve, are subject to redemption by UPC at any time at a redemption price of
$25.00 per share plus any unpaid dividends accrued thereon. Holders of Series E
Preferred Stock have no voting rights except as required by law and in certain
other limited circumstances. See "CERTAIN REGULATORY CONSIDERATIONS -- Payment
of Dividends."
OTHER MATTERS
As of the date of this Proxy Statement, the FNB Board knows of no
matters that will be presented for consideration at the Special Meeting other
than as described in this Proxy Statement. However, if any other matters shall
properly come before the Special Meeting or any adjournment or postponement
thereof and be voted upon, the enclosed proxy shall be deemed to confer
discretionary authority to the individuals named as proxies therein to vote the
shares represented by such proxy as to any such matters.
SHAREHOLDER PROPOSALS
UPC expects to hold its next annual meeting of shareholders after the
Merger in April 1999. Under SEC rules, proposals of UPC shareholders intended
to be presented at that meeting must be received by UPC at its principal
executive offices no later than the date specified in UPC's 1999 annual meeting
proxy statement. FNB's annual meeting of shareholders for 1998 has been held.
It is not currently anticipated that FNB will hold its annual meeting in 1999
unless the Merger is not consummated. In the event the Merger is not
consummated, proposals of FNB shareholders for directors nominations intended
to be presented at that meeting must have been received by FNB at its principal
executive offices no later than 60 days prior to the meeting.
EXPERTS
The consolidated financial statements of UPC and subsidiaries
incorporated in this Prospectus/Proxy Statement by reference to the UPC Annual
Report on Form 10-K for the year ended December 31, 1997, have been so
incorporated in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The consolidated financial statements of FNB and its subsidiaries as
of the years ended December 31, 1997 and 1996 (and notes thereto) have been
included in this Proxy Statement in reliance upon the report of Mauldin &
Jenkins, LLC, independent certified public accountants, given upon the
authority of such firm as experts in accounting and auditing.
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OPINIONS
The legality of the shares of UPC Common Stock to be issued in the
Merger will be passed upon by E. James House, Jr., Secretary and Manager of the
Legal Department of UPC. E. James House, Jr. is an officer of, and receives
compensation from, UPC.
Certain tax consequences of the transaction have been passed upon by
Wyatt, Tarrant & Combs, Memphis Tennessee for UPC.
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APPENDIX A
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AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
UNION PLANTERS CORPORATION,
UNION PLANTERS HOLDING CORPORATION
AND
FIRST NATIONAL BANCSHARES OF WETUMPKA, INC.
DATED AS OF DECEMBER 30, 1997
<PAGE> 82
TABLE OF CONTENTS
<TABLE>
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ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER....................................... 1
1.1 Merger............................................................................... 1
1.2 Time and Place of Closing............................................................ 2
1.3 Effective Time....................................................................... 2
1.4 Reserved............................................................................. 2
1.5 Restructure of Transaction........................................................... 2
1.6 Post Signing Due Diligence Review.................................................... 3
ARTICLE 2
TERMS OF MERGER............................................... 3
2.1 Charter.............................................................................. 3
2.2 Bylaws............................................................................... 3
2.3 Directors and Officers............................................................... 3
ARTICLE 3
MANNER OF CONVERTING SHARES......................................... 4
3.1 Conversion of Shares................................................................. 4
3.2 Anti-Dilution Provisions............................................................. 4
3.3 Shares Held by Subject Company or Parent............................................. 5
3.4 Fractional Shares.................................................................... 5
ARTICLE 4
EXCHANGE OF SHARES.............................................. 5
4.1 Exchange Procedures.................................................................. 5
4.2 Rights of Former Subject Company Shareholders........................................ 6
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF SUBJECT COMPANY.............................. 6
5.1 Organization, Standing, and Power.................................................... 6
5.2 Authority; No Breach by Agreement.................................................... 7
5.3 Capital Stock........................................................................ 8
5.4 Subject Company Subsidiaries......................................................... 8
5.5 Financial Statements................................................................. 9
5.6 Absence of Undisclosed Liabilities................................................... 10
</TABLE>
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<TABLE>
<S> <C> <C>
5.7 Absence of Certain Changes or Events................................................. 10
5.8 Tax Matters.......................................................................... 10
5.9 Assets............................................................................... 11
5.10 Intellectual Property................................................................ 12
5.11 Environmental Matters................................................................ 13
5.12 Compliance With Laws................................................................. 13
5.13 Labor Relations...................................................................... 14
5.14 Employee Benefit Plans............................................................... 14
5.15 Material Contracts................................................................... 16
5.16 Legal Proceedings.................................................................... 17
5.17 Reports.............................................................................. 17
5.18 Statements True and Correct.......................................................... 17
5.19 Accounting, Tax, and Regulatory Matters.............................................. 18
5.20 Charter Provisions; Takeover Laws.................................................... 18
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF PARENT................................... 18
6.1 Organization, Standing and Power..................................................... 18
6.2 Authority; No Breach by Agreement.................................................... 19
6.3 Capital Stock........................................................................ 19
6.4 Parent Subsidiaries.................................................................. 20
6.5 Financial Statements................................................................. 21
6.6 Absence of Undisclosed Liabilities................................................... 21
6.7 Absence of Certain Changes or Events................................................. 21
6.8 Tax Matters.......................................................................... 21
6.9 Environmental Matters................................................................ 22
6.10 Compliance With Laws................................................................. 22
6.11 Legal Proceedings.................................................................... 23
6.12 Reports.............................................................................. 23
6.13 Statements True and Correct.......................................................... 23
6.14 Accounting, Tax, and Regulatory Matters.............................................. 24
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION................................... 24
7.1 Affirmative Covenants of Subject Company............................................. 24
7.2 Negative Covenants of Subject Company................................................ 24
7.3 Covenants of Parent.................................................................. 27
7.4 Adverse Changes in Condition......................................................... 28
7.5 Reports.............................................................................. 28
</TABLE>
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<TABLE>
<S> <C> <C>
ARTICLE 8
ADDITIONAL AGREEMENTS............................................ 28
8.1 Registration Statement; Proxy Statement; Shareholder Approval........................ 28
8.2 Authorization of Shares; Exchange Listing............................................ 29
8.3 Applications......................................................................... 29
8.4 Filings With State Offices........................................................... 29
8.5 Agreement as to Efforts to Consummate................................................ 30
8.6 Investigation and Confidentiality.................................................... 30
8.7 Press Releases....................................................................... 31
8.8 Certain Actions...................................................................... 31
8.9 Accounting and Tax Treatment......................................................... 32
8.10 Agreement of Affiliates.............................................................. 32
8.11 Employee Benefits and Contracts...................................................... 33
8.12 Indemnification...................................................................... 33
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE.............................. 35
9.1 Conditions to Obligations of Each Party.............................................. 35
9.2 Conditions to Obligations of Parent.................................................. 36
9.3 Conditions to Obligations of Subject Company......................................... 38
ARTICLE 10
TERMINATION................................................. 39
10.1 Termination.......................................................................... 39
10.2 Effect of Termination................................................................ 42
10.3 Non-Survival of Representations and Covenants........................................ 42
ARTICLE 11
MISCELLANEOUS................................................ 42
11.1 Definitions.......................................................................... 42
11.2 Expenses............................................................................. 49
11.3 Brokers and Finders.................................................................. 50
11.4 Entire Agreement..................................................................... 50
11.5 Amendments........................................................................... 50
11.6 Waivers.............................................................................. 50
11.7 Assignment........................................................................... 51
11.8 Notices.............................................................................. 51
11.9 Governing Law........................................................................ 52
11.10 Counterparts......................................................................... 52
11.11 Captions............................................................................. 52
</TABLE>
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<TABLE>
<S> <C> <C> <C>
11.12 Interpretations..................................................................... 52
11.13 Enforcement of Agreement............................................................ 52
11.14 Severability........................................................................ 53
Exhibit 1............................................................................................. 1
PLAN OF MERGER................................................................................ 1
Exhibit 2............................................................................................. i
AFFILIATE AGREEMENT........................................................................... i
Exhibit 3............................................................................................. 1
FORM OF EMPLOYMENT AGREEMENT.................................................................. 1
</TABLE>
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and
entered into as of December 30, 1997, by and between First National Bancshares
of Wetumpka, Inc., a Delaware corporation having its principal office located in
Wetumpka, Alabama ("Subject Company"), Union Planters Holding Corporation, a
Tennessee corporation having its principal office located in Memphis, Tennessee
("Merger Subsidiary"), and joined in by Union Planters Corporation, a Tennessee
corporation having its principal office located in Memphis, Tennessee
("Parent").
PREAMBLE
The Boards of Directors of Subject Company, Merger Subsidiary and
Parent are of the opinion that the transactions described herein are in the best
interests of the parties and their respective shareholders. This Agreement and
the Plan of Merger attached hereto at Exhibit 1 and incorporated herein by
reference, provide for the acquisition of Subject Company by Parent pursuant to
the merger of Subject Company with and into Merger Subsidiary. At the effective
time of such merger, the outstanding shares of the common stock of Subject
Company shall be converted into the right to receive shares of the common stock
of Parent (except as provided in Sections 3.3 and 3.4 of this Agreement). As a
result, shareholders of Subject Company shall become shareholders of Parent and
Surviving Corporation shall continue to conduct its business and operations as a
wholly owned subsidiary of Parent. The transactions described in this Agreement
are subject to the approvals of the shareholders of Subject Company, the Board
of Governors of the Federal Reserve System, 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 Section 252 of the, and with the effect provided in
Section 48-21-108 of the TBCA and Section 252 of the DGCL (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
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shall be consummated pursuant to the terms of this Agreement and the Plan of
Merger, which have been or will be approved and adopted by the respective Boards
of Directors of Subject Company, Parent and Merger Subsidiary.
1.2 Time and Place of Closing. The Closing will take place at 9:00 A.M.
on the date that the Effective Time occurs (or the immediately preceding day if
the Effective Time is earlier than 9:00 A.M.), or at such other time as the
Parties, acting through their chief executive officers or chief financial
officers, may mutually agree. The Closing shall be held at such place as may be
mutually agreed upon by the Parties.
1.3 Effective Time. The Merger and other transactions contemplated by
this Agreement shall become effective at the time the Articles of Merger
reflecting the Merger shall become effective with the Secretary of State of the
State of the State of Tennessee and the Secretary of State of the State of
Delaware (the "Effective Time"). Subject to the terms and conditions hereof,
unless otherwise mutually agreed upon in writing by the chief executive officers
or chief financial officers of each Party, the Parties shall use their
reasonable efforts to cause the Effective Time to occur on a date designated by
Parent which date shall be within 30 days following the last to occur of (i) the
effective date of the last required Consent of any Regulatory Authority having
authority over and approving or exempting the Merger (taking into account any
requisite waiting period in respect thereof), (ii) the date on which the
shareholders of Subject Company approve this Agreement, and (iii) the date on
which all other conditions precedent (other than those conditions which relate
to actions to be taken at the Closing) to each Party's obligations hereunder
shall have been satisfied or waived (to the extent waivable by such Party).
1.4 Reserved.
1.5 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 or the DGCL, the holders of the Subject
Company Common Stock, to make any revision to the structure of the Merger which:
(i) changes the amount of the consideration which the holders of shares of
Subject Company Common Stock are entitled to receive (determined in the manner
provided in Section 3.1 of this Agreement); (ii) changes the intended tax free
effects of the Merger to Parent, Subject Company or the holders of shares of
Subject Company Common Stock or changes the intended pooling-of-interests
accounting treatment; (iii) would permit Parent to pay the consideration other
than by delivery of Parent Common Stock registered with the SEC (in the manner
described in Section 4.1 of this Agreement); (iv) would be materially adverse to
the interests of Subject Company or adverse to the holders of shares of Subject
Company Common Stock; (v) would materially impede or delay consummation of the
Merger; or (vi) would require a vote of Parent's shareholders under relevant
state Law. Parent may exercise this right of revision by giving written notice
to Subject Company in the manner provided in Section 11.8 of this Agreement
which notice shall be in the
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form of an amendment to this Agreement and the Plan of Merger or in the form of
an Amended and Restated Agreement and Plan of Merger.
1.6 Post Signing Due Diligence Review. Within 30 days of this
Agreement, each Party shall deliver to the opposite Party any amendments to or
updates of their respective Disclosure Memorandum, and the Disclosure
Memorandum, as so amended or updated within that 30 day time period, shall be
deemed to have been delivered as of the date of this Agreement. Upon execution
hereof, each Party shall be entitled forthwith to continue its due diligence
review of the Records and operations of the other Party, including, but not
limited to, a review of the other Party's Assets, including its loan portfolios,
ORE and classified assets, investment portfolios and properties, to verify the
quality of such Assets, the adequacy of the Allowances which have been provided
against them and the reasonableness of the other Party's earnings projections,
growth projections and sustained earnings prospects after consummation of the
Merger at reasonable growth rates; provided, however, that any review conducted
by a Party pursuant to the provisions of this Section 1.6 shall be completed
within 30 days from the date of this Agreement. Should, as a result of such
review, either Party find in good faith that the allowances for loan and lease
losses and other reserves provided by the other Party are insufficient to absorb
any losses inherent in such other Party's Assets or that the earnings
projections, growth projections or sustained earnings prospects provided by the
other Party are not likely to be achieved or maintained after consummation of
the Merger, or that any other event has been determined to have a Material
Adverse Effect on the other Party, the Party discovering such fact may, prior to
the expiration of said post signing due diligence review period, terminate this
Agreement without penalty by giving the other Party written notice of such
termination in the manner provided in Section 10.1(f). Nothing in this Section
1.6 shall be construed to limit the right of any Party to continue its due
diligence review through the Closing Date or to release any Party from its
obligation to provide updates or amendments to their respective Disclosure
Memorandum after the expiration of such 30 day time period and prior to the
Effective Time.
ARTICLE 2
TERMS OF MERGER
2.1 Charter. The Charter (the "Charter") of Merger Subsidiary in effect
immediately prior to the Effective Time shall be the Charter of the Surviving
Corporation until otherwise amended or repealed.
2.2 Bylaws. The Bylaws of Merger Subsidiary (the "Bylaws") in effect
immediately prior to the Effective Time shall be the Bylaws of the Surviving
Corporation until otherwise amended or repealed.
2.3 Directors and Officers. The directors of Merger Subsidiary in
office immediately prior to the Effective Time, together with such additional
persons as may thereafter be elected, shall serve as the directors of the
Surviving Corporation from and after the Effective Time in accordance with the
Bylaws of the Surviving Corporation. The officers of Merger Subsidiary in office
immediately prior to the Effective Time, together with such additional persons
as may
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thereafter be elected, shall serve as the officers of the Surviving Corporation
from the Effective Time in accordance with the Bylaws of the Surviving
Corporation.
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 Conversion of Shares. Subject to the provisions of this Article 3
(and Section 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.
(b) Each share of Merger Subsidiary Common Stock issued and
outstanding immediately prior to the Effective Time shall remain issued and
outstanding and shall represent one share of the Surviving Corporation from and
after the Effective Time.
(c) Except for Dissenting Shares, each share of Subject
Company Common Stock, including any associated or attached Subject Company
Rights, (excluding shares held by Subject Company, any Subject Company
Subsidiary, Parent or any Parent Subsidiary, in each case other than in a
fiduciary capacity or as a result of debts previously contracted) issued and
outstanding at the Effective Time shall cease to be outstanding and shall be
converted into and exchanged for the right to receive 4.179 shares of Parent
Common Stock (the "Exchange Ratio"). Pursuant to the Parent Rights Agreement,
each share of Parent Common Stock issued in connection with the Merger upon
conversion of Subject Company Common Stock shall be accompanied by a Parent
Right.
(d) Dissenting Shares shall not be converted pursuant to
Section 3.1(c) in the Merger but, at and after the Effective Time, shall present
only the right to receive payment in accordance with Section 262 of the DGCL. If
a holder of Dissenting Shares becomes ineligible for payment under Section 262
of the DGCL, then such holder's Dissenting Shares shall cease to be Dissenting
Shares and shall be converted in the manner set forth in Section 3.1(c)
effective as of the Effective Time.
3.2 Anti-Dilution Provisions. In the event Parent changes the number of
shares of Parent Common Stock issued and outstanding after the date of this
Agreement and prior to the Effective Time as a result of a stock split, stock
dividend, or similar recapitalization with respect to such stock and the record
date therefor (in the case of a stock dividend) or the effective date thereof
(in the case of a stock split or similar recapitalization for which a record
date is not established) shall be prior to the Effective Time, the Exchange
Ratio shall be proportionately adjusted.
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3.3 Shares Held by Subject Company or Parent. Each of the shares of
Subject Company Common Stock held by Subject Company, any Subject Company
Subsidiary, Parent or any Parent Subsidiary, in each case other than in
fiduciary capacity or as a result of debts previously contracted, shall be
canceled and retired at the Effective Time and no consideration shall be issued
in exchange therefor.
3.4 Fractional Shares. Notwithstanding any other provision of this
Agreement, each holder of shares of Subject Company Common Stock exchanged
pursuant to the Merger who would otherwise have been entitled to receive a
fractional share of Parent Common Stock (after taking into account all
certificates delivered by such holder) shall receive, in lieu thereof, cash
(without interest) in an amount equal to such fractional share of Parent Common
Stock multiplied by the closing price of such common stock on the NYSE-Composite
Transactions List (as reported by The Wall Street Journal or, if not reported
thereby, any other authoritative source selected by Parent) on the last trading
day preceding the Effective Time. No such holder will be entitled to dividends,
voting rights, or any other rights as a shareholder in respect of any fractional
shares.
ARTICLE 4
EXCHANGE OF SHARES
4.1 Exchange Procedures. Promptly after the Effective Time, Parent and
Subject Company shall cause the exchange agent selected by Parent (the "Exchange
Agent") to mail to the former shareholders of Subject Company appropriate
transmittal materials (which shall specify that delivery shall be effected, and
risk of loss and title to the certificates theretofore representing shares of
Subject Company Common Stock shall pass, only upon proper delivery of such
certificates to the Exchange Agent). Subject Company shall have the right to
review and approve the transmittal materials. The Exchange Agent may establish
reasonable and customary rules and procedures in connection with its duties.
After the Effective Time, each holder of shares of Subject Company Common Stock
(other than Dissenting Shares or shares to be canceled pursuant to Section 3.3
of this Agreement) issued and outstanding at the Effective Time shall surrender
the certificate or certificates representing such shares to the Exchange Agent
and shall promptly upon surrender thereof receive in exchange therefor the
consideration provided in Section 3.1(c) of this Agreement, together with all
undelivered dividends or distributions in respect of such shares (without
interest thereon) pursuant to Section 4.2 of this Agreement. To the extent
required by Section 3.4 of this Agreement, each holder of shares of Subject
Company Common Stock issued and outstanding at the Effective Time also shall
receive, upon surrender of the certificate or certificates representing such
shares, cash in lieu of any fractional share of Parent Common Stock to which
such holder may be otherwise entitled (without interest). Parent shall not be
obligated to deliver the consideration to which any former holder of Subject
Company Common Stock is entitled as a result of the merger until such holder
surrenders such holder's certificate or certificates representing the shares of
Subject Company Common Stock for exchange as provided in this Section 4.1. The
certificate or certificates of Subject Company Common Stock so surrendered shall
be duly endorsed as the Exchange Agent may require. Any other provision of this
Agreement notwithstanding, neither Parent nor the Exchange Agent shall
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be liable to a holder of Subject Company Common Stock for any amounts paid or
property delivered in good faith to a public official pursuant to any applicable
abandoned property Law.
4.2 Rights of Former Subject Company Shareholders. At the Effective
Time, the stock transfer books of Subject Company shall be closed as to holders
of Subject Company Common Stock immediately prior to the Effective Time and no
transfer of Subject Company Common Stock by any such holder shall thereafter be
made or recognized. Until surrendered for exchange in accordance with the
provisions of Section 4.1 of this Agreement, each certificate theretofore
representing shares of Subject Company Common Stock (other than Dissenting
Shares or shares to be canceled pursuant to Section 3.3 of this Agreement) shall
from and after the Effective Time represent for all purposes only the right to
receive the consideration provided in Sections 3.1(c) and 3.4 of this Agreement
in exchange therefor, subject, however, to the Surviving Corporation's
obligations to pay any dividends or make any other distributions with a record
date prior to the Effective Time which have been declared or made by Subject
Company in respect of such shares of Subject Company Common Stock in accordance
with the terms of this Agreement and which remain unpaid at the Effective Time.
Whenever a dividend or other distribution is declared by Parent on the Parent
Common Stock, the record date for which is at or after the Effective Time, the
declaration shall include dividends or other distributions on all shares of
Parent Common Stock issuable pursuant to this Agreement, but beginning 30 days
after the Effective Time no dividend or other distribution payable to the
holders of record of Parent Common Stock as of any time subsequent to the
Effective Time shall be delivered to the holder of any certificate representing
shares of Subject Company Common Stock issued and outstanding at the Effective
Time until such holder surrenders such certificate for exchange as provided in
Section 4.1 of this Agreement. However, upon surrender of such Subject Company
Common Stock certificate, both a Parent Common Stock certificate (together with
all such undelivered dividends or other distributions without interest) and any
undelivered dividends and cash payments payable hereunder (without interest)
shall be delivered and paid with respect to each share represented by such
certificate. In the event any Subject Company Common Stock certificate shall
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming such certificate to be lost, stolen or destroyed
and, if reasonably required by Parent, the posting by such person of a bond in
such amount as Parent may reasonably direct as indemnity against any claim that
may be made against it with respect to such certificate, the Exchange Agent
shall issue in exchange for such lost, stolen or destroyed certificate the
shares of Parent Common Stock and cash in lieu of fractional shares deliverable
in respect thereof pursuant to this Agreement.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF SUBJECT COMPANY
Subject Company hereby represents and warrants to Parent, except as set
forth on the Subject Company Disclosure Memorandum, as follows:
5.1 Organization, Standing, and Power. Subject Company is a corporation
duly organized, validly existing, and in good standing under the Laws of the
State of Delaware, and has the corporate power and authority to carry on its
business as now conducted and to own,
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lease, and operate its Assets. Subject Company is duly qualified or licensed to
transact business as a foreign corporation in good standing in the States of the
United States and foreign jurisdictions where the character of its Assets or the
nature or conduct of its business requires it to be so qualified or licensed,
except for such jurisdictions in which the failure to be so qualified or
licensed is not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Subject Company.
5.2 Authority; No Breach by Agreement. (a) Subject Company has the
corporate power and authority necessary to execute, deliver, and perform its
obligations under this Agreement and the Plan of Merger and to consummate the
transactions contemplated hereby and thereby. The execution, delivery, and
performance of this Agreement and the Plan of Merger, and the consummation of
the transactions contemplated herein, including the Merger, have been duly and
validly authorized by all necessary corporate action (including valid
authorization and adoption of this Agreement by Subject Company's duly
constituted Board of Directors) in respect thereof on the part of Subject
Company, subject to the approval of this Agreement and the Plan of Merger by the
holders of the outstanding shares of Subject Company Common Stock, which is the
only shareholder vote required for approval of this Agreement and consummation
of the Merger by Subject Company. Subject to such requisite shareholder approval
and assuming due authorization, execution and delivery of this Agreement and the
Plan of Merger by each of Parent and Merger Subsidiary, this Agreement and the
Plan of Merger each represents a legal, valid, and binding obligation of Subject
Company, enforceable against Subject Company in accordance with its terms
(except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, receivership, conservatorship,
moratorium, or similar Laws (including provisions of the U.S., Delaware and
Tennessee Constitutions) affecting the enforcement of creditors' rights
generally and except that the availability of the equitable remedy of specific
performance or injunctive relief is subject to the discretion of the court
before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement or
the Plan of Merger by Subject Company, nor the consummation by Subject Company
of the transactions contemplated hereby, nor compliance by Subject Company with
any of the provisions hereof or thereof, will (i) conflict with or result in a
breach of any provision of the Charter or Bylaws, or (ii) constitute or result
in a Default under, or require any Consent (excluding Consents required by Law
or Order) pursuant to, or result in the creation of any Lien on any material
Asset of Subject Company or any Subject Company Subsidiary under, any Contract
or Permit of Subject Company or any Subject Company Subsidiary, except for such
Defaults, Liens and Consents, which, if not obtained or made, are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Subject Company, or (iii) subject to receipt of the requisite Consents referred
to in Section 9.1(b) of this Agreement, violate any Law or Order applicable to
Subject Company, its Subsidiaries or any of their respective material Assets.
(c) Other than in connection or compliance with the provisions
of the Securities Laws, applicable state corporate and securities Laws, and
other than Consents required from Regulatory Authorities, and other than notices
to or filings with the Internal Revenue Service or
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the Pension Benefit Guaranty Corporation with respect to any employee benefit
plans, or under the HSR Act, and other than Consents, filings, or notifications
which, if not obtained or made, are not reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on Subject Company, no notice to,
filing with, or Consent of, any public body or authority is necessary for the
consummation by Subject Company of the Merger and the other transactions
contemplated in this Agreement.
5.3 Capital Stock. (a) The authorized capital stock of Subject Company
consists of: 200,000 shares of Subject Company Common Stock, of which all
200,000 shares are issued and outstanding as of the date of this Agreement
(exclusive of treasury shares) and not more than 200,000 shares of Subject
Company Common Stock will be issued and outstanding at the Effective Time. All
of the issued and outstanding shares of capital stock of Subject Company are
duly and validly issued and outstanding and are fully paid and nonassessable
under the DGCL and Subject Company's Charter and Bylaws. None of the outstanding
shares of capital stock of Subject Company has been issued in violation of any
preemptive rights of the current or past shareholders of Subject Company.
(b) Other than as set forth in Section 5.3(a) of this
Agreement or Section 5.3(b) of the Subject Company Disclosure Memorandum, there
are no shares of capital stock or other equity securities of Subject Company
outstanding and no outstanding Rights relating to the capital stock of Subject
Company.
5.4 Subject Company Subsidiaries. Subject Company has disclosed in
Section 5.4 of the Subject Company Disclosure Memorandum all of the Subject
Company Subsidiaries that are corporations (identifying its jurisdiction of
incorporation) and all of the Subject Company Subsidiaries that are general or
limited partnerships or other non-corporate entities (identifying the Law under
which such entity is organized, and the amount and nature of the ownership
interest therein of Subject Company Subsidiaries). Subject Company or one of its
wholly owned Subsidiaries owns all of the issued and outstanding shares of
capital stock (or other equity interests) of each of the Subject Company
Subsidiaries. No capital stock (or other equity interest) of any Subject Company
Subsidiary is or may become required to be issued (other than to another Subject
Company Subsidiary) by reason of any option, warrant or any other type of right,
and there are no Contracts by which Subject Company or any of the Subject
Company Subsidiaries is bound to issue (other than to Subject Company or another
of the Subject Company Subsidiaries) additional shares of its capital stock (or
other equity interests) or Rights or by which Subject Company or any of the
Subject Company Subsidiaries is or may be bound to transfer any shares of the
capital stock (or other equity interests) of any of Subject Company or any of
the Subject Company Subsidiaries (other than to Subject Company or any of the
Subject Company Subsidiaries). There are no Contracts relating to the rights of
Subject Company or any Subject Company Subsidiary to vote or to dispose of any
shares of the capital stock (or other equity interests) of Subject Company or
any Subject Company Subsidiary. All of the shares of capital stock (or other
equity interests) of each Subject Company Subsidiary held by Subject Company or
any Subject Company Subsidiary are fully paid and nonassessable under the
applicable corporation or similar Law of the jurisdiction in which such
Subsidiary is incorporated or
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organized and are owned by Subject Company or a Subject Company Subsidiary free
and clear of any Liens. Each Subject Company Subsidiary is either a bank,
federal savings bank, partnership, limited liability corporation, or a
corporation, and each such Subsidiary is duly organized, validly existing, and
(as to corporations) in good standing under the Laws of the jurisdiction in
which it is incorporated or organized, and has the corporate power and authority
necessary for it to own, lease, and operate its Assets and to carry on its
business as now conducted. Each Subject Company Subsidiary is duly qualified or
licensed to transact business as a foreign corporation in good standing in the
States of the United States and foreign jurisdictions where the character of its
Assets or the nature or conduct of its business requires it to be so qualified
or licensed, except for such jurisdictions in which the failure to be so
qualified or licensed is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Subject Company. The only Subject
Company Subsidiary that is a depository institution is First National Bank,
Wetumpka, Delaware (the "Bank") . The Bank is an "insured institution" as
defined in the Federal Deposit Insurance Act and applicable regulations
thereunder, and the deposits in which are insured by the Bank Insurance Fund.
The minute book and other organizational documents (and all amendments thereto)
for Subject Company and each Subject Company Subsidiary that is a "Significant
Subsidiary" (as such term is defined in Regulation S-X promulgated under the
1934 Act) have been or will be made available to Parent for its review, and are
true and complete as in effect as of the date of this Agreement.
5.5 Financial Statements. As disclosed in Section 5.5 of the Subject
Company Disclosure Memorandum, 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 consolidated statements
of financial position (including related notes and schedules, if any) of Subject
Company as of September 30, 1997, and as of December 31, 1996, and December 31,
1995, and the related statements of operations, stockholders' equity, and cash
flows (including related notes and schedules, if any) for the nine-months ended
September 30, 1997, and for each of the fiscal years ended December 31, 1996 and
1995, (ii) the consolidated statements of financial position of Subject Company
(including related notes and schedules, if any) and related statements of
operations, stockholders' equity, and cash flows (including related notes and
schedules, if any) with respect to any period ending subsequent to September 30,
1997, and prior to the Closing Date, and (iii) all Call Reports (or similar
reports, regardless of name), including any amendments thereto, filed with any
Regulatory Authorities by Subject Company and Bank for the years ended December
31, 1996, 1995, and 1994, together with any correspondence with the SEC or with
any other Regulatory Authorities concerning any of the aforesaid financial
statements and Reports (the "Subject Company Financial Statements"). Such
Subject Company Financial Statements (i) were (or will be) prepared from the
Records of Subject Company and/or each Subject Company Subsidiary; (ii) were (or
will be) prepared in accordance with GAAP (or, where applicable, regulatory
accounting principles) consistently applied; (iii) accurately present (or, when
prepared, will present) Subject Company's and each Subject Company Subsidiary's
financial condition and the results of its operations, changes in stockholders'
equity and cash flows at the relevant dates thereof and for the periods covered
thereby, except that the unaudited interim Financial Statements were or are
subject to normal and recurring year-end adjustments which were not expected to
be material in amount or effect; (iv)
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do contain or reflect (or, when prepared, will contain and reflect) all
necessary adjustments and accruals for an accurate presentation of Subject
Company's and each Subject Company Subsidiary's financial condition and the
results of Subject Company's and each Subject Company Subsidiary's operations
and cash flows for the periods covered by such financial statements; (v) do
contain and reflect (or, when prepared, will contain and reflect) adequate
provisions or allowances for loan losses, for ORE reserves and for all
reasonably anticipatable liabilities and Taxes, with respect to the periods then
ended; and (vi) do contain and reflect (or, when prepared, will contain and
reflect) adequate provisions for all reasonably anticipated liabilities for Post
Retirement Benefits Other Than Pensions ("OPEB") pursuant to SFAS Nos. 106 and
112.
5.6 Absence of Undisclosed Liabilities. Neither Subject Company nor any
of the Subject Company Subsidiaries has any Liabilities that are reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Subject Company, except Liabilities which are accrued or reserved against in the
consolidated balance sheets of Subject Company as of September 30, 1997,
included in the Subject Company Financial Statements made available prior to the
date of this Agreement or reflected in the notes thereto, and except as
disclosed in Section 5.6 of the Subject Company Disclosure Memorandum. Neither
Subject Company nor any of the Subject Company Subsidiaries has incurred or paid
any Liability since September 30, 1997, except for such Liabilities incurred or
paid (i) in the ordinary course of business consistent with past business
practice or which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Subject Company or (ii) in connection
with the transactions contemplated by this Agreement.
5.7 Absence of Certain Changes or Events. Since December 31, 1996,
except as disclosed in the Subject Company Financial Statements made available
prior to the date of this Agreement or disclosed in Section 5.7 of the Subject
Company Disclosure Memorandum, there have been no events, changes, or
occurrences which have had, or are reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Subject Company.
5.8 Tax Matters. Except as set forth in Section 5.8 of the Subject
Company Disclosure Memorandum:
(a) All material Tax Returns required to be filed by or on
behalf of Subject Company or any of the Subject Company Subsidiaries have been
timely filed or requests for extensions have been timely filed, granted, and
have not expired for periods ended on or before December 31, 1996, and on or
before the date of the most recent fiscal year end immediately preceding the
Effective Time, and all such Tax Returns filed are complete and accurate in all
material respects. All Taxes shown on filed Tax Returns have been paid. There is
no audit examination or refund Litigation with respect to any material Taxes,
except as reserved against in the Subject Company Financial Statements made
available prior to the date of this Agreement. All material Taxes and other
material Liabilities due with respect to completed and settled examinations or
concluded Litigation have been paid. There are no material Liens with respect to
Taxes upon any of the Assets of Subject Company or any of the Subject Company
Subsidiaries.
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(b) Neither Subject Company nor any of the Subject Company
Subsidiaries has executed an extension or waiver of any statute of limitations
on the assessment or collection of any Tax due (excluding such statutes that
relate to years currently under examination by the Internal Revenue Service or
other applicable taxing authorities) that is currently in effect.
(c) Adequate provision for any material Taxes due or to become
due for Subject Company or the Subject Company Subsidiaries for the period or
periods through and including the date of the respective Subject Company
Financial Statements has been made and is reflected on such Subject Company
Financial Statements.
(d) Material deferred Taxes of Subject Company and the Subject
Company Subsidiaries have been provided for in accordance with GAAP.
(e) Subject Company and the Subject Company Subsidiaries are
in material compliance with, and its records contain all information and
documents (including properly completed Internal Revenue Service Forms W-9)
necessary to comply in all material respects with, all applicable information
reporting and Tax withholding requirements under federal, state, and local Tax
Laws, and such records identify with specificity all accounts subject to backup
withholding under Section 3406 of the Internal Revenue Code.
(f) Neither Subject Company nor any of the Subject Company
Subsidiaries has made any payments, is obligated to make any payments, or is a
party to any Contract that could obligate it to make any payments that would be
disallowed as a deduction under Section 280G or 162(m) of the Internal Revenue
Code.
(g) 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,
1996, except in connection with the transactions contemplated pursuant to this
Agreement.
(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 material
Liability for taxes of any Person (other than Subject Company and the Subject
Company Subsidiaries) under Treasury Regulation Section 1.15026 (or any similar
provision of state, local, or foreign law) as a transferee or successor or by
Contract or otherwise.
5.9 Assets. Except as disclosed or reserved against in the Subject
Company Financial Statements made available prior to the date of this Agreement
or in Section 5.9 of the Subject Company Disclosure Memorandum, Subject Company
and the Subject Company Subsidiaries have good and marketable title, free and
clear of all Liens, to all of their respective Assets. All
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tangible properties used in the businesses of Subject Company and its
Subsidiaries are in good condition, reasonable wear and tear excepted, and are
usable in the ordinary course of business of Subject Company and its
Subsidiaries. All Assets which are material to Subject Company's business on a
consolidated basis, held under leases or subleases by the Subject Company or any
of the Subject Company Subsidiaries, are held under valid Contracts enforceable
in accordance with their respective terms (except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium, or
other Laws (including provisions of the U.S. and Tennessee Constitutions)
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceedings
may be brought), and each such Contract is in full force and effect. Subject
Company and the Subject Company Subsidiaries currently maintain insurance in
amounts, scope, and coverage which, in the reasonable opinion of management of
Subject Company, are adequate for the operations of Subject Company and the
Subject Company Subsidiaries. Neither Subject Company nor any of the Subject
Company Subsidiaries has received notice from any insurance carrier that (i)
such insurance will be canceled or that coverage thereunder will be reduced or
eliminated, or (ii) premium costs with respect to such policies of insurance
will be substantially increased. There are presently no claims pending under any
such policies of insurance and no notices have been given by Subject Company or
any of the Subject Company Subsidiaries under such policies.
5.10 Intellectual Property. All of the Intellectual Property rights of
Subject Company and the Subject Company Subsidiaries are in full force and
effect and, if applicable, constitute legal, valid, and binding obligations of
the respective parties thereto, and there have not been, and, to the Knowledge
of Subject Company, there currently are not, any Defaults thereunder by Subject
Company or a Subject Company Subsidiary. Subject Company or a Subject Company
Subsidiary owns or is the valid licensee of all such Intellectual Property
rights free and clear of all Liens or claims of infringement. Neither Subject
Company nor any of the Subject Company Subsidiaries nor, to the Knowledge of
Subject Company, their respective predecessors has infringed the Intellectual
Property rights of others and, to the Knowledge of Subject Company, none of the
Intellectual Property rights as used in the business conducted by Subject
Company or the Subject Company Subsidiaries infringes upon or otherwise violates
the rights of any Person, nor has any Person asserted a claim of such
infringement. Neither Subject Company nor the Subject Company Subsidiaries is
obligated to pay any royalties to any Person with respect to any such
Intellectual Property. Subject Company or a Subject Company Subsidiary owns or
has the valid right to use all of the Intellectual Property rights which it is
presently using, or in connection with performance of any material Contract to
which it is a party. No officer, director, or employee of Subject Company or the
Subject 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.
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5.11 Environmental Matters. Except as set forth in Section 5.11 of the
Subject Company Disclosure Memorandum:
(a) To the Knowledge of Subject Company, each of Subject
Company and the Subject Company Subsidiaries, its Participation Facilities, and
its Operating Properties are, and have been, in compliance with all
Environmental Laws, except for violations which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on Subject
Company.
(b) To the Knowledge of Subject Company, there is no
Litigation pending or threatened before any court, governmental agency, or
authority or other forum in which Subject Company, any of the Subject Company
Subsidiaries or any of their respective Operating Properties or Participation
Facilities (or Subject Company in respect of such Operating Property or
Participation Facility) has been or, with respect to threatened Litigation, may
be named as a defendant (i) for alleged noncompliance (including by any
predecessor) with any Environmental Law or (ii) relating to the release into the
environment of any Hazardous Material, whether or not occurring at, on, under,
adjacent to, or affecting (or potentially affecting) a site owned, leased, or
operated by Subject Company or any of the Subject Company Subsidiaries or any of
their respective Operating Properties or Participation Facilities, except for
such Litigation pending or threatened that is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Subject Company,
nor, to the Knowledge of Subject Company, is there any reasonable basis for any
Litigation of a type described in this sentence.
(c) During the period of (i) Subject Company's or any of the
Subject Company Subsidiaries' ownership or operation of any of their respective
current properties, (ii) Subject Company's or any of the Subject Company
Subsidiaries' participation in the management of any Participation Facility, or
(iii) Subject Company's or any of the Subject Company Subsidiaries' holding of a
security interest in an Operating Property, to the Knowledge of Subject Company,
there have been no releases of Hazardous Material in, on, under, adjacent to, or
affecting (or potentially affecting) such properties, except such as are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Subject Company. Prior to the period of (i) Subject Company's or any
of the Subject Company Subsidiaries' ownership or operation of any of their
respective current properties, (ii) Subject Company's or any of the Subject
Company Subsidiaries' participation in the management of any Participation
Facility, or (iii) Subject Company's or any of the Subject Company Subsidiaries'
holding of a security interest in an Operating Property, to the Knowledge of
Subject Company, there were no releases of Hazardous Material in, on, 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
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reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Subject Company. Neither Subject Company nor any of the Subject
Company Subsidiaries:
(a) is in violation of any Laws, Orders, or Permits applicable
to its business or employees conducting its business, except for such violations
which would not be reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on Subject Company; or
(b) has received any notification or communication from any
agency or department of federal, state, or local government or any Regulatory
Authority or the staff thereof (i) asserting that Subject Company or any of the
Subject Company Subsidiaries is not in material compliance with any of the Laws
or Orders which such governmental authority or Regulatory Authority enforces,
(ii) threatening to revoke any Permits, or (iii) requiring Subject Company or
any of the Subject Company Subsidiaries to enter into or consent to the issuance
of a cease and desist order, formal agreement, directive, commitment, or
memorandum of understanding, or to adopt any Board resolution or similar
undertaking, which restricts materially the conduct of its business, or in any
manner relates to its capital adequacy, its credit or reserve policies, its
management, or the payment of dividends.
5.13 Labor Relations. Neither Subject Company nor any of the Subject
Company Subsidiaries is the subject of any Litigation asserting that Subject
Company or any of the Subject Company Subsidiaries has committed an unfair labor
practice (within the meaning of the National Labor Relations Act or comparable
state law) or seeking to compel Subject Company or any of the Subject Company
Subsidiaries to bargain with any labor organization as to wages or conditions of
employment, nor is there any strike or other labor dispute involving Subject
Company or any of the Subject Company Subsidiaries, pending or, to the Knowledge
of Subject Company, threatened, or to the Knowledge of Subject Company, is there
any activity involving Subject Company's or any of the Subject Company
Subsidiaries' employees seeking to certify a collective bargaining unit or
engaging in any other organization activity.
5.14 Employee Benefit Plans. (a) Subject Company has disclosed in
Section 5.14(a) of the Subject Company Disclosure Memorandum, and has delivered
or made available to Parent prior to the execution of this Agreement copies in
each case of, all pension, retirement, profit sharing, deferred compensation,
stock option, employee stock ownership, severance pay, vacation, bonus, or other
incentive plan, all other written employee programs, arrangements, or
agreements, all medical, vision, dental, or other health plans, all life
insurance plans, and all other employee benefit plans or fringe benefit plans,
including "employee benefit plans" as that term is defined in Section 3(3) of
ERISA, currently adopted, maintained by, sponsored in whole or in part by, or
contributed to by Subject Company or the Subject Company Subsidiaries or ERISA
Affiliate thereof for the benefit of employees, retirees, dependents, spouses,
directors, independent contractors, or other beneficiaries of Subject Company or
any Subject Company Subsidiary and under which employees, retirees, dependents,
spouses, directors, independent contractors, or other beneficiaries of Subject
Company or any Subject Company Subsidiary are eligible to participate
(collectively, the "Subject Company Benefit Plans"). Any of the Subject Company
Benefit Plans
UPC/FNB WETUMPKA - Page 14
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which is an "employee pension benefit plan," as that term is defined in Section
3(2) of ERISA, is referred to herein as a "Subject Company ERISA Plan." Neither
Subject Company nor any Subject Company Subsidiary maintains any "defined
benefit plan" (as defined in Section 414(j) of the Internal Revenue Code). No
Subject Company Pension Plan is or has been a multi-employer plan within the
meaning of Section 3(37) of ERISA.
(b) All Subject Company Benefit Plans are in material
compliance with the applicable terms of ERISA, the Internal Revenue Code, and
any other applicable Laws the breach or violation of which are reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on Subject
Company. Each Subject Company ERISA Plan that is intended to be qualified under
Section 401(a) of the Internal Revenue Code has either received a favorable
determination letter from the Internal Revenue Service (and Subject Company is
not aware of any circumstances likely to result in revocation of any such
favorable determination letter) or timely application has been made therefor. To
the Knowledge of Subject Company, neither Subject Company nor any of the Subject
Company Subsidiaries has engaged in a transaction with respect to any Subject
Company Benefit Plan that, assuming the taxable period of such transaction
expired as of the date hereof, would subject any Subject Company to a material
Tax imposed by either Section 4975 of the Internal Revenue Code or Section
502(i) of ERISA.
(c) No "defined benefit plan" (as defined in Section 414(j) of
the Internal Revenue Code) or any "single-employer plan," within the meaning of
Section 4001(a)(15) of ERISA, formerly maintained by Subject Company or any of
the Subject Company Subsidiaries, or the single-employer plan of any entity
which is considered one employer with Subject Company under Section 4001 of
ERISA or Section 414 of the Internal Revenue Code or Section 302 of ERISA
(whether or not waived) (an "ERISA Affiliate") has an "accumulated funding
deficiency" within the meaning of Section 412 of the Internal Revenue Code or
Section 302 of ERISA. Neither Subject Company nor any of the Subject Company
Subsidiaries has provided, or, to Subject Company's knowledge, is required to
provide, security to any single-employer plan of an ERISA Affiliate pursuant to
Section 401(a)(29) of the Internal Revenue Code.
(d) Within the six year period preceding the Effective Time,
no material Liability under Subtitle C or D of Title IV of ERISA has been
incurred by Subject Company or any of the Subject Company Subsidiaries with
respect to any current, frozen, or terminated single-employer plan or the
single-employer plan of any ERISA Affiliate. Neither Subject Company nor any of
the Subject Company Subsidiaries has incurred any material withdrawal Liability
with respect to a multi-employer plan under Subtitle E of Title IV of ERISA
(regardless of whether based on contributions of an ERISA Affiliate). No notice
of a "reportable event," within the meaning of Section 4043 of ERISA for which
the 30 day reporting requirement has not been waived, has been required to be
filed for any Subject Company Pension Plan or by any ERISA Affiliate within the
12 month period ending on the date hereof.
(d) 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.
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(e) Except as set forth in Section 5.14(e) of the Subject
Company Disclosure Memorandum, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (i)
result in any payment (including severance, unemployment compensation or golden
parachute) becoming due to any director or any employee of Subject Company or
any of the Subject Company Subsidiaries from Subject Company or any of the
Subject Company Subsidiaries under any Subject Company Benefit Plan, (ii)
materially increase any benefits otherwise payable under any Subject Company
Benefit Plan, or (iii) result in any acceleration of the time of payment or
vesting of any such benefit.
(f) The actuarial present values of all accrued deferred
compensation entitlements (including entitlements under any executive
compensation, supplemental retirement, or employment agreement) of employees and
former employees of any Subject Company Subsidiary and their respective
beneficiaries, other than entitlements accrued pursuant to funded retirement
plans subject to the provisions of Section 412 of the Internal Revenue Code or
Section 302 of ERISA, have been fully reflected on the Subject Company Financial
Statements to the extent required by and in accordance with GAAP.
5.15 Material Contracts. Except as set forth in Section 5.15 of the
Subject Company Disclosure Memorandum, neither Subject Company, the Subject
Company Subsidiaries, nor any of their respective Assets, businesses, or
operations, is a party to, or is bound or affected by, or receives benefits
under, (i) any employment, severance, termination, consulting, or retirement
Contract, (ii) any Contract relating to the borrowing of money by Subject
Company or any of the Subject Company Subsidiaries or the guarantee by Subject
Company or any of the Subject Company Subsidiaries of any such obligation (other
than Contracts evidencing deposit liabilities, purchases of federal funds,
fully-secured repurchase agreements, trade payables, and Contracts relating to
borrowings or guarantees made in the ordinary course of business), (iii) any
Contracts which prohibit or restrict Subject Company or any of the Subject
Company Subsidiaries from engaging in any business activities in any geographic
area, line of business, or otherwise in competition with any other Person, (iv)
any Contracts between or among Subject Company and the Subject Company
Subsidiaries, (v) any exchange-traded or over-the-counter swap, forward, future,
option, cap, floor, or collar financial Contract, or any other interest rate or
foreign currency protection Contract (not disclosed in the Subject Company
Financial Statements delivered prior to the date of this Agreement) which is a
financial derivative Contract (including various combinations thereof), and (vi)
any other Contract or amendment thereto that would be required to be filed as an
exhibit to a Subject Company SEC Report filed by Subject Company with the SEC
prior to the date of this Agreement if Subject Company was required to file SEC
Reports (together with all Contracts referred to in Sections 5.9 and 5.14(a) of
this Agreement, the "Subject Company Contracts"). With respect to each Subject
Company Contract: (i) the Contract is in full force and effect; (ii) neither
Subject Company nor any Subject Company Subsidiary is in Default thereunder;
(iii) neither Subject Company nor its Subsidiaries has repudiated or waived any
material provision of any such Contract; and (iv) no other party to any such
Contract is, to the Knowledge of Subject Company, in Default in any respect or
has repudiated or waived any material provision thereunder.
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5.16 Legal Proceedings. Except as disclosed in Section 5.16 of the
Subject Company Disclosure Memorandum, there is no Litigation instituted or
pending, or, to the Knowledge of Subject Company, threatened (or unasserted but
considered probable of assertion and which if asserted would have at least a
reasonable probability of an unfavorable outcome) against Subject Company or any
of the Subject Company Subsidiaries, or against any Asset, employee benefit
plan, interest, or right of any of them, that is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Subject Company,
nor are there any Orders of any Regulatory Authorities, other governmental
authorities, or arbitrators outstanding against Subject Company or any of the
Subject Company Subsidiaries. Section 5.16 of the Subject Company Disclosure
Memorandum includes a summary report of all material Litigation as of the date
of this Agreement to which Subject Company or any Subject Company Subsidiary is
a party and which names Subject Company or a Subject Company Subsidiary as a
defendant or cross-defendant.
5.17 Reports. Since January 1, 1994, or the applicable date of
organization if later, Subject Company and each Subject Company Subsidiary has
timely filed all reports and statements, together with any amendments required
to be made with respect thereto, that it was required to file with (i) the SEC,
including, but not limited to, Forms 10-K, Forms 10-Q, Forms 8-K, and proxy
statements (the "Subject Company SEC Reports"), (ii) other Regulatory
Authorities, and (iii) any applicable state securities or banking authorities,
except failures to file which are not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Subject Company. As of its
respective date (or, if amended or superseded by a filing prior to the date of
this Agreement, then on the date of such filing), each of such reports and
documents, including the financial statements, exhibits, and schedules thereto,
complied in all material respects with all applicable Laws. As of its respective
date (or, if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing), each Subject Company SEC Report did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. None of the Subject Company Subsidiaries is required to file any SEC
Documents.
5.18 Statements True and Correct. None of the information supplied or
to be supplied by Subject Company for inclusion in the Registration Statement to
be filed by Parent with the SEC will, when the Registration Statement becomes
effective, be false or misleading with respect to any material fact, or omit to
state any material fact necessary to make the statements therein not misleading.
None of the information supplied or to be supplied by Subject Company for
inclusion in the Proxy Statement to be mailed to Subject Company's shareholders
in connection with the Shareholders' Meeting, and any other documents to be
filed by Subject Company with the SEC or any other Regulatory Authority in
connection with the transactions contemplated hereby, will, at the respective
time such documents are filed, and with respect to the Proxy Statement, when
first mailed to the shareholders of Subject Company, be false or misleading with
respect to any material fact, or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, or, in the case of the Proxy Statement or any amendment
thereof or supplement thereto, at the time of the
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Shareholders' Meeting, be false or misleading with respect to any material fact,
or omit to state any material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of any proxy for the
Shareholders' Meeting. All documents that Subject Company or the Subject Company
Subsidiaries are responsible for filing with any Regulatory Authority in
connection with the transactions contemplated hereby will comply as to form in
all material respects with the provisions of applicable Law.
5.19 Accounting, Tax, and Regulatory Matters. Neither Subject Company
nor any of the Subject Company Subsidiaries has taken any action or has any
Knowledge of any fact or circumstance relating to Subject Company that is
reasonably likely to (i) prevent the transactions contemplated hereby, including
the Merger, from qualifying for pooling-of-interests accounting treatment or as
a reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, or (ii) materially impede or delay receipt of any Consents of Regulatory
Authorities referred to in Section 9.1(b) of this Agreement.
5.20 Charter Provisions; Takeover Laws. Subject Company has taken all
action so that the entering into of this Agreement and the consummation of the
Merger and the other transactions contemplated by this Agreement do not and will
not result in the grant of any rights to any Person under the Charter, Bylaws or
other governing instruments of Subject Company or any Subject Company Subsidiary
or restrict or impair the ability of Parent or any of the Parent Subsidiaries to
vote, or otherwise to exercise the rights of a shareholder with respect to,
shares of Subject Company or any Subject Company Subsidiary. Subject Company has
taken all necessary action to exempt this Agreement from, and the transactions
contemplated by hereby and thereby are exempt from, any "super-majority" voting
requirements or the requirements of any "moratorium," "fair price," "business
combination," "control share," or other anti-takeover provisions under
applicable Laws, or the Charter or Bylaws of the Subject Company or any Subject
Company Subsidiary (collectively, "Takeover Laws").
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent hereby represents and warrants to Subject Company,
except as set forth on Parent's Disclosure Memorandum, as follows:
6.1 Organization, Standing and Power. Parent is a corporation duly
organized, validly existing, and in good standing under the Laws of the State of
Tennessee, and has the corporate power and authority to carry on its business as
now conducted and to own, lease and operate its material Assets. Parent is duly
qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for such jurisdictions in which the failure
to be so qualified or licensed is not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Parent.
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6.2 Authority; No Breach by Agreement. (a) Parent has the corporate
power and authority necessary to execute, deliver and perform its obligations
under this Agreement and the Plan of Merger and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated herein,
including the Merger, have been or will be duly and validly authorized by all
necessary corporate action (including valid authorization and adoption of this
Agreement and the Plan of Merger by Parent's duly constituted Board of
Directors) in respect thereof on the part of Parent, subject to the adoption of
an amendment to the charter of Parent to increase the number of authorized
shares of Parent Common Stock. Assuming due authorization, execution and
delivery of this Agreement and the Plan of Merger by Subject Company, this
Agreement and the Plan of Merger each represents a legal, valid, and binding
obligation of Parent, enforceable against Parent in accordance with its terms
(except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or similar Laws (including
provisions of the U.S., Delaware and Tennessee Constitutions) affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement or
the Plan of Merger by Parent, nor the compliance by Parent with any of the
provisions hereof, will (i) conflict with or result in a breach of any provision
of Parent's Restated Charter of Incorporation or Bylaws (subject to the
amendment of the Parent's Restated Charter of Incorporation to increase the
number of authorized shares of Parent Common Stock), or (ii) constitute or
result in a Default under, or require any Consent (excluding Consents required
by Law or Order) pursuant to, or result in the creation of any Lien on any
material Asset of Parent or any Parent Subsidiary under, any Contract or Permit
of Parent or any Parent Subsidiary, except for such Defaults, Liens and
Consents, which, if not obtained or made, are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Parent, or (iii)
subject to receipt of the requisite approvals referred to in Section 9.1(b) of
this Agreement, violate any Law or Order applicable to Parent or any Parent
Subsidiary or any of their respective material Assets.
(c) Other than in connection or compliance with the provisions
of the Securities Laws, applicable state corporate and securities Laws, and
rules of the NYSE, and other than Consents required from Regulatory Authorities,
and other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit plans,
or under the HSR Act, and other than Consents, filings, or notifications which,
if not obtained or made, are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Parent, no notice to, filing with,
or Consent of, any public body or authority is necessary for the consummation by
Parent of the Merger and the other transactions contemplated in this Agreement.
6.3 Capital Stock. The authorized capital stock of Parent consists of
(i) 100,000,000 shares of Parent Common Stock, of which 68,077,181 shares were
issued and outstanding as of October 31, 1997, and (ii) 10,000,000 shares of
Parent Preferred Stock, of which 2,278,228
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shares of Parent Series E Preferred Stock were issued and outstanding as of
October 31, 1997. All of the issued and outstanding shares of Parent Capital
Stock are, and, subject to the amendment of Parent's Restated Charter of
Incorporation to increase the number of authorized shares of Parent Common
Stock, all of the shares of Parent Common Stock to be issued in exchange for
shares of Subject Company Common Stock upon consummation of the Merger, when
issued in exchange for shares of Subject Company Common Stock upon consummation
of the Merger, when issued in accordance with the terms of this Agreement, will
be, duly and validly issued and outstanding and fully paid and nonassessable
under the TBCA. None of the outstanding shares of Parent Capital Stock has been,
and none of the shares of Parent Common Stock to be issued in exchange for
shares of Subject Company Common Stock upon consummation of the Merger will be,
issued in violation of any preemptive rights of the current or past shareholders
of Parent.
6.4 Parent Subsidiaries. Except for Capital Factors, Inc., a majority
of the outstanding stock of which may be acquired prior to the Closing Date,
Parent or one of its wholly owned Subsidiaries owns all of the issued and
outstanding shares of capital stock (or other equity interests) of each of the
Parent Subsidiaries. No capital stock (or other equity interest) of any Parent
Subsidiary is or may become required to be issued (other than to another Parent
Subsidiary) by reason of any rights, and there are no Contracts by which the
Parent or any of the Parent Subsidiaries are bound to issue (other than to
Parent or any of the Parent Subsidiaries) additional shares of its capital stock
(or other equity interests) or Rights or by which Parent or any of the Parent
Subsidiaries are or may be bound to transfer any shares of the capital stock (or
other equity interests) of any of Parent or any of the Parent Subsidiaries
(other than to Parent or any of the Parent Subsidiaries). There are no Contracts
relating to the rights of Parent or any Parent Subsidiary to vote or to dispose
of any shares of the capital stock (or other equity interests) of Parent or any
of the Parent Subsidiaries. All of the shares of capital stock (or other equity
interests) of each Parent Subsidiary held by Parent or any Parent Subsidiary are
fully paid and nonassessable (except pursuant to 12 U.S.C. Section 55 in the
case of national banks and comparable, applicable state Law, if any, in the case
of state depository institutions) under the applicable corporation or similar
Law of the jurisdiction in which such Subsidiary is incorporated or organized
and are owned by Parent or a Parent Subsidiary free and clear of any Liens. Each
Parent Subsidiary is either a bank, a savings association, partnership, limited
liability corporation, or a corporation, and each such Subsidiary is duly
organized, validly existing, and (as to corporations) in good standing under the
Laws of the jurisdiction in which it is incorporated or organized, and has the
corporate power and authority necessary for it to own, lease, and operate its
Assets and to carry on its business as now conducted. Each Parent Subsidiary is
duly qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for such jurisdictions in which the failure
to be so qualified or licensed is not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Parent. The minute book and other
organizational documents (and all amendments thereto) for each of Parent and
each Parent Subsidiary that is a Significant Subsidiary have been made available
to Subject Company for its review, and are true and complete as in effect as of
the date of this Agreement.
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6.5 Financial Statements. Each of the Parent Financial Statements
(including, in each case, any related notes) contained in the Parent SEC
Reports, including any Parent SEC Reports filed after the date of this Agreement
until the Effective Time, complied, or will comply, as to form in all material
respects with the applicable published rules and regulations of the SEC with
respect thereto, was prepared, or will be prepared, in accordance with GAAP
applied on a consistent basis throughout the periods involved (except as may be
indicated in the notes to such financial statements or, in the case of unaudited
interim statements, as permitted by Form 10-Q of the SEC), and fairly presented,
or will fairly present, in all material respects the consolidated financial
position of Parent and the Parent Subsidiaries as at the respective dates and
the consolidated results of its operations and cash flows for the periods
indicated, except that the unaudited interim financial statements were or are
subject to normal and recurring year-end adjustments which were not or are not
expected to be material in amount or effect.
6.6 Absence of Undisclosed Liabilities. Neither Parent nor any of the
Parent Subsidiaries has any Liabilities that are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Parent, except
Liabilities which are accrued or reserved against in the consolidated balance
sheets of Parent as of September 30, 1997, included in the Parent Financial
Statements made available prior to the date of this Agreement or reflected in
the notes thereto. Neither Parent nor any of the Parent Subsidiaries has
incurred or paid any Liability since September 30, 1997, except for such
Liabilities incurred or paid (i) in the ordinary course of business consistent
with past business practice or which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Parent or (ii) in
connection with the transaction contemplated by this Agreement.
6.7 Absence of Certain Changes or Events. Since December 31, 1996,
except as disclosed in the Parent SEC Reports made available prior to the date
of this Agreement, 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 Tax Matters. (a) All material Tax Returns required to be filed by
or on behalf of Parent or any of the Parent Subsidiaries have been timely filed
or requests for extensions have been timely filed, granted, and have not expired
for periods ended on or before December 31, 1996, and on or before the date of
the most recent fiscal year end immediately preceding the Effective Time, and
all such Tax Returns filed are complete and accurate in all material respects.
All Taxes shown on filed Tax Returns have been paid. There is no audit
examination, or refund Litigation with respect to any material Taxes, except as
reserved against in the Parent Financial Statements delivered prior to the date
of this Agreement. All material Taxes and other material Liabilities due with
respect to completed and settled examinations or concluded Litigation have been
paid. There are no material Liens with respect to Taxes upon any of the Assets
of Parent or any of the Parent Subsidiaries.
(b) Adequate provision for any material Taxes due or to become
due for Parent or any of the Parent Subsidiaries for the period or periods
through and including the date of the
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respective Parent Financial Statements has been made and is reflected on such
Parent Financial Statements.
(c) Material deferred Taxes of Parent and the Parent
Subsidiaries have been provided for in accordance with GAAP.
6.9 Environmental Matters. (a) To the Knowledge of Parent, each of
Parent and the Parent Subsidiaries, its Participation Facilities, and its
Operating Properties are, and have been, in compliance with all Environmental
Laws, except for violations which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Parent.
(b) To the Knowledge of Parent, there is no Litigation pending
or threatened before any court, governmental agency, or authority or other forum
in which Parent or any of the Parent Subsidiaries or any of their respective
Operating Properties or Participation Facilities (or Parent in respect of such
Operating Property or Participation Facility) has been or, with respect to
threatened Litigation, may be named as a defendant (i) for alleged noncompliance
(including by any predecessor) with any Environmental Law or (ii) relating to
the release into the environment of any Hazardous Material, whether or not
occurring at, on, under, adjacent to, or affecting (or potentially affecting) a
site owned, leased, or operated by Parent or any of the Parent Subsidiaries or
any of their respective Operating Properties or Participation Facilities, except
for such Litigation pending or threatened that is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Parent, nor, to
the knowledge of Parent, is there any reasonable basis for any Litigation of a
type described in this sentence.
(c) During the period of (i) Parent's or any of the Parent
Subsidiaries' ownership or operation of any of their respective current
properties, (ii) any Parent's or any of the Parent Subsidiaries' participation
in the management of any Participation Facility, or (iii) Parent's or any of the
Parent Subsidiaries' holding of a security interest in an Operating Property, to
the Knowledge of Parent, there have been no releases of Hazardous Material in,
on, under, adjacent to, or affecting (or potentially affecting) such properties,
except such as are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Parent. Prior to the period of (i)
Parent's or any of Parent Subsidiaries' ownership or operation of any of their
respective current properties, (ii) Parent's or any of Parent Subsidiaries'
participation in the management of any Participation Facility, or (iii) Parent
or any of Parent Subsidiaries' holding of a security interest in an Operating
Property, to the Knowledge of Parent, there were no releases of Hazardous
Material in, on, under, or affecting any such property, Participation Facility
or Operating Property, except such as are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Parent.
6.10 Compliance With Laws. Parent is duly registered as a bank holding
company under the BHC Act. Each of Parent and the Parent Subsidiaries has in
effect all Permits necessary for it to own, lease, or operate its material
Assets and to carry on its business as now conducted, except where the failure
to hold such permits would not be reasonably likely to have,
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individually or in the aggregate, a Material Adverse Effect on Parent. Neither
Parent nor any of the Parent Subsidiaries:
(a) is in violation of any Laws, Orders, or Permits applicable
to its business or employees conducting its business, except for such violations
which would not be reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on Parent; or
(b) has received any notification or communication from any
agency or department of federal, state, or local government or any Regulatory
Authority or the staff thereof (i) asserting that Parent or any Parent
Subsidiary is not in material compliance with any of the Laws or Orders which
such governmental authority or Regulatory Authority enforces, (ii) threatening
to revoke any Permits, or (iii) requiring Parent or any Parent Subsidiary to
enter into or consent to the issuance of a cease and desist order, formal
agreement, directive, commitment or memorandum of understanding, or to adopt any
Board resolution or similar undertaking, which restricts materially the conduct
of its business, or in any manner relates to its capital adequacy, its credit or
reserve policies, its management, or the payment of dividends.
6.11 Legal Proceedings. There is no Litigation instituted or pending,
or, to the Knowledge of Parent, threatened (or unasserted but considered
probable of assertion and which if asserted would have at least a reasonable
probability of an unfavorable outcome) against Parent or any Parent Subsidiary,
or against any Asset, interest, or right of any of them, that is reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Parent, nor are there any Orders of any Regulatory Authorities, other
governmental authorities, or arbitrators outstanding against Parent or any
Parent Subsidiary.
6.12 Reports. Since January 1, 1994, or the applicable date of
organization if later, Parent and each Parent Subsidiary has filed all reports
and statements, together with any amendments required to be made with respect
thereto, that it was required to file with (i) the SEC, including, but not
limited to, Forms 10-K, Forms 10-Q, Forms 8-K, and proxy statements (the "Parent
SEC Reports"), (ii) other Regulatory Authorities, and (iii) any applicable state
securities or banking authorities, except failures to file which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Parent. As of its respective date (or, if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing),
each of such reports and documents, including, the financial statements,
exhibits, and schedules thereto complied in all material respects with all
applicable Laws. As of its respective date, each Parent SEC Report did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they were made, not misleading. Except
for Parent Subsidiaries that are registered as a broker, dealer, or investment
advisor, no Parent Subsidiary is required to file any SEC Documents.
6.13 Statements True and Correct. None of the information supplied or
to be supplied by Parent for inclusion in the Registration Statement to be filed
by Parent with the SEC, will, when the Registration Statement becomes effective,
be false or misleading with respect to any
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material fact, or omit to state any material fact necessary to make the
statements therein not misleading. None of the information supplied or to be
supplied by Parent for inclusion in the Proxy Statement to be mailed to Subject
Company's shareholders in connection with the Shareholders' Meeting, and any
other documents to be filed by Parent or any Parent Subsidiary with the SEC or
any other Regulatory Authority in connection with the transactions contemplated
hereby, will, at the respective time such documents are filed, and with respect
to the Proxy Statement, when first mailed to the shareholders of Subject
Company, be false or misleading with respect to any material fact, or omit to
state any material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, or, in the case of
the Proxy Statement or any amendment thereof or supplement thereto, at the time
of the Shareholders' Meeting, be false or misleading with respect to any
material fact, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of any
proxy for the Shareholders' Meeting. All documents that Parent or any Parent
Subsidiary is responsible for filing with any Regulatory Authority in connection
with the transactions contemplated hereby will comply as to form in all material
respects with the provisions of applicable Law.
6.14 Accounting, Tax, and Regulatory Matters. Neither Parent nor any
Parent Subsidiary has taken any action or has 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
pooling-of-interests accounting treatment or as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code, or (ii) materially
impede or delay receipt of any Consents of Regulatory Authorities referred to in
Section 9.1(b) of this Agreement.
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 Affirmative Covenants of Subject Company. Unless the prior written
consent of Parent shall have been obtained, and except as otherwise expressly
contemplated herein or expressly provided for in the Subject Company Disclosure
Memorandum, Subject Company shall and shall cause each of the Subject Company
Subsidiaries to (i) operate its business only in the usual, regular, and
ordinary course, (ii) use reasonable efforts to preserve intact its business
organization and Assets and maintain its rights and franchises, and (iii) take
no action which would (a) materially adversely affect the ability of any Party
to obtain any Consents required for the transactions contemplated hereby or
prevent the transactions contemplated hereby, including the Merger, from
qualifying for pooling-of-interests accounting treatment or as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code, or (b)
materially adversely affect the ability of any Party to perform its covenants
and agreements under this Agreement.
7.2 Negative Covenants of Subject Company. Except as specifically
permitted by this Agreement or as and to the extent expressly disclosed or
provided for in the Subject Company Disclosure Memorandum, from the date of this
Agreement until the earlier of the Effective Time or the termination of this
Agreement, Subject Company covenants and agrees that it will not do
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or agree or commit to do, or permit any of the Subject Company Subsidiaries to
do or agree or commit to do, any of the following without the prior written
consent of the chief executive officer, president, or chief financial officer of
Parent, which consent shall not be unreasonably withheld:
(a) amend the Charter, Bylaws, or other governing instruments
of Subject Company or any Subject Company Subsidiary; or
(b) incur any additional debt obligation for borrowed money
(other than indebtedness of Subject Company or the Subject Company Subsidiaries
to each other) in excess of an aggregate of $50,000 (for Subject Company and the
Subject Company Subsidiaries on a consolidated basis) except in the ordinary
course of the business of the Subject Company Subsidiaries consistent with past
practices (which shall include, for the Subject Company Subsidiaries that are
depository institutions, creation of deposit liabilities, purchases of federal
funds, advances from the Federal Reserve Bank or Federal Home Loan Bank, and
entry into repurchase agreements fully secured by U.S. government or agency
securities), or impose, or suffer the imposition, on any material Asset of
Subject Company or any of the Subject Company Subsidiaries of any Lien or permit
any such Lien to exist (other than in connection with deposits, repurchase
agreements, bankers acceptances, "treasury tax and loan" accounts established in
the ordinary course of business, the satisfaction of legal requirements in the
exercise of trust powers, and Liens in effect as of the date hereof that are
disclosed in the Subject Company Disclosure Memorandum); or
(c) repurchase, redeem, or otherwise acquire or exchange
(other than exchanges in the ordinary course under employee benefit plans),
directly or indirectly, any shares, or any securities convertible into any
shares, of the capital stock of Subject Company or any of the Subject Company
Subsidiaries, or declare or pay any dividend or make any other distribution in
respect of Subject Company's capital stock, provided that Subject Company may
(to the extent legally and contractually permitted to do so), but shall not be
obligated to, declare and pay regular quarterly cash dividends on the shares of
Subject Company Common Stock at a rate not in excess of $2.25 per share with
usual and regular record and payment dates in accordance with past practice,
provided, that, notwithstanding the provisions of Section 1.3, the Parties shall
cooperate in selecting the Effective Time to ensure that, with respect to the
quarterly period in which the Effective Time occurs, the holders of Subject
Company Common Stock do not become entitled to receive both a dividend in
respect of their Subject Company Common Stock and a dividend in respect of
Parent Common Stock or fail to be entitled to receive any dividend; or
(d) except for this Agreement, issue, sell, pledge, encumber,
authorize the issuance of, enter into any Contract to issue, sell, pledge,
encumber, or authorize the issuance of, or otherwise permit to become
outstanding, any additional shares of its common stock or any other capital
stock, or any stock appreciation rights, or any option, warrant, conversion, or
other right to acquire any such stock, or any security convertible into any such
stock; or
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(e) adjust, split, combine or reclassify any capital stock of
Subject Company or any of the Subject Company Subsidiaries or issue or authorize
the issuance of any other securities in respect of or in substitution for shares
of Subject Company Common Stock, or sell, lease, mortgage or otherwise dispose
of or otherwise encumber any shares of capital stock of any Subject Company
Subsidiary (unless any such shares of stock are sold or otherwise transferred to
another Subject Company Subsidiary) or any Asset having a book value in excess
of $50,000 other than in the ordinary course of business for reasonable and
adequate consideration; or
(f) except for purchases of investment securities acquired in
the ordinary course of business consistent with past practice, purchase any
securities or make any material investment, either by purchase of stock or
securities, contributions to capital, Asset transfers, or purchase of any
Assets, in any Person other than a wholly owned Subsidiary of Subject Company,
or otherwise acquire direct or indirect control over any Person, other than in
connection with (i) foreclosures in the ordinary course of business, (ii)
acquisitions of control by a depository institution Subsidiary in its fiduciary
capacity, or (iii) the creation of new wholly owned Subsidiaries organized to
conduct or continue activities otherwise permitted by this Agreement; or
(g) grant any increase in compensation or benefits to the
employees or officers of Subject Company or the Subject Company Subsidiaries,
except in the ordinary course of business consistent with past practice or as
required by Law; pay any severance or termination pay or any bonus other than
pursuant to written policies or written Contracts in effect on the date of this
Agreement; enter into or amend any severance agreements with officers of Subject
Company or the Subject Company Subsidiaries; grant any material increase in fees
or other increases in compensation or other benefits to directors of Subject
Company or the Subject Company Subsidiaries; or voluntarily accelerate the
vesting of any stock options or other stock-based compensation or employee
benefits (other than the acceleration of vesting which occurs under a benefit
plan upon a change of control of Subject Company); or
(h) enter into or amend any employment Contract between
Subject Company or the Subject Company Subsidiaries and any Person (unless such
amendment is required by Law) that Subject Company does not have the
unconditional right to terminate without Liability (other than Liability for
services already rendered), at any time on or after the Effective Time; or
(i) adopt any new employee benefit plan of Subject Company or
the Subject Company Subsidiaries or terminate or withdraw from, or make any
material change in or to, any existing employee benefit plans of Subject Company
or 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; provided,
however that notwithstanding the foregoing, (1) after the Effective Time, all
contributions under Subject Company's defined contribution benefit plan as in
effect on the date of this Agreement shall cease and employees
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of Subject Company and Subject Company Subsidiaries who continue their
employment with the Surviving Corporation or a Subject Company or Parent
Subsidiary after the Effective Time shall be entitled to participate in Parent's
401(k) Plan to the same extent as other employees of Parent and its Subsidiaries
as of immediately after the Effective Time. Such employees shall receive past
service credit for their service with Subject Company and the Subject Company
Subsidiaries for purposes of eligibility, participation, and vesting in Parent's
401(k) Plan. Subject Company, in coordination with Parent's Human Resources
Department, shall take such steps as are necessary to merge Subject Company's
defined contribution plan with and into Parent's 401(k) Plan as of the Effective
Time or as soon as reasonably practicable after the Effective Time, but any
delay in effectuating such merger shall not delay Subject Company's employees'
right to participate in Parent's 401(k) Plan as of the Effective Time. Prior to
the Effective Time, Subject Company shall fully reserve for all anticipated
costs and expenses related to its defined contribution benefit plan and the
merger thereof into Parent's 401(k) Plan, or termination thereof if it cannot be
economically or easily merged into Parent's 401(k) Plan. Subject Company, in
coordination with Parent's Human Resources Department, shall obtain such
regulatory determinations regarding the merger of its defined contribution
benefit plan into Parent's 401(k) Plan (or termination of Subject Company's
plan) as may be appropriate to ensure the qualified status of such plans and
related trusts under the Internal Revenue Code; (2) to the extent not prohibited
by applicable law, prior to the Effective Time of the Merger Subject Company
shall take such steps as are necessary or appropriate, if any, to amend Subject
Company's phantom stock plan so that it would terminate at the Effective Time of
the Merger; and prior to the Effective Time, Subject Company shall fully reserve
for all costs and expenses, including funding obligations, to fully fund all
obligations arising under any such phantom stock plan;
(j) make any material change in any Tax or accounting methods
or systems of internal accounting controls, except as may be appropriate to
conform to changes in Tax Laws or regulatory accounting requirements or GAAP; or
(k) commence any Litigation other than in accordance with past
practice, settle any Litigation involving any Liability of Subject Company or
the Subject Company Subsidiaries for material money damages or restrictions upon
the operations of Subject Company or the Subject Company Subsidiaries; or
(l) except in the ordinary course consistent with past
practice, enter into, modify, amend, or terminate any material Contract
(excluding any loan Contract) or waive, release, compromise, or assign any
material rights or claims.
7.3 Covenants of Parent. From the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, Parent
covenants and agrees that it shall (i) continue to conduct its business and the
business of the Parent Subsidiaries in a manner designed in its reasonable
judgment to enhance the long-term value of the Parent Common Stock and the
business prospects of Parent and the Parent Subsidiaries, and (ii) take no
action which would (a) materially adversely affect the ability of any Party to
obtain any Consents required for the transactions contemplated hereby or prevent
the transactions contemplated hereby, including
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the Merger, from qualifying for pooling-of-interests accounting treatment or as
a reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, (b) materially adversely affect the ability of any Party to perform its
covenants and agreements under this Agreement, or (c) result in Parent entering
into an agreement with respect to an Acquisition Proposal with a third party
which could be reasonably expected to result in the Merger not being consummated
or an agreement with respect to an Acquisition Proposal to be consummated prior
to the Closing Date which would effect a change in the number or kind of shares
of Parent Common Stock held by Parent shareholders immediately prior to such
consummation; provided, that the foregoing shall not prevent Parent or any
Parent Subsidiary from acquiring any other Assets or businesses or from
discontinuing or disposing of any of its Assets or business if such action is,
in the reasonable judgment of Parent, desirable in the conduct of the business
of Parent and the Parent Subsidiaries and would not, in the reasonable judgment
of Parent, likely delay the Effective Time to a date subsequent to the date set
forth in Section 10.1(e) of this Agreement.
7.4 Adverse Changes in Condition. Each Party agrees to give written
notice promptly to the other Party upon becoming aware of the occurrence or
impending occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on it or (ii) would cause or constitute a
material breach of any of its representations, warranties, or covenants
contained herein, and to use its reasonable efforts to prevent or promptly to
remedy the same.
7.5 Reports. Each Party and its Subsidiaries shall file all reports
required to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time and, to the extent permitted by Law, shall
deliver to the other Party copies of all such reports promptly after the same
are filed. If financial statements are contained in any such reports filed with
the SEC, such financial statements will fairly present the consolidated
financial position of the entity filing such statements as of the dates
indicated and the consolidated results of operations, changes in shareholders'
equity, and cash flows for the periods then ended in accordance with GAAP
(subject in the case of interim financial statements to normal recurring year
end adjustments that are not material). As of their respective dates, such
reports filed with the SEC will comply in all material respects with the
Securities Laws and will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. Any financial statements contained in any other
reports to another Regulatory Authority shall be prepared in accordance with
Laws applicable to such reports.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 Registration Statement; Proxy Statement; Shareholder Approval. Each
of Parent and Subject Company shall prepare and file the Registration Statement,
of which the Proxy Statement shall form a part, with the SEC, and shall use its
reasonable efforts to cause the Registration Statement to become effective under
the 1933 Act and Parent shall take any action
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required to be taken under the applicable state Blue Sky or securities Laws in
connection with the issuance of the shares of Parent Common Stock upon
consummation of the Merger. Each of Parent and Subject Company shall furnish all
information concerning it and the holders of its capital stock as the other
Party may reasonably request in connection with such action. Subject Company
shall call a Shareholders' Meeting, to be held after the Registration Statement
is declared effective by the SEC for the purpose of voting upon approval of this
Agreement and the Plan of Merger and such other related matters as it deems
appropriate. Assuming the Registration Statement is then effective, the Subject
Company shall call the Shareholders' Meeting to be held not later than 40 days
after the Parent's 1998 Annual Meeting of Shareholders. Otherwise, the Subject
Company shall call a Shareholders' Meeting as soon thereafter as practicable
after the Registration Statement is declared effective by the SEC. In connection
with the Shareholders' Meeting, (i) the Board of Directors of Subject Company
shall recommend (subject to compliance with its fiduciary duties as advised by
counsel) to its shareholders the approval of the Merger, and (ii) the Board of
Directors (subject to compliance with its fiduciary duties as advised by
counsel) and officers of Subject Company shall use their reasonable efforts to
obtain shareholder approval.
8.2 Authorization of Shares; Exchange Listing. Parent shall submit to
its shareholders, at the 1998 Annual Meeting of Shareholders of Parent, a
proposal to amend the Restated Charter of Incorporation of Parent to increase
the number of authorized shares of Parent Common Stock by an amount at least
equal to the number of shares of Parent Common Stock issuable in connection with
the Merger, and, subject to the approval of such amendment by the shareholders
of Parent, shall cause such amendment to become effective and reserve for
issuance a sufficient number of shares of Parent Common Stock for the purpose of
issuing shares of Parent Common Stock in accordance with the provisions of
Section 3.1 of this Agreement and the Plan of Merger. Parent shall use its
reasonable efforts to list, prior to the Effective Time, on the NYSE, subject to
official notice of issuance, the shares of Parent Common Stock to be issued to
the holders of Subject Company Common Stock or Subject Company Options pursuant
to the Merger, and Parent shall give all notices and make all filings with the
NYSE required in connection with the transactions contemplated herein.
8.3 Applications. Parent shall prepare and file, and Subject Company
shall cooperate in the preparation and, where appropriate, filing of,
applications with all Regulatory Authorities having jurisdiction over the
transactions contemplated by this Agreement seeking the requisite Consents
necessary to consummate the transactions contemplated by this Agreement. At
least five business days prior to each filing, Parent shall provide Subject
Company and its counsel with copies of such applications. The Parties shall
deliver to each other copies of all filings, correspondence and orders to and
from all Regulatory Authorities in connection with the transactions contemplated
hereby as soon as practicable upon their becoming available.
8.4 Filings With State Offices. Upon the terms and subject to the
conditions of this Agreement, Parent, Merger Subsidiary and Subject Company
shall execute and file the Articles of Merger with the Secretary of State of the
State of Tennessee and the Secretary of State of the State of Delaware in
connection with the Closing.
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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. The Board of Directors of Subject Company shall recommend (subject to
compliance with its fiduciary duties as advised by counsel) to Subject Company
Shareholders that they vote "For" the approval of this Agreement and the Plan of
Merger.
8.6 Investigation and Confidentiality. (a) Prior to the Effective Time,
each Party shall keep the other Party advised of all material developments
relevant to its business and to consummation of the Merger and shall permit the
other Party to make or cause to be made such investigation of the business and
properties of it and its Subsidiaries and of their respective financial and
legal conditions as the other Party reasonably requests, provided that such
investigation shall be reasonably related to the transactions contemplated
hereby and shall not interfere unnecessarily with normal operations. Neither
Party shall be required to provide access to or to disclose information where
such access or disclosure would violate or prejudice the rights of such Party's
customers, jeopardize any attorney-client privilege or contravene any Law, rule,
regulation, order, judgment, decree, fiduciary duty or binding agreement entered
into prior to the date of this Agreement. The Parties will make appropriate
substitute disclosure arrangements under circumstances in which the restrictions
of the preceding sentence apply. No investigation by a Party shall affect the
representations and warranties of the other Party.
(b) Each Party will hold, and will cause its respective
Affiliates and their respective officers, directors, employees, agents,
consultants, and other representatives to hold, in strict confidence, unless
compelled to disclose by judicial or administrative process (including without
limitation in connection with obtaining the necessary Consents of Regulatory
Authorities) or by other requirements of Law, all confidential documents and
confidential or proprietary information concerning the other Parties gathered
from the other Parties, or their respective officers, directors, employees,
agents, consultants or Representatives, pursuant to this Agreement, except to
the extent that such documents or information can be shown to have been (a)
previously lawfully known by the Party receiving such documents or information,
(b) in the public domain through no fault of such receiving Party, or (c) later
acquired by the receiving party from other sources not themselves bound by, and
in breach of, a confidentiality agreement. Except as provided in Sections 8.1,
8.2 and 8.3 hereof, no Party will disclose or otherwise provide any such
confidential or proprietary documents or information to any other Person, except
to the Party's auditors, Representatives and other consultants and advisors who
need such documents or information in connection with this Agreement and the
transactions contemplated
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hereby, and the Parties agree to cause each of the foregoing to be subject to
and bound by the confidentiality provisions hereof.
8.7 Press Releases. Prior to the Effective Time, Subject Company and
Parent shall consult with each other as to the form and substance of any press
release or other public disclosure materially related to this Agreement or any
other transaction contemplated hereby; provided, that nothing in this Section
8.7 shall be deemed to prohibit any Party from making any disclosure which its
counsel deems necessary or advisable in order to satisfy such Party's disclosure
obligations imposed by Law.
8.8 Certain Actions. (a) Except with respect to this Agreement and the
transactions contemplated hereby, after the date of this Agreement, neither
Subject Company, the Subject Company Subsidiaries nor any Representatives
thereof retained by Subject Company or the Subject Company Subsidiaries shall
directly or indirectly solicit any Acquisition Proposal by any Person. Except to
the extent necessary to comply with the fiduciary duties of Subject Company's
Board of Directors as advised by counsel, Subject Company, the Subject Company
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 Seven Hundred
Thousand Dollars ($2,700,000), 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
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contemplated by this Agreement not being consummated. Accordingly, Subject
Company hereby stipulates and covenants that prior to Subject Company's entering
into a letter of intent, agreement in principle, or definitive agreement,
(whether binding or non-binding, conditional or unconditional) with any third
party with respect to an Acquisition Proposal or supporting or indicating an
intent to support an Acquisition Proposal, either Subject Company or such third
party shall have paid to Parent the amount set forth above in immediately
available funds to satisfy the specific, absolute, and unconditionally binding
condition precedent imposed by this Section 8.8. Notwithstanding anything to the
contrary in this Section 8.8(b), in the event such Acquisition Proposal should
be the result of a hostile takeover of Subject Company, any sums due Parent
hereunder shall be paid only at the closing of the transactions set forth in
such Acquisition Proposal. Parent acknowledges that under no circumstances shall
any officer or director of Subject Company) (unless such officer or director
shall have an interest in a potential acquiring party in any Acquisition
Proposal) be held personally liable to Parent for any amount of the foregoing
payment. On payment of such amount to Parent, Parent shall have no cause of
action or claim (either in law or equity) whatsoever against Subject Company, or
any officer or director of Subject Company, with respect to or in connection
with such Acquisition Proposal or this Agreement.
(c) The requirements, conditions, and obligations imposed by
this Section 8.8 shall continue in full force and effect from the date of this
Agreement until the earlier of (i) the Effective Time or (ii) December 31, 1998;
or (iii) the date on which this Agreement shall have been terminated (i)
mutually by the Parties pursuant to Section 10.1(a) of this Agreement; (ii) by
Subject Company pursuant to Section 10.1(b), 10.1(c) or 10.1(g) of this
Agreement; (iii) by Subject Company pursuant to Section 10.1(e), but only in the
event the failure to close by the particular date is not due to litigation or
other delays related to an Acquisition Proposal; (iv) by either Party pursuant
to Section 10.1(d)(1)(i) of this Agreement; or (v) by Parent pursuant to Section
10.1(f) 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 is an "affiliate" of Subject Company as of the date of this Agreement
for purposes of Rule 145 under the 1933 Act. Subject Company shall use its
reasonable efforts to cause each such Person to deliver to Parent not later than
40 days prior to the Effective Time, a written agreement, substantially in the
form of Exhibit 2, providing that such Person will not sell, pledge, transfer,
or otherwise dispose of the shares of Subject Company Common Stock held by such
Person except as contemplated by such agreement or by this Agreement and will
not sell, pledge, transfer, or otherwise dispose of the shares of Parent Common
Stock to be received by such Person upon consummation of the Merger except in
compliance with applicable provisions of the
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1933 Act and the rules and regulations thereunder and until such time as
financial results covering at least 30 days of combined operations of Parent and
Subject Company have been published within the meaning of Section 201.01 of the
SEC's Codification of Financial Reporting Policies. If the Merger will qualify
for pooling-of-interests accounting treatment, shares of Parent Common Stock
issued to such affiliates of Subject Company in exchange for shares of Subject
Company Common Stock shall not be transferable until such time as financial
results covering at least 30 days of combined operations of Parent and Subject
Company have been published within the meaning of Section 201.01 of the SEC's
Codification of Financial Reporting Policies, regardless of whether each such
affiliate has provided the written agreement referred to in this Section 8.10
(and Parent shall be entitled to place restrictive legends upon certificates for
shares of Parent Common Stock issued to affiliates of Subject Company pursuant
to this Agreement to enforce the provisions of this Section 8.10). Parent shall
not be required to maintain the effectiveness of the Registration Statement
under the 1933 Act for the purposes of resale of Parent Common Stock by such
affiliates.
8.11 Employee Benefits and Contracts. (a) Following the Effective Time,
Parent shall provide to officers and employees of the Subject Company and any
Subject Company Subsidiary, employee benefits under employee benefit and welfare
plans of Parent or the Parent Subsidiaries on terms and conditions which when
taken as a whole are substantially similar to those currently provided by Parent
or a Parent Subsidiary to their similarly situated officers and employees. For
purposes of participation, vesting, and (except in the case of retirement plans)
benefit accrual under such employee benefit plans, the service of the employees
of the Subject Company and any Subject Company Subsidiary prior to the Effective
Time shall be treated as service with Parent or a Parent Subsidiary
participating in such employee benefit plans. Parent acknowledges its agreements
with respect to continuing employee benefit and related matters as set forth in
Section 7.2(i) above.
(b) Parent and Subject Company hereby acknowledge that
consummation of the Merger will constitute a "Change in Control" under Subject
Company's phantom stock plan and agreement.
8.12 Indemnification. (a) After the Effective Time, Parent shall
indemnify, defend and hold harmless the present and former directors, officers,
employees, and agents of the Subject Company and any Subject Company Subsidiary
(each, an "Indemnified Party") (including any person who becomes a director,
officer, employee, or agent prior to the Effective Time) against all Liabilities
(including reasonable attorneys' fees, and expenses, judgments, fines and
amounts paid in settlement) arising out of actions or omissions occurring at or
prior to the Effective Time (including the transactions contemplated by this
Agreement) to the full extent permitted under any of Tennessee Law, Subject
Company's Charter and Bylaws as in effect on the date hereof and any indemnity
agreements entered into prior to the date of this Agreement by Subject Company
or any Subject Company Subsidiary and any director, officer, employee or agent
of Subject Company or any Subject Company Subsidiary, including provisions
relating to advances of expenses incurred in the defense of any Litigation.
Without limiting the foregoing, in any case in which approval by Parent is
required to effectuate any indemnification, Parent shall direct, at
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the election of the Indemnified Party, that the determination of any such
approval shall be made by independent counsel mutually agreed upon between
Parent and the Indemnified Party.
(b) Parent shall use its reasonable efforts (and Subject
Company shall cooperate prior to the Effective Time in these efforts) to
maintain in effect for a period of three years after the Effective Time Subject
Company's existing directors' and officers' liability insurance policy (provided
that Parent may substitute therefor (i) policies of at least the same coverage
and amounts containing terms and conditions which are substantially no less
advantageous or (ii) with the consent of Subject Company given prior to the
Effective Time, any other policy) with respect to claims arising from facts or
events which occurred prior to the Effective Time and covering persons who are
currently covered by such insurance; provided, that the Surviving Corporation
shall not be obligated to make aggregate annual premium payments for such
three-year period in respect of such policy (or coverage replacing such policy)
which exceed, for the portion related to Subject Company's directors and
officers, 150% of the annual premium payments on Subject Company's current
policy in effect as of the date of this Agreement (the "Maximum Amount"). If the
amount of the premiums necessary to maintain or procure such insurance coverage
exceeds the Maximum Amount, Parent shall use its reasonable efforts to maintain
the most advantageous policies of directors' and officers' liability insurance
obtainable for a premium equal to the Maximum Amount.
(c) Any Indemnified Party wishing to claim indemnification
under paragraph (a) of this Section 8.12, upon learning of any such Liability or
Litigation, shall promptly notify Parent thereof, provided that the failure so
to notify shall not affect the obligations of Parent under this Section 8.12
unless and to the extent such failure materially increases Parent's Liability
under this Section 8.12. In the event of any such Litigation (whether arising
before or after the Effective Time), (i) Parent or the Surviving Corporation
shall have the right to assume the defense thereof and Parent shall not be
liable to such Indemnified Parties for any legal expenses of other counsel or
any other expenses subsequently incurred by such Indemnified Parties in
connection with the defense thereof, except that if Parent or the Surviving
Corporation elects not to assume such defense or counsel for the Indemnified
Parties advises that there are substantive issues which raise conflicts of
interest between Parent or the Surviving Corporation and the Indemnified Parties
or between the Indemnified Parties, the Indemnified Parties may retain counsel
satisfactory to them, and Parent or the Surviving Corporation shall pay all
reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received; provided, that Parent shall be
obligated pursuant to this paragraph (c) to pay for only two firms of counsel
for all Indemnified Parties in any jurisdiction, (ii) the Indemnified Parties
will cooperate in the defense of any such Litigation, and (iii) neither Parent
nor the Surviving Corporation shall be liable for any settlement effected
without its prior written consent or have any obligation hereunder to any
Indemnified Party when and if a court of competent jurisdiction shall determine,
and such determination shall have become final, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by applicable
Law.
(d) If either Parent or the Surviving Corporation or any of
their respective successors or assigns shall consolidate with or merge into any
other Person and shall not be the
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continuing or surviving Person of such consolidation or merger or shall transfer
all or substantially all of its assets to any Person, then and in each case,
proper provision shall be made so that the successors and assigns of Parent or
the Surviving Corporation, as the case may be, shall assume the obligations set
forth in this Section 8.12.
(e) Parent shall pay all reasonable costs, including
attorneys' fees, that may be incurred by any Indemnified Party in enforcing the
indemnity and other obligations provided for in this Section 8.12.
(f) The provisions of this Section 8.12 are intended to be for
the benefit of, and shall be enforceable by, each Indemnified Party and his or
her heirs and representatives.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
9.1 Conditions to Obligations of Each Party. The respective obligations
of each Party to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by both Parties pursuant to Section 11.6 of
this Agreement:
(a) Shareholder Approval. The shareholders of Subject Company
shall have approved this Agreement and the consummation of the transactions
contemplated hereby and thereby, including the Merger, as and to the extent
required by Law, or by the provisions of any governing instruments (without
regard to any shares which are voted pursuant to irrevocable proxies, the
validity of which has been contested by the underlying owner, unless the
underlying owner has given written instructions with respect to the voting of
such shares in connection with this Agreement).
(b) Regulatory Approvals. All Consents of, filings and
registrations with, and notifications to, all Regulatory Authorities required
for consummation of the Merger shall have been obtained or made and shall be in
full force and effect and all waiting periods required by Law shall have
expired. No Consent obtained from any Regulatory Authority which is necessary to
consummate the transactions contemplated hereby shall be conditioned or
restricted in a manner (other than matters relating to the raising of additional
capital or the disposition of Assets or deposit Liabilities and associated
branches) which in the reasonable judgment of the Board of Directors of Parent
would so materially adversely impact the financial or economic benefits of the
transactions contemplated by this Agreement that, had such condition or
requirement been known, Parent would not, in its reasonable judgment, have
entered into this Agreement.
(c) Consents and Approvals. Each Party shall have obtained any
and all Consents required for consummation of the Merger (other than those
referred to in Section 9.1(b) of this Agreement) or for the preventing of any
Default under any Contract or Permit of such Party which, if not obtained or
made, is reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on such Party.
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(d) Legal Proceedings. No court or governmental or regulatory
authority of competent jurisdiction shall have enacted, issued, promulgated,
enforced, or entered by Law or Order (whether temporary, preliminary, or
permanent) or taken any other action which prohibits, restricts, or makes
illegal consummation of the transactions contemplated by this Agreement.
(e) Registration Statement. The Registration Statement shall
be effective under the 1933 Act, no stop orders suspending the effectiveness of
the Registration Statement shall have been issued, no action, suit, proceeding,
or investigation by the SEC to suspend the effectiveness thereof shall have been
initiated and be continuing, and all necessary approvals under state securities
Laws or the 1933 Act or 1934 Act relating to the issuance or trading of the
shares of Parent Common Stock issuable pursuant to the Merger shall have been
received.
(f) Exchange Listing. The shares of Parent Common Stock
issuable pursuant to the Merger shall have been approved for listing on the
NYSE, subject to official notice of issuance.
(g) Tax Matters. Parent shall have received a written opinion
of counsel from Wyatt, Tarrant & Combs, and Subject Company shall have received
a written opinion of counsel from Balch & Bingham, LLP, in form and substance
reasonably satisfactory to Parent and Subject Company, respectively, dated as of
the Effective Time, in each case substantially to the effect that (i) the Merger
will constitute a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code, (ii) Parent, Merger Subsidiary and Subject Company will
each be "a party to a reorganization" within the meaning of Section 368(b) of
the Internal Revenue Code; (iii) no gain or loss will be recognized by the
shareholders of Subject Company who exchange all of their Subject Company Common
Stock solely for Parent Common Stock pursuant to the Merger (except with respect
to cash received in lieu of a fractional share interest in Parent Common Stock),
(iv) the tax basis of the Parent Common Stock received by shareholders of
Subject Company who exchange Subject Company Common Stock solely for Parent
Common Stock in the Merger will be the same as the tax basis of the Subject
Company Common Stock surrendered in exchange therefor, (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:
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(a) Representations and Warranties. For purposes of this
Section 9.2(a), the accuracy of the representations and warranties of Subject
Company set forth in this Agreement shall be assessed as of the date of this
Agreement and as of the Effective Time with the same effect as though all such
representations and warranties had been made on and as of the Effective Time
(provided that representations and warranties which are confined to a specific
date shall speak only as of such date). The representations and warranties of
Subject Company set forth in Sections 5.1, 5.2, 5.3, 5.19 and 5.20 of this
Agreement shall each be true and correct in all material respects. There shall
not exist inaccuracies in the representations and warranties of Subject Company
set forth in this Agreement (including the representations and warranties set
forth in Sections 5.1, 5.2, 5.3, 5.19 and 5.20) such that the aggregate effect
of such inaccuracies has, or is reasonably likely to have, a Material Adverse
Effect on Subject Company, provided that, for purposes of this sentence only,
those representations and warranties which are qualified by references to
"material" or "Material Adverse Effect" or "Knowledge" shall be deemed not to
include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of
the agreements and covenants of Subject Company to be performed and complied
with pursuant to this Agreement and the other agreements contemplated hereby
prior to the Effective Time shall have been duly performed and complied with in
all material respects.
(c) Certificates. Subject Company shall have delivered to
Parent (i) a certificate, dated as of the Effective Time and signed on its
behalf by its chief executive officer and its chief financial officer, to the
effect that the conditions of its obligations set forth in Sections 9.2(a) and
9.2(b) of this Agreement have been satisfied, and (ii) certified copies of
resolutions duly adopted by Subject Company's Board of Directors and
shareholders evidencing the taking of all corporate action necessary to
authorize the execution, delivery, and performance of this Agreement, and the
consummation of the transactions contemplated hereby, all in such reasonable
detail as Parent shall request.
(d) Parent Pooling Letter. Parent shall have received a copy
of a letter, dated as of the date of filing of the Registration Statement with
the SEC and as of the Effective Time, addressed to it and in a form reasonably
acceptable to it, from Price Waterhouse LLP to the effect that the Merger will
qualify for pooling-of-interests accounting treatment.
(e) Employment Agreements. Robert M. Barrett, Travis Cosby,
III and Michael R. Morgan each shall have executed and delivered at Closing
employment agreements substantially similar to those attached hereto
collectively as Exhibit 3.
(f) Amendment of Parent's Charter. The shareholders of Parent
shall have approved an amendment to Parent's Restated Charter of Incorporation
to increase the number of authorized shares of Parent Common Stock to at least
200,000,000 and in any event to a sufficient number of authorized shares of
Parent Common Stock to enable Parent to issue authorized shares of Parent Common
Stock in accordance with its obligations under Article 3 of this Agreement and
the Plan of Merger.
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9.3 Conditions to Obligations of Subject Company. The obligations of
Subject Company to perform this Agreement and consummate the Merger and the
other transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by Subject Company pursuant to Section
11.6(b) of this Agreement.
(a) Representations and Warranties. For purposes of this
Section 9.3(a), the accuracy of the representations and warranties of Parent set
forth in this Agreement shall be assessed as of the date of this Agreement and
as of the Effective Time with the same effect as though all such representations
and warranties had been made on and as of the Effective Time (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date). The representations and warranties of Parent set
forth in Sections 6.1, 6.2, 6.3 and 6.14 of this Agreement shall each be true
and correct in all material respects. There shall not exist inaccuracies in the
representations and warranties of Parent set forth in this Agreement (including
the representations and warranties set forth in Sections 6.1, 6.2, 6.3 and 6.14)
such that the aggregate effect of such inaccuracies has, or is reasonably likely
to have, a Material Adverse Effect on Parent; provided that, for purposes of
this sentence only, those representations and warranties which are qualified by
references to "material" or "Material Adverse Effect" or "Knowledge" shall be
deemed not to include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of
the agreements and covenants of Parent to be performed and complied with
pursuant to this Agreement and the other agreements contemplated hereby prior to
the Effective Time shall have been duly performed and complied with in all
material respects.
(c) Certificates. Parent shall have delivered to Subject
Company (i) a certificate, dated as of the Effective Time and signed on its
behalf by its chief executive officer and its chief financial officer, to the
effect that the conditions of its obligations set forth in Sections 9.3(a) and
9.3(b) of this Agreement have been satisfied, and (ii) certified copies of
resolutions duly adopted by Parent's or Merger Subsidiary's Boards of Directors
evidencing the taking of all corporate action necessary to authorize the
execution, delivery and performance of this Agreement, and the consummation of
the transactions contemplated hereby, all in such reasonable detail as Subject
Company shall request.
(d) Employment Agreements. Robert M. Barrett, Travis Cosby,
III and Michael R. Morgan each shall have been offered employment pursuant to
employment agreements substantially similar to those attached hereto
collectively as Exhibit 3, which offer shall not have been withdrawn or
substantially amended as of the Closing or as of the Effective Time.
(e) Fairness Opinion. Subject Company shall have received and
opinion from an investment banker or valuation expert to the effect that the
Merger is fair to the Subject Company shareholders from a financial point of
view dated the date of the Proxy Statement.
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ARTICLE 10
TERMINATION
10.1 Termination. Notwithstanding any other provision of this
Agreement, and notwithstanding the approval of this Agreement by the
shareholders of Subject Company, this Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time:
(a) By mutual consent of the Board of Directors of Parent and
the Board of Directors of Subject Company; or
(b) By the Board of Directors of either Party (provided that
the terminating Party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in Section
9.2(a) of this Agreement in the case of Subject Company and Section 9.3(a) in
the case of Parent or in material breach of any covenant or other agreement
contained in this Agreement) in the event of an inaccuracy of any representation
or warranty of the other Party contained in this Agreement which cannot be or
has not been cured within 30 days after the giving of written notice to the
breaching Party of such inaccuracy and which inaccuracy would provide the
terminating Party the ability to refuse to consummate the Merger under the
applicable standard set forth in Section 9.2(a) of this Agreement in the case of
Subject Company and Section 9.3(a) of this Agreement in the case of Parent; or
(c) By the Board of Directors of either Party (provided that
the terminating Party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in Section
9.2(a) of this Agreement in the case of Subject Company and Section 9.3(a) in
the case of Parent or in material breach of any covenant or other agreement
contained in this Agreement) in the event of a material breach by the other
Party of any covenant or agreement contained in this Agreement which cannot be
or has not been cured within 30 days after the giving of written notice to the
breaching Party of such breach; or
(d)(1) By the Board of Directors of either Party in the event
(i) any Consent of any Regulatory Authority required for consummation of the
Merger and the other transactions contemplated hereby shall have been denied by
final 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 DGCL and this
Agreement at the Shareholders' Meeting where the transactions were presented to
such shareholders for approval and voted upon, or (2) by Parent in the event the
shareholders of Parent, at the 1998 Annual Meeting of Shareholders of Parent,
fail to vote their approval of an amendment to the Restated Charter of
Incorporation of Parent to increase the number of authorized shares of Parent
Common Stock, to the extent Parent would not have sufficient authorized shares
of Parent Common Stock available for issuance in the Merger; or
(e) By the Board of Directors of either Party in the event
that the Merger shall not have been consummated by September 30, 1998, if the
failure to consummate the transactions
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contemplated hereby on or before such date is not caused by any willful breach
of this Agreement by the Party electing to terminate pursuant to this Section
10.1(e); or
(f) By the Board of Directors of either party pursuant to
Section 1.6 prior to the expiration of such 30 day period.
(g) By the Board of Directors of Subject Company upon written
notice to Parent at any time during the ten-day period commencing two days after
the Determination Date, if both of the following conditions are satisfied:
(1) the Average Closing Price shall be less than the product
of (i) 0.80 and (ii) the Starting Price; and
(2) (i) the quotient obtained by dividing the Average Closing
Price by the Starting Price (such number being referred to
herein as the "Parent Ratio") shall be less than (ii) the
quotient obtained by dividing the Index Price on the
Determination Date by the Index Price on the Starting Date and
subtracting 0.20 from the quotient in this clause (2)(ii)
(such number being referred to herein as the "Index Ratio");
subject, however, to the following three sentences. If Subject
Company refuses to consummate the Merger pursuant to this
Section 10.1(g), it shall give prompt written notice thereof
to Parent; provided, that such notice of election to terminate
may be withdrawn at any time within the aforementioned ten-day
period. During the five-day period commencing with its receipt
of such notice, Parent shall have the option to elect to
increase the Exchange Ratio to equal the lesser of (i) the
quotient obtained by dividing (1) the product of 0.80, the
Starting Price, and the Exchange Ratio (as then in effect) by
(2) the Average Closing Price, and (ii) the quotient obtained
by dividing (1) the product of the Index Ratio and the
Exchange Ratio (as then in effect) by (2) the Parent Ratio. If
Parent makes an election contemplated by the preceding
sentence, within such five-day period, it shall give prompt
written notice to Subject Company of such election and the
revised Exchange Ratio, whereupon no termination shall have
occurred pursuant to this Section 10.1(g) and this Agreement
shall remain in effect in accordance with its terms (except as
the Exchange Ratio shall have been so modified), and any
references in this Agreement to "Exchange Ratio" shall
thereafter be deemed to refer to the Exchange Ratio as
adjusted pursuant to this Section 10.1(g).
For purposes of this Section 10.1(g), the following terms
shall have the meanings indicated:
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"Average Closing Price" shall mean the average of the
daily last sales prices of Parent Common Stock as reported on
the NYSE (as reported by The Wall Street Journal or, if not
reported thereby, another authoritative source as chosen by
Parent) for the 20 consecutive full trading days in which such
shares are traded on the NYSE ending at the close of trading
on the Determination Date.
"Determination Date" shall mean the later of the date
(i) of the Shareholders' Meeting and (ii) on which the Consent
of the Board of Governors of the Federal Reserve System shall
be received (without regard to any requisite waiting period
thereof).
"Index Group" shall mean the 15 bank holding
companies listed below, the common stocks of all of which
shall be publicly traded and as to which there shall not have
been, since the Starting Date and before the Determination
Date, any public announcement of a proposal for such company
to be acquired or for such company to acquire another company
or companies in transactions with a value exceeding 25% of the
acquiror's market capitalization as of the Starting Date. In
the event that any such company or companies are removed from
the Index Group as a result of any of the events described in
the preceding sentence, the weights (which shall be determined
based upon the number of outstanding shares of common stock)
shall be redistributed proportionately for purposes of
determining the Index Price. The 15 bank holding companies and
the weights attributed to them are as follows:
<TABLE>
<CAPTION>
Bank Holding Companies Weighting
- ---------------------- ---------
<S> <C>
AmSouth Bancorporation 5.367%
BB&T Corporation 8.928
Commerce Bancshares, Inc. 2.474
Crestar Financial Corporation 7.353
First of America Bank Corporation 3.895
First Security Corporation 7.725
First Tennessee National Corp. 4.275
Firstar Corporation 9.654
Huntington Bancshares, Inc. 12.753
Marshall & Ilsley Corporation 6.761
Mercantile Bancorporation, Inc. 8.688
National Commerce Bancorp 3.258
Old Kent Financial Corporation 3.137
Regions Financial Corporation 9.079
SouthTrust Corporation 6.655
------
Total 100.00%
======
</TABLE>
UPC/FNB WETUMPKA - Page 41
<PAGE> 127
"Index Price" on a given date shall mean the weighted
average (weighted in accordance with the factors listed above)
of the closing prices of the companies composing the Index
Group.
"Starting Date" shall mean the fourth full trading
day after the announcement by press release of the Merger.
"Starting Price" shall mean the closing price per
share of Parent Common Stock as reported on the NYSE (as
reported by The Wall Street Journal or, if not reported
thereby, another authoritative source as chosen by Parent) on
the Starting Date.
If Parent or any company belonging to the Index Group declares or
effects a stock dividend, reclassification, recapitalization, split-up,
combination, exchange of shares, or similar transaction between the date of this
Agreement and the Determination Date, the prices for the common stock of such
company or Parent shall be appropriately adjusted for the purposes of applying
this Section 10.1(g).
10.2 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 10.1 of this Agreement, this
Agreement and the Plan of Merger shall become void and have no effect, except
that (i) the provisions of this Section 10.2, Section 8.6(b), Section 8.8,
Section 11.2 and Section 11.3 of this Agreement shall survive any such
termination and abandonment, and (ii) a termination pursuant to the terms of
this Agreement shall not relieve the breaching Party from Liability for an
uncured willful breach of a representation, warranty, covenant, or agreement.
10.3 Non-Survival of Representations and Covenants. The respective
representations, warranties, obligations, covenants, and agreements of the
Parties shall not survive the Effective Time except for those covenants and
agreements which by their terms apply in whole or in part after the Effective
Time.
ARTICLE 11
MISCELLANEOUS
11.1 Definitions. (a) Except as otherwise provided herein, the
capitalized terms set forth below shall have the following meanings:
"Acquisition Proposal" with respect to a Party shall mean any tender
offer or exchange offer or any proposal for a merger, acquisition of all of the
stock or assets of, or other business combination involving such Party or any of
its Subsidiaries or the acquisition of a substantial equity interest in, or a
substantial portion of the assets of, such Party or any of its Subsidiaries.
"Affiliate" of a Person shall mean any other Person, directly or
indirectly through one or more intermediaries, controlling, controlled by, or
under common control with such Person.
UPC/FNB WETUMPKA - Page 42
<PAGE> 128
"Agreement" shall mean this Agreement, including the Stock Option
Agreement and the Exhibits delivered pursuant hereto and incorporated herein by
reference.
"Articles of Merger" shall mean the Articles of Merger to be executed
by Parent, Merger Subsidiary and Subject Company and filed with the Secretary of
State of the Tennessee and the Secretary of State of Delaware relating to the
Merger as contemplated by Section 1.1 of this Agreement.
"Assets" of a Person shall mean all of the assets, properties,
businesses, and rights of such Person of every kind, nature, character and
description, whether real, personal or mixed, tangible or intangible, accrued or
contingent, or otherwise relating to or utilized in such Person's business,
directly or indirectly, in whole or in part, whether or not carried on the books
and records of such Person, and whether or not owned in the name of such Person
or any Affiliate of such Person and wherever located.
"Bank" shall mean First National Bank, Wetumpka, Delaware.
"BHC Act" shall mean the federal Bank Holding Company Act of 1956, as
amended.
"Closing Date" shall mean the date on which the Closing occurs.
"Consent" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order or Permit.
"Contract" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease, obligation,
plan, practice, restriction, understanding, or undertaking of any kind or
character, or other document to which any Person is a party or that is binding
on any Person or its capital stock, Assets or business.
"Default" shall mean (i) any breach or violation of or default under
any Contract, Order, or Permit, (ii) any occurrence of any event that with the
passage of time or the giving of notice or both would constitute a breach or
violation of or default under any Contract, Order, or Permit, or (iii) any
occurrence of any event that with or without the passage of time or the giving
of notice would give rise to a right to terminate or revoke, change the current
terms of, or renegotiate, or to accelerate, increase or impose any Liability
under, any Contract, Order or Permit.
"DGCL" shall mean the Delaware General Corporation Law.
"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 262 of the DGCL.
UPC/FNB WETUMPKA - Page 43
<PAGE> 129
"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 Subject Company would be deemed a "single
employer" within the meaning of section 4001(b) of ERISA.
"Exhibits" shall mean the Exhibits so marked, copies of which are
attached to this Agreement. Such Exhibits are hereby incorporated by reference
herein and made a part hereof, and may be referred to in this Agreement and any
other related instrument or document without being attached hereto.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"Hazardous Material" shall mean (i) any hazardous substance, hazardous
material, hazardous waste, regulated substance, or toxic substance (as those
terms are defined by any applicable Environmental Laws) and (ii) any chemicals,
pollutants, contaminants, petroleum, petroleum products, or oil (and
specifically shall include asbestos requiring abatement, removal, or
encapsulation pursuant to the requirements of governmental authorities and any
polychlorinated biphenyls).
"HSR Act" shall mean Section 7A of the Clayton Act, as added by Title
II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
the rules and regulations promulgated thereunder.
"Intellectual Property" shall mean copyrights, patents, trademarks,
service marks, service names, trade names, applications therefor, technology
rights and licenses, computer software (including any source or object codes
therefor or documentation relating thereto), trade secrets, franchises,
know-how, inventions, and other intellectual property rights.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder.
UPC/FNB WETUMPKA - Page 44
<PAGE> 130
"Knowledge" as used with respect to a Person (including references to
such Person being aware of a particular matter) shall mean those facts that are
known by the Chairman, President, Chief Financial Officer, Chief Accounting
Officer, Chief Credit Officer, or General Counsel of such Person.
"Law" shall mean any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or statute applicable to a Person or its Assets,
Liabilities or business, including those promulgated, interpreted, or enforced
by any Regulatory Authority.
"Liability" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost, or expense (including costs
of investigation, collection, and defense), claim, deficiency, guaranty, or
endorsement of or by any Person (other than endorsements of notes, bills,
checks, and drafts presented for collection or deposit in the ordinary course of
business) of any type, whether accrued, absolute or contingent, liquidated or
unliquidated, matured or unmatured, or otherwise.
"Lien" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title retention,
or other security arrangement, or any adverse right or interest, charge, or
claim of any nature whatsoever of, on, or with respect to any property or
property interest, other than (i) Liens for current Taxes upon the assets or
properties of a Party or its Subsidiaries which are not yet due and payable, and
(ii) for depository institution Subsidiaries of a Party, pledges to secure
deposits and other Liens incurred in the ordinary course of the banking
business.
"Litigation" shall mean any action, arbitration, cause of action,
claim, complaint, criminal prosecution, demand letter, governmental or other
examination or investigation, hearing, inquiry, administrative or other
proceeding, or notice (written or oral) by any Person alleging potential
Liability or requesting information relating to or affecting a Party, its
business, its Assets (including Contracts related to it), or the transactions
contemplated by this Agreement, but shall not include regular, periodic
examinations of depository institutions and their Affiliates by Regulatory
Authorities.
"Material Adverse Effect" on a Party shall mean an event, change, or
occurrence which, individually or together with any other event, change, or
occurrence, has a material adverse impact on (i) the financial position,
business, or results of operations of such Party and its Subsidiaries, taken as
a whole, or (ii) the ability of such Party to perform its obligations under this
Agreement or to consummate the Merger or the other transactions contemplated by
this Agreement in accordance with applicable Law, provided that "Material
Adverse Effect" and "material adverse impact" shall not be deemed to include the
impact of (a) changes in banking and similar Laws of general applicability or
interpretations thereof by courts or governmental authorities, (b) changes in
GAAP or regulatory accounting principles generally applicable to banks and their
holding companies, (c) actions or omissions of a Party (or any of its
Subsidiaries) taken with the prior written consent of the other Party, (d)
changes in economic conditions or
UPC/FNB WETUMPKA - Page 45
<PAGE> 131
interest rates generally affecting financial institutions, or (e) the direct
effects of compliance with this Agreement (including the expense associated with
the vesting of benefits under the various employee benefit plans of Subject
Company as a result of the Merger constituting a change of control) on the
operating performance of the Parties, including expenses incurred by the Parties
in consummating the transactions contemplated by the Agreement.
"Merger Subsidiary" shall mean Union Planters Holding Corporation, a
wholly owned subsidiary of Parent organized under the Laws of the State of
Tennessee.
"Merger Subsidiary Common Stock" shall mean the $1.00 par value common
stock of Merger Subsidiary.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NYSE" shall mean the New York Stock Exchange, Inc.
"1933 Act" shall mean the Securities Act of 1933, as amended.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
"Operating Property" shall mean any property owned by the Party in
question or by any of its Subsidiaries or in which such Party or Subsidiary
holds a security interest, and, where required by the context, includes the
owner or operator of such property, but only with respect to such property.
"Order" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or writ
of any federal, state, local, or foreign or other court, arbitrator, mediator,
tribunal, administrative agency, or Regulatory Authority.
"Parent Capital Stock" shall mean, collectively, the Parent Common
Stock, the Parent Preferred Stock and any other class or series of capital stock
of Parent.
"Parent Common Stock" shall mean the $5.00 par value common stock of
Parent.
"Parent Disclosure Memorandum" shall mean the written information
entitled "Parent Memorandum" delivered prior to the date of this Agreement to
Subject Company describing in reasonable detail the matters contained therein
and, with respect to each disclosure made therein, specifically referencing each
Section of this Agreement under which such disclosure is being made.
"Parent Financial Statements" shall mean (i) the consolidated balance
sheets (including related notes and schedules, if any) of Parent as of September
30, 1997, and as of December 31, 1996 and 1995, and the related statements of
earnings, changes in shareholders' equity, and cash flows (including related
notes and schedules, if any) for the nine months ended September 30,
UPC/FNB WETUMPKA - Page 46
<PAGE> 132
1997 and for each of the three years ended December 31, 1996, 1995 and 1994, as
filed by Parent in SEC Documents, and (ii) the consolidated balance sheets of
Parent (including related notes and schedules, if any) and related statements of
earnings, changes in shareholders' equity, and cash flows (including related
notes and schedules, if any) included in SEC Documents filed with respect to
periods ended subsequent to September 30, 1997.
"Parent Preferred Stock" shall mean the no par value preferred stock of
Parent and shall include the (i) Series A Preferred Stock and (ii) Series E 8%
Cumulative, Convertible Preferred Stock, of Parent ("Parent Series E Preferred
Stock").
"Parent Rights" shall mean the preferred stock purchase rights issued
pursuant to the Parent Rights Agreement.
"Parent Rights Agreement" shall mean that certain Rights Agreement,
dated January 19, 1989, between Parent and UPNB, as Rights Agent.
"Parent Subsidiaries" shall mean the Subsidiaries of Parent and any
corporation, bank, or other organization acquired as a Subsidiary of Parent in
the future and owned by Parent at the Effective Time.
"Participation Facility" shall mean any facility or property in which
the Party in question or any of its Subsidiaries participates in the management
and, where required by the context, said term means the owner or operator of
such facility or property, but only with respect to such facility or property.
"Party" shall mean either Subject Company or Merger Subsidiary or
Parent, and "Parties" shall mean, collectively, Subject Company, Merger
Subsidiary and Parent.
"Permit" shall mean any federal, state, local, and foreign governmental
approval, authorization, certificate, easement, filing, franchise, license,
notice, permit, or right to which any Person is a party or that is or may be
binding upon or inure to the benefit of any Person or its securities, Assets or
business.
"Person" shall mean a natural person or any legal, commercial, or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting in a
representative capacity.
"Plan of Merger" shall mean the Plan of Merger of even date herewith
entered into by Parent, Merger Subsidiary and Subject Company, in the form of
Exhibit 1.
"Proxy Statement" shall mean the proxy statement used by Subject
Company to solicit the approval of its shareholders of the transactions
contemplated by this Agreement, which shall
UPC/FNB WETUMPKA - Page 47
<PAGE> 133
include the prospectus of Parent relating to the issuance of the Parent Common
Stock to holders of Subject Company Common Stock.
"Registration Statement" shall mean the Registration Statement on Form
S-4, or other appropriate form, including any pre-effective or post-effective
amendments or supplements thereto, filed with the SEC by Parent under the 1933
Act with respect to the shares of Parent Common Stock to be issued to the
shareholders of Subject Company in connection with the transactions contemplated
by this Agreement.
"Regulatory Authorities" shall mean, collectively, the Federal Trade
Commission, the United States Department of Justice, the Board of the Governors
of the Federal Reserve System, the Office of the Comptroller of the Currency,
the Federal Deposit Insurance Corporation, the Department of Financial
Institutions of the State of Tennessee, all state regulatory agencies having
jurisdiction over the Parties and their respective Subsidiaries, the NYSE, the
NASD, and the SEC.
"Representative" shall mean any investment banker, financial advisor,
attorney, accountant, consultant, or other representative of a Person.
"Rights" shall mean all arrangements, calls, commitments, Contracts,
options, rights to subscribe to, scrip, warrants, or other binding obligations
of any character whatsoever by which a Person is or may be bound to issue
additional shares of its capital stock or other Rights, or securities or rights
convertible into or exchangeable for, shares of the capital stock of a Person.
"SEC Documents" shall mean all forms, proxy statements, registration
statements, reports, schedules, and other documents filed, or required to be
filed, by a Party or any of its Subsidiaries with any Regulatory Authority
pursuant to the Securities Law.
"Securities Laws" shall mean the 1933 Act, the 1934 Act, the Investment
Company Act of 1940, as amended, the Investment Advisors Act of 1940, as
amended, the Trust Indenture Act of 1939, as amended, and the rules and
regulations of any Regulatory Authority promulgated thereunder.
"Shareholders' Meeting" shall mean the meeting of the shareholders of
Subject Company to be held pursuant to Section 8.1 of this Agreement, including
any adjournment or adjournments thereof.
"Subject Company Common Stock" shall mean the common stock of Subject
Company.
"Subject Company Disclosure Memorandum" shall mean the written
information entitled "Subject Company Disclosure Memorandum" delivered prior to
the date of this Agreement to Parent describing in reasonable detail the matters
contained therein and, with respect to each disclosure made therein,
specifically referencing each Section of this Agreement under which such
disclosure is being made.
UPC/FNB WETUMPKA - Page 48
<PAGE> 134
"Subject Company Financial Statements" shall mean (i) the consolidated
statements of financial position (including related notes and schedules, if any)
of Subject Company as of September 30, 1997, and as of December 31, 1996 and
1995, and the related statements of operations, shareholders' equity, and cash
flows (including related notes and schedules, if any) for the nine months ended
September 30, and for each of the three fiscal years ended December 31, 1996,
1995 and 1994, and (ii) the consolidated statements of financial position of
Subject Company (including related notes and schedules, if any) and related
statements of operations, shareholders' equity, and cash flows (including
related notes and schedules, if any) with respect to periods ended subsequent to
September 30, 1997.
"Subject Company Stock Plans" shall mean the existing stock option and
other stock-based compensation plans of Subject Company.
"Subject Company Subsidiaries" shall mean the Subsidiaries of Subject
Company, which shall include Subject Company Subsidiaries described in Section
5.4 of this Agreement and any corporation, bank, or other organization acquired
as a Subsidiary of Subject Company in the future and owned by Subject Company at
the Effective Time.
"Subsidiaries" shall mean all those corporations, banks, associations,
or other entities of which the entity in question owns or controls 10% or more
of the outstanding equity securities either directly or through an unbroken
chain of entities as to each of which 10% or more of the outstanding equity
securities is owned directly or indirectly by its parent; provided, there shall
not be included any such entity acquired through foreclosure or any such equity
the equity securities of which are owned or controlled in a fiduciary capacity.
"Surviving Corporation" shall mean Merger Subsidiary as the surviving
corporation resulting from the Merger.
"Tax" or "Taxes" shall mean all taxes, charges, fees, levies or other
assessments, including, without limitation, all net income, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits, license,
withholding, payroll, employment, excise, estimated, severance, stamp,
occupation, property or other taxes, customs duties, fees, assessments or
charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any taxing authority (domestic
or foreign).
"TBCA" shall mean the Tennessee Business Corporation Act.
(b) Any singular term in this Agreement shall be deemed to include the
plural, and any plural term the singular. Whenever the words "include,"
"includes," or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation."
11.2 Expenses. (a) Except as otherwise provided in this Section 11.2 or
Section 10.2, each of the Parties shall bear and pay all direct costs and
expenses incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including filing, registration and
UPC/FNB WETUMPKA - Page 49
<PAGE> 135
application fees, printing fees, and fees and expenses of its own financial or
other consultants, investment bankers, accountants, and counsel, except that
each of the Parties shall bear and pay the filing fees payable in connection
with the Registration Statement and the Proxy Statement and printing costs
incurred in connection with the printing of the Registration Statement and the
Proxy Statement based on the relative Asset sizes of the Parties at December 31,
1996.
(b) Nothing contained in this Section 11.2 shall constitute or
shall be deemed to constitute liquidated damages for the willful breach by a
Party of the terms of this Agreement or otherwise limit the rights of the
non-breaching Party.
11.3 Brokers and Finders. 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 specifically described in Section 11.3 of the Subject Company
Disclosure Memorandum. In the event of a claim by any broker or finder based
upon his or its representing or being retained by or allegedly representing or
being retained by Subject Company or Parent other than those disclosed in the
previous sentence, each of Subject Company and Parent, as the case may be,
agrees to indemnify and hold the other Party harmless of and from any Liability
incurred by such party in respect of any such claim.
11.4 Entire Agreement. Except as otherwise expressly provided herein,
this Agreement (including the other documents and instruments referred to herein
and the Supplemental Letter of even date herewith) 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 8.12 of this Agreement.
11.5 Amendments. To the extent permitted by Law, this Agreement may be
amended by a subsequent writing signed by each of the Parties upon the approval
of the Boards of Directors of each of the Parties, whether before or after
shareholder approval of this Agreement has been obtained.
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.
UPC/FNB WETUMPKA - Page 50
<PAGE> 136
(b) Prior to or at the Effective Time, Subject Company, acting
through its Board of Directors, chief executive officer, or other authorized
officer, shall have the right to waive any Default in the performance of any
term of this Agreement by Parent, to waive or extend the time for the compliance
or fulfillment by Parent of any and all of its obligations under this Agreement,
and to waive any or all of the conditions precedent to its obligations of
Subject Company under this Agreement, except any condition which, if not
satisfied, would result in the violation of any Law. No such waiver shall be
effective unless in writing signed by a duly authorized officer of Subject
Company.
(c) The failure of any Party at any time or times to require
performance of any provision hereof shall in no manner affect the right of such
Party at a later time to enforce the same or any other provision of this
Agreement. No waiver of any condition or of the breach of any term contained in
this Agreement in one or more instances shall be deemed to be or construed as a
further or continuing waiver of such condition or breach of a waiver of any
other condition or of the breach of any other term of this Agreement.
11.7 Assignment. Neither this Agreement nor any of the rights,
interests, or obligations hereunder shall be assigned by any Party hereto
(whether by operation of Law or otherwise) without the prior written consent of
the other Party. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the Parties and
their respective successors and assigns.
11.8 Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, by registered or certified mail, postage prepaid, or by
courier or overnight carrier, to the person at the addresses set forth below (or
at such other address as may be provided hereunder), and shall be deemed to have
been delivered as of the date so delivered:
Subject Company: First National Bancshares of Wetumpka, Inc.
408 S. E. Main Street
Wetumpka, Alabama 36092
Attention: Robert M. Barrett
Telecopy Number: (334) 567-1609
Copy to Subject Counsel: Balch & Bingham LLP
The Winter Building
2 Dexter Avenue
Montgomery, Alabama 36101
Attention: Michael D. Waters
Telecopy Number: (334) 269-3115
UPC/FNB WETUMPKA - Page 51
<PAGE> 137
Parent: Union Planters Corporation
7130 Goodlett Farms Parkway
Memphis, Tennessee 38018
Attention: Jackson W. Moore
Telecopy Number: (901) 580-2939
Copy to Counsel: Union Planters Corporation
7130 Goodlett Farms Parkway
Memphis, Tennessee 38018
Attention: E. James House, Jr., Esq.
Telecopy Number: (901) 580-2939
and
Wyatt, Tarrant & Combs
6075 Poplar Avenue, Suite 650
Memphis, Tennessee 38017
Attention: R. Nash Neyland, Esq.
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
UPC/FNB WETUMPKA - Page 52
<PAGE> 138
agreed that the Parties shall be entitled to an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically the terms and
provisions hereof in any court of the United States or any state having
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity.
11.14 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be enforceable, the provision shall be interpreted
to be only so broad as is enforceable.
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf and its corporate seal to be hereunto affixed and
attested by officers thereunto as of the day and year first above written.
ATTEST: FIRST NATIONAL BANCSHARES OF WETUMPKA, INC.
By: /s/ Travis Cosby, III By: /s/ Robert M. Barrett
-------------------------- ---------------------------------------
Robert M. Barrett
Chairman, President & CEO
[CORPORATE SEAL]
ATTEST: UNION PLANTERS CORPORATION
By: /s/ E. James House, Jr. By: /s/ Jackson W. Moore
-------------------------- ---------------------------------------
Jackson W. Moore
President & Chief Operating Officer
ATTEST: UNION PLANTERS HOLDING CORPORATION
By: /s/ Lynn L. Lanigan By: /s/ Jackson W. Moore
-------------------------- ---------------------------------------
Jackson W. Moore
President
[CORPORATE SEAL]
UPC/FNB WETUMPKA - Page 53
<PAGE> 139
December 30, 1997
First National Bancshares of Wetumpka, Inc.
408 S. E. Main Street
Wetumpka, Alabama 36092
Ladies and Gentlemen:
We have, today, entered into an Agreement and Plan of Merger
(the "Agreement") between Union Planters Corporation ("Parent"), Union Planters
Holding Corporation ("Merger Subsidiary") and First National Bancshares of
Wetumpka, Inc. ("Subject Company"). This Supplemental Letter is intended to set
forth certain additional agreements and understandings of Parent and Subject
Company. Each of such parties agrees that this letter is an integral part of the
Agreement and is being entered into separately, solely as an accommodation to
Subject Company. All terms used herein without definition have the same meaning
as ascribed to such terms in the Agreement.
Accordingly, in consideration of the Parties having entered
into the Agreement and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, it is further agreed that:
A. BENEFIT PLANS
1. DEFINED CONTRIBUTION PLAN. Notwithstanding anything to the
contrary in the Agreement, after the Effective Time, all contributions under
Subject Company's Defined Contribution 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. Such employees shall receive past service
credit for their service with Subject Company and the Subject Company
Subsidiaries for purposes of eligibility, participation, and vesting in Parent's
401(k) Plan. Subject Company, in coordination with Parent's Human Resources
<PAGE> 140
Department, shall take such steps as are necessary to merge Subject Company's
Plan with and into Parent's 401(k) Plan as of the Effective Time or as soon as
reasonably practicable after the Effective Time, but any delay in effectuating
such merger shall not delay Subject Company's employees' right to participate in
Parent's 401(k) Plan as of the Effective Time; provided, however, that should a
merger of Subject Company's Plan be prohibited by law or not adminstratively
feasible, as determined by Parent's Human Resources Department, then Subject
Company shall take such steps necessary to terminate its Plan as of or
immediately prior to the Effective Time of the Merger. Prior to the Effective
Time, Subject Company shall fully reserve for all anticipated costs and expenses
related to its Plan and the merger thereof into Parent's 401(k) Plan, or
termination thereof, whichever may be the case. Subject Company, in coordination
with Parent's Human Resources Department, shall obtain such regulatory
determinations regarding the termination of Subject Company's Plan, if
applicable, or regarding the merger of Subject Company's Plan into the Parent
401(k) Plan, in either case as may be appropriate to ensure the qualified status
of such plans and related trusts under the Internal Revenue Code.
2. Employee Stock OwnershipPlan. Subject Company represents and
warrants that its Employee Stock Ownership Plan ("ESOP") is not leveraged.
Notwithstanding anything to the contrary in the Agreement, after the Effective
Time, all contributions under Subject Company's ESOP 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 ESOP Plan to the same extent as other employees of Parent as of
immediately after the Effective Time. Such employees shall receive past service
credit for their service with Subject Company and the Subject Company
Subsidiaries for purposes of eligibility, participation, and vesting in Parent's
ESOP. Subject Company, in coordination with Parent's Human Resources Department,
shall take such steps as are necessary to merge Subject Company's ESOP with and
into Parent's ESOP as of the Effective Time or as soon as reasonably practicable
after the Effective Time, but any delay in effectuating such merger shall not
delay Subject Company's employees' right to participate in Parent's ESOP as of
the Effective Time; provided, however, that should a merger of Subject Company's
ESOP be prohibited by law or not adminstratively feasible, as determined by
Parent's Human Resources Department, then Subject Company shall take such steps
necessary to terminate its ESOP as of or immediately prior to the Effective Time
of the Merger. Prior to the Effective Time, Subject Company shall fully reserve
for all anticipated costs and expenses related to its ESOP and the merger
thereof into Parent's ESOP, or termination thereof, whichever may be the case.
Subject Company, in coordination with Parent's Human Resources Department, shall
obtain such regulatory determinations regarding the termination of Subject
Company's ESOP, if applicable, or regarding the merger of Subject Company's ESOP
into the Parent ESOP, in either case as may be appropriate to ensure the
qualified status of such plans and related trusts under the Internal Revenue
Code.
B. OTHER BENEFIT MATTERS
1. Employment Agreements. Attached as Exhibit 4 to the
Agreement is a form of employment agreement that will be offered to Messrs.
Barrett, Cosby and Morgan. We do not
<PAGE> 141
anticipte that there will be any material changes to the form of employment
agreement except as may be necessry on an individual basis. In connection
therewith, the restricted stock grants to Messrs. Barret and Cosby shall be for
4,000 shares of Parent Common Stock, and for Mr. Morgan will be 2,000 shares of
Parent Common Stock. The restricted stock agreements will contain standard
provisions with respect to vesting and potential forfeiture, including, but not
being limited to, 100% vesting in the event of a change of control of Parent.
2. Phantom Stock Plan and Agreement. Notwithstanding anything
to the contrary in the Agreement, Subject Company, in coordination with Parent's
Human Resources Department, shall takes such steps as are necessary to terminate
Subject Company's Phantom Stock Plan and Agreement ("Phantom Stock Plan") as of
or immediately prior to the Effective Time of the Merger. Subject Company shall
fully reserve for all costs and expenses related to the termination of such
Phantom Stock Plan, including, but not limited to, paying all benefits
thereunder in cash to the participants entitled to benefits thereunder. Subject
Company shall use its best efforts to obtain full and unconditional releases
from all participants in the Phantom Stock Plan upon payment of the benefits
thereunder.
3. Medical, Life and Related Employee Welfare Benefits. After
the Effective Time of the Merger, the continuing employees of Subject Company
and any Subject Company Subsidiary shall be immediately eligible to receive
group hospitalization, medical, life, disability, and other employee welfare
benefits no less than those provided to other employees of Parent or Parent
Subsidiaries holding comparable positions. Parent shall provide full coverage
under its group medical, dental, flex benefits, severance, disability, and life
insurance plans. For purposes of eligibility, benefit accrual and vesting,
Subject Company employees shall receive full service credit for service at
Subject Company prior to the Effective Date of the Merger. After the Effective
Time of Merger, Subject Company, in coordination with Parent's Human Resources
Department, shall take such steps as are necessary to terminate all such
employee welfare benefits plans it maintained for its employees immediately
prior to the Effective Time of the Merger. Prior to the Effective Time of the
Merger, Subject Company shall fully reserve for all costs and expenses related
to such employee welfare benefit plans, and the termination thereof, as well as
for all costs related thereto which would continue after the Effective Time of
Merger, including, but not limited to, costs arising under or pursuant to the
Consolidated Omnibus Budget Reconciliation Act and reserves required for
post-termination benefits.
4. Accrued Vacation and Sick Leave. Notwithstanding anything
to the contrary above, beginning with the calendar first year following the
Effective Time of the Merger, Subject Company employees shall become subject to
Parent's policies and procedures relative to accrued vacation, sick leave and
other paid time-off benefits. For the remainder of the calendar year in which
the Effective Time of the Merger occurs, however, all existing Subject Company
vacation, sick leave and other paid time-off benefits will remain in force and
effect as to the then former Subject Company employees and shall be administered
in accordance with the terms of such plans and consistent with past practices.
On January 1st next following the Effective Time of the Merger, the Subject
Company vacation, sick leave and other paid time-off benefit plans and
arrangements shall terminate. In their place Parent's vacation, sick leave and
other paid time-off benefit plans,
<PAGE> 142
arrangements and policies shall become effective and applicable to the then
former Subject Company employees who are still employed by Parent or any of its
Subsidiaries. The applicable then former Subject Company employees will be given
full credit for prior service at Subject Company or any Subject Company
subsidiary for purposes of participation, vesting and benefit accrual under the
terms of the Parent plans, arrangements and policies; however, the applicable
then former Subject Company employees shall not be allowed to carryover or
carryforward any accrued vacation, sick leave or other paid time-off benefits
under the former Subject Company 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.
C. GENERAL CONCERNS.
Notwithstanding anything in this Supplemental Letter to the
contrary, the rights granted by Parent to Subject Company employees in
connection with the Merger shall not in and of themselves be construed in any
way to be an employment contract with, or right to employment by, Subject
Company, Parent, or any other subsidiary of Parent after the Effective Time. In
addition, no rights or vesting in any stock, pension, welfare, benefit or other
benefit or welfare plan of Subject Company or any Subject Company Subsidiary,
shall be accelerated or modified in contravention of the accounting rules
necessary to account for the Merger under the "pooling of interest" method of
accounting. To the extent that any employee benefit or welfare benefit plan of
Subject Company or Subject Company Subsidiary, including, but not limited to,
the Subject Company ESOP or Subject Company Phantom Stock Plan, provides for
acceleration of vesting rights upon consummation of the Merger, Subject Company
shall take such steps as are appropriate or necessary to amend such plan or
arrangement if such amendment were determined to be necessary to allow the
Merger to be accounted for under the "pooling of interests" method of
accounting. Furthermore, to the extent that any of the contemplated agreements
set forth in this Supplemental Letter would cause the Merger not to be accounted
for as a pooling of interests, then Subject Company is not obligated to effect
the Merger and the parties agree to negotiate, in good faith, to restructure the
agreements contemplated by this Supplemental Letter in a manner that would
permit the Merger to be accounted for as a pooling of interests and provide
substantially the same economic value to the recipient of the benefit.
Upon execution of this Supplemental Letter (or counterparts thereof) by
the parties hereto this Supplemental Letter shall constitute an agreement
between the parties to be enforceable following the Effective Time of the Merger
by either party hereto or by any other party who is intended to be benefitted
hereunder.
<PAGE> 143
UNION PLANTERS CORPORATION
By:
-------------------------------
UNION PLANTERS HOLDING CORPORATION
By:
-------------------------------
FIRST NATIONAL BANCSHARES OF WETUMPKA, INC.
By:
-------------------------------
<PAGE> 144
APPENDIX B
<PAGE> 145
Exhibit 1
PLAN OF MERGER
OF
FIRST NATIONAL BANCSHARES OF WETUMPKA, INC.
WITH AND INTO
UNION PLANTERS HOLDING CORPORATION
Pursuant to this Plan of Merger ("Plan of Merger"), First National
Bancshares of Wetumpka, Inc. ("Subject Company"), a corporation organized and
existing under the laws of the State of Delaware, shall be merged with and into
Union Planters Holding Corporation ("Merger Subsidiary"), a corporation
organized and existing under the laws of the State of Tennessee and which is a
wholly-owned subsidiary of Union Planters Corporation ("Parent").
Except as otherwise provided herein, the capitalized terms set forth
below shall have the meanings ascribed thereto in that certain merger agreement
dated as of December 30, 1997 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 Section 252 of the DGCL, and with the effect provided
in Section 48-21-108 of the TBCA and Section 252 of the DGCL (the "Merger").
Merger Subsidiary shall be the Surviving Corporation resulting from the Merger
and shall continue to be governed by the Laws of the State of Tennessee. The
Merger shall be consummated pursuant to the terms of the Agreement and this Plan
of Merger, which have been or will be approved and adopted by the respective
Boards of Directors of Subject Company, Parent and Merger Subsidiary.
1.2 Time and Place of Closing. The Closing will take place at 9:00 A.M.
on the date that the Effective Time occurs (or the immediately preceding day if
the Effective Time is earlier than 9:00 A.M.), or at such other time as the
Parties, acting through their chief executive officers or chief financial
officers, may mutually agree. The Closing shall be held at such place as may be
mutually agreed upon by the Parties.
1.3 Effective Time. The Merger and other transactions contemplated by
the Agreement and this Plan of Merger shall become effective at the time the
Articles of Merger reflecting the Merger shall become effective with the
Secretary of State of the State of the State of Tennessee (the "Effective
Time").
1.4 Restructure of Transaction. Subject to the terms of the Agreement,
Parent shall, in its reasonable discretion, have the unilateral right to revise
the structure of the Merger
Plan of Merger - 1
<PAGE> 146
contemplated by the Agreement and this Plan of Merger in order to achieve tax
benefits or for any other reason which Parent may deem advisable.
ARTICLE 2
TERMS OF MERGER
2.1 Charter. The Charter (the "Charter") of Merger Subsidiary in effect
immediately prior to the Effective Time shall be the Charter of the Surviving
Corporation until otherwise amended or repealed.
2.2 Bylaws. The Bylaws of Merger Subsidiary (the "Bylaws") in effect
immediately prior to the Effective Time shall be the Bylaws of the Surviving
Corporation until otherwise amended or repealed.
2.3 Directors and Officers. The directors of Merger Subsidiary in
office immediately prior to the Effective Time, together with such additional
persons as may thereafter be elected, shall serve as the directors of the
Surviving Corporation from and after the Effective Time in accordance with the
Bylaws of the Surviving Corporation. The officers of Merger Subsidiary in office
immediately prior to the Effective Time, together with such additional persons
as may thereafter be elected, shall serve as the officers of the Surviving
Corporation from the Effective Time in accordance with the Bylaws of the
Surviving Corporation.
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 Conversion of Shares. Subject to the provisions of this Article 3
(and Article 3 of the Agreement), at the Effective Time, by virtue of the Merger
and without any action on the part of Parent, Merger Subsidiary, Subject
Company, or the shareholders of any of the foregoing, the shares of the
constituent corporations shall be converted as follows:
(a) Each share of Parent Capital Stock, including any
associated Parent Rights, issued and outstanding immediately prior to the
Effective Time shall remain issued and outstanding from and after the Effective
Time.
(b) Each share of Merger Subsidiary Common Stock issued and
outstanding immediately prior to the Effective Time shall remain issued and
outstanding and shall represent one share of the Surviving Corporation from and
after the Effective Time.
(c) Except for Dissenting Shares, each share of Subject
Company Common Stock, including any associated or attached Subject Company
Rights, (excluding shares held by Subject Company, any Subject Company
Subsidiary, Parent or any Parent Subsidiary, in each case other than in a
fiduciary capacity or as a result of debts previously contracted) issued and
outstanding at the Effective Time shall cease to be outstanding and shall be
converted into and exchanged for the right to receive 4.179 shares of Parent
Common Stock (subject to possible adjustment as
Plan of Merger - 2
<PAGE> 147
set forth in Section 10.1(g) of the Agreement, the "Exchange Ratio"). Pursuant
to the Parent Rights Agreement, each share of Parent Common Stock issued in
connection with the Merger upon conversion of Subject Company Common Stock shall
be accompanied by a Parent Right.
(d) Dissenting Shares shall not be converted pursuant to
Section 3.1(c) in the Merger but, at and after the Effective Time, shall present
only the right to receive payment in accordance with Section 262 of the DGCL. If
a holder of Dissenting Shares becomes ineligible for payment under Section 262
of the DGCL, then such holder's Dissenting Shares shall cease to be Dissenting
Shares and shall be converted in the manner set forth in Section 3.1(c)
effective as of the Effective Time.
3.2 Anti-Dilution Provisions. In the event Parent changes the number of
shares of Parent Common Stock issued and outstanding after the date of this
Agreement and prior to the Effective Time as a result of a stock split, stock
dividend, or similar recapitalization with respect to such stock and the record
date therefor (in the case of a stock dividend) or the effective date thereof
(in the case of a stock split or similar recapitalization for which a record
date is not established) shall be prior to the Effective Time, the Exchange
Ratio shall be proportionately adjusted.
3.3 Shares Held by Subject Company or Parent. Each of the shares of
Subject Company Common Stock held by Subject Company, any Subject Company
Subsidiary, Parent or any Parent Subsidiary, in each case other than in
fiduciary capacity or as a result of debts previously contracted, shall be
canceled and retired at the Effective Time and no consideration shall be issued
in exchange therefor.
3.4 Fractional Shares. Notwithstanding any other provision of this
Agreement, each holder of shares of Subject Company Common Stock exchanged
pursuant to the Merger who would otherwise have been entitled to receive a
fractional share of Parent Common Stock (after taking into account all
certificates delivered by such holder) shall receive, in lieu thereof, cash
(without interest) in an amount equal to such fractional share of Parent Common
Stock multiplied by the closing price of such common stock on the NYSE-Composite
Transactions List (as reported by The Wall Street Journal or, if not reported
thereby, any other authoritative source selected by Parent) on the last trading
day preceding the Effective Time. No such holder will be entitled to dividends,
voting rights, or any other rights as a shareholder in respect of any fractional
shares.
ARTICLE 4
EXCHANGE OF SHARES
4.1 Exchange Procedures. Promptly after the Effective Time, Parent and
Subject Company shall cause the exchange agent selected by Parent (the "Exchange
Agent") to mail to the former shareholders of Subject Company appropriate
transmittal materials (which shall specify that delivery shall be effected, and
risk of loss and title to the certificates theretofore representing shares of
Subject Company Common Stock shall pass, only upon proper delivery
Plan of Merger - 3
<PAGE> 148
of such certificates to the Exchange Agent). Subject Company shall have the
right to review and approve the transmittal materials. The Exchange Agent may
establish reasonable and customary rules and procedures in connection with its
duties. After the Effective Time, each holder of shares of Subject Company
Common Stock (other than Dissenting Shares or shares to be canceled pursuant to
Section 3.3 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 Plan of Merger,
together with all undelivered dividends or distributions in respect of such
shares (without interest thereon) pursuant to Section 4.2 of this Plan of
Merger. To the extent required by Section 3.4 of this Plan of Merger, each
holder of shares of Subject Company Common Stock issued and outstanding at the
Effective Time also shall receive, upon surrender of the certificate or
certificates representing such shares, cash in lieu of any fractional share of
Parent Common Stock to which such holder may be otherwise entitled (without
interest). Parent shall not be obligated to deliver the consideration to which
any former holder of Subject Company Common Stock is entitled as a result of the
merger until such holder surrenders such holder's certificate or certificates
representing the shares of Subject Company Common Stock for exchange as provided
in this Section 4.1. The certificate or certificates of Subject Company Common
Stock so surrendered shall be duly endorsed as the Exchange Agent may require.
Any other provision of this Plan of Merger or the Agreement notwithstanding,
neither Parent nor the Exchange Agent shall be liable to a holder of Subject
Company Common Stock for any amounts paid or property delivered in good faith to
a public official pursuant to any applicable abandoned property Law.
4.2 Rights of Former Subject Company Shareholders. At the Effective
Time, the stock transfer books of Subject Company shall be closed as to holders
of Subject Company Common Stock immediately prior to the Effective Time and no
transfer of Subject Company Common Stock by any such holder shall thereafter be
made or recognized. Until surrendered for exchange in accordance with the
provisions of Section 4.1 of this Plan of Merger, each certificate theretofore
representing shares of Subject Company Common Stock (other than Dissenting
Shares or shares to be canceled pursuant to Section 3.3 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 Plan of
Merger in exchange therefor, subject, however, to the Surviving Corporation's
obligations to pay any dividends or make any other distributions with a record
date prior to the Effective Time which have been declared or made by Subject
Company in respect of such shares of Subject Company Common Stock in accordance
with the terms of this Plan of Merger and the Agreement and which remain unpaid
at the Effective Time. Whenever a dividend or other distribution is declared by
Parent on the Parent Common Stock, the record date for which is at or after the
Effective Time, the declaration shall include dividends or other distributions
on all shares of Parent Common Stock issuable pursuant to this Agreement, but
beginning 30 days after the Effective Time no dividend or other distribution
payable to the holders of record of Parent Common Stock as of any time
subsequent to the Effective Time shall be delivered to the holder of any
certificate representing shares of Subject Company Common Stock issued and
outstanding at the Effective Time until such holder surrenders such certificate
for exchange as provided in Section 4.1 of this Plan of Merger and the
Agreement. However,
Plan of Merger - 4
<PAGE> 149
upon surrender of such Subject Company Common Stock certificate, both a Parent
Common Stock certificate (together with all such undelivered dividends or other
distributions without interest) and any undelivered dividends and cash payments
payable hereunder (without interest) shall be delivered and paid with respect to
each share represented by such certificate. In the event any Subject Company
Common Stock certificate shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming such certificate to
be lost, stolen or destroyed and, if reasonably required by Parent, the posting
by such person of a bond in such amount as Parent may reasonably direct as
indemnity against any claim that may be made against it with respect to such
certificate, the Exchange Agent shall issue in exchange for such lost, stolen or
destroyed certificate the shares of Parent Common Stock and cash in lieu of
fractional shares deliverable in respect thereof pursuant to this Plan of Merger
and the Agreement.
ARTICLE 5
MISCELLANEOUS
5.1 Conditions Precedent. Consummation of the Merger by Merger
Subsidiary shall be conditioned on the satisfaction of or waiver by Parent of
the conditions precedent to the Merger set forth in Sections 9.1 and 9.2 of the
Agreement. Consummation of the Merger by Subject Company shall be conditioned on
the satisfaction of, or waiver by Subject Company of, of the conditions
precedent to the Merger set forth in Sections 9.1 and 9.3 of the Agreement.
5.2 Termination. This Plan of Merger may be terminated at any time
prior to the Effective Time by the Parties hereto as provided in Article 10 of
the Agreement.
5.3 Amendments. To the extent permitted by Law, this Plan of Merger may
be amended by a subsequent writing signed by each of the Parties upon the
approval of the Boards of Directors of each of the Parties, whether before or
after shareholder approval of the Agreement and this Plan of Merger has been
obtained; provided, that after any such approval by the holders of Subject
Company Common Stock, there shall be made no amendment that modifies in any
material respect the Consideration to be received by the Subject Company Record
Holders.
5.4 Assignment. Except as expressly contemplated hereby, neither this
Plan of Merger nor the Agreement, nor any of the rights, interests, or
obligations hereunder or thereunder shall be assigned by any Party hereto
(whether by operation of Law or otherwise) without the prior written consent of
the other Party. Subject to the preceding sentence, the Agreement and this Plan
of Merger will be binding upon, inure to the benefit of and be enforceable by
the Parties and their respective successors and assigns.
5.5 Governing Law. This Plan of Merger shall be governed by and
construed in accordance with the Laws of the State of Tennessee, without regard
to any applicable conflicts of Laws.
Plan of Merger - 5
<PAGE> 150
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.
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.
FIRST NATIONAL BANCSHARES OF WETUMPKA, INC.
By /s/ Robert M. Barrett
----------------------------------------
Robert M. Barrett
Its: Chairman, President and CEO
ATTEST:
/s/ Travis Cosby, III Secretary
- ---------------------
UNION PLANTERS CORPORATION
By: /s/ Jackson W. Moore
----------------------------------------
Jackson W. Moore
Its: President and COO
ATTEST:
/s/ E. James House, Jr.
- -------------------------------
E. James House, Jr.
Secretary
UNION PLANTERS HOLDING CORPORATION
By: /s/ Jackson W. Moore
----------------------------------------
Jackson W. Moore
Its: President and COO
ATTEST:
/s/ E. James House, Jr.
- -------------------------------
E. James House, Jr.
Secretary
Plan of Merger - 6
<PAGE> 151
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 First National Bancshares of
Wetumpka, Inc., ("Subject Company") a corporation organized and existing under
the laws of the State of Delaware, 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 December 30, 1997, (the "Agreement"),
by and between Parent, Union Planters Holding Corporation ("Merger Subsidiary"),
and Subject Company. Under the terms of the Agreement, Subject Company will be
merged with and into Merger Subsidiary (the "Merger"), and shares of the $1.00
par value common stock of Subject Company ("Subject Company Common Stock") will
be converted into and exchanged for shares of the $5.00 par value common stock
of Parent ("Parent Common Stock"). This Affiliate Agreement represents an
agreement between the undersigned and Parent regarding rights and obligations of
the undersigned in connection with the shares of Parent to be received by the
undersigned as a result of the Merger.
In consideration of the Merger and the mutual covenants contained
herein, the undersigned and Parent hereby agree as follows:
1. Affiliate Status. The undersigned understands and agrees that as to
Subject Company the undersigned is an "affiliate" under Rule 145(c) as defined
in Rule 405 of the Rules and Regulations of the Securities and Exchange
Commission ("SEC") under the Securities Act of 1933, as amended ("1933 Act"),
and the undersigned anticipates that the undersigned will be such an "affiliate"
at the time of the Merger.
2. Initial Restriction on Disposition. The undersigned agrees that the
undersigned will not sell, transfer, or otherwise dispose of the undersigned's
interest in, or reduce the under-signed's risk relative to, any of the shares of
Parent Common Stock into which the undersigned's shares of Subject Company
Common Stock are converted upon consummation of the Merger until such time as
the requirements of SEC Accounting Series Release Nos. 130 and 135 ("ASR 130 and
135") have been met. The undersigned understands that ASR 130 and 135 relate to
publication of financial results of post-Merger combined operations of Parent
and Subject Company. Parent agrees that it will publish such results within 45
days after the end of
UPC - FNB Wetumpka Affiliate's Agreement - - Page i
<PAGE> 152
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 Shareholders' Meeting of Subject Company held to approve
the Merger.
(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 Parent is under no obligation to
file a registration statement with the SEC covering the disposition of the
undersigned's shares of Parent Common Stock or to take any other action
necessary to make compliance with an exemption from such registration available.
(d) The undersigned will register, and will cause each of the other
parties whose shares are deemed to be beneficially owned by the undersigned
pursuant to Section 8 hereof to have all shares of Subject Company Common Stock
beneficially owned by the undersigned registered in the name of the undersigned
or such parties, as applicable, prior to the Effective Date of the Merger and
not in the name of any bank, broker-dealer, nominee, or clearinghouse.
(e) The undersigned is aware that Parent intends to treat the Merger as
a tax-free reorganization under Section 368 of the Internal Revenue Code
("Code") for federal income tax purposes. The undersigned agrees to treat the
transaction in the same manner as Parent for federal income tax purposes. The
undersigned acknowledges that Section 1.368-1(b) of the Income Tax Regulations
requires "continuity of interest" in order for the Merger to be treated as
tax-free under Section 368 of the Code. This requirement is satisfied if, taking
into account those Subject Company shareholders who receive cash in exchange for
their stock, who receive cash in lieu of fractional shares, or who dissent from
the Merger, there is no plan, or intention on the part of the Subject Company
shareholders to sell or otherwise dispose of the Parent Common Stock to be
received in the Merger. The undersigned has no prearrangement, plan, or
intention
UPC - FNB Wetumpka Affiliate's Agreement - - Page ii
<PAGE> 153
to sell or otherwise dispose of an amount of his Parent Common Stock to be
received in the Merger which would cause the foregoing requirement not to be
satisfied.
4. Restrictions on Transfer. The undersigned understands and agrees
that stop order instructions with respect to the shares of Parent Common Stock
received by the undersigned pursuant to the Merger will be given to Parent's
Transfer Agent and that there will be placed on the certificates for such
shares, or shares issued in substitution thereof, a legend stating in substance:
"The shares represented by this certificate were issued pursuant to a
business combination which is accounted for as a "pooling-of-interests"
and may not be sold, nor may the owner thereof reduce his risks
relative thereto in any way, until such time as Union Planters
Corporation ("Parent") has published the financial results covering at
least 30 days of combined operations after the effective date of the
merger through which the business combination was effected. In
addition, the shares represented by this certificate may not be sold,
transferred, or otherwise disposed of except or unless (1) covered by
an effective registration statement under the Securities Act of 1933,
as amended, (2) in accordance with (i) Rule 145(d) (in the case of
shares issued to an individual who is not an affiliate of Parent) or
(ii) Rule 144 (in the case of shares issued to an individual who is an
affiliate of Parent) of the Rules and Regulations of such Act, or (3)
in accordance with a legal opinion satisfactory to counsel for Parent
that such sale or offer is otherwise exempt from the registration
requirements of such Act."
Such legend will also be placed on any certificate
representing Parent securities issued subsequent to the original issuance of the
Parent Common Stock pursuant to the Merger as a result of any offer of such
shares or any stock dividend, stock split, or other recapitalization as long as
the Parent Common Stock issued to the undersigned pursuant to the Merger has not
been transferred in such manner to justify the removal of the legend therefrom.
Upon the request of the undersigned, Parent shall cause the certificates
representing the shares of Parent Common Stock issued to the undersigned in
connection with the Merger to be reissued free of any legend relating to
restrictions on transfer by virtue of ASR 130 and 135 as soon as practicable
after the requirements of ASR 130 and 135 have been met. In addition, if the
provisions of Rules 144 and 145 are amended to delete restrictions applicable 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
UPC - FNB Wetumpka Affiliate's Agreement - - Page iii
<PAGE> 154
by the undersigned, to the extent he believes necessary, with his counsel or
counsel for Subject Company.
6. Filing of Reports by Parent. Parent agrees, for a period of three
years after the Effective Time of the Merger, to file on a timely basis all
reports required to be filed by it pursuant to Section 13 of the Securities
Exchange Act of 1934, as amended, so that the public information provisions of
Rule 145(d) promulgated by the SEC as the same are presently in effect will be
available to the undersigned in the event the undersigned desires to transfer
any shares of Parent Common Stock issued to the undersigned pursuant to the
Merger.
7. Transfer Under Rule 145(d). If the undersigned desires to sell or
otherwise transfer the shares of Parent Common Stock received by him in
connection with the Merger at any time during the restrictive period set forth
in Rule 145(d), the undersigned will provide the necessary representation letter
to the transfer agent for Parent Common Stock together with such additional
information as the transfer agent for Parent Common Stock may reasonably
request. If Parent's counsel concludes that such proposed sale or transfer
complies with the requirements of Rule 145(d), Parent shall cause such counsel
to provide such opinions as may be necessary to Parent's transfer agent so that
the undersigned may complete the proposed sale or transfer.
8. Acknowledgments. The undersigned recognizes and agrees that the
foregoing provisions also apply to all shares of the capital stock of Subject
Company and Parent that are deemed to be beneficially owned by the undersigned
pursuant to applicable federal securities laws, which the undersigned agrees may
include, without limitation, shares owned or held in the name of (i) the
undersigned's spouse, (ii) any relative of the undersigned or of the
undersigned's spouse who has the same home as the undersigned, (iii) any trust
or estate in which the undersigned, the undersigned's spouse, and any such
relative collectively own at least a 10% beneficial interest or of which any of
the foregoing serves as trustee, executor, or in any similar capacity, and (iv)
any corporation or other organization in which the undersigned, the
undersigned's spouse and any such relative collectively own at least 10% of any
class of equity securities or of the equity interest. The undersigned further
recognizes that, in the event that the undersigned is a director or officer of
Parent or becomes a director or officer of Parent upon consummation of the
Merger, among other things, any sale of Parent Common Stock by the undersigned
within a period of less than six months following the Effective Time of the
Merger may subject the undersigned to liability pursuant to Section 16(b) of the
Securities Exchange Act of 1934, as amended.
9. Miscellaneous. This Affiliate Agreement is the complete agreement
between Parent and the undersigned concerning the subject matter hereof. Any
notice required to be sent
UPC - FNB Wetumpka Affiliate's Agreement - - Page iv
<PAGE> 155
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.
This Affiliate Agreement is executed as of the __ day of
_____________, 199_.
Very truly yours,
------------------------------
Affiliate Signature
------------------------------
Printed Name
------------------------------
------------------------------
------------------------------
Address
Add below the signatures of all registered owners of shares
deemed to be beneficially owned by the Affiliate.
------------------------------
Name:
-------------------------
------------------------------
Name:
-------------------------
------------------------------
Name:
-------------------------
AGREED TO AND ACCEPTED as of ______________________, 1998.
UNION PLANTERS CORPORATION
By:
--------------------------
Jackson W. Moore
President
UPC - FNB Wetumpka Affiliate's Agreement - - Page v
<PAGE> 156
Exhibit 3
FORM OF EMPLOYMENT AGREEMENT
This Employment Agreement, made and entered into this ____ day of
_______, 1998, between [BANK] ("Bank") and ________________ ("Executive"). Union
Planters Corporation ("UPC") owns, directly or indirectly, all of the
outstanding capital stock of Bank.
In consideration of the mutual covenants, promises and agreements
herein made, and Ten Dollars ($10.00) in hand paid by each party hereto to the
other, the receipt and sufficiency of which is hereby acknowledged, the parties
agree as follows:
1. Employment. Bank hereby employs Executive's full-time services as
__________________ for a period of time commencing on [insert date of effective
date of the merger, and ending thirty-six (36) months thereafter] (or such
earlier date as is determined in accordance with Section 5). Additionally, on
the third anniversary date of the Effective Date, Executive's term of employment
shall be extended for an additional one-year period beyond the then effective
expiration date provided the Board of Directors of the Bank, in its sole
discretion, determines in a duly adopted resolution that the performance of the
Executive has met the Board's requirements and standards and that this Agreement
shall be extended. Executive hereby accepts such employment, shall diligently
perform the duties customarily performed by such officer, subject to the
authority of the management of Bank and shall hold and perform all of the
responsibilities and duties prescribed by the management of Bank.
2. Base Salary. As compensation for services to Bank, Bank agrees to
pay to Executive the sum of $___________________ per annum payable in
twenty-four (24) as equal as possible payments, one such payment being made
twice each month. Such compensation may be increased annually by Bank subject to
an annual review by Bank of the Executive's performance.
3. Benefits. Bank agrees to provide Executive the following benefits,
commencing with the date hereof or as soon hereafter as practicable, (all of
which shall vest as of the date hereof or at such date or dates as provided in
the plan documents establishing such benefits) and continuing for so long as
Executive is employed under this Agreement or any extension thereof.
(a) The fringe benefit package presently offered or to be
offered in the future to the employees of Bank.
(b) ______ shares of restricted UPC Common Stock granted
pursuant to the Union Planters Corporation 1992 Stock Incentive Plan
vesting twenty-five percent on the date hereof and twenty-five percent
increments on the first, second and third anniversaries of this
Agreement, and subject to such other conditions as may be imposed under
the Union Planters Corporation 1992 Stock Incentive Plan as it relates
to restricted stock grants, and such other provisions as the parties
may mutually agree.
UPC - FNB Wetumpka - Form of Employment Agreement - - Page 1
<PAGE> 157
(c) An annual paid vacation in accordance with Bank's
Personnel Policy. At least two (2) weeks of such vacation shall be
taken consecutively.
(d) Any other benefits generally provided to Bank employees as
the Board of Directors may, from time to time, approve.
4. Expenses. Executive is authorized to incur necessary and customary
expenses in connection with the business of Bank. Bank will pay or reimburse
Executive for such expenses upon presentation by Executive of the appropriate
records which verify such expenses in accordance with expense policies of Bank.
5. Termination. This Agreement shall terminate upon the first to occur
of the following:
(a) The expiration of the term, as the same may be renewed, as
provided for in Paragraph 1;
(b) The death of the Executive;
(c) The permanent disability of Executive, as defined in
Paragraph 6;
(d) Termination by Executive or Bank "for cause," as defined
in Paragraph 7;
(e) Termination by Bank without cause, provided that in such
event Bank shall pay to Executive an amount which is equal to the
greater of (i) the Base Salary then in effect for the remaining term of
this Agreement, without consideration of any renewal period if such
termination occurs within the first 36 months of this Agreement, unless
notice of renewal has been given by Bank prior to such termination, or
(ii) six months' Base Salary then in effect, and all restricted stock
granted to Executive pursuant to Section 3(b) which had not vested
shall be deemed to have vested immediately prior to such termination.
Without limiting the generality of the foregoing, Executive's
employment shall be deemed to have been terminated without cause
should, among other things, the Bank or UPC require Executive to move
his personal residence, or perform his principal executive functions on
a regular basis, more than thirty-five (35) miles from his primary
office as of the date of this Agreement, without Executive's consent.
(f) Termination by Executive without cause, provided that
Executive shall give at least ninety (90) days written prior notice of
termination. Bank reserves the right to accelerate Executive's
termination under this provision; provided that in such instance, Bank
shall pay to Executive an amount equal to one month's Base Salary and
all other vested benefits of Executive.
(g) Change in Control. (1) Notwithstanding any provision
herein to the contrary, if Executive's employment under this Agreement
is terminated by the Bank
UPC - FNB Wetumpka - Form of Employment Agreement - - Page 2
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without Executive's prior written consent and for a reason other than
for cause, in connection with or within twelve (12) months after any
change in control of the Bank or UPC, the provisions of this Section
5(g) shall control and Executive shall be entitled to the greater of
(i) his Base Salary then in effect for the remaining term of this
Agreement, without consideration of any renewal period if such
termination occurs within the first 36 months of this Agreement, unless
notice of renewal has been given by Bank prior to such termination, or
(ii) twelve months' Base Salary then in effect, and all restricted
stock granted to Executive pursuant to Section 3(b) which had not
vested shall be deemed to have vested immediately prior to such
termination. The cash sum due Executive pursuant to this provision
shall be paid in one lump sum within ten (10) days of such termination.
The term "change in control" shall mean (1) the ownership, holding or
power to vote more than 25% of the Bank's or UPC's voting stock, (2)
the control of the election of a majority of the Bank's or UPC's
directors, (3) the exercise of a controlling influence over the
management or policies of the Bank or UPC by any person or by persons
acting as a group within the meaning of Section 13(d) of the Securities
Exchange Act of 1934, or (4) during any period of two consecutive
years, individuals who at the beginning of such period constitute the
Board of Directors of UPC Bank (the "Company Board") (the "Continuing
Directors") cease for any reason to constitute at least two-thirds
thereof, provided that any individuals whose election or nomination for
election as a member of the Company Board was approved by a vote of at
least two-thirds of the Continuing Directors then in office shall be
considered a Continuing Director. The term "person" means an individual
other than the Employee, or a corporation, partnership, trust,
association, joint venture, pool, syndicate, sole proprietorship
unincorporated organization or any other form of entity not
specifically listed herein. Notwithstanding anything in this Agreement
to the contrary, no "change in control" of the Bank or UPC shall be
deemed to have occurred under this Agreement in connection with any
internal reorganization of UPC or its subsidiaries, after which UPC
will directly or indirectly own or control at least eighty percent
(80%) of the outstanding voting stock of the Bank or its successor, or
based upon a change in the composition of the Board of Directors of
Bank or any Subsidiary of UPC.
(2) Notwithstanding any other provision of this Agreement to
the contrary, other than the last sentence of Section 5(g)(1) of this
Agreement, Executive may voluntarily terminate his employment under
this Agreement within twelve (12) months following a change in control
of the Bank or UPC, and Executive shall thereupon be entitled to
receive the payments and benefits described in Section 5(g)(1) of this
Agreement, upon the occurrence of any of the following events, or
within ninety (90) days thereafter, which have not been consented to in
advance by Executive in writing: (i) the requirement that Executive
move his personal residence, or perform his principal executive
functions, more than thirty-five (35) miles from his primary office as
of the effective date of this Agreement; (ii) a reduction in
Executive's base compensation as in effect on the effective date of
this Agreement and as the same may be increased from time to time;
(iii) the failure by the Bank or UPC (or either or their successors) to
continue to provide Executive with compensation and benefits provided
for under this Agreement or benefits
UPC - FNB Wetumpka - Form of Employment Agreement - - Page 3
<PAGE> 159
substantially similar to those provided to him under any of the
employee benefit plans in which the Executive becomes a participant, or
the taking of any action by the Bank or UPC (or either of their
successors) which would directly or indirectly reduce any of such
benefits or deprive Executive of any material fringe benefit enjoyed by
him at the time of the change in control; (iv) the assignment to
Executive of duties and responsibilities other than those normally
associates with his position as of the date of the change in control;
or (v) a material diminution or reduction in Executive's
responsibilities or authority (including reporting responsibilities) in
connection with his employment with the Bank.
(3) In the event that any dispute arises between Executive and
the Bank or UPC as to the terms or interpretation of this Agreement,
including this Section 5, whether instituted by formal legal
proceedings or otherwise, including any action that the Executive takes
to enforce the terms of this Section 5 or to defend against any action
taken by the Bank or UPC, Executive shall be reimbursed for all costs
and expenses, including reasonable attorneys' fees arising from such
dispute, proceedings or actions, provided that the Executive shall
obtain a final judgment by a court of competent jurisdiction in favor
of the Executive. Such reimbursement shall be paid within ten (10) days
of Executive's furnishing to the Bank and UPC written evidence, which
may be in the form, among other things, of a canceled check or receipt,
of any costs or expenses incurred by Executive.
The only event which will justify termination of Executive without
payment of severance and other benefits by Bank is termination by Bank "for
cause," as specified in this Paragraph 5(d). In the event of Executive's death,
nothing contained in this Paragraph 5 shall be construed to abrogate the
obligations of Bank to Executive's personal representative or heirs, as the case
may be, with respect to all rights which shall have accrued prior to
termination.
6. Disability. As used in Paragraph 5(c), "permanent disability" shall
mean six (6) months of substantially continuous disability. Disability shall be
deemed "substantially continuous" if, as a practical matter, Executive, by
reason of mental or physical health, is unable to sustain reasonably long
periods of substantial performance of duties. Frequently long illnesses, though
different from the preceding illness and though separated by relatively short
periods of performance, shall be deemed to be "substantially continuous." The
determination of Executive's disability to perform the duties of the position
shall be made in good faith after appropriate consultation with physicians who
are familiar with Executive's health. In this regard, Executive hereby consents
to medical examinations by such physicians and medical consultants as Bank shall
from time to time require. Thirty (30) days notice of termination for permanent
disability shall be given in writing, stating bases upon which such termination
is made.
7. Termination for Cause. As used in Paragraphs 5(d) and 5(g),
termination "for cause" shall be deemed to have occurred if either party has
breached this Agreement and the non-breaching party gives notice in writing,
delivered to the breaching party and providing ten (10) calendar days, from the
date of delivery of the notice, within which the breaching party has the
UPC - FNB Wetumpka - Form of Employment Agreement - - Page 4
<PAGE> 160
opportunity to cure, if possible, the breach. In addition, cause for termination
shall exist if Executive engages in a conflict of interest which shall
exclusively mean engaging in any of the following conduct while an employee of
Bank: (1) willful and knowing dishonesty in communication of any kind on any
material subject for any purpose either to Bank or to any person or entity for
or on behalf of Bank; (2) obtaining from any person or entity, other than from
Bank, anything of value in return for or because of rendering service or advice
which, under the circumstances, might reasonably be construed as part of the
duties expected of an employee of Bank; (3) use of more than an insubstantial
and quantitatively small amount of time during normal business hours of Bank for
activities not calculated and reasonably designed to produce profit for Bank;
(4) theft, embezzlement, false entries on records, misapplication of funds or
property, misappropriation of any asset, any conduct resulting in conversion of
any kind, or any actual or constructive fraud; (5) at any time during or after
employment at Bank, imparting Confidential Information, whether proprietary or
non-proprietary, to any person other than (i) an authorized employee of Bank; or
(ii) as required by law, or (iii) as part of a privileged communication to an
attorney, or violating the non-compete terms of this Agreement; (6) gross
neglect of duty, including, but not limited to, refusal to attend to the duties
of employment at Bank; (7) participating in any conduct involving moral
turpitude or which results in public disgrace including, but not limited to,
conduct for which there is probable cause to believe that, if criminally
prosecuted, such conduct would be adjudged felonious; (8) counseling, advising,
assisting, procuring or aiding any employee of Bank in any above-recited
conflict of interest; (9) knowing, believing or having reason to know or believe
that an employee of Bank has, is, or is about to engage in any above-recited
conflict of interest and not revealing said knowledge or belief and the reason
for it to Bank; (10) receiving, during the term of this Agreement, compensation,
income, any thing of value, or a future interest in or future entitlement to
compensation, income or a thing of value, from any person or entity who or which
is engaged in the same or substantially the same business as Bank in the same
product, service or geographical market, except stock dividends and/or capital
gains from passive investments in financial institutions by Executive made in
the ordinary course of business and as part of Executive's investment portfolio.
However, a conflict of interest shall not be deemed to exist merely because of a
difference of opinion between Executive and Bank, or any employees, directors or
officers of either, as to philosophy of management or other personal beliefs.
8. (a) Definition of Confidential Information and Authorized Employee.
Confidential information means any information not disseminated by Bank to the
general public (including identity of customers, clients, business contacts,
suppliers of goods and/or services, and any transaction by or between such
person or entities and Bank) and which Executive used or knew of because of his
employment at Bank; PROVIDED: excluding specific information about methods not
generally employed in the industry at large and which are used or known to be
contemplated for use in the future by Bank for the purpose of gaining
proprietary advantage over competitors; general knowledge of skills and
techniques acquired or improved as a result of the employment experience at Bank
shall not constitute confidential information. Authorized employee means the
members of the Board of Directors; the Chief Executive Officers; the Presidents;
Executive Vice Presidents; immediate supervisors; a fellow employee on a
need-to-know basis only; and any Bank employee on instruction from immediate
supervisors. Employee
UPC - FNB Wetumpka - Form of Employment Agreement - - Page 5
<PAGE> 161
shall be entitled at all times to disclose confidential information to his
personal attorney in the context of attorney-client privilege as may otherwise
be required by law.
(b) Non-competition Provisions. Except as otherwise specifically
provided herein, during the term specified in Paragraph 1 hereof, including any
extension or revision thereof, and for a period of one year after the
termination of Executive's employment under this Agreement (i) by Bank for cause
or (ii) by Executive for any reason, Executive covenants and agrees that: (1)
Executive shall not communicate or disclose to any unauthorized person or use
for the Executive's own benefit, without the prior written consent of the
Corporation, confidential information concerning the business, methods of
operation or affairs of the Company; and (2) Executive shall not, directly or
indirectly, on his or her own behalf, or as an employee, representative, or
agent of a third party, by ownership of any type of interest in any business
enterprise or by any other means whatsoever, engage in any business or
activities which are similar to or competitive with the Corporation's business
(a "Competitor's Business") or become associated with or render services to a
Competitor's Business; and (3) the Executive shall not, directly or indirectly,
call upon or solicit any customers of the Company or any presently existing or
future Affiliate which operates within _________________ counties, Alabama for
any purpose or business that is competitive with the Company's business. For the
purposes of this paragraph, the term "Competitor's Business" shall apply only to
such businesses or activities conducted by a competitor of the Corporation in
_____________________ counties, Alabama, and it shall not be a violation of this
provisions for Executive to retain his ownership interest in TriCo Financial
Services, LLC. The covenants and agreements contained in Paragraphs 8(a) and
8(b) hereof shall survive any event of termination; provided, however, that upon
a change in control, as defined in Section 5(g) hereof, the provisions of
8(b)(2) and (3) shall immediately terminate.
9. Non-Disclosure. For a period of five (5) years after the date of
any termination or expiration of this Agreement, Executive will not disclose any
information deemed Confidential Information, except as provided in Paragraph
8(a) above. If Executive shall attempt to use, dispose of or disclose the
Confidential Information or any part or parts thereof in a manner contrary to
the terms of this Agreement, Bank shall have the right, in addition to other
remedies which may be available to it, to injunctive relief enjoining such acts
or attempts, it being acknowledged that legal remedies are inadequate. This
provision shall survive termination of this Agreement for the five (5) year
period above provided.
10. Assignment. The rights and obligations of Bank and Executive
(except Executive's obligation to perform services) under this Agreement shall
inure to the benefit of and shall be binding upon their respective successors,
if any.
11. Execution of Agreement. The execution of this Agreement by Bank is
subject to authorization and ratification by the Bank Board of Directors at the
next scheduled meeting.
12. Entire Agreement. This Agreement contains the entire agreement
between the parties and supersedes all prior discussions, understandings and
commitments, if any, whether oral or written. This Agreement cannot be amended
or modified except by subsequent written
UPC - FNB Wetumpka - Form of Employment Agreement - - Page 6
<PAGE> 162
agreement signed by all of the parties. In agreeing that this Agreement may not
be changed in any way except by a written and executed document, the parties
knowingly waive and give up any constitutional right which they may otherwise
have to amend or modify this Agreement by some means other than in writing.
Finally, any agreement between Bank and Executive which concerns any subject
dealt with by this Agreement shall be considered an amendment or modification of
this Agreement and not an agreement separate from this Agreement.
13. Attorneys' Fees and Costs. If action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and necessary
disbursements in addition to any other relief to which he may be entitled.
14. Director and Officers' Liability. In any action at law or in
equity, or in any administrative proceeding arising during the term hereof, or
for a period of five years hereafter, which is brought against Executive in his
representative capacity as an officer of Bank, or against him in his personal
capacity but related to his employment hereunder and there is no finding of
intentional misconduct or criminal activity against the Executive, Bank shall be
responsible for the payment of all reasonable attorneys' fees of Executive in
taking such defensive actions as he deems necessary or appropriate. Bank
represents there are no state or federal banking violations, investigations
pending, or otherwise, of which Bank is aware that might give rise to any claim
against the Executive.
15. Controlling Law. This Agreement and the rights and obligations
hereunder shall be governed by and construed in accordance with the federal law
of the United States of America, and in the absence of controlling federal law,
in accordance with the laws of the State of Tennessee.
16. Regulatory Intervention. Notwithstanding any term of this Agreement
to the contrary, this Agreement is subject to the following terms and
conditions:
(a) The Bank's obligations to provide compensation or other
benefits to Executive under this Agreement may be suspended if the Bank has been
served with a notice of charges by the appropriate federal banking agency under
provisions of Section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818)
directing the Bank to cease making payments required hereunder; provided,
however, that
(i) The Bank shall seek in good faith with best efforts to
oppose such notice of charges as to which there are reasonable
defenses;
(ii) In the event the notice of charges is dismissed or
otherwise resolved in a manner that will permit the Bank to resume its
obligations to provide compensation or other benefits hereunder, the
Bank shall immediately resume such payments and shall also pay
Executive the compensation withheld while the contract obligations were
suspended, except to the extent precluded by such notice; and
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<PAGE> 163
(iii) During the period of suspension, the vested rights of
the contracting parties shall not be affected, except to the extent
precluded by such notice.
(b) The Bank's obligations to provide compensation or other
benefits to Executive under this Agreement shall be terminated to the extent a
final order has been entered by the appropriate federal banking agency under
provisions of Section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818)
directing the Bank not to make the payments required hereunder; provided,
however, that the vested rights of the contracting parties shall not be affected
by such order, except to the extent precluded by such order.
(c) The Bank's obligations to provide compensation or other
benefits to the Employee under this Agreement shall be terminated or limited to
the extent required by the provisions of any final regulation or order of the
Federal Deposit Insurance Corporation promulgated under Section 18(k) of the
Federal Deposit Insurance Act (12 U.S.C. 1828(k)) limiting or prohibiting any
"golden parachute payment" as defined therein, but only to the extent that the
compensation or payments to be provided under this Agreement are so prohibited
or limited.
(d) Notwithstanding the foregoing, the Bank shall not be
required to make any payments under this Agreement prohibited by law.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
BANK Executive
By:
---------------------------- -----------------------------------
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<PAGE> 164
APPENDIX C
, 1998
Board of Directors
First National Bancshares of Wetumpka, Inc.
408 S.E. Main Street
Wetumpka, AL 36092
Dear Directors:
T. Stephen Johnson & Associates, Inc., Roswell, Georgia ("TSJ&A") has been asked
to render an opinion as to the fairness from a financial point of view of the
consideration to be received by the shareholders of First National Bancshares of
Wetumpka, Inc. ("Wetumpka") in connection with the proposed merger of Wetumpka
with and into Union Planters Corporation ("UPC"), pursuant to an Agreement and
Plan of Merger (the "Merger Agreement") dated as of December 30, 1997 (the
"Merger"). The Merger Agreement calls for each outstanding share of Wetumpka
common stock to be converted into the right to receive 4.179 shares of UPC
common stock.
TSJ&A is an investment banking and consulting firm that specializes in the
valuation of closely-held corporations and provides fairness opinions as part of
its practice. Because of its prior experience in the appraisal of southeastern
financial institutions involved in mergers, it has developed an expertise in
fairness opinions related to the securities of southeastern financial
institutions. Wetumpka has retained TSJ&A for the purpose of rendering a
fairness opinion for which fixed compensation will be received.
In performing its analysis, TSJ&A relied upon and assumed without independent
verification, the accuracy and completeness of all information provided to it.
TSJ&A has not performed any independent appraisal or evaluation of the assets of
Wetumpka or of UPC or any of its subsidiaries. As such, TSJ&A does not express
an opinion as to the fair market value of Wetumpka. The opinion of financial
fairness expressed herein is necessarily based on market, economic and other
relevant considerations as they exist and can be evaluated as of March 11, 1998.
In arriving at its opinion, TSJ&A reviewed and analyzed audited and unaudited
financial information regarding Wetumpka and UPC, the Merger, the Merger
Agreement, a draft of SEC filings, federal regulatory applications as well as
publicly available information regarding projected earnings and dividends and
actual comparable transactions.
The merger consideration to be received by Wetumpka Shareholders is based on a
set exchange ratio for UPC common shares. The value of the shares to be received
is the current market value of UPC common shares which currently trade on the
New York Stock Exchange. The March 11, 1998 closing price for UPC common shares
was $62.25 per share. Based on this closing price, the transaction value of each
of the 200,000 Wetumpka common shares would be $260.14. This transaction value
equals 2.168 times December 31, 1997 book value and 17.103 times 1997 earnings
per share.
The Merger Agreement provides Wetumpka the right to terminate the transaction if
the market value of UPC common shares fall more than 20 percent below a Starting
Price and such change in market value is more than 20 percent when compared to
the change of the market value of a predetermined group of comparable bank
holding companies over the same period (the "Index Group"). The Starting Price
has been determined to equal $63.50 per share. Should the market value of UPC
common shares fall to below $50.80 per share and the change in market value is
more than 20 percent when compared to the change of the market value of the
Index Group, Wetumpka could terminate the Merger Agreement. Extreme changes in
the market place would have to take place between the date of this letter and
closing for this to happen.
TSJ&A reviewed the Merger as of March 11, 1998, for the purpose of determining
purchase premiums that could be used in comparing the Merger with other
announced transactions. TSJ&A reviewed the purchase premiums paid in 44
transactions that were announced between January 1, 1997 and March 9, 1998
involving selling
<PAGE> 165
Board of Directors
First National Bancshares of Wetumpka, Inc.
, 1998
Page 2
institutions with total assets between $100 million and $300 million
headquartered in the southeastern United States. Of these transactions, 13
involved selling institutions that have been determined to be comparable
transactions. They include institutions representing commercial bank
institutions with total equity greater than 10.00 percent of total assets. A
listing of these transactions is attached. The purchase premiums in the Merger
rank within the range of purchase premiums paid in the comparable transactions.
On average, the ten comparable transactions reported an announced deal price to
book value of 2.361 times and an announced deal price to earnings of 20.52
times.
During 1997, Wetumpka shareholders received dividends totaling $9.00 per share.
After the merger and assuming the current UPC common share quarterly dividend
rate of $0.50 per share, the Wetumpka shareholders would receive an annual
dividend equivalent to $8.36 per Wetumpka common share, a reduction of $0.64 per
share. However, UPC has a stronger historical earnings growth, market value
appreciation and liquidity. It should be noted that dividends are neither
cumulative nor guaranteed.
Therefore, in consideration of the above, it is the opinion of TSJ&A that, based
on the structure of the Merger and the analyses that have been performed, the
consideration to be received by the shareholders of Wetumpka is fair from a
financial point of view.
Sincerely,
/s/ T. Stephen Johnson & Associates, Inc.
T. Stephen Johnson & Associates, Inc.
<PAGE> 166
APPENDIX D
DELAWARE STATUTORY LAW RELATING TO APPRAISAL RIGHTS
SECTION 262 OF THE
DELAWARE GENERAL CORPORATION LAW
262 Appraisal Rights. (a) Any shareholder of a corporation of this State
who holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to 228 of this title shall be entitled to an appraisal by the Court of
Chancery of the fair value of his shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "shareholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to 251 (other than a merger effected pursuant to 251(g) of
this title), 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the shareholders entitled to receive notice of and to vote at
the meeting of shareholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the holder of the surviving corporation as
provided in subsection (f) of 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to 251,
252, 254, 257, 258, 263 and 264 of this title to accept for such stock
anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
D-1
<PAGE> 167
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of shareholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its shareholders who has such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each shareholder electing to demand the appraisal of such holder's
shares shall deliver to the corporation, before the taking of the vote on
the merger or consolidation, a written demand for appraisal of such
holder's shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the shareholder and that the shareholder
intends thereby to demand the appraisal of such holder's shares. A proxy or
vote against the merger or consolidation shall not constitute such a
demand. A shareholder electing to take such action must do so by a separate
written demand as herein provided. Within 10 days after the effective date
of such merger or consolidation, the surviving or resulting corporation
shall notify each shareholder of each constituent corporation who has
complied with this subsection and has not voted in favor of or consented to
the merger or consolidation of the date that the merger or consolidation
has become effective; or
(2) If the merger or consolidation was approved pursuant to 228 or 253
of this title, each constituent corporation, either before the effective
date of the merger or consolidation or within 10 days thereafter, shall
notify each of the holders of any class or series of stock of such
constituent corporation who are entitled to appraisal rights of the
approval of the merger or consolidation and that appraisal rights are
available for any or all shares of such class or series of stock of such
constituent corporation, and shall include in such notice a copy of this
section; provided that, if the notice is given on or after the effective
date of the merger or consolidation, such notice shall be given by the
surviving or resulting corporation to all such holders of any class or
series of stock of a constituent corporation that are entitled to appraisal
rights. Such notice may, and, if given on or after the effective date of
the merger or consolidation, shall, also notify such shareholders of the
effective date of the merger or consolidation. Any shareholder entitled to
appraisal rights may, within 20 days after the date of mailing of the
notice, demand in writing from the surviving or resulting corporation the
appraisal of such holder's shares. Such demand will be sufficient if it
reasonably informs the corporation of the identity of the shareholder and
that the shareholder intends thereby to demand the appraisal of such
holder's shares. If such notice did not notify shareholders of the
effective date of the merger or consolidation, either (i) each such
constituent corporation shall send a second notice before the effective
date of the merger or consolidation notifying each of the holders of any
class or series of stock of such constituent corporation that are entitled
to appraisal rights of the effective date of the merger or consolidation or
(ii) the surviving or resulting corporation shall send such a second notice
to all such holders on or within 10 days after such effective date;
provided, however, that if such second notice is sent more than 20 days
following the sending of the first notice, such second notice need only be
sent to each shareholder who is entitled to appraisal rights and who has
demanded appraisal of such holder's shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary or of the
transfer agent of the corporation that is required to give either notice
that such notice has been given shall, in the absence of fraud, be prima
facie evidence of the facts stated therein. For purposes of determining the
shareholders entitled to receive either notice, each constituent
corporation may fix, in advance, a record date that shall be not more than
10 days prior to the
D-2
<PAGE> 168
date the notice is given, provided, that if the notice is given on or after
the effective date of the merger or consolidation, the record date shall be
such effective date. If no record date is fixed and the notice is given
prior to the effective date, the record date shall be the close of business
on the day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any shareholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such shareholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any shareholder shall have the right to
withdraw such holder's demand for appraisal and to accept the terms offered upon
the merger or consolidation. Within 120 days after the effective date of the
merger or consolidation, any shareholder who has complied with the requirements
of subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the shareholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a shareholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all shareholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the shareholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
shareholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the shareholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any shareholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such shareholder.
(h) After determining the shareholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining the fair rate of
interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any shareholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the shareholder entitled to an appraisal. Any
shareholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
D-3
<PAGE> 169
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
shareholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such shareholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a shareholder, the Court may order all or a portion of the
expenses incurred by any shareholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and the fees and expenses of experts, to be charged pro rata against the
value of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
shareholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to shareholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such shareholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of his section or thereafter with the written approval of the
corporation, then the right of such shareholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any shareholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting shareholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
D-4
<PAGE> 170
APPENDIX E
<PAGE> 171
------------------------------
FIRST NATIONAL BANCSHARES OF
WETUMPKA, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL REPORT
DECEMBER 31, 1997
------------------------------
<PAGE> 172
FIRST NATIONAL BANCSHARES
OF WETUMPKA, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL REPORT
DECEMBER 31, 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INDEPENDENT AUDITOR'S REPORT...........................................................1
FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS.......................................................2
CONSOLIDATED STATEMENTS OF INCOME.................................................3
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY...................................4
CONSOLIDATED STATEMENTS OF CASH FLOWS.......................................5 AND 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.....................................7-30
</TABLE>
<PAGE> 173
INDEPENDENT AUDITOR'S REPORT
TO THE BOARD OF DIRECTORS
FIRST NATIONAL BANCSHARES OF WETUMPKA,
INC. AND SUBSIDIARY
WETUMPKA, ALABAMA
We have audited the accompanying consolidated balance sheets
of FIRST NATIONAL BANCSHARES OF WETUMPKA, INC. AND SUBSIDIARY as of December 31,
1997 and 1996, and the related consolidated statements of income, stockholders'
equity and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial position of
First National Bancshares of Wetumpka, Inc. and Subsidiary as of December 31,
1997 and 1996, and the results of their operations and their cash flows for the
years then ended in conformity with generally accepted accounting principles.
/s/ MAULDIN & JENKINS, LLC
Atlanta, Georgia
March 4, 1998
<PAGE> 174
FIRST NATIONAL BANCSHARES
OF WETUMPKA, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
ASSETS 1997 1996
------------- -------------
<S> <C> <C>
Cash and due from banks $ 5,248,873 $ 1,922,459
Federal funds sold 1,270,000 4,450,000
Securities available-for-sale 4,009,390 4,373,965
Securities held-to-maturity, fair value of
$66,897,392 and $62,499,343 65,894,157 61,954,993
Loans 128,682,036 114,337,555
Less allowance for loan losses 1,411,165 1,359,100
------------- -------------
Loans, net 127,270,871 112,978,455
------------- -------------
Premises and equipment 4,460,776 3,467,662
Other assets 3,014,346 2,340,851
------------- -------------
TOTAL ASSETS $ 211,168,413 $ 191,488,385
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing demand $ 18,769,539 $ 17,581,400
Interest-bearing demand 34,761,362 28,150,195
Savings 8,381,178 8,923,065
Time, $100,000 and over, including brokered
deposits of $4,235,000 and $1,235,000 31,599,000 29,683,535
Other time 76,111,452 72,656,040
------------- -------------
Total deposits 169,622,531 156,994,235
Other borrowings 15,000,000 10,000,000
Other liabilities 3,029,687 1,821,469
------------- -------------
TOTAL LIABILITIES 187,652,218 168,815,704
------------- -------------
Commitments and contingent liabilities
Stockholders' equity
Common stock, par value $1; 200,000 shares
authorized, issued and outstanding 200,000 200,000
Capital surplus 201,871 201,871
Retained earnings 23,145,511 22,365,120
Unrealized losses on securities available-
for-sale, net of tax (31,187) (94,310)
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 23,516,195 22,672,681
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 211,168,413 $ 191,488,385
============= =============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
2
<PAGE> 175
FIRST NATIONAL BANCSHARES
OF WETUMPKA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
INTEREST INCOME
Loans $11,586,842 $10,646,325
Taxable securities 3,402,654 3,069,732
Nontaxable securities 926,544 896,352
Federal funds sold 105,564 146,936
----------- -----------
TOTAL INTEREST INCOME 16,021,604 14,759,345
----------- -----------
INTEREST EXPENSE
Deposits 7,564,237 7,103,143
Federal funds purchased 109,327 26,230
Other borrowings 534,469 321,097
----------- -----------
TOTAL INTEREST EXPENSE 8,208,033 7,450,470
----------- -----------
NET INTEREST INCOME 7,813,571 7,308,875
PROVISION FOR LOAN LOSSES 215,000 200,000
----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 7,598,571 7,108,875
----------- -----------
OTHER INCOME
Service charges on deposit accounts 1,019,010 991,793
Gains on sales of securities 24,727 --
Gains on sales of other assets -- 364,857
Other operating income 65,647 44,727
----------- -----------
TOTAL OTHER INCOME 1,109,384 1,401,377
----------- -----------
OTHER EXPENSES
Salaries and employee benefits 3,283,960 2,404,594
Equipment and occupancy expenses 666,871 613,774
Other operating expenses 1,193,151 1,129,229
----------- -----------
TOTAL OTHER EXPENSES 5,143,982 4,147,597
----------- -----------
INCOME BEFORE INCOME TAXES 3,563,973 4,362,655
INCOME TAX EXPENSE 983,582 1,321,316
----------- -----------
NET INCOME $ 2,580,391 $ 3,041,339
=========== ===========
EARNINGS PER COMMON SHARE $ 12.90 $ 15.21
=========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE> 176
FIRST NATIONAL BANCSHARES
OF WETUMPKA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
UNREALIZED
LOSSES ON
SECURITIES
COMMON STOCK AVAILABLE- TOTAL
-------------------- CAPITAL RETAINED FOR-SALE, STOCKHOLDERS'
SHARES PAR VALUE SURPLUS EARNINGS NET OF TAX EQUITY
-------- --------- -------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1995 200,000 $ 200,000 $201,871 $20,973,781 $ (79,712) $21,295,940
Net income -- -- -- 3,041,339 -- 3,041,339
Cash dividends declared, $8.25 per share -- -- -- (1,650,000) -- (1,650,000)
Net change in unrealized losses on securities
available-for-sale, net of tax -- -- -- -- (14,598) (14,598)
-------- --------- -------- ----------- ---------- -----------
BALANCE, DECEMBER 31, 1996 200,000 200,000 201,871 22,365,120 (94,310) 22,672,681
Net income -- -- -- 2,580,391 -- 2,580,391
Cash dividends declared, $9.00 per share -- -- -- (1,800,000) -- (1,800,000)
Net change in unrealized losses on securities
available-for-sale, net of tax -- -- -- -- 63,123 63,123
-------- --------- -------- ----------- ---------- -----------
BALANCE, DECEMBER 31, 1997 200,000 $ 200,000 $201,871 $23,145,511 $ (31,187) $23,516,195
======== ========= ======== =========== ========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE> 177
FIRST NATIONAL BANCSHARES
OF WETUMPKA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,580,391 $ 3,041,339
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 304,726 310,820
Amortization -- 45,833
Provision for loan losses 215,000 200,000
Deferred income taxes (285,640) (3,068)
Gains on sales of securities (24,727) --
Gains on sales of other assets -- (364,857)
(Increase) decrease in interest receivable (111,709) 64,917
Increase (decrease) in interest payable 400,929 (46,776)
Increase in deferred compensation payable 713,080 --
Other operating activities 178,347 (45,857)
------------ ------------
Net cash provided by operating activities 3,970,397 3,202,351
------------ ------------
INVESTING ACTIVITIES
Purchases of securities available-for-sale (635,600) (3,060,475)
Proceeds from sales of securities available-for-sale 995,937 --
Proceeds from maturities of securities available-
for-sale 83,149 25,433
Purchases of securities held-to-maturity (17,150,653) (18,356,660)
Proceeds from maturities of securities held-
to-maturity 13,211,489 11,923,952
Net (increase) decrease in Federal funds sold 3,180,000 (4,450,000)
Net increase in loans (14,858,761) (7,251,546)
Proceeds from sales of other real estate -- 472,392
Proceeds from sale of premises and equipment -- 125,000
Purchase of premises and equipment (1,297,840) (353,769)
------------ ------------
Net cash used in investing activities (16,472,279) (20,925,673)
------------ ------------
FINANCING ACTIVITIES
Net increase in deposits 12,628,296 6,114,703
Net decrease in Federal funds purchased -- (640,000)
Proceeds from other borrowings 5,000,000 10,000,000
Dividends paid (1,800,000) (1,600,000)
------------ ------------
Net cash provided by financing activities 15,828,296 13,874,703
------------ ------------
</TABLE>
5
<PAGE> 178
FIRST NATIONAL BANCSHARES
OF WETUMPKA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Net increase (decrease) in cash and due from banks $ 3,326,414 $(3,848,619)
Cash and due from banks at beginning of year 1,922,459 5,771,078
----------- -----------
Cash and due from banks at end of year $ 5,248,873 $ 1,922,459
=========== ===========
SUPPLEMENTAL DISCLOSURES
Cash paid for:
Interest $ 7,807,104 $ 7,497,246
Income taxes $ 1,216,652 $ 1,370,684
NONCASH TRANSACTIONS
Unrealized (gains) losses on securities available-
for-sale $ (54,184) $ 24,572
Principal balances of loans transferred to other
real estate $ 351,345 $ 103,532
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
6
<PAGE> 179
FIRST NATIONAL BANCSHARES
OF WETUMPKA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
First National Bancshares of Wetumpka, Inc. (the "Company") is a
one-bank holding company whose business is presently conducted by its
wholly-owned subsidiary, First National Bank of Wetumpka, (the "Bank").
The Bank is a commercial bank with operations in Elmore County,
Alabama. The Bank provides a full range of banking services to
individual and corporate customers in its primary market area of Elmore
County.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the
Company and its subsidiary. Significant intercompany transactions and
accounts are eliminated in consolidation.
The accounting and reporting policies of the Company and its subsidiary
conform to generally accepted accounting principles and general
practices within the financial services industry. In preparing the
financial statements, management is required to make estimates and
assumptions that affect the reported amounts and disclosures of assets
and liabilities as of the date of the balance sheet and revenues and
expenses for the period. Actual results could differ from those
estimates.
CASH AND DUE FROM BANKS
Cash on hand, cash items in process of collection, and amounts due from
banks are included in cash and due from banks.
The Company maintains amounts due from banks which, at times, may
exceed Federally insured limits. The Company has not experienced any
losses in such accounts.
7
<PAGE> 180
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SECURITIES
Securities are classified based on management's intention on the date
of purchase. Securities which management has the intent and ability to
hold to maturity are classified as held-to-maturity and reported at
amortized cost. All other debt securities are classified as
available-for-sale and carried at fair value with net unrealized gains
and losses included in stockholders' equity, net of tax. Marketable
equity securities are carried at fair value with net unrealized gains
and losses included in stockholders' equity. Other equity securities
without a readily determinable fair value are carried at cost.
Interest and dividends on securities, including amortization of
premiums and accretion of discounts, are included in interest income.
Realized gains and losses from the sales of securities are determined
using the specific identification method.
LOANS
Loans are carried at their principal amounts outstanding less the
allowance for loan losses. Interest income on loans is credited to
income based on the principal amount outstanding.
Loan origination fees and direct costs of loans are recognized at the
time the loan is recorded. Because net loan origination fees and costs
are not material, the results of operations are not materially
different than the results which would be obtained by accounting for
loan fees and costs in accordance with generally accepted accounting
principles.
The allowance for loan losses is maintained at a level that management
believes to be adequate to absorb potential losses in the loan
portfolio. Management's determination of the adequacy of the allowance
is based on an evaluation of the portfolio, past loan loss experience,
current economic conditions, volume, growth, composition of the loan
portfolio, and other risks inherent in the portfolio. In addition,
regulatory agencies, as an integral part of their examination process,
periodically review the Company's allowance for loan losses, and may
require the Company to record additions to the allowance based on their
judgment about information available to them at the time of their
examinations.
8
<PAGE> 181
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LOANS (CONTINUED)
The accrual of interest on impaired loans is discontinued when, in
management's opinion, the borrower may be unable to meet payments as
they become due. When accrual of interest is discontinued, all unpaid
accrued interest is reversed. Interest income is subsequently
recognized only to the extent cash payments are received.
A loan is impaired when it is probable the Company will be unable to
collect all principal and interest payments due in accordance with the
terms of the loan agreement. Individually identified impaired loans are
measured based on the present value of payments expected to be
received, using the contractual loan rate as the discount rate.
Alternatively, measurement may be based on observable market prices or,
for loans that are solely dependent on the collateral for repayment,
measurement may be based on the fair value of the collateral. If the
recorded investment in the impaired loan exceeds the measure of fair
value, a valuation allowance is established as a component of the
allowance for loan losses. Changes to the valuation allowance are
recorded as a component of the provision for loan losses.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated
depreciation. Depreciation is computed principally by the declining
balance methods over the estimated useful lives of the assets.
OTHER REAL ESTATE OWNED
Other real estate owned represents properties acquired through
foreclosure. Other real estate owned is held for sale and is carried at
the lower of the recorded amount of the loan or fair value of the
properties less estimated selling costs. Any write-down to fair value
at the time of transfer to other real estate owned is charged to the
allowance for loan losses. Subsequent gains or losses on sale and any
subsequent adjustment to the value are included in current earnings.
9
<PAGE> 182
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
Income tax expense consists of current and deferred taxes. Current
income tax provisions approximate taxes to be paid or refunded for the
applicable year. Deferred tax assets and liabilities are recognized for
the temporary differences between the bases of assets and liabilities
as measured by tax laws and their bases as reported in the financial
statements. Deferred tax expense or benefit is then recognized for the
change in deferred tax assets or liabilities between periods.
Recognition of deferred tax balance sheet amounts is based on
management's belief that it is more likely than not that the tax
benefit associated with certain temporary differences, tax operating
loss carryforwards and tax credits will be realized. A valuation
allowance would be recorded for those deferred tax items for which it
is more likely than not that realization would not occur.
The Company and the Bank file a consolidated income tax return. Each
entity provides for income taxes based on its contribution to income
taxes (benefits) of the consolidated group.
INTEREST RATE CAPS
Interest rate cap contracts are entered into by the Company as a hedge
against rising interest rates. Premium costs are amortized into other
expenses over the life of the contract. Income is recognized whenever
the prevailing market interest rate exceeds the specified index rate on
a rate determination date.
EARNINGS PER COMMON SHARE
Earnings per common share are computed by dividing net income by the
weighted average number of shares of common stock outstanding.
10
<PAGE> 183
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) has issued, and the
Company has adopted, Statement of Financial Accounting Standards (SFAS)
No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities". SFAS No. 125 was amended by SFAS
No. 127, which defers the effective date of certain provisions of SFAS
No. 125 until January 1, 1998. This statement provides accounting and
reporting standards for transfers and servicing of financial assets and
extinguishments of liabilities based on consistent application of a
financial-components approach that focuses on control. It distinguishes
transfers of financial assets that are sales from transfers that are
secured borrowings. The adoption of this statement did not have a
material effect on the Company's financial statements.
The FASB has issued, and the Company has adopted, SFAS No. 128,
"Earnings Per Share". SFAS No. 128 supersedes Accounting Principles
Board Opinion No. 15 "Earnings Per Share" and specifies the
computation, presentation, and disclosure requirements for earnings per
share (EPS) for entities with publicly held common stock or potential
issuable common stock. SFAS No. 128 replaces the presentation of
primary EPS with a presentation of basic EPS and fully diluted EPS with
diluted EPS. It also requires dual presentation of basic and diluted
EPS on the face of the income statement for all entities with complex
capital structures and requires a reconciliation of the numerator and
denominator for the basic EPS computation to the numerator and
denominator of the diluted EPS computation. SFAS No. 128 is effective
for financial statements for both interim and annual periods ending
after December 15, 1997. Because the Company has a simple capital
structure consisting only of common stock, the adoption of this
statement did not have an effect on the Company's computation of
earnings per share.
11
<PAGE> 184
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)
The FASB has issued SFAS No. 130, "Reporting Comprehensive Income".
This statement establishes standards for reporting and display of
comprehensive income and its components in the financial statements.
SFAS No. 130 requires all items that are required to be recognized
under accounting standards as components of comprehensive income to be
reported in a financial statement that is displayed in equal prominence
with the other financial statements. The term "comprehensive income" is
used in the SFAS to describe the total of all components of
comprehensive income including net income. "Other comprehensive income"
refers to revenues, expenses, gains and losses that are included in
comprehensive income but excluded from earnings under current
accounting standards. Currently, "other comprehensive income" for the
Company consists of items previously recorded directly in equity under
SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities". SFAS No. 130 is effective for periods beginning after
December 15, 1997.
12
<PAGE> 185
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. SECURITIES
The amortized cost and fair value of securities are summarized as
follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE-FOR-SALE
DECEMBER 31, 1997:
U.S. GOVERNMENT AND
AGENCY SECURITIES $ 2,012,334 $ 1,900 $ (2,354) $ 2,011,880
EQUITY SECURITIES 2,047,156 -- (49,646) 1,997,510
------------ ------------ ------------ ------------
$ 4,059,490 $ 1,900 $ (52,000) $ 4,009,390
============ ============ ============ ============
December 31, 1996:
U.S. Government and
agency securities $ 3,012,957 $ -- $ (26,247) $ 2,986,710
Equity securities 1,465,292 -- (78,037) 1,387,255
------------ ------------ ------------ ------------
$ 4,478,249 $ -- $ (104,284) $ 4,373,965
============ ============ ============ ============
SECURITIES HELD-TO-MATURITY
DECEMBER 31, 1997:
U.S. GOVERNMENT AND
AGENCY SECURITIES $ 8,492,124 $ 35,139 $ (23,955) $ 8,503,308
STATE AND MUNICIPAL
SECURITIES 16,630,734 553,764 (73,954) 17,110,544
MORTGAGE-BACKED SECURITIES 40,271,167 619,424 (108,236) 40,782,355
CORPORATE SECURITIES 500,132 1,053 -- 501,185
------------ ------------ ------------ ------------
$ 65,894,157 $ 1,209,380 $ (206,145) $ 66,897,392
============ ============ ============ ============
December 31, 1996:
U.S. Government and
agency securities $ 8,679,622 $ 69,722 $ (42,222) $ 8,707,122
State and municipal
securities 16,274,348 406,131 (109,036) 16,571,443
Mortgage-backed securities 34,497,909 391,166 (184,382) 34,704,693
Corporate securities 2,503,114 12,971 -- 2,516,085
------------ ------------ ------------ ------------
$ 61,954,993 $ 879,990 $ (335,640) $ 62,499,343
============ ============ ============ ============
</TABLE>
13
<PAGE> 186
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. SECURITIES (CONTINUED)
The amortized cost and fair value of securities as of December 31, 1997
by contractual maturity are shown below. Maturities may differ from
contractual maturities in mortgage-backed securities because the
mortgages underlying the securities may be called or prepaid with or
without penalty. Therefore, these securities and equity securities are
not included in the maturity categories in the following summary.
<TABLE>
<CAPTION>
SECURITIES AVAILABLE-FOR-SALE SECURITIES HELD-TO-MATURITY
----------------------------- ---------------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Due in one year or less $ -- $ -- $ 3,218,271 $ 3,230,200
Due from one to five years 2,012,334 2,011,880 11,603,334 11,776,285
Due from five to ten years -- -- 10,525,906 10,839,414
Due after ten years -- -- 275,479 269,138
Equity securities 2,047,156 1,997,510 -- --
Mortgage-backed securities -- -- 40,271,167 40,782,355
----------- ----------- ----------- -----------
$ 4,059,490 $ 4,009,390 $65,894,157 $66,897,392
=========== =========== =========== ===========
</TABLE>
Securities with a carrying value of $19,199,000 and $13,964,000 at
December 31, 1997 and 1996, respectively, were pledged to secure public
deposits and for other purposes.
Gross realized gains and losses on sales of securities was $37,048 and
$12,321, respectively, for 1997. There were no sales of securities
during 1996.
14
<PAGE> 187
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES
The composition of loans is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1997 1996
------------- -------------
<S> <C> <C>
Commercial, financial and agricultural $ 11,235,000 $ 9,797,000
Real estate 93,567,000 83,572,000
Consumer 19,896,000 17,486,000
Other 3,984,036 3,482,555
------------- -------------
128,682,036 114,337,555
Allowance for loan losses (1,411,165) (1,359,100)
------------- -------------
Loans, net $ 127,270,871 $ 112,978,455
============= =============
</TABLE>
Changes in the allowance for loans losses are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1997 1996
------------- -------------
<S> <C> <C>
BALANCE, BEGINNING OF YEAR $ 1,359,100 $ 1,284,132
Provision for loan losses 215,000 200,000
Loans charged off (389,342) (320,505)
Recoveries of loans previously charged off 226,407 195,473
------------- -------------
BALANCE, END OF YEAR $ 1,411,165 $ 1,359,100
============= =============
</TABLE>
15
<PAGE> 188
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
The total recorded investment in impaired loans was $96,000 and
$268,000 at December 31, 1997 and 1996, respectively. There were no
impaired loans that had related allowances determined in accordance
with Statement of Financial Accounting Standard No. 114, ("Accounting
by Creditors for Impairment of a Loan") at December 31, 1997 and 1996.
The average recorded investment in impaired loans for 1997 and 1996 was
$245,000 and $129,000. Interest income recognized for cash payments
received on impaired loans was not material for the years ended
December 31, 1997 and 1996.
The Company has granted loans to certain directors, executive officers,
and their related entities. The interest rates on these loans were
substantially the same as rates prevailing at the time of the
transaction and repayment terms are customary for the type of loan
involved. Changes in related party loans for the year ended December
31, 1997 are as follows:
<TABLE>
<S> <C>
BALANCE, BEGINNING OF YEAR $ 1,662,660
Advances 813,398
Repayments (1,397,148)
------------
BALANCE, END OF YEAR $ 1,078,910
============
</TABLE>
NOTE 4. PREMISES AND EQUIPMENT
Premises and equipment are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1997 1996
----------- -----------
<S> <C> <C>
Land $ 495,161 $ 495,161
Buildings and improvements 4,022,451 3,228,327
Equipment 2,661,032 2,064,917
Construction and equipment installation in progress -- 92,399
----------- -----------
7,178,644 5,880,804
Accumulated depreciation (2,717,868) (2,413,142)
----------- -----------
$ 4,460,776 $ 3,467,662
=========== ===========
</TABLE>
16
<PAGE> 189
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5. OTHER BORROWINGS
Other borrowings consist of the following Federal Home Loan Bank
advances:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1997 1996
----------- -----------
<S> <C> <C>
5.02%, interest only due quarterly, subject to conversion
to adjustable rate interest based upon three month
LIBOR on December 24, 1998, maturity
December 24, 2007, subject to early termination
on December 24, 1998 $ 5,000,000 $ --
Adjustable rate interest based upon one month LIBOR
(5.9114% at December 31, 1997) interest only,
due monthly, maturity May 26, 1998 10,000,000 10,000,000
----------- -----------
$15,000,000 $10,000,000
=========== ===========
</TABLE>
The Company's advances from the Federal Home Loan Bank are
collateralized by a blanket floating lien on qualifying first mortgage
loans and pledging of the Company's stock in the Federal Home Loan Bank
of Atlanta.
NOTE 6. EMPLOYEE BENEFIT PLANS
PROFIT SHARING PLAN
The Company has a profit sharing plan covering all employees, subject
to certain minimum age and service requirements. Annual contributions
are set by the Board of Directors. The Company contributed $87,500 and
$80,000 to the plan for the years ended December 31, 1997 and 1996,
respectively.
17
<PAGE> 190
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6. EMPLOYEE BENEFIT PLANS (CONTINUED)
EMPLOYEE STOCK OWNERSHIP PLAN
The Company sponsors a nonleveraged employee stock ownership plan
(ESOP) covering all employees, subject to certain minimum age and
service requirements. Annual contributions are set by the Company's
Board of Directors. The Company contributed $87,500 and $80,000 to the
plan for the years ended December 31, 1997 and 1996, respectively.
Dividends on allocated ESOP shares are recorded as a reduction of
retained earnings. As of December 31, 1997 and 1996, the ESOP held
4,404 and 4,479, respectively, of allocated shares of stock in the
Company at an approximate fair value of $630,961 and $582,270. If at
the time of distribution, shares distributed from the ESOP are not
readily tradable, the shares will be subject to a put option in the
hands of the holder by which the holder may sell all or any part of the
shares distributed by the Company. The put option is subject to certain
conditions outlined in the ESOP plan document.
DEFERRED COMPENSATION PLAN
The Company has a deferred compensation plan for certain key
executives. The deferred compensation is based upon the award of
performance units, the value of which is related to the appreciation of
the book value of the Company. The plan has provisions which accelerate
the payment of the compensation should there be a change in control of
the Company (see Note 13). Accordingly, all amounts due under the plan
have been recorded in other liabilities. The Company incurred expense
for the plan of $713,080 and $ - for the years ended December 31, 1997
and 1996, respectively.
NOTE 7. INCOME TAXES
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1997 1996
----------- -----------
<S> <C> <C>
Current $ 1,269,222 $ 1,324,384
Deferred taxes (285,640) (3,068)
----------- -----------
Income tax expense $ 983,582 $ 1,321,316
=========== ===========
</TABLE>
18
<PAGE> 191
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7. INCOME TAXES (CONTINUED)
The Company's income tax expense differs from the amounts computed by
applying the Federal income tax statutory rates to income before income
taxes. A reconciliation of the differences is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------
1997 1996
--------------------------- ---------------------------
AMOUNT PERCENT Amount Percent
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Income taxes at statutory rate $ 1,211,751 34 % $ 1,483,303 34 %
Tax-exempt interest (325,790) (9) (305,180) (7)
State income taxes 69,541 2 107,528 2
Other items, net 28,080 1 35,665 1
----------- ----------- ----------- -----------
Income tax expense $ 983,582 28 % $ 1,321,316 30 %
=========== =========== =========== ===========
</TABLE>
The components of deferred income taxes are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
DEFERRED TAX ASSETS:
Loan loss reserves $387,750 $370,143
Deferred compensation 269,188 --
Securities available-for-sale 18,913 9,974
Other 41,734 27,139
-------- --------
717,585 407,256
-------- --------
DEFERRED TAX LIABILITIES, other $ 27,952 $ 12,202
-------- --------
NET DEFERRED TAX ASSETS $689,633 $395,054
======== ========
</TABLE>
19
<PAGE> 192
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8. COMMITMENTS AND CONTINGENT LIABILITIES
In the normal course of business, the Company has entered into
off-balance sheet financial instruments which are not reflected in the
financial statements. These financial instruments include commitments
to extend credit, standby letters of credit and interest rate cap
agreements. Such financial instruments are included in the financial
statements when funds are disbursed or the instruments become payable.
These instruments involve, to varying degrees, elements of credit risk
in excess of the amount recognized in the balance sheet.
The Company's exposure to credit loss in the event of nonperformance by
the other party to the financial instrument for commitments to extend
credit and standby letters of credit is represented by the contractual
amount of those instruments. A summary of the Company's commitments is
as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1997 1996
---------- ----------
<S> <C> <C>
Commitments to extend credit $6,927,000 $5,462,000
Credit card commitments 1,352,000 947,000
Standby letters of credit 192,000 391,000
---------- ----------
$8,471,000 $6,800,000
========== ==========
</TABLE>
Commitments to extend credit 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 credit risk involved in issuing these financial
instruments is essentially the same as that involved in extending loans
to customers. The Company evaluates each customer's creditworthiness on
a case-by-case basis. The amount of collateral obtained, if deemed
necessary by the Company upon extension of credit, is based on
management's credit evaluation of the customer. Collateral held varies
but may include real estate and improvements, marketable securities,
accounts receivable, livestock, inventory, equipment and personal
property.
20
<PAGE> 193
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8. COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
Credit card commitments are unsecured.
Standby letters of credit are conditional commitments issued by the
Company to guarantee the performance of a customer to a third party.
Those guarantees are primarily issued to support public and private
borrowing arrangements. The credit risk involved in issuing letters of
credit is essentially the same as that involved in extending loans to
customers. Collateral held varies as specified above and is required in
instances which the Company deems necessary.
The Company entered into interest rate cap agreements to reduce the
impact of changes in interest rates. At December 31, 1997, the Company
had three outstanding interest rate cap agreements having a total
notional principal amount of $15,000,000. The Company's exposure to
credit loss is represented by the premiums paid to enter into these
agreements and not the notional amounts. The unamortized balance of the
premiums paid was $88,500 and $91,667 at December 31, 1997 and 1996,
respectively.
In the normal course of business, the Company is involved in various
legal proceedings. In the opinion of management of the Company, any
liability resulting from such proceedings would not have a material
effect on the Company's financial statements.
21
<PAGE> 194
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9. CONCENTRATIONS OF CREDIT RISK
The Company originates primarily agribusiness, commercial, residential
and consumer loans to customers primarily in Elmore County, Alabama.
The ability of the majority of the Company's customers to honor their
contractual loan obligation is dependent on the economy in Elmore
County and the surrounding area.
Seventy-three percent of the Company's loan portfolio is concentrated
in loans secured by real estate, of which a substantial portion is
secured by real estate in the Company's primary market area. In
addition, a substantial portion of the other real estate owned is
located in the same market. Accordingly, the ultimate collectibility of
the loan portfolio and the recovery of the carrying amount of other
real estate owned are susceptible to changes in market conditions in
the Company's primary market area. The other significant concentrations
of credit by type of loan are set forth in Note 3.
The Company, as a matter of policy, does not generally extend credit to
any single borrower or group of related borrowers in excess of 15% of
the total bank equity plus the allowance for loan loss as defined by
the office of the Comptroller of the Currency (OCC), or approximately
$3,647,000, except for certain loans guaranteed by Federal or state
agencies at December 31, 1997.
NOTE 10. REGULATORY MATTERS
The Bank is subject to certain restrictions on the amount of dividends
that may be declared without prior regulatory approval. At December 31,
1997, approximately $3,347,000 of retained earnings were available for
dividend declaration without regulatory approval.
The Company and the Bank are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to
meet minimum capital requirements can initiate certain mandatory - and
possibly additional discretionary - actions by regulators that, if
undertaken, could have a direct material effect on the financial
statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Company and Bank must meet
specific capital guidelines that involve quantitative measures of the
assets, liabilities, and certain off-balance sheet items as calculated
under regulatory accounting practices. The Company and Bank's capital
amounts and classification are also subject to qualitative judgments by
the regulators about components, risk weightings and other factors.
22
<PAGE> 195
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10. REGULATORY MATTERS (CONTINUED)
Quantitative measures established by regulation to ensure capital
adequacy require the Company and the Bank to maintain minimum amounts
and ratios of total and Tier I capital to risk-weighted assets and of
Tier I capital to average assets. Management believes, as of December
31, 1997, the Company and the Bank meet all capital adequacy
requirements to which they are subject.
As of December 31, 1997, the most recent notification from the OCC
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 following table. There are
no conditions or events since that notification that management
believes have changed the Bank's category.
The Company and Bank's actual capital amounts and ratios are presented
in the following table.
<TABLE>
<CAPTION>
TO BE WELL
FOR CAPITAL CAPITALIZED UNDER
ADEQUACY PROMPT CORRECTIVE
ACTUAL PURPOSES ACTION PROVISIONS
---------------- ----------------- -----------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------- ----- ------- ----- ------- ------
DOLLARS IN THOUSANDS
----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1997:
Total Capital (to Risk Weighted Assets):
Consolidated $24,958 20.30% $ 9,836 8.00% $12,294 10.00%
Bank $24,317 19.96% $ 9,748 8.00% $12,185 10.00%
Tier I Capital (to Risk Weighted Assets):
Consolidated $23,547 19.15% $ 4,918 4.00% $ 7,377 6.00%
Bank $22,906 18.80% $ 4,874 4.00% $ 7,311 6.00%
Tier I Capital (to Average Assets):
Consolidated $23,547 11.22% $ 8,397 4.00% $10,496 5.00%
Bank $22,906 10.92% $ 8,393 4.00% $10,491 5.00%
</TABLE>
23
<PAGE> 196
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10. REGULATORY MATTERS (CONTINUED)
<TABLE>
<CAPTION>
TO BE WELL
FOR CAPITAL CAPITALIZED UNDER
ADEQUACY PROMPT CORRECTIVE
ACTUAL PURPOSES ACTION PROVISIONS
---------------- ----------------- -----------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------- ----- ------- ----- ------- ------
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1996:
Total Capital (to Risk Weighted Assets):
Consolidated $24,046 20.83% $ 9,237 8.00% $11,546 10.00%
Bank $23,379 20.26% $ 9,237 8.00% $11,546 10.00%
Tier I Capital (to Risk Weighted Assets):
Consolidated $22,687 19.65% $ 4,618 4.00% $ 6,928 6.00%
Bank $22,020 19.07% $ 4,618 4.00% $ 6,928 6.00%
Tier I Capital (to Average Assets):
Consolidated $22,687 11.79% $ 7,698 4.00% $ 9,622 5.00%
Bank $22,020 11.45% $ 7,698 4.00% $ 9,622 5.00%
</TABLE>
NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments. In
cases where quoted market prices are not available, fair values are
based on estimates using discounted cash flow methods. Those methods
are significantly affected by the assumptions used, including the
discount rates 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 instrument. The use of different
methodologies may have a material effect on the estimated fair value
amounts. Also, the fair value estimates presented herein are based on
pertinent information available to management as of December 31, 1997
and 1996. Such amounts have not been revalued for purposes of these
financial statements since those dates and, therefore, current
estimates of fair value may differ significantly from the amounts
presented herein.
24
<PAGE> 197
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
CASH, DUE FROM BANKS, AND FEDERAL FUNDS SOLD:
The carrying amounts of cash, due from banks, and Federal funds sold
approximate their fair value.
SECURITIES:
Fair values for securities are based on quoted market prices. The
carrying values of equity securities with no readily determinable fair
value approximate fair values.
LOANS:
For variable-rate loans that reprice frequently and have no
significant change in credit risk, fair values are based on carrying
values. For other loans, the fair values are estimated using
discounted cash flow methods, using interest rates currently being
offered for loans with similar terms to borrowers of similar credit
quality. Fair values for impaired loans are estimated using discounted
cash flow methods or underlying collateral values.
DEPOSITS:
The carrying amounts of demand deposits, savings deposits and
variable-rate certificates of deposit approximate their fair values.
Fair values for fixed-rate certificates of deposit are estimated using
discounted cash flow methods, using interest rates currently being
offered on certificates.
OTHER BORROWINGS:
The fair value of the Company's other borrowings are estimated using
discounted cash flow methods based on the Company's current
incremental borrowing rates for similar types of borrowing
arrangements.
ACCRUED INTEREST:
The carrying amounts of accrued interest approximate their fair
values.
INTEREST RATE CAPS:
The fair value of interest rate caps is based on a quoted market
price.
25
<PAGE> 198
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
OFF-BALANCE SHEET INSTRUMENTS:
Fair values of the Company's off-balance sheet financial instruments
are based on fees charged to enter into similar agreements. However,
commitments to extend credit and standby letters of credit do not
represent a significant value to the Company until such commitments
are funded. The Company has determined that these instruments do not
have a distinguishable fair value and no fair value has been assigned.
The estimated fair values of the Company's financial instruments were
as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------------
1997 1996
---------------------------- ----------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Financial assets:
Cash, due from banks
and Federal funds sold $ 6,518,873 $ 6,518,873 $ 6,372,459 $ 6,372,459
Securities available-for-sale 4,009,390 4,009,390 4,343,965 4,343,965
Securities held-to-maturity 65,894,157 66,897,392 61,954,993 62,499,343
Loans 127,270,871 127,250,000 112,978,455 112,810,000
Accrued interest receivable 1,806,659 1,806,659 1,694,950 1,694,950
Interest rate cap agreements 88,500 45,278 91,667 40,463
Financial liabilities:
Deposits 169,622,531 174,242,079 156,994,235 157,894,660
Other borrowings 15,000,000 14,600,000 10,000,000 9,730,000
Accrued interest payable 1,647,547 1,647,547 1,246,618 1,246,618
</TABLE>
26
<PAGE> 199
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12. PARENT COMPANY FINANCIAL INFORMATION
The following information presents the condensed balance sheets,
statements of income and cash flows of First National Bancshares of
Wetumpka, Inc. as of and for the years ended December 31, 1997 and
1996:
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Cash $ 545,517 $ 546,375
Investment in subsidiary 22,874,800 22,030,430
Land 95,440 95,440
Other assets 450,438 450,436
----------- -----------
Total assets $23,966,195 $23,122,681
=========== ===========
LIABILITIES, other $ 450,000 $ 450,000
STOCKHOLDERS' EQUITY 23,516,195 22,672,681
----------- -----------
Total liabilities and stockholders' equity $23,966,195 $23,122,681
=========== ===========
</TABLE>
27
<PAGE> 200
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12. PARENT COMPANY FINANCIAL INFORMATION (CONTINUED)
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
INCOME, dividends from subsidiary $ 1,800,000 $ 1,650,000
----------- -----------
EXPENSE, other 1,295 1,285
----------- -----------
Income before income tax (benefits) and equity
in undistributed income of subsidiary 1,798,705 1,648,715
INCOME TAX (BENEFITS) (437) (437)
----------- -----------
Income before equity in undistributed
income of subsidiary 1,799,142 1,649,152
EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARY 781,249 1,392,187
----------- -----------
Net income $ 2,580,391 $ 3,041,339
=========== ===========
</TABLE>
28
<PAGE> 201
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12. PARENT COMPANY FINANCIAL INFORMATION (CONTINUED)
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,580,391 $ 3,041,339
Adjustments to reconcile net income to
net cash provided by operating activities:
Undistributed income of subsidiary (781,249) (1,392,187)
Other operating activities -- (58,066)
----------- -----------
Net cash provided by operating activities 1,799,142 1,591,086
----------- -----------
FINANCING ACTIVITIES
Dividends paid (1,800,000) (1,600,000)
----------- -----------
Net cash used in financing activities (1,800,000) (1,600,000)
----------- -----------
Net decrease in cash (858) (8,914)
Cash at beginning of year 546,375 555,289
----------- -----------
Cash at end of year $ 545,517 $ 546,375
=========== ===========
</TABLE>
29
<PAGE> 202
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13. BUSINESS COMBINATION
On December 30, 1997, the Company entered into an Agreement and Plan of
Merger with Union Planters Corporation ("UPC") of Memphis, Tennessee.
Under this agreement, the Company will merge with and into UPC. Upon
consummation of the merger, each share of Company stock will be
converted into and exchanged for the right to receive 4.179 shares of
UPC stock, subject to possible adjustment as defined in the agreement.
Consummation is subject to certain conditions, including regulatory and
stockholder approval.
30
<PAGE> 203
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Restated Charter of the Registrant provides as follows:
TWELFTH: INDEMNIFICATION OF CERTAIN PERSONS:
To the fullest extent permitted by Tennessee law, the
Corporation may indemnify or purchase and maintain insurance to
indemnify any of its directors, officers, employees or agents and any
persons who may serve at the request of the Corporation as directors,
officers, employees, trustees or agents of any other corporation, firm,
association, national banking association, state-chartered bank, trust
company, business trust, organization or any other type of entity
whether or not the Corporation shall have any ownership interest in
such entity. Such indemnification(s) may be provided for in the Bylaws,
or by resolution of the Board of Directors or by appropriate contract
with the person involved.
Article V, INDEMNIFICATION, of the Registrant's Amended and Restated
Bylaws provides as follows:
The Corporation does hereby indemnify its directors and
officers to the fullest extent permitted by the laws of the State of
Tennessee and by ARTICLE TWELFTH of its Charter. The Corporation may
indemnify any other person to the extent permitted by the Charter and
by applicable law.
Indemnification of corporate directors and officers is
governed by Sections 48-18-501 through 48-18-509 of the Tennessee
Business Corporation Act (the "Act"). Under the Act, a person may be
indemnified by a corporation against judgments, fines, amounts paid in
settlement and reasonable expenses (including attorneys' fees) actually
and necessarily incurred by him in connection with any threatened or
pending suit or proceeding or any appeal thereof (other than an action
by or in the right of the corporation), whether civil or criminal, by
reason of the fact that he is or was a director or officer of the
corporation or is or was serving at the request of the corporation as a
director or officer, employee or agent of another corporation of any
type or kind, domestic or foreign, if such director or officer acted in
good faith for a purpose which he reasonably believed to be in the best
interest of the corporation and, in criminal actions or proceedings
only, in addition, had no reasonable cause to believe that his conduct
was unlawful. A Tennessee corporation may indemnify a director or
officer thereof in a suit by or in the right of the corporation against
amounts paid in settlement and reasonable expenses, including
attorneys' fees, actually and necessarily incurred as a result of such
suit unless such director or officer did not act in good faith or with
the degree of diligence, care and skill which ordinarily prudent men
exercise under similar circumstances and in like positions.
A person who has been wholly successful, on the merits or
otherwise, in the defense of any of the foregoing types of suits or
proceedings is entitled to indemnification for the foregoing amounts. A
person who has not been wholly successful in any such suit or
proceeding may be indemnified only upon the order of a court or a
finding that the director or officer met the required statutory
standard of conduct by (i) a majority vote of a disinterested quorum of
the Board of Directors, (ii) the Board of Directors based upon the
written opinion of independent legal counsel to such effect, or (iii) a
vote of the shareholders.
II-1
<PAGE> 204
ITEM 21. EXHIBITS.
The following exhibits are filed herein or have been, as noted,
previously filed:
Exhibit No. Description
- ----------- -----------------------------------------------------------------
2.1 Agreement and Plan of Merger, dated as of December 30, 1997, by
and between Union Planters Corporation, Union Planters Holding
Corporation and First National Bancshares of Wetumpka, Inc.
(Included as Appendix A to the Proxy Statement included as part
of this Registration Statement.)
2.2 Plan of Merger of First National Bancshares of Wetumpka, Inc.
into and with Union Planters Holding Corporation. (Included as
Appendix B to the Proxy Statement included as part of this
Registration Statement.)
4.1 Restated Charter of Union Planters Corporation. (Incorporated by
reference to Exhibit 3(a) to the Annual Report on Form 10-K of
UPC for the fiscal year ended December 31, 1996.)
4.2 Amended and Restated Bylaws of Union Planters Corporation.
(Incorporated by reference to exhibit 3(d) to the Annual Report
on Form 10-K of UPC for the fiscal year ended December 31, 1996
(File No. 0-6919).)
5.1 Opinion of E. James House, Jr., Secretary and Manager of the
Legal Department of Union Planters Corporation, as to the
validity of the shares of UPC Common Stock.
8.1 Opinion of Wyatt, Tarrant & Combs as to federal income tax
consequences.
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Mauldin & Jenkins, LLC, independent auditors for
First National Bancshares of Wetumpka, Inc.
23.3 Consent of E. James House, Jr., Secretary and Manager of the
Legal Department of Union Planters Corporation (included in
Exhibit 5.1).
23.4 Consent of Wyatt Tarrant & Combs (included in Exhibit 8.1).
23.5 Consent of T. Steven Johnson & Associates.
24.1 Power of Attorney (contained on the signature page hereof).
99.1 Form of proxy of First National Bancshares of Wetumpka, Inc.
II-2
<PAGE> 205
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report pursuant
to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(2) That for purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(3) That for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(5) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form
S-4, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means. This
includes information contained in documents filed subsequent to the effective
date of the registration statement through the date of responding to the
request.
(6) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the registration statement when it became
effective.
(7) That prior to any public reoffering of the securities registered
hereunder through the use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus
will contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other items of the applicable form.
(8) That every prospectus: (i) that is filed pursuant to Paragraph (7)
immediately preceding, or (ii) that purports to meet the requirements of Section
10(a)(3) of the Act and is used in connection with an offering of securities
subject to Rule 415, will be filed as a part of an amendment to the registration
statement and will not be used until such amendment is effective, and that, for
purposes of determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 206
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Memphis,
State of Tennessee on this the 19th day of February, 1998.
REGISTRANT
UNION PLANTERS CORPORATION
By: /s/ Benjamin W. Rawlins, Jr.
----------------------------
Benjamin W. Rawlins, Jr.
Chairman of the Board and Chief Executive Officer
We, the undersigned directors and officers of Union Planters
Corporation do hereby constitute and appoint E. James House, Jr. and M. Kirk
Walters, and each of them, our true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for us and in our name,
place and stead, in any and all capacities, to sign any and all amendments to
this Registration Statement and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securites 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> <S>
/s/Benjamin W. Rawlins, Jr. Chairman of the Board, Chief Executive February 19, 1998
- ---------------------------------- Officer, Director
Benjamin W. Rawlins, Jr. (Principal Executive Officer)
/s/Jackson W. Moore President, Chief Operating Officer,
- ---------------------------------- Director February 19, 1998
Jackson W. Moore
/s/John W. Parker Executive Vice President and February 19, 1998
- ---------------------------------- Chief Financial Officer
John W. Parker (Principal Financial Officer)
/s/M. Kirk Walters Senior Vice President, Treasurer, February 19, 1998
- ----------------------------------- and Chief Accounting Officer
M. Kirk Walters
/s/Edgar H. Bailey Vice Chairman of the Board February 19, 1998
- ----------------------------------- and Director
Edgar H. Bailey
</TABLE>
<PAGE> 207
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
/s/Albert M. Austin Director February 19, 1998
- --------------------------------
Albert M. Austin
/s/Marvin E. Bruce Director February 19, 1998
- --------------------------------
Marvin E. Bruce
/s/George W. Bryan Director February 19, 1998
- --------------------------------
George W. Bryan
/s/James E. Harwood Director February 19, 1998
- --------------------------------
James E. Harwood
/s/Parnell S. Lewis, Jr. Director February 19, 1998
- --------------------------------
Parnell S. Lewis, Jr.
/s/C.J. Lowrance, III Director February 19, 1998
- --------------------------------
C. J. Lowrance, III
/s/Stanley D. Overton Director February 19, 1998
- --------------------------------
Stanley D. Overton
/s/Dr. V. Lane Rawlins Director February 19, 1998
- --------------------------------
Dr. V. Lane Rawlins
/s/Donald F. Schuppe Director February 19, 1998
- --------------------------------
Donald F. Schuppe
/s/Mike P. Sturdivant Director February 19, 1998
- --------------------------------
Mike P. Sturdivant
/s/David M. Thomas Director February 19, 1998
- --------------------------------
David M. Thomas
Director February 19, 1998
- --------------------------------
Richard A. Trippeer, Jr.
Director February 19, 1998
- --------------------------------
Spence L. Wilson
</TABLE>
II-5
<PAGE> 208
EXHIBIT INDEX
The following exhibits are filed herein or have been, as
noted, previously filed:
<TABLE>
<CAPTION>
Exhibit No. Description
- -------------- ---------------------------------------------------------------------------------------------------
<S> <C>
2.1 Agreement and Plan of Merger, dated as of December 30, 1997, by
and between Union Planters Corporation, Union Planters Holding
Corporation and First National Bancshares of Wetumpka, Inc.
(Included as Appendix A to the Proxy Statement included as part
of this Registration Statement.)
2.2 Plan of Merger of First National Bancshares of Wetumpka, Inc. into and with Union Planters Holding
Corporation. (Included as Appendix B to the Proxy Statement included as part of this Registration
Statement.)
4.1 Restated Charter of Union Planters Corporation. (Incorporated by
reference to Exhibit 3(a) to the Annual Report on Form 10-K of
UPC for the fiscal year ended December 31, 1996.)
4.2 Amended and Restated Bylaws of Union Planters Corporation.
(Incorporated by reference to exhibit 3(d) to the Annual Report
on Form 10-K of UPC for the fiscal year ended December 31, 1996
(File No. 0-6919).)
5.1 Opinion of E. James House, Jr., Secretary and Manager of the
Legal Department of Union Planters Corporation, as to the
validity of the shares of UPC Common Stock.
8.1 Opinion of Wyatt, Tarrant & Combs as to federal income tax consequences.
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Mauldin & Jenkins, LLC, independent auditors for First National Bancshares of
Wetumpka, Inc.
23.3 Consent of E. James House, Jr., Secretary and Manager of the
Legal Department of Union Planters Corporation (included in
Exhibit 5.1).
23.4 Consent of Wyatt Tarrant & Combs (included in Exhibit 8.1).
23.5 Consent of T. Steven Johnson & Associates.
24.1 Power of Attorney (contained on the signature page hereof).
99.1 Form of proxy of First National Bancshares of Wetumpka, Inc.
</TABLE>
II-6
<PAGE> 1
EXHIBIT 5.1
LOGO
UNION PLANTERS CORPORATION
March 31, 1998
Union Planters Corporation
7130 Goodlett Farms Parkway
Memphis, Tennessee 38018
Re: 835,800 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 835,800 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 December 30, 1997, by
and between UPC, Union Planters Holding Corporation ("UPHC") and First National
Bancshares of Wetumpka, Inc. ("FNB") (the "Agreement").
For purposes of rendering the opinion expressed herein, the undersigned has
examined UPC's Charter and all amendments thereto; UPC's Bylaws and amendments
thereto; the Merger Agreement and such of UPC's corporate records as the
undersigned has deemed necessary and material to rendering the undersigned's
opinion. The undersigned has relied upon certificates of public officials and
representations of UPC officials, and has assumed that all documents examined by
the undersigned as originals are authentic, that all documents submitted to the
undersigned as photocopies are exact duplicates of original documents, and that
all signatures on all documents are genuine.
Further, the undersigned is familiar with and has supervised all corporate
action taken in connection with the authorization of the issuance and offering
of the subject securities.
Based upon and subject to the foregoing and subsequent assumptions,
qualifications and exceptions, it is the undersigned's opinion that:
1. UPC is a duly organized and validly existing corporation in good standing
under the laws of the State of Tennessee and has all requisite power and
authority to issue, sell and deliver the subject securities, and to carry on its
business and own its property; and
2. The shares of UPC Common Stock to be issued by UPC pursuant to the Merger
have or will have been duly authorized and when issued by UPC in accordance with
the Agreement, 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.
<PAGE> 2
(c) This opinion has been rendered solely for the benefit of Union
Planters Corporation and no other person or entity shall be entitled to rely
hereon without the express written consent of the undersigned.
(d) 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 "Legal Opinions" in the Prospectus
constituting part of the Registration Statement and to the filing of this
opinion with the Securities and Exchange Commission as well as all state
regulatory bodies and jurisdictions where qualification is sought for the sale
of the subject securities.
The undersigned is an officer of, and receives compensation from UPC and
therefore is not independent from UPC.
Very truly yours,
UNION PLANTERS CORPORATION
By: /s/ E. James House, Jr.
-----------------------------
E. James House, Jr.
Manager, Legal Department
<PAGE> 1
EXHIBIT 8
502 562-7278
April 8, 1998
Board of Directors
Union Planters Corporation
7130 Goodlett Farms Parkway
Memphis, Tennessee 38018
Gentlemen:
We have acted as counsel to Union Planters Corporation, a Tennessee
corporation ("UPC"), in connection with (i) the proposed merger (the "Merger")
of First National Bancshares of Wetumpka, Inc., a Delaware corporation ("FNBW"),
with and into Union Planters Holding Corporation, a Tennessee corporation and a
wholly-owned subsidiary of UPC ("Holdings"), pursuant to the terms of the
Agreement and Plan of Merger by and between UPC, Holdings and FNBW dated
December 30, 1997 (the "Merger Agreement") and related Plan of Merger between
UPC, Holdings and FNBW (collectively, the "Plan of Reorganization"), and (ii)
the filing of the registration statement by UPC on Form S-4 (together with all
amendments and exhibits thereto through the date hereof, the "Registration
Statement"), under the Securities Act of 1933, as amended (the "Act"), covering
the shares of UPC Common Stock to be issued pursuant to the Plan of
Reorganization. Capitalized terms used but not defined herein shall have the
meanings assigned to them in the Registration Statement.
In rendering this opinion we have examined such documents as we have deemed
relevant or necessary, including without limitation, the Plan of Reorganization
and the Registration Statement. In our examination, we have assumed the
genuineness of all signatures, the due execution and delivery of all documents,
the legal capacity of all natural persons, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified, conformed or copies, and the
authenticity of the originals of such copies.
As to factual matters, in rendering this opinion, we have relied solely on
and have assumed the present and continuing truth and accuracy of (i) the
description of the facts relating to the Merger contained in the Plan of
Reorganization and Registration
<PAGE> 2
Board of Directors
Union Planters Corporation
April 8, 1998
Page 2.
Statement, (ii) the factual representations and warranties contained in the Plan
of Reorganization and Registration Statement and related documents and
agreements, and (iii) the factual matters addressed by representations from
certain executive officers of UPC, Holdings and FNBW contained in letters to us
dated April 8, 1998, copies of which are attached as Exhibit A and
Exhibit B to this opinion (the "Representation Letters"). The Representation
Letters address various factual matters relevant to the qualification of the
Merger as a tax-deferred reorganization under Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"). The initial and continuing truth
and accuracy of all such factual matters constitutes an integral basis for, and
a material condition to, this opinion.
The scope of this opinion 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 FNBW subject
to special rules under the Code, such as foreign persons, tax-exempt
organizations, insurance companies, financial institutions, dealers in stocks
and securities, and persons who do not own such stock as a capital asset, (iii)
the federal income tax consequences affecting shares of FNBW 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 FNBW 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 FNBW 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 Code.
Subject to the qualifications, assumptions and conditions provided herein,
we are of the opinion that:
1. The acquisition by Holdings of substantially all of the assets of FNBW
in exchange for shares of UPC Common Stock and the assumption of liabilities of
FNBW pursuant to the Merger will constitute a reorganization within the meaning
of Section 368(a) of the Code.
2. FNBW, UPC and Holdings will each be "a party to a reorganization" within
the meaning of Section 368(b) of the Code.
<PAGE> 3
Board of Directors
Union Planters Corporation
April 8, 1998
Page 3.
3. No gain or loss will be recognized by FNBW as a result of the Merger.
4. No gain or loss will be recognized by Holdings or UPC as a result of the
Merger.
5. No gain or loss will be recognized by the shareholders of FNBW as a
result of the exchange of FNBW Common Stock for UPC Common Stock pursuant to the
Merger, except that a gain or loss will be recognized on the receipt of any cash
in lieu of a fractional share. Assuming that the FNBW Common Stock is a capital
asset in the hands of the respective FNBW 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 FNBW Common Stock allocable to the
fractional share.
6. The tax basis of UPC Common Stock to be received by the shareholders of
FNBW will be the same as the tax basis of the FNBW Common Stock surrendered in
exchange therefor (reduced by any amount allocable to a fractional share
interest for which cash is received).
7. The holding period of the UPC Common Stock to be received by
shareholders of FNBW will include the holding period of the FNBW Common Stock
surrendered in exchange therefor, provided the FNBW shares were held as a
capital asset by the shareholders of FNBW on the date of the exchange.
8. A shareholder of FNBW who perfects his dissenter's rights and who
receives payment of the fair market value of his shares of FNBW Common Stock
will be treated as having received such payment in redemption of such stock.
Such redemption will be subject to the conditions and limitations of Section 302
of the Code.
This opinion is based on the Code, the Treasury Regulations promulgated
thereunder, judicial decisions and administrative pronouncements of the Internal
Revenue Service ("IRS"), all existing and in effect on the date of this opinion
and all of which are subject to change at any time, possibly retroactively. Any
such change could materially alter the conclusions reached in this opinion. We
undertake no obligation to you or any other person to give notice of any such
change. As noted above, this opinion is limited strictly to the matters
expressly stated herein and no other opinion may be implied or inferred beyond
such matters. You should realize that this opinion is not binding on the IRS or
the courts.
<PAGE> 4
Board of Directors
Union Planters Corporation
April 8, 1998
Page 4.
This opinion is provided to you solely for purposes of complying with the
requirements of Item 21(a) of Form S-4 under the Act and Section 9.1(g) of the
Merger Agreement. We hereby consent to the use of this opinion as an exhibit to
the Registration Statement, to the disclosure and summarization of the opinion
in the Registration Statement, including in the proxy statement/prospectus
included therein, and to the reference to this Firm in the Registration
Statement under the caption "Legal Matters." In giving this consent we do not
thereby admit that we come within the category of persons whose consent is
required under Section 7 of the Act or the rules and regulations of the
Securities and Exchange Commission promulgated thereunder. Without our prior
written consent, this opinion may not otherwise be quoted or referred to in
whole or in part in any report or document or furnished to any other person or
entity other than your counsel, your accountants or your employees, except in
response to a valid subpoena or other lawful process.
Very truly yours,
WYATT, TARRANT & COMBS
<PAGE> 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 January 15, 1998, except
as to note 2 which is as of March 3, 1998, which appears on page 41 of Union
Planters Corporation's 1997 Annual Report to Shareholders, which is incorporated
by reference in its Annual Report on Form 10-K of the year ended December 31,
1997. We also consent to the reference to us under the heading "EXPERTS" in such
Proxy Statement/Prospectus.
PRICE WATERHOUSE LLP
/s/ PRICE WATERHOUSE LLP
- ------------------------
Memphis, Tennessee
April 7, 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 relating to First National Bancshares of
Wetumpka, Inc. dated March 4, 1998, a copy of which is attached as Appendix
E to the Proxy Statement, and to the reference to us under the heading "EXPERTS"
in this Registration Statement.
MAULDIN & JENKINS, LLC
/s/ Mauldin & Jenkins, LLC
Atlanta, Georgia
April 7, 1998
<PAGE> 1
EXHIBIT 23.5
CONSENT OF FINANCIAL ADVISOR
We consent to the use in this Registration Statement of Union Planters
Corporation on Form S-4 of our opinion relating to First National Bancshares of
Wetumpka, Inc. included in the Prospectus to such Registration Statement at
Exhibit C and to the reference to our firm in the Prospectus under the caption
"DESCRIPTION OF TRANSACTION-Opinion of FNB's Financial Advisor."
T. Stephen Johnson & Associates
/s/T. Stephen Johnson & Associates
- ----------------------------------
T. Stephen Johnson & Associates
April 7,1998
<PAGE> 1
EXHIBIT 99.1
FIRST NATIONAL BANCSHARES OF WETUMPKA, INC.
The undersigned hereby constitutes and appoints W.F. Little and
Frederick T. Enslen, Jr., or either of them, as proxies, each with full power of
substitution, to vote the number of shares of common stock of First National
Bancshares of Wetumpka, Inc. ("FNB") which the undersigned would be entitled to
vote if personally present at the Special Meeting of FNB Shareholders to be held
at First National Bank, 408 S.E. Main Street, Wetumpka, Alabama at 1:00 p.m.,
local time, on Wednesday, May 13, 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 April __, 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 December 30, 1997
(the "Agreement"), by and between FNB, Union Planters
Corporation, a Tennessee corporation ("UPC"), and Union
Planters Holding Corporation ("UP Holding"), a wholly-owned
subsidiary of UPC, and the related Plan of Merger (the "Plan
of Merger"), by and between FNB, UPC and UP Holding, pursuant
to which (i) FNB will merge (the "Merger") with and into UP
Holding, with the effect that UP Holding shall be the
corporation surviving from the Merger, and (ii) each share of
the $1.00 par value common stock of FNB ("FNB Common Stock")
issued and outstanding at the effective time of the Merger
will be converted into 4.179 sharess of the $5.00 par value
common stock of UPC, and the associated "Preferred Share
Rights" (as hereinafter defined), subject to possible
adjustment, 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
FIRST NATIONAL BANCSHARES OF WETUMPKA, INC.
AND MAY BE REVOKED PRIOR TO ITS EXERCISE.
