<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13E-3
SECTION 240.13e.100.
Schedule 13E-3 [Section 240.13e-3], Rule 13e-3 Transaction Statement
Pursuant to Section 13(e) of the Securities Exchange Act of 1934 and Rule 13e-3
[Section 240.13e-3] thereunder.
RULE 13e-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF 1934)
[AMENDMENT NO.________]
CAPITAL FACTORS HOLDING, INC.
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(Name of the Issuer)
UNION PLANTERS BANK, NATIONAL ASSOCIATION
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(Name of Person(s) Filing Statement)
Common Stock, $.01 par value per share
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(Title of Class of Securities)
139905103
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(CUSIP Number of Class of Securities)
E. James House, Jr. - 7130 Goodlett Farms Parkway, Memphis,
Tennessee 38018 - (901) 580-6596
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(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications on Behalf of Person(s) Filing Statement)
This statement is filed in connection with (check the appropriate box):
a. The filing of solicitation materials or an information statement
- --- subject to Regulation 14A (17 CFR 240.14a-1 to 240.14b-1], Regulation
14C [17 CFR 240.14c-1 to 240.14c-101] or Rule 13e-3(c) [Section
240.13e-3(c)] under the Securities Exchange Act of 1934.
b. The filing of a registration statement under the Securities Act of 1933.
- ---
c. A tender offer.
- ---
X d. None of the above.
- ---
Check the following box if the soliciting materials or information
- --- statement referred to in checking box (a) are preliminary copies:
CALCULATION OF FILING FEE
<TABLE>
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<S> <C>
Transaction Valuation* Amount of filing fee
$16,645,335 $3,329
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</TABLE>
* The filing fee as calculated in accordance with Rule 0-11 by multiplying
the product of cash consideration amount of $17.50 per share and 951,162,
the remaining number of shares outstanding not owned by filer, by 1/50 of
one percent.
Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
- --- and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
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Amount Previously Paid:___________________________________________________
Form or Registration No.:_________________________________________________
Filing Party:_____________________________________________________________
Date Filed:_______________________________________________________________
Instruction: Eight copies of this statement, including all exhibits, should
be filed with the Commission.
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION
(a) Capital Factors Holdings, Inc. ("CFH") is a corporation organized and
existing under the laws of the State of Florida. The Company's principal
executive offices are located at Suite 500, East Palmetto Park Road, Boca
Raton, Florida 33432.
CFH has three first-tier and three second-tier subsidiaries as shown in the
following chart.
[GRAPHIC]
Capital Factors, Inc. ("Factors") and Capital Tempfunds, Inc. ("Tempfunds"),
are principally engaged in providing account receivable-based financing and
related fee-based credit, collection and management services. CFH also owns
three securitization vehicles and one subsidiary which holds subordinated
certificates issued in securitizations.
(b) CFH has authorized 25,000,000 shares of $.01 par value common stock (the
"CFH Common Stock") of which 12,309,012 shares were issued and outstanding
as of September 30, 1998. As of September 30, 1998, Union Planters Bank,
National Association ("UPBNA") owned 11,357,850 shares of CFH Common Stock,
or approximately 92.27% of the issued and outstanding shares of CFH Common
Stock. Approximately 16 holders of record own the remaining 7.73% of the
issued and outstanding shares of CFH Common Stock.
(c) CFH Common Stock is traded on the Nasdaq National Market under the symbol
"CAPF." The following table sets forth for the indicated periods, the high
and low closing sale prices for CFH Common Stock as reported on the Nasdaq
National Market for the indicated periods.
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<TABLE>
<CAPTION>
Price Range
--------------------
High Low
-------- --------
<S> <C> <C>
1998
First Quarter.......... $19.00 $15.00
Second Quarter ........ 20.00 17.25
Third Quarter ......... 17.78 15.63
Fourth Quarter (through
October 22, 1998)...... 17.44 16.00
----- -----
1997
First Quarter.......... $15.38 $12.00
Second Quarter......... 17.75 13.25
Third Quarter.......... 19.38 16.25
Fourth Quarter......... 19.25 16.00
1996
First Quarter.......... $ n/a $ n/a
Second Quarter......... n/a n/a
Third Quarter.......... 10.38 8.25
Fourth Quarter......... 13.25 9.88
</TABLE>
(d) CFH has not paid any dividends on CFH Common Stock in the past two years.
(e) On July 16, 1996, CFH completed an initial public offering of 2,000,000
shares of CFH Common Stock, at a price of $8.50 per share. On August 2,
1996, the underwriting syndicate exercised its option to acquire an
additional 300,000 shares of CFH Common Stock. Prior to the initial public
offering, CFH was a wholly-owned subsidiary of Capital Bank. As a result of
the initial public offering, Capital Bank's ownership of CFH was reduced to
approximately 81%. Capital Bank was the principal banking subsidiary of
Capital Bancorp, which Union Planters Corporation ("UPC"), the parent
company of UPBNA, acquired on December 31, 1997, pursuant to the merger of
Capital Bancorp into Union Planters Holding Corporation ("UPHC"), a
wholly-owned subsidiary of UPC. As a result of this acquisition, Capital
Bank became a second-tier subsidiary of UPC. Capital Bank was subsequently
merged with and into UPBNA on August 1, 1998, and as a result, CFH and its
subsidiaries became subsidiaries of UPBNA. UPBNA has also made certain
additional unsolicited purchases of CFH Common Stock. A summary of such
purchases is set forth in the table below.
(f)
<TABLE>
<CAPTION>
- ------------------------- -------------------------- -------------------------
DATE OF PURCHASE NUMBER OF SHARES PER SHARE PRICE
- ------------------------- -------------------------- -------------------------
<S> <C> <C>
August 10, 1998 500,000 $17.50
- ------------------------- -------------------------- -------------------------
August 18, 1998 157,700 $17.50
- ------------------------- -------------------------- -------------------------
August 31, 1998 444,900 $17.50
- ------------------------- -------------------------- -------------------------
September 1, 1998 143,250 $17.50
- ------------------------- -------------------------- -------------------------
September 3, 1998 87,500 $17.50
- ------------------------- -------------------------- -------------------------
September 16, 1998 24,500 $17.50
- ------------------------- -------------------------- -------------------------
</TABLE>
ITEM 2. IDENTITY AND BACKGROUND
(a) UPBNA is a national banking association, organized and existing under the
laws of the United States and is a wholly-owned subsidiary of UPHC, a
corporation organized and existing under the laws of the State of Tennessee.
UPHC is a wholly-owned subsidiary of UPC, a corporation organized and
existing under the laws of the State of Tennessee.
(b) The principal executive offices of UPBNA are located at 7130 Goodlett Farms
Parkway, Memphis, Tennessee 38018.
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(c) UPBNA was founded in 1869 and provides a diversified range of financial
services in the communities in which it operates. As ofSeptember 30, 1998,
UPBNA's total assets were $19.8 billion. In addition to UPBNA, UPC operates
eight other bank subsidiaries and two savings banks subsidiaries. UPC's
total assets at September 30, 1998 were $30.5 billion.
(d) Not Applicable.
(e) During the past five years, none of UPBNA, UPHC, UPC or, to the knowledge of
UPBNA, UPHC, and UPC, any director or executive officer thereof, have been
convicted in any criminal proceedings (excluding traffic violations or
similar misdemeanors).
(f) None of UPBNA, UPHC, UPC, or, to the knowledge of UPBNA, UPHC, and UPC, any
director or executive officer thereof, have been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction
which resulted in a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or defending any violations with respect to such laws.
(g) Not Applicable.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS
(a) (1) Prior to the Merger, CFH had a $150 million credit facility with Capital
Bank. CFH expensed interest payments to Capital Bank of $7,391,000 and
$5,265,000 on this facility during the periods ended December 31, 1997, and
December 31, 1996, respectively. In January 1998, CFH entered into a new
$150 million credit facility with UPC
Prior to the Merger, Capital Bank obtained group medical, dental and life
insurance coverage on behalf of CFH. This practice is continued by UPBNA.
Premiums are charged to CFH at the same amount as they are assessed to
UPBNA, and were formerly to Capital Bank. During 1997 and 1996, CFH paid
premiums of $662,075 and $605,227, for its actual portion of such premiums.
Capital Bank provided approximately $166.5 million and $135.5 million,
during 1997 and 1996, respectively, of letters of credit for clients of CFH.
CFH paid Capital Bank $315,635 and $224,332, during 1997 and 1996,
respectively, for charges related to services performed by Capital Bank for
CFH. Fees charged for issuance of letters of credit were paid directly to
Capital Bank and amounted to $605,429 and $373,688 in 1997 and 1996,
respectively.
See Response to Items 1(e) and (f).
(b) Not Applicable.
ITEM 4. TERMS OF THE TRANSACTION.
(a) That certain Agreement and Plan of Reorganization by and between UPBNA and
CFH, provides for UPBNA's acquisition of 100% of the issued and outstanding
shares of CFH Common Stock pursuant to the merger (the "Merger") of CFH with
a newly-formed wholly-owned subsidiary of UPBNA ("Merger Sub") to which
UPBNA would contribute it's shares of CFH Common Stock prior to the Merger.
See also "The Merger Agreement" in the Information Statement attached hereto
as Exhibit D.
(b) Merger Sub will not receive any consideration in exchange for its shares of
CFH Common Stock.
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE
(a) See Response to Item 4(a).
(b) See Response to Item 4(a).
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<PAGE> 5
(c) See "The Merger Agreement -- The Surviving Corporation" in the Information
Statement attached hereto as Exhibit D.
(d) As a result of the Merger, all outstanding shares of shares of CFH Common
Stock held by a holder other than UPBNA or Merger Sub will be canceled.
(e) None.
(f) As a result of the Merger, all shares of CFH Common Stock will be held by
UPBNA and CFH will no longer be obligated to file reports under the Exchange
Act.
(g) See Response to Item 5(f).
ITEM 6. SOURCE AND AMOUNTS OF FUNDS OR OTHER CONSIDERATION
(a) The source of funds to be used in the transaction is working capital of
UPBNA. The total amount of funds is $16,645,335 (the product of the
remaining issued and outstanding shares of CFH Common Stock not owned by
UPBNA multiplied by $17.50 per share).
(b) ESTIMATED FEES AND EXPENSES
Estimated fees and expenses incurred or to be incurred by the Company and
UPBNA in connection with the Merger are approximately as follows:
<TABLE>
<CAPTION>
------------------------------------------------------- ------------------
EXPENSES AND FEES
------------------------------------------------------- ------------------
<S> <C>
Payment of merger consideration (1) ................... $16,645,335
------------------------------------------------------- ------------------
Advisory fees (2) ..................................... 57,500
------------------------------------------------------- ------------------
Legal fees and expenses (3) ........................... 35,000
------------------------------------------------------- ------------------
Accounting fees and expenses .......................... 8,500
------------------------------------------------------- ------------------
Securities and Exchange Commission filing fee ......... 3,329
------------------------------------------------------- ------------------
Printing and mailing expenses ......................... 7,000
------------------------------------------------------- ------------------
Exchange Agent fees and expenses ...................... 1,000
------------------------------------------------------- ------------------
Miscellaneous expenses ................................ 500
------------------------------------------------------- ------------------
TOTAL ........................................... $ 16,758,164
------------------------------------------------------- ------------------
</TABLE>
(1) Includes payment for all outstanding shares of Common Stock other than
those owned by UPBNA plus payments in settlement of outstanding stock
options in accordance with the Merger Agreement.
(2) Includes the fees and estimated expenses of Stifel.
(3) Includes the estimated fees and expenses of counsel for the Company and
counsel for UPBNA.
(c) Not applicable.
(d) Not applicable.
ITEM 7. PURPOSE(s), ALTERNATIVES, REASONS AND EFFECTS
(a) The purpose of the Merger is for UPBNA to acquire all of the issued and
outstanding shares of CFH Common Stock at the same price, while ensuring
that the interests of minority shareholders are protected.
(b) None.
(c) The management of UPBNA believed the Merger to be the most efficient means
of allowing UPBNA to gain 100% control of CFH while protecting the interests
of CFH's minority shareholders.
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(d) See "Special Factors -- Certain Federal Income Tax Consequences of the
Merger" in the Information Statement attached hereto as Exhibit D.
ITEM 8. FAIRNESS OF THE TRANSACTION
(a) UPBNA reasonably believes that the consideration to be paid to the minority
holders of CFH Common Stock is fair from a financial point of view based on
(i) the opinion of Stifel Nicolaus & Company, Inc. ("Stifel") attached
hereto as Exhibit B and the fact that (ii) the per share price of $17.50 is
equal to the highest price paid by UPBNA to institutional investors who were
holders of CFH Common Stock in purchases of the Common Stock made by UPBNA
in unsolicited open market transactions. The Board of Directors of CFH
approved the Merger at a meeting duly called and convened on October 16,
1998. Ten of the twelve directors of CFH were present at such meeting, all
of whom voted in favor of the Merger.
(b) See "SPECIAL FACTORS" -- Approvals of the Boards of Directors" in the
Information Statement attached hereto as Exhibit D.
(c) Approval of at least a majority of unaffiliated holders of CFH Common Stock
is not required to consummate the Merger. See also "Special Factors --
Approval of Minority Holders not Required" in the Information Statement
attached hereto as Exhibit D.
(d) Stifel has been engaged by UPBNA to render an opinion as to the fairness
from a financial point of view of the consideration to be paid to minority
holders of CFH Common Stock. The opinion rendered by Stifel has been issued
to the Boards of Directors of both UPBNA and CFH. Stifel is not acting
solely on behalf of the unaffiliated directors of CFH.
See also response to Item 9(b)(5).
(e) The Merger was approved at a meeting of the Board of Directors of CFH duly
called and convened on October 16, 1998. Seven of the eight non-employee
directors were present at that meeting, all of whom voted in favor of the
Merger.
(f) Not applicable.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS
(a) See response to Item 8(d).
(b) (1) Stifel Nicolaus & Company, Incorporated prepared the fairness opinion
which is attached hereto as Exhibit B. See also "SPECIAL FACTORS --
Opinion of the Financial Advisor" in the Information Statement attached
hereto as Exhibit D.
(2) See "SPECIAL FACTORS -- Opinion of the Financial Advisor" in the
Information Statement attached hereto as Exhibit D.
(3) The management of UPBNA considered Stifel and one other investment
banking firm to render a fairness opinion in connection with the Merger.
Management chose Stifel for the following reasons: (i) Stifel is an
investment banking and securities firm regularly engaged in the
valuation of businesses, and (ii) Stifel has provided similar services
to UPC and its subsidiaries in the past and is familiar with the
businesses of UPBNA and CFH and its subsidiaries.
(4) Stifel has provided services to UPC and its subsidiaries in the past.
UPC paid fees to Stifel in consideration of such services in such
amounts as were customary in the industry at the time.
(5) Prior to engaging Stifel, UPBNA had determined that the consideration to
be paid in the Merger would be $17.50 for each issued and outstanding
share of CFH Common Stock not held by UPBNA. The $17.50 price was chosen
because it was the price UPBNA had recently paid to institutional
holders in the trades referenced in Item 1(f) herein.
(c) The fairness opinion of Stifel shall be made available for inspection and
copying at the principal executive offices of UPBNA during its regular
business hours by any interested equity security holder of the issuer or his
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<PAGE> 7
representative who has been so designated in writing. A copy of such report,
opinion or appraisal will be transmitted by UPBNA to any interested equity
security holder of the issuer or his representative who has been so
designated in writing upon written request and at the expense of the
requesting security holder.
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER
(a) See Response to Item 1(b).
(b) UPBNA has made six purchases of CFH Common Stock since its Merger with
Capital Bank in July 1998. Certain information regarding this purchase is
set forth in the chart contained in the response to Item 1(f).
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE ISSUER'S
SECURITIES
None.
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD TO
THE TRANSACTION
(a) Not applicable.
(b) Not applicable.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION
(a) No appraisal rights will be available to holders of CFH Common Stock in
relation to the Merger.
(b) Not applicable.
(c) Not applicable.
ITEM 14. FINANCIAL INFORMATION
(a) (1) See pages F-2 through F-17 of the Information Statement attached hereto
as Exhibit D.
(2) See pages F-18 through F-23 of the Information Statement attached hereto
as Exhibit D.
(3)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
----------------------- -----------------------
(dollars in thousands)
------------------------------------------------
1998 1997 1997 1996
------- ------- ------- --------
<S> <C> <C> <C> <C>
PRE-TAX EARNINGS $10,538 $ 9,187 $19,601 $19,039
FIXED CHARGES 17,299 11,357 27,587 20,403
EARNINGS 27,837 20,544 47,188 39,442
FIXED CHARGES 17,299 11,357 27,587 20,403
RATIO 1.61x 1.81x 1.71x 1.93x
- --------------------------------------------------------------------------------
</TABLE>
(4)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
------------ -----------------
1998 1997
------------ -----------------
<S> <C> <C>
BOOK VALUE PER SHARE $6.55 $6.03
</TABLE>
(b) (1) Not applicable.
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(2) Not applicable.
(3) Not applicable.
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED
(a) None.
(b) None.
ITEM 16. ADDITIONAL INFORMATION
None.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS
Furnish a copy of:
(a) Not applicable.
(b) The opinion of Stifel, Nicolaus & Company, Incorporated is attached as
Exhibit B.
(c) Not applicable.
(d) The Information Statement to be furnished to Minority Holders is attached as
Exhibit D.
(e) Not applicable.
(f) Not applicable.
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
October 26, 1998
-------------------------------
(Date)
/s/ E. James House, Jr.
-------------------------------
(Signature)
E. James House, Jr.
-------------------------------
Corporate Secretary
-------------------------------
(Name and Title)
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<PAGE> 9
EXHIBIT B
[Stifel, Nicolaus & Company, Incorporated Letterhead]
October 16, 1998
THE BOARD OF DIRECTORS THE BOARD OF DIRECTORS
UNION PLANTERS BANK, NATIONAL ASSOCIATION CAPITAL FACTORS HOLDING, INC.
Gentlemen:
We understand that Capital Factors Holding, Inc. (the "Company") and
Union Planters Bank, National Association ("UPBNA") propose to enter into an
Agreement and Plan of Reorganization (the "Merger Agreement"). Pursuant to the
Merger Agreement, UPBNA proposes to form a wholly-owned subsidiary ("Merger
Sub") to which it will contribute the shares of the common stock of the Company
(the "Common Stock") owned by it and then merge (the "Merger") Merger Sub with
and into the Company. Upon consummation of the Merger, all of the issued and
outstanding shares of the Common Stock will be cancelled and each holder of
Common Stock other than UPBNA or Merger Sub will receive $17.50 in cash (the
"Cash Consideration") in exchange for each share of Common Stock held by such
holder immediately prior to consummation of the Merger. We understand that
approximately 92% of the outstanding shares of Common Stock are currently owned
by UPBNA.
You have asked for our opinion as investment bankers, as of the date
hereof, as to whether the Cash Consideration to be received by the holders of
Common Stock (other than the Common Stock owned directly or indirectly by UPBNA
or Merger Sub) pursuant to the Merger is fair to such shareholders from a
financial point of view. As you are aware, we did not set or recommend the
amount of the Cash Consideration, and we were not retained to nor did we advise
the Company with respect to alternatives to the Merger or the Company's
underlying decision to proceed with or effect the Merger. Further, we were not
requested to nor did we solicit or assist the Company in soliciting indications
of interest from third parties for all or any part of the Company.
In connection with our opinion, we have, among other things:
1. Reviewed certain publicly available financial and other data with
respect to the Company, including its consolidated financial
statements, for the 1997, 1996 and 1995 fiscal years and interim
periods to June 30, 1998, and certain other relevant financial and
operating data relating to the Company made available to us from
published sources and from internal records of the Company;
2. Reviewed the financial terms and conditions set out in the drafts
distributed on October 13 of the Merger Agreement, the Information
Statement and Schedule 13E-3 Transaction Statement with respect to
the Merger;
3. Reviewed certain publicly available information concerning the
trading of, and the trading market for, the Company's Common Stock,
including the prices of certain recent purchases of large blocks of
the Company's shares from institutional investors by UPBNA;
4. Compared the Company from a financial point of view with certain
other companies in the factoring and commercial finance industries,
the securities of which are publicly traded;
<PAGE> 10
5. Considered the financial terms, to the extent publicly available, of
selected recent business combinations involving companies in the
factoring and commercial finance industries which we deemed to be
comparable, in whole or in part, to the Company;
6. Considered the financial terms, to the extent publicly available, of
selected recent business combinations whereby the buyer owned 75% or
more of the capital stock of the seller prior to the combination and
as a result of the combination owned 100% of the capital stock of
the seller following the combination, which we deemed to be
comparable, in whole or in part, to the Merger;
7. Reviewed and discussed with representatives of management of the
Company certain information of a business and financial nature
regarding the Company, furnished to us by them, including financial
forecasts and related assumptions prepared by management of the
Company;
8. Utilizing the information and forecasts furnished by the Company, in
consultation with the Company's management and with the Company's
advice and consent, created a 5-year financial projection for use in
preparing our opinion; 9. Performed such other analysis and
examinations as we deemed appropriate.
We have relied upon the accuracy and completeness of the financial and
other information used by us in arriving at our opinion without independent
verification, and have further relied upon the assurances of management of the
Company that they are not aware of any facts that would make such information
inaccurate or misleading. With respect to the financial projections for the
years 1998 through 2003 which we developed based on certain forecasts,
information and assumptions provided by management and with management's advice
and your consent to use such projections in our analysis, we have assumed that
the forecasts, information, and assumptions and guidance provided by management
have been reasonably prepared and reflect the best currently available
estimates and judgement of the Company's management at the time of preparation,
and that they and the projections provide a reasonable basis upon which we
could form our opinion. Such forecasts and projections were not prepared with a
view toward public disclosure. In addition, such forecasts and projections were
based upon numerous variables and assumptions that are inherently uncertain,
including, without limitation, factors related to general economic and
competitive conditions. Accordingly, actual results could vary significantly
from those set forth in such forecasts and projections. With your consent, we
have assumed no responsibility or liability for such forecasts or projections.
We also assumed that there have been no material changes in the Company's
assets, financial condition, results of operations, business or prospects since
the date of the last financial statements made available to us and that the
aggregate allowances for loan losses are in the aggregate adequate to cover all
such losses. We did not make or obtain any independent evaluation, appraisal,
or physical inspection of the Company's assets or liabilities, the collateral
securing any of such assets or liabilities, or the collectibility of any such
assets nor did we review loan or credit files of the Company. With your
permission we have assumed no responsibility for any legal and accounting
matters relating to UPBNA, the Company, the Merger and the Merger Agreement. We
assumed that the Merger will be consummated in a manner that complies in all
respects with the applicable provisions of the Exchange Act, and all other
applicable federal and state statutes, rules and regulations. In arriving at
our opinion, we have not conducted a physical inspection of the properties or
facilities of the Company. We have not made or obtained any evaluations or
appraisals of the assets or liabilities (contingent or otherwise) of the
Company, nor were we furnished with any such appraisals. Our opinion is
necessarily based upon market, economic and other conditions as they exist and
can only be evaluated as of the date of this letter.
We have performed various investment banking services for Union Planters
Corporation, the parent of UPBNA, from time to time in the past, and expect to
render such services to Union Planters Corporation and its subsidiaries and
affiliates in the future.
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<PAGE> 11
Based upon and subject to the foregoing and in reliance thereon, it is
our opinion as of the date hereof as investment bankers that the Cash
Consideration to be received by the holders of Common Stock (other than Common
Stock owned directly or indirectly by UPBNA or Merger Sub) as a result of the
Merger is fair to such shareholders from a financial point of view.
This opinion is directed to the Boards of Directors of UPBNA and the
Company for their consideration in connection with the financial aspects of the
Merger and is not a recommendation to any director as to how such director
should vote with respect to the Merger. Further, this opinion addresses only
the fairness from a financial point of view of the Cash Consideration to be
received by the holders of Common Stock (other than shares of Common Stock
owned directly or indirectly by UPBNA or Merger Sub) and does not address the
relative merits of the Merger and any effect the Merger may have on the Company
or any other aspect of the Merger. In arriving at our opinion, we were not
authorized to solicit, and did not solicit, interest from any party with
respect to the acquisition of the Company, any of its assets or minority
shares. The Company is authorized to disclose in full and refer to this opinion
in any information statement or proxy statement prepared in connection with the
Merger, provided that we expressly approve all statements in such documents
relating to this opinion. The Company may not disclose, quote, use or refer to
this opinion in any manner for any other purpose without our express prior
written consent.
Sincerely,
/s/ STIFEL, NICOLAUS & COMPANY, INCORPORATED
STIFEL, NICOLAUS & COMPANY, INCORPORATED
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EXHIBIT D
CAPITAL FACTORS HOLDING, INC.
EAST PALMETTO PARK ROAD
SUITE 500
BOCA RATON, FLORIDA 33432
INFORMATION STATEMENT
----------------------------------------
INTRODUCTION
Union Planters Bank, National Association, ("UPBNA") the holder of 92.27%
of the issued and outstanding shares of the $.01 par value common stock (the
"Common Stock") of Capital Factors Holding, Inc., a Florida corporation (the
"Company"), is furnishing this Information Statement to the holders (the
"Minority Holders") of the remaining 7.73% of the issued and outstanding shares
(the "Minority Shares") of the Common Stock, in connection with UPBNA's
acquisition of the Minority Shares. UPBNA's acquisition is to be effected
pursuant to the merger (the "Merger") of the Company with CFH Acquisition
Company, Inc. ("Merger Sub") a newly-formed, wholly-owned subsidiary of UPBNA,
with the Company as the surviving corporation (the "Surviving Corporation")
resulting from the Merger. Upon consummation of the Merger, each Minority Holder
will receive a cash payment of $17.50 (the "Cash Payment Amount"), without
interest, for each Minority Share held by such holder. The terms of the Merger
are more fully described herein and in the Agreement and Plan of Reorganization
by and between the Company and UPBNA (the "Merger Agreement") and the related
plan of merger attached as Appendices A and B hereto, respectively. The Boards
of Directors of UPBNA and the Company have received an opinion of Stifel
Nicolaus & Company, Incorporated ("Stifel") that the Cash Payment Amount is
fair, from a financial point of view, to the Minority Holders. This opinion is
attached as Appendix C to this Information Statement.
The Boards of Directors of UPBNA and the Company have approved the
Merger. Approval of the Minority Holders is not required for consummation of the
Merger and the Minority Holders have no dissenters' rights in connection with
the Merger.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR
MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION
CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
The date of this Information Statement is October 26, 1998
<PAGE> 13
AVAILABLE INFORMATION
UPBNA has filed with the Securities and Exchange Commission (the
"Commission") a Schedule 13E-3 Transaction Statement (including any amendments
thereto, the "Schedule 13E-3") under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), with respect to the Merger. This Information
Statement does not contain all the information set forth in the Schedule 13E-3
and the exhibits thereto, certain parts of which are omitted in accordance with
the rules and regulations of the Commission.
The Company is subject to the informational requirements of the Exchange
Act and, in accordance therewith, files reports, information statements and
other information with the Commission.
The Schedule 13E-3 and the respective exhibits thereto, as well as such
reports, information statements and other information filed by the Company with
the Commission can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549; and at the Commission's Northeast Regional Office, 7 World Trade
Center, Suite 1300, New York, New York 10048, and Midwest Regional Office,
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material can also be obtained at prescribed rates
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington D.C. 20549. The Commission maintains a Web site that contains
reports, proxy and information statements and other information regarding
registrants, such as the Company, that file electronically with the Commission.
The address of such site is http://www.sec.gov. The Common Stock is traded on
the Nasdaq National Market under the symbol "CAPF" and certain of the Company's
reports, proxy materials and other information are available at the offices of
the Nasdaq National Market, 1735 K Street, N.W., Washington, D.C. 20006.
<PAGE> 14
TABLE OF CONTENTS
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SUMMARY..................................................................... 1
SPECIAL FACTORS............................................................. 5
Background of the Merger............................................. 5
Approvals of the Boards of Directors................................. 5
Approval of Minority Holders Not Required............................ 6
Opinion of the Financial Adviser..................................... 6
Certain Effects of the Merger........................................10
Interests of Certain Persons in the Merger...........................10
Certain Federal Income Tax Consequences of the Merger................10
Accounting Treatment of the Merger...................................11
Certain Litigation...................................................11
Regulatory Approvals.................................................11
THE MERGER AGREEMENT........................................................12
General..............................................................12
Effective Time of the Merger.........................................12
The Surviving Corporation............................................12
Consideration to be Received by Shareholders of the Company..........12
Treatment of Options.................................................13
Representations and Warranties.......................................13
Covenants............................................................14
Conditions to Consummation of the Merger.............................14
Termination..........................................................14
Expenses.............................................................14
Amendments...........................................................15
Estimated Fees and Expenses..........................................15
MARKET PRICES FOR THE COMMON STOCK..........................................16
THE COMPANY.................................................................17
General..............................................................17
Initial Public Offering and Acquisition of Stock by UPBNA............17
Payment of Dividends.................................................17
RATIO EARNINGS TO FIXED CHARGES.............................................18
BOOK VALUE PER SHARE........................................................18
CERTAIN INFORMATION CONCERNING UPBNA AND MERGER SUB.........................19
UPBNA................................................................19
Merger Sub...........................................................19
Certain Transactions.................................................19
INDEPENDENT AUDITORS........................................................20
INDEX TO FINANCIAL STATEMENTS...............................................F-1
APPENDIX A: Merger Agreement
APPENDIX B: Plan of Merger by and between Capital Factors Holding, Inc. and CFH
Acquisition Company, Inc.
APPENDIX C: Opinion of Stifel Nicolaus & Company, Inc.
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SUMMARY
The following is a summary of certain information contained elsewhere in
this Information Statement. The following summary is not intended to be a
complete description of the matters covered in this Information Statement and is
subject to and qualified in its entirety by reference to the more detailed
information contained elsewhere in this Information Statement, including the
Appendices hereto. Shareholders are urged to read carefully the entire
Information Statement, including the Appendices.
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GENERAL
Structure of the Merger................Pursuant to the Merger Agreement, Merger Sub will merge with and into the Company, with
the Company being the Surviving Corporation and becoming a wholly-owned subsidiary of
UPBNA. Each of the Minority Shares will be converted into the right to receive the Cash
Payment Amount of $17.50 in cash, without interest. Each outstanding share of Common
Stock beneficially owned by UPBNA or held by the Company as treasury stock will be
canceled without consideration. Each outstanding share of common stock, $1.00 par
value, of Merger Sub will be converted into one share of common stock of the Surviving
Corporation. Each outstanding option to purchase shares of Common Stock ("CFH Options")
held by an employee of CFH or any of its subsidiaries, with an exercise price below the
Cash Payment Amount of $17.50, will be converted into options to purchase the $5.00 par
value common stock ("UPC Common Stock") of Union Planters Corporation, the parent
company of UPBNA ("UPC"). Certain CFH Options held by directors of CFH will be canceled
prior to the effective time of the Merger in exchange for a cash payment equal to the
difference (if positive) between the Cash Payment Amount and the exercise price of such
options. See "SPECIAL FACTORS-- Interests of Certain Persons in the Merger" and "THE
MERGER AGREEMENT."
Plans for the Company After the
Merger.................................Upon consummation of the Merger, the Company will become a wholly-owned subsidiary
of UPBNA. It is anticipated that the Company and its subsidiaries will maintain
their current corporate structure and the Company's operations will remain
substantially unchanged, with the exception that the current Board of Directors of
the Company will be replaced with a board consisting solely of officers of UPBNA.
See "THE MERGER AGREEMENT - The Survivng Corporation."Certain Effects of the Merger
As a result of the Merger, the entire equity interest in the Company will be
beneficially owned by UPBNA. Therefore, following the Merger, the Minority Holders
will no longer have an equity interest in the Company. Instead, each Minority
Holder will have only the right to receive the Cash Payment Amount for each share of
Common Stock held by such holder. At the time that the Merger is consummated, UPBNA
intends to cause the Company to terminate the registration of the Common Stock under
the Exchange Act and its obligation to file reports, information statements and
other information with the Commission. In addition, UPBNA intends to cause the
Company to terminate its listing of shares for trading on the Nasdaq National
Market. See "SPECIAL FACTORS -- Certain Effects of the Merger."
Opinion of the Financial Advisor.......Stifel, a nationally recognized investment banking firm, has rendered its written
opinion to the Boards of Directors of UPBNA and the Company,
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to the effect that, as of the date of such opinion and based upon and subject to
certain matters stated therein, the Cash Payment Amount is fair, from a financial
point of view, to the Minority Holders. The full text of Stifel's written opinion,
dated as of October 16, 1998, which sets forth the assumptions made, procedures
followed, matters considered and limits of its review, is included hereto as
Appendix C. MINORITY HOLDERS OF COMMON STOCK ARE URGED TO READ SUCH OPINION IN ITS
ENTIRETY. For additional information relating to the opinion of Stifel, see
"SPECIAL FACTORS -- Opinion of the Financial Advisor."
Determination of the Company's
Board of Directors.....................The Company's Board of Directors has determined, based in part upon the opinion
of Stifel, that the Merger and the Cash Payment Amount are fair, from a
financial point of view, to, and in the best interests of, the Minority Holders
and has approved the Merger Agreement and the Merger. See "SPECIAL FACTORS --
Background of the Merger and --Approval of the Boards of Directors."
No Shareholder Vote Required;
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Inapplicability of Section 607.0901
of the FBCA............................Under the FBCA, no approval of the Minority Holders is required for
consummation of the Merger. Section 607.0901 of the FBCA requires approval of
minority shareholders in a transaction such as the Merger in certain
circumstances. As the Merger has been approved by a majority of the Board of
Directors of the Company, the voting requirements of Section 607.0901 do not
apply to the Merger. See "SPECIAL FACTORS -- Approval of Minority Holders not
Required."
Interests of Certain Persons in
the Merger; Conflicts of Interest......Certain directors and officers of the Company beneficially own an aggregate of
approximately 1.1% of the outstanding Common Stock, and will be entitled to
receive the Cash Payment Amount for such shares. In addition, UPBNA is the owner
of approximately 92.27% of the issued and outstanding Common Stock and is deemed
to control the Company.
UPBNA has agreed that all rights to indemnification arising at or prior to the
effectiveness of the Merger in favor of the directors or officers of the
Company (including the members of the Board of Directors) as provided in the
Company's Articles of Incorporation and Bylaws, as in effect on the date of the
Merger Agreement will, for a period of six years survive the Merger and
continue in full force and effect. See "SPECIAL FACTORS -- Interests of Certain
Persons in the Merger" and "THE MERGER AGREEMENT -- Covenants."
Federal Income Tax
Consequences...........................Each Minority Holder will recognize gain or loss equal to the difference
between the amount received in exchange for shares of Common Stock and the
adjusted basis such holder had in the exchanged shares of Common Stock. Each
holder of CFH Options will have ordinary income equal to the amount of cash, if
any, received in exchange for the CFH options. No gain or loss will be
recognized by holders of CFH Options upon the conversion of such options into
Options to purchase UPC Common Stock ("UPC Options") exercisable under the same
terms and conditions as in effect immediately prior to the Merger. Each
Minority Holder and holder of CFH Options is urged to consult his or her own
tax advisor as to the specific tax consequences to him/her, based on his/her
particular status and circumstances. See "SPECIAL FACTORS -- Certain Federal
Income Tax Consequences".
THE MERGER AGREEMENT
Effective Time of the Merger...........The Merger will become effective upon the filing of articles of merger with the
Secretary of State of the State of Florida or at such later time as is specified
in such articles of merger (the "Effective Time"). The filing will occur after
all conditions to the Merger contained in the Merger Agreement have been satisfied
or waived. The Company and UPBNA anticipate that the Effective Time will occur on
the 30th day after the date of this Information Statement. See "THE MERGER
AGREEMENT -- General and -- Effective Time of the Merger."
Conditions to Consummation
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of the Merger..........................The respective obligations of the Company, on the one hand, and UPBNA, on the
other hand, to consummate the Merger are subject to the satisfaction or waiver
at or prior to the Effective Time of the following conditions, among others:
(i) the absence of a competent governmental or regulatory authority taking any
action which prohibits, restricts or makes illegal the transactions
contemplated by the Merger Agreement, including consummation of the Merger;
(ii) the material compliance by all parties with their obligations under the
Merger Agreement; (iii) the material truth and correctness of all
representations and warranties of the parties to the Merger Agreement; and (iv)
the delivery of Stifel's fairness opinion which shall not have been withdrawn.
See "THE MERGER AGREEMENT -- Conditions to Consummation of the Merger."
Termination of the Merger..............The Merger Agreement may be terminated and the Merger may be abandoned at any
time prior to the Effective Time: (i) by mutual written consent of the Company
and UPBNA; or (ii) by either the Company or UPBNA, if there shall be any law or
regulation that makes consummation of the Merger illegal or otherwise
prohibited or if any judgment, injunction, order or decree enjoining UPBNA or
the Company from consummating the Merger is entered and becomes final and
nonappealable. See "THE MERGER AGREEMENT -- Termination."
Expenses ..............................Generally, all expenses incurred in connection with the Merger are to be borne
by the party incurring such expenses, with the exception that UPBNA shall bear
and pay the filing fees payable in connection with the Schedule 13E-3 and the
fees and expenses of Stifel. See "THE MERGER AGREEMENT -- Expenses."
Amendments to the Merger
Agreement..............................The Merger Agreement may not be amended prior to the Effective Time except by
action of the Company and UPBNA set forth in a written instrument signed on
behalf of each of the parties. See "THE MERGER AGREEMENT -- Amendments."
Source of Funds........................The total amount of cash required by UPBNA to pay the Cash Payment Amount and
to pay its fees and expenses in connection with the Merger is expected to be
approximately $17 million. These funds will be provided out of UPBNA's working
capital.
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<PAGE> 19
SPECIAL FACTORS
BACKGROUND OF THE MERGER
On July 16, 1996, the Company completed an initial public offering of
2,000,000 shares of Common Stock, at a price of $8.50 per share. On August 2,
1996, the underwriting syndicate exercised its option to acquire an additional
300,000 shares of the Common Stock. Prior to the initial public offering, the
Company was a wholly-owned subsidiary of Capital Bank. As a result of the
initial public offering, Capital Bank's ownership of the Company was reduced to
approximately 81%. Capital Bank was the principal banking subsidiary of Capital
Bancorp, which UPC, the parent company of UPBNA, acquired on December 31, 1997,
pursuant to the merger of Capital Bancorp into Union Planters Holding
Corporation ("UPHC"), a wholly-owned subsidiary of UPC. As a result of this
acquisition, Capital Bank became a second-tier subsidiary of UPC. Capital Bank
was subsequently merged with and into UPBNA on August 1, 1998, and as a result,
the Company and its subsidiaries became subsidiaries of UPBNA.
Following the merger of Capital Bank with and into UPBNA, UPBNA made
certain unsolicited purchases of the Common Stock. See "THE COMPANY -- Initial
Public Offering and Acquisition of Stock by UPBNA." UPBNA ceased these purchases
after September 16, 1998, as UPC and UPBNA began to consider certain strategic
alternatives regarding the Company. Ultimately, the Management of UPC and UPBNA
determined it was in the best interests of both the Minority Holders and the
shareholders of UPC for UPC to acquire a 100% interest in the Company. UPC and
UPBNA subsequently proposed the terms of the Merger to the Company's directors
who approved the Merger at a meeting duly called and convened on October 16,
1998.
APPROVALS OF THE BOARDS OF DIRECTORS
The Company. At a meeting of the Company's Board of Directors on October
16, 1998, the Board approved the Merger Agreement and the Cash Payment Amount of
$17.50 in cash per share. At such meeting the Board reviewed the opinion of
Stifel that the Cash Payment Amount was fair to the Minority Holders, from a
financial point of view, and concluded the Merger and the Cash Payment Amount
are fair to, and in the best interests of, the Minority Holders.
The Company's Board, in reaching its conclusion that the Merger was fair
to, and in the best interests of, the Minority Holders, and in approving the
Merger Agreement and the Merger, considered a number of factors, including,
without limitation:
1. The written opinion of Stifel dated October 16, 1998 to the effect
that, as of the date of such opinion and based upon and subject to certain
matters stated in such opinion, the Cash Payment Amount was fair, from a
financial point of view, to the Minority Shareholders. See " -- Opinion of the
Financial Advisor." The opinion of Stifel is attached hereto as Appendix C. The
shareholders of the Company are urged to read such opinion carefully in its
entirety.
2. The Board's conclusion that the Cash Payment Amount represented the
highest price that UPBNA would be willing to pay in acquiring the Minority
Shares.
3. The terms of the Cash Payment Amount, including without limitation,
the amount and form of consideration; the nature of the parties'
representations, warranties, covenants and agreements; and the conditions to the
obligations of UPBNA and the Company.
4. The possibility that, in the absence of a Merger Agreement, UPBNA
could increase its ownership of the Common Stock in a transaction not approved
by the Company or the Board.
5. The fact that the Merger Consideration was equal to the highest price
paid by UPBNA to institutional investors who were holders of the Common Stock in
purchases of the Common Stock made by UPBNA in unsolicited open market
transactions.
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6. The Board's knowledge of the business, financial condition, results
of operations and prospects of the Company.
7. The historical trading prices of the Common Stock and the limited
trading volume and market for the Common Stock, resulting in limited liquidity
for the Minority Holders.
In view of the number and disparate nature of the factors considered by
the Board, the Board did not assign relative weights to the factors considered
in reaching its conclusions. The Board did, however, rely significantly on the
opinion of Stifel described above. See "-- Opinion of the Financial Advisor ."
The members of the Company's Board of Directors are indemnified by the
Company under the Company's Articles of Incorporation and Bylaws and the
applicable provisions of the Florida Business Corporation Act ("FBCA"), and are
exculpated from certain liabilities under the Company's Articles of
Incorporation, with respect to their actions in connection with Merger.
UPBNA. The UPBNA Board of Directors has concluded that the Merger and
Cash Payment Amount are fair to the Minority Holders based upon the following
factors: (i) the conclusions of the Company's Board of Directors; (ii)
information provided to and discussed with UPBNA in connection with the
financial analyses performed by Stifel; (iii) the fact that Stifel issued a
fairness opinion to UPBNA's Board and the Company's Board to the effect that the
Merger is fair, from a financial point of view, to the Minority Holders; and
(iv) the fact that the Cash Payment Amount was equal to the highest price paid
by UPBNA to institutional investors who were holders of the Common Stock in
purchases of the Common Stock made by UPBNA in unsolicited open market
transactions. See "-- Background of the Merger" and "-- Opinion of the Financial
Advisor."
In view of the wide variety of factors considered in connection with its
evaluation of the Merger and the Cash Payment Amount, the UPBNA Board of
Directors did not find it practicable to assign relative weights to the factors
considered in reaching their decision and, therefore, the members of the UPBNA
Board did not quantify or otherwise attach relative weights to the specific
factors considered by the Company's Board of Directors. The members of the Board
of Directors of UPBNA recognized that the interests of UPBNA in the Merger are
not the same as the interests of the Minority Holders in the Merger. See "--
Interests of Certain Persons in the Merger."
APPROVAL OF MINORITY HOLDERS NOT REQUIRED
Under the FBCA, no approval of the Minority Holders is required for
consummation of the Merger. Section 607.0901 of the FBCA requires approval of
minority shareholders in a transaction such as the Merger in certain
circumstances. As the Merger has been approved by the majority of the Board of
Directors of the Company, the voting requirements of Section 607.0901 do not
apply to the Merger.
OPINION OF THE FINANCIAL ADVISOR
UPBNA retained Stifel to render a fairness opinion to the Boards of
Directors of UPBNA and the Company in connection with the Merger. Stifel is an
investment banking and securities firm with membership on all principal U.S.
securities exchanges. As part of its investment banking activities, Stifel is
regularly engaged in the valuation of businesses and their securities in
connection with merger transactions and other types of acquisitions,
underwritings, sales and distributions of listed and unlisted securities,
private placements and valuations for estate, corporate, and other purposes.
The full text of Stifel's opinion, which sets forth the assumptions made,
matters considered, and limitations of the review undertaken, is attached as
Appendix C to this Information Statement and is incorporated herein by
reference, and should be read in its entirety in connection with this
Information Statement. The summary of the opinion of Stifel set forth in this
Information Statement is qualified in its entirety by reference to the full text
of such opinion.
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In connection with its opinion, Stifel, among other things: (i) reviewed
certain publicly available financial and other data with respect to the Company,
including its consolidated financial statements, for the 1997, 1996 and 1995
fiscal years and interim periods to June 30, 1998, and certain other relevant
financial and operating data relating to the Company made available to Stifel
from published sources and from internal records of the Company; (ii) reviewed
the financial terms and conditions set out in the drafts distributed on October
13, 1998, of the Merger Agreement, this Information Statement and the Schedule
13E-3; (iii) reviewed certain publicly available information concerning the
trading of, and the trading market for, the Company's Common Stock, including
the prices of certain recent purchases of large blocks of the Company's shares
from institutional investors by UPBNA; (iv) compared the Company from a
financial point of view with certain other companies in the factoring and
commercial finance industries, the securities of which are publicly traded; (v)
considered the financial terms, to the extent publicly available, of selected
recent business combinations involving companies in the factoring and commercial
finance industries which Stifel deemed to be comparable, in whole or in part, to
the Company; (vi) considered the financial terms, to the extent publicly
available, of selected recent business combinations whereby the buyer owned 75%
or more of the capital stock of the seller prior to the combination and as a
result of the combination owned 100% of the capital stock of the seller
following the combination, which Stifel deemed to be comparable, in whole or in
part, to the Merger; (vii) reviewed and discussed with representatives of
management of the Company certain information of a business and financial nature
regarding the Company, furnished to Stifel by them, including financial
forecasts and related assumptions prepared by management of the Company; (viii)
utilizing the information and forecasts furnished by the Company, in
consultation with the Company's management and with the Company's advice and
consent, created a five-year financial projection for use in preparing Stifel's
opinion; and (ix) performed such other analysis and examinations as Stifel
deemed appropriate.
In rendering its opinion, Stifel relied upon and assumed, without
independent verification, the accuracy and completeness of all of the financial
and other information that was provided to it or that was otherwise reviewed by
it and did not assume any responsibility for independently verifying any of such
information. With respect to the financial forecasts supplied to Stifel and the
five-year financial projections prepared therefrom, Stifel assumed with UPBNA's
and the Company's consent that they were reasonably prepared on the basis
reflecting the best currently available estimates and judgments of UPBNA and the
Company as to the future operating and financial performance of the Company,
that they would be realized in the amounts and time periods estimated and that
they provided a reasonable basis upon which Stifel could form its opinion.
Stifel also assumed that there were no material changes in the assets,
liabilities, financial condition, results of operations, business, or prospects
of the Company since the date of the last financial statements and that the
aggregate allowances for loan losses are in the aggregate adequate to cover all
such losses. Stifel did not make or obtain any independent evaluation,
appraisal, or physical inspection of the Company's assets or liabilities, the
collateral securing any of such assets or liabilities, or the collectibility of
any such assets nor did it review loan or credit files of the Company. Stifel
assumed no responsibility for any legal and accounting matters with respect to
UPBNA, the Company, the Merger, the Merger Agreement, and other matters
contained or contemplated therein. Stifel assumed, with UPBNA's and the
Company's consent, that there are no factors that would delay or subject to any
adverse conditions any necessary regulatory or governmental approval and that
all conditions to the Merger will be satisfied and not waived.
The financial forecasts furnished to Stifel for the Company and the
five-year financial projections prepared therefrom were prepared by and in
consultation with the management of the Company and constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. As a matter of policy, the Company does not publicly disclose internal
management forecasts, projections or estimates of the type furnished to Stifel
in connection with its analysis of the financial terms of the Merger, and such
forecasts and estimates were not prepared with a view towards public disclosure.
These forecasts and estimates were based on numerous variables and assumptions
which are inherently uncertain and which may not be within the control of the
management of the Company, including, without limitation, factors related to
general economic, regulatory, and competitive conditions. Accordingly, actual
results could vary materially from those set forth in such forecasts and
estimates.
In connection with rendering its opinion, Stifel performed a variety
of financial analyses that are summarized below. Such summary does not purport
to be a complete description of such analyses. Stifel believes that its analyses
and the summary set forth herein must be considered as a whole and that
selecting portions of such analyses and the factors considered therein, without
considering all factors and analyses, could create an incomplete view of the
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<PAGE> 22
analyses and processes underlying its opinions. The preparation of a fairness
opinion is a complex process involving subjective judgements and is not
necessarily susceptible to partial analysis or summary description. In its
analyses, Stifel made numerous assumptions with respect to industry performance,
business, and economic conditions, and other matters, many of which are beyond
the control of the Company. Any estimates contained in Stifel's analyses are not
necessarily indicative of actual future values or results, which may be
significantly more or less favorable than suggested by such estimates. Estimates
of values of companies do not purport to be appraisals or necessarily reflect
the actual prices at which companies or their securities actually may be bought
or sold. No company or transaction utilized in Stifel's analyses was identical
to the Company or the Merger. Accordingly, such analyses are not based solely on
arithmetic calculations; rather, they involve complex considerations and
judgements concerning differences in financial and operating characteristics of
the relevant companies, the timing of the relevant transactions, and prospective
buyer interest, as well as other factors that could affect the public trading
values of the company or companies to which they are being compared. None of the
analyses performed by Stifel was assigned a greater significance by Stifel than
any other.
Stifel has performed various investment banking services for UPC, the
parent of UPBNA, from time to time in the past, and expects to render such
services to UPC and its subsidiaries and affiliates in the future.
Stifel's opinion addresses only the fairness, from a financial point of
view, of the Cash Payment Amount to be received by the holders of the Minority
Shares and does not address the relative merits of the Merger and any affect the
Merger may have on the Company or any other aspect of the Merger. Stifel was not
authorized to solicit, and did not solicit, interests from any party with
respect to the acquisition of the Company, any of its assets or minority shares.
HISTORICAL STOCK PRICE ANALYSIS AND CURRENT MARKET PRICE. Stifel analyzed
the prices at which shares of the Company traded since its initial public
offering on July 10, 1996. During 1996, the Company's high closing price was
$13.25 and the low closing price was $8.50. In calendar 1997, the Company's high
closing price was $19.38 and the low closing price was $12.50. In calendar 1998
through October 12, 1998, the Company's high closing price was $19.75 and the
low closing price was $15.50. In addition, Stifel observed that the Cash Payment
Amount of $17.50 per share is greater than the closing stock price on October
12, 1998 of $16.25.
RECENT LARGE BLOCK TRANSACTIONS. In addition, Stifel reviewed the prices
of certain recent purchases of large blocks of the Company's shares from
institutional investors by UPBNA, including the following: a purchase of 500,000
shares on August 10, 1998, from Franklin Mutual for a price of $17.50, a
purchase of 157,700 shares on August 18, 1998 from Kramer Spellman for a price
of $17.50, a purchase of 444,900 shares on August 31, 1998, from Wellington
Management for a price of $17.50, a purchase of 143,250 shares on September 1,
1998, from Furman Selz for a price of $17.50, a purchase of 87,500 shares on
September 3, 1998, from Keefe Management for a price of $17.50, and a purchase
of 24,500 shares on September 9, 1998, from Oppenheimer & Co. for a price of
$17.50.
VALUATION SUMMARY OF SELECTED COMPARABLE PUBLICLY TRADED COMPANIES.
Stifel reviewed and compared certain financial, operating and stock market
information of the Company and the following publicly traded companies in the
factoring and commercial finance industries: Allstate Financial Corporation, CIT
Group, Inc., DVI Inc., Financial Federal Corporation, FINOVA Group Inc., First
Sierra Financial Inc., HealthCare Financial Partners, Heller Financial Inc.,
HPSC Inc., Interpool Inc., KBK Capital Corporation, Leasing Solutions Inc.,
Resource America Inc., Source Capital Corp., T&W Financial Corp., and Willis
Lease Finance Corporation. Stifel calculated, among other things, current market
price as a multiple of the latest twelve months earnings per share ("EPS"),
current market price as a multiple of estimated EPS for calendar year 1999,
current market price as a multiple of book value per share and current market
price as a multiple of tangible book value per share. The EPS estimates were
based on the median of publicly available earnings estimates made by research
analysts as provided by I/B/E/S, except in the case of Allstate Financial
Corporation where such estimates were provided by Nelson Information.
With respect to the comparable companies, the latest twelve months price
/ earnings ("P/E") ratios ranged from 6.02x to 24.85x, with a median of 13.56x,
and 6.94x to 17.0x for estimated calendar year 1999, with a median of 8.72x.
Based on the Cash Payment Amount of $17.50 and using earnings values for the
Company based on financial results, forecasts and other information provided by
management and projections prepared by Stifel with the assistance of management,
Stifel calculated a multiple for the Company of 17.33x for the latest twelve
months and
- 8 -
<PAGE> 23
12.70x for estimated calendar year 1999. Stifel noted that the latest
twelve months multiple was greater than the median multiple of the comparable
companies and the estimated 1999 multiple was greater than the median multiple
of the comparable companies.
With respect to the comparable companies, the current market price as a
multiple of book value per share ratios ranged from 58% to 258%, with a median
of 126%, and 58% to 258% for tangible book value per share, with a median of
147%. Stifel noted that the Cash Payment Amount implied a book value per share
multiple of 267%, which was greater than the median multiple of the comparable
companies, and a tangible book value per share multiple of 273%, which was
greater than the median multiple of the comparable companies.
DISCOUNTED CASH FLOW ANALYSIS. Stifel performed a discounted cash flow
analysis using financial projections prepared by Stifel based on forecasts,
information and guidance provided by management of the Company. Using the
discounted cash flow analysis, Stifel estimated the present value of the future
cash flows set forth in these forecasts. Stifel calculated a net present value
of estimated net income for the years 1998 through 2003 using discount rates
ranging from 19% to 23%. Stifel calculated the Company's terminal values in the
year 2003 based on multiples of year 2003 projected net income with a midpoint
of 14x and ranging from 12x to 16x. Stifel observed that the analysis produced a
midpoint value of $16.32, which was less than than the Cash Payment Amount of
$17.50.
COMPARABLE TRANSACTIONS ANALYSIS. Stifel analyzed the consideration paid
in several recent merger and acquisition transactions involving companies deemed
by Stifel to be reasonably similar to the Company and considered the multiple of
the equity purchase price to the acquired entity's latest twelve months net
income and to the acquired entity's book value, based upon publicly available
information for such transactions. The transactions analyzed were the
combinations of: Epic Funding Corp./SJNB Financial Corp., TempFunds America,
Inc./Capital Bancorp, National Business Finance, Inc./Norwest Corp., Business
Finance Corp./Cowlitz Bancorp, AT&T Capital Corp./Newcourt Credit Group, Inc.,
AT&T Capital Corp./The Nomura Securities Co. Ltd., Astra Financial, Inc./SJNB
Financial Corp., Sterling Business Credit, Inc./First Capital Corp., Foothill
Group, Inc./Norwest Corp., Jacom Computer Services, Inc./UniCapital Corp.,
Granite Financial, Inc./Fidelity National Financial, Inc., Scotsman Holdings,
Inc./Cypress Group-Keystone, Inc., Winthrop Resources Corp./TCF Financial Corp.,
Trans Ocean Ltd./Transamerica Corp. The comparable transactions were found to
imply for the acquired entity an equity purchase price within a range of 2.50x
to 52.31x latest twelve months income, with a median of 17.46x, and an equity
purchase price within a range of 101% to 936% book value, with a median of
238%. Applying such multiples to the Company's latest twelve months income and
book value resulted in an implied range of share prices of the Company of
$15.62 to $17.63 per share.
PREMIUMS PAID ANALYSIS. Stifel reviewed the consideration paid or offered
in 17 U.S. transactions involving aggregate value paid of $150 million or less
completed since January 1, 1995, whereby shares representing 25% or fewer of the
aggregate shares outstanding were purchased by an entity that owned 100% of the
shares outstanding following the transaction. The transactions reviewed were:
Group 1 Software, Inc./COMNET Corp., XLConnect Solutions, Inc./Xerox Corp.,
Steck-Vaughn Publishing Corp./Harcourt General, Inc., Seaman Furniture Co./an
investor group, Guaranty National Corp./Orion Capital Corp., Golden Poultry Co.,
Inc./Gold Kist, Inc., Mafco Consolidated Group/Mafco Holdings, Inc., Bally's
Grand, Inc./Hilton Hotels Corp., LXE (Electronmagnetic Sciences)/Electromagnetic
Sciences, Inc., Bankers Life Holding/Conseco Inc., WCI Steel, Inc./Renco Group,
Inc., Bobbie Brooks, Inc./Pubco Corp., Great American Management & Investment
Inc./Equity Holdings, SCOR US Corp./SCOR, Sportmart, Inc./investor, Grand Gaming
Corp./Grand Casinos, Inc., Rust International, Inc./WMX Technologies, Inc.
Stifel calculated the premiums paid in these transactions over the applicable
stock price of the target company one day, one week and one month prior to the
announcement of the transaction, and then calculated the median of those
premiums. These calculations yielded a median premium paid of 21.65% of the
target company's stock price one day prior the public announcement of the
transaction, 25.65% of the target company's stock price one week prior to such
announcement, and 27.62% of the target company's stock price one month prior to
such transaction. Stifel then applied the median premiums so derived to the
current stock price of the Company. Such analysis indicated a range of share
prices of the Company of $19.77 to $21.62 per share.
None of the companies or transactions utilized in the above analyses for
comparative purposes are, of course, identical to the Company or the Merger.
Accordingly, a complete analysis of the results of the foregoing calculations
- 9 -
<PAGE> 24
cannot be limited to a quantitative review of such results and involves complex
considerations and judgements concerning differences in financial and operating
characteristics and terms of the companies and transactions and other factors
that could affect the public trading value of or consideration paid for each of
the acquired entities as well as that of the Company.
CERTAIN EFFECTS OF THE MERGER
Upon consummation of the Merger, each of the Minority Shares will be
converted into the right to receive the Cash Payment Amount of $17.50 in cash,
without interest. As a result, the present holders of the Common Stock,
including officers and directors of the Company who are beneficial owners of
Common Stock (other than UPBNA), will cease to have any ownership interest in
the Company. The Company will as a result of the Merger become a wholly-owned
subsidiary of UPBNA. The Common Stock will be delisted from the Nasdaq Stock
Market's National Market, the registration of Common Stock under the Exchange
Act will terminate and the Company will be relieved of the obligation to comply
with the proxy rules of Regulation 14A under Section 14 of the Exchange Act, and
its officers, directors and beneficial owners of more than 10% of the Common
Stock will be relieved of the reporting requirements and restrictions on insider
trading under Section 16 of the Exchange Act. Further, the Company will no
longer be subject to the periodic reporting requirements of the Exchange Act,
and will not be required to file, among other things, quarterly reports on Form
10-Q and annual reports on Form 10-K. Accordingly, substantially less
information will be required to be made publicly available about the Company
than is currently the case.
Immediately after the Merger, all of the then issued and outstanding
Common Stock will be beneficially owned by UPBNA. Accordingly, UPBNA's indirect
interest in the assets and liabilities of the Company, including the net book
value and net earnings of the Company, will increase, upon effectiveness of the
Merger, from 92.27% to 100%. The Merger will be a taxable transaction to the
holders of the Common Stock who receive the Cash Payment Amount and to holders
of CFH Options who receive cash in exchange for their options for federal income
tax purposes and may be taxable for state, local, foreign and other tax
purposes. The Merger will generally not be a taxable transaction to holders of
CFH Options who receive options to purchase UPC Common Stock in exchange for
their options. See "-- Certain Federal Income Tax Consequences of the Merger."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Merger Sub was organized by UPBNA solely for the purpose of enabling
UPBNA to acquire, pursuant to the Merger Agreement, the entire equity interest
in the Company. As a result of the Merger, the Minority Holders will no longer
have an equity interest in the Company. See "-- Certain Effects of the Merger."
UPBNA is the beneficial owner of 11,357,850 shares or approximately 92.27% of
the outstanding shares of Common Stock of the Company.
All directors and executive officers of the Company served as directors
or executive officers of the Company during the fiscal year ended December 31,
1997. As of the date hereof, the directors and executive officers of the Company
beneficially own an aggregate of 135,000, or approximately 1.1% of the
outstanding shares of Common Stock of the Company, not including 657,100 shares
which are issuable pursuant to stock options. No current director or officer of
UPBNA owns any shares of the Company's Common Stock.
In the Merger Agreement, UPBNA has agreed that all rights to
indemnification arising at or prior to the Effective Time in favor of the
directors or officers of the Company to the full extent permitted under Florida
Law and in the Company's Articles of Incorporation or Bylaws, as in effect on
the date of the Merger Agreement, will, for a period of six years after the
Effective Time, with respect to matters occurring at or prior to the Effective
Time, survive the Merger and continue in full force and effect. See "THE MERGER
AGREEMENT -- Covenants."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following is a discussion of certain of the federal income tax
consequences of the Merger. The discussion may not apply to special situations,
such as Minority Holders who received the Common Stock upon the exercise of
employee stock options or otherwise as compensation, who are insurance
companies, securities dealers, financial
- 10 -
<PAGE> 25
institutions or foreign persons, or who received the CFH Options other than in
connection with the performance of services. In addition, the disussion does not
address any aspects of state, local, or foreign taxation. Accordingly, each
Minority Holder and holder of CFH Options is urged to consult his or her own tax
advisor as to the specific tax consequences to him/her, based on his/her
particular status and circumstances.
No gain or loss will be recognized by the Company or UPBNA as a
result of the Merger. Each Minority Holder will recognize gain or loss equal to
the difference between the amount received in exchange for shares of Common
Stock and the adjusted basis such shareholder had in the exchanged shares of
the Common Stock. Such gain or loss will generally be capital gain or loss
provided that the Minority Holder held the shares of Common Stock as capital
assets. A Holder of CFH Options who receives cash in exchange for his/her
options will recognize ordinary income equal to the amount of cash received. No
gain or loss will be recognozed by the holders of CFH Options upon the
conversion of such options into UPC Options exercisable under the same terms
and conditions as in effect immediately prior to the Merger.
ACCOUNTING TREATMENT OF THE MERGER
The Merger will be accounted for as a "purchase" as that term is used
under generally accepted accounting principles for accounting and financial
reporting purposes. Under this method of accounting, the purchase price will be
allocated to assets acquired and liabilities assumed based on their estimated
fair values at the Effective Time.
CERTAIN LITIGATION
The Company is also party to various legal and administrative
proceedings, all of which management believes constitute ordinary routine
litigation incident to the business conducted by the Company, or are not
material in amount.
REGULATORY APPROVALS
No federal or state regulatory approvals are required to be obtained, nor
any regulatory requirements complied with, in connection with consummation of
the Merger by any party to the Merger Agreement, except for the requirements of
the FBCA in connection with providing notice to the Minority Holders, and the
requirements of federal securities law.
- 11 -
<PAGE> 26
THE MERGER AGREEMENT
GENERAL
The Merger Agreement provides for the merger of Merger Sub into the
Company. The Company will be the Surviving Corporation of the Merger and, as a
result of the Merger, UPBNA will beneficially own all of the Surviving
Corporation's common stock. Upon consummation of the Merger, the Minority
Holders will receive the Cash Payment Amount of $17.50 in cash, without
interest. See "SPECIAL FACTORS -- Certain Effects of the Merger."
EFFECTIVE TIME OF THE MERGER
The Effective Time of the Merger will occur upon the filing of articles
of merger with the Secretary of State of the State of Florida as required by the
FBCA or at such later time as is specified in the articles of merger. The filing
will occur after all conditions to the Merger contained in the Merger Agreement
and the Plan of Merger have been satisfied or waived. The Company and UPBNA
anticipate that the Effective Time will occur on the 30th day following the date
of this Information Statement. The following discussion of the Merger Agreement
is qualified in its entirety by reference to the complete text of the Merger
Agreement, which is included in this Information Statement as Appendix A and is
incorporated herein by reference.
THE SURVIVING CORPORATION
The Merger Agreement provides that, from and after the Effective Time,
officers of the Company in office immediately prior to the Effective Time shall
serve as officers of the Surviving Corporation but that the directors of Merger
Sub will serve as the directors of the Surviving Corporation. Therefore,
although the management of the Company will not change as a result of the
Merger, the Company's current Board will be replaced with a Board consisting of
three officers of UPBNA.
CONSIDERATION TO BE RECEIVED BY SHAREHOLDERS OF THE COMPANY
As a result of the Merger, each Minority Share will be converted into the
right to receive the Cash Payment Amount of $17.50 in cash, without interest.
Each share of Common Stock owned by UPBNA or held by the Company as treasury
stock will be canceled without consideration.
Each of the outstanding shares of common stock, $1.00 par value, of
Merger Sub will automatically be converted into one share of common stock, $.01
par value, of the Surviving Corporation.
Promptly after the Effective Time, instructions with regard to the
surrender of certificates formerly representing shares of Common Stock, together
with the letter of transmittal to be used for that purpose, will be mailed to
the Minority Holders. The Exchange Agent (as defined in the Merger Agreement),
as soon as practicable following receipt from a shareholder of a duly executed
letter of transmittal, together with certificates formerly representing Common
Stock and any other items required by the letter of transmittal, shall pay to
such shareholder the Cash Payment Amount. If payment is to be made to a person
other than the person in whose name the certificate surrendered is registered,
it will be a condition of payment that the certificate so surrendered be
properly endorsed or otherwise in proper form for transfer and that the person
requesting such payment pay to the Exchange Agent any transfer or other taxes
required by reason of such payment or establish to the satisfaction of the
Exchange Agent that such taxes have been paid or are not applicable.
Notwithstanding the foregoing, neither UPBNA, Merger Sub nor the Exchange
Agent shall be liable to any holder of Common Stock for any amount paid to a
public official pursuant to applicable abandoned property laws.
Shareholders should not submit any stock certificates for Common Stock at
the present time.
After the Effective Time a holder of a certificate formerly representing
Common Stock shall cease to have any rights as a shareholder of the Company, and
such holder's sole right will be to receive the Cash Payment Amount.
- 12 -
<PAGE> 27
In no event will holders of Common Stock be entitled to receive any
interest on the Cash Payment Amount to be distributed to them in connection with
the Merger.
No transfer of shares outstanding immediately prior to the Effective Time
will be made on the stock transfer books of the Surviving Corporation after the
Effective Time. Certificates formerly representing Common Stock presented to the
Surviving Corporation after the Effective Time will be canceled in exchange for
the Cash Payment Amount.
TREATMENT OF OPTIONS
At the Effective Time, CFH Options which are held by employees of the
Company and have an exercise price which is less than $17.50 will be converted
into UPC Options . UPC Common Stock is traded on the New York Stock Exchange
(the "NYSE"). The number of UPC Options into which each CFH Option shall be
converted shall be equal to the quotient obtained by dividing (i) the Cash
Payment Amount of $17.50 by (ii) the average of the closing prices of UPC Common
Stock for the ten full trading day period ending on the last full trading day
immediately preceding the Effective Time (the "Average Closing Price"). The
exercise price of each UPC Option to be issued in connection with the merger
shall be equal to the quotient obtained by dividing (i) the exercise price of
the CFH Option from which the UPC Option was converted by (ii) quotient obtained
by dividing (A) the Cash Payment Amount of 17.50 by (B) the Average Closing
Price.
Prior to the Effective Time, the Company will cancel all CFH Options held
by non-employee directors of the Company in exchange for a cash payment equal to
the difference (if positive) between $17.50 and the exercise price of such
options.
All CFH Options with an exercise price greater than $17.50 shall be
cancelled at the Effective Time for no consideration.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of
the Company and UPBNA confirming generally, among other things, the following
matters: (i) due incorporation, corporate existence, good standing and similar
corporate matters with respect to the Company and UPBNA; (ii) (A) existence of
necessary corporate power and authority to execute deliver and perform the
obligations under the Merger Agreement by each such party and (B) that (with
certain exceptions) the Merger Agreement represents a legal valid and binding
obligation of the Company and UPBNA; (iii) absence of any notice to, filing with
or consent of any public body or authority necessary to consummate the Merger,
except as provided for in the Merger Agreement; (iv) the Merger Agreement and
the Merger not (A) conflicting with or resulting in a breach of any provision of
the charter documents or bylaws of either of the parties, (B) constituting or
resulting in a default under any contract or permit which would have a material
adverse effect on either party or (C) violating any law or order relating to the
Company, UPBNA or any of the subsidiaries or assets thereof which would have a
material adverse effect on either party; and (v) the accuracy of information
supplied by the Company and UPBNA included in this Information Statement and the
Schedule 13E-3.
UPBNA has also warranted that it will have funds available at the
Effective Time to carry out its obligations under the Merger Agreement.
In addition, the Merger Agreement contains certain representations of the
Company relating to its capital structure, the existence of outstanding options
and the absence of any action which would impair the rights of UPBNA and Merger
Sub as stockholders of the Company.
- 13 -
<PAGE> 28
COVENANTS
The Company has agreed in the Merger Agreement that until consummation of
the Merger the Company and its subsidiaries will, unless the prior written
consent of UPBNA shall have been obtained (i) operate its business only in the
usual regular and ordinary course, (ii) preserve intact in all material respects
its business organization and assets and maintain its rights and franchises,
(iii) take no action which would materially adversely affect the ability of any
party to (A) obtain any consents required for consummation of the transactions
contemplated by the Merger Agreement or (B) perform its covenants and agreements
under the Merger Agreement, and (iv) take no action to issue or authorize the
issuance of any additional shares of the Common Stock or any options to purchase
shares of the Common Stock.
UPBNA has agreed in the Merger Agreement to take no action and to cause
each of its subsidiaries to take no action which would materially adversely
affect the ability of any party to (i) obtain consents required for the
transactions contemplated by the Merger Agreement or (ii) perform its covenants
and obligations under the Merger Agreement
Each of UPBNA and the Company have agreed to use its best efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable to consummate the transactions
contemplated by the Merger Agreement.
The Company has agreed to take all necessary steps to exempt the
transactions contemplated by the Merger Agreement from and to challenge the
applicability of Section 607.0901 of the FBCA. See "SPECIAL FACTORS -- Approval
of Minority Holders not Required."
UPBNA has agreed that for six years after the Effective Time, UPBNA will
or will cause the Surviving Corporation to indemnify and hold harmless the
present and former officers and directors of the Company in respect of acts or
omissions occurring at or prior to the Effective Time to the extent provided
under the Company's Articles of Incorporation and Bylaws in effect on the date
of the Merger Agreement.
CONDITIONS TO CONSUMMATION OF THE MERGER
The respective obligations of the Company and UPBNA to consummate the
Merger are subject to the satisfaction or waiver, at or prior to the Effective
Time, of the following conditions, among others: (i) the absence of any statute,
rule, regulation, executive order, decree, injunction or other order (whether
temporary, preliminary or permanent) enacted, issued, promulgated, enforced or
entered prohibiting the consummation of the Merger; (ii) the receipt of all
other required authorizations, consents and approvals of governmental
authorities; (iii) the performance of and compliance with, in all material
respects, all agreements and obligations contained in the Merger Agreement and
required to be performed or complied with at or prior to the Effective Time by
the respective parties to the Merger Agreement; (iv) the material truth and
correctness of all representations and warranties of the parties to the Merger
Agreement; and (v) Stifel having issued and not withdrawn its written fairness
opinion.
TERMINATION
The Merger Agreement may be terminated and the Merger abandoned at any
time prior to the Effective Time: (i) by mutual written consent of the Company
and UPBNA or (ii) by either the Company or UPBNA, if there shall be any law or
regulation that makes consummation of the Merger illegal or otherwise prohibited
or if any judgment, injunction, order or decree enjoining UPBNA or the Company
from consummating the Merger is entered and becomes final and nonappealable.
EXPENSES
Generally, the Merger Agreement provides that all costs and expenses
incurred in connection with the Merger shall be borne by the party incurring
such expenses with the exception that UPBNA shall pay the filing fees payable in
connection with the Schedule 13E-3 and the fees and expenses of Stifel.
- 14 -
<PAGE> 29
AMENDMENTS
The Merger Agreement may not be amended prior to the Effective Time
except by action of the Company and UPBNA set forth in a written instrument
signed on behalf of each of the parties; provided that amendment which would
reduce the Cash Payment Amount must be approved by the Board of Directors of the
Company.
ESTIMATED FEES AND EXPENSES
Estimated fees and expenses incurred or to be incurred by the Company and
UPBNA in connection with the Merger are approximately as follows:
<TABLE>
<S> <C>
Payment of merger consideration (1)................................ $16,645,335
Advisory fees (2).................................................. 57,500
Legal fees and expenses (3)........................................ 35,000
Accounting fees and expenses....................................... 8,500
Securities and Exchange Commission filing fee...................... 3,329
Printing and mailing expenses...................................... 7,000
Exchange Agent fees and expenses................................... 1,000
Miscellaneous expenses............................................. 500
-----------
Total.................................................. $16,758,164
===========
- -------------------------
</TABLE>
(1) Includes payment for all outstanding shares of Common Stock other than
those owned by UPBNA plus payments in settlement of outstanding stock
options in accordance with the Merger Agreement.
(2) Includes the fees and estimated expenses of Stifel.
(3) Includes the estimated fees and expenses of counsel for the Company and
counsel for UPBNA.
- 15 -
<PAGE> 30
MARKET PRICES FOR THE COMMON STOCK
The Company's Common Stock is listed and traded on the Nasdaq National
Market under the symbol "CAPF." The following table sets forth for the indicated
periods, the high and low closing sale prices for the Common Stock as reported
by the Nasdaq National Market.
<TABLE>
<CAPTION>
Price Range
--------------------------
High Low
------------- -----------
<S> <C> <C>
1998
First Quarter................... $19.00 $15.00
Second Quarter ................. 20.00 17.25
Third Quarter .................. 17.78 15.63
Fourth Quarter (through
October 22, 1998)............... 17.44 16.00
----- -----
1997
First Quarter................... $15.38 $12.00
Second Quarter.................. 17.75 13.25
Third Quarter................... 19.38 16.25
Fourth Quarter.................. 19.25 16.00
1996
First Quarter................... $ n/a $ n/a
Second Quarter.................. n/a n/a
Third Quarter................... 10.38 8.25
Fourth Quarter.................. 13.25 9.88
</TABLE>
On October 21, 1998, the most recent practicable date before the
printing of this Information Statement, the last sale price as reported by the
Nasdaq National Market was $17.25.
- 16 -
<PAGE> 31
THE COMPANY
GENERAL
The Company is a corporation organized and existing under the laws of the
State of Florida. The Company's principal executive offices are located at Suite
500, East Palmetto Park Road, Boca Raton, Florida 33432.
The Company has three first-tier and three second-tier subsidiaries as
shown in the following chart.
[GRAPHIC]
Capital Factors, Inc. and Capital Tempfunds, Inc., are principally
engaged in providing account receivable-based financing and related fee-based
credit, collection and management services. CF Funding Corporation holds
securities representing residual interests in Capital Factors Financing Trust, a
securitization vehicle for the Company's receivables. CF One, Inc., CF Two, LLC
and CF Investor Corporation hold subordinated certificates issued in the
Company's securitizations.
INITIAL PUBLIC OFFERING AND ACQUISITION OF STOCK BY UPBNA
On July 16, 1996, the Company completed an initial public offering of
2,000,000 shares of Common Stock, at a price of $8.50 per share. On August 2,
1996, the underwriting syndicate exercised its option to acquire an additional
300,000 shares of the Common Stock. Prior to the initial public offering, the
Company was a wholly-owned subsidiary of Capital Bank. As a result of the
initial public offering, Capital Bank's ownership of the Company was reduced to
approximately 81%. Capital Bank was the principal banking subsidiary of Capital
Bancorp, which UPC, the parent company of UPBNA, acquired on December 31, 1997,
pursuant to the merger of Capital Bancorp into UPHC, a wholly-owned subsidiary
of UPC. As a result of this acquisition, Capital Bank became a second-tier
subsidiary of UPC. Capital Bank was subsequently merged with and into UPBNA on
August 1, 1998, and as a result, the Company and its subsidiaries became
subsidiaries of UPBNA. UPBNA has also made certain additional unsolicited
purchases of the Common Stock. A summary of such purchases is set forth in the
table below.
<TABLE>
<CAPTION>
--------------------------- -------------------- ---------------------
DATE OF PURCHASE NUMBER OF SHARES PER SHARE PRICE
--------------------------- -------------------- ---------------------
<S> <C> <C>
August 10, 1998 500,000 $17.50
--------------------------- -------------------- ---------------------
August 18, 1998 157,700 $17.50
--------------------------- -------------------- ---------------------
August 31, 1998 444,900 $17.50
--------------------------- -------------------- ---------------------
September 1, 1998 143,250 $17.50
--------------------------- -------------------- ---------------------
September 3, 1998 87,500 $17.50
--------------------------- -------------------- ---------------------
September 16, 1998 24,500 $17.50
--------------------------- -------------------- ---------------------
</TABLE>
PAYMENT OF DIVIDENDS
The Company has never paid dividends on the shares of its Common Stock.
- 17 -
<PAGE> 32
RATIO EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for
the Company for the indicated periods.
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
---------------------- ---------------------
(dollars in thousands)
----------------------------------------------------
1998 1997 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
PRE-TAX EARNINGS $10,538 $ 9,187 $19,601 $19,039
FIXED CHARGES 17,299 11,357 27,587 20,403
EARNINGS 27,837 20,544 47,188 39,442
FIXED CHARGES 17,299 11,357 27,587 20,403
RATIO 1.61x 1.81x 1.71x 1.93x
- -----------------------------------------------------------------------------
</TABLE>
BOOK VALUE PER SHARE
The following table sets forth the book value per share of the Company's
Common Stock for the indicated periods.
<TABLE>
<CAPTION>
JUNE 30,
-----------
DECEMBER 31,
-----------------------------------
1998 1997
----------- -----------------------------------
<S> <C> <C>
BOOK VALUE PER SHARE $6.55 $6.03
</TABLE>
- 18 -
<PAGE> 33
CERTAIN INFORMATION CONCERNING UPBNA AND MERGER SUB
UPBNA
UPBNA is a national banking association, organized and existing under the
laws of the United States and is a wholly-owned subsidiary of UPHC, a
corporation organized and existing under the laws of the State of Tennessee.
UPHC is a wholly-owned subsidiary of UPC, a corporation organized and existing
under the laws of the State of Tennessee. The principal executive offices of
UPBNA are located at 7130 Goodlett Farms Parkway, Memphis, Tennessee 38018.
UPBNA was founded in 1869 and provides a diversified range of financial
services in the communities in which it operates. As of September 30, 1998,
UPBNA's total assets were $19.8 billion. In addition to UPBNA, UPC operates
eight other bank subsidiaries and two savings banks subsidiary. UPC's total
assets at September 30, 1998 were $30.5 billion.
MERGER SUB
Merger Sub, a Florida Corporation and a wholly-owned subsidiary of UPBNA,
was organized for the sole purpose of effectuating the Merger. The directors and
sole shareholder of Merger Sub have approved the Merger Agreement. Until the
consummation of the Merger, it is not anticipated that Merger Sub will have any
significant assets or liabilities (other than those arising under the Merger
Agreement or in connection with the Merger and the transactions contemplated
thereby) or engage in any activities other than those incident to its formation
and capitalization and the Merger. The principal executive offices of Merger Sub
are located at 7130 Goodlett Farms Parkway, Memphis, Tennessee 38018.
CERTAIN TRANSACTIONS
The Company and UPBNA and its affiliates are parties to certain
agreements as follows.
Prior to UPC's acquisition of Capital Bancorp (the "Acquisition"), the
Company had a $150 million credit facility with Capital Bank. The Company
expensed interest payments to Capital Bank of $7,391,000 and $5,265,000 on this
facility during the periods ended December 31, 1997, and December 31, 1996,
respectively. In January 1998, the Company entered into a new $150 million
credit facility with UPC.
Prior to the Acquisition, Capital Bank obtained group medical, dental and
life insurance coverage on behalf of the Company. UPBNA has continued such
coverage to the Company since the merger of Capital Bank and UPBNA on August 1,
1998. Premiums are charged to the Company at the same amount as they are
assessed to UPBNA, and were formerly to Capital Bank. During 1997 and 1996, the
Company paid premiums of $662,075 and $605,227, for its actual portion of such
premiums.
Capital Bank provided approximately $166.5 million and $135.5 million,
during 1997 and 1996, respectively of letters of credit for clients of the
Company. The Company paid Capital Bank $315,635 and $224,332, during 1997 and
1996, respectively, for charges related to services performed by Capital Bank
for the Company. Fees charged for issuance of letters of credit were paid
directly to Capital Bank and ammounted to $605,429 and $373,688 in 1997 and
1996, respectively.
It is the intention of management that all transactions with affiliated
parties will be on terms no less favorable to the Company than could be obtained
from unaffiliated parties, and all such transactions with affiliates have been
approved by the Company's directors who are not employed by the Company or
UPBNA.
- 19 -
<PAGE> 34
INDEPENDENT AUDITORS
The consolidated financial statements of the Company as of and for the
years ended December 31, 1997 and 1996 included herein have been audited by
Deloitte & Touche LLP, independent auditors, as indicated in their report
appearing herein.
- 20 -
<PAGE> 35
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
AUDITED FINANCIAL STATEMENTS:
Independent Auditors' Report................................................................................ F-2
Consolidated Balance Sheets as of December 31, 1996 and 1997................................................ F-3
Consolidated Statements of Income for the Years Ended December 31,
1995, 1996 and 1997.................................................................................... F-4
Consolidated Statements of Shareholders' Equity for the Years Ended
December 31, 1995, 1996 and 1997....................................................................... F-5
Consolidated Statements of Cash Flows for the Years Ended December 31,
1995, 1996 and 1997.................................................................................... F-6
Notes to Consolidated Financial Statements.................................................................. F-7
UNAUDITED FINANCIAL STATEMENTS:
Consolidated Balance Sheet as of June 30, 1998 ............................................................. F-18
Consolidated Statements of Income for the Three Months and the Six
Months Ended June 30, 1997 and 1998.................................................................... F-19
Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 1997 and June 30, 1998........................................................................ F-20
Notes to Consolidated Financial Statements.................................................................. F-21
</TABLE>
F-1
<PAGE> 36
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of Capital Factors Holding, Inc.
We have audited the accompanying consolidated balance sheets of Capital Factors
Holding, Inc. (a majority owned subsidiary of Union Planters Bank of Florida)
and subsidiaries as of December 31, 1997 and 1996 and the related consolidated
statements of income, stockholders' equity and cash flows for each of the three
years in the period ended December 31, 1997. These consolidated 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 audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Capital Factors Holding, Inc. and
subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Certified Public Accountants
Miami, Florida
March 6, 1998
F-2
<PAGE> 37
CAPITAL FACTORS HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
1997 1996
---------------- ----------------
ASSETS
<S> <C> <C>
Cash $41,253,904 $ 28,101,237
Restricted cash 10,134,375 6,562,500
Receivables 700,786,603 490,977,592
Unearned discounts (2,926,865) (2,436,301)
Allowance for credit losses (6,125,359) (2,993,534)
---------------- ----------------
Receivables, net 691,734,379 485,547,757
Property and equipment, net 4,471,397 3,095,157
Other assets 8,983,100 7,260,672
---------------- ----------------
TOTAL $756,577,155 $ 530,567,323
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Due to affiliates $ 145,570 $ 1,310,304
Capital Factors variable rate asset backed
Certificates 275,000,000 175,000,000
Note payable to affiliate 111,754,000 70,131,000
Other borrowings 53,600,000 25,900,000
Due to factoring clients 234,745,074 191,488,668
Other liabilities 7,150,825 4,648,892
---------------- ----------------
Total liabilities 682,395,469 468,478,864
---------------- ----------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $0.01 par value, 25,000,000
shares authorized; issued and outstanding
12,303,950 in 1997, 12,300,000 in 1996 123,040 123,000
Additional paid-in capital 27,582,840 27,151,932
Retained earnings 46,475,806 34,813,527
---------------- ----------------
Total stockholders' equity 74,181,686 62,088,459
---------------- ----------------
TOTAL $756,577,155 $ 530,567,323
================ ================
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 38
CAPITAL FACTORS HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
--------------- ---------------- --------------
<S> <C> <C> <C>
REVENUES
Factoring fees $30,139,585 $26,066,382 $19,518,541
Interest income 48,192,429 35,835,351 28,210,599
Letter of credit and other fees 4,260,039 3,098,596 2,040,383
Other 2,098,944 1,707,995 1,849,466
--------------- ---------------- --------------
Total revenues 84,690,997 66,708,324 51,618,989
--------------- ---------------- --------------
EXPENSES
Interest expense 20,196,669 15,137,924 11,629,391
Interest expense to affiliates 7,390,855 5,265,025 4,731,668
Salaries and benefits 19,141,804 14,674,483 11,240,046
Provision for credit losses 7,250,000 3,750,000 2,234,721
Occupancy and other office expenses 4,718,825 3,628,446 2,588,459
Depreciation and amortization 898,044 656,384 632,739
Professional fees 1,274,043 1,006,441 991,535
Other 4,219,966 3,550,441 3,004,570
--------------- ---------------- --------------
Total expenses 65,090,206 47,669,144 37,053,129
--------------- ---------------- --------------
INCOME BEFORE INCOME TAXES 19,600,791 19,039,180 14,565,860
PROVISION FOR INCOME TAXES 7,938,512 7,923,956 5,872,763
--------------- ---------------- --------------
NET INCOME $11,662,279 $11,115,224 $ 8,693,097
=============== ================ ==============
Basic earnings per share $ 0.95 $ 1.01 $ 0.87
=============== ================ ==============
Diluted earnings per share $ 0.93 $ 1.00 $ 0.87
=============== ================ ==============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 39
CAPITAL FACTORS HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Years Ended December 31, 1995, 1996 and 1997
Additional
Common Paid-In Retained
Stock Capital Earnings
---------------- --------------- ----------------
<S> <C> <C> <C>
BALANCE, DECEMBER 31, 1994 $100,000 $9,542,096 $15,005,206
Net Income 8,693,097
---------------- --------------- ----------------
BALANCE, DECEMBER 31, 1995 100,000 9,542,096 23,698,303
Net proceeds from the sale of common stock 23,000 17,609,836
Net Income 11,115,224
---------------- --------------- ----------------
BALANCE, DECEMBER 31, 1996 123,000 27,151,932 34,813,527
Net proceeds from the sale of common stock 40 33,535
Allocation of tax benefits from exercise of Bancorp
stock options by company personnel 397,373
Net Income 11,662,279
---------------- --------------- ----------------
BALANCE, DECEMBER 31, 1997 $123,040 $27,582,840 $46,475,806
================ =============== ================
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 40
CAPITAL FACTORS HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
---------------- ---------------- ---------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $11,662,279 $11,115,224 $ 8,693,097
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 898,044 656,384 632,739
Deferred income taxes (1,755,379) (76,610) (399,986)
Provision for credit losses 7,250,000 3,750,000 2,234,721
Increase in restricted cash (3,571,875) (375,000) (1,500,000)
Loss on sale of assets 14,495 3,873
Due (from) to affiliates (1,164,734) (5,142,660) 1,617,266
Other assets (122,912) (2,103,811) (430,465)
Other liabilities 2,899,306 808,467 690,179
---------------- ---------------- ---------------
Net cash provided by operating activities 16,094,729 8,646,489 11,541,424
---------------- ---------------- ---------------
INVESTING ACTIVITIES:
Loan to clients, net (27,860,326) (1,913,535) (3,053,589)
(Increase) decrease in asset based loans (82,773,666) 2,295,896 (27,841,907)
Net increase in factoring accounts receivable,
net of due to factoring clients (79,319,123) (79,560,531) (32,940,825)
Sales of participations 26,291,256 11,432,386 1,238,287
Payments on participations (6,518,356) (3,919,712) (751,947)
Purchases of property and equipment (2,219,148) (456,749) (914,342)
Disposals of property and equipment 50,931 25,033 18,836
---------------- ---------------- ---------------
Net cash used in investing activities (172,348,432) (72,097,212) (64,245,487)
---------------- ---------------- ---------------
FINANCING ACTIVITIES:
Issuance of senior certificates 100,000,000 50,000,000
Restricted proceeds from senior certificates 10,000,000 (10,000,000)
Net proceeds from sale of common stock 33,575 17,632,836
Proceeds from borrowings 163,167,000 127,528,000 53,522,033
Payments on borrowings (93,844,000) (83,757,000) (35,802,033)
Payments of deferred financing costs (972,230) (980,825) (744,802)
Amortization of deferred costs 1,022,025 802,135 608,844
---------------- ---------------- ---------------
Net cash provided by financing activities 169,406,370 71,225,146 57,584,042
---------------- ---------------- ---------------
NET INCREASE IN CASH 13,152,667 7,774,423 4,879,979
CASH, BEGINNING OF PERIOD 28,101,237 20,326,814 15,446,835
---------------- ---------------- ---------------
CASH, END OF PERIOD $41,253,904 $28,101,237 $20,326,814
================ ================ ===============
SUPPLEMENTAL CASH FLOW
INFORMATION:
Cash payments for interest $25,554,308 $18,338,991 $14,784,541
================ ================ ===============
Cash payments for income taxes $ 9,669,839 $13,648,128 $ 4,929,303
================ ================ ===============
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 41
CAPITAL FACTORS HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND DESCRIPTION OF OPERATIONS
Capital Factors Holding, Inc. ("the Parent Company") is a majority-owned
subsidiary of Union Planters Bank of Florida (the "Bank") which was formerly
known as Capital Bank. The Bank is a wholly-owned subsidiary of Union Planters
Corporation ("UPC"), the surviving company of a merger with Capital Bancorp
("Bancorp") effective December 31, 1997 and was accounted for as a pooling of
interests. The Parent Company was incorporated in June 1994, in order to
accommodate the issuance of Variable Rate Asset Backed Certificates (as further
discussed in Note 5 to the financial statements), and issued 1000 shares (100%)
of its stock to Capital Bank in exchange for 60 shares (100%) of the outstanding
shares of Capital Factors, Inc. ("Factors"). On July 1, 1996, the Parent Company
effected a 10,000-for-1 stock split resulting in 10,000,000 common shares
issued. The stock split was retroactively reflected in the consolidated
financial statements. On July 16, 1996, the Parent Company completed an initial
public offering of 2,000,000 shares of common stock at a public offering price
of $8.50 per share. On August 2, 1996, the underwriting syndicate exercised its
option to acquire an additional 300,000 shares of common stock. As a result of
the public offering, the Bank's ownership of the Parent Company was reduced to
approximately 81% of the outstanding 12,300,000 shares of common stock.
The Parent Company has three wholly-owned subsidiaries, Factors, CF One, Inc.
("CF One"), and CF Investor Corp. Factors has two wholly-owned subsidiaries, CF
Funding Corp. ("Funding") and Capital TempFunds, Inc. ("TempFunds"), a North
Carolina corporation formed in 1996. On August 9, 1996, Factors acquired
substantially all of the assets of TempFunds America, Inc. and its affiliate,
TempFunds America Funding Corporation of South Carolina, Inc. The purchase price
paid by Factors was approximately $5.9 million (approximately $5.0 million equal
to the net book value of the assets plus an additional $900,000.) An additional
amount up to $900,000 is payable over a three year period if certain
contingencies are met. Goodwill resulting from the acquisition is being
amortized using the straight-line method over a 10 year period. TempFunds is a
specialized financial services company principally engaged in providing
receivables-based commercial financing and related fee-based credit, collection
and management information services to temporary employment and home health care
agencies.
Factors provides factoring and other services primarily to commercial businesses
and generally purchases trade accounts receivables from clients and assumes all
risks of collectibility for credit approved receivables, except as such risks
result from fraud or invalid receivables, and dilution. Factors generally enters
into advance factoring arrangements which allow clients to obtain cash advances
against a stipulated percentage of the receivables before they are due or
collected.
The Company provides services to its clients through four regional offices
located in Boca Raton, Florida; Los Angeles, California; New York, New York and
Charlotte, North Carolina and an asset based lending office in Atlanta, Georgia.
The Company's clients primarily include manufacturers, importers, wholesalers
and distributors in apparel and textile related industries and, to a lesser
extent, clients in consumer goods related industries and healthcare services.
The Company's factored accounts receivable are due from clients' customers
geographically located throughout the United States, principally retailers,
manufacturers and distributors. As of December 31, 1997 and 1996, the Company
had factored accounts receivable aggregating approximately $294.3 million and
$192.9 million, respectively, due from 54 and 38 customers, respectively, each
with balances exceeding $1 million. These customers are primarily large national
or regional department store chains or specialty retailers. The largest amount
due from any one customer, a national department store chain, at December 31,
1997 was approximately $35.4 million.
The Company's asset-based loans represent loans provided to clients principally
collateralized by accounts receivables. The Company does not service the
accounts receivable nor does it provide credit protection of the receivables.
F-7
<PAGE> 42
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Principles of Consolidation - The consolidated financial statements of Capital
Factors Holding, Inc. and Subsidiaries (the "Company") include the accounts of
the Parent Company, Factors, TempFunds, Funding, CF One, and CF Investor Corp.
All significant intercompany transactions and balances have been eliminated in
consolidation.
Unearned and Earned Discounts - The Company deducts trade and cash discounts on
all factoring invoices purchased. Discounts not taken by customers are
recognized as income principally at the time of payment of the invoice.
Allowance for Credit Losses - The allowance for credit losses is maintained at a
level deemed adequate by management to absorb losses in the portfolio after
evaluating the portfolio, current economic conditions, changes in the nature and
the volume of the portfolio, past loss experience and other pertinent factors.
Many of these factors involve a significant degree of estimation and are subject
to rapid change which may be unforeseen by management. It is reasonably possible
that changes in these factors could result in material adjustments to the
allowance in the near term.
Property and Equipment - Property and equipment are carried at cost less
accumulated depreciation. Depreciation is provided over the estimated useful
lives, primarily on the straight-line method. Estimated depreciable lives range
from 3 - 8 years for furniture, equipment, software and leasehold improvements
and 39 years for buildings.
Income Recognition - Interest income on all loans and advances is calculated
using the simple interest method on the daily balances of principal outstanding
and is recorded as earned in accordance with the terms of the related factoring
agreements with clients. Accrual of interest income is discontinued on troubled
loans and advances to factoring clients when the loan balance and interest
receivable exceeds the estimated value of the collateral securing the loan or
advance. Factoring fees are recognized generally at the time of purchase of
factored receivables due to the nature of the relationship with the factoring
client and the relatively short term nature of the factored receivables. The
difference between the Company's income recognition policy and amortization of
such fee over the service period is immaterial. Commitment/closing fees related
to asset based loans are amortized over the life of the loan as an adjustment of
yield.
Unallocated Credits - The Company generally notifies the payor when
unidentifiable payments or portions thereof are received. If the payor does not
respond within 90 days, the Company records the unallocated credits as income.
The Company maintains an allowance for unallocated credits recorded as income
which may be subsequently repaid based upon its historical experience.
Income Taxes - There are two components of the income tax provision, current and
deferred. Current income tax provisions approximate taxes to be paid or refunded
for the applicable period. Balance sheet amounts of deferred taxes are
recognized on 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 liabilities or assets 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 is recorded for those deferred tax items for which it is more likely
than not that realization will not occur. The results of operations of the
Company are included in the consolidated Federal income tax return filed by UPC.
UPC allocates income taxes to the Company principally calculated on a separate
return basis.
Accounting for Stock Options - In October 1995, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock-Based Compensation" which
F-8
<PAGE> 43
is effective for awards granted in fiscal years beginning after December 15,
1995. This standard defines a fair value-based method of measuring employee
stock options or similar equity instruments. In lieu of recording the value of
such options as compensation expense, companies may provide pro forma
disclosures quantifying the difference between net income as prescribed by
current accounting standards and the related cost measured by such fair
value-based method. The Company will measure cost for stock-based compensation
as prescribed by the Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees."
New Accounting Pronouncements
SFAS No. 130, "Reporting Comprehensive Income," is effective for fiscal years
beginning after December 15, 1997. This statement establishes standards for
reporting and display of comprehensive income and its components in a full set
of general-purpose financial statements. Management has not evaluated the impact
this statement will have on the Company's consolidated financial position and
results of operations
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," is effective for financial statements for periods beginning after
December 15, 1997. This statement establishes standards for the way that public
companies report selected information about operating segments. Adoption of this
statement is not expected to have a material impact on the Company's
consolidated financial position or results of operations but may have an effect
on disclosure of such.
3. RECEIVABLES
Receivables consist of the following:
<TABLE>
<CAPTION>
December 31,
1997 1996
---------------- ---------------
<S> <C> <C>
Nonrecourse $326,642,458 $269,812,980
Recourse 201,321,817 157,178,312
---------------- ---------------
Factored accounts receivables 527,964,275 426,991,292
Loans to factoring clients 54,029,119 27,966,757
Asset based loans 118,793,209 36,019,543
---------------- ---------------
$700,786,603 $490,977,592
================ ===============
</TABLE>
The Company also makes advances to factoring clients. Such advance payments,
which are interest earning, are recorded as reductions to the amounts due to the
factoring clients for the purchase of receivables. Average funds employed
(receivables less amounts due to factoring clients) were $391.0 million and
$286.2 million at December 31, 1997 and December 31, 1996, respectively.
Changes in the Company's allowance for credit losses were as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
------------- -------------- --------------
<S> <C> <C> <C>
Beginning balance $2,993,534 $2,980,778 $1,774,101
Allowance related to acquisition of
TempFunds America, Inc. 100,000
Provision for credit losses 7,250,000 3,750,000 2,234,721
Charge-offs (4,597,179) (4,402,745) (1,625,148)
Recoveries 479,004 565,501 597,104
------------- -------------- --------------
Net charge-offs (4,118,175) (3,837,244) (1,028,044)
------------- -------------- --------------
Ending balance $6,125,359 $2,993,534 $2,980,778
============= ============== ==============
</TABLE>
The Company specifically considered approximately $430,000 and $660,000 of its
client advances impaired at December 31, 1997 and December 31, 1996,
respectively, and has discontinued the accrual of interest income. The
F-9
<PAGE> 44
allowance for credit losses related to these impaired loans for the same periods
was approximately $309,000 and $30,000, respectively.
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
December 31,
1997 1996
---------------- ---------------
<S> <C> <C>
Land $ 479,581 $. 479,581
Building 1,518,538 1,518,538
Building improvements 922,157 749,568
Furniture and equipment 4,369,292 2,752,850
Computer software 397,215 288,930
Leasehold improvements 230,201 76,874
---------------- ---------------
$7,916,984 $5,866,341
Less accumulated depreciation (3,445,587) (2,771,184)
---------------- ---------------
$4,471,397 $ 3,095,157
================ ===============
</TABLE>
5. VARIABLE RATE ASSET-BACKED CERTIFICATES
On June 29, 1994, December 15, 1994 and July 28, 1995 Capital Factors, Inc.,
through its wholly owned subsidiary CF Funding Corp., issued $100,000,000,
$25,000,000 and $50,000,000, respectively, of Variable Rate Asset Backed
Certificates ("senior certificates") with maturity dates of December 1999, June
2000 and January 2001. The senior certificates bear an interest rate of LIBOR
plus 1.25%. The interest rates on December 31, 1997 and 1996 were 7.23% and
6.86%, respectively. The senior certificates may not be redeemed prior to their
stated maturity. On April 30, 1997, CF Funding Corp., issued a fourth series of
variable rate asset-backed certificates ("the Variable Funding Certificates")
that mature at June 2004. Unlike the previously issued Certificates which were
fixed as to principal amount, the Variable Funding Certificates provide for a
monthly settlement of principal, which may increase or decrease the outstanding
amount. The fourth series includes the issuance of $95.25 million of senior
Variable Funding Certificates and $4.75 million of senior subordinated Variable
Funding Certificates which bear interest rates of LIBOR plus 0.75% and LIBOR
plus 1.50%, respectively. The interest rates at December 31, 1997 were 6.73% and
7.48%, respectively, excluding annualized transaction costs of 0.17%. Interest
on all certificates is payable monthly. The certificates are collateralized by
interest-earning advances to factoring clients which totaled approximately
$323,760,000 at December 31, 1997. Such advances are made on receivables before
they are due or collected by the Company. Capital Factors, Inc., services and
administers these advances and related receivables under an agreement entered
into by Bankers Trust Company, as Trustee, CF Funding Corp. and Capital Factors,
Inc. The senior certificates are subject to acceleration if certain collateral
and net worth requirements are not maintained. Remaining deferred issuance costs
of $2.1 million are being amortized over the terms of the related series. Such
costs are included in other assets on the balance sheets.
Restricted Cash - CF Funding Corporation is required to maintain a cash
collateral account at Bankers Trust Company, pursuant to the terms of the
aforementioned agreement. Such restricted cash collateral amounted to
$10,134,375 and $6,562,500 at December 31, 1997 and 1996, respectively.
F-10
<PAGE> 45
6. OTHER BORROWINGS
Notes payable are summarized as follows:
<TABLE>
<CAPTION>
December 31,
1997 1996
---------------- ---------------
<S> <C> <C>
Affiliate:
- ----------
A $150 million revolving line-of-credit payable to the Bank at
prime ( 8.50% and 8.25% at December 31, 1997 and 1996,
respectively) with interest payable monthly. The loan matures on
demand. $ 111,754,000 $ 70,131,000
Non-Affiliate:
- --------------
A $50,000,000 revolving loan payable to an unaffiliated bank at
LIBOR plus 2.15% (8.09% at December 31, 1997) with interest
payable monthly. The loan matures in March 1999, with automatic
1 year renewal periods. 43,600,000 15,900,000
7.95% subordinated note issued in connection with the Company's
Securitized Financings. Interest is payable monthly. The loan is
due in July 2001. 10,000,000 10,000,000
---------------- ---------------
Total Other Borrowings $165,354,000 $ 96,031,000
================ ===============
</TABLE>
Amounts borrowed under the affiliate Bank facility are subject to the Bank's
overall statutory limitation on investments in and advances to subsidiaries of
10% of consolidated Bank assets. In addition to the line with the Bank, the
Company entered into a $150 million unsecured line of credit with Union Planters
Corporation on January 2, 1998. Indebtedness under this facility will bear
interest at 0.75% below the WSJ prime rate.
Under the revolving loan payable to an unaffiliated bank, the Company has
certain financial covenants and ratios, including those relating to the
Company's debt to net worth, profitability and net cash flows. In February 1998,
this revolving credit facility was increased to $75.0 million and the interest
rate was reduced to LIBOR plus 1.25%, a decrease of 0.90%.
Supplemental information for the Company's borrowings, including the Variable
Rate Asset Backed Certificates (Note 5), follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
---------------- ---------------- --------------
<S> <C> <C> <C>
Maximum amount outstanding at any month-end $448,464,000 $295,566,000 $221,871,000
Average borrowings $346,411,000 $258,342,000 $191,264,000
Interest expense for the period $ 25,708,058 $ 18,843,230 $ 15,140,324
Average interest rate 7.42% 7.29% 7.92%
Average interest rate, end of period 7.54% 7.31% 7.57%
</TABLE>
The aggregate maturities of total borrowings at December 31, 1997 are as
follows:
<TABLE>
<CAPTION>
<S> <C>
Year Ending:
1998 $111,754,000
1999 143,600,000
2000 25,000,000
2001 60,000,000
Thereafter 100,000,000
---------------
Total $440,354,000
===============
</TABLE>
F-11
<PAGE> 46
7. INCOME TAXES
The results of operations of the Company are included in the consolidated
Federal income tax return filed by the Bank. UPC allocates income taxes to the
Company principally calculated on a separate return basis. The Company pays to
the Bank the amount of its estimated annual current tax provisions. The Company
paid approximately $9,609,000, $13,620,000, and $4,929,000, for income taxes in
the years ended December 31, 1997, 1996 and 1995, respectively, for income taxes
related to its fiscal years ended December 31, 1997 through 1995.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
The tax effects of significant items comprising the Company's net deferred tax
asset, which is included in other assets in the balance sheet, as of December
31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
------------------ -----------------
<S> <C> <C>
Deferred tax assets:
Bad debts $ 2,362,551 $ 1,154,756
Difference between book and tax basis of
property 211,343 214,115
Deferred stock option compensation 458,519
Deferred compensation 136,466 89,347
------------------ -----------------
Deferred asset 3,168,879 1,458,218
------------------ -----------------
Deferred tax liability:
Pension costs 27,524 (29,750)
Other (31,456) (18,900)
------------------ -----------------
Deferred liability (3,932) (48,650)
------------------ -----------------
Net deferred asset $ 3,164,947 $ 1,409,568
================== =================
</TABLE>
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
-------------- --------------- --------------
<S> <C> <C> <C>
Current taxes:
Federal $8,185,557 $ 6,996,887 $ 4,898,648
State 1,508,334 1,003,679 1,374,101
-------------- --------------- --------------
9,693,891 8,000,566 6,272,749
Deferred taxes (benefit):
Federal and State (1,755,379)
(76,610) (399,986)
-------------- --------------- --------------
$ 7,938,512 $ 7,923,956 $ 5,872,763
============== =============== ==============
</TABLE>
The following is a reconciliation between the provision for income taxes
included in the accompanying statements of income and the provision computed
using the statutory federal tax rate:
F-12
<PAGE> 47
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
------------------------- ------------------------ -----------------------
% of % of Pre- % of
Pre-tax tax Pre -tax
Amount Income Amount Income Amount Income
------------------------- ------------------------ -----------------------
<S> <C> <C> <C> <C> <C> <C>
Computed provision at
statutory rate $6,860,276 35.0% $6,663,713 35.0% $5,098,051 35.0%
State taxes, net of Federal
benefit 802,882 4.1% 678,883 3.6% 774,712 5.3%
Other 275,354 1.4% 581,360 3.0%
------------------------- ----------------------- ------------------------
$7,938,512 40.5% $7,923,956 41.6% $5,872,763 40.3%
========================= ======================== =======================
</TABLE>
8. COMMITMENTS AND OFF-BALANCE SHEET RISK
The Company is a lessee under operating leases for real estate and equipment.
The real estate leases contain clauses which require additional rent for
increases in operating expenses or a proportionate share of taxes and operating
expenses. There are no options to renew the leases of the leased regional
offices. The approximate future minimum rental payments under noncancellable
leases (exclusive of additional amounts for taxes and operating expenses) as of
December 31, 1997, are as follows:
<TABLE>
Years ending December 31,
<S> <C>
1998 $1,242,761
1999 1,242,761
2000 661,595
2001 635,540
2002 718,048
Thereafter 2,465,507
----------------
$6,966,212
================
</TABLE>
Rental expense for the years ended December 31, 1997, 1996 and 1995 was
approximately $1,092,000, $745,000 and $624,000, respectively.
In the normal course of business, the Company utilizes certain financial
instruments with off-balance sheet risk to meet the financing needs of its
clients. These off-balance sheet activities include amounts available under the
unused portion of approved customer and client credit limits, commercial letters
of credit and standby letters of credit and financial guarantees. Letters of
credit are issued by the Bank for the Company's clients and the Company
guarantees the payment by its clients under these letters of credit. The credit
and market risks associated with these financial instruments are generally
managed in conjunction with the Company's balance sheet activities and are
subject to normal credit policies, financial controls and risk limiting and
monitoring procedures.
Credit losses may be incurred when one of the parties fails to perform in
accordance with the terms of the contract. The Company's exposure to credit loss
is represented by the contractual amount of the commitments to extend credit,
commercial letters of credit and standby letters of credit and financial
guarantees. This is the maximum potential loss of principal in the event the
commitment is drawn upon and the counterparty defaults. In addition, the
measurements of the risks associated with these financial instruments is
meaningful only when all related and offsetting transactions are considered.
Amounts available under the unused portion of approved customer and client
credit limits do not necessarily represent legally binding arrangements to
factored sales or otherwise advance funds to clients. Generally, credit
approvals and limits are modified or withdrawn based upon the Company's
evaluation of the customer or client's credit or if the client violates the
terms of the factoring agreement. Credit limits for clients and customers
continually vary and do not necessarily represent future cash requirements to
fund the factored sales or otherwise advance funds to clients.
F-13
<PAGE> 48
Commercial letters of credit are issued to facilitate certain trade
transactions, principally the purchase of goods. The risks associated with these
transactions are somewhat reduced since the contracts are generally for a short
commitment period. Standby letters of credit and financial guarantees are
conditional commitments issued to guarantee the performance of a customer to a
third party. The Company issues standby letters of credit and financial
guarantees to ensure contract performance or assure payment by its clients. The
risk involved in issuing standby letters of credit to clients and financial
guarantees is similar to the risk involved in extending credit to clients and
they are subject to the same credit approvals and monitoring procedures. At
December 31, 1997 and 1996, the Company had approximately $48,684,000 and
$29,294,000, respectively, of letters of credit and financial guarantees
outstanding. The Company usually guarantees letters of credit and financial
guarantees only for clients with which the Company has factoring arrangements.
Generally, the Company requires collateral to support these commitments and the
collateral held varies but may include cash, merchandise, inventory, real estate
and the client's reserve balance.
9. RELATED PARTY TRANSACTIONS
The Company expensed interest payments to the Bank of $7,391,000, $5,265,000,
and $4,732,000 on its $150 million revolving line of credit facility with the
Bank during the periods ended December 31, 1997, 1996 and 1995, respectively.
The Bank obtained group medical, dental and life insurance coverage on behalf of
the Company. Premiums are charged to the Company at the same amount as they are
assessed by the insurance companies to the Bank with respect to the Company.
During 1997, 1996 and 1995, the Company paid insurance premiums of $662,075,
$605,277 and $527,669, respectively, for its actual portion of such insurance
premiums.
The Bank provided approximately $166.5 million, $135.5 million and $130.1
million during 1997, 1996 and 1995, respectively, of letters of credit for
clients of the Company. For a fee, the Company guarantees the payment by its
clients under these letters of credit. Fees charged for issuance of the letters
of credit are paid directly to the Bank and amounted to $605,429, $373,688, and
$462,013 during 1997, 1996 and 1995, respectively.
The Company reimburses the Bank for its portion of commercial insurance
expenses. Payments to the Bank for insurance expenses during 1997, 1996 and 1995
equaled $85,426, $465,513, and $149,302, respectively. In addition, the Company
paid the Bank $315,635, $224,332, and $148,900, during the periods ended
December 31, 1997, 1996 and 1995, respectively, for bank service charges. In
addition, the Company paid the Bank $75,000 for internal audit services during
1997. The Company did not pay the Bank for internal audit services in 1996 or
1995.
Due to affiliate represents balances owed to the Bank, principally for income
taxes and unpaid interest on the line of credit with the Bank.
10. CONTINGENCIES
From time to time, the Company has been a party to lawsuits and claims,
including lender liability claims, which management considers incidental to
normal operations. The Company believes that these matters will not materially
affect its financial position or results of its operations.
11. RETIREMENT PLAN
Bancorp sponsored a noncontributory defined benefit pension plan (the "Plan")
covering employees meeting certain eligibility requirements. The Company's
employees are included in the Plan. The benefits are based on years of service
and the employee's compensation for the five consecutive years during the last
ten years of service that produce the highest average salary. The Plan provides
for accumulation of full benefits equal to 1.2% of eligible
F-14
<PAGE> 49
compensation over a 25-year period. Full vesting will occur after completion of
seven years of service. Bancorp's funding policy is to contribute annually the
maximum amount that can be deducted for Federal income tax purposes. The Bank
charged the Company pension costs of approximately $300,000, $283,000, and
$172,090 for the years ended December 31, 1997, 1996 and 1995, respectively.
Bancorp and the Company ceased the accrual of benefits under this plan effective
December 31, 1997 and is in the process of terminating the plan. At December 31,
1997 and 1996 the fair value of plan assets was $10,858,220 and $8,613,511, and
consisted primarily of corporate obligations, mutual funds, U.S. Government
securities and other cash equivalents. The effect of this termination by Bancorp
is not expected to have a material effect on the Company's financial position or
results of operations.
12. STOCK OPTION PLAN
In July 1996, the Company adopted, and later amended, a stock option plan under
which 1.3 million shares of Common Stock were reserved for issuance upon
exercise of stock options. The stock option plan provides for the granting of
both incentive stock options and nonqualified stock options. Options granted
vest 20% a year over five years and expire at the end of the tenth year. The
plan also provides for the granting of stock appreciation rights.
Stock option activity in the plan is summarized as follows:
<TABLE>
<CAPTION>
Available Option Price Weighted
for Grant Outstanding per Share Average Price
-------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Balance, January 1, 1996 0 0
Adoption of Plan 800,000
Granted (572,500) 572,500 $8.50
Exercised
Canceled 0 0
-------------- --------------- ---------------- ---------------
Balance, December 31, 1996 227,500 572,500 $8.50 $8.50
Amendment of Plan 500,000
Granted (133,850) 133,850 $13.50-$14.875 $13.66
Exercised (3,950) $8.50 $8.50
Canceled 3,500 (3,500)
-------------- --------------- ---------------- ---------------
Balance, December 31, 1997 597,150 698,900 $8.50-$14.875 $9.48
============== =============== ================ ===============
</TABLE>
The weighted-average exercise price and the weighted-average remaining
contractual life for options outstanding at December 31, 1997:
<TABLE>
<CAPTION>
Weighted-Average
-------------------------------------
Number of
Range of Options Remaining
Exercise Price Outstanding Exercise Price Contractual Life Exercisable
- ------------------- --------------- ---------------- ------------------ ---------------
<S> <C> <C> <C> <C>
$8.50 565,850 $8.50 8.6 years 110,450
$13.50 117,050 $13.50 9.3 years
$14.875 16,000 $14.875 9.3 years
-------------- ---------------
$8.50 - $14.875 698,900 $9.48 110,450
============== ===============
</TABLE>
The Company measures compensation cost for stock based compensation as
prescribed by APB 25, "Accounting for Stock Issued to Employees." All options
granted in 1997 and 372,500 options granted in 1996 were granted with
restrictions as to their exercise as long as the Bank owns 80% or more of the
Company's outstanding shares. These options are accompanied by stock
appreciation rights. In accordance with APB 25, the Company has recorded
compensation expense of $1,040,000 and $149,000 for 1997 and 1996, respectively,
based on the market value of the
F-15
<PAGE> 50
Company's stock and the vesting schedule of such options. However, SFAS No. 123,
"Accounting for Stock Based Compensation" requires pro forma disclosures of net
income and earnings per share as if the fair value method of accounting had been
applied. The fair value of the options granted in 1997 and 1996 is estimated on
the date of grant using the binomial option-pricing model with the following
weighted average assumptions in 1997 and 1996, respectively: dividend yield of
00.0%, expected volatility of 45.4499% and 30.00%, risk-free interest rate of
6.798% and 6.66% and expected option life of 5.0 years. The weighted average
fair value of options granted in 1997 was $6.665 and $7.2822 per share,
respectively, and $3.34 per share in 1996.
Had compensation cost for the Company's stock option plans been consistently
determined based upon the fair value at the grant date for awards under the
methodology prescribed under SFAS No. 123, the Company's net income and earnings
per share would have been different as shown in the table below.
<TABLE>
<CAPTION>
1997 1996
--------------- --------------
<S> <C> <C>
Net earnings - as reported 11,662,279 11,115,224
Net earnings - pro forma 11,979,609 11,098,317
Earnings per share - as reported
Basic $0.95 $1.01
Diluted $0.93 $1.00
Earnings per share - pro forma
Basic $0.97 $1.00
Diluted $0.95 $1.00
</TABLE>
13. EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued SFAS No. 128,
Earnings Per Share, which became effective for reporting periods ending after
December 15, 1997. Under the provisions of SFAS No. 128, primary and fully
diluted earnings per share were replaced with basic and diluted earnings per
share in an effort to simplify the computation of these measures and align them
more closely with the methodology used internationally. Basic earnings per share
is arrived at by dividing net earnings available to common shareholders by the
weighted-average number of common shares outstanding and does not include the
impact of any potentially dilutive common stock equivalents. The diluted
earnings per share calculation method is slightly different from the previously
required fully diluted earnings per share method and is arrived at by dividing
net earnings available to common shareholders by the weighted-average number of
shares outstanding, adjusted for the dilutive effect of outstanding stock
options and the conversion impact of convertible equity securities. The diluted
earnings per share calculation for 1997 equates to what would have been reported
in the fully diluted earnings per share calculation. For purposes of
comparability, all prior-period earnings per share data have been restated.
The calculation of net earnings per share follows:
F-16
<PAGE> 51
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995
-------------- -------------- -------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C>
Basic:
Net income applicable to common shares 11,662 ,279 11,115,224 8,693,097
Average common shares outstanding 12,301,315 11,044,809 10,000,000
-------------- -------------- -------------
Net earnings per common share -- basic $0.95 $1.01 $0.87
============== ============== =============
Diluted:
Net earnings applicable to common shares 11,662,279 11,115,224 8,693,097
-------------- -------------- -------------
Average common shares outstanding 12,301,315 11,044,809 10,000,000
Stock option adjustment 294,955 106,034 -
-------------- -------------- -------------
Average common shares outstanding -- diluted 12,596,270 11,150,843 10,000,000
-------------- -------------- -------------
Net earnings per common share -- diluted $0.93 $1.00 $0.87
============== ============== =============
</TABLE>
14. FAIR VALUE OF FINANCIAL INSTRUMENTS
In cases where quoted market prices are not available, fair value estimates are
based on the quoted market price of a financial instrument with similar
characteristics, the present value of expected future cash flows or other
valuation techniques. Fair value estimates determined using other valuation
techniques are significantly affected by the assumptions used and consequently
may not reflect the proceeds that may be realizable from the sale of such
financial instruments.
The estimated fair value disclosures related to the Company's financial
instruments are as follows:
Cash: Since the Company's cash is maintained in demand deposit accounts, the
carrying amount is equal to the fair value.
Accounts Receivable, Asset Based Loans, Due to/from Factoring Clients: The
Company's receivables turn over quickly and interest earning advances made to
clients against such receivables and loans to factoring clients carry variable
interest rates based upon the prime rate and reprice as the prime rate changes.
Therefore, the Company believes the carrying amounts are reasonable estimates of
fair value.
Notes and Certificates Payable: The Company's notes payable are short-term in
nature. All but one of the notes payable carry variable interest rates which
reprice at least every 30 days. The Company holds one $10,000,000 note payable
at a fixed interest rate of 7.95%. The Company believes the interest rates on
the notes and certificates payable approximate rates currently available to the
Company and consequently the carrying amount is a reasonable estimate of fair
value.
Letters of Credit: As indicated in Note 8, the Company utilizes certain
financial instruments with off-balance sheet risk to meet the financing needs of
its clients. At December 31, 1997 and 1996, the Company had approximately
$48,684,000 and $29,294,000, respectively, of letters of credit and financial
guarantees for clients outstanding. The estimated fair value of these
off-balance sheet instruments, based on discounting the fees to be charged on
the unused portion of such facilities until their respective expiration dates is
considered insignificant.
F-17
<PAGE> 52
FINANCIAL INFORMATION
CAPITAL FACTORS HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
--------------------- --------------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash $ 39,803,773 $ 41,253,904
Restricted cash 9,375,000 10,134,375
Receivables 704,865,590 700,786,603
Unearned discounts (2,861,551) (2,926,865)
Allowance for credit losses (6,191,867) (6,125,359)
--------------------- -------------------
Receivables, net 695,812,172 691,734,379
Property and equipment, net 4,321,311 4,471,397
Other assets 9,229,567 8,983,100
--------------------- -------------------
TOTAL $ 758,541,823 $ 756,577,155
===================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Due to affiliates $ 715,488 $ 145,570
Capital Factors variable rate asset-backed certificates 253,740,158 275,000,000
Notes payable to affiliates 129,411,000 111,754,000
Other borrowings 83,800,000 53,600,000
Due to factoring clients 201,538,132 234,745,074
Other liabilities 8,708,141 7,150,825
--------------------- -------------------
Total liabilities 677,912,919 682,395,469
--------------------- -------------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $0.01 par value, 25,000,000
Shares authorized; 12,304,650 issued and
Outstanding at 6/30/98 and 12,303,950
Issued and outstanding at 12/31/97 123,047 123,040
Additional paid-in capital 27,588,783 27,582,840
Retained earnings 52,917,074 46,475,806
--------------------- -------------------
Total stockholders' equity 80,628,904 74,181,686
--------------------- -------------------
TOTAL $ 758,541,823 $ 756,577,155
===================== ===================
</TABLE>
See accompanying notes to consolidated financial statements.
F-18
<PAGE> 53
CAPITAL FACTORS HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------------- ------------------------------------
1998 1997 1998 1997
--------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
REVENUES
Factoring fees $ 7,437,027 $ 7,053,027 $14,740,986 $ 13,877,404
Interest income 15,063,481 10,836,702 29,482,190 20,230,857
Letter of credit and other fees 1,260,116 1,118,953 2,329,571 2,071,389
Other 511,254 603,161 931,432 1,027,963
Total revenues 24,271,878 19,611,843 47,484,179 37,207,613
--------------- ---------------- ---------------- ----------------
EXPENSES
Interest expense 6,155,371 4,704,882 12,135,720 8,553,259
Interest expense to affiliates 2,616,053 1,337,795 5,163,336 2,803,520
Salaries and benefits 5,377,593 4,666,900 10,719,241 9,172,244
Provision for credit losses 1,300,000 800,000 2,850,000 2,200,000
Occupancy and other office expenses 1,220,386 1,154,809 2,449,889 2,108,762
Depreciation 276,918 215,594 552,366 391,357
Professional fees 435,664 378,365 752,663 680,254
Other 1,233,614 1,095,338 2,322,983 2,110,999
--------------- ---------------- ---------------- ----------------
Total expenses 18,615,599 14,353,683 36,946,198 28,020,395
--------------- ---------------- ---------------- ----------------
INCOME BEFORE INCOME TAXES 5,656,279 5,258,160 10,537,981 9,187,218
PROVISION FOR INCOME TAXES 2,222,274 2,118,554 4,096,713 3,727,668
--------------- ---------------- ---------------- ----------------
NET INCOME $ 3,434,005 $ 3,139,606 $ 6,441,268 $ 5,459,550
=============== ================ ================ ================
BASIC EARNINGS PER SHARE $ 0.28 $ 0.26 $ 0.52 $ 0.44
=============== ================ ================ ================
DILUTED EARNINGS PER SHARE $ 0.28 $ 0.25 $ 0.52 $ 0.44
- ---------------------------------------------------- =============== ================ ================ ================
</TABLE>
See accompanying notes to consolidated financial statements.
F-19
<PAGE> 54
CAPITAL FACTORS HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
(Unaudited)
Six Months Ended June 30,
1998 1997
----------------- ---------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 6,441,268 $ 5,459,550
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 552,366 391,357
Amortization of deferred costs 578,520 464,590
Deferred income taxes (benefit) (234,203) (609,853)
Provision for credit losses 2,850,000 2,200,000
Decrease (increase) in restricted cash 759,375 (1,567,500)
Increase in due to affiliates 569,918 2,666,947
Increase in other assets (666,073) (445,447)
Increase in other liabilities 1,557,316 1,890,826
----------------- ----------------
Net cash provided by operating activities 12,408,487 10,450,470
----------------- ----------------
INVESTING ACTIVITIES:
Increase in loans to clients, net (7,188,882) (21,273,833)
Increase in asset-based loans (41,278,969) (17,342,625)
Net decrease (increase) in factoring accounts
Receivable, net of due to factoring clients 3,135,106 (39,669,362)
Sales of participations 20,159,211 16,825,635
Payments on participations (14,961,202) (3,215,066)
Purchases of property and equipment (326,990) (1,442,983)
----------------- ----------------
Net cash used in investing activities (40,461,726) (66,118,234)
----------------- ----------------
FINANCING ACTIVITIES:
Issuance (repayment) of Senior Certificates (21,259,842) 43,884,515
Proceeds from exercise of stock options 5,950 -
Proceeds from borrowing 135,237,000 91,036,000
Payments on borrowing (87,380,000) (76,214,000)
Payments of deferred financing costs - (703,343)
----------------- ----------------
Net cash provided by financing activities 26,603,108 58,003,172
----------------- ----------------
NET INCREASE (DECREASE) IN CASH (1,450,131) 2,335,408
CASH, BEGINNING OF PERIOD 41,253,904 28,101,237
----------------- ----------------
CASH, END OF PERIOD $ 39,803,773 $ 30,436,645
================= ================
SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments for interest $ 16,099,513 $ 10,788,348
================= ================
Cash payments for income taxes $ 3,387,028 $ -
================= ================
</TABLE>
See accompanying notes to consolidated financial statements.
F-20
<PAGE> 55
CAPITAL FACTORS HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998
Note 1: General
The accompanying unaudited consolidated financial statements of Capital Factors
Holding, Inc. and Subsidiaries (the "Company") have been prepared on a
consistent basis in conformity with the instructions to Form 10-Q and Article 10
of Regulation S-X and therefore do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, the financial statements
reflect all adjustments (principally consisting of normal, recurring accruals)
necessary to present fairly the financial condition of the Company as of June
30, 1998 and December 31, 1997, the results of its operations for the three and
six month periods ended June 30, 1998 and 1997 and its cash flows for the six
months ended June 30, 1998 and 1997. All significant inter-company transactions
and balances have been eliminated. The statements are unaudited except for the
Consolidated Balance Sheet as of December 31, 1997.
The accounting policies followed for interim financial reporting are consistent
with the accounting policies set forth in Note 2 to the Consolidated Financial
Statements appearing in the Company's Form 10-K for the year ended December 31,
1997 as filed with the Securities and Exchange Commission.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," is effective for financial statements for periods beginning after
December 15, 1997. This statement establishes standards for the way that public
companies report selected information about operating segments. Adoption of this
statement is not expected to have a material impact on the Company's
consolidated financial position or results of operations but may have an effect
on disclosure of such.
Note 2: Receivables
Receivables consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
----------------- ---------------
<S> <C> <C>
Nonrecourse $ 361,626,323 $ 373,100,405
Recourse 122,835,367 154,863,870
----------------- ---------------
Factored accounts receivables 484,461,690 527,964,275
Loans to factoring clients 60,331,721 54,029,119
Asset-based loans 160,072,179 118,793,209
----------------- ---------------
Total Receivables $ 704,865,590 $ 700,786,603
================= ===============
</TABLE>
The Company also makes advances to factoring clients. Such advance payments,
which are interest earning, are recorded as reductions to the amounts due to the
factoring clients for the purchase of receivables. Average funds employed
(receivables less amounts due to factoring clients) were $483.1 million and
$391.0 million for the six months ended June 30, 1998 and the year ended
December 31, 1997, respectively.
F-21
<PAGE> 56
Changes in the Company's allowance for credit losses were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
-------------------------------------------------------- -----------------------------
% of % of % of
June 30, Factored June 30, Factored December 31, Factored
1998 Sales 1997 Sales 1997 Sales
------------- ---------- -------------- -------- --------------- --------
<S> <C> <C> <C> <C> <C> <C>
Beginning balance $ 6,125,359 $ 2,993,534 $ 2,993,534
Provision for credit losses 2,850,000 .17 2,200,000 .15 7,250,000 .22
Charge-offs (3,098,553) .19 (2,256,698) .15 (4,597,179) .14
Recoveries 315,061 .02 308,655 .02 479,004 .01
-------------- -------------- ----------------
Net charge-offs (2,783,492) .17 (1,948,043) .13 (4,118,175) .13
-------------- -------------- ----------------
Ending balance $ 6,191,867 $ 3,245,491 $ 6,125,359
============== ============== ================
</TABLE>
The Company specifically considered approximately $1,464,000 and $430,000 of its
client advances impaired at June 30, 1997 and December 31, 1997, respectively,
and has discontinued the accrual of interest income. The allowance for credit
losses related to these impaired loans for the same periods were approximately
$350,000 and $309,000, respectively.
Note 3: Borrowings
Borrowings are summarized as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
---------------- ----------------
<S> <C> <C>
Variable rate asset-backed certificates due 1999 through 2001 $253,740,158 $275,000,000
Variable rate revolving credit line due on demand 129,411,000 111,754,000
Variable rate revolver loan due 1999 73,800,000 43,600,000
7.95% subordinated notes due 2001 10,000,000 10,000,000
---------------- ----------------
Total borrowings $466,951,158 $440,354,000
================ ================
</TABLE>
Note 4: Earnings Per Share
In February 1997, the Financial Accounting Standards Board issued SFAS No. 128,
Earnings Per Share, which became effective for reporting periods ending after
December 15, 1997. Under the provisions of SFAS No. 128, primary and fully
diluted earnings per share were replaced with basic and diluted earnings per
share in an effort to simplify the computation of these measures and align them
more closely with the methodology used internationally. Basic earnings per share
is arrived at by dividing net earnings available to common shareholders by the
weighted-average number of common shares outstanding and does not include the
impact of any potentially dilutive common stock equivalents. The diluted
earnings per share calculation method is slightly different from the previously
required fully diluted earnings per share method and is arrived at by dividing
net earnings available to common shareholders by the weighted-average number of
shares outstanding, adjusted for the dilutive effect of outstanding stock
options and the conversion impact of convertible equity securities. The diluted
earnings per share calculation for 1998 equates to what would have been reported
in the fully diluted earnings per share calculation under the previous method.
For purposes of comparability, all prior-period earnings per share data have
been restated.
See accompanying notes to consolidated financial statements.
F-22
<PAGE> 57
The calculation of net earnings per share follows:
<TABLE>
<CAPTION>
Three Months Ended June 30,
1998 1997
---------------- ----------------
(Dollars in thousands, except per share data)
<S> <C> <C>
Basic:
Net income applicable to common shares $ 3,434,005 $ 3,139,606
Average common shares outstanding 12,304,531 12,300,000
================ ================
Net income per common share - basic $ 0.28 $ 0.26
================ ================
Diluted:
Net income applicable to common shares $ 3,434,005 $ 3,139,606
---------------- ----------------
Average common shares outstanding 12,304,531 12,300,000
Stock option adjustment 163,007 54,199
---------------- ----------------
Average common shares outstanding - diluted 12,467,538 12,354,199
---------------- ----------------
Net income per common share - diluted $ 0.28 $ 0.25
================ ================
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30,
1998 1997
---------------- ----------------
(Dollars in thousands, except per share data)
<S> <C> <C>
Basic:
Net income applicable to common shares $ 6,441,268 $ 5,459,550
Average common shares outstanding 12,304,273 12,300,000
================ ================
Net income per common share -- basic $ 0.52 $ 0.44
================ ================
Diluted:
Net income applicable to common shares $ 6,441,268 $ 5,459,550
---------------- ----------------
Average common shares outstanding 12,304,273 12,300,000
Stock option adjustment 140,568 52,736
---------------- ----------------
Average common shares outstanding -- diluted 12,444,841 12,352,736
---------------- ----------------
Net income per common share -- diluted $ 0.52 $ 0.44
================ ================
</TABLE>
See accompanying notes to consolidated financial statements.
F-23
<PAGE> 58
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
BY AND BETWEEN
CAPITAL FACTORS HOLDING, INC.
AND
UNION PLANTERS BANK, NATIONAL ASSOCIATION
DATED AS OF OCTOBER 19, 1998
<PAGE> 59
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Parties........................................................................................A-1
Preamble.......................................................................................A-1
ARTICLE 1 - TRANSACTIONS AND TERMS OF MERGER...................................................A-1
1.1 Merger...........................................................................A-1
1.2 Time and Place of Closing........................................................A-1
1.3 Effective Time...................................................................A-1
ARTICLE 2 - TERMS OF MERGER....................................................................A-2
2.1 Articles of Incorporation........................................................A-2
2.2 Bylaws...........................................................................A-2
2.3 Directors and Officers...........................................................A-2
ARTICLE 3 - MANNER OF CONVERTING SHARES........................................................A-2
3.1 Conversion of Shares.............................................................A-2
3.2 Shares Held by CFH or UPBNA......................................................A-2
3.3 Conversion of Stock Options......................................................A-2
ARTICLE 4 - DELIVERY OF CONSIDERATION..........................................................A-3
4.1 Delivery Procedures..............................................................A-3
4.2 Rights of Former CFH Shareholders................................................A-4
4.3 UPBNA to Make Cash Available.....................................................A-4
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF CFH..............................................A-4
5.1 Organization, Standing, and Power................................................A-4
5.2 Authority; No Breach By Agreement................................................A-4
5.3 Capital Stock....................................................................A-5
5.4 Charter Provisions...............................................................A-5
5.5 Statements True and Correct......................................................A-5
ARTICLE 6 - REPRESENTATIONS AND WARRANTIES OF UPBNA............................................A-5
6.1 Organization, Standing, and Power................................................A-5
6.2 Authority; No Breach By Agreement................................................A-6
6.3 Financing........................................................................A-6
6.4 Statements True and Correct......................................................A-6
ARTICLE 7 - CONDUCT OF BUSINESS PENDING CONSUMMATION...........................................A-6
7.1 Affirmative Covenants of CFH.....................................................A-6
7.2 Covenants of UPBNA...............................................................A-7
ARTICLE 8 - ADDITIONAL AGREEMENTS..............................................................A-7
8.1 Filing Schedule 13E-3; Delivery of Plan of Merger; Information Statement.........A-7
8.2 Filings with State Offices.......................................................A-7
8.3 Agreement as to Efforts to Consummate............................................A-7
8.4 State Takeover Laws..............................................................A-7
8.5 Indemnification..................................................................A-7
8.6 Merger Subsidiary Organization...................................................A-8
ARTICLE 9 - CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE..................................A-8
9.1 Conditions to Obligations of Each Party..........................................A-8
9.2 Conditions to Obligations of UPBNA...............................................A-8
9.3 Conditions to Obligations of CFH.................................................A-9
ARTICLE 10 - TERMINATION.......................................................................A-9
10.1 Termination......................................................................A-9
</TABLE>
A-i
<PAGE> 60
<TABLE>
<S> <C>
10.2 Effect of Termination............................................................A-9
10.3 Non-Survival of Representations and Covenants....................................A-10
ARTICLE 11 - MISCELLANEOUS.....................................................................A-10
11.1 Definitions......................................................................A-10
11.2 Expenses.........................................................................A-13
11.3 Entire Agreement.................................................................A-13
11.4 Amendments.......................................................................A-14
11.5 Waivers..........................................................................A-14
11.6 Assignment.......................................................................A-14
11.7 Notices..........................................................................A-14
11.8 Governing Law....................................................................A-15
11.9 Counterparts.....................................................................A-15
11.10 Captions.........................................................................A-15
11.12 Interpretations..................................................................A-15
11.13 Enforcement of Agreement.........................................................A-15
11.14 Severability.....................................................................A-15
Signatures.....................................................................................A-16
</TABLE>
A-ii
<PAGE> 61
LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
<S> <C>
1. Plan of Merger. (Sections 1.1, 11.1).
</TABLE>
<PAGE> 62
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made and
entered into as of October 19, 1998, by and between CAPITAL FACTORS HOLDING,
INC. ("CFH"), a corporation organized and existing under the laws of the State
of Florida, with its principal office located in Boca Raton, Florida, and UNION
PLANTERS BANK, NATIONAL ASSOCIATION ("UPBNA"), a national banking association
organized and existing under the laws of the United States and the holder of
92.27% of the issued and outstanding common stock of CFH.
PREAMBLE
The Boards of Directors of CFH and UPBNA are of the opinion that the
transactions described herein are in the best interests of the parties and their
respective shareholders. This Agreement provides for the acquisition of the
remaining 7.73% of the issued and outstanding common stock of CFH by UPBNA
pursuant to the merger of a newly-formed, wholly-owned subsidiary of UPBNA
("Merger Sub") with and into CFH with CFH as the surviving corporation of the
merger. Prior to the merger, UPBNA will contribute its shares of CFH Common
Stock to Merger Sub and at the effective time of the merger, the outstanding
shares of the capital stock of CFH not held by Merger Sub shall be converted
into the right to receive a cash payment amount. As a result, CFH shall continue
to conduct its business and operations as a wholly-owned subsidiary of UPBNA.
The transactions described in this Agreement are subject to the satisfaction of
certain conditions described in this Agreement.
Certain terms used in this Agreement are defined in Section 11.1 of
this Agreement.
NOW, THEREFORE, in consideration of the above and the mutual
warranties, representations, covenants, and agreements set forth herein, the
parties agree as follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
1.1 MERGER. Subject to the terms and conditions of this Agreement, at
the Effective Time, Merger Sub shall be merged with and into CFH in accordance
with the provisions of Section 607.1104 of the FBCA (the "Merger") and with the
effect provided for in Section 607.1106 of the FBCA. CFH shall be the Surviving
Corporation of the Merger and shall continue to be governed by the Laws of the
State of Florida. The Merger shall be consummated pursuant to the terms of this
Agreement, which has been approved and adopted by the Boards of Directors of CFH
and UPBNA, and the Plan of Merger, in substantially the form of Exhibit 1, which
will be approved and adopted by the Boards of Directors of CFH and Merger Sub
upon the organization of Merger Sub.
1.2 TIME AND PLACE OF CLOSING. The Closing will take place at 9:00
A.M. Central Time on the date that the Effective Time occurs (or the immediately
preceding day if the Effective Time is earlier than 9:00 A.M. Central Time), or
at such other time as the Parties, acting through their duly authorized
officers, may mutually agree. The place of Closing shall be at the offices of
UPBNA, in Memphis, Tennessee, or such other place as may be mutually agreed upon
by the Parties.
1.3 EFFECTIVE TIME. The Merger and other transactions contemplated by
this Agreement shall become effective on the date and at the time the Florida
Articles of Merger reflecting the Merger shall become effective with the
Secretary of State of the State of Florida (the "Effective Time"). Subject to
the terms and conditions hereof, unless otherwise mutually agreed upon in
writing by the duly authorized officers of each Party, the Parties shall use
their reasonable efforts to cause the Effective Time to occur on the 30th day
after the date that the Information Statement, this Agreement and the Plan of
Merger are mailed to the Minority Shareholders, as provided for in Section
601.1104 of the FBCA.
A-1
<PAGE> 63
ARTICLE 2
TERMS OF MERGER
2.1 ARTICLES OF INCORPORATION. The Articles of Incorporation of CFH in
effect immediately prior to the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation after the Effective Time until
otherwise amended or repealed.
2.2 BYLAWS. The Bylaws of CFH in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation after the
Effective Time until otherwise amended or repealed.
2.3 DIRECTORS AND OFFICERS. The directors of Merger Sub 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 CFH in office immediately prior to
the Effective Time, together with such additional persons as may thereafter be
elected, shall serve as the officers of the Surviving Corporation from and after
the Effective Time in accordance with the Bylaws of the Surviving Corporation.
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 CONVERSION OF SHARES. Subject to the provisions of this Article 3,
at the Effective Time, by virtue of the Merger and without any action on the
part of the holders thereof, the shares of the constituent corporations shall be
converted as follows:
(a) Each share of UPBNA Common Stock 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 Sub Common Stock issued and
outstanding at the Effective Time shall be converted into and
exchanged for one share of CFH Common Stock.
(c) Each share of CFH Common Stock (excluding shares held
by CFH or any of its Subsidiaries or by UPBNA or any of its
Subsidiaries, in each case other than in a fiduciary capacity or
as a result of debts previously contracted) issued and outstanding
immediately prior to the Effective Time shall be cancelled and
converted into the right to receive in consideration thereof a
cash payment from UPBNA in the amount of the Cash Payment Amount.
3.2 SHARES HELD BY CFH OR UPBNA. Each of the shares of CFH Common
Stock held by CFH or any of its Subsidiaries or, UPBNA, or any of its
Subsidiaries, in each case other than in a fiduciary capacity or as a result of
debts previously contracted, shall be canceled and retired at the Effective Time
and no consideration shall be issued in exchange therefor.
3.3 CONVERSION OF STOCK OPTIONS.
(a) At the Effective Time, each option to purchase shares of CFH
Common Stock pursuant to stock options granted by CFH under the CFH Stock Option
Plan each, a ("CFH Option") held by employees of CFH or any of its Subsidiaries
with an exercise price which is less than the Cash Payment Amount, which is
outstanding at the Effective Time, whether or not then exercisable, shall be
converted into and become rights with respect to UPC Common Stock, and UPC shall
assume such CFH Option, in accordance with the terms of the CFH Stock Option
Plan and stock option or other agreement by which it is evidenced, except that
from and after the Effective Time, (i) UPC and its Salary and Benefits Committee
shall be substituted for CFH and the Committee of
A-2
<PAGE> 64
CFH's Board of Directors (including, if applicable, the entire Board of
Directors of CFH) or other independent committee administering the CFH Stock
Option Plan, (ii) each CFH Option assumed by UPC may be exercised solely for
shares of UPC Common Stock, (iii) the number of shares of UPC Common Stock
subject to such CFH Option shall be equal to the product of (A) the number of
shares of CFH Common Stock for which such CFH Option is exercisable and (B) the
quotient obtained by dividing the Cash Payment Amount by the Average Closing
Price and rounding down to the nearest whole share, and (iv) the per share
exercise price under each such CFH Option shall be adjusted by dividing the per
share exercise price under each such CFH Option by the quotient obtained by
dividing the Cash Payment Amount by the Average Closing Price and rounding up to
the nearest cent. Notwithstanding the clauses (iii) and (iv) of the first
sentence of this Section 3.6, each CFH Option which is an "incentive stock
option" shall be adjusted as required by Section 424 of the Internal Revenue
Code, and the regulations promulgated thereunder, so as not to constitute a
modification, extension or renewal of the option, within the meaning of Section
424(h) of the Internal Revenue Code. UPC and CFH agree to take all necessary
steps to effectuate the foregoing provisions of this Section 3.6.
(b) Prior to the Effective Time, each outstanding CFH Option held
by non-employee directors of CFH with an exercise price which is less than the
Cash Payment Amount, which is outstanding at the Effective Time, whether or not
exercisable, shall be cancelled in exchange for a cash payment equal to the
difference between the Cash Payment Amount and the exercise price of such
option.
(c) At the Effective Time, each outstanding CFH Option, whether
or not exercisable, with an exercise price which is greater than the Cash
Payment Amount, shall be cancelled with no consideration in exchange therefore.
(d) As soon as practicable after the Effective Time, UPC shall
deliver to the participants in the CFH Stock Option Plan an appropriate notice
setting forth such participant's rights pursuant thereto and the grants subject
to the CFH Stock Option Plan shall continue in effect on the same terms and
conditions (subject to the adjustments required by Section 3.6(a) after giving
effect to the Merger), and UPC shall comply with the terms of the CFH Stock
Option Plan to ensure, to the extent required by, and subject to the provisions
of, the CFH Stock Option Plan, that CFH Options which qualified as incentive
stock options prior to the Effective Time continue to qualify as incentive stock
options after the Effective Time. As soon as practicable after the Effective
Time, UPC shall file a registration statement on Form S-8 (or any successor or
other appropriate forms), with respect to the shares of UPC Common Stock subject
to such options and shall use its reasonable efforts to maintain the
effectiveness of such registration statements (and maintain the current status
of the prospectus or prospectuses contained therein) for so long as such options
remain outstanding.
ARTICLE 4
DELIVERY OF CONSIDERATION
4.1 DELIVERY PROCEDURES. Promptly after the Effective Time, UPBNA and
the Surviving Corporation shall cause the exchange agent selected by UPBNA (the
"Exchange Agent") to mail to the Minority Shareholders of CFH appropriate
transmittal materials (which shall specify that delivery shall be effected, and
risk of loss and title to the certificates theretofore representing shares of
CFH Common Stock shall pass, only upon proper delivery of such certificates to
the Exchange Agent). After the Effective Time, each Minority Shareholder
promptly upon the surrender of the certificate or certificates representing such
shares to the Exchange Agent, shall receive in exchange therefor the
consideration provided in Section 3.1 of this Agreement (without interest
thereon) pursuant to Section 4.2 of this Agreement. UPBNA shall not be obligated
to deliver any cash payments to which any Minority Shareholder is entitled as a
result of the Merger, until such holder surrenders such holder's certificate or
certificates representing the shares of CFH Common Stock for exchange as
provided in this Section 4.1, or otherwise complies with the procedures of the
Exchange Agent with respect to lost, stolen, or destroyed certificates. The
certificate or certificates of CFH Common Stock so surrendered shall be duly
endorsed as the Exchange Agent
A-3
<PAGE> 65
may require. Any other provision of this Agreement notwithstanding, neither
UPBNA, CFH, nor the Exchange Agent shall be liable to a holder of CFH 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 CFH SHAREHOLDERS. At the Effective Time, the
stock transfer books of CFH shall be closed as to holders of CFH Common Stock
immediately prior to the Effective Time and no transfer of CFH 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 held by a Minority Shareholder theretofore representing shares
of CFH Common Stock shall from and after the Effective Time represent for all
purposes only the right to receive the consideration provided in Section 3.1 of
this Agreement in exchange therefor.
4.3 UPBNA TO MAKE CASH AVAILABLE. At or prior to the Effective Time,
UPBNA shall deposit, or shall cause to be deposited, with the Exchange Agent,
for the benefit of the Minority Shareholders, for exchange in accordance with
this Article 4, the requisite aggregate amount of the Cash Payment Amount to be
paid pursuant to Sections 3.1(c) and 3.3 in exchange for outstanding shares of
CFH Common Stock and CFH Options.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF CFH
CFH hereby represents and warrants to UPBNA that:
5.1 ORGANIZATION, STANDING, AND POWER. CFH is a corporation duly
organized and validly existing, and in good standing under the Laws of the State
of Florida, and has the corporate power and authority to carry on its business
as now conducted and to own, lease, and operate its material Assets. CFH is duly
qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States 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 CFH.
5.2 AUTHORITY; NO BREACH BY AGREEMENT.
(a) CFH has the corporate power and authority necessary to
execute, deliver, and perform its obligations under this Agreement and the Plan
of Merger and to consummate the transactions contemplated hereby and thereby.
The execution, delivery, and performance of this Agreement and the Plan of
Merger and the consummation of the transactions contemplated herein and therein,
including the Merger, have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of CFH. This Agreement
represents a legal, valid, and binding obligation of CFH, enforceable against
CFH in accordance with its terms (except in all cases as such enforceability may
be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium,
or similar Laws affecting the enforcement of creditors' rights generally and
(ii) application of, and limitations on the application of, equitable principles
and remedies, including limitations on the availability of the equitable remedy
of specific performance or injunctive relief).
(b) Neither the execution and delivery of this Agreement by CFH,
nor the consummation by CFH of the transactions contemplated hereby, nor
compliance by CFH with any of the provisions hereof, will (i) conflict with or
result in a breach of any provision of CFH's Articles of Incorporation or
Bylaws, or (ii) constitute or result in a Default under, or require any Consent
pursuant to, or result in the creation of any Lien on any Asset of any CFH
Company under, any Contract or Permit of any CFH Company, where such Default or
Lien, or any failure to obtain such Consent, is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on CFH, or violate
any Law or Order applicable to any CFH Company or any of their respective
material Assets where such violation would have, individually or in the
aggregate, a Material Adverse Effect on CFH.
A-4
<PAGE> 66
(c) Other than in connection or compliance with the provisions of
the Securities Laws, applicable state corporate and securities Laws, and rules
of the NASD, 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 or both 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 CFH, no notice
to, filing with, or Consent of, any public body or authority is necessary for
the consummation by CFH of the Merger and the other transactions contemplated in
this Agreement.
5.3 CAPITAL STOCK. The authorized capital stock of CFH consists of:
25,000,000 shares of CFH Common Stock, of which 12,309,012 shares are issued and
outstanding as of the date of this Agreement and not more than 12,309,012 shares
will be issued and outstanding at the Effective Time. CFH has reserved 1,300,000
shares of CFH Common Stock for issuance under the CFH Stock Option Plan,
pursuant to which options to purchase not more than 250,925 shares of CFH Common
Stock are outstanding and exercisable as of the date of this Agreement. Options
issued under the CFH Stock Option Plan may not be exercised without the prior
consent of UPBNA as provided for in the CFH Stock Option Plan. All of the issued
and outstanding shares of capital stock of CFH are duly and validly issued and
outstanding and are fully paid and nonassessable under the FBCA. None of the
outstanding shares of capital stock of CFH has been issued in violation of any
preemptive rights of the current or past shareholders of CFH. Except as set
forth above, there are no shares of capital stock or other equity securities of
CFH outstanding and no outstanding Rights relating to the capital stock of CFH.
5.4 CHARTER PROVISIONS. Each CFH Company has taken all action so that
the entering into of this Agreement and the consummation of the Merger and the
other transactions contemplated by this Agreement do not and will not result in
the grant of any rights to any Person under the Articles of Incorporation,
Bylaws, or other governing instruments of any CFH Company or restrict or impair
the ability of UPBNA or Merger Sub to vote, or otherwise to exercise the rights
of a shareholder with respect to, shares of any CFH Company that may be directly
or indirectly acquired or controlled by it.
5.5 STATEMENTS TRUE AND CORRECT. None of the information supplied or
to be supplied by any CFH Company or any Affiliate thereof for inclusion in the
Schedule 13E-3 or the Information Statement to be mailed to CFH shareholders,
and any other documents to be filed with the SEC in connection with the
transactions contemplated hereby, will, at the respective time such documents
are filed, and with respect to the Information Statement, when mailed to the
shareholders of CFH, contain any misstatement of material fact, or omit to state
any material fact required to be stated thereunder or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF UPBNA
UPBNA hereby represents and warrants to CFH as follows:
6.1 ORGANIZATION, STANDING, AND POWER. UPBNA is a national banking
association duly organized, validly existing, and in good standing under the
Laws of the United States, and has the corporate power and authority to carry on
its business as now conducted and to own, lease, and operate its material
Assets. UPBNA 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 UPBNA.
A-5
<PAGE> 67
6.2 AUTHORITY; NO BREACH BY AGREEMENT.
(a) UPBNA has the corporate power and authority necessary to
execute, deliver, and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery, and
performance of this Agreement and the consummation of the transactions
contemplated herein, including the Merger, have been duly and validly authorized
by all necessary corporate action in respect thereof on the part of UPBNA. This
Agreement represents a legal, valid, and binding obligation of UPBNA,
enforceable against UPBNA in accordance with its terms (except in all cases as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by UPBNA,
nor the consummation by UPBNA of the transactions contemplated hereby, nor
compliance by UPBNA with any of the provisions hereof, will (i) conflict with or
result in a breach of any provision of UPBNA's Articles of Association or
Bylaws, or (ii) constitute or result in a Default under, or require any Consent
pursuant to, or result in the creation of any Lien on any Asset of UPBNA, or any
Contract or Permit of UPBNA, where such Default or Lien, or any failure to
obtain such Consent, is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on UPBNA, or violate any Law or Order
applicable to UPBNA or any of its 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 NASD, and other than notices to or filings with the Internal Revenue
Service or the Pension Benefit Guaranty Corporation, or both, 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
UPBNA or Merger Sub, no notice to, filing with, or Consent of, any public body
or authority is necessary for the consummation by UPBNA of the Merger and the
other transactions contemplated in this Agreement.
6.3 FINANCING. At the Effective Time, UPBNA will have funds sufficient
to enable it to carry out its obligations under this Agreement.
6.4 STATEMENTS TRUE AND CORRECT. None of the information supplied or
to be supplied by UPBNA or any Affiliate thereof for inclusion in the Schedule
13E-3 or the Information Statement to be mailed to CFH shareholders, and any
other documents to be filed with the SEC in connection with the transactions
contemplated hereby, will, at the respective time such documents are filed, and
with respect to the Information Statement, when mailed to the shareholders of
CFH, contain any misstatement of material fact, or omit to state any material
fact required to be stated thereunder or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 AFFIRMATIVE COVENANTS OF CFH. Unless the prior written consent of
a duly authorized officer of UPBNA shall have been obtained, and except as
otherwise expressly contemplated herein, CFH shall and shall cause each of its
Subsidiaries to, from the date of this Agreement until the Effective Time or
termination of this Agreement, (i) operate its business only in the usual,
regular, and ordinary course, (ii) preserve intact in all material respects its
business organization and Assets and maintain its rights and franchises, (iii)
take no action which would (x) materially adversely affect the ability of any
Party to obtain any Consents required for the transactions contemplated hereby
or (y) materially adversely affect the ability of any Party to perform its
covenants and agreements under this Agreement, and (iv) take no action to issue
or authorize the issuance of any shares of CFH Common Stock or CFH Options.
A-6
<PAGE> 68
7.2 COVENANTS OF UPBNA. From the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, UPBNA
covenants and agrees that it shall and shall cause each of its Subsidiaries to
take no action which would (i) materially adversely affect the ability of any
Party to obtain any Consents required for the transactions contemplated hereby,
or (ii) materially adversely affect the ability of any Party to perform its
covenants and agreements under this Agreement.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 FILING SCHEDULE 13E-3; DELIVERY OF PLAN OF MERGER; INFORMATION
STATEMENT. As soon as reasonably practicable after the execution of this
Agreement, UPBNA shall prepare and file the Schedule 13E-3. UPBNA shall also
promptly prepare and mail the Information Statement to the Minority Shareholders
with a copy of this Agreement and the Plan of Merger, and CFH shall furnish to
UPBNA all information concerning CFH and the CFH Companies that UPBNA may
reasonably request in connection with such Information Statement.
8.2 FILINGS WITH STATE OFFICES. Upon the terms and subject to the
conditions of this Agreement, CFH shall execute and file the Florida Articles of
Merger with the Secretary of State of the State of Florida.
8.3 AGREEMENT AS TO EFFORTS TO CONSUMMATE. Subject to the terms and
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper, or
advisable under applicable Laws to consummate and make effective, as soon as
practicable after the date of this Agreement, the transactions contemplated by
this Agreement, including using its reasonable efforts to lift or rescind any
Order adversely affecting its ability to consummate the transactions
contemplated herein and to cause to be satisfied the conditions referred to in
Article 9 of this Agreement; provided, that nothing herein shall preclude either
Party from exercising its rights under this Agreement. Each Party shall use, and
shall cause each of its Subsidiaries to use, its reasonable efforts to obtain
all Consents necessary or desirable for the consummation of the transactions
contemplated by this Agreement.
8.4 STATE TAKEOVER LAWS. Each CFH Company shall take all necessary
steps to exempt the transactions contemplated by this Agreement from, if
applicable, or if necessary, challenge, the applicability of Section 607.0901 of
the FBCA.
8.5 INDEMNIFICATION.
(a) For a period of six years after the Effective Time, UPBNA
shall, and shall cause the Surviving Corporation to, indemnify, defend, and hold
harmless the present and former directors, officers, employees, and agents of
each of the CFH Companies (each, an "Indemnified Party") against all Liabilities
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 Florida Law and by CFH's Articles of Incorporation and Bylaws as
in effect on the date hereof, including provisions relating to advances of
expenses incurred in the defense of any Litigation, provided, however, that the
indemnification provided by this Section 8.5(a) shall not apply to any claim
against an Indemnified Party if such Indemnified Party knew of the existence of
the claim and failed to make a good faith effort to require CFH to notify its
director and officer liability insurance carrier of the existence of such claim
prior to the Effective Time, and provided, further, that all rights to
indemnification in respect of any claim (a "claim") made in writing received by
UPBNA within such six-year period provided hereby shall continue until final
disposition of the claim. Without limiting the foregoing, in any case in which
approval is required to effectuate any indemnification, the determination of any
such approval shall be made, at the election of the Indemnified Party, by
independent counsel mutually agreed upon between UPBNA and the Indemnified
Party.
(b) Any Indemnified Party wishing to claim indemnification under
paragraph (a) of this Section 8.5, upon learning of any such Liability or
Litigation, shall promptly notify UPBNA thereof. In the event of
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any such Litigation (whether arising before or after the Effective Time), (i)
UPBNA or CFH shall have the right to assume the defense thereof and UPBNA 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 UPBNA or CFH elects not
to assume such defense or counsel for the Indemnified Parties advises in writing
that there are material substantive issues which raise conflicts of interest
between UPBNA or CFH and the Indemnified Parties, the Indemnified Parties may
retain counsel satisfactory to them, and UPBNA or CFH shall pay all reasonable
fees and expenses of such counsel for the Indemnified Parties promptly as
statements therefor are received; provided, that (i) UPBNA shall be obligated
pursuant to this paragraph (b) to pay for only one firm of counsel for all
Indemnified Parties in any jurisdiction, (ii) the Indemnified Parties will
cooperate (to the extent reasonably appropriate under the circumstances) in the
defense of any such Litigation, and (iii) UPBNA shall not be liable for any
settlement effected without its prior written consent; and provided further that
UPBNA shall not have any obligation hereunder to any Indemnified Party when and
if a court of competent jurisdiction shall determine, and such determination
shall have become final, that the indemnification of such Indemnified Party in
the manner contemplated hereby is prohibited by applicable Law.
8.6 MERGER SUB ORGANIZATION. UPBNA shall organize Merger Sub under the
Laws of the State of Florida. Prior to the Effective Time, the outstanding
capital stock of Merger Sub shall consist of 1,000 shares of Merger Sub Common
Stock, all of which shares shall be owned by UPBNA. Prior to the Effective Time,
Merger Sub shall not (i) conduct any business operations whatsoever or (ii)
enter into any Contract or agreement of any kind, acquire any assets or incur
any Liability, except as may be specifically contemplated by this Agreement or
the Plan of Merger or as the Parties may otherwise agree.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
9.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective
obligations of each Party to 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 11.5 of this Agreement:
(a) CONSENTS AND APPROVALS. Each Party shall have obtained any
and all Consents required for consummation of the Merger 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. No Consent so obtained which is necessary
to consummate the transactions contemplated hereby shall be conditioned or
restricted in a manner which in the reasonable judgment of the Board of
Directors of UPBNA would so materially adversely impact the economic or business
benefits of the transactions contemplated by this Agreement to UPBNA that, had
such condition or restriction been known, UPBNA would not, in its reasonable
judgment, have entered into this Agreement.
(b) LEGAL PROCEEDINGS. No court or governmental or regulatory
authority of competent jurisdiction shall have enacted, issued, promulgated,
enforced, or entered any Law or Order (whether temporary, preliminary, or
permanent) or taken any other action which prohibits, restricts, or makes
illegal consummation of the transactions contemplated by this Agreement.
(c) OPINION OF FINANCIAL ADVISOR. The Parties shall have received
an opinion of Stifel Nicolaus & Company, Inc., which shall not have been
withdrawn, to the effect that the Cash Payment Amount is fair to the Minority
Shareholders from a financial point of view.
9.2 CONDITIONS TO OBLIGATIONS OF UPBNA. The obligations of UPBNA to
consummate the Merger and the other transactions contemplated hereby are subject
to the satisfaction of the following conditions, unless waived by UPBNA pursuant
to 11.5(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 CFH 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 CFH set forth
in Section 5.3 of this Agreement shall be true and correct in all material
respects. There shall not exist inaccuracies in the representations and
warranties of CFH set forth in this Agreement (including the representations and
warranties set forth in Section 5.3 of the Agreement) such that the aggregate
effect of such inaccuracies has, or is reasonably likely to have, a Material
Adverse Effect on CFH; provided that for purposes of this sentence only those
representations and warranties which are qualified by references to "material"
or "Material Adverse Effect" shall be deemed not to include such qualifications.
(b) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the
agreements and covenants of CFH 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.
9.3 CONDITIONS TO OBLIGATIONS OF CFH. The obligations of CFH to
consummate the Merger and the other transactions contemplated hereby are subject
to the satisfaction of the following conditions, unless waived by CFH pursuant
to Section 11.5 (b) of this Agreement:
(a) REPRESENTATIONS AND WARRANTIES. For purposes of this Section
9.3(a), the accuracy of the representations and warranties of UPBNA 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). There shall not exist inaccuracies in the
representations and warranties of UPBNA set forth in this Agreement such that
the aggregate effect of such inaccuracies has, or is reasonably likely to have,
a Material Adverse Effect on UPBNA; provided that for purposes of this sentence
only those representations and warranties which are qualified by references to
"material" or "Material Adverse Effect" shall be deemed not to include such
qualifications.
(b) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the
agreements and covenants of UPBNA 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.
ARTICLE 10
TERMINATION
10.1 TERMINATION. Notwithstanding any other provision of this
Agreement, 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 UPBNA and the
Board of Directors of CFH; or
(b) By the Board of Directors of either Party, if there shall be
enacted any Law that makes consummation of the Merger illegal or
otherwise prohibited or if any Order enjoining either Party from
consummating the Merger is entered and such order shall become final and
nonappealable.
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 shall become void and have no effect, and neither Party shall have any
claim or legal right to redress, whether for breach of contract or otherwise, as
a result of a
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breach of any representation, warranty, covenant, or condition of this
Agreement, except that the provisions of this Section 10.2 shall survive any
such termination and abandonment.
10.3 NON-SURVIVAL OF REPRESENTATIONS AND COVENANTS. The respective
representations, warranties, obligations, covenants, and agreements of the
Parties shall not survive the Effective Time except this Section 10.3, Articles
2, 3, 4, and 11 of this Agreement, and Section 8.5 of this Agreement.
ARTICLE 11
MISCELLANEOUS
11.1 DEFINITIONS. Except as otherwise provided herein, the capitalized
terms set forth below shall have the following meanings:
"AGREEMENT" shall mean this Agreement and Plan of Reorganization,
including the Exhibits delivered pursuant hereto and incorporated herein
by reference.
"AVERAGE CLOSING PRICE" shall mean the average of the closing
prices of UPC Common Stock on the NYSE (as reported by the Wall Street
Journal or, if not reported thereby, another authoritative source chosen
by UPBNA) during the ten full trading day period ending on the last full
trading day immediately prior to the Effective Time.
"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.
"CFH COMMON STOCK" shall mean the $0.01 par value common stock of
CFH.
"CFH COMPANIES" shall mean, collectively, CFH and all
Subsidiaries of CFH.
"CFH OPTION" shall have the meaning ascribed to it in Section 3.3
of this Agreement.
"CFH STOCK OPTION PLAN" shall mean the existing stock option plan
of CFH.
"CASH PAYMENT AMOUNT" shall mean an amount in cash equal to
$17.50.
"CLOSING" shall mean the closing of the transactions contemplated
hereby, as described in Section 1.2 of this Agreement.
"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 control or both would
constitute a breach or violation of or default under any Contract, Order,
or Permit, or (iii) any occurrence of
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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 where, in any such
event, such Default is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on a Party.
"EFFECTIVE TIME" shall have the meaning ascribed to it in Section
1.3 of this Agreement.
"FBCA" shall mean the Florida Business Corporation Act.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"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.
"INFORMATION STATEMENT" shall mean the disclosure statement to be
delivered to the Minority Shareholders.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of
1986, as amended, and the rules and regulations promulgated thereunder.
"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 of the Regulatory Authorities.
"LIABILITY" shall mean any direct or indirect, primary or
secondary liability, indebtedness, obligation, penalty, cost, or expense
(including costs of investigation, collection, and defense), claim,
deficiency, guaranty, or endorsement of or by any Person (other than
endorsements of notes, bills, checks, and drafts presented for collection
or deposit in the ordinary course of business) of any type, whether
accrued, absolute, or contingent, liquidated or unliquidated, matured or
unmatured, or otherwise.
"LIEN" shall mean any conditional sale agreement, default of
title, easement, encroachment, encumbrance, hypothecation, infringement,
lien, mortgage, pledge, reservation, restriction, security interest,
title retention, or other security arrangement, or any adverse right or
interest, charge, or claim of any nature whatsoever of, on, or with
respect to any property or property interest, other than (i) Liens for
current property or other Taxes not yet due and payable, (ii) such
imperfections of title and encumbrances, if any, as do not materially
detract from the value or interfere with the present use of any of such
Party's Assets, (iii) for depository institution Subsidiaries of a Party,
pledges to secure deposits, and other Liens incurred in the ordinary
course of the banking business, and (iv) Liens that arise by operation of
Law with respect to Liabilities that are not delinquent or are being
contested in good faith.
"LITIGATION" shall mean any action, arbitration, cause of action,
claim, complaint, criminal prosecution, demand letter, governmental or
other examination or investigation, hearing, inquiry, administrative, or
other proceeding, or notice (written or oral) by any Person alleging
potential Liability or requesting information about a potential claim
relating to or affecting a Party, its business, its Assets (including
Contracts related to it), or the transactions contemplated by this
Agreement, but shall not include regular, periodic examinations of
depository institutions and their Affiliates by Regulatory Authorities.
"MATERIAL" for purposes of this Agreement shall be determined in
light of the facts and circumstances of the matter in question; provided
that any specific monetary amount stated in this Agreement shall
determine materiality in that instance.
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"MATERIAL ADVERSE EFFECT" on a Party shall mean an event, change,
or occurrence which, together with any other event, change, or
occurrence, has a material adverse impact on (i) the financial position,
business, or results of operations of such Party and its Subsidiaries,
taken as a whole, or (ii) the ability of such Party to perform its
obligations under this Agreement or to consummate the Merger or the other
transactions contemplated by this Agreement, provided that "material
adverse effect" 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 the parties, (c)
expenses incurred by CFH and CFH Companies in connection with the
transactions contemplated by this Agreement, (d) actions and omissions of
a Party (or any of its Subsidiaries) taken with the prior informed
consent of the other Party in contemplation of the transactions
contemplated hereby, and (e) the Merger and compliance with the
provisions of this Agreement on the operating performance of the Parties.
"MERGER" shall have the meaning ascribed to it in Section 1.1 of
this Agreement.
"MERGER SUB" shall mean the corporation to be formed as a
wholly-owned subsidiary of UPBNA, organized and existing under the Laws
of the State of Florida.
"MERGER SUB COMMON STOCK" shall mean the $1.00 par value common
stock of Merger Sub.
"MINORITY SHAREHOLDERS" shall mean all holders of CFH Common
Stock other than UPBNA and Merger Sub.
"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.
"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.
"PARTY" shall mean either CFH or UPBNA, and "PARTIES" shall mean
both CFH and UPBNA.
"PERMIT" shall mean any federal, state, and local 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 between CFH and
Merger Sub in substantially the form of Exhibit 1.
"RIGHTS" shall mean all arrangements, calls, commitments,
Contracts, options, rights to subscribe to, scrip, understandings,
warrants, or other binding obligations of any character whatsoever
relating to, or securities or rights convertible into or exchangeable
for, shares of the capital stock of a Person or by which a Person is or
may be bound to issue additional shares of its capital stock or other
Rights.
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"SCHEDULE 13E-3" shall mean the Schedule 13E-3 to be filed by
UPBNA relating to the Merger as required by the 1934 Act.
"SEC" shall mean the United States Securities and Exchange
Commission.
"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.
"SUBSIDIARIES" shall mean all those corporations, banks,
associations, or other entities of which the entity in question owns or
controls 50% or more of the outstanding equity securities either directly
or through an unbroken chain of entities as to each of which 50% or more
of the outstanding equity securities is owned directly or indirectly by
its parent; provided, there shall not be included any such entity
acquired through foreclosure or any such entity the equity securities of
which are owned or controlled in a fiduciary capacity.
"SURVIVING CORPORATION" shall mean CFH as the Surviving
Corporation resulting from the Merger.
"TAX" or "TAXES" shall mean all federal, state, and local taxes,
charges, fees, levies, imposts, duties, or other assessments, including
income, gross receipts, excise, employment, sales, use, transfer,
license, payroll, franchise, severance, stamp, occupation, windfall
profits, environmental, federal highway use, commercial rent, customs
duties, capital stock, paid-up capital, profits, withholding, Social
Security, single business and unemployment, disability, real property,
personal property, registration, ad valorem, value added, alternative or
add-on minimum, estimated, or other tax or governmental fee of any kind
whatsoever, imposed or required to be withheld by the United States or
any state, local, foreign government or subdivision or agency thereof,
including any interest, penalties or additions thereto.
"UPC COMMON STOCK" shall mean the $5.00 par value common stock of
UPC.
"UPBNA COMMON STOCK" shall mean the $10.00 par value common stock
of UPBNA.
Any singular term in this Agreement shall be deemed to include the plural, and
any plural term the singular. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed followed by the
words "without limitation."
11.2 EXPENSES.
(a) Except as otherwise provided in this Section 11.2, each of
the Parties shall bear and pay all direct costs and expenses incurred by it or
on its behalf in connection with the transactions contemplated hereunder,
including filing, fees, and expenses of its own financial or other consultants,
investment bankers, accountants, and counsel, except that UPBNA shall bear and
pay the filing fees payable in connection with the Schedule 13E-3 and the fees
of Stifel Nicolaus & Company, Inc..
(b) Nothing contained in this Section 11.2 shall constitute or
shall be deemed to constitute liquidated damages for the willful and knowing
breach by a Party of the terms of this Agreement or otherwise limit the rights
of the nonbreaching Party.
11.3 ENTIRE AGREEMENT. Except as otherwise expressly provided herein,
this Agreement (including the documents and instruments referred to herein)
constitutes the entire agreement between the Parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral, other than the
confidentiality agreement between the Parties, which shall remain in effect.
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Except as contemplated by Articles 3 and 4 of this Agreement and Section 8.5 of
this Agreement, 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.
11.4 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.
11.5 WAIVERS.
(a) Prior to or at the Effective Time, UPBNA, acting through its
Board of Directors, chief executive officer, vice chairman, or other authorized
officer, shall have the right to waive any Default in the performance of any
term of this Agreement by CFH, to waive or extend the time for the compliance or
fulfillment by CFH of any and all of its obligations under this Agreement, and
to waive any or all of the conditions precedent to the obligations of UPBNA
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 UPBNA except that any unfulfilled
conditions shall be deemed to have been waived at the Effective Time.
(b) Prior to or at the Effective Time, CFH, 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 UPBNA, to waive or extend the time for the compliance or
fulfillment by UPBNA of any and all of its obligations under this Agreement, and
to waive any or all of the conditions precedent to the obligations of CFH 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 CFH except that any unfulfilled
conditions shall be deemed to have been waived at the Effective Time.
(c) The failure of any Party at any time or times to require
performance of any provision hereof shall in no manner affect the right of such
Party at a later time to enforce the same or any other provision of this
Agreement. No waiver of any condition or of the breach of any term contained in
this Agreement in one or more instances shall be deemed to be or construed as a
further or continuing waiver of such condition or breach or a waiver of any
other condition or of the breach of any other term of this Agreement.
11.6 ASSIGNMENT. Except as expressly contemplated hereby, neither this
Agreement nor any of the rights, interests, or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise) without
the prior written consent of the other Party. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of, and be enforceable
by the Parties and their respective successors and assigns.
11.7 NOTICES. All notices or other communications which are required
or permitted hereunder shall be in writing and sufficient if delivered by hand,
by facsimile transmission, by registered or certified mail, postage pre-paid, or
by courier or overnight carrier, to the persons at the addresses set forth below
(or at such other address as may be provided hereunder), and shall be deemed to
have been delivered as of the date so delivered:
CFH: CAPITAL FACTORS HOLDING, INC.
Suite 500
East Palmetto Park Road
Boca Raton, Florida 33432
Telecopy Number: (561) 347-6207
Attention: Dennis McDermott
Executive Vice President and Chief
Financial Officer
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Copy to Counsel: MILBANK, TWEED, HADLEY & MCCLOY
1 Chase Manhattan Plaza
New York, New York 10005-1401
Telecopy Number: (212) 530-5219
Attention: John T. O'Connor
UPBNA: UNION PLANTERS BANK, NATIONAL ASSOCIATION
7130 Goodlett Farms Parkway
Memphis, Tennessee 38018
Telecopy Number: (901) 580-2939
Attention: Jackson W. Moore
President and Chief Operating Officer
Copy to Counsel: UNION PLANTERS CORPORATION
7130 Goodlett Farms Parkway
Memphis, Tennessee 38018
Telecopy Number: (901) 580-2939
Attention: E. James House, Jr.
Manager, Legal Division
11.8 GOVERNING LAW. Except to the extent the laws of the State of
Florida apply to the Merger, 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.
11.9 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.
11.10 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 the
Parties.
11.13 ENFORCEMENT OF AGREEMENT. The Parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the Parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
11.14 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
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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: CAPITAL FACTORS HOLDING, INC.
By: /s/ Dennis A. McDermott By: /s/ John W. Kiefer
----------------------------------- -----------------------------
Dennis A. McDermott John W. Kiefer
Executive Vice President and President and Chief Executive
Financial Officer Officer
[CORPORATE SEAL]
UNION PLANTERS BANK, NATIONAL
ASSOCIATION
By: /s/ E. James House, Jr. By: /s/ Jackson W. Moore
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E. James House, Jr. Jackson W. Moore
Secretary President and Chief Operating
Officer
[CORPORATE SEAL]
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APPENDIX B
PLAN OF MERGER
OF
CFH ACQUISITION COMPANY, INC.
WITH AND INTO
CAPITAL FACTORS HOLDING, INC.
Pursuant to this Plan of Merger ("Plan of Merger) CFH ACQUISITION
COMPANY, INC., a corporation organized and existing under the laws of the State
of Florida ("Merger Sub"), will be merged with and into CAPITAL FACTORS HOLDING,
INC., a corporation organized and existing under the laws of the State of
Florida ("CFH").
ARTICLE 1
DEFINITIONS
Except as otherwise provided herein, the capitalized terms set forth
below shall have the following meanings:
1.1 "ARTICLES OF MERGER" shall mean the Articles of Merger to be
executed by Merger Sub and CFH and filed with the Secretary of State of the
State of Florida relating to the merger of Merger Sub with and into UPC as
contemplated by Section 2.1 of this Plan of Merger.
1.2 "CASH PAYMENT AMOUNT" shall mean an amount in cash equal to
$17.50.
1.3 "CFH COMMON STOCK" shall mean the $.01 par value common stock of
CFH.
1.4 "CLOSING" shall mean the Closing of the transactions contemplated
hereby, as described in Section 2.2 of this Plan of Merger.
1.5 "EFFECTIVE TIME" shall have the meaning ascribed to it in Section
2.3 of this Plan of Merger.
1.6 "FBCA" shall mean the Florida Business Corporation Act.
1.7 "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 federal or state regulatory agencies having jurisdiction over a person or
its subsidiaries.
1.8 "MERGER" shall have the meaning ascribed to it in Section 2.1 of
this Plan of Merger.
1.9 "MERGER AGREEMENT" shall mean that certain Agreement and Plan of
Reorganization by and between UPBNA and CFH.
1.10 "MERGER SUB COMMON STOCK" shall mean the $1.00 par value common
stock of Merger Sub.
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1.11 "SURVIVING CORPORATION" shall refer to CFH as the surviving
corporation resulting from the Merger.
1.12 "UPBNA" shall mean Union Planters Bank, National Association.
1.13 "UPBNA COMMON STOCK" shall mean the $10.00 par value common stock
of UPBNA.
ARTICLE 2
TRANSACTIONS AND TERMS OF MERGER
2.1 MERGER. Subject to the terms and conditions of this Agreement, at
the Effective Time, Merger Sub shall be merged with and into CFH in accordance
with the provisions of Section 607.1104 of the FBCA (the "Merger") and with the
effect provided for in Section 607.1106 of the FBCA. CFH shall be the Surviving
Corporation of the Merger and shall continue to be governed by the Laws of the
State of Florida. The Merger shall be consummated pursuant to the terms of the
Merger Agreement, which has been approved and adopted by the Boards of Directors
of CFH and UPBNA, and this Plan of Merger, which has been approved and adopted
by the Boards of Directors of CFH and Merger Sub.
2.2 TIME AND PLACE OF CLOSING. The Closing will take place at 9:00
A.M. Central Time on the date that the Effective Time occurs (or the immediately
preceding day if the Effective Time is earlier than 9:00 A.M. Central Time), or
at such other time as the Parties, acting through their duly authorized
officers, may mutually agree. The place of Closing shall be at the offices of
UPBNA, in Memphis, Tennessee, or such other place as may be mutually agreed upon
by the parties to the Merger Agreement.
2.3 EFFECTIVE TIME. The Merger and other transactions contemplated by
the Merger Agreement and this Plan of Merger shall become effective on the date
and at the time the Florida Articles of Merger reflecting the Merger shall
become effective with the Secretary of State of the State of Florida (the
"Effective Time").
ARTICLE 3
TERMS OF MERGER
3.1 ARTICLES OF INCORPORATION. The Articles of Incorporation of CFH in
effect immediately prior to the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation after the Effective Time until
otherwise amended or repealed.
3.2 BYLAWS. The Bylaws of CFH in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation after the
Effective Time until otherwise amended or repealed.
3.3 DIRECTORS AND OFFICERS. The directors of Merger Sub 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 CFH in office immediately prior to
the Effective Time, together with such additional persons as may thereafter be
elected, shall serve as the officers of the Surviving Corporation from and after
the Effective Time in accordance with the Bylaws of the Surviving Corporation.
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ARTICLE 4
MANNER OF CONVERTING SHARES
5.1 CONVERSION OF SHARES. Subject to the provisions of Article 3 of
the Merger Agreement, at the Effective Time, by virtue of the Merger and without
any action on the part of the holders thereof, the shares of the constituent
corporations shall be converted as follows:
(a) Each share of UPBNA Common Stock 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 Sub Common Stock issued and
outstanding at the Effective Time shall be converted into and
exchanged for one share of CFH Common Stock.
(c) Each share of CFH Common Stock (excluding shares held by
CFH or any of its Subsidiaries or by UPBNA or any of its Subsidiaries,
in each case other than in a fiduciary capacity or as a result of
debts previously contracted) issued and outstanding immediately prior
to the Effective Time shall be cancelled and converted into the right
to receive in consideration thereof a cash payment from UPBNA in the
amount of the Cash Payment Amount.
5.2 SHARES HELD BY CFH OR UPBNA. Each of the shares of CFH Common
Stock held by CFH or any of its Subsidiaries or, UPBNA, or any of its
Subsidiaries, in each case other than in a fiduciary capacity or as a result of
debts previously contracted, shall be canceled and retired at the Effective Time
and no consideration shall be issued in exchange therefor.
ARTICLE 6
MISCELLANEOUS
6.1 CONDITIONS PRECEDENT. Consummation of the Merger by Merger Sub
shall be conditioned on the satisfaction of, or waiver by UPBNA of the
conditions precedent to the Merger set forth in Sections 9.1 and 9.2 of the
Merger Agreement. Consummation of the Merger by CFH shall be conditioned on the
satisfaction of, or waiver by CFH of, the conditions precedent to the Merger set
forth in Sections 9.1 and 9.3 of the Merger Agreement.
6.2 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 Merger Agreement.
6.3 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be an original; but all of such counterparts together shall
constitute one and the same instrument.
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IN WITNESS WHEREOF, each of the parties has caused this Plan of Merger
to be executed on its behalf and its corporate seal to be hereunto affixed and
attested by officers thereunto duly authorized all as of the ____ day of
________, 1998.
CFH ACQUISITION COMPANY, INC.
[CORPORATE SEAL]
By:
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ATTEST:
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CAPITAL FACTORS HOLDING, INC.
[CORPORATE SEAL]
By:
--------------------------------
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ATTEST:
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APPENDIX C
[STIFEL, NICOLAUS & COMPANY, INCORPORATED LETTERHEAD]
October 16, 1998
THE BOARD OF DIRECTORS THE BOARD OF DIRECTORS
UNION PLANTERS BANK, NATIONAL ASSOCIATION CAPITAL FACTORS HOLDING, INC.
Gentlemen:
We understand that Capital Factors Holding, Inc. (the "Company") and
Union Planters Bank, National Association ("UPBNA") propose to enter into an
Agreement and Plan of Reorganization (the "Merger Agreement"). Pursuant to the
Merger Agreement, UPBNA proposes to form a wholly-owned subsidiary ("Merger
Sub") to which it will contribute the shares of the common stock of the Company
(the "Common Stock") owned by it and then merge (the "Merger") Merger Sub with
and into the Company. Upon consummation of the Merger, all of the issued and
outstanding shares of the Common Stock will be cancelled and each holder of
Common Stock other than UPBNA or Merger Sub will receive $17.50 in cash (the
"Cash Consideration") in exchange for each share of Common Stock held by such
holder immediately prior to consummation of the Merger. We understand that
approximately 92% of the outstanding shares of Common Stock are currently owned
by UPBNA.
You have asked for our opinion as investment bankers, as of the date
hereof, as to whether the Cash Consideration to be received by the holders of
Common Stock (other than the Common Stock owned directly or indirectly by UPBNA
or Merger Sub) pursuant to the Merger is fair to such shareholders from a
financial point of view. As you are aware, we did not set or recommend the
amount of the Cash Consideration, and we were not retained to nor did we advise
the Company with respect to alternatives to the Merger or the Company's
underlying decision to proceed with or effect the Merger. Further, we were not
requested to nor did we solicit or assist the Company in soliciting indications
of interest from third parties for all or any part of the Company.
In connection with our opinion, we have, among other things:
1. Reviewed certain publicly available financial and other data
with respect to the Company, including its consolidated
financial statements, for the 1997, 1996 and 1995 fiscal years
and interim periods to June 30, 1998, and certain other
relevant financial and operating data relating to the Company
made available to us from published sources and from internal
records of the Company;
2. Reviewed the financial terms and conditions set out in the
drafts distributed on October 13 of the Merger Agreement, the
Information Statement and Schedule 13E-3 Transaction Statement
with respect to the Merger;
3. Reviewed certain publicly available information concerning the
trading of, and the trading market for, the Company's Common
Stock, including the prices of certain recent purchases of
large blocks of the Company's shares from institutional
investors by UPBNA;
4. Compared the Company from a financial point of view with
certain other companies in the factoring and commercial
finance industries, the securities of which are publicly
traded;
5. Considered the financial terms, to the extent publicly
available, of selected recent business combinations involving
companies in the factoring and commercial finance industries
which we deemed to be comparable, in whole or in part, to the
Company;
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6. Considered the financial terms, to the extent publicly
available, of selected recent business combinations whereby the
buyer owned 75% or more of the capital stock of the seller
prior to the combination and as a result of the combination
owned 100% of the capital stock of the seller following the
combination, which we deemed to be comparable, in whole or in
part, to the Merger;
7. Reviewed and discussed with representatives of management of
the Company certain information of a business and financial
nature regarding the Company, furnished to us by them,
including financial forecasts and related assumptions prepared
by management of the Company;
8. Utilizing the information and forecasts furnished by the
Company, in consultation with the Company's management and
with the Company's advice and consent, created a 5-year
financial projection for use in preparing our opinion;
9. Performed such other analysis and examinations as we deemed
appropriate.
We have relied upon the accuracy and completeness of the financial
and other information used by us in arriving at our opinion without independent
verification, and have further relied upon the assurances of management of the
Company that they are not aware of any facts that would make such information
inaccurate or misleading. With respect to the financial projections for the
years 1998 through 2003 which we developed based on certain forecasts,
information and assumptions provided by management and with management's advice
and your consent to use such projections in our analysis, we have assumed that
the forecasts, information, and assumptions and guidance provided by management
have been reasonably prepared and reflect the best currently available
estimates and judgement of the Company's management at the time of preparation,
and that they and the projections provide a reasonable basis upon which we
could form our opinion. Such forecasts and projections were not prepared with a
view toward public disclosure. In addition, such forecasts and projections were
based upon numerous variables and assumptions that are inherently uncertain,
including, without limitation, factors related to general economic and
competitive conditions. Accordingly, actual results could vary significantly
from those set forth in such forecasts and projections. With your consent, we
have assumed no responsibility or liability for such forecasts or projections.
We also assumed that there have been no material changes in the Company's
assets, financial condition, results of operations, business or prospects since
the date of the last financial statements made available to us and that the
aggregate allowances for loan losses are in the aggregate adequate to cover all
such losses. We did not make or obtain any independent evaluation, appraisal,
or physical inspection of the Company's assets or liabilities, the collateral
securing any of such assets or liabilities, or the collectibility of any such
assets nor did we review loan or credit files of the Company. With your
permission we have assumed no responsibility for any legal and accounting
matters relating to UPBNA, the Company, the Merger and the Merger Agreement. We
assumed that the Merger will be consummated in a manner that complies in all
respects with the applicable provisions of the Exchange Act, and all other
applicable federal and state statutes, rules and regulations. In arriving at
our opinion, we have not conducted a physical inspection of the properties or
facilities of the Company. We have not made or obtained any evaluations or
appraisals of the assets or liabilities (contingent or otherwise) of the
Company, nor were we furnished with any such appraisals. Our opinion is
necessarily based upon market, economic and other conditions as they exist and
can only be evaluated as of the date of this letter.
We have performed various investment banking services for Union
Planters Corporation, the parent of UPBNA, from time to time in the past, and
expect to render such services to Union Planters Corporation and its
subsidiaries and affiliates in the future.
Based upon and subject to the foregoing and in reliance thereon, it is
our opinion as of the date hereof as investment bankers that the Cash
Consideration to be received by the holders of Common Stock (other than Common
Stock owned directly or indirectly by UPBNA or Merger Sub) as a result of the
Merger is fair to such shareholders from a financial point of view.
This opinion is directed to the Boards of Directors of UPBNA and the
Company for their consideration in connection with the financial aspects of the
Merger and is not a recommendation to any director as to how such director
should vote with respect to the Merger. Further, this opinion addresses only
the fairness
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from a financial point of view of the Cash Consideration to be received by the
holders of Common Stock (other than shares of Common Stock owned directly or
indirectly by UPBNA or Merger Sub) and does not address the relative merits of
the Merger and any effect the Merger may have on the Company or any other aspect
of the Merger. In arriving at our opinion, we were not authorized to solicit,
and did not solicit, interest from any party with respect to the acquisition of
the Company, any of its assets or minority shares. The Company is authorized to
disclose in full and refer to this opinion in any information statement or proxy
statement prepared in connection with the Merger, provided that we expressly
approve all statements in such documents relating to this opinion. The Company
may not disclose, quote, use or refer to this opinion in any manner for any
other purpose without our express prior written consent.
Sincerely,
/s/ STIFEL, NICOLAUS & COMPANY, INCORPORATED
STIFEL, NICOLAUS & COMPANY, INCORPORATED
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