As filed with the Securities and Exchange Commission on February 3, 1998
Registration No. 333-
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
WHITNEY HOLDING CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
LOUISIANA 6711 72-6017893
(State or other jurisdiction of (Primary Standard Indus (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
228 St. Charles Avenue
New Orleans, Louisiana 70130
(504) 586-7117
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
<TABLE>
<S> <C> <C>
Joseph S. Schwertz, Jr., Esq. Copies to: Copies to:
Secretary Patrick J. Butler, Jr., Esq. Gerald F. Heupel, Jr., Esq.
Whitney Holding Corporation Milling, Benson, Woodward, Elias, Matz, Tiernan & Herrick L.L.P.
228 St. Charles Ave. - Room 622 Hillyer, Pierson & Miller, L.L.P. 12th Floor, 734 15th Street, N.W.
New Orleans, LA 70130 909 Poydras Street, Suite 2300 Washington, D.C. 20005
(504) 586-3474 New Orleans, LA 70112
(Name, address, including zip code, and
telephone number, including area code, of agent for service)
</TABLE>
Approximate Date of Commencement of Proposed Sale of the Securities to the
Public:
Upon submission of the Plan of Merger described in this registration statement
for the vote of shareholders of Meritrust Federal Savings Bank.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, please check the following box. |_|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_| _________
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_| _________
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
Proposed Proposed
Title of each class of Amount maximum maximum Amount of
securities to be registered to be offering price aggregate registration
registered(1) per share offering price(2) fee
<S> <C> <C> <C> <C>
Common stock, no par value 1,338,120 shares $45.37 $60,708,672 $17,909.06
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Based on the minimum closing sales price of a share of Whitney Holding
Corporation common stock, no par value, of $46.00 that may be applied
pursuant to the pricing formula described herein, resulting in the maximum
aggregate amount of such securities that may be issued without waiver in
connection with the merger described in the Registration Statement (assuming
all Bank Options described herein are exercised). There is also registered
hereby a currently indeterminate number of additional shares that may be
issued in the transaction described herein under certain limited
circumstances.
(2) Calculated in accordance with Rule 457(f)(1) based on the average of the bid
and asked prices per share of the common stock, $1.00 par value, of
Meritrust Federal Savings Bank outstanding on January 28, 1998, as reported
on the Nasdaq SmallCap Market (assuming all Bank Options are exercised), and
included herein solely for purposes of calculating the registration fee.
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
- --------------------------------------------------------------------------------
<PAGE>
WHITNEY HOLDING CORPORATION
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Item of Form S-4 Location in Prospectus
- ---------------- -----------------------
<S> <C> <C>
A. Information About the Transaction
1. Forepart of Registration Statement and Cover Page
Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages Inside Cover; Table of Contents
of Prospectus
3. Risk Factors, Ratio of Earnings to Fixed Summary
Charges and Other Information
4. Terms of the Transaction Summary; The Plan of Merger
5. Pro Forma Financial Information *
6. Material Contacts with the Company Being The Plan of Merger - Background; The Plan
Acquired of Merger - Reasons for the Plan of Merger;
The Plan of Merger - Recommendation of the
Bank's Board of Directors
7. Additional Information Required for *
Reoffering by Persons and Parties Deemed
to be Underwriters
8. Interests of Named Experts and Counsel *
9. Disclosure of Commission Position on *
Indemnification for Securities Act Liabilities
B. Information About the Registrant
10. Information with Respect to S-3 Registrants Inside Cover; Summary; Information about
Whitney
11. Incorporation of Certain Information by Information about Whitney; Incorporation of
Reference Certain Documents by Reference
12. Information with Respect to S-2 or S-3 *
Registrants
13. Incorporation of Certain Information by *
Reference
14. Information with Respect to Registrants *
other than S-3 or S-2 Registrants
C. Information About the Company Being Acquired
15. Information with Respect to S-3 Companies *
16. Information with Respect to S-2 or S-3 Information about the Bank
Companies
</TABLE>
<PAGE>
WHITNEY HOLDING CORPORATION
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
<S> <C>
Item of Form S-4 Location in Prospectus
- ---------------- ----------------------
17. Information with Respect to Companies *
other than S-3 or S-2 Companies
D. Voting and Management Information
18. Information if Proxies, Consents or
Authorizations are to be Solicited
(1) Date, Time and Place Information The Meeting - General
(2) Revocability of Proxy The Meeting - Solicitation, Voting and
Revocation of Proxies
(3) Dissenters' Rights of Appraisal Absence of Dissenters' Rights
(4) Persons Making the Solicitation The Meeting - General; The Meeting -
Solicitation, Voting and Revocation of
Proxies
(5) Interests of Certain Persons in Summary - Interests of Certain Persons; The
Matters to be Acted Upon; Voting Plan of Merger - Interests of Certain Persons;
Securities and Principal Holders Information About the Bank - Security
Thereof Holdings of Principal Shareholders and
Management
(6) Vote Required for Approval The Meeting - Shares Entitled to Vote;
Quorum; Vote Required
(7) Directors and Executive Officers; Information About the Bank
Executive Compensation; Certain
Relationships and Related
Transactions
19. Information if Proxies, Consents or *
Authorizations are not to be Solicited or in
an Exchange Offer
<FN>
*Not applicable or answer is in the negative.
</FN>
</TABLE>
<PAGE>
MERITRUST FEDERAL SAVINGS BANK
200 West Second Street
Thibodaux, Louisiana 70302
_______________, 1998
Dear Shareholder:
You are cordially invited to attend a special meeting of shareholders
(the "Meeting") of Meritrust Federal Savings Bank (the "Bank") to be held in the
main office of the Bank, 200 West Second Street, Thibodaux, Louisiana 70302, on
________, ____________, 1998 at 3:00 p.m., local time.
At the Meeting, shareholders will be asked to approve the Agreement and
Plan of Merger dated November 20, 1997 between Whitney Holding Corporation
("Whitney"), Whitney National Bank ("Whitney Bank") and the Bank and a related
merger agreement (collectively, the "Plan of Merger"). Pursuant to the Plan of
Merger, the Bank will merge with and into Whitney Bank (the "Merger"), and each
share of common stock of the Bank ("Bank Common Stock") will be converted into
the right to receive shares of common stock of Whitney ("Whitney Common Stock")
and cash in lieu of any fractional share. Whitney Bank will be the surviving
entity in the Merger, and shareholders of the Bank will become shareholders of
Whitney. It is a condition to the Merger that, among other things, the exchange
of Bank Common Stock solely for shares of Whitney Common Stock will be tax free
to the Bank's shareholders for federal income tax purposes.
Each share of Bank Common Stock is expected to be converted into the
right to receive between 1.352 shares and 1.587 shares of Whitney Common Stock,
depending upon the Average Whitney Market Price (as defined) and other factors,
as described in the accompanying Proxy Statement-Prospectus. If the effective
date of the Merger had been ______________, 1998, each share of Bank Common
Stock would have been converted into the right to receive _____ shares of
Whitney Common Stock. See "The Plan of Merger -- Description of the Plan of
Merger -- Conversion of Common Stock" in the accompanying Proxy
Statement-Prospectus.
The Merger has been approved by your Board of Directors, and the Board
recommends that each shareholder vote FOR the Plan of Merger. The Board believes
that the Merger is in the best interests of the Bank and its shareholders.
Consummation of the Merger is subject to certain conditions, including approval
of the Plan of Merger by the Bank's shareholders, approval of the Merger by
various regulatory agencies, and the satisfaction or waiver of certain other
contractual conditions.
The accompanying Notice of Special Meeting and Proxy
Statement-Prospectus contain information about the proposed merger. Please read
carefully these materials and the documents incorporated therein by reference,
copies of which are available as indicated under the caption "Incorporation of
Certain Documents by Reference."
The Board of Directors recommends that you vote FOR the Plan of Merger
and urges you to sign and date the enclosed proxy and return it promptly in the
accompanying envelope in order to ensure that your vote is represented. Of
course, if you attend the Meeting, you nevertheless may vote in person, even
though you previously returned your proxy.
Sincerely,
Stephen R. Berthelot Lee J. Guarisco
President Vice Chairman
<PAGE>
MERITRUST FEDERAL SAVINGS BANK
200 West Second Street
Thibodaux, Louisiana 70302
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD _______, _____________, 1998
To the Holders of Common Stock of Meritrust Federal Savings Bank:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
"Meeting") of Meritrust Federal Savings Bank (the "Bank") will be held at its
main office, 200 West Second Street, Thibodaux, Louisiana 70302, on ______,
___________, 1998 at 3:00 p.m., local time, for the following purposes:
1. To consider and vote upon a proposal to approve an Agreement and
Plan of Merger dated November 20, 1997, and a related merger
agreement, copies of which are attached as Appendix A to the
accompanying Proxy Statement-Prospectus and are incorporated
herein by reference (collectively, the "Plan of Merger"),
pursuant to which, among other things: (a) the Bank would merge
into Whitney National Bank ("Whitney Bank"), a wholly-owned bank
subsidiary of Whitney Holding Corporation ("Whitney"), and (b)
each outstanding share of common stock of the Bank would be
converted into shares of Whitney common stock as determined in
accordance with the terms of the Plan of Merger, all as more
fully described in the attached Proxy Statement-Prospectus.
2. To adjourn the Meeting, if necessary, to solicit additional
proxies.
3. To transact such other business as may properly come before the
Meeting or any adjournments or postponements thereof.
Only shareholders of record at the close of business on February 19,
1998 are entitled to notice of and to vote at the Meeting or any adjournment or
postponements thereof.
Shareholders are cordially invited to attend the Meeting in person.
Whether or not you plan to attend the Meeting, you are urged to complete, date
and sign the enclosed proxy and to return it promptly.
By order of the Board of Directors
of Meritrust Federal Savings Bank
Edward J. Patterson, Jr., Secretary
Thibodaux, Louisiana
____________, 1998
- --------------------------------------------------------------------------------
I M P O R T A N T
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING REGARDLESS OF THE
NUMBER THAT YOU HOLD. PLEASE PROMPTLY COMPLETE, SIGN AND MAIL THE ENCLOSED PROXY
IN THE ACCOMPANYING POST-PAID ENVELOPE, WHETHER OR NOT YOU INTEND TO BE PRESENT
AT THE MEETING. YOU MAY REVOKE YOUR PROXY AT ANY TIME BEFORE IT IS VOTED BY
GIVING WRITTEN NOTICE OF REVOCATION TO THE SECRETARY OF THE BANK OR BY EXECUTION
OF A PROXY OF A LATER DATE FILED WITH THE SECRETARY OF THE BANK AT OR BEFORE THE
MEETING. IN ADDITION, IF YOU ATTEND THE MEETING, YOU MAY REVOKE YOUR PROXY BY
VOTING IN PERSON.
- --------------------------------------------------------------------------------
<PAGE>
MERITRUST FEDERAL SAVINGS BANK
PROXY STATEMENT FOR SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ________________________, 1998
--------------------------------
WHITNEY HOLDING CORPORATION
PROSPECTUS
Common Stock, No Par Value
This Proxy Statement-Prospectus is being furnished to holders of common
stock, par value $1.00 per share ("Bank Common Stock"), of Meritrust Federal
Savings Bank (the "Bank") in connection with the solicitation of proxies by the
Bank's Board of Directors for use at a Special Meeting of Shareholders of the
Bank (the "Meeting") to be held on _________, _________________, 1998 at 3:00
p.m., local time, at the Bank's main office, 200 West Second Street, Thibodaux,
Louisiana 70302, and at any adjournments or postponements thereof. The purpose
of the Meeting is to consider and vote upon a proposal to approve an Agreement
and Plan of Merger dated November 20, 1997, and a related merger agreement
(collectively, the "Plan of Merger") between the Bank, on the one hand, and
Whitney Holding Corporation ("Whitney") and Whitney National Bank ("Whitney
Bank"), on the other hand. The Plan of Merger provides for, among other things,
the merger of the Bank into Whitney Bank (the "Merger"). Upon consummation of
the Merger, each outstanding share of Bank Common Stock will be converted into
or exchanged for shares of common stock, no par value, of Whitney ("Whitney
Common Stock") in the manner described herein, with cash being paid for any
fractional share interests, and any outstanding options to purchase Bank Common
Stock will be converted into options to purchase Whitney Common Stock in the
manner described herein. See "The Plan of Merger - Description of the Plan of
Merger -- Conversion of Common Stock." Consummation of the Merger requires the
approval of the holders of at least two-thirds of the outstanding shares of Bank
Common Stock. Consummation of the Merger is also subject to the satisfaction of
certain other conditions, including obtaining necessary regulatory approvals.
Whitney has filed a Registration Statement pursuant to the Securities
Act of 1933, as amended (the "Securities Act"), covering up to 1,338,120 shares
of Whitney Common Stock that may be issued in connection with the Merger, as
determined on the basis of the pricing formula described herein. The actual
number of shares of Whitney Common Stock to be issued will be determined in
accordance with the terms of the Plan of Merger. See "The Plan of Merger
Description of the Plan of Merger -- Conversion of Common Stock." The
outstanding shares of Whitney Common Stock are, and the shares of Whitney Common
Stock offered hereby will be, included for quotation on the Nasdaq National
Market System (the "Nasdaq National Market"). The outstanding shares of Bank
Common Stock are included for quotation on the Nasdaq SmallCap Market. The
closing price per share of Whitney Common Stock on the Nasdaq National Market on
_________, 1998 was $________, and the closing price per share of Bank Common
Stock on the Nasdaq SmallCap Market on _________, 1998 was $________. On
November 20, 1997, the last trading day before the Bank announced that it had
entered into the Plan of Merger, the closing price per share of Bank Common
Stock on the Nasdaq SmallCap Market was $51.219.
This Proxy Statement-Prospectus, and the accompanying Notice of Special
Meeting and form of proxy, are being first mailed to shareholders of the Bank on
or about __________________, 1998.
---------------------------
THE SECURITIES TO BE ISSUED IN CONNECTION WITH THE PROPOSED
MERGER HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCU-
RACY OR ADEQUACY OF THIS PROXY STATEMENT-PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE NOT SAVINGS OR DEPOSIT ACCOUNTS OR OTHER OBLIGATIONS
OF ANY BANK OR NON-BANK SUBSIDIARY OF WHITNEY AND ARE NOT INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE
FUND OR ANY OTHER GOVERNMENTAL AGENCY.
----------------------------
This Proxy Statement-Prospectus is dated ______________, 1998.
<PAGE>
No person has been authorized to give any information or to make any
representation in connection with the solicitation of proxies or the offering of
securities made hereby other than those contained or incorporated by reference
in this Proxy Statement-Prospectus, and, if given or made, such information or
representation must not be relied upon as having been authorized by Whitney or
the Bank. This Proxy Statement-Prospectus shall not constitute an offer to sell
or exchange or the solicitation of an offer to purchase any security, or the
solicitation of a proxy, nor shall there be any such sale, exchange or
solicitation in any jurisdiction in which, or to any person to whom, it is
unlawful to make such an offer, solicitation of an offer or proxy solicitation.
Neither the delivery of this Proxy Statement-Prospectus nor any distribution of
securities made hereunder shall, under any circumstances, create any implication
that there has been no change in the affairs of Whitney or the Bank since the
date hereof.
All information contained or incorporated by reference herein with
respect to the Bank has been provided by the Bank, and Whitney is relying on the
accuracy of that information. All information contained or incorporated by
reference herein with respect to Whitney has been provided by Whitney, and the
Bank is relying on the accuracy of that information.
AVAILABLE INFORMATION
Whitney and the Bank are subject to the informational requirements of
the Securities Exchange Act of 1934 (the "Exchange Act") and in accordance
therewith file reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission") and the Office of Thrift
Supervision ("OTS"), respectively. The reports, proxy statements and other
information filed by Whitney with the Commission can be inspected and copied at
the public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's Regional
Offices at 7 World Trade Center, 13th Floor, New York, New York 10048 and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates, and they are also available to the public at the web
site maintained by the Commission at "http://www.sec.gov." The reports, proxy
statements and other information filed by the Bank with the OTS can be inspected
and copied at the public reference facilities maintained by the OTS at the
Office of Records Management and Information Policy - Dissemination Branch,
Office of Thrift Supervision, 1700 G Street, N.W., Washington, D.C. 20552, and
can also be obtained by written request from such office at prescribed rates. In
addition, Whitney Common Stock is included for quotation on the Nasdaq National
Market (Symbol: WTNY), and the Bank Common Stock is included for quotation on
the Nasdaq SmallCap Market (Symbol: MERI). Such reports, proxy statements and
other information concerning Whitney and the Bank can be inspected at the
offices of the National Association of Securities Dealers, Inc., 1735 K Street,
N.W., Washington, D.C. 20006.
Whitney has filed with the Commission a Registration Statement on Form
S-4 ("Registration Statement") under the Securities Act with respect to the
Whitney Common Stock offered by this Proxy Statement-Prospectus. This Proxy
Statement-Prospectus does not contain all of the information set forth in the
Registration Statement or the exhibits thereto. Statements contained in this
Proxy Statement-Prospectus as to the contents of any documents are necessarily
summaries of the documents, and each statement is qualified in its entirety by
reference to the copy of the applicable document filed with the Commission. For
further information with respect to Whitney and the transactions described
herein, reference is made to the Registration Statement, including the exhibits
thereto and any documents incorporated by reference therein.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents previously filed with the Commission by Whitney
(File No. 0-1026) pursuant to the Exchange Act are incorporated by reference
into this Proxy Statement-Prospectus:
1. Whitney's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996;
2. Whitney's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1997;
ii
<PAGE>
3. Whitney's Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1997;
4. Whitney's Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 1997; and
5. The description of Whitney common stock set forth in Whitney's
registration statement under the Exchange Act, as updated and
modified in its entirety by Whitney's Current Report on Form
8-K filed with the Commission on January 19, 1996.
The following documents previously filed with the OTS by the Bank (OTS
Docket No. 06866) pursuant to the Exchange Act are incorporated by reference
into this Proxy Statement-Prospectus:
1. The Bank's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1996 (including certain information in the
Bank's Proxy Statement dated March 25, 1997 used in connection
with the Bank's 1996 Annual Meeting of Stockholders and
incorporated by reference into the Form 10-KSB);
2. The Bank's Quarterly Report on Form 10-QSB for the quarter ended
March 31, 1997;
3. The Bank's Quarterly Report on Form 10-QSB for the quarter ended
June 30, 1997;
4. The Bank's Quarterly Report on Form 10-QSB for the quarter ended
September 30, 1997;
5. The Bank's Current Reports on Form 8-K filed with the OTS on
December 2, 1997 and January 30, 1998; and
6. The following portions of the Bank's Annual Report to
Stockholders for the fiscal year ended December 31, 1996:
selected consolidated financial data (page 5); management's
discussion and analysis of financial condition and results of
operations (pages 6 through 20); and audited consolidated
financial statements and notes thereto (pages 21 through 44).
Accompanying this Proxy Statement-Prospectus are the Bank's Annual
Report to Stockholders for the fiscal year ended December 31, 1996 and its
Quarterly Report on Form 10-QSB for the quarter ended September 30, 1997.
All documents filed by Whitney pursuant to Sections 13(a), 13(c), 14,
or 15(d) of the Exchange Act after the date of this Proxy Statement-Prospectus
and prior to the date of the Meeting described herein shall be deemed to be
incorporated by reference in this Proxy Statement-Prospectus and to be a part
hereof from the date of their filing. Any statement contained herein, in any
supplement hereto, or in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes
hereof to the extent that a statement contained herein, or in any supplement
hereto, or in any subsequently filed document which also is, or is deemed to be,
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed to constitute a part
hereof, except as so modified or superseded.
THIS PROXY STATEMENT-PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
THAT ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE
AVAILABLE UPON REQUEST, IF FILED BY WHITNEY, FROM EDWARD B. GRIMBALL, CHIEF
FINANCIAL OFFICER, WHITNEY HOLDING CORPORATION, 228 ST. CHARLES AVENUE, NEW
ORLEANS, LOUISIANA 70130 (TELEPHONE (504) 586-7252), AND, IF FILED BY THE BANK,
FROM MICHAEL D.TEMPLET, CHIEF FINANCIAL OFFICER, MERITRUST FEDERAL SAVINGS BANK,
200 WEST SECOND STREET, THIBODAUX, LOUISIANA 70302 (TELEPHONE (504) 446-5011).
IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE
BY _______________________, 1998. Whitney hereby undertakes to provide copies of
any such documents, other than exhibits thereto that are not specifically
incorporated by reference therein, without charge to each person, including any
beneficial owner of Bank Common Stock, to whom this Proxy Statement-Prospectus
is delivered, upon the written or oral request of such person to Whitney's Chief
Financial Officer at the address and telephone number written above.
iii
<PAGE>
TABLE OF CONTENTS
SUMMARY.......................................................................vi
Parties to the Merger................................................vi
Whitney ...................................................vi
The Bank ...................................................vi
The Meeting..........................................................vi
General ...................................................vi
Purpose of the Meeting......................................vi
Vote Required.......................................................vii
Reasons for the Plan of Merger......................................vii
Recommendation of the Bank's Board of Directors.....................vii
Fairness Opinion of Friedman, Billings, Ramsey & Co., Inc...........vii
The Plan of Merger..................................................vii
Conversion of Common Stock.................................vii
Exchange of Certificates....................................ix
Regulatory Approvals and Other Conditions to
Consummation of the Merger................................ix
Waiver, Amendment and Termination...........................ix
Accounting Treatment..................................................x
Certain Federal Income Tax Consequences...............................x
Absence of Dissenters' Rights.........................................x
Interests of Certain Persons..........................................x
Market Prices........................................................xi
Comparative Rights of Shareholders...................................xi
Selected Financial Data of the Bank..................................xi
Selected Financial Data of Whitney.................................xiii
Comparative Per Share Data..........................................xiv
THE MEETING....................................................................1
General .............................................................1
Purpose of the Meeting................................................1
Shares Entitled to Vote; Quorum; Vote Required........................1
Solicitation, Voting and Revocation of Proxies........................2
THE PLAN OF MERGER.............................................................2
General .............................................................2
Background............................................................2
Reasons for the Plan of Merger........................................3
General ....................................................3
Whitney ....................................................3
The Bank ....................................................4
Recommendation of the Bank's Board of Directors.......................4
Fairness Opinion of Friedman, Billings, Ramsey & Co., Inc.............4
Description of the Plan of Merger.....................................8
Conversion of Common Stock...................................8
Exchange of Certificates.....................................9
Transfer and Exchange Agents................................10
Regulatory Approvals and Other Conditions of the Merger.....10
Effective Date..............................................10
Conduct of Business Prior to the Effective Date.............10
Waiver, Amendment and Termination...........................11
Expenses ...................................................12
Interests of Certain Persons.........................................12
Employment Status...........................................12
Employee Benefits...........................................12
iv
<PAGE>
Management..................................................13
Change in Control Agreements................................13
Bank Options................................................13
Advisory Board..............................................15
Indemnification and Insurance...............................15
Status Under Federal Securities Laws; Certain Restrictions
on Resales .......................................................15
Accounting Treatment.................................................16
Pro Forma Data.......................................................16
ABSENCE OF DISSENTERS' RIGHTS.................................................16
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.......................................16
ADJOURNMENT OF SPECIAL MEETING, IF NECESSARY..................................17
INFORMATION ABOUT THE BANK....................................................18
General ............................................................18
Market Prices of and Dividends Declared on Bank Common Stock.........18
Security Holdings of Principal Shareholders and Management...........19
INFORMATION ABOUT WHITNEY.....................................................20
General ............................................................20
Recent Developments..................................................20
Market Prices of and Dividends Declared on Whitney Common Stock .....21
COMPARATIVE RIGHTS OF SHAREHOLDERS............................................21
Description of Whitney Common Stock..................................21
Comparison of Whitney Common Stock and Bank Common Stock.............26
Boards of Directors.........................................26
Removal of Directors........................................26
Issuance of Shares to Directors, Officers or
Controlling Shareholders..................................26
Nomination of Directors.....................................27
Preferred Stock.............................................27
Special Meetings of Shareholders............................27
Business Conducted at Annual Meetings of Shareholders.......27
Amendment to Charter and Bylaws.............................27
Supermajority Vote Requirements.............................28
Indemnification Rights......................................28
Liquidation Account.........................................28
LEGAL MATTERS.................................................................29
EXPERTS.......................................................................29
SHAREHOLDER PROPOSALS.........................................................29
OTHER MATTERS.................................................................29
Appendix A - Agreement and Plan of Merger...........................A-1
Appendix B - Fairness Opinion of Friedman, Billings, Ramsey &
Co., Inc..........................................................B-1
v
<PAGE>
SUMMARY
The following summary is not intended to be complete and is qualified
in its entirety by the more detailed information appearing elsewhere herein, the
appendices hereto and the documents incorporated herein by reference.
Shareholders are urged to read carefully all such material.
Parties to the Merger
Whitney. Whitney Holding Corporation, a Louisiana corporation
("Whitney"), is a bank holding company registered pursuant to the Bank Holding
Company Act of 1956. Whitney became an operating entity in 1962 with Whitney
National Bank ("Whitney Bank") as its only significant subsidiary. Whitney Bank,
a national banking association headquartered in Orleans Parish, Louisiana, has
been engaged in general banking business in southern Louisiana since 1883. It
currently conducts its general banking business through approximately 100
banking offices in south Louisiana, southern Mississippi and Alabama and
northwestern Florida. Whitney Bank also maintains a foreign branch on Grand
Cayman in the British West Indies.
Whitney and its subsidiaries are sometimes referred to collectively
herein as "Whitney's consolidated group." At September 30, 1997, Whitney had
consolidated assets of approximately $4.2 billion and total consolidated
deposits of approximately $3.3 billion. Whitney's principal executive offices
are at 228 St. Charles Avenue, New Orleans, Louisiana 70130, and its telephone
number is (504) 586-7117. See "Information About Whitney."
The Bank. Meritrust Federal Savings Bank (the "Bank") is a federally
chartered, stock savings bank headquartered in Thibodaux, Louisiana. The Bank's
business consists primarily of attracting deposits from the general public and
using those and other available sources of funds to originate consumer loans and
loans secured by single-family residences located primarily in Thibodaux, Houma,
Luling, Raceland, Vacherie and Galliano, Louisiana and in St. Mary Parish,
Louisiana. At September 30, 1997, the Bank had total assets of $233.3 million,
deposits of $210.4 million and total stockholders' equity of $19.3 million.
The Bank's principal executive offices are at 200 West Second Street,
Thibodaux, Louisiana 70302, and its telephone number is (504) 446-5011. See
"Information About the Bank."
The Meeting
General. A special meeting of the shareholders of the Bank (the
"Meeting") will be held on ________________, 1998 at the time and place set
forth in the accompanying Notice of Special Meeting of Shareholders. Only record
holders of the common stock, $1.00 par value per share, of the Bank ("Bank
Common Stock") at the close of business on February 19, 1998 are entitled to
notice of and to vote at the Meeting. On that date, there were 774,176 shares of
Bank Common Stock issued and outstanding, each of which is entitled to one vote
on each matter properly to come before the Meeting.
Purpose of the Meeting. The purpose of the Meeting is to vote upon a
proposal to approve an Agreement and Plan of Merger dated November 20, 1997, and
a related merger agreement (collectively, the "Plan of Merger"), copies of which
are attached hereto as Appendix A, pursuant to which, among other things, the
Bank will merge into Whitney Bank (the "Merger") and shareholders of the Bank
will receive shares of Whitney common stock, no par value ("Whitney Common
Stock"), and cash in lieu of fractional shares, as described below under " - The
Plan of Merger -- Conversion of Common Stock." See "The Meeting - Purpose of the
Meeting." Shareholders will also be asked to approve a proposal to adjourn the
Meeting if necessary to solicit additional proxies in favor of the Plan of
Merger in order for the Plan of Merger to be approved and adopted (the
"Adjournment Proposal"). Approval of the Adjournment Proposal will allow the
Bank's Board of Directors to adjourn the meeting in order to solicit additional
proxies if necessary to meet the two-thirds vote requirement. See "Adjournment
of Special Meeting, if Necessary."
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<PAGE>
Vote Required
The Plan of Merger must be approved by the affirmative vote of holders
of at least two-thirds of the outstanding shares of Bank Common Stock. Directors
and executive officers of the Bank holding an aggregate of 176,616 shares, or
approximately 22.8%, of the outstanding shares of Bank Common Stock have agreed,
subject to certain conditions, to vote their shares in favor of the Plan of
Merger at the Meeting. It is also anticipated that the directors and executive
officers of the Bank will vote for the proposal to adjourn the Meeting if
necessary to solicit additional proxies. Whitney, as the sole shareholder of
Whitney Bank, must approve the Plan of Merger. Under Louisiana law, shareholders
of Whitney are not required to approve the Plan of Merger. See "The Meeting -
Shares Entitled to Vote; Quorum; Vote Required."
Reasons for the Plan of Merger
The Board of Directors of the Bank believes that the approval of the
Plan of Merger is in the best interests of the Bank and its shareholders. In
reaching its decision, the Board considered a number of factors, including the
Bank's and Whitney's business and prospects, the price to be received by the
Bank's shareholders, the liquidity of Whitney Common Stock and the opinion of
Friedman, Billings, Ramsey & Co., Inc. that the consideration to be received by
the Bank's shareholders is fair, from a financial point of view. See "The Plan
of Merger - Background" and "The Plan of Merger - Reasons for the Plan of
Merger."
Recommendation of the Bank's Board of Directors
THE BOARD OF DIRECTORS OF THE BANK HAS UNANIMOUSLY APPROVED THE PLAN OF
MERGER AND RECOMMENDS THAT ITS SHAREHOLDERS VOTE FOR APPROVAL OF THE PLAN OF
MERGER. SEE "THE PLAN OF MERGER - RECOMMENDATION OF THE BANK'S BOARD OF
DIRECTORS."
Fairness Opinion of Friedman, Billings, Ramsey & Co., Inc.
Friedman, Billings, Ramsey & Co., Inc. has rendered its opinion to the
Bank's Board of Directors that, based on and subject to the assumptions made,
the factors considered, the review undertaken and the limitations stated, the
consideration to be received by the Bank's shareholders under the Plan of Merger
is fair to the Bank's shareholders from a financial point of view. Friedman,
Billings, Ramsey & Co., Inc.'s opinion is directed only to the fairness of the
terms of the Plan of Merger from a financial point of view and does not
constitute a recommendation to any shareholder on how to vote at the Meeting.
See "The Plan of Merger -- Fairness Opinion of Friedman, Billings, Ramsey & Co.,
Inc."
A copy of the fairness opinion of Friedman, Billings, Ramsey & Co.,
Inc. dated _______________, 1998 is attached as Appendix B and should be read in
its entirety.
The Plan of Merger
Conversion of Common Stock. Pursuant to the Plan of Merger, if all
conditions to the Merger are satisfied or waived, on the effective date of the
Merger, the Bank will be merged with and into Whitney Bank, and the separate
existence of the Bank will cease. By reason of the Merger, and subject to the
adjustments described below, each outstanding share of Bank Common Stock will be
converted into a number of shares of Whitney Common Stock that is equal to (a)
if the Average Whitney Market Price (defined below) is greater than or equal to
$46.00 and less than or equal to $54.00, the quotient (rounded to the nearest
thousandth) determined by dividing (i) $73.00 by (ii) the Average Whitney Market
Price, (b) if the Average Whitney Market Price is less than $46.00, 1.587
shares, (c) if the Average Whitney Market Price is greater than $54.00, 1.352
shares, or (d) notwithstanding any of the foregoing, if, prior to the effective
date of the Merger, Whitney issues a press release announcing that it is
negotiating or has executed a letter of intent or definitive merger or other
acquisition agreement as a result of which Whitney will cease to be an
independent, publicly traded company and (y) Whitney has not thereafter issued a
press release announcing the termination of such negotiations, letter of intent
or definitive agreement prior to the closing of the transactions contemplated by
the Plan of Merger, 1.352 shares. The number of shares of Whitney Common Stock
into which one share of Bank Common
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<PAGE>
Stock would be converted by reason of the merger pursuant to the foregoing
provisions is referred to as the "Exchange Ratio."
The Plan of Merger defines "Average Whitney Market Price" as the
average of the closing per share trading prices of Whitney Common Stock
(adjusted appropriately for any stock split, stock dividend, recapitalization,
reclassification or similar transaction which is effected, or for which a record
date occurs) on the 20 trading days preceding the fifth trading day immediately
prior to the effective date of the Merger, as reported in the Wall Street
Journal (corrected for typographical errors), and such period of trading days is
referred to as the "Pricing Period."
The Bank may terminate the Plan of Merger by giving notice to Whitney
at any time during the five-day period following the Pricing Period if both (a)
the Average Whitney Market Price is less than $40.00 and (b) (i) the quotient
obtained by dividing the Average Whitney Market Price by $50.00 is less than
(ii) the result obtained by subtracting 0.15 from the quotient obtained by
dividing the average of the Index Prices (hereinafter defined) during the
Pricing Period by the Index Price on November 24, 1997 (the "Starting Date").
The "Index Price" for a particular date is the weighted average of the closing
sales prices on such date of an index of 12 bank holding companies specified in
the Plan of Merger, and the Index Price on the Starting Date was $46.55. If the
Bank gives Whitney notice of its intent to terminate the Plan of Merger pursuant
to the conditions described in this paragraph, Whitney may determine, in its
sole discretion, to eliminate the Bank's right to terminate the Plan of Merger
by increasing the Exchange Ratio to equal the quotient (rounded to the nearest
thousandth) obtained by dividing $63.48 by the Average Whitney Market Price.
Conversely, Whitney may terminate the Plan of Merger by giving notice
to the Bank at any time during the five-day period following the Pricing Period
if: (a) the Average Whitney Market Price is greater than $60.00, (b) (i) the
quotient obtained by dividing the Average Whitney Market Price by $50.00 is
greater than (ii) the result obtained by adding 0.15 to the quotient obtained by
dividing the average of the Index Prices during the Pricing Period by $46.55
(the Index Price on the Starting Date), and (c) none of the events described in
clause (d) of the first paragraph under this subheading shall have occurred and
be continuing. If Whitney gives the Bank notice of its intent to terminate the
Plan of Merger pursuant to the conditions set forth in the preceding sentence,
the Bank may determine, in its sole discretion, to eliminate Whitney's right to
terminate the Plan of Merger by decreasing the Exchange Ratio to equal the
quotient (rounded to the nearest thousandth) determined by dividing $81.12 by
the Average Whitney Market Price.
On ___________________, 1998, the closing trading price for a share of
Whitney Common Stock was $_______, and if such date had been the effective date
of the Merger, the Average Whitney Market Price would have been $_______ and the
Exchange Ratio would have been ______. Based on such closing trading price, the
market value of ___________ shares of Whitney Common Stock on that date would
have been $__________. There can be no assurance as to the market value of
Whitney Common Stock on the effective date of the Merger.
Inasmuch as the consideration to be paid by Whitney in the Merger will
be based on the "Average Whitney Market Price" as defined in the Plan of Merger,
the actual value on the effective date of the Merger of the shares to be
received by holders of Bank Common Stock in the Merger may be more or less than
the Average Whitney Market Price of those shares as calculated in accordance
with the Plan of Merger.
In lieu of issuing any fractional share of Whitney Common Stock, each
Bank shareholder who would otherwise be entitled thereto will receive a cash
payment (without interest) equal to such fractional share multiplied by the
Average Whitney Market Price.
The Plan of Merger also provides that each outstanding option to
purchase shares of Bank Common Stock (the "Bank Options") granted pursuant to
the Bank's 1993 Key Employee Stock Compensation Program and 1993 Directors'
Stock Option Plan (the "Bank Option Plans") that are outstanding at the
effective time of the Merger, whether or not exercisable, will be converted into
and become a right to purchase shares of Whitney Common Stock in accordance with
the terms of the Bank Option Plans and the option agreements by which such Bank
Options are evidenced, except that from and after the effective time of the
Merger, (a) the number of shares of Whitney Common Stock subject to each Bank
Option will equal the number of shares of Bank Common Stock subject to such Bank
Options prior to the effective time of the Merger, multiplied by the Exchange
Ratio (with fractional shares rounded down to the nearest share) and
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<PAGE>
(b) the exercise price per share of Whitney Common Stock purchasable thereunder
will be the exercise price specified in the applicable Bank Option divided by
the Exchange Ratio (rounded up to the nearest cent).
See "The Plan of Merger - Description of the Plan of Merger" and "The
Plan of Merger - Description of the Plan of Merger -- Conversion of Common
Stock."
For information regarding restrictions on the transfer of Whitney
Common Stock received pursuant to the Plan of Merger applicable to certain of
the Bank's shareholders, see "Status Under Federal Securities Laws; Certain
Restrictions on Resales."
Exchange of Certificates. Upon consummation of the Merger, a letter of
transmittal, together with instructions for the exchange of certificates
representing shares of Bank Common Stock for certificates representing shares of
Whitney Common Stock, will be mailed to each person who was a shareholder of
record of the Bank on the effective date of the Merger. Shareholders are
requested not to send in their stock certificates until they have received a
letter of transmittal and further written instructions.
Shareholders of the Bank who cannot locate their stock certificates are
urged to contact promptly:
Michael D. Templet, Chief Financial Officer
Meritrust Federal Savings Bank
200 West Second Street
Thibodaux, Louisiana 70302
(504) 446-5011
A new stock certificate will be issued to replace the lost certificate(s) only
upon execution by the shareholder of an affidavit certifying that his
certificate(s) cannot be located and containing an agreement to indemnify the
Bank and Whitney against any claim that may be made against the Bank or Whitney
by the owner of the certificate(s) alleged to have been lost or destroyed. The
Bank or Whitney may also require the shareholder to post a bond in such sum as
is sufficient to support the shareholder's agreement to indemnify the Bank and
Whitney. See "The Plan of Merger Description of the Plan of Merger -- Exchange
of Certificates."
Regulatory Approvals and Other Conditions to Consummation of the
Merger. In addition to approval by the shareholders of the Bank, consummation of
the Merger is conditioned upon, among other things, (i) the accuracy on the date
of closing of the representations and warranties, and the compliance with
covenants, made in the Plan of Merger by each party, and the absence of any
material adverse change in the financial condition, results of operations or
business of the other party's consolidated group, (ii) the receipt of required
regulatory approvals, (iii) the receipt by Whitney of assurances that the Merger
may be accounted for as a pooling-of-interests, (iv) the receipt by Whitney and
the Bank of opinions as to the qualification of the Merger as a tax-free
reorganization under applicable law, (v) the Bank's receipt of a letter from
Friedman, Billings, Ramsey & Co., Inc., dated as of the date of the Meeting, in
form and substance satisfactory to the Bank, confirming its fairness opinion to
the Board of Directors of the Bank, and (vi) certain other conditions customary
for agreements of this sort. The parties intend to consummate the Merger as soon
as practicable after all of the conditions to the Merger have been met or
waived.
On _______________________, 1998, Whitney filed an application with
the Office of the Comptroller of the Currency of the United States (the
"Comptroller") seeking approval of the Merger. The application was accepted on
______________, 1998. There can be no assurance that final approval of this
application will be obtained, or that the other conditions to consummation of
the Merger will be satisfied by the date of the Meeting or at all. See "The Plan
of Merger - Description of the Plan of Merger -- Regulatory Approvals and Other
Conditions of the Merger."
Waiver, Amendment and Termination. The Plan of Merger provides that
each of the parties to the Plan of Merger may waive any of the conditions to its
obligation to consummate the Merger other than approval by the shareholders of
the Bank, the absence of a stop order suspending the effectiveness of the
Registration Statement of which this Proxy Statement-Prospectus forms a part,
the receipt of all necessary regulatory approvals, the satisfaction
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<PAGE>
of all requirements prescribed by law for consummation of the Merger, and the
Bank's receipt of a letter from Friedman, Billings, Ramsey & Co., Inc. dated as
of the date of the Meeting, in form and substance satisfactory to the Bank,
confirming Friedman, Billings, Ramsey & Co., Inc.'s fairness opinion to the
Board of Directors of the Bank.
The Plan of Merger may be amended, at any time before or after its
approval by the shareholders of the Bank, by the mutual agreement of the Board
of Directors of the parties to the Plan of Merger.
In addition to their rights to terminate the Plan of Merger under
certain circumstances if the Average Whitney Market Price is less than $40.00 or
more than $60.00 (as described above under the heading " - Conversion of Common
Stock"), the parties have rights to terminate the Plan of Merger at any time
prior to the effective date of the Merger (i) by the mutual consent of Whitney
and the Bank; (ii) in the event of a material breach of any representation,
warranty or covenant in the Plan of Merger that cannot be cured by the earlier
of 15 days after written notice of such breach or August 31, 1998; (iii) if the
Merger has not occurred by August 31, 1998; (iv) if the Bank's Board of
Directors withdraws its recommendation of the Merger or recommends another
acquisition transaction; (v) if the Bank receives a written offer with respect
to another acquisition transaction and the Board of Directors of the Bank
determines in good faith, after consultation with its financial advisers and
counsel, that such transaction is more favorable to the Bank's shareholders than
the transactions contemplated by the Plan of Merger; or (vi) on the basis of
certain other grounds specified in the Plan of Merger. The Plan of Merger
provides for a termination fee of $3,000,000 payable to Whitney if the Plan of
Merger is terminated under the circumstances described in clause (iv) or clause
(v) of the preceding sentence. See "The Plan of Merger - Description of the Plan
of Merger -- Waiver, Amendment and Termination."
Accounting Treatment
Whitney intends to account for the Merger as a pooling-of-interests,
and it is a condition to Whitney's obligation to consummate the Merger that (i)
it receive certain assurances from the Bank's independent public accountants
that the Merger may be accounted for as a pooling-of-interests and (ii) neither
Whitney's independent public accountants nor the Securities and Exchange
Commission shall have taken the position that the transactions contemplated by
the Plan of Merger do not qualify for pooling-of-interests accounting treatment.
See "The Plan of Merger - Accounting Treatment."
Certain Federal Income Tax Consequences
Consummation of the Merger is conditioned upon receipt by Whitney and
the Bank of an opinion from Arthur Andersen LLP to the effect that, among other
things, the Merger will qualify as a tax-free reorganization under applicable
law and that each Bank shareholder who receives Whitney Common Stock pursuant to
the Merger will not recognize gain or loss except with respect to the receipt of
cash in lieu of fractional shares of Whitney Common Stock. Because of the
complexity of the tax laws, each shareholder should consult his tax advisor
concerning the applicable federal, state and local income tax consequences of
the Merger. See "Certain Federal Income Tax Consequences."
Absence of Dissenters' Rights
A Bank shareholder who objects to the Merger does not have "dissenters'
rights" and, therefore, does not have the right to dissent from the Merger and
have paid to him in cash by Whitney the fair cash value of his shares of Bank
Common Stock. See "Absence of Dissenters' Rights."
Interests of Certain Persons
The executive officers and members of the Board of Directors of the
Bank have interests in the Merger that are in addition to their interests as
shareholders of the Bank. These interests include, among others, payments to be
received by executive officers pursuant to the Bank's incentive bonus
arrangements and other agreements with the Bank; the acceleration of vesting of
Bank Options held by directors and executive officers pursuant to the Bank
Option Plans; the continued employment of the executive officers by Whitney
after the effective date; the continuation of certain
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<PAGE>
employee benefits generally; and provisions in the Plan of Merger relating to
indemnification of directors and officers of the Bank and continuation of
directors and officers liability insurance.
See "The Plan of Merger - Interests of Certain Persons."
Market Prices
On November 20, 1997, the last trading day preceding the date that
Whitney and the Bank publicly announced that they had entered into the Plan of
Merger, the closing sales price for a share of Whitney Common Stock, as quoted
on the Nasdaq National Market, was $50.50. No assurance can be given as to the
market price of Whitney Common Stock on the effective date of the Merger. On
___________________, 1998, the closing sales price for a share of Whitney Common
Stock was $_______, and if such date had been the effective date of the Merger,
the Average Whitney Market Price would have been approximately $_______ and the
Exchange Ratio would have been ______. Based on such closing trading price, the
market value of ___________ shares of Whitney Common Stock on that date would
have been $__________. There can be no assurance as to the market value of
Whitney Common Stock on the effective date of the Merger.
The closing sales price for a share of Bank Common Stock on the Nasdaq
SmallCap Market was $51.219 on November 20, 1997. On _______________, 1998, the
closing sale price for a share of Bank Common Stock was $___________. No
assurance can be given as to the market price of the Bank Common Stock on the
effective date of the Merger. See "Information About the Bank - Market Prices of
and Dividends Declared on Bank Common Stock."
Comparative Rights of Shareholders
If the Merger is consummated, all shareholders of the Bank will become
shareholders of Whitney, and their rights will be governed by and be subject to
Whitney's Articles of Incorporation and Bylaws rather than those of the Bank.
Whitney's Articles of Incorporation contain provisions that are different from
those of the Bank, some of which may have the effect of discouraging a third
party from seeking to obtain control of Whitney in a transaction not approved by
Whitney's Board of Directors. See "Comparative Rights of Shareholders."
Selected Financial Data of the Bank
The selected financial data presented below for, and as of the end of,
each of the years in the five-year period ended December 31, 1996 are derived
from consolidated financial statements of the Bank and subsidiaries, which
financial statements have been audited by KPMG Peat Marwick LLP, independent
certified public accountants. The selected financial data for the nine months
ended September 30, 1997 and 1996 have been derived from the Bank's unaudited
consolidated financial statements, which, in the opinion of the Bank's
management, reflect all adjustments (consisting only of normal recurring
accruals) that are necessary for a fair presentation of the results of
operations for the interim periods presented. The results of operations for the
nine-month period ended September 30, 1997 are not necessarily indicative of the
results to be expected for the entire year. The audited consolidated financial
statements as of December 31, 1996 and 1995, and for each of the years in the
three year period ended December 31, 1996, and the report thereon, as well as
the unaudited consolidated financial statements as of September 30, 1997 and for
the three and nine months ended September 30, 1997 and 1996, are incorporated by
reference elsewhere in this Proxy Statement- Prospectus.
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<PAGE>
<TABLE>
<CAPTION>
Nine months ended
September 30 Years ended December 31,
--------------------- ---------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---------- --------- --------- --------- --------- -------- --------
(In thousands, except per share data, unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets........................ $233,311 $230,713 $226,591 $220,855 $215,462 $222,434 $231,945
Total earning assets................ 223,160 220,715 216,257 210,192 204,663 211,336 221,224
Total loans......................... 121,856 115,106 116,479 110,236 104,333 110,844 125,748
Total investment in securities...... 91,886 98,544 94,749 92,573 97,225 81,206 68,684
Interest-bearing deposits........... 203,577 203,511 199,707 196,314 194,044 202,644 217,754
Noninterest-bearing deposits........ 6,839 6,496 6,438 5,662 4,515 4,704 4,564
Shareholders' equity................ 19,270 16,774 17,525 16,440 14,659 12,923 6,838
Income Statement Data:
Total interest income............... $12,526 $12,128 $16,283 $15,241 $14,154 $15,040 $17,467
Net interest income................. 5,877 5,403 7,254 6,957 6,858 6,974 6,695
Provision for possible loan losses.. 120 90 120 0 0 132 (95)
Non-interest income................. 1,290 1,185 1,589 1,309 1,281 1,383 1,502
Non-interest expense................ 4,983 5,815 7,461 6,079 6,072 6,286 6,387
Income before extraordinary item
and cumulative effect of change in
accounting for income taxes....... 2,064 683 1,262 2,187 2,065 1,939 1,905
Extraordinary item - tax benefit of
net operating loss carryforward... 0 0 0 0 0 0 553
Income before cumulative effect of
change in accounting for income
taxes............................. 2,064 683 1,262 2,187 2,065 1,939 2,458
Cumulative effect of change in
accounting for income taxes....... 0 0 0 0 0 (284) 0
Net income.......................... 2,064 683 1,262 2,187 2,065 1,655 2,458
Per Share Data:
Primary earnings per share.......... $2.67 $0.86 $1.63 $2.82 $2.67 $2.14 $3.17
Fully diluted earnings per share.... 2.53 0.84 1.56 2.73 2.60 n/a n/a
Cash dividends per share............ 0.53 0.45 0.63 0.53 0.43 0.27 0.34
Fully diluted book value per share,
end of period..................... 23.64 20.72 21.65 20.51 18.49 16.69 n/a
Key Ratios:
Net income as a percent of
average assets.................... 0.90% 0.30% 0.56% 1.00% 0.94% 0.73% 1.04%
Net income as a percent of
average equity.................... 11.14% 3.98% 7.43% 14.06% 14.97% 16.75% 43.46%
Allowance for loan losses as
a percent of loans and leases
at period end..................... 0.51% 0.59% 0.56% 0.58% 0.69% 0.75% 0.65%
Average equity as a percent
of average total assets........... 8.26% 7.27% 7.59% 7.13% 6.30% 4.35% 2.38%
Dividend payout ratio............... 19.66% 51.14% 38.34% 18.58% 15.93% 8.99% 3.79%
</TABLE>
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<PAGE>
Selected Financial Data of Whitney
The following selected financial data with respect to each of the
fiscal years in the five-year period ended December 31, 1996 and for the
nine-month periods ended September 30, 1997 and 1996 have been derived from the
consolidated financial statements of Whitney's consolidated group and should be
read in conjunction with the information concerning Whitney that has been
incorporated by reference in this Proxy Statement-Prospectus. The selected
financial data for the nine months ended September 30, 1997 and 1996 have been
derived from Whitney's unaudited financial statements, which, in the opinion of
Whitney's management, reflect all adjustments that are necessary for a fair
presentation of the results of operations for the interim periods presented. The
results of operations for the nine-month period ended September 30, 1997 are not
necessarily indicative of the results to be expected for the entire year.
<TABLE>
<CAPTION>
Nine months ended
September 30, Years ended December 31,
--------------------------- --------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
------------- ------------- ----------- ----------- ------------- ------------- ----------
(In thousands, except per share data, unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Average Balance Sheet Data:
Total assets................... $4,166,029 $3,962,177 $3,576,681 $3,292,574 $3,263,890 $3,194,181 $3,134,850
Total earning assets........... 3,791,433 3,590,908 3,252,217 2,975,057 2,950,064 2,885,083 2,825,865
Total loans.................... 2,349,510 1,914,706 1,778,074 1,379,587 1,151,750 1,106,631 1,274,674
Total investment in securities. 1,404,002 1,625,152 1,446,923 1,535,826 1,716,532 1,648,913 1,372,064
Interest bearing deposits...... 2,305,013 2,275,589 1,953,054 1,892,768 1,918,547 1,896,111 1,877,137
Noninterest bearing deposits... 941,243 901,198 842,168 827,348 806,914 793,408 783,582
Shareholders' equity........... 454,081 420,012 388,855 348,960 306,566 247,663 200,785
Income Statement Data:
Total interest income.......... $216,808 $200,711 $241,706 $221,660 $198,753 $191,550 $200,757
Net interest income............ 136,693 125,204 151,811 145,719 139,234 134,828 125,457
Reduction in reserve (provision)
for possible loan losses.... 2,812 (375) 5,000 9,380 25,869 59,295 (4,640)
Gains on sale of securities.... - 16 11 3 46 112 5,601
Non-interest income............ 37,826 31,144 37,311 33,966 34,964 34,143 30,292
Non-interest expense........... (118,704) (108,179) (134,394) (122,680) (115,661) (111,475) (123,837)
Income before income tax and
effect of accounting changes 58,627 47,810 59,739 66,388 84,452 116,903 32,873
Income tax expense............ 20,036 15,115 19,118 20,855 26,862 37,321 9,969
Income before effect of
accounting changes, net..... 38,591 32,695 40,621 45,533 57,590 79,582 22,904
Cumulative effect of accounting
changes, net................ - - - - - 345 -
Net income..................... 38,591 32,695 40,621 45,533 57,590 79,927 22,904
Per Share Data:
Primary earnings per share..... $1.85 $1.59 2.26 2.57 3.32 4.67 1.35
Fully diluted earnings per
share........................ 1.85 1.59 2.26 2.56 3.32 4.67 1.35
Cash dividends per share....... 0.84 0.72 0.97 0.82 0.64 0.43 0.07
Book value per share, end of
period....................... 22.38 20.96 22.53 21.28 18.89 16.83 12.34
Key Ratios:
Net income as a percent of
average assets............... 1.24% 1.10% 1.14% 1.38% 1.76% 2.50% 0.73%
Net income as a percent of
average equity............... 11.36% 10.37% 10.45% 13.05% 18.78% 33.35% 11.85%
Net interest margin............ 4.94% 4.77% 4.81% 5.03% 4.86% 4.79% 4.55%
Allowance for loan losses as
a percent of loans and leases
at period end................ 1.69% 2.28% 1.90% 2.40% 3.00% 4.10% 8.50%
Average equity as a percent
of average total assets...... 10.90% 10.60% 10.87% 10.60% 9.39% 7.50% 6.35%
Equity as a percent of total
assets at period end......... 11.12% 10.66% 10.72% 10.70% 10.21% 8.72% 6.47%
Dividend payout ratio.......... 44.29% 37.63% 41.75% 28.63% 17.61% 8.58% 6.40%
</TABLE>
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<PAGE>
Comparative Per Share Data
The following table presents certain information for Whitney and the
Bank on an historical, unaudited pro forma combined and unaudited pro forma
equivalent basis. The unaudited pro forma combined information is based upon the
historical financial condition and results of operations of the companies and
adjustments directly attributable to the Plan of Merger based on estimates
derived from information currently available. This information does not purport
to be indicative of the results that would actually have been obtained if the
Merger had been consummated on the date or for the periods indicated below, or
the results that may be obtained in the future. Whitney expects to account for
the Merger using the pooling-of-interests method applied in accordance with
generally accepted accounting principles.
<TABLE>
<CAPTION>
Historical Pro Forma Bank
Whitney Bank Combined(1) Equivalent(2)
---------------------- ----------- -------------
Earnings per common share:
<S> <C> <C> <C> <C>
Years ended:
December 31, 1996................. $2.26 $1.56 $2.19 $2.19
December 31, 1995................. $2.57 $2.73 $2.54 $2.54
December 31, 1994................. $3.32 $2.60 $3.23 $3.23
Nine months ended September 30, 1997 $1.85 $2.53 $1.85 $1.85
Dividends declared per common share:
Years ended:
December 31, 1996................. $0.97 $0.63 $0.91 $0.91
December 31, 1995................. $0.82 $0.53 $0.71 $0.71
December 31, 1994................. $0.64 $0.43 $0.57 $0.57
Nine months ended September 30, 1997 $0.84 $0.53 $0.78 $0.78
Book value per common share:
As of September 30, 1997.............. $22.38 $23.64 $22.14 $22.14
As of December 31, 1996............... $22.53 $21.65 $22.15 $22.15
</TABLE>
- ------------------------------
(1) Assumes an Exchange Ratio of 1.460 to 1 (based on an assumed Average
Whitney Market Price of $50.00), no exercise of Bank Options prior to
the Merger, and the issuance of 1,130,296 shares of Whitney Common
Stock to effect the Merger.
(2) The Bank Equivalent is calculated by multiplying the amount in the pro
forma combined column by an exchange ratio of 1.460 at the assumed
Average Whitney Market Price of $50.00.
In addition to the proposed Merger, Whitney has another merger
transaction pending. See "Information About Whitney - Recent Developments."
There can be no assurance that such transaction will be completed.
xiv
<PAGE>
THE MEETING
General
This Proxy Statement-Prospectus is furnished to shareholders of
Meritrust Federal Savings Bank (the "Bank") in connection with the solicitation
of proxies on behalf of its Board of Directors for use at a special meeting of
shareholders of the Bank (the "Meeting") to be held on the date and at the time
and place specified in the accompanying Notice of Special Meeting of
Shareholders, or any adjournments or postponements thereof.
The Bank has supplied all information included herein with respect to
the Bank. Whitney Holding Corporation ("Whitney") has supplied all information
included herein with respect to Whitney and its consolidated subsidiaries, which
are sometimes collectively referred to herein as "Whitney's consolidated group."
Purpose of the Meeting
The purpose of the Meeting is to consider and vote upon a proposal to
approve an Agreement and Plan of Merger dated November 20, 1997, between Whitney
and its wholly-owned banking subsidiary Whitney National Bank ("Whitney Bank"),
on the one hand, and the Bank, on the other hand, and the related Agreement of
Merger between Whitney Bank and the Bank (the "Bank Merger Agreement" and,
together with the Agreement and Plan of Merger, the "Plan of Merger"). Pursuant
to the Plan of Merger, the Bank will merge into Whitney Bank (the "Merger"). In
consideration of the Merger, each outstanding share of common stock, $1.00 par
value, of the Bank ("Bank Common Stock") will be converted into a number of
shares of common stock, no par value, of Whitney ("Whitney Common Stock") as
described elsewhere in this Proxy Statement-Prospectus under the heading
captioned "The Plan of Merger - Description of the Plan of Merger -- Conversion
of Common Stock." If it becomes necessary to adjourn the Meeting in order to
solicit additional proxies in favor of the Plan of Merger so that the two-thirds
vote requirement can be satisfied, the Bank's shareholders will be asked to
approve the Adjournment Proposal (as defined elsewhere in this Proxy
Statement-Prospectus). See "Adjournment of Special Meeting, if Necessary."
Shares Entitled to Vote; Quorum; Vote Required
Only holders of record of Bank Common Stock at the close of business on
February 19, 1998 are entitled to notice of and to vote at the Meeting. On that
date there were 774,176 shares of Bank Common Stock outstanding, each of which
is each entitled to one vote on each matter properly brought before the Meeting.
With respect to consideration of the Plan of Merger and any other
matter properly brought before Meeting, the presence at the Meeting, in person
or by proxy, of the holders of a majority of the outstanding shares of Bank
Common Stock is necessary to constitute a quorum. The Plan of Merger must be
approved by the affirmative vote of the holders of at least two-thirds of the
outstanding shares of Bank Common Stock. Abstentions and broker non-votes will
have the effect of votes against the Plan of Merger. Broker non-votes will be
counted for purposes of determining the presence of a quorum for the Meeting.
The Adjournment Proposal requires the affirmative vote of holders of a majority
of the outstanding shares of Bank Common Stock represented in person or by proxy
at the Meeting, assuming a quorum is present. Abstentions will have the same
effect as a vote against the Adjournment Proposal, while broker non-votes will
have no effect on the outcome of the Adjournment Proposal.
Directors and executive officers of the Bank holding an aggregate of
176,616 shares, or approximately 22.8% of the outstanding Bank Common Stock,
have agreed, subject to certain conditions, to vote in favor of the Plan of
Merger at the Meeting. It is also anticipated that the directors and executive
officers of the Bank will vote in favor of the Adjournment Proposal, if that
proposal is submitted to the shareholders for consideration and approval.
Louisiana law does not require that shareholders of Whitney approve the
Plan of Merger. Whitney, as the sole shareholder of Whitney Bank, must approve
the Plan of Merger.
1
<PAGE>
Solicitation, Voting and Revocation of Proxies
A form of proxy for use at the Meeting accompanies this Proxy
Statement-Prospectus and will permit each holder of record of Bank Common Stock
on the record date for the Meeting to vote the shares held by him as of such
date at the Meeting. A shareholder may use a proxy whether or not he intends to
attend the Meeting in person. Duly executed proxies will authorize the persons
named therein to vote on all other matters that properly come before the Meeting
or any adjournments or postponements thereof. Where a shareholder specifies his
choice on the proxy with respect to the proposal to approve the Plan of Merger
and the Adjournment Proposal, the shares represented by the proxy will be voted
in accordance with such specification. If no such specification is made, the
shares will be voted in favor of the Plan of Merger and in favor of the
Adjournment Proposal. A proxy may be revoked by (i) giving written notice of
revocation at any time before its exercise to the Secretary of the Bank, or (ii)
executing and delivering to the Secretary at any time before its exercise a
later dated proxy. In addition, shareholders who attend the Meeting may revoke
their proxies by voting in person.
In addition to soliciting proxies by mail, directors, officers and
employees of the Bank, without receiving additional compensation therefor, may
solicit proxies by telephone and in person. Arrangements will also be made with
brokerage firms and other custodians, nominees and fiduciaries to forward
solicitation materials to the beneficial owners of shares of Bank Common Stock,
and the Bank will reimburse such parties for reasonable out-of-pocket expenses
incurred in connection therewith. The Bank will pay the cost of soliciting
proxies.
THE PLAN OF MERGER
General
The transactions contemplated by the Plan of Merger are to be effected
in accordance with the terms and conditions set forth in the Plan of Merger,
which is incorporated herein by reference. The following brief description does
not purport to be complete and is qualified in its entirety by reference to the
Plan of Merger, a copy of which is attached hereto as Appendix A.
The ultimate result of the transactions contemplated by the Plan of
Merger will be that the business, properties, debts and liabilities of the Bank
will become the business, properties, debts and liabilities of Whitney Bank, and
the shareholders of the Bank will become shareholders of Whitney. To achieve
this result, the Bank will merge into Whitney Bank and the separate existence of
the Bank will cease, and shareholders of the Bank (and holders of any
outstanding options to acquire Bank Common Stock) will receive the consideration
described below under the heading captioned " - Description of the Plan of
Merger -- Conversion of Common Stock."
Background
From time to time the Bank has received preliminary inquiries from
other financial institutions or their holding companies regarding a possible
acquisition of the Bank. From March through June 1996, Messrs. Guarisco and
Berthelot had several meetings with representatives of Friedman, Billings,
Ramsey & Co., Inc. ("FBR") and another investment banking firm to discuss the
Bank's strategic options. In July 1996, FBR met with the Board of Directors of
the Bank to present and discuss an analysis of the following strategic options:
business as usual, growth through acquisition, and merger with another financial
institution. After due consideration of the Bank's options and past financial
performance, the Board of Directors adopted the "business as usual" option.
In July 1997, as part of the Board's and management's ongoing fiduciary
duties to monitor merger and acquisition possibilities, the Bank noticed
increased acquisition activity. Argent Bank announced its acquisition by
Hibernia Bancorp, and shortly thereafter Magna BankCorp of Hattiesburg,
Mississippi announced its acquisition by Union Planters Bank Corp. of Memphis,
Tennessee. Within a month, Acadia Bank in Thibodaux, Louisiana entered into a
merger agreement with Union Planters. The Bank's management discussed with the
management of Magna BankCorp their reasons for selling.
2
<PAGE>
The Bank received a number of inquiries from interested parties in
August 1997 concerning a possible acquisition of the Bank. In early September,
Mr. Guarisco attended a two-day seminar sponsored by FBR. At the Bank's
September Board of Directors' meeting, the Board authorized management to hire
FBR to further review all of the Bank's strategic alternatives. During this
time, Whitney made several contacts with Mr. Guarisco to express Whitney's
interest in pursuing a transaction with the Bank.
In October 1997, FBR sent confidentiality agreements to three potential
acquirors (including Whitney), which agreements were signed on October 16, 1997.
FBR then provided each prospective acquiror a package of confidential materials
giving an overview of the Bank. Each of the potential acquirors expressed
interest in acquiring the Bank. Whitney's preliminary price indication was
substantially better than the other two, and on November 6, 1997, the Board of
Directors of the Bank authorized management to negotiate on an exclusive basis
with Whitney the possible acquisition of the Bank.
The Bank received the initial draft of the Plan of Merger from Whitney
on November 10, 1997. FBR met with the Board of Directors of the Bank on
November 13, 1997 and gave a detailed presentation of the proposed terms of the
transaction, the exchange ratio, and comparable transactions. The Board of
Directors instructed management to continue with the negotiations of a
definitive acquisition agreement. Over the following week, with the assistance
of its legal counsel and investment banker, the Bank reviewed and revised
several drafts of the Plan of Merger. The terms of the Plan of Merger were
reviewed in detail and actively negotiated.
On November 20, 1997, the Board of Directors of the Bank reviewed the
proposed definitive Plan of Merger in detail. After consideration of all factors
deemed relevant and in conjunction with the receipt of a fairness opinion from
FBR and advice from counsel, the Board of Directors determined that the proposed
Merger was in the Bank's best interests and the best interests of the Bank's
shareholders. All directors of the Bank present at the meeting (2 of 13 were
absent) unanimously approved the Plan of Merger. The parties executed the Plan
of Merger on November 20, 1997 and publicly announced the Merger the next
morning.
On December 11, 1997, Whitney delivered to the Bank the notice required
under the Plan of Merger that Whitney had completed its initial due diligence
examination of the Bank, and subject to satisfaction of the other conditions to
closing, Whitney intended to proceed to closing.
Reasons for the Plan of Merger
General. The financial and other terms of the Plan of Merger are the
result of arm's-length negotiations between representatives of Whitney and the
Bank. Determination of the consideration to be received by the Bank's
shareholders was based upon many factors considered by the Boards of Directors
of Whitney and the Bank, including the comparative financial condition,
historical results of operations, current business and future prospects of
Whitney and the Bank, the market price and historical earnings per share of the
common stock of Whitney and the Bank, and the desirability of combining the
financial and managerial resources of Whitney and the Bank to pursue consumer
and commercial banking business in the markets currently served by the Bank.
Whitney. Whitney's business strategy includes expansion through the
Gulf Coast region, including the development of a significant banking presence
in the Acadiana region of Louisiana. Whitney's management has identified the
Bank as an institution that complements this strategy. The Bank's nine banking
facilities located in several southern Louisiana communities would enhance
Whitney's presence in Terrebonne and St. Mary Parishes, and would result in the
expansion of Whitney's branch structure into Lafourche, St. Charles and St.
James Parishes.
In deciding to pursue an acquisition of the Bank, Whitney's management
and the Executive Committee of Whitney's Board of Directors noted, among other
things: (i) the Bank's deposit base and branch network in southeast Louisiana;
(ii) the Bank's headquarters in Thibodaux, Louisiana, an economic center in the
Acadiana region of Louisiana; (iii) the Bank's stable, experienced management
team and staff; and (iv) the Bank's capitalization and strong asset quality.
3
<PAGE>
Whitney believes that other opportunities for expansion in the Acadiana
region of Louisiana, such as de-novo branching, would be less desirable than a
merger with the Bank because the Bank's size and location will further an
important element of Whitney's geographic expansion strategy while also
providing an established base from which Whitney can build on what it believes
to be the strength of the Whitney name throughout southern Louisiana.
The Bank. The terms of the Plan of Merger, including the Exchange Ratio
(hereinafter defined under " - Description of the Plan of Merger -- Conversion
of Common Stock"), were the result of arm's-length negotiations between the
representatives of the Bank and Whitney. Among the factors considered by the
Board of Directors of the Bank in deciding to approve and recommend the terms of
the Merger were (i) the value of the Whitney Common Stock to be exchanged for
each share of Bank Common Stock in relation to the market value, book value,
earnings per share and dividend rates of the Bank Common Stock, (ii) information
concerning the financial condition, results of operations, capital levels, asset
quality and prospects of the Bank, (iii) industry and economic conditions, (iv)
the general structure of the transaction, (v) the likelihood of receiving the
requisite regulatory approvals in a timely manner, (vi) the opinion of the
Bank's financial advisor as to the fairness of the Exchange Ratio from a
financial point of view to the holders of the Bank Common Stock, (vii) the
impact of the Merger on the depositors, employees, customers and communities
served by the Bank through expanded consumer lending and retail banking products
and services, and (viii) the ability of the combined enterprise to compete in
relevant banking and non-banking markets.
The discussion of the information and factors considered and given
weight by the Board of Directors of the Bank is not intended to be exhaustive.
In view of the variety of factors considered in connection with their evaluation
of the Plan of Merger, the Board did not quantify or otherwise assign relative
weights to the specific factors considered in reaching its determination. In
addition, individual members of the Board may have given different weights to
different factors.
Recommendation of the Bank's Board of Directors
THE BOARD OF DIRECTORS OF THE BANK HAS UNANIMOUSLY APPROVED THE PLAN OF
MERGER AND UNANIMOUSLY RECOMMENDS THAT THE BANK'S SHAREHOLDERS VOTE FOR
APPROVAL OF THE PLAN OF MERGER.
Fairness Opinion of Friedman, Billings, Ramsey & Co., Inc.
Pursuant to a letter agreement dated as of September 30, 1997 (the "FBR
Agreement"), FBR was retained by the Bank to act as its financial advisor in
connection with the Merger. At the meeting of the Bank Board held on November
20, 1997, FBR delivered its written opinion to the Bank Board to the effect that
as of such date, the Exchange Ratio (as defined elsewhere in this Proxy
Statement-Prospectus under the heading " - Description of the Plan of Merger --
Conversion of Common Stock") was fair, from a financial point of view, to the
holders of the Bank Common Stock. FBR has reconfirmed its November 20, 1997
opinion by delivery of its written opinion (the "FBR Opinion") to the Bank
Board, dated the date of this Proxy Statement-Prospectus, stating that as of the
date hereof, based on the matters set forth in such opinion and pursuant to the
Plan of Merger, the Exchange Ratio is fair to such holders from a financial
point of view.
THE FULL TEXT OF THE FBR OPINION, WHICH SETS FORTH THE ASSUMPTIONS
MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITS ON THE REVIEW
UNDERTAKEN, IS ATTACHED AS APPENDIX B TO THIS PROXY STATEMENT-PROSPECTUS AND IS
INCORPORATED HEREIN BY REFERENCE. THE DESCRIPTION OF THE FBR OPINION SET FORTH
HEREIN IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO APPENDIX B. THE BANK'S
SHAREHOLDERS ARE URGED TO READ THE FBR OPINION IN ITS ENTIRETY. FBR'S OPINION IS
ADDRESSED ONLY TO THE BANK'S BOARD OF DIRECTORS AND DIRECTED ONLY TO THE
EXCHANGE RATIO TO BE RECEIVED IN THE MERGER BY THE HOLDERS OF BANK COMMON STOCK,
AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER AS TO HOW SUCH
SHAREHOLDER SHOULD VOTE AT THE MEETING.
4
<PAGE>
FBR is a nationally recognized investment banking firm and was selected
by the Bank based on the firm's reputation and experience in investment banking
in general, its recognized expertise in the valuation of banking businesses and
because of its familiarity with the Bank. FBR, as part of its investment banking
business, is frequently engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes.
In connection with rendering the opinions dated November 20, 1997 and
the date hereof, FBR, among other things: (i) reviewed the Plan of Merger; (ii)
reviewed the Annual Report to Stockholders of the Bank for the fiscal year ended
December 31, 1996 and Annual Report of the Bank on Form 10-KSB filed with the
Office of Thrift Supervision (the "OTS") for the fiscal year ended December 31,
1996, as well as Quarterly Reports of the Bank on Form 10-QSB filed with the OTS
for the three month periods ended March 31, 1997, June 30, 1997 and September
30, 1997; (iii) reviewed the Annual Report to Stockholders of Whitney for the
fiscal year ended December 31, 1996 and Annual Reports of Whitney on Form 10-K
filed with the Securities and Exchange Commission (the "Commission") for the
fiscal years ended December 31, 1994 through 1996, as well as Quarterly Reports
of Whitney on Form 10-Q filed with the Commission for the three month periods
ended March 31, 1997, June 30, 1997 and September 30, 1997; (iv) reviewed the
Bank's unaudited financial statements for the ten months ended October 31, 1997;
(v) reviewed the reported market prices and trading activity for Whitney Common
Stock for the period January 1994 through November 19, 1997 and reviewed the
reported market prices and trading activity for Bank Common Stock for the period
January 1994 through November 19, 1997; (vi) discussed the financial condition,
results of operations, business and prospects of the Bank and Whitney with the
managements of the Bank and Whitney; (vii) compared the results of operations
and financial condition of the Bank and Whitney with those of certain
publicly-traded financial institutions (or their holding companies) that FBR
deemed to be reasonably comparable to the Bank or Whitney, as the case may be;
(viii) reviewed the financial terms, to the extent publicly available, of
certain acquisition transactions that FBR deemed to be reasonably comparable to
the Merger; (ix) reviewed the financial terms, to the extent publicly available,
of certain acquisition transactions previously entered into by Whitney; and (x)
performed such other analyses and reviewed and analyzed such other information
as FBR deemed appropriate.
In connection with rendering the FBR Opinion, as set forth herein, FBR
assumed and relied upon, without independent verification, the accuracy and
completeness of all the financial information, analyses and other information
reviewed by and discussed with it, and did not make an independent evaluation or
appraisal of the specific assets, the collateral securing assets or the
liabilities of Whitney, the Bank or any of their respective subsidiaries, or the
collectibility of any such assets (relying, where relevant, on the analyses and
estimates of Whitney and the Bank). With respect to the financial projections
reviewed with each company's management, FBR assumed that they reflect the best
currently available estimates and judgments of the respective managements of the
respective future financial performances of each of Whitney and the Bank and of
the combined company, and that such performances will be achieved. FBR also
assumed that there has been no material change in Whitney's or the Bank's
assets, financial condition, results of operations, business or prospects since
the date of the last financial statements noted above. Finally, FBR assumed
without independent verification that the aggregate consolidated allowances for
loan losses for the Bank and Whitney were adequate to cover such losses, and
that the conditions precedent in the Plan of Merger are not waived.
The forecasts and projections furnished to FBR for the Bank were
prepared by the management of the Bank. As a matter of policy, the Bank does not
publicly disclose internal management forecasts, projections or estimates of the
type furnished to FBR in connection with its analysis of the Merger, and such
forecasts, projections and estimates were not prepared with a view towards
public disclosure. These forecasts, projections and estimates were based on
numerous variables and assumptions which are inherently uncertain and which may
not be within the control of management including, without limitation, general
economic, regulatory and competitive conditions. Accordingly, actual results
could vary materially from those set forth in such forecasts, projections and
estimates.
The Bank Board imposed no limitations on FBR with respect to the
investigation made or procedures followed by FBR in rendering the FBR Opinion.
In connection with rendering such fairness opinion to the Bank Board, FBR
performed a variety of financial analyses. The following is a summary of the
material financial analyses performed by FBR, but does not purport to be a
complete description of FBR's analyses or presentation at the November 13, 1997
5
<PAGE>
and November 20, 1997 meetings of the Bank Board. FBR believes that its analyses
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 analyses and the processes underlying the
FBR Opinion. The preparation of a fairness opinion is a complex process
involving subjective judgments and is not necessarily susceptible to partial
analyses or summary description. In its analyses, FBR made numerous assumptions
with respect to industry performance, business and economic conditions and
various other matters, many of which are beyond the control of the Bank and
Whitney. Any estimates contained in FBR's analyses are not necessarily
indicative of future results or values, which may be significantly more or less
favorable than such estimates. Estimates of values of companies do not purport
to be appraisals or necessarily reflect the prices at which the companies or
their securities may actually be sold.
Summary of Terms of Proposed Transaction. FBR reviewed the terms of the
proposed Merger, including the Exchange Ratio, the form of consideration, and
the percentage of premium to the Bank's market price at November 19, 1997. The
Bank's shareholders will receive a floating exchange ratio if during the
specified 20-day measurement period, the Average Whitney Market Price (as
defined elsewhere in this Proxy Statement-Prospectus under the heading "-
Description of the Plan of Merger -- Conversion of Common Stock") is between
$54.00 and $46.00 per share, which would result in a $73.00 per share value to
the Bank's shareholders based on an Average Whitney Market Price within that
range. If the Average Whitney Market Price rises above $54.00 per share, the
Exchange Ratio will become fixed at 1.352 Whitney shares for each Bank share
held; in addition, if the Average Whitney Market Price drops below $46.00 per
share, the Bank's shareholders will receive a fixed Exchange Ratio of 1.587
Whitney shares for each Bank share held. Based on the price per share of $50.50
for Whitney Common Stock (the closing price for such stock on November 19,
1997), the amount of consideration on November 20, 1997 was $73.00 per share of
Bank Common Stock (the "Fixed Price"). As of November 19, 1997, the Fixed Price
represented a 42.53% premium to the then current market price per share of
$51.22 for Bank Common Stock (the closing price for such stock on November 19,
1997).
Based on the closing share price of Whitney Common Stock as of November
19, 1997, the Fixed Price represented a multiple of (i) 22.87x the Bank's
earnings per share for the twelve months ended September 30, 1997; (ii) 21.73x
the Institutional Brokers Estimate System, Inc. analysts' estimate of the Bank's
1997 earnings per share; (iii) 3.14x the Bank's book value per share as of
September 30, 1997; and (iv) 3.14x the Bank's tangible book value per share as
of September 30, 1997. The Fixed Price also represented a tangible book premium
to core deposits of 19.60% based on the Bank's tangible book value at September
30, 1997.
Comparable Transaction Analysis. FBR reviewed certain information
relating to transactions announced since January 1, 1997 involving the
acquisition of thrifts nationwide ("Nationwide Transactions"); thrifts in
Louisiana ("Louisiana Transactions"); thrifts in the southern region of the
United States including Alabama, Arkansas, Louisiana, Mississippi and Texas
("Southern Region Transactions"); thrifts nationwide in which the seller's
return on average equity ("ROAE") is between 13% and 16% ("Seller's ROAE
Comparable Transactions"); and thrifts nationwide with assets between $150
million and $300 million (the "Asset Comparable Transactions" and collectively,
the "Comparable Groups"). In conjunction with its analysis, FBR reviewed
valuation multiples based on price to book value, price to tangible book value,
price to latest twelve months earnings per share and the premium over tangible
book value as a percentage of core deposits. FBR compared Whitney's pending
acquisition of the Bank to transactions involving the Comparable Groups over the
period from January 1, 1997 through November 10, 1997. FBR computed the
foregoing ratios for the Merger based on the Exchange Ratio and Fixed Price of
$73.00 per share based on the closing price of $50.50 per share for Whitney
Common Stock (the closing price for such stock on November 19, 1997). The
Comparable Groups included the following numbers of transactions: Nationwide
Transactions (87); the Louisiana Transactions (2); the Southern Region
Transactions (6); Seller's ROAE Comparable Transactions (6); and Asset
Comparable Transactions (8). FBR's computations yielded the following median
multiples at announcement for the Nationwide Transactions, the Louisiana
Transactions, the Southern Region Transactions, the Seller's ROAE Comparable
Transactions and the Asset Comparable Transactions, respectively, as compared
with the following indicated multiples for the Bank at announcement of the
Merger: (i) price to book value multiples of 1.70x, 1.61x, 1.66x, 1.98x and
1.86x, compared with 3.14x for the Merger; (ii) price to tangible book value
multiples of 1.72x, 1.61x, 1.66x, 1.98x and 1.87x, compared with 3.14x for the
Merger; (iii) price to latest twelve months earnings multiples of 24.48x,
45.92x, 30.70x, 18.00x and 19.70x, compared with 22.87x for the Merger; and (iv)
core deposit premiums of 10.69%, 10.90%, 8.20%, 12.20% and 10.30%, compared with
an indicated deposit premium in the Merger of 19.60%.
6
<PAGE>
Discounted Earnings Stream and Terminal Value Analysis. Using a
discounted earnings stream and terminal value analysis, FBR estimated the future
stream of earnings flows that the Bank could be expected to produce through the
year 2001, under various circumstances, assuming the Bank performed in
accordance with the earnings forecasts of the Bank management. To approximate
the terminal value of Bank Common Stock at the end of a four-year period
(December 31, 2001), FBR applied price to earnings multiples ranging from 20.0
to 22.5, applied multiples of tangible book value ranging from 300 percent to
325 percent and applied premiums over tangible book value as a percentage of
core deposits of 15.0 percent to 20.0 percent. The net income streams, dividend
streams and terminal values were then discounted to present values using a
discount rate of 12 percent. When a 12 percent discount rate was applied to
median merger multiples based on the price to book value multiples of 300 to 325
percent, the analysis indicated a reference range between $74.57 to $80.58 per
share of Bank Common Stock. When the same discount rate of 12 percent was
applied to merger market multiples based on price to earnings per share
multiples of 20.0 times to 22.5 times, the analysis indicated a reference range
between $61.70 and $69.11 per share of Bank Common Stock. When the same discount
rate of 12 percent was applied to merger market multiples based on tangible book
premium to core deposits of 15.0 percent to 20.0 percent, the analysis indicated
a reference range between $61.87 and $73.65 per share of Bank Common Stock.
Pro Forma Merger Analysis. FBR performed pro forma merger analyses that
combined the Bank's and Whitney's current and projected income statements and
balance sheets based on earnings forecasts of the Bank and Whitney,
respectively. Assumptions and analyses of the accounting treatment, acquisition
adjustments, operating efficiencies and other adjustments were made to arrive at
a base case pro forma analysis to determine the effect of the Merger on Whitney.
FBR noted that, based on the Exchange Ratio and the Fixed Price of $73.00 per
share for each share of Bank Common Stock, and net of the impact of merger
related charges and other one-time expenses, the impact of the Merger on
Whitney's earnings per share and tangible book value per share based on such
earnings forecasts did not appear to be material. The actual results achieved by
the combined company will vary from the projected results and such variations
may be material.
Analysis of Selected Publicly Traded Companies. In preparing its
presentation, FBR used publicly available information to compare selected
financial and market trading information, including book value, tangible book
value, earnings, asset quality ratios, loan loss reserve levels, profitability
and capital adequacy, for Whitney and selected other publicly traded regional
commercial banks located in the southern region of the United States. This peer
group consisted of 13 commercial bank holding companies with total assets
between $1 billion and $10 billion. FBR reviewed the historical financial and
trading information for Whitney and each member of the peer group between
December 31, 1993 and September 30, 1997.
In connection with rendering the FBR Opinion, FBR confirmed the
appropriateness of its reliance on the analyses used to render its November 20,
1997 opinion by performing procedures to update certain of such analyses and by
reviewing the assumptions upon which such analyses were based and the factors
considered in connection therewith. The FBR Opinion is necessarily based on
economic, market and other conditions as in effect on, and the information made
available to it as of, the date of such opinion. Events occurring after the date
of the FBR Opinion could materially affect the assumptions used in preparing
such opinion.
Pursuant to the FBR Agreement, the Bank retained FBR to act as its
independent financial advisor in connection with the Merger. For its services as
financial advisor to the Bank in connection with the Merger, FBR will receive a
fee equal to seventy-five basis points (0.75%) of the fair market value of the
first $50 million of aggregate consideration received by the Bank's shareholders
as of the closing of the transaction; and two percent (2.00%) of the fair market
value of any aggregate consideration received by the Bank's shareholders as of
the closing of the transaction in excess of $50 million. Based on this formula,
FBR will earn a fee of approximately $585,000 if the Average Whitney Market
Price on the effective date of the Merger is greater than or equal to $46.00 and
less than or equal to $54.00. Twenty-five percent (25%) of the anticipated fee
was paid to FBR in immediately available funds upon the signing of a definitive
agreement with Whitney, which amount shall be returned to the Bank if the
transaction is not consummated for any reason other than the breach of the Plan
of Merger by the Bank. The remainder of such fee shall be due to FBR in
immediately available funds at the closing of the transaction. The Bank also has
agreed to reimburse FBR up to $15,000 for its reasonable out-of-pocket expenses
in connection with its engagement and to indemnify FBR and its
7
<PAGE>
affiliates and their respective partners, directors, officers, employees, agents
and controlling persons against certain expenses and liabilities, including
liabilities under applicable securities laws.
FBR has advised the Bank that, in the ordinary course of its business
as a full-service securities firm, FBR may, subject to certain restrictions,
actively trade the equity securities of the Bank and/or Whitney for its own
account or for the accounts of its customers, and, accordingly, may at any time
hold a long or short position in such securities.
Description of the Plan of Merger
Conversion of Common Stock. Pursuant to the Plan of Merger, if all
conditions to the Merger are satisfied or waived, on the effective date of the
Merger, the Bank will be merged with and into Whitney Bank, and the separate
existence of the Bank will cease. By reason of the Merger, and subject to the
adjustments described below, each outstanding share of Bank Common Stock will be
converted into a number of shares of Whitney Common Stock that is equal to (a)
if the Average Whitney Market Price (defined below) is greater than or equal to
$46.00 and less than or equal to $54.00, the quotient (rounded to the nearest
thousandth) determined by dividing (i) $73.00 by (ii) the Average Whitney Market
Price, (b) if the Average Whitney Market Price is less than $46.00, 1.587
shares, (c) if the Average Whitney Market Price is greater than $54.00, 1.352
shares, or (d) notwithstanding any of the foregoing, if, prior to the effective
date of the Merger, Whitney issues a press release announcing that it is
negotiating or has executed a letter of intent or definitive merger or other
acquisition agreement as a result of which Whitney will cease to be an
independent, publicly traded company and (y) Whitney has not thereafter issued a
press release announcing the termination of such negotiations, letter of intent
or definitive agreement prior to the closing of the transactions contemplated by
the Plan of Merger, 1.352 shares. The number of shares of Whitney Common Stock
into which one share of Bank Common Stock would be converted by reason of the
merger pursuant to the foregoing provisions is referred to as the "Exchange
Ratio."
The Plan of Merger defines "Average Whitney Market Price" as the
average of the closing per share trading prices of Whitney Common Stock
(adjusted appropriately for any stock split, stock dividend, recapitalization,
reclassification or similar transaction which is effected, or for which a record
date occurs) on the 20 trading days preceding the fifth trading day immediately
prior to the effective date of the Merger, as reported in the Wall Street
Journal (corrected for typographical errors), and such period of trading days is
referred to as the "Pricing Period."
The Bank may terminate the Plan of Merger by giving notice to Whitney
at any time during the five-day period following the Pricing Period if both (a)
the Average Whitney Market Price is less than $40.00 and (b) (i) the quotient
obtained by dividing the Average Whitney Market Price by $50.00 is less than
(ii) the result obtained by subtracting 0.15 from the quotient obtained by
dividing the average of the Index Prices (hereinafter defined) during the
Pricing Period by the Index Price on November 24, 1997 (the "Starting Date").
The "Index Price" for a particular date is the weighted average of the closing
sales prices on such date of an index of 12 bank holding companies specified in
the Plan of Merger, and the Index Price on the Starting Date was $46.55. If the
Bank gives Whitney notice of its intent to terminate the Plan of Merger pursuant
to the conditions described in this paragraph, Whitney may determine, in its
sole discretion, to eliminate the Bank's right to terminate the Plan of Merger
by increasing the Exchange Ratio to equal the quotient (rounded to the nearest
thousandth) obtained by dividing $63.48 by the Average Whitney Market Price.
Conversely, Whitney may terminate the Plan of Merger by giving notice
to the Bank at any time during the five-day period following the Pricing Period
if: (a) the Average Whitney Market Price is greater than $60.00, (b) (i) the
quotient obtained by dividing the Average Whitney Market Price by $50.00 is
greater than (ii) the result obtained by adding 0.15 to the quotient obtained by
dividing the average of the Index Prices during the Pricing Period by $46.55
(the Index Price on the Starting Date), and (c) none of the events described in
clause (d) of the first paragraph under this subheading shall have occurred and
be continuing. If Whitney gives the Bank notice of its intent to terminate the
Plan of Merger pursuant to the conditions set forth in the preceding sentence,
the Bank may determine, in its sole discretion, to eliminate Whitney's right to
terminate the Plan of Merger by decreasing the Exchange Ratio to equal the
quotient (rounded to the nearest thousandth) determined by dividing $81.12 by
the Average Whitney Market Price.
On ___________________, 1998, the closing trading price for a share of
Whitney Common Stock was $_______, and if such date had been the effective date
of the Merger, the Average Whitney Market Price would have
8
<PAGE>
been $_______ and the Exchange Ratio would have been ______. Based on that
closing trading price, the market value of ___________ shares of Whitney Common
Stock on that date would have been $__________. There can be no assurance as to
the market value of Whitney Common Stock on the effective date of the Merger.
Inasmuch as the consideration to be paid by Whitney in the Merger will
be based on the "Average Whitney Market Price" as defined in the Plan of Merger,
the actual value on the effective date of the Merger of the shares to be
received by holders of Bank Common Stock in the Merger may be more or less than
the Average Whitney Market Price of those shares as calculated in accordance
with the Plan of Merger.
In lieu of issuing any fractional share of Whitney Common Stock, each
shareholder of the Bank who would otherwise be entitled thereto will receive a
cash payment (without interest) equal to such fractional share multiplied by the
Average Whitney Market Price.
The Plan of Merger also provides that each outstanding option to
purchase shares of Bank Common Stock (the "Bank Options") granted pursuant to
the Bank's 1993 Key Employee Stock Compensation Program and 1993 Directors'
Stock Option Plan (the "Bank Option Plans") that are outstanding at the
effective time of the Merger, whether or not exercisable, will be converted into
and become a right to purchase shares of Whitney Common Stock in accordance with
the terms of the Bank Option Plans and the option agreements by which such Bank
Options are evidenced, except that from and after the effective time of the
Merger, (a) the number of shares of Whitney Common Stock subject to each Bank
Option will equal the number of shares of Bank Common Stock subject to such Bank
Options prior to the effective time of the Merger, multiplied by the Exchange
Ratio (with fractional shares rounded down to the nearest share) and (b) the
exercise price per share of Whitney Common Stock purchasable thereunder will be
the exercise price specified in the applicable Bank Option divided by the
Exchange Ratio (rounded up to the nearest cent). Each such assumed stock option
existing immediately after the effective time of the Merger is referred to as a
"Replacement Option."
For information regarding restrictions on the transfer of Whitney
Common Stock received pursuant to the Plan of Merger applicable to certain of
the Bank's shareholders, see "Status Under Federal Securities Laws; Certain
Restrictions on Resales."
Exchange of Certificates. On the effective date of the Merger, each
Bank shareholder will cease to have any rights as a shareholder of the Bank and
his sole rights will pertain to the shares of Whitney Common Stock into which
his shares of Bank Common Stock have been converted pursuant to the Merger. As
of the effective date of the Merger, Whitney is required to deposit with the
exchange agent selected by Whitney for the Merger certificates representing the
shares of Whitney Common Stock and the cash in lieu of fractional shares to be
issued and paid in exchange for shares of Bank Common Stock. Promptly after the
effective date, Whitney is required to send or cause to be sent to each person
who was a shareholder of record of the Bank on the effective date of the Merger
a letter of transmittal, together with instructions for the exchange of
certificates representing shares of Bank Common Stock for certificates
representing shares of Whitney Common Stock.
Shareholders are requested not to send in their Bank Common Stock
certificates until they have received a letter of transmittal and further
written instructions after the effective date of the Merger. Please do NOT send
in your stock certificates with your proxy.
After the effective date of the Merger and until surrendered,
certificates representing Bank Common Stock will be deemed for all purposes,
other than the payment of dividends or other distributions, if any, in respect
of Whitney Common Stock, to represent the number of whole shares of Whitney
Common Stock into which such shares have been converted. Whitney, at its option,
may decline to pay former shareholders of the Bank who become holders of Whitney
Common Stock pursuant to the Merger any dividends or other distributions that
may have become payable to holders of record of Whitney Common Stock following
the effective date of the Merger until they have surrendered their certificates
evidencing ownership of shares of Bank Common Stock, at which time any such
dividends or other distributions will be paid, without interest.
9
<PAGE>
Shareholders of the Bank who cannot locate their stock certificates are
urged to contact promptly:
Michael D. Templet, Chief Financial Officer
Meritrust Federal Savings Bank
200 West Second Street
Thibodaux, Louisiana 70302
(504) 446-5011
A new stock certificate will be issued to replace the lost certificate(s) only
upon execution by the shareholder of an affidavit certifying that his
certificate(s) cannot be located and containing an agreement to indemnify the
Bank and Whitney against any claim that may be made against the Bank or Whitney
by the owner of the certificate(s) alleged to have been lost or destroyed. The
Bank or Whitney may also require the shareholder to post a bond in such sum as
is sufficient to support the shareholder's agreement to indemnify the Bank and
Whitney.
Transfer and Exchange Agents. Bank of New York serves as Transfer Agent
and Registrar for Whitney Common Stock and will act as Exchange Agent in
connection with the Merger. The Transfer Agent and Registrar for the Bank
Common Stock is ChaseMellon Shareholder Services.
Regulatory Approvals and Other Conditions of the Merger. In addition to
approval by the shareholders of the Bank and satisfaction of the other
conditions described below, consummation of the Merger will require the approval
of the Office of the Comptroller of the Currency of the United States (the
"Comptroller"). On _____________________, 1998, Whitney filed an application
with the Comptroller seeking the approval of the Merger, which was accepted on
____________________, 1998. Whitney is currently awaiting final approval of that
application; however, there can be no assurance that it will be obtained by the
time of the Meeting or at all.
The obligations of the parties to the Plan of Merger are also subject
to other conditions set forth in the Plan of Merger, including, among others:
(i) the accuracy on the date of closing of the representations and warranties,
and the compliance with covenants, made in the Plan of Merger by each party, and
the absence of any material adverse change in the financial condition, results
of operations or business of the other party's consolidated group, (ii) the
receipt of required regulatory approvals, (iii) the receipt by Whitney of
assurances that the Merger may be accounted for as a pooling-of-interests, (iv)
the receipt by Whitney and the Bank of opinions as to qualification of the
Merger as a tax-free reorganization under applicable law, (v) the Bank's receipt
of a letter from FBR, dated as of the date of the Meeting, in form and substance
satisfactory to the Bank, confirming its fairness opinion to the Board of
Directors of the Bank, and (vi) certain other conditions customary for
agreements of this sort.
The parties intend to consummate the Merger as soon as practicable
after all of the conditions to the Merger have been met or waived; however,
there can be no assurance that the conditions to the Merger will be satisfied.
Effective Date. As soon as practicable after shareholder and regulatory
approval is obtained and all other conditions to the consummation of the Plan of
Merger have been satisfied or waived, the Bank Merger Agreement will be executed
on behalf of Whitney Bank and the Bank and filed with the Comptroller. The
Merger will be effective at the time and date specified therein. Whitney and the
Bank are not able to predict the effective date of the Merger and no assurance
can be given that the transactions contemplated by the Plan of Merger will be
effected at any time. See "- Regulatory Approvals and Other Conditions of the
Merger." If the Merger is not consummated by August 31, 1998, either Whitney or
the Bank may terminate the Plan of Merger. See " - Waiver, Amendment and
Termination."
Conduct of Business Prior to the Effective Date. The Bank has agreed
pursuant to the Plan of Merger that, prior to the effective date of the Merger,
it will conduct its business only in the ordinary course consistent with past
practices and that, without the prior written consent of the chief executive
officer of Whitney or his duly authorized designee, and except as otherwise
provided in the Plan of Merger, it will not, among other things, (a) declare or
pay any dividend, declare or make any distribution on or directly or indirectly
combine, redeem, reclassify, purchase or otherwise acquire any shares of capital
stock or authorize the creation or issuance of or issue any additional shares of
capital stock or securities or obligations convertible into or exchangeable
therefor except the Bank's payment of regular quarterly dividends of $0.175 per
share and the issuance of shares of Bank Common Stock upon exercise of Bank
10
<PAGE>
Options; (b) amend its charter or bylaws or adopt or amend any resolution or
agreement concerning indemnification of directors or officers; (c) enter into or
modify any agreement requiring the payment of any salary, bonus, extra
compensation, pension or severance payment to any of its current or former
directors, officers or employees or increase by more than 5% the compensation of
any such person whose annual compensation would, following such increase, exceed
$50,000, in any manner inconsistent with its past practices, except (i) such
agreements as are terminable at will without penalty or other payment by it,
(ii) an increase in the Bank's corporate 401(k) contribution for 1997 in an
amount not to exceed in the aggregate more than $20,000 more than the Bank's
total contribution to such plan for 1996 and (iii) an increase of no more than
$50,000 in the aggregate bonus payments to employees having base salaries of
$50,000 or more; (d) except in the ordinary course of business consistent with
past practices, place or suffer to exist on any of its assets or properties any
mortgage, pledge, lien, charge or other encumbrances (except as allowed under
the Plan of Merger) or cancel any material indebtedness owing to it or any
claims it may have possessed, or waive any right of substantial value or
discharge or satisfy any material non-current liability; (e) acquire another
business or merge or consolidate with another entity, or sell or otherwise
dispose of a material part of its assets, except in the ordinary course of
business consistent with past practices; (f) commit or omit to do any act that
would cause a breach of any Bank covenant in the Plan of Merger or would cause
any representation or warranty of the Bank contained in the Plan of Merger to
become untrue; (g) commit or fail to take any action that is intended or
reasonably may be expected to result in a material breach or violation of any
applicable law, statute, rule, governmental regulation or order; (h) fail to
maintain its books, accounts and records in the usual manner on a basis
consistent with that previously employed; (i) fail to pay or to make adequate
provision in all material respects for the payment of all taxes, interest
payments and penalties due and payable, except those being contested in good
faith by appropriate proceedings and for which sufficient reserves have been
established; (j) dispose of investment securities, except in a manner consistent
with past practices and in no event more than 5% of the aggregate book value of
such securities, or make investments in non-investment grade securities or that
are inconsistent with past investment practices; (k) enter into any new line of
non-banking business; (l) charge off (except as required by law or regulatory
authorities or generally accepted accounting principles consistently applied) or
sell (except for a price not materially less than the value thereof) any of its
portfolio of loans, discounts or financing leases, or sell any asset held as
other real estate or other foreclosed assets for an amount materially less than
its book value as of September 30, 1997; (m) make any extension of credit that,
when added to all other extensions of credit to a borrower and its affiliates,
would exceed the Bank's applicable regulatory lending limits; (n) take or cause
to be taken any action that would disqualify the Merger as a
"pooling-of-interests" for accounting purposes or as a "reorganization" within
the meaning of Section 368(a) of the Internal Revenue Code; or (o) agree or
commit to do any of the foregoing.
In addition, the Bank has agreed that it will not, without the prior
approval of Whitney, solicit or initiate inquiries or proposals with respect to,
or, except to the extent determined by the Bank's Board of Directors in good
faith, after consultation with its financial advisors and legal counsel, to be
required to discharge properly the directors' fiduciary duties to the Bank's
shareholders, furnish any information relating to, or participate in any
negotiations or discussions concerning, any acquisition or purchase of all or a
substantial portion of its assets, or of a substantial equity interest in it, or
any business combination with it (other than as contemplated by the Plan of
Merger) or withdraw its recommendation of the Merger to the Bank's shareholders.
The Bank has also agreed that in no event will any such information be supplied
except pursuant to a confidentiality agreement in form and substance
substantially the same as the confidentiality agreement previously executed
between the Bank and Whitney, that it will instruct its respective officers,
directors, agents and affiliates to refrain from doing any of the foregoing and
that it will notify Whitney immediately if any such inquiries or proposals are
received by, any such information is requested from or any discussions or
negotiations are sought to be initiated with, the Bank or any of its officers,
directors, agents or affiliates. Notwithstanding the foregoing, nothing
contained in the Plan of Merger shall be deemed to prohibit any officer or
director of the Bank from taking any action that the Board determines, in good
faith after consultation with and receipt of written advice from counsel, is
required by law or is required to discharge his fiduciary duties to the Bank's
shareholders.
Waiver, Amendment and Termination. The Plan of Merger provides that the
parties thereto may waive any of the conditions to their respective obligations
to consummate the Merger other than approval by the shareholders of the Bank,
the absence of a stop order suspending the effectiveness of the Registration
Statement of which this Proxy Statement-Prospectus forms a part, the receipt of
all necessary regulatory approvals, the satisfaction of all requirements
prescribed by law for consummation of the Merger, and the Bank's receipt of a
letter from FBR dated as of the date
11
<PAGE>
of the Meeting, in form and substance satisfactory to the Bank, confirming FBR's
fairness opinion to the Board of Directors of the Bank. A waiver must be in
writing.
The Plan of Merger, including all related agreements, may be amended or
modified at any time, before or after approval by the shareholders of the Bank,
by the mutual agreement in writing of the Board of Directors of the parties to
the Plan of Merger. Additionally, the Plan of Merger may be amended at any time
by the sole action of the chief executive officers of the respective parties to
the Plan of Merger to correct typographical errors or to change erroneous
references or cross-references, or in any other manner that is not material to
the substance of the transactions contemplated by the Plan of Merger.
As described under the subheading " -- Conversion of Common Stock,"
Whitney and the Bank have certain rights to terminate the Plan of Merger if,
under certain circumstances, the Average Whitney Market Price is more than
$60.00 or less than $40.00. The Plan of Merger may also be terminated at any
time prior to the effective date of the Merger by (i) the mutual consent of the
respective Boards of Directors of Whitney and the Bank; (ii) the Board of
Directors of either Whitney or the Bank in the event of a breach by any member
of the consolidated group of the other of them of any representation, warranty
or covenant in the Plan of Merger that cannot be cured by the earlier of 15 days
after written notice of such breach or August 31, 1998; (iii) the Board of
Directors of either Whitney or the Bank if by August 31, 1998 all the conditions
to closing required by the Plan of Merger have not been met or waived or cannot
be met, or the Merger has not occurred by such date; (iv) Whitney or the Bank if
the Plan of Merger fails to receive the requisite vote of the Bank's
shareholders; (v) Whitney if the Bank's Board of Directors (A) withdraws,
modifies or changes its recommendation to its shareholders as contained herein
or resolves to do so, (B) recommends to its shareholders any other merger,
consolidation, share exchange, business combination or other similar
transaction, any sale, lease, transfer or other disposition of all or
substantially all of the assets of the Bank or any acquisition of 15% or more of
any class of the Bank's capital stock or (C) makes any announcement of an
agreement to do any of the foregoing; (vi) the Bank, if the Bank receives a
written offer with respect to any transaction described in (v) above and the
Board of Directors of the Bank determines in good faith, after consultation with
its financial advisors and counsel, that such transaction is more favorable to
the Bank's shareholders than the transactions contemplated by the Plan of
Merger; or (vii) Whitney or the Bank if any applicable regulatory authority
formally disapproves the Merger or approves the Merger in a manner not
reasonably acceptable to Whitney in good faith. The Plan of Merger provides for
a termination fee of $3,000,000 payable to Whitney if the Plan of Merger is
terminated under the circumstances described in clause (v) or (vi) of the
preceding sentence. The provisions in the Plan of Merger regarding
confidentiality, payment of the termination fee and certain miscellaneous
matters will survive any termination of the Plan of Merger.
Expenses. The Plan of Merger provides that regardless of whether the
Merger is consummated, expenses incurred in connection with the Plan of Merger
and the transactions contemplated thereby shall be borne by the party that has
incurred them.
Interests of Certain Persons
Employment Status. All employees of the Bank at the effective time of
the Merger shall become or remain employees of Whitney Bank. Whitney and Whitney
Bank reserve the right to terminate any such employee, and to modify the job
duties, compensation and authority of such employees.
Employee Benefits. Whitney has agreed that, at the effective time of
the Merger, all persons then employed by the Bank shall be eligible for such
employee benefits as are generally available to employees of Whitney Bank having
like tenure, officer status and compensation levels, except that (a) all
executive and senior level management bonuses, stock options, restricted stock
and similar benefits will be at the discretion of Whitney Bank's Compensation
Committee, and (b) all Bank employees who are employed at the effective time of
the Merger will be given full credit for all prior service as employees of the
Bank, provided, however, that all such employees shall be treated as newly hired
Whitney Bank's employees for all purposes of Whitney's or Whitney Bank's defined
benefit pension plan (i.e., prior service credit with the Bank will not be
considered in determining future benefits under Whitney's or Whitney Bank's
defined benefit pension plan).
12
<PAGE>
Management. As of the effective time of the Merger, Whitney has agreed
to hire Lee J. Guarisco, Vice Chairman of the Bank, as the Thibodaux City
President and Senior Vice President. Mr. Guarisco's base salary will be $125,000
per year. Based upon the review of Mr. Guarisco's performance by Whitney's
Compensation Committee, Mr. Guarisco will be eligible for annual bonuses up to
50% of his base salary and the granting of restricted shares of Whitney Common
stock and incentive stock options. Mr. Guarisco will also receive a change in
control agreement entitling him to two times his average annual compensation
from Whitney if his employment is terminated within one year before or three
years following a change in control of Whitney. Mr. Guarisco will also be
entitled to the continued use of his Bank-owned automobile following the Merger.
Mr. Guarisco has agreed not to compete directly or indirectly with Whitney in
the parishes in which the Bank has offices for a period of two years after he
ceases to be an employee of Whitney, in exchange for the payment by Whitney of
up to $60,000 (subject to certain conditions), with the exact amount to be based
upon an appraisal of the value of Mr. Guarisco's undertaking not to compete. Mr.
Guarisco's employment by Whitney will be on an "at will" basis.
Change in Control Agreements. The Bank has employment agreements with
each of Messrs. Guarisco and Berthelot and three other executive officers (the
"Change in Control Agreements"). Whitney has agreed to assume the Bank's
obligations under these agreements and has agreed that the consummation of the
Merger will trigger the payment of severance benefits under the Change in
Control Agreements. The benefits payable under each Change in Control Agreement
will be paid in monthly installments commencing on the first business day of the
month following the effective date of the Merger.
The sum of (1) the present value of the cash severance benefits to be
paid pursuant to the Change in Control Agreements, (2) the present value of the
fringe benefits to be provided pursuant to the Change in Control Agreements, and
(3) the deemed parachute payments that arise from the accelerated vesting of
stock options, which will be treated as contingent on the change in control for
purposes of Section 280G of the Internal Revenue Code of 1986, as amended, will
be approximately $407,000 and $277,000 for Messrs. Guarisco and Berthelot,
respectively.
Bank Options. The directors and executive officers of the Bank have
been granted currently outstanding stock options to purchase an aggregate of
69,000 shares of Bank Common Stock pursuant to the Bank Option Plans. All
options outstanding under the Bank Option Plans have an exercise price equal to
the fair market value of Bank Common Stock on the date the options were granted.
In accordance with the terms of the respective Bank Option Plans and the Plan of
Merger, each Bank Option outstanding under the Bank Option Plans on the
effective date of the Merger will become immediately exercisable and be
converted into a Replacement Option as described above under the heading " -
Description of the Plan of Merger -- Conversion of Common Stock."
The following table presents the number and exercise price of
Replacement Options each director and executive officer would receive on the
effective date of the Merger, based on the number of Bank Options held by such
person as of December 31, 1997.
13
<PAGE>
<TABLE>
<CAPTION>
Bank Options Replacement Options(2)
------------------------------------ ---------------------------------
Director/Executive Officer No. of Shares(1) Exercise Price No. of Shares Exercise Price
- -------------------------- ---------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Stephen R. Berthelot 10,000 $10.00 14,600 $6.85
Jack C. Caldwell 2,000 10.00 2,920 6.85
250 18.25 365 12.50
205 26.25 299 17.98
J. Parker Conrad 2,000 10.00 2,920 6.85
250 18.25 365 12.50
204 26.25 298 17.98
H. V. Fondren, Jr. 2,000 10.00 2,920 6.85
250 18.25 365 12.50
205 26.25 299 17.98
Rogers A. George 2,000 10.00 2,920 6.85
250 18.25 365 12.50
205 26.25 299 17.98
Lee J. Guarisco 10,000 10.00 14,600 6.85
10,000 31.50 14,600 21.58
Victor Guarisco II 250 18.25 365 12.50
204 26.25 298 17.98
Bobby J. Hebert, Sr. 2,000 10.00 2,920 6.85
250 18.25 365 12.50
205 26.25 299 17.98
Art E. Magee 2,000 10.00 2,920 6.85
250 18.25 365 12.50
204 26.25 298 17.98
Curtis Mire 2,000 10.00 2,920 6.85
250 18.25 365 12.50
205 26.25 299 17.98
Edward J. Patterson, Jr. 2,000 10.00 2,920 6.85
250 18.25 365 12.50
205 26.25 299 17.98
Marco J. Picciola II 2,000 10.00 2,920 6.85
250 18.25 365 12.50
204 26.25 298 17.98
Fallon J. Weldon 2,000 10.00 2,920 6.85
250 18.25 365 12.50
204 26.25 298 17.98
William J. Barbera 4,000 31.50 5,840 21.58
JoAnne R. Bergeron 4,000 10.00 5,840 6.85
Michael D. Templet 6,000 10.00 8,760 6.85
Total Shares 69,000 15.22 100,740 10.42
(Footnotes are on following page)
</TABLE>
14
<PAGE>
- ------------------------
(1) Represents the total number of shares subject to option. As of December 31,
1997, all of such options were vested; the vesting of 13.3% of the Bank
Options accelerated upon execution of the Plan of Merger in accordance with
the terms of the Bank Option Plans. See "Information about the Bank --
Security Holdings of Principal Shareholders and Management."
(2) Based on an Average Whitney Market Price on the effective date of the
Merger of $50.00 per share. The actual number of shares subject to
Replacement Options and the exercise price thereof will be determined based
on, among other things, the Average Whitney Market Price on the effective
date of the Merger. See " - Description of the Plan of Merger -- Conversion
of Common Stock."
---------------------
Advisory Board. Whitney has indicated that the directors of the Bank
will be invited to join Whitney Bank's Thibodaux City Board, an advisory board,
following the effective time of the Merger. Advisory directors who are not
full-time employees of Whitney will be entitled to receive a per diem payment of
$100 for each city board meeting they attend. The advisory board meetings are
anticipated to be held monthly.
Indemnification and Insurance. Whitney has agreed that all rights to
indemnification and all limitations of liability existing in favor of
indemnified parties under the charter, bylaws and indemnification plan of the
Bank as in effect on November 20, 1997 and under applicable law with respect to
matters occurring prior to or on the effective date of the Merger will survive
for a period concurrent with the applicable statute of limitations. Whitney has
also agreed to use its best efforts to cause those persons serving as officers
and directors of the Bank immediately prior to the effective time of the Merger
to be covered for three years thereafter by the directors and officers liability
insurance policy maintained by the Bank (or a substitute policy) with respect to
acts or omissions occurring prior to or at the effective time of the Merger,
subject to certain conditions. In addition, Whitney has agreed to indemnify,
under certain conditions, the Bank's directors, officers and controlling persons
against certain expenses and liabilities, including certain liabilities arising
under federal securities laws.
No director or executive officer of the Bank owns any shares of Whitney
Common Stock. No director or executive officer of Whitney has any personal
interest in the Merger other than by reason of his holdings of Whitney Common
Stock, nor do such directors or executive officers own any shares of Bank Common
Stock.
Status Under Federal Securities Laws; Certain Restrictions on Resales
The shares of Whitney Common Stock to be issued to shareholders of the
Bank pursuant to the Plan of Merger have been registered under the Securities
Act of 1933, as amended (the "Securities Act"), thereby allowing such shares to
be freely traded without restriction by persons who will not be "affiliates" (as
that term is defined in the Securities Act and the rules and regulations
thereunder) of Whitney or who were not "affiliates" of the Bank.
Directors and certain officers and principal shareholders of the Bank
may be deemed to be "affiliates" of the Bank. Such persons may resell Whitney
Common Stock received by them pursuant to the Merger only if the shares are
registered for resale under the Securities Act or an exemption from the
registration requirements of the Securities Act is available. All such persons
should carefully consider the limitations imposed by Rules 144 and 145
promulgated under the Securities Act prior to effecting any resales of Whitney
Common Stock. Each such affiliate has entered into an agreement not to sell
shares of Whitney Common Stock received by him in violation of the Securities
Act. This Proxy Statement-Prospectus does not cover resales of Whitney Common
Stock offered hereby to be received by Bank shareholders deemed to be
"affiliates" of the Bank or of Whitney upon consummation of the Merger.
Further, in accordance with the requirements for using the
pooling-of-interests method of accounting, shareholders of the Bank who may be
deemed "affiliates" of the Bank have agreed not to sell the shares of Whitney
Common Stock received by them in the Merger until at least 30 days of
post-closing combined earnings of Whitney and the Bank have been published by
Whitney. Whitney has agreed to publish such an earnings release as promptly as
practicable following receipt of such financial results.
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Accounting Treatment
It is a condition to Whitney's obligation to consummate the Merger that
(i) it receive certain assurances from the Bank's independent public accountants
that the Merger may be accounted for as a pooling-of-interests under the
requirements of Opinion No. 16 of the Accounting Principles Board of the
American Institute of Certified Public Accountants and the published rules and
regulations of the Commission for accounting and financial reporting purposes
and (ii) neither Whitney's independent public accountants nor the Commission
shall have taken the position that the transactions contemplated by the Plan of
Merger do not qualify for pooling-of-interests accounting treatment. Under the
pooling-of-interests method of accounting, after certain adjustments necessary
to conform the basis of presentation of the Whitney and the Bank information,
the recorded assets and liabilities of Whitney and the Bank will be carried
forward to Whitney's consolidated financial statements at their recorded
amounts, the consolidated earnings of Whitney will include earnings of Whitney
and the Bank for the entire fiscal year in which the Merger occurs and the
reported earnings of Whitney and the Bank for prior periods will be combined and
restated as consolidated earnings of Whitney. Similar treatment will be given to
any other acquisitions that are accounted for as poolings of interests and that
are consummated during the fiscal year. See "- Regulatory Approvals and Other
Conditions of the Merger" and "- Status Under Federal Securities Laws; Certain
Restrictions on Resales."
Pro Forma Data
In light of the respective total assets and net income of Whitney and
the Bank, pro forma financial statements are not included in this Proxy
Statement-Prospectus. Meritrust's total assets were less than 6% of Whitney's
total assets at both September 30, 1997 and December 31, 1996, and Meritrust's
net income for both the nine months ended September 30, 1997 and the year ended
December 31, 1996 were less than 6% of Whitney's net income for the same
periods. As a result, pro forma financial information giving effect to the
Merger was deemed to be immaterial.
ABSENCE OF DISSENTERS' RIGHTS
A Bank shareholder who objects to the Merger does not have "dissenters'
rights" and, therefore, does not have the right to dissent from the Merger and
have paid to him in cash by Whitney the fair cash value of his shares of Bank
Common Stock.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the opinion of Arthur Andersen LLP that
Whitney and the Bank expect to receive concerning the material federal income
tax consequences to holders of Bank Common Stock resulting from the Plan of
Merger. Consummation of the Merger is conditioned upon receipt by Whitney and
the Bank of such opinion dated the date set for consummation of the Plan of
Merger. The following is based upon applicable federal law and judicial and
administrative interpretations on the date hereof, any of which is subject to
change at any time, and representations of management of Whitney and of the
Bank.
(a) The Merger will qualify as a reorganization under Section 368 of
the Internal Revenue Code of 1986, as amended (the "Code"), and the Bank,
Whitney and Whitney Bank each will be a "party to a reorganization" within the
meaning of Section 368(b) of the Code.
(b) No gain or loss will be recognized by the Bank, Whitney or Whitney
Bank as a result of the Merger.
(c) No gain or loss will be recognized by a shareholder of the Bank on
the receipt solely of Whitney Common Stock in exchange for his shares of Bank
Common Stock.
(d) The tax basis of the shares of Whitney Common Stock to be received
by shareholders of the Bank pursuant to the Merger will be the same as the basis
of the shares of Bank Common Stock surrendered in exchange therefor, decreased
by the amount of basis allocated to any cash received in lieu of fractional
shares that are hypothetically received by the shareholder and redeemed for
cash.
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(e) The holding period of the shares of Whitney Common Stock to be
received by shareholders of the Bank pursuant to the Merger will include the
holding period of the shares of Bank Common Stock exchanged therefor, provided
that the shares of Bank Common Stock are held as capital assets on the effective
date of the Merger.
(f) The payment of cash to shareholders of the Bank in lieu of
fractional share interests of Whitney Common Stock will be treated as if the
fractional shares were distributed as part of the exchange and then redeemed by
Whitney. These cash payments will be treated as having been received as a
distribution in redemption of that fractional share interest subject to the
conditions and limitations of Section 302 of the Code. If a fractional share of
Whitney Common Stock would constitute a capital asset in the hands of a
redeeming shareholder, any resulting gain or loss will be characterized as
capital gain or loss in accordance with the provisions and limitations of
Subchapter P of Chapter 1 of the Code.
The opinion of Arthur Andersen LLP is not binding on the Internal
Revenue Service, which could take positions contrary to the conclusions in such
opinion.
As a result of the complexity of the tax laws, and because the tax
consequences to any particular shareholder may be affected by matters not
discussed herein, it is recommended that each shareholder of the Bank consult
his personal tax advisor concerning the applicable federal, state and local
income tax consequences of the Merger.
ADJOURNMENT OF SPECIAL MEETING, IF NECESSARY
Each proxy solicited hereby requests authority to vote for an
adjournment of the Meeting, if an adjournment is deemed to be necessary. The
Bank may seek an adjournment of the Meeting for not more than 29 days in order
to enable the Bank to solicit additional votes in favor of the proposal to adopt
the Plan of Merger if such proposal has not received the requisite vote of
shareholders at the Meeting and such proposal has not received the negative
votes of the holders of one-third of the outstanding Bank Common Stock. If the
Bank desires to adjourn the Meeting with respect to such proposal, it will
request a motion that the Meeting be adjourned for up to 29 days with respect to
such proposal, and no vote will be taken on such proposal at the originally
scheduled Meeting. Each proxy solicited hereby, if properly signed and returned
to the Bank and not revoked prior to its use, will be voted on any motion for
adjournment in accordance with the instructions contained therein. If no
contrary instructions are given, each proxy received will be voted in favor of
any motion to adjourn the Meeting. Unless revoked prior to its use, any proxy
solicited for the Meeting will continue to be valid for any adjournment of the
Meeting, and will be voted in accordance with instructions contained therein,
and if no contrary instructions are given, for the proposal in question.
Any adjournment will permit the Bank to solicit additional proxies and
will permit a greater expression of the shareholders' views with respect to the
Merger proposal. Such an adjournment would be disadvantageous to shareholders
who are against the Merger proposal, because an adjournment will give the Bank
additional time to solicit favorable votes and thus increase the chances of
passing the Merger proposal.
If a quorum is not present at the Meeting, no proposal will be acted
upon and the Board of Directors of the Bank will adjourn the Meeting to a later
date in order to solicit additional proxies on each of the proposals being
submitted to shareholders.
An adjournment for up to 29 days will not require either the setting of
a new record date or notice of the adjourned meeting as in the case of an
original meeting. The Bank has no reason to believe that an adjournment of the
Meeting will be necessary at this time.
Because the Board of Directors recommends that shareholders vote FOR
the proposal to adopt the Plan of Merger, as discussed above, the Board of
Directors recommends that shareholders vote FOR the possible adjournment of the
Meeting. The holders of a majority of the Bank Common Stock present, in person
or by proxy, at the Meeting will be required to approve a motion to adjourn the
Meeting.
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INFORMATION ABOUT THE BANK
General
The Bank is a federally chartered, stock savings bank headquartered in
Thibodaux, Louisiana. On September 30, 1993, First Federal Savings and Loan
Association of Thibodaux ("First Federal") converted from mutual to stock form
and simultaneously merged with and into Atchafalaya Federal Savings Bank
("Atchafalaya"), with Atchafalaya being the surviving institution (the "Merger
Conversion"). Atchafalaya then changed its name to Meritrust Federal Savings
Bank and changed its home office to the home office of First Federal. The
274,176 shares of common stock of Atchafalaya outstanding immediately prior to
the Merger Conversion were converted into shares of Bank Common Stock on a
one-for-one basis, and the Bank issued an additional 500,000 shares of Bank
Common Stock in the Merger Conversion at a price of $10.00 per share. The Merger
Conversion was accounted for under the pooling-of-interests method of
accounting, and accordingly all historical data included or incorporated by
reference herein for the Bank includes both First Federal and Atchafalaya.
The business of the Bank consists primarily of attracting deposits from
the general public and using those and other available sources of funds to
originate consumer loans and loans secured by single-family residences located
primarily in Thibodaux, Houma, Luling, Raceland, Vacherie and Galliano,
Louisiana and in St. Mary Parish. To a lesser extent, the Bank also originates
construction loans and loans secured by multi-family residential and commercial
real estate. In addition, the Bank invests in U.S. Government and agency
securities and mortgage-backed securities. At September 30, 1997, the Bank had
total assets of $233.3 million, deposits of $210.4 million and total
shareholders' equity of $19.3 million.
Deposits in the Bank are insured by the Savings Association Insurance
Fund ("SAIF"), which is administered by the Federal Deposit Insurance
Corporation ("FDIC"), to the maximum extent provided by law. The Bank is subject
to examination and comprehensive regulation by the OTS and the FDIC. The Bank is
a member of the Federal Home Loan Bank ("FHLB") of Dallas, which is one of the
12 regional banks comprising the FHLB System. The Bank is also subject to
regulations of the Board of Governors of the Federal Reserve System governing
reserves required to be maintained against deposits and certain other matters.
The Bank's executive office is located at 200 West Second Street,
Thibodaux, Louisiana 70302, and its telephone number is (504) 446-5011.
Market Prices of and Dividends Declared on Bank Common Stock
The Bank Common Stock is included for quotation on the Nasdaq SmallCap
Market under the symbol "MERI." The following table sets forth for the periods
indicated the high and low reported closing sale prices per share of Bank Common
Stock as reported on the Nasdaq SmallCap Market and the quarterly dividends
declared for each such period.
Price Range of Common Stock and Quarterly Dividends
High Low Dividend
1996
First Quarter.............................. $34 $29 1/2 $0.150
Second Quarter............................. 34 29 1/2 0.150
Third Quarter.............................. 31 1/2 30 3/4 0.150
Fourth Quarter............................. 31 5/8 30 3/4 0.175
1997
First Quarter ............................ $36 3/8 $31 1/2 $0.175
Second Quarter............................ 41 1/2 34 0.175
Third Quarter............................. 47 39 0.175
Fourth Quarter............................ 69 46 0.175
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Security Holdings of Principal Shareholders and Management
The following table sets forth, as of February 19, 1998, certain
information as to the Bank Common Stock beneficially owned by (i) each person or
entity, including any "group" as that term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), who or which
was known to the Bank to be the beneficial owner of more than 5% of the issued
and outstanding Bank Common Stock, (ii) each director of the Bank, and (iii) all
directors and executive officers of the Bank as a group.
Bank Common Stock
Beneficially Owned(1)(2)
------------------------
Name of Beneficial Owner Number Percent
- ------------------------ ---------- -------
Lee J. Guarisco, Director 57,490(3)(4) 7.2%
1005 Poplar Street
Morgan City, Louisiana 70380
Curtis Mire, Director 45,080(5) 5.8%
910 Marshall Street
Morgan City, Louisiana 70380
Other Directors:
Stephen R. Berthelot 16,000(6) 2.0%
Jack C. Caldwell 13,155(7) 1.7%
J. Parker Conrad 22,216(4) 2.9%
H. V. Fondren, Jr. 22,455 2.9%
Rogers A. George 5,955 *
Victor Guarisco II 5,954(4) *
Bobby J. Hebert, Sr. 5,955 *
Art E. Magee 3,704 *
Edward J. Patterson, Jr. 19,530(4) 2.5%
Marco J. Piccola II 5,954 *
Fallon J. Weldon 5,954(4) *
All directors and executive officers of the
Bank as a group (16 persons) 245,616 29.1%
- --------------------
* Represents less than 1% of the outstanding Bank Common Stock.
(1) For purposes of this table, pursuant to rules promulgated under the
Exchange Act, an individual is considered to beneficially own shares of
Bank Common Stock if he or she directly or indirectly has or shares (1)
voting power, which includes the power to vote or to direct the voting
of the shares; or (2) investment power, which includes the power to
dispose or direct the disposition of the shares. Unless otherwise
indicated, an individual has sole voting power and sole investment
power with respect to the indicated shares.
(2) Under applicable regulations, a person is deemed to have beneficial
ownership of any shares of Bank Common Stock which may be acquired
within 60 days pursuant to the exercise of outstanding stock options.
Shares of Bank Common Stock which are subject to stock options are
deemed to be outstanding for the purpose of computing the percentage of
outstanding Bank Common Stock owned by such person or group but not
deemed outstanding for the purpose of computing the percentage of Bank
Common Stock owned by any other person
(Footnotes continued on following page)
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or group. The above table includes stock options in the following
amounts: Mr. Lee Guarisco, 20,000 shares; each of Messrs. Mire,
Caldwell, Fondren, George, Hebert and Patterson, 2,455 shares; Mr.
Berthelot, 10,000 shares; each of Messrs. Conrad, Magee, Piccola and
Weldon, 2,454 shares; Mr. Victor Guarisco, 454 shares; and all
directors and executive officers as a group, 69,000 shares.
(3) Includes 27,490 shares held jointly with Mr. Guarisco's spouse and
3,000 shares held by his spouse.
(4) Excludes shares held by other family members not living in the same
household, as to which shares the specified individual disclaims
beneficial ownership.
(5) Includes 625 shares held by Mr. Mire's spouse.
(6) Shares held jointly with spouse.
(7) Includes 2,500 shares held by Mr. Caldwell's spouse.
INFORMATION ABOUT WHITNEY
General
Whitney is a Louisiana corporation and a registered bank holding
company under the Bank Holding Company Act of 1956, as amended. Whitney became
an operating entity in 1962 with Whitney Bank as its only significant
subsidiary. Whitney Bank, a national banking association headquartered in
Orleans Parish, Louisiana, has been engaged in the general banking business in
southern Louisiana continuously since 1883. As a result of consolidating mergers
of Whitney's other banking subsidiaries into Whitney Bank effective January 1
and 2, 1998, Whitney Bank currently operates through approximately 100 banking
offices in south Louisiana, southern Mississippi and Alabama and northwestern
Florida. Whitney Bank also maintains a foreign branch on Grand Cayman in the
British West Indies.
Whitney Bank is a full-service commercial bank engaged in commercial
and retail banking and in the trust business, including the taking of deposits,
the making of secured and unsecured loans, the financing of commercial
transactions, the delivery of corporate, pension and personal trust and
investment services and safe deposit rentals. Whitney Bank also issues credit
cards and is active as a correspondent for other banks.
During 1995, Whitney established Whitney Community Development
Corporation ("WCDC"), a for-profit community development corporation
incorporated under the laws of the State of Louisiana. WCDC is authorized to
make equity and debt investments in corporations or projects designed primarily
to promote community welfare, including the economic rehabilitation and
development of low to moderate income areas by providing housing, services or
jobs for residents, or promoting small businesses that service low to moderate
income areas.
At September 30, 1997, Whitney had consolidated total assets of
approximately $4.2 billion, consolidated total deposits of approximately $3.3
billion and consolidated shareholders' equity of approximately $468 million.
Whitney's and Whitney Bank's principal executive offices are located at 228 St.
Charles Avenue, New Orleans, Louisiana 70130, and its telephone number is (504)
586-7117.
Recent Developments
Whitney has entered into a definitive agreement dated December 5, 1997
with Louisiana National Security Bank ("LNSB"), pursuant to which LNSB would
merge with and into Whitney Bank (the "LNSB Acquisition"). LNSB is a national
banking association headquartered in Donaldsonville, Louisiana, with
approximately $110 million in assets and three branches located in Ascension
Parish, Louisiana.
Under the terms of the LNSB Agreement, shareholders of LNSB would
receive, in the aggregate, shares of Whitney Common Stock having a value of
approximately $32 million (plus the amount of LNSB's retained net income
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after taxes from July 1, 1997 through the month preceding the closing of that
transaction). As in the Merger, the actual value on the effective date of the
LNSB Acquisition of the shares of Whitney Common Stock to be received by LNSB's
shareholders may be more or less than the amount described above inasmuch as
such consideration will be determined in reference to a defined "average market
price" of Whitney Common Stock. The LNSB Acquisition is expected to be
consummated in the second quarter of 1998, but is subject to regulatory and LNSB
shareholder approval and other customary conditions. There can be no assurance
that the LNSB Acquisition will be consummated at such time or at all.
Whitney continues to explore opportunities to acquire additional
financial institutions as part of an expansion strategy that focuses on
developing a significant banking presence along the United States Gulf Coast
from southeast Texas through the Florida panhandle. Discussions are continually
being carried on relating to such potential acquisitions. Whitney may, after the
date of this Proxy Statement-Prospectus, enter into one or more acquisition
agreements with one or more of such institutions; however, it is not currently
known whether Whitney's discussions will result in further acquisitions or on
what terms any such acquisitions would be made.
On January 15, 1998, Whitney announced 1997 annual earnings of $52.2
million, or $2.52 per share, with fourth quarter 1997 earnings of $13.6 million,
or $0.66 per share, in each case after the recognition of non-recurring
merger-related expenses (net of tax) of $2.4 million and $0.6 million,
respectively.
Market Prices of and Dividends Declared on Whitney Common Stock
Whitney Common Stock is included for quotation on the Nasdaq National
Market System (the "Nasdaq National Market") under the symbol "WTNY." The
following table sets forth for the periods indicated the high and low reported
closing sale prices per share of Whitney Common Stock as reported on the Nasdaq
National Market and the quarterly dividends declared for each such period.
Price Range of Common Stock and Quarterly Dividends
High Low Dividend
------ ----- --------
1996
First Quarter.................... $31 3/4 $29 3/4 $0.22
Second Quarter................... 31 3/4 29 3/4 0.25
Third Quarter.................... 32 3/4 29 1/2 0.25
Fourth Quarter................... 35 7/8 31 3/4 0.25
1997
First Quarter ................... $40 1/2 34 3/4 0.28
Second Quarter................... 43 1/8 35 0.28
Third Quarter.................... 47 3/8 30 3/4 0.28
Fourth Quarter................... 61 3/4 45 3/4 0.28
COMPARATIVE RIGHTS OF SHAREHOLDERS
If the shareholders of the Bank approve the Plan of Merger and the
Merger is subsequently consummated, all shareholders of the Bank will become
shareholders of Whitney, and their rights will be governed by and be subject to
the Articles of Incorporation and By-laws of Whitney rather than the Charter and
Bylaws of the Bank. The following is a description of the Whitney Common Stock
and a brief summary of certain of the principal differences between the rights
of shareholders of Whitney and the Bank not described elsewhere herein.
Description of Whitney Common Stock
The authorized capital stock of Whitney consists of 40,000,000 shares
of Common Stock, no par value, of which 20,804,175 were outstanding on December
31, 1997. The following description of Whitney's capital stock is
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qualified in its entirety by reference to Whitney's Articles of Incorporation
and By-laws and to the applicable provisions of the Louisiana Business
Corporation Law (the "LBCL").
Common Stock
Voting Rights - Non-cumulative Voting. Holders of Whitney Common Stock
are entitled to one vote per share on all matters to be voted on by the
shareholders. Holders of Whitney Common Stock do not have cumulative voting
rights. As a result, the holders of more than 50% of the Whitney Common Stock
may elect all of the directors.
Dividend Rights. Holders of outstanding Whitney Common Stock are
entitled to receive such dividends, if any, as may be declared by the Board of
Directors, in its discretion, out of funds legally available therefor.
Liquidation Rights. In the event of the liquidation of Whitney, the
holders of Whitney Common Stock are entitled to receive pro rata any assets
distributable to shareholders in respect of their shares.
Preemptive Rights. Holders of Whitney Common Stock have no preemptive
rights to subscribe for additional shares of capital stock.
Directors
The Board of Directors of Whitney is divided into five classes, with
members of each class to serve for five years and one class being elected each
year. Directors of Whitney must also be shareholders of Whitney. Any director of
Whitney may be removed from office with or without cause only by the affirmative
vote of at least 90% of the voting power of Whitney present at a special meeting
of the shareholders called for that purpose. The quorum requirement for such a
meeting is 90% of the total voting power of Whitney present in person or by
proxy.
The LBCL permits corporations to (i) include provisions in their
articles of incorporation that limit the personal liability of directors and
officers for monetary damages resulting from breaches of the duty of care,
subject to certain exceptions, and (ii) indemnify directors and officers, among
others, in certain circumstances for their expenses and liabilities incurred in
connection with defending pending or threatened suits. Whitney's Articles of
Incorporation include a provision that eliminates the personal liability of
directors and officers to Whitney and its shareholders for monetary damages
resulting from breaches of the duty of care to the full extent currently
permitted by the LBCL and further provides that any amendment or repeal of that
provision will not affect the elimination or limitation of liability of an
officer or director with respect to conduct occurring prior to the time of such
amendment or repeal.
The Articles of Incorporation also provide for indemnification and
advancement of expenses of any officer, director, employee or agent of Whitney
for any action taken in good faith by that officer, director, employee or agent.
Indemnification in the case of actions by or in the right of Whitney shall be
limited to expenses actually and reasonably incurred in defense or settlement of
the action. The Board of Directors, in its discretion, may choose to provide
further indemnification to officers, directors, employees and agents of Whitney.
The Articles of Incorporation and By-laws authorize Whitney to maintain
insurance covering the actions of its officers, directors, employees and agents,
and its By-laws provide for indemnification to the fullest extent allowed under
the LBCL.
No amendment to Whitney's Articles may change any of the provisions
thereof relating to the Board of Directors unless such amendment receives the
affirmative vote of 90% of the voting power present at a shareholders meeting
for which there is a quorum as described above; provided, however, that such 90%
vote is not required for any amendment unanimously recommended to the
shareholders by the Board of Directors at a time when there is no Related Person
(as defined below).
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Supermajority and Fair Price Provisions
Supermajority Provisions. The Articles of Incorporation contain certain
provisions designed to provide safeguards for shareholders when a Related Person
attempts to effect a Business Combination (as defined below) with Whitney. In
general, a Business Combination between Whitney and a Related Person must be
approved by the affirmative vote of at least 90% of the voting power of Whitney
present at a shareholders meeting, at which meeting at least 90% of the total
voting power of Whitney must be present in person or by proxy to constitute a
quorum, unless certain minimum price and procedural requirements are satisfied
and the Board of Directors of Whitney has the opportunity to state its
recommendations to the shareholders in a proxy statement. If these requirements
are satisfied, only the affirmative vote of two-thirds of the voting power
present or represented at a shareholders meeting of Whitney (the quorum for
which would be the presence in person or by proxy of a majority of the total
voting power of Whitney) would be required.
A "Related Person" is defined as any person who, together with certain
persons related to him or it, is the beneficial owner of 10% or more of the
outstanding shares of Whitney stock entitled to vote in elections of directors.
The term "beneficial owner" includes persons directly or indirectly owning or
having the right to acquire or vote the stock of Whitney.
A "Business Combination" includes the following transactions: (1) any
merger or consolidation involving Whitney or its principal subsidiary; (2) any
sale or lease by Whitney or its principal subsidiary of all or a substantial
part of its assets; or (3) any sale or lease to Whitney or any of its
subsidiaries of any assets of any Related Person in exchange for securities of
Whitney or its principal subsidiary.
Fair Price Provisions. There is no requirement that 90% of the voting
power present of Whitney approve a Business Combination between a Related Person
and Whitney if all of the requirements described below are satisfied:
(1) Minimum Price Requirement. The cash, or fair market value of other
consideration, to be received per share by shareholders of Whitney in connection
with the Business Combination must bear the same or a greater percentage
relationship to the market price of Whitney Common Stock immediately prior to
the announcement of such Business Combination as the highest per share price
(including brokerage commissions and soliciting dealers' fees) that the Related
Person has theretofore paid for any of the shares of Whitney Common Stock
already owned by it bears to the market price of the Whitney Common Stock
immediately prior to the commencement of the acquisition of Whitney Common Stock
by the Related Person. In addition, the cash, or fair market value of other
consideration, to be received per share by shareholders of Whitney in such
Business Combination must not be less than (i) the highest per share price
(including brokerage commissions and soliciting dealers' fees) paid by the
Related Person in acquiring any of its holdings of Whitney Common Stock and (ii)
the earnings per share of Whitney Common Stock for the four full consecutive
fiscal quarters immediately preceding the record date for solicitation of votes
on such Business Combination, multiplied by the then price/earnings multiple (if
any) of the Related Person as customarily computed and reported in the financial
community.
(2) Procedural Requirements. The following procedural requirements must
be satisfied at all times after the Related Person becomes a Related Person: (i)
the Related Person shall have taken steps to ensure that Whitney's Board of
Directors included at all times representation by Continuing Directors (as
defined below) proportionate to the stockholdings of Whitney's shareholders not
affiliated with the Related Person; (ii) there shall have been no reduction in
the rate of dividends paid on the shares of Whitney Common Stock unless
otherwise approved by unanimous vote of the directors; (iii) the Related Person
shall not have acquired any newly issued shares of Whitney Common Stock,
directly or indirectly, except upon conversion of convertible securities
acquired by it prior to becoming a Related Person or as a result of a prorata
stock dividend or stock split; and (iv) the Related Person shall not have
acquired any additional shares of Whitney Common Stock or securities convertible
into Whitney Common Stock except as part of the transaction by which such
Related Person became a Related Person.
A "Continuing Director" includes a person who was a member of the Board
of Directors of Whitney elected by the shareholders prior to the time that a
Related Person acquired in excess of 10% of the stock of Whitney, or a person
recommended to succeed a Continuing Director by a majority of Continuing
Directors.
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(3) Actions Prior to Becoming a Related Person. The Related Person
shall not have (i) received the benefit, directly or indirectly (except
proportionately as a shareholder), of any loans, advances, guarantees, pledges
or other financial assistance or tax credits provided by Whitney; or (ii) made
any major change in Whitney's business or equity capital structure without the
unanimous approval of the Board of Directors, in either case prior to the
consummation of the Business Combination.
(4) Proxy Statement. A proxy statement responsive to the requirements
of the Exchange Act shall be mailed to all shareholders of Whitney for the
purpose of soliciting shareholder approval of the Business Combination and shall
contain at the front thereof, in a prominent place, any recommendations as to
the advisability (or inadvisability) of the Business Combination that the
Continuing Directors, or any of them, may choose to state, and if deemed
advisable by a majority of the Continuing Directors, an opinion of a reputable
investment banking firm as to the fairness (or not) of the terms of such
Business Combination from the point of view of shareholders other than the
Related Person.
(5) Vote Necessary to Amend Articles of Incorporation. The Articles of
Incorporation provide that the affirmative vote of the holders of 90% or more of
the voting power present at a shareholders meeting for which there is a quorum
as described above is required in order to amend the fair price provisions,
provided that only a vote of the holders of a majority of the total voting power
of Whitney is required if the action to amend is unanimously recommended to
shareholders by the Board of Directors if all such directors are persons who
would be eligible to serve as Continuing Directors.
Purposes and Effect of Supermajority and Fair Price Provisions. The
fair price provisions are designed to prevent a purchaser from utilizing
two-tier pricing and similar inequitable tactics in the event of an attempted
takeover of Whitney. In the absence of the supermajority and fair price
provisions, a purchaser who acquired control of Whitney would be in a position,
by virtue of such control, to compel minority shareholders to accept a lower
price or a less desirable form of consideration than that given to other
shareholders.
The effect of the provisions is to encourage any Related Person or
potential Related Person interested in a Business Combination to negotiate the
terms of such transaction with the Board of Directors of Whitney prior to its
acquisition of a substantial amount of the capital stock of Whitney and in a
context that would provide adequate time and information so that all relevant
considerations would receive the requisite attention and, if necessary,
publicity. The Board of Directors of Whitney believes that the Continuing
Directors of Whitney are likely to be more knowledgeable than individual
shareholders in assessing the business and prospects of Whitney and are
accordingly better able to negotiate effectively with the Related Person. Also,
the provisions should help to protect those shareholders who by choice or for
lack of adequate opportunity did not sell shares in the first step of a
two-tiered offer, by ensuring that a fair price will be paid to the shareholders
in the second step of the two-tiered transaction if, but only if, the Related
Person elects to initiate a second step.
It should be noted, however, that tender offers are usually made at
premium prices above the prevailing market price of a company's stock. In
addition, acquisitions of stock by persons attempting to acquire control through
market purchases may cause the market price of the stock temporarily to reach
levels that are higher than would otherwise be the case. Because of the higher
percentage requirements for shareholder approval of any subsequent Business
Combination, and the possibility of having to pay a higher price to other
shareholders in such a Business Combination, it may become more costly for a
purchaser to acquire control of Whitney. The Articles of Incorporation may
discourage such purchases, particularly those for less than all of the shares of
Whitney, and may therefore deprive holders of the Whitney Common Stock of an
opportunity to sell their stock at a temporarily higher market price. A
potential purchaser of stock seeking to obtain control may also be discouraged
from purchasing stock because a supermajority shareholder vote would be required
in order to change or eliminate the fair price protection provisions in the
Articles of Incorporation.
Although the supermajority and fair price provisions are designed to
assure fair treatment of all shareholders in the event of a takeover, the
provisions may also adversely affect the ability of shareholders to benefit from
certain transactions that are opposed by the Board of Directors of Whitney.
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In certain instances, the fair price provisions, while providing
objective pricing criteria, could be arbitrary and not indicative of value. In
addition, a Related Person may be unable, as a practical matter, to comply with
all of the procedural requirements of the Articles of Incorporation. In these
circumstances, a potential purchaser would be forced either to negotiate with
the Continuing Directors and offer terms acceptable to them or to abandon the
proposed Business Combination.
Under the fair price provisions, in certain circumstances, a Business
Combination that might be attractive to some shareholders might never be
proposed to the shareholders by a Related Person, or if proposed, might not be
consummated. Further, the provisions may, under certain circumstances, give
holders of a minority of the voting power a veto power over a Business
Combination that the majority of shareholders may believe desirable and
beneficial. To Whitney's knowledge, on December 31, 1997, directors and
executive officers of Whitney beneficially owned approximately 2,429,566 shares
(approximately 11.7%) of the Whitney Common Stock. Therefore, it may be
difficult or impossible for a Related Person to secure the necessary
supermajority vote without management's approval.
Since only the Continuing Directors will have the authority to avoid
the requirement of a supermajority shareholder vote to approve Business
Combinations if otherwise applicable, the provisions also may tend to insulate
management against the possibility of removal in the event of a takeover bid.
Further, if the Related Person were to replace all of the directors who were in
office on the date it became a Related Person (which it could not be assured of
accomplishing for at least four years because of the Board's classification),
there would be no Continuing Directors and, consequently, the 90% shareholder
vote requirement would apply to any Business Combination, unless the minimum
price and procedural requirements were satisfied.
Federal securities laws and regulations applicable to Business
Combinations govern the disclosure required to be made to minority shareholders
in order to consummate certain Business Combinations. However, the laws and
regulations do not assure that the terms of a Business Combination will be fair
from a financial standpoint. The LBCL provides that, under certain
circumstances, the affirmative vote of the holders of at least 80% of the voting
power of a Louisiana corporation is necessary in order to approve certain types
of business combinations with a related party unless the shareholders receive a
price for their shares as set forth in the LBCL and certain other conditions are
met. While the fair price protection provisions of the LBCL would apply to any
Business Combination involving Whitney and a Related Party, the Board of
Directors of Whitney believes that the fair price provisions in the Articles of
Incorporation provide additional assurance that the shareholders of Whitney will
receive an equitable price for their shares if a Business Combination is
consummated.
Considerations in Change of Control
The LBCL authorizes the Board of Directors of Whitney, when considering
any proposal to acquire control of Whitney, to take into account, among other
enumerated factors and any other factors the Board deems relevant, the interests
of Whitney's employees, creditors and the communities in which Whitney conducts
its business, as well as purely financial interests of Whitney's shareholders.
Amendment of Articles of Incorporation
Except for the 90% vote required to amend any provision of the Articles
of Incorporation relating to the Board of Directors of Whitney or the
supermajority and fair price provisions contained therein, the affirmative vote
of at least a majority of the total voting power of Whitney (i.e., a majority of
the outstanding shares of Whitney Common Stock), at a meeting the quorum for
which is the presence in person or by proxy of a majority of the total voting
power, is required to amend the Articles of Incorporation. See " -- Directors"
and " -- Supermajority and Fair Price Provisions," above.
Amendment of By-laws
Whitney's By-laws may be amended or repealed by the affirmative vote of
a majority of the Board of Directors of Whitney or by the affirmative vote of at
least a majority of the votes cast at a meeting of the shareholders of Whitney.
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Shareholders Meetings
Shareholders holding not less than 20% of the outstanding Whitney
Common Stock may require Whitney to call a meeting of its shareholders.
Louisiana Control Share Acquisition Statute
The LBCL Control Share Acquisition Statute provides that any shares
acquired by a person or group (an "Acquiror") in an acquisition that causes such
person or group to have the power to direct the exercise of voting power in the
election of directors in excess of 20%, 33-1/3% or 50% thresholds shall have
only such voting power as shall be accorded by the holders of all shares other
than Interested Shares (as defined below) at a meeting called for the purpose of
considering the voting power to be accorded to shares held by the Acquiror.
"Interested Shares" include all shares as to which the Acquiror, any officer of
Whitney and any director of Whitney who is also an employee of Whitney may
exercise or direct the exercise of voting power. If a meeting of shareholders is
held to consider the voting rights to be accorded to an Acquiror and the
shareholders do not vote to accord voting rights to such shares, Whitney may
have the right to redeem the shares held by the Acquiror for their fair market
value.
Comparison of Whitney Common Stock and Bank Common Stock
The following comparison of the rights of holders of Whitney Common
Stock and Bank Common Stock is based on current terms of the governing documents
of the respective companies and on the current provisions of the LBCL and
federal law applicable to Bank Common Stock. Although Whitney Common Stock is
governed by applicable provisions of the LBCL and Bank Common Stock is governed
by OTS regulations, the rights of holders of Bank Common Stock and holders of
Whitney Common Stock are similar in many respects: (i) each shareholder is
entitled to one vote for each share held on all matters submitted to a vote of
shareholders and neither is entitled to cumulative voting rights in connection
with the election of directors; (ii) each shareholder is entitled to receive pro
rata any assets distributed to the shareholders upon liquidation, dissolution or
a winding up of the affairs of their respective companies; and (iii) neither
Whitney's nor the Bank's shareholders have preemptive rights to acquire shares
of stock issued by their respective companies. Although it is impracticable to
note all the differences between the applicable governing documents of Whitney
and the Bank, the following is intended to be a summary of certain significant
differences between the rights of holders of Whitney Common Stock and the rights
of holders of Bank Common Stock.
Boards of Directors. Whitney's Articles of Incorporation provide for a
board of directors consisting of not less than five nor more than twenty-five
members divided into five classes, with directors serving five-year staggered
terms expiring for each class of directors at successive annual meetings of
shareholders. The Bank's Board consists of not less than seven nor more than
fifteen members, and the number of directors is currently fixed in the Bank's
Bylaws at thirteen. The Bank's Board is divided into three classes as nearly
equal in number as possible, with the members of each class being elected by
ballot at successive annual meetings for terms expiring in three years. The
directors of Whitney must also be shareholders of Whitney; the Bank's directors
do not have to be shareholders of the Bank.
Removal of Directors. Whitney's Articles of Incorporation provide that
a director may be removed from office, with or without cause, only by the
affirmative vote of 90% of the voting power present at a special meeting of
shareholders called for that purpose at which a "quorum" is present. A "quorum"
for these purposes means the presence, in person or by proxy, of the holders of
90% of the total voting power of Whitney.
The Bank's Bylaws state that its directors may be removed for cause by
the affirmative vote of a majority of shares then entitled to vote in the
election of directors at a special meeting of shareholders called for that
purpose.
Issuance of Shares to Directors, Officers or Controlling Shareholders.
The Bank's Charter provides that, except for shares issuable in connection with
the conversion of the Bank from mutual to stock form of capitalization, no
shares of common stock (including shares issuable upon conversion, exchange or
exercise of other securities) shall be issued, directly or indirectly, to
officers, directors or controlling persons of the Bank other than as part of a
general
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public offering or as qualifying shares to a director, unless the issuance or
the plan under which they would be issued has been approved by a majority of the
total votes eligible to be cast at a legal meeting.
Whitney's Articles of Incorporation do not contain a similar provision,
and issuances of shares of Whitney Common Stock to its directors, officers and
controlling persons is not restricted in this manner.
Nomination of Directors. The Bank's Bylaws provide that its Board of
Directors shall act as a nominating committee for selecting management nominees
for election as directors. The management nominees must be posted in a
conspicuous place in each office of the Bank at least 20 days prior to the date
of the annual meeting, and no nominations for director except those made by the
nominating committee shall be voted upon at the annual meeting unless other
nominations by shareholders are made in writing and delivered to the secretary
of the Bank at least five days prior to the date of the annual meeting. Upon
delivery, such shareholder nominations must be posted in a conspicuous place in
each office of the Bank. If the nominating committee shall fail or refuse to act
at least 20 days prior to the annual meeting, nominations for director may be
made at the annual meeting by any shareholder entitled to vote and shall be
voted upon.
Whitney's Articles of Incorporation and By-laws do not contain
provisions restricting a shareholder's right to nominate directors for election
at an annual meeting.
Preferred Stock. The Board of Directors of the Bank is authorized,
without action of its shareholders, to issue Bank preferred stock (the "Bank
Preferred Stock") from time to time and to fix the preferences, limitations and
relative rights thereof, as well as to establish and fix variations in the
relative rights as between holders of any one or more series of such Bank
Preferred Stock. Shares of Bank Preferred Stock that are authorized would be
available for issuance in connection with the acquisition of other businesses,
infusion of capital, or for other lawful corporate purposes, at the discretion
of the Board of Directors. The Board of Directors could issue Bank Preferred
Stock to a person or persons who would support management in connection with a
proxy contest to replace an incumbent director or in opposition to an
unsolicited tender offer. As a result, such proposals or tender offers could be
defeated even though favored by the holders of a majority of the Bank Common
Stock. The Bank's Charter authorizes the issuance of 1,000,000 shares of Bank
Preferred Stock, none of which are currently outstanding.
Whitney's Articles of Incorporation do not authorize the issuance of
preferred stock.
Special Meetings of Shareholders. Under the LBCL, special meetings of
Whitney's shareholders may be called by the President or the Board of Directors,
or upon the written request of any shareholder or shareholders holding in the
aggregate one-fifth of the total voting power of Whitney. The Bank's Bylaws
provide that, unless otherwise prescribed by regulation of the OTS, special
meetings of its shareholders may be called by the President, the Chairman of the
Board or the Board of Directors, or upon the written request of any shareholder
or shareholders holding in the aggregate one-tenth of the total voting power.
Business Conducted at Annual Meetings of Shareholders. The Bank's
Bylaws provide that any business to be taken up at the annual meeting of
shareholders shall be stated in writing and filed with the Secretary of the Bank
at least five days before the date of the annual meeting, and all business so
stated, proposed and filed shall be considered at the annual meeting; but no
other proposal shall be acted upon at the annual meeting. Any shareholder may
make any other proposal at the annual meeting and the same may be discussed and
considered, but unless stated in writing and filed with the Secretary at least
five days before the meeting, such proposal shall be laid over for action at an
adjourned, special or annual meeting of shareholders taking place 30 days or
more thereafter.
Whitney's Articles of Incorporation and By-laws do not contain a
similar provision, and all matters properly brought before an annual meeting in
accordance with the LBCL may be considered and voted upon at such meeting.
Amendment to Charter and Bylaws. Except in connection with the Board of
Directors' creation of classes of Bank Preferred Stock, no amendment or repeal
of the Bank's Charter may be made unless such action is first proposed by the
Board of Directors of the Bank, then preliminarily approved by the OTS, which
preliminary approval may be granted by the OTS pursuant to regulations specified
in pre-approved charter amendments, and thereafter approved by
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the shareholders by a majority of the total votes eligible to be cast at a legal
meeting. The Bank's Bylaws may be amended in a manner consistent with
regulations of the OTS at any time by a majority vote of the full Board of
Directors or by a majority vote of the votes cast by the shareholders of the
Bank at any legal meeting.
Whitney's Articles of Incorporation and By-laws may be amended as
described above under the heading " Description of Whitney Common Stock --
Amendment of Articles of Incorporation" and " - Description of Whitney Common
Stock -- Amendment of By-laws."
Supermajority Vote Requirements. Whitney's Articles of Incorporation
contain supermajority shareholder voting provisions for certain "business
combinations." Whitney's provisions are triggered if any shareholder or group of
shareholders acquires 10% of the total voting power of Whitney, and the
supermajority vote that may be required to approve such a "business combination"
or to amend these provisions in Whitney's Articles of Incorporation is 90% of
the total voting power of Whitney.
Neither the Bank's Charter nor applicable federal law contain
supermajority vote requirements for business combinations, except that
applicable OTS regulations impose a two-thirds vote requirement for most
mergers.
Indemnification Rights. Whitney's Articles of Incorporation provide
that, in addition to any rights to indemnification that a person might have by
law or otherwise, Whitney shall indemnify any person who was or is a party or is
threatened to be made a party to any action, suit or proceeding, including any
action by or in the right of Whitney, by reason of the fact that he is or was a
director, officer, employee or agent of Whitney, or is or was serving at the
request of Whitney as a director, officer, employee or agent of another business
or enterprise, against expenses, including attorneys' fees, judgments, fines and
amounts paid in settlement, actually and reasonably incurred by him in
connection with such action, suit or proceeding, if he acted in good faith and
in a manner he reasonably believed to be in, or not opposed to, the best
interests of Whitney and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his conduct was unlawful. In the case of actions
by or in the right of Whitney, the indemnification provided to employees or
agents is limited to expenses not exceeding, in the judgment of the Board of
Directors, the estimated expense of litigating the action to conclusion, but the
Board of Directors is authorized in its discretion to pay or provide additional
indemnity in particular cases and, as to directors and officers, the indemnity
in such cases is similarly limited if it would permit indemnification of an
individual for (i) the results of his willful or intentional misconduct, (ii)
breach of duty of loyalty to Whitney or the entity otherwise served by the
individual or (iii) engaging in a transaction in which the individual derived an
improper personal benefit. No indemnification may be made in respect of a claim
in which the person seeking indemnity shall have been adjudged by a court of
competent jurisdiction to be liable for willful or intentional misconduct in the
performance of its duties to Whitney unless and only to the extent that the
court shall determine upon application that, despite the adjudication of
liability but in view of all of the circumstances of the case, he is fairly and
reasonably entitled to indemnity for such expenses that the court shall deem
proper.
The Bank's Charter and Bylaws do not provide indemnification to its
directors and officers; however, under applicable federal law and the Bank's
indemnification plan, the Bank is required to indemnify its directors, officers
and employees against whom any judicial or administrative proceeding, whether
civil, criminal or otherwise, is brought or threatened because that person is or
was a director, officer or employee of the Bank, subject to certain
requirements. Prior to making any such indemnification, the Bank must first
provide the OTS with at least 60 days' advance notice, and no indemnification
may be made if the OTS objects thereto during the notice period. The Bank is
permitted to obtain, and has obtained, insurance to protect the Bank and its
directors, officers and employees from potential claims (other than those
involving willful or criminal misconduct). The Bank is also permitted to advance
the payment of reasonable costs and expenses, subject to certain conditions.
Liquidation Account. In connection with the conversions from the mutual
to the stock form of ownership of its predecessor companies, the Bank was
required to establish "liquidation accounts" for the benefit of certain
depositors at the time of such conversions. The liquidation accounts grant such
depositors who have continued to maintain their savings accounts at the Bank the
right to a priority distribution from the liquidation accounts before any
distribution can be made with respect to the Bank Common Stock in the event of a
complete liquidation of the Bank (and only in such event). The Merger does not
constitute a complete liquidation and will not trigger a distribution from the
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liquidation accounts. Upon the consummation of the Merger, the liquidation
accounts will be maintained by Whitney Bank. For further information regarding
the liquidation accounts, see Note 10 to the Bank's consolidated financial
statements set forth in the Bank's 1996 Annual Report to Shareholders, which is
incorporated herein by reference and accompanies this Proxy Statement-
Prospectus. See "Documents Incorporated by Reference."
LEGAL MATTERS
Milling, Benson, Woodward, Hillyer, Pierson & Miller, L.L.P., New
Orleans, Louisiana, has rendered its opinion that the shares of Whitney Common
Stock to be issued in connection with the Merger have been duly authorized and,
if and when issued pursuant to the terms of the Plan of Merger, will be validly
issued, fully paid and non-assessable. Such firm will also opine as to certain
other legal matters relating to the Merger.
Elias, Matz, Tiernan & Herrick L.L.P., Washington, D.C., special
counsel to the Bank, will render an opinion on behalf of the Bank as to certain
legal matters relating to the Merger.
EXPERTS
The consolidated financial statements of the Bank and its subsidiaries
at December 31, 1996 and 1995, and for each of the three years in the period
ended December 31, 1996, have been incorporated in this Proxy Statement-
Prospectus by reference in reliance on the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated herein by reference, and
upon the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of Whitney and its subsidiaries
as of December 31, 1996 and 1995 and for each of the three years in the period
ended December 31, 1996 incorporated by reference in this Proxy Statement-
Prospectus have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto and have been so
incorporated by reference in reliance upon the authority of such firm as experts
in accounting and auditing in giving such report.
Arthur Andersen LLP will also render a tax opinion with respect to the
Merger, a form of which is filed as an exhibit to the Registration Statement of
which this Proxy Statement-Prospectus forms a part.
SHAREHOLDER PROPOSALS
To be eligible for inclusion in the Bank's proxy materials relating to
the Bank's Annual Meeting of Shareholders to be held in 1998 (unless the Merger
is consummated prior to the Annual Meeting), a shareholder proposal was required
to be received by the Bank by no later than November 25, 1997. No shareholder
proposal was received by such date.
OTHER MATTERS
At the time of the preparation of this Proxy Statement-Prospectus, the
Bank had not been informed of any matters to be presented by or on behalf of the
Bank or its management for action at the Meeting other than those listed in the
Notice of Special Meeting of Shareholders and referred to herein. If any other
matters properly come before the Meeting or any adjournments or postponements
thereof, the persons named in the enclosed proxy will vote on such matters
according to their best judgment.
Shareholders are urged to sign the enclosed proxy, which is solicited
on behalf of the Board of Directors of the Bank, and return it at once in the
enclosed envelope.
BY ORDER OF THE BOARD OF DIRECTORS OF THE BANK
-----------------------------------------------
Edward J. Patterson, Jr., Secretary
__________, 1998
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APPENDIX A
Agreement and Plan of Merger
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") is made November 20,
1997, between Whitney Holding Corporation ("Whitney"), a Louisiana corporation,
and Whitney National Bank ("WNB"), a national banking association, on the one
hand, and Meritrust Federal Savings Bank ("Bank"), a federally chartered stock
savings bank, on the other hand. Whitney, WNB and Bank shall be hereinafter
collectively referred to as the "Constituent Corporations".
Preamble
WHEREAS, the boards of directors of Whitney, WNB and Bank have each
determined that it is desirable and in the best interests of their respective
corporations and their shareholders that Bank merge into WNB (the "Merger") on
the terms and subject to the conditions set forth in this Agreement and the
Merger Agreement (as hereinafter defined).
NOW THEREFORE, in consideration of the representations, warranties,
covenants and agreements herein contained, the parties hereto agree as follows:
Section 1. The Merger and Closing
1.01. Merger. (a) Promptly after execution of this Agreement, the
Boards of Directors of WNB and Bank will execute the merger agreement annexed
hereto as Exhibit 1.01(a) (the "Merger Agreement"), pursuant to which, on the
terms set forth herein and subject to the conditions set forth in Section 6
hereof (including without limitation the satisfaction of all notice requirements
of 12 C.F.R. 563.22(b)), Bank will merge with and into WNB, which shall be the
surviving bank.
(b) Effects of Merger. The Merger shall have the effects set
forth in the national banking laws and regulations and the regulations of the
Office of Thrift Supervision (the "OTS"). Without limiting the generality of the
foregoing, and subject thereto, at the effective time of the Merger, all the
property and assets, rights, privileges and all debts, liabilities and
obligations of Bank will become the property and assets, rights, privileges and
debts, liabilities and obligations of WNB as the surviving bank in the Merger.
1.02. The Closing. The "Closing" of the transactions contemplated
hereby will take place in the Board Room of Whitney, 228 St. Charles Avenue, New
Orleans, Louisiana 70130, at 9:00 a.m., New Orleans time, on a mutually
agreeable date as soon as practicable following satisfaction of the conditions
set forth in subparagraphs (a), (b) and (d) of Section 6.01 hereof, or if no
date has been agreed to, on any date specified by any party to the others upon
10 days notice following satisfaction of such conditions. The date on which the
Closing occurs is herein called the "Closing Date". If all conditions set forth
in Section 6 hereof are satisfied or waived by the party entitled to grant such
waiver, at the Closing (a) the Constituent Corporations shall each provide to
the other such proof of satisfaction of the conditions set forth in Section 6 as
the party whose obligations are conditioned upon such satisfaction may
reasonably request, (b) the certificates, letters, opinions and other items
required by Section 6 shall be delivered, (c) the appropriate officers of the
parties shall execute, deliver and acknowledge the Merger Agreement and (d) the
parties shall take such further action as is required to consummate the
transactions contemplated by this Agreement and the Merger Agreement. If on any
date established for the Closing all conditions in Section 6 hereof have not
been satisfied or waived by the party entitled to grant such waiver, then such
party, on one or more occasions, may declare a delay of the Closing of such
duration, not exceeding 10 business days, as the declaring party shall select,
but no such delay shall extend beyond the date set forth in subparagraph (c) of
Section 7.01, and no such delay shall interfere with the right of any party to
terminate this Agreement pursuant to Section 7.
1.03. The Effective Date and Time. Immediately following (or
concurrently with) the Closing, the Merger Agreement shall be filed and recorded
with the Office of the Comptroller of the Currency and the Merger shall be
effective at the date and time specified in the Merger Agreement. The date on
which and the time at which the Merger becomes effective are herein referred to
as the "Effective Date" and the "Effective Time," respectively.
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1.04. Surviving Corporation. The Articles of Association and Bylaws of
WNB as in effect immediately prior to the Effective Time shall remain unchanged
by reason of the Merger and shall be the Articles of Association and Bylaws of
WNB as the surviving entity in the Merger. The directors and officers of WNB
immediately prior to the Effective Time shall be the directors and officers of
WNB as the surviving entity in the Merger until the earlier of their resignation
or removal or until their respective successors are duly elected and qualified,
as the case may be. Each share of capital stock of WNB issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding from
and after the Effective Time and shall be the capital stock of WNB as the
surviving entity in the Merger. At the Effective Time the shares of Bank Common
Stock (as hereinafter defined) shall be converted as set forth in Section 2.
1.05. Tax Consequences. It is the intention of the parties hereto that
the Merger shall constitute a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and that
this Agreement shall constitute a "plan of reorganization" for purposes of
Section 368 of the Code.
Section 2. Conversion of Stock of Bank
2.01. Conversion. Subject to the provisions of this Section 2, at the
Effective Time, by virtue of the Merger and without any action on the part of
the holders thereof, the shares of Bank common stock, par value $1.00 per share
("Bank Common Stock") shall be converted as follows:
(a) Exchange Ratio. (i) Except for shares of Bank Common Stock
held by Bank as treasury shares (other than in a fiduciary capacity), if any,
which shall by reason of the Merger be canceled ("Treasury Shares"), and subject
to the provisions of subsection 2.01(b) relating to fractional shares, each
issued and outstanding share of Bank Common Stock shall be converted into and
become that number of shares of Whitney common stock, no par value ("Whitney
Common Stock"), that is equal to (A) if the Average Whitney Market Price (as
hereinafter defined) is greater than or equal to $46.00 and less than or equal
to $54.00, the quotient (rounded to the nearest thousandth) determined by
dividing (x) $73.00 by (y) the Average Whitney Market Price, (B) if the Average
Whitney Market Price is less than $46.00, 1.587 shares, (C) if the Average
Whitney Market Price is greater than $54.00, 1.352 shares, or (D)
notwithstanding any of the foregoing, if prior to the Effective Date (x) Whitney
issues a press release announcing that it is negotiating or has executed a
letter of intent or definitive merger or other acquisition agreement as a result
of which Whitney will cease to be an independent, publicly traded company and
(y) Whitney has not thereafter issued a press release announcing the termination
of such negotiations, letter of intent or definitive agreement prior to the
Closing, 1.352 shares (the "Exchange Ratio").
(ii) Average Whitney Market Price. The "Average Whitney
Market Price" shall be the average of the closing per share trading prices of
Whitney Common Stock(adjusted appropriately for any stock split, stock dividend,
recapitalization, reclassification or similar transaction which is effected, or
for which a record date occurs) on the twenty (20) trading days preceding the
fifth trading day immediately prior to the Effective Date, as reported in the
Wall Street Journal (corrected for typographical errors) (the "Pricing Period").
(b) Fractional Shares. In lieu of the issuance of fractional
shares of Whitney Common Stock, each shareholder of Bank, upon surrender of his
or her certificate that immediately prior to the Effective Time represented Bank
Common Stock, other than Treasury Shares, shall receive a cash payment (without
interest) equal to the fair market value at the Effective Time of any fraction
of a share of Whitney Common Stock to which such holder would be entitled but
for this provision. For purposes of calculating such payment, the fair market
value of a fraction of a share of Whitney Common Stock at the Effective Time
shall be such fraction multiplied by the Average Whitney Market Price.
(c) Exchange of Certificates. After the Effective Time, each
holder of an outstanding certificate or certificates theretofore representing a
share or shares of Bank Common Stock, other than Treasury Shares, upon surrender
thereof to the exchange agent selected by Whitney (the "Exchange Agent"),
together with duly executed transmittal materials provided pursuant to
subsection 2.01(e) or upon compliance by the holder or holders thereof with the
procedures of the Exchange Agent with respect to lost, stolen or destroyed
certificates, shall be entitled to receive in exchange therefor any payment due
in lieu of fractional shares and a certificate or certificates representing the
number
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of whole shares of Whitney Common Stock into which such holder's shares of Bank
Common Stock were converted. Until so surrendered, each outstanding Bank stock
certificate shall be deemed for all purposes, other than as provided below with
respect to the payment of dividends or other distributions (if any) in respect
of Whitney Common Stock, to represent the number of whole shares of Whitney
Common Stock into which such holder's shares of Bank Common Stock shall have
been converted. Whitney may, at its option, refuse to pay any dividend or other
distribution to holders of unsurrendered Bank stock certificates until
surrendered; provided, however, that upon the surrender and exchange of any Bank
stock certificates there shall be paid, to the extent not previously paid, to
the record holders of the Whitney stock certificates issued in exchange therefor
the amount, without interest, of accumulated dividends and distributions, if
any, which have become payable with respect to the number of whole shares of
Whitney Common Stock into which the shares of Bank Common Stock theretofore
represented by such certificates shall have been exchanged. The provisions of
this subsection 2.01(c) are intended for the benefit of the holders of shares of
Bank Common Stock and shall be enforceable by such holders and each such
holder's heirs, representatives and successors.
(d) Deposit. As of the Effective Time, Whitney shall deposit
or cause to be deposited with the Exchange Agent (i) certificates representing
the shares of Whitney Common Stock and (ii) the cash in lieu of fractional
shares to be issued and paid, as the case may be, in exchange for outstanding
shares of Bank Common Stock pursuant to this Section 2.
(e) Transmittal Materials. Promptly after the Effective Time,
Whitney shall send or cause to be sent to each former shareholder of record of
Bank at the Effective Time transmittal materials for use in exchanging
certificates of Bank Common Stock for certificates of Whitney Common Stock.
(f) Bank Options. Each Bank Option under the Bank Option Plans
(as such terms are hereinafter defined) that is outstanding at the Effective
Time shall be converted into an option to acquire shares of Whitney Common Stock
in the manner set forth in Section 5.21 of this Agreement.
2.02. Closing Transfer Books. At the Effective Time, the stock transfer
books of Bank shall be closed and no transfer of shares of Bank Common Stock
shall be made thereafter. All shares of Whitney Common Stock issued, and any
fractional share payments paid upon surrender for exchange of certificates
representing shares of Bank Common Stock in accordance with this Section 2 shall
be deemed to have been issued in full satisfaction of all rights pertaining to
the shares of Bank Common Stock theretofore represented by such certificates.
Section 3. Representations and Warranties of Bank
Bank represents and warrants to Whitney and WNB that, as of the date of
this Agreement and as of the Closing Date, except as set forth in the
corresponding subsection of the Schedule of Exceptions (as hereinafter defined
in subsection 5.01(b)):
3.01. Organization and Qualification. Bank is a federally chartered
stock savings bank, duly organized, validly existing and in good standing under
the laws of the United States and has all of its offices within the State of
Louisiana. Bank has all requisite corporate power and authority to own and lease
its property and to carry on its business as it is currently being conducted and
to execute this Agreement and the Merger Agreement and to consummate the
transactions contemplated hereby and thereby, and is qualified and in good
standing as a foreign corporation in all jurisdictions in which the failure to
so qualify would have a Material Adverse Effect (as hereinafter defined) on
Bank's financial condition, results of operations or business. For the purposes
of this Agreement, "Material Adverse Effect" shall mean, with respect to Bank
and the Subsidiaries (as hereinafter defined), any effect or effects which taken
individually or in the aggregate are material and adverse to its financial
condition, results of operations or business, provided, however, that Material
Adverse Effect shall not be deemed to include (a) any change occurring after the
date hereof in any federal or state law, rule, or regulation or in generally
accepted accounting principles ("GAAP"), which change affects federally
chartered savings institutions generally, (b) expenses incurred in connection
with this Agreement and the transactions contemplated hereby (not to exceed
$800,000 in the aggregate), (c) payments to executive officers or other
employees of Bank pursuant to agreements between the Bank and such persons, true
and complete copies of which have been delivered to Whitney prior to execution
of this Agreement, (d) actions or omissions of Bank either specifically
permitted under this Agreement or taken with the prior written consent of
Whitney in
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contemplation of the transactions contemplated hereby, and (f) any effect with
respect to Bank caused, in whole or in part, by Whitney or WNB.
3.02. Capital Stock; Other Interests. The authorized capital stock of
Bank consists of 5,000,000 shares of Bank Common Stock, of which 774,176 shares
are issued and outstanding and no shares are held in its treasury. All issued
and outstanding shares of capital stock of Bank have been duly authorized and
are validly issued, fully paid and non-assessable. Other than outstanding
options to acquire up to an aggregate of 69,000 shares of Bank Common Stock
("Bank Options") granted pursuant to the Bank's 1993 Key Employee Stock
Compensation Program and 1993 Directors' Stock Option Plan ("Bank Option
Plans"), Bank does not have any outstanding stock options or other rights to
acquire any shares of its capital stock or any security convertible into such
shares, nor does it have any obligation or commitment to issue, sell or deliver
any of the foregoing or any shares of its capital stock (other than pursuant to
such options). There are no agreements among Bank and Bank's shareholders or by
which Bank is bound, or to Bank's knowledge among shareholders of Bank, with
respect to the voting or transfer of Bank Common Stock or granting registration
rights to any holder thereof. The outstanding capital stock of Bank and each of
its Subsidiaries (hereinafter defined) has been issued in compliance with all
legal requirements and in compliance with any preemptive or similar rights. Bank
does not have any subsidiaries or any direct or indirect ownership interest
exceeding 5% in any firm, corporation, partnership or other entity, except that
Bank owns 100% of the issued and outstanding stock of First Federal Services,
Inc. and Atchafalaya Services, Inc. (the "Subsidiaries"). Both of the
Subsidiaries are inactive, have no employees and have no assets or liabilities,
contingent or otherwise. Each of Subsidiaries is duly organized, validly
existing and in good standing under the laws of the State of Louisiana.
3.03. Corporate Authorization; No Conflicts. Subject to the approval of
this Agreement and the Merger Agreement by the shareholders of Bank in
accordance with applicable federal law, all corporate acts and other proceedings
required of Bank for the due and valid authorization, execution, delivery and
performance of this Agreement and the Merger Agreement and consummation of the
Merger have been validly and appropriately taken. Subject to their approval by
the shareholders of Bank and to such regulatory approvals as are required by
law, this Agreement and the Merger Agreement are legal, valid and binding
obligations of Bank and are enforceable against Bank in accordance with the
respective terms hereof and thereof, except that enforcement may be limited by
(i) bankruptcy, insolvency, reorganization, moratorium, receivership,
conservatorship, and other laws now or hereafter in effect relating to or
affecting the enforcement of creditors' rights generally or the rights of
creditors of insured depository institutions, (ii) general equitable principles,
and (iii) laws relating to the safety and soundness of insured depository
institutions, and except that no representation is made as to the effect or
availability of equitable remedies or injunctive relief (regardless of whether
such enforceability is considered in a proceeding in equity or at law). Neither
the execution, delivery or performance of this Agreement or the Merger
Agreement, nor the consummation of the transactions contemplated hereby or
thereby will (i) violate, conflict with, or result in a breach of any provision
of, (ii) constitute a default (or an event which, with notice or lapse of time
or both, would constitute a default) under, (iii) result in the termination of
or accelerate the performance required by, or (iv) result in the creation of any
lien, security interest, charge or encumbrance upon any of Bank's properties or
assets under, any of the terms, conditions or provisions of Bank's charter or
bylaws or any material note, bond, mortgage, indenture, deed of trust, lease,
license, agreement or other instrument or obligation to or by which Bank or any
of Bank's assets is bound; or violate any order, writ, injunction, decree,
statute, rule or regulation of any governmental body applicable to Bank or any
of Bank's assets.
3.04. Financial Statements, Reports and Proxy Statements.(a) Bank has
delivered to Whitney true and complete copies of (i) the consolidated statements
of financial condition as of December 31, 1995 and December 31, 1996 of Bank and
its consolidated subsidiaries, the related consolidated statements of
operations, stockholders' equity and cash flows for the respective years then
ended, the related notes thereto, and the report of its independent public
accountants with respect thereto, as presented in Bank's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1996 filed with the OTS under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), (collectively,
the "Financial Statements"), (ii) the unaudited statements of financial
condition as of September 30, 1997 and September 30, 1996 of Bank and its
consolidated subsidiaries, and the related unaudited statements of operations
and cash flows for the nine-month periods then ended, as presented in Bank's
Quarterly Reports on Form 10-QSB filed with the OTS under the Exchange Act
(collectively, the "Interim Financial Statements"), (iii) all thrift financial
reports, including all amendments thereto, made to the OTS since December 31,
1993 by Bank, (iv) Bank's Annual Report to Shareholders for 1995 and 1996 and
all subsequent Quarterly Reports to Shareholders, (vi) all offering circulars
filed
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with the OTS and all reports filed by Bank with the OTS since December 31, 1993
pursuant to Section 13 or 15(d) of the Exchange Act, and (vii) all Proxy
Statements and other communications disseminated to Bank's shareholders or the
shareholders of any of its subsidiaries at any time since December 31, 1993.
(b) The Financial Statements and, except as indicated in the
notes thereto or, as permitted by Form 10-QSB and the rules and regulations of
the OTS, the Interim Financial Statements, have been (and all financial
statements delivered to Whitney as required by this Agreement will be) prepared
in conformity with GAAP applied on a basis consistent with prior periods, and
present fairly, in conformity with GAAP the consolidated results of operations
of Bank for the respective periods covered thereby and the financial condition
of Bank as of the respective dates thereof. All thrift financial and other
regulatory reports referred to above have been filed on the appropriate form and
prepared in all material respects in accordance with such forms' instructions
and the applicable rules and regulations of the regulating federal agency. As of
the date of the latest statement of financial condition forming part of the
Interim Financial Statements (the "Latest Balance Sheet"), Bank did not have,
nor were any of its assets subject to, any material liability, commitment,
indebtedness or obligation (of any kind whatsoever, whether absolute, accrued,
contingent, matured or unmatured) which is not reflected and adequately reserved
against in accordance with GAAP. No report, proxy statement, registration
statement or offering circular filed by Bank with the OTS or other regulatory
agency since January 1, 1994 through the date of this Agreement, and no report
made to shareholders of Bank since January 1, 1994 through the date of this
Agreement, as of the respective dates thereof, contained any untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. No such report, proxy
statement, registration statement or report to shareholders filed or
disseminated after the date of this Agreement will contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except for any
information concerning Whitney's consolidated group provided by or on behalf of
Whitney specifically for inclusion therein. The Financial Statements and Interim
Financial Statements are supported by and consistent with a general ledger and
detailed trial balances of investment securities, loans and commitments,
depositors' accounts and cash balances on deposit with other institutions,
copies of which have been made available to Whitney.
3.05. Loan and Investment Portfolios. All loans, discounts and
financing leases (in which Bank is lessor) reflected on the Latest Balance Sheet
(a) were, at the time and under the circumstances in which made, made for good,
valuable and adequate consideration in the ordinary course of business of Bank
(b) are evidenced by genuine notes, agreements or other evidences of
indebtedness and (c) to the extent secured, have been secured by valid liens and
security interests which have been perfected. Accurate lists of all such loans,
discounts and financing leases as of the date of the Latest Balance Sheet (or a
more recent date), and of the investment portfolios of Bank as of such date,
will be delivered to Whitney concurrently with the Schedule of Exceptions.
Except as specifically noted on the loan schedule attached to the Schedule of
Exceptions, Bank is not a party to any written or oral loan agreement, note or
borrowing arrangement, including any loan guaranty, that was, as of the most
recent month-end (i) delinquent by more than 30 days in the payment of principal
or interest, (ii) known by Bank to be otherwise in material default for more
than 30 days, (iii) classified as "substandard," "doubtful," "loss," "other
assets especially mentioned" or any comparable classification by Bank, the OTS
or the Federal Deposit Insurance Corporation (the "FDIC"), (iv) an obligation of
any director, executive officer or 10% shareholder of Bank who is subject to
Regulation O of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") (12 C.F.R. Part 215) or any similar regulation
applicable to Bank, or any person, corporation or enterprise controlling,
controlled by or under common control with any of the foregoing, or (v) in
violation of any law, regulation or rule of any governmental authority, other
than those that are immaterial in amount.
3.06. Adequacy of Allowances for Losses. Each of the allowances for
losses on loans, financing leases and other real estate shown on the Latest
Balance Sheet is adequate in accordance with applicable regulatory guidelines
and GAAP in all material respects, and there are no facts or circumstances known
to Bank which are likely to require in accordance with applicable regulatory
guidelines or GAAP a future material increase in any such provisions for losses
or a material decrease in any of the allowances therefor reflected in the Latest
Balance Sheet. Each of the allowances for losses on loans, financing leases and
other real estate reflected on the books of Bank at all times from and after the
date of the Latest Balance Sheet is adequate in accordance with applicable
regulatory guidelines and GAAP in all material respects, and there are no facts
or circumstances known to Bank which are likely to require in accordance with
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applicable regulatory guidelines or GAAP a future material increase in any of
such provisions for losses or a material decrease in the allowances therefor
reflected in the Latest Balance Sheet.
3.07. Examination Reports. To the extent permitted by applicable law,
Bank has provided to Whitney true and correct copies of all examination reports
with respect to Bank made by any federal or state regulatory authority since
December 31, 1992.
3.08. Absence of Certain Changes or Events. Since the date of the
Latest Balance Sheet, Bank has not declared, set aside for payment or paid any
dividend to holders of, or declared or made any distribution on, any shares of
Bank's capital stock except regular quarterly dividends from the date of the
Latest Balance Sheet until the Closing Date in amounts not to exceed $0.175 per
share payable quarterly. Whitney and Bank shall cooperate in selecting the
record date of Bank's dividend for the quarter in which the Effective Time is to
occur to ensure that, with respect to such quarterly period, the holders of Bank
Common Stock do not receive both a dividend in respect of their shares of Bank
Common Stock and Whitney Common Stock or fail to receive any dividend, and
Whitney and Bank will use their best efforts to select the Closing Date such
that holders of Bank Common Stock qualify for the dividend in respect of the
Whitney Common Stock (rather than the dividend in respect of the Bank Common
Stock) declared in the quarter in which the Effective Time is to occur. Since
the date of the Latest Balance Sheet, there has been no event or condition of
any character (whether actual or threatened) that has had, or can reasonably be
anticipated to have, a Material Adverse Effect. Except as may result from the
transactions contemplated by this Agreement, Bank has not, since the date of the
Latest Balance Sheet:
(a) borrowed any money or entered into any capital lease or
leases or, except in the ordinary course of business consistent with past
practices, (i) lent any money or pledged any of its credit in connection with
any aspect of its business whether as a guarantor, surety, issuer f a letter of
credit or otherwise, (ii) mortgaged or otherwise subjected to any lien,
encumbrance or other liability any of its assets, (iii) sold, assigned or
transferred any of its assets in excess of $100,000 in the aggregate, or (iv)
incurred any material liability, commitment, indebtedness or obligation (of any
kind whatsoever, whether absolute or contingent);
(b) suffered any material damage, destruction or loss to
immovable or movable property, whether or not covered by insurance;
(c) experienced any material change in asset concentrations as
to customers or industries or in the nature and source of its liabilities or in
the mix of interest-bearing versus non-interest bearing deposits;
(d) received notice or had knowledge or reason to believe that
any material labor unrest exists among any of its employees or that any group,
organization or union has attempted to organize any of its employees;
(e) received notice or had knowledge or reason to believe that
any of its substantial customers has terminated or intends to terminate such
customers' relationship with it;
(f) failed to operate its business in the ordinary course
consistent with past practices, or failed to preserve its business organization
intact or to preserve the goodwill of its customers and others with whom it has
business relations;
(g) incurred any material loss or expense except for losses
adequately reserved against on the Latest Balance Sheet and expenses associated
with the transactions contemplated by this Agreement and the Merger Agreement,
or waived any material right in connection with any aspect of its business,
whether or not in the ordinary course of business;
(h) forgiven any debt owed to it, or canceled any of its
claims or paid any of its noncurrent obligations or liabilities;
(i) made any capital expenditure or capital addition or
betterment in excess of $50,000;
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(j) entered into any agreement requiring the payment,
conditionally or otherwise, of any salary, bonus, extra compensation, pension or
severance payment to any of its present or former directors, officers or
employees, except such agreements as are terminable at will without any penalty
or other payment by it or increased (except for increases of not more than 5%
consistent with past practices) the compensation (including salaries, fees,
bonuses, profit sharing, incentive, pension, retirement or other similar
payments) of any such person whose annual compensation would, following such
increase, exceed $50,000;
(k) except as required in accordance with GAAP, changed any
accounting practice followed or employed in preparing the Financial Statements
or Interim Financial Statements;
(l) made any loan, given any discount or entered into any
financing lease which has not been (i) made, at the time and under the
circumstances in which made, for good, valuable and adequate consideration in
the ordinary course of business, (ii) evidenced by genuine notes, agreements or
other evidences of indebtedness and (iii) fully reserved against in an amount
sufficient in accordance with applicable regulatory guidelines to provide for
all charge-offs reasonably anticipated in the ordinary course of business after
taking into account all recoveries reasonably anticipated in the ordinary course
of business; or
(m) entered into any agreement, contract or commitment to do
any of the foregoing.
3.09. Taxes. Bank (i) has timely filed all federal, state and local
income, franchise, excise, sales and use, real and personal property, employment
and other tax returns, tax information returns and reports required to be filed,
(ii) has paid all taxes, interest payments and penalties as reflected therein
which have become due, other than taxes which are being contested in good faith
and for which adequate reserves are set forth on the Latest Balance Sheet, (iii)
has made adequate provision for the payment of all such taxes accruable for all
periods ending on or before the date of this Agreement (and will make such
accruals through the Closing Date) to any city, parish, state, the United States
or any other taxing authority, and (iv) is not delinquent in the payment of any
material tax or governmental charge of any nature. The consolidated federal
income tax returns of Bank have not been audited by the Internal Revenue
Service. No audit, examination or investigation is presently being conducted or
is, to the actual knowledge of Bank, presently being threatened by any taxing
authority, no material unpaid tax deficiencies or additional liabilities of any
sort have been proposed to Bank by any governmental representative, and no
agreements for extension of time for the assessment of any tax have been entered
into by or on behalf of Bank. Bank has withheld from its employees (and timely
paid to the appropriate governmental entity) proper and accurate amounts for all
periods in compliance with all tax withholding provisions of applicable federal,
state and local laws (including, without limitation, income, social security and
employment tax withholding for all forms of compensation).
3.10. Title to Assets. (a) On the date of the Latest Balance Sheet,
Bank had, and, except with respect to assets disposed of for adequate
consideration in the ordinary course of business since such date, now has, good
and merchantable title to all real property and good and merchantable title to
all other material properties and assets reflected on the Latest Balance Sheet,
and has good and merchantable title to all real property and good and
merchantable title to all other material properties and assets acquired since
the date of the Latest Balance Sheet, in each case free and clear of all
mortgages, liens, pledges, restrictions, security interests, charges and
encumbrances of any nature except for (i) mortgages and encumbrances which
secure indebtedness which is properly reflected in the Latest Balance Sheet or
which secure deposits of public funds as required by law; (ii) liens for taxes
accrued but not yet payable; (iii) liens arising as a matter of law in the
ordinary course of business with respect to obligations incurred after the date
of the Latest Balance Sheet, provided that the obligations secured by such liens
are not delinquent or are being contested in good faith; (iv) such imperfections
of title and encumbrances, if any, as do not materially detract from the value
or materially interfere with the present use of any of such properties or assets
or the potential sale of any of such owned properties or assets; and (v) capital
leases and leases, if any, to third parties for fair and adequate consideration.
Bank owns, or has valid leasehold interests in, all material properties and
assets used in the conduct of its business. Any real property and other material
assets held under lease by Bank are held under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere with the
use made of and proposed to be made of such property by Bank.
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(b) With respect to each lease of any real property or a
material amount of personal property to which Bank is a party (whether as lessee
or lessor), except for financing leases in which Bank is lessor, (i) such lease
is in full force and effect in accordance with its terms; (ii) all rents and
other monetary amounts that have become due and payable thereunder have been
paid; (iii) there exists no default, or event, occurrence, condition or act,
which with the giving of notice, the lapse of time or the happening of any
further event, occurrence, condition or act would become a default under such
lease; and (iv) the Merger will not constitute a default or a cause for
termination or modification of such lease.
(c) Bank does not have any legal obligation, absolute or
contingent, to any other person to sell or otherwise dispose of any substantial
part of its assets, or to sell or dispose of any of its assets except in the
ordinary course of business consistent with past practices.
3.11. Legal Matters. (a) Except for the actions listed on the
subsection of the Schedule of Exceptions that corresponds to this subsection,
there are no material claims, actions, suits, proceedings, arbitrations or
investigations pending or, to Bank's actual knowledge, threatened against Bank
or the Subsidiaries nor do any facts or circumstances exist that would be likely
to form the basis for any material claim, in any court or before or by any
governmental agency or instrumentality or arbitration panel or otherwise,
against Bank.
(b) Bank and the Subsidiaries have complied with and are not
in default in any material respect under (and have not been charged or
threatened with or, to Bank's actual knowledge, come under investigation with
respect to any charge concerning any material violation of any provision of) any
federal, state or local law, regulation, ordinance, rule or order (whether
executive, judicial, legislative or administrative) or any order, writ,
injunction or decree of any court, agency or instrumentality.
(c) There are no material uncured violations, or violations
with respect to which material refunds or restitution may be required, cited in
any compliance report to Bank as a result of examination by any bank or thrift
regulatory authority.
(d) There is no claim, action, suit, proceeding, arbitration,
or investigation, pending or, to Bank's actual knowledge, threatened, in which
any material claim or demand is made or threatened to be made against Bank or
the Subsidiaries or any officer, director, advisory director or employee, in
each case by reason of any person being or having been an officer, director,
advisory director or employee of Bank or the Subsidiaries.
3.12. Employee Benefit Plans. (a) Except for the plans listed on the
subsection of the Schedule of Exceptions that corresponds to this subsection
(the "ERISA Plans"), Bank does not sponsor, maintain or contribute to, and Bank
has not at any time sponsored, maintained or contributed to, any employee
benefit plan that is subject to any of the provisions of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"). Each of the ERISA Plans has
been maintained and administered in all material respects in compliance with its
terms, the provisions of ERISA and all other applicable laws, and, where
applicable, the provisions of the Code. No ERISA Plan, including any "party in
interest" or "disqualified person" with respect thereto has engaged in a
nonexempt prohibited transaction under Section 4975 of the Code or Section
502(i) of ERISA; there is no matter relating to any of the ERISA Plans pending
or, to Bank's actual knowledge, threatened, nor to Bank's actual knowledge, are
there any facts or circumstances existing that could reasonably be expected to
lead to (other than routine filings such as qualification determination
filings), proceedings before, or administrative actions by, any governmental
agency; there are no actions, suits or claims pending or, to Bank's actual
knowledge, threatened (including, without limitation, breach of fiduciary duty
actions, but excluding routine uncontested claims for benefits) against any of
the ERISA Plans or the assets thereof. Bank has complied in all material
respects with the reporting and disclosure requirements of ERISA and the Code.
None of the ERISA Plans is a multi-employer plan within the meaning of Section
3(37) of ERISA. A favorable determination letter has been issued by the Internal
Revenue Service with respect to each ERISA Plan that is intended to be qualified
under Section 401(a) of the Code and, to Bank's actual knowledge, the Internal
Revenue Service has taken no action to revoke any such letter and nothing has
occurred, whether by action or failure to act, which would cause the loss of
such qualification. Bank has not sponsored, maintained or made contributions to
any plan, fund or arrangement subject to Title IV of ERISA or the requirements
of Section 412 of the Code or providing for medical benefits, insurance coverage
or other similar
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benefits for any period extending beyond the termination of employment, except
as may be required under the "COBRA" provisions of ERISA and the Code.
(b) Set forth on the subsection of the Schedule of Exceptions
corresponding to this subsection is a true and complete list and description of
each and every benefit plan and benefit arrangement of Bank other than the ERISA
Plans. True and complete copies of all plan (including ERISA Plan) documents and
written agreements (including all amendments and modifications thereof),
together with copies of any tax determination letters, trust agreements, summary
plan descriptions, insurance contracts, investment management agreements and the
three most recent annual reports on form series 5500 with respect to such plan
or arrangement will be delivered to Whitney concurrently with the Schedule of
Exceptions. No such ERISA Plan or other plan constitutes a defined benefit
pension plan or has any "accumulated funding deficiency" within the meaning of
the Code.
(c) All group health plans of Bank to which Section 4980B(f)
of the Code or Section 601 of ERISA applies are in compliance in all material
respects with continuation coverage requirements of Section 4980B(f) of the Code
and Section 601 of ERISA and any prior violations of such sections have been
cured prior to the date hereof.
(d) Each plan, fund or arrangement previously sponsored or
maintained by Bank, or to which Bank previously made contributions which has
been terminated by Bank was terminated in accordance with ERISA, the Code and
the terms of such plan, fund or arrangement and no event has occurred and no
condition exists that would subject Bank, Whitney or WNB to any tax, penalty,
fine or other liability as a result of, directly or indirectly, the termination
of such plan, fund or arrangement.
(e) The current fair market value of the assets of each ERISA
Plan subject to the provisions of Title IV of ERISA equals or exceeds the
present value of the accrued benefits of each such plan as of the end of the
most recent plan year, calculated on a termination and on-going basis, and there
has been no material change likely to change the funding status of any such
plan. No funding deficiency within the meaning of Section 412 of the Code exists
with respect to any ERISA Plan. All contributions required or accrued under the
terms of any plan (including any ERISA Plan) have been made and all insurance
premiums required or accrued under the terms of any plan (including any ERISA
plan) have been paid as of the date hereof.
3.13. Insurance Policies. Bank maintains in force insurance policies
and bonds in such amounts and against such liabilities and hazards as are
considered by it to be adequate. An accurate list of all such insurance policies
is attached to the Schedule of Exceptions. Bank is not liable for, nor has Bank
received any notice of, any material retroactive premium adjustment. All
policies are valid and enforceable and in full force and effect, and Bank has
not received any notice of a material premium increase or cancellation with
respect to any of its insurance policies or bonds. Within the last three years,
Bank has not been refused any basic insurance coverage sought or applied for
(other than certain exclusions for coverage of certain events or circumstances
as stated in such polices), and Bank does not have any reason to believe that
its existing insurance coverage cannot be renewed as and when the same shall
expire, upon terms and conditions standard in the market at the time renewal is
sought.
3.14. Agreements. (a) Bank is not a party to:
(i) any collective bargaining agreement;
(ii) other than the employee benefits and plans
referred to in the section of the Schedule of
Exceptions that corresponds to Section 3.12 of this Agreement, any employment or
other agreement or contract with or commitment to any employee except the
agreements, arrangements, policies and practices referred to in the section of
the Schedule of Exceptions that corresponds to subparagraph (j) of Section 3.08
of this Agreement and such agreements as are terminable without penalty upon not
more than 30 days notice by the employer;
(iii) any obligation of guaranty or indemnification
except such indemnification of officers,
directors, employees and agents of Bank as on the date of this Agreement may be
provided in its charter, bylaws, indemnification plan (true and complete copies
of which have been provided to Whitney) or pursuant to 12 C.F.R. ss.545.121 (and
no indemnification of any such officer, director, employee or agent has been
proposed, authorized,
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granted or awarded except as set forth in the subsection of the Schedule of
Exceptions that corresponds with this subsection), and except, if entered into
in the ordinary course of business with respect to customers of Bank, letters of
credit, guaranties of endorsements and guaranties of signatures;
(iv) any agreement, contract or commitment which is
or if performed will result in a Material
Adverse Effect on Bank;
(v) any agreement, contract or commitment containing
any covenant limiting the freedom of Bank (x) to engage in any line of
business permitted by regulatory authorities, (y) to compete with any person
in a line of business permitted by applicable regulatory guidelines to be
engaged in by Louisiana state or national banks or federally chartered savings
institutions, as applicable to Bank, or (z) to fulfill any of its requirements
or needs for services or products (including, for example, contracts with
vendors to supply customers with credit insurance); or
(vi) any written agreement, memorandum, letter, order
or decree, formal or informal, with any federal or state regulatory agency.
(b) The subsection of the Schedule of Exceptions that
corresponds to this subsection contains a list of each material agreement,
contract or commitment (except those entered into in the ordinary course of
business with respect to loans, lines of credit, letters of credit, depositor
agreements, certificates of deposit and similar banking activities and equipment
maintenance agreements which are not material) to which Bank is a party or which
affects Bank. Bank has not in any material respect breached, nor is there any
pending or, to Bank's actual knowledge, threatened claim that it has materially
breached, any of the terms or conditions of any of such agreements, contracts or
commitments or of any material agreement, contract or commitment that it enters
into after the date of this Agreement. Bank is not in material violation of any
written agreement, memorandum, letter, order or decree, formal or informal, with
any federal or state regulatory agency.
3.15. Licenses, Franchises and Governmental Authorizations. Bank
possesses all licenses, franchises, permits and other governmental
authorizations necessary for the continued conduct of its business without
interference or interruption. The deposits of Bank are insured by the Savings
Association Insurance Fund, which is administered by the FDIC, to the extent
provided by applicable law, and there are no pending or, to Bank's actual
knowledge, threatened proceedings to revoke or modify that insurance or for
relief under 12 U.S.C. Section 1818.
3.16. Corporate Documents. Bank has delivered to Whitney true and
correct copies of its charter and its bylaws, all as amended. All of the
foregoing and all of the corporate minutes and stock transfer records of Bank
are current, complete and correct in all material respects.
3.17. Certain Transactions. No past or present director, executive
officer or five percent shareholder of Bank has, since January 1, 1994, engaged
in any transaction or series of transactions required to be disclosed pursuant
to Item 404 of Regulation S-K of the Rules and Regulations of the Securities and
Exchange Commission (the "SEC"), other than transactions that were so disclosed.
3.18. Broker's or Finder's Fees. Except for Friedman, Billings, Ramsey
& Co., Inc., whose fees and right to reimbursement of expenses are as disclosed
pursuant to a contract dated September 30, 1997 (a copy of which has been
provided to Whitney), no agent, broker, investment banker, investment or
financial advisor or other person acting on behalf of Bank is entitled to any
commission, broker's or finder's fee from any of the parties hereto in
connection with any of the transactions contemplated by this Agreement.
3.19. Environmental Matters. (a) (i) Bank has obtained all material
permits, licenses and other authorizations that are required to be obtained by
it under any applicable Environmental Law Requirements (as hereinafter defined)
in connection with the operation of its businesses and ownership of its
properties (collectively, the "Subject Properties"), including without
limitation, properties acquired by foreclosure or in settlement of loans;
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(ii) Except as disclosed in the subsection of the
Schedule of Exceptions that corresponds to this subsection, Bank is in
compliance in all material respects with all terms and conditions of such
permits, licenses and authorizations and with all applicable Environmental Law
Requirements;
(iii) Except as disclosed in the subsection of the
Schedule of Exceptions that corresponds to this subsection, there are no past
or present events, conditions, circumstances, activities or plans by Bank
related in any manner to Bank or the Subject Properties that did or would in any
material respect, violate or prevent compliance or continued compliance with
any of the Environmental Law Requirements, or give rise to any Environmental
Liability, as hereinafter defined;
(iv) Except as set forth in the Schedule of
Exceptions pursuant to clause (iii) above, there is no civil, criminal or
administrative action, suit, demand, claim, order, judgment, hearing, notice
or demand letter, notice of violation, investigation or proceeding pending or,
to Bank's actual knowledge, threatened by any person against Bank, or, to Bank's
actual knowledge, any prior owner of any of the Subject Properties, which
relates to the Subject Properties and relates in any way to any Environmental
Law Requirement or seeks to impose any Environmental Liability; and
(v) To Bank's actual knowledge, Bank is not subject
to or responsible for any material Environmental Liability which is not set
forth and adequately reserved against on the Latest Balance Sheet.
(b) "Environmental Law Requirement" means all applicable
present statutes, regulations, rules, ordinances, codes, licenses, permits,
orders, approvals, plans, authorizations, concessions, franchises and similar
items, of all governmental agencies, departments, commissions, boards, bureaus,
or instrumentalities of the United States, states and political subdivisions
thereof and all applicable judicial, administrative, and regulatory decrees,
judgments and orders relating to the protection of human health or the
environment, including without limitation: (A) all requirements, including but
not limited to those pertaining to reporting, licensing, permitting,
investigation, and remediation of emissions, discharges, releases, or threatened
releases of Hazardous Materials (as such term is defined below), chemical
substances, pollutants, contaminants, or hazardous or toxic substances,
materials or wastes whether solid, liquid, or gaseous in nature, into the air,
surface water, groundwater, or land, or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
Hazardous Materials, chemical substances, pollutants, contaminants, or hazardous
or toxic substances, materials or wastes, whether solid, liquid, or gaseous in
nature; (B) all requirements pertaining to protection of the health and safety
of employees or the public; and (C) all requirements pertaining to the (i)
drilling, production, and abandonment of oil and gas wells, (ii) the
transportation of produced oil and gas, and (iii) the remediation of sites
related to that drilling, production or transportation.
(c) "Hazardous Materials" shall mean: (A) Any "hazardous
substance" as defined by either the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (42 U.S.C. Section 9601, et seq.)
("CERCLA") as amended from time to time, or regulations promulgated thereunder;
(B) asbestos; (C) polychlorinated biphenyls; (D) any "regulated substance" as
defined by 40 C.F.R. Section 280.12, or the Louisiana Administrative Code; (E)
any naturally occurring radioactive material ("NORM"), as defined by applicable
federal or state laws or regulations as amended from time to time, irrespective
of whether the NORM is located in Louisiana or another jurisdiction; (F) any
non-hazardous oilfield wastes ("NOW") defined under applicable federal or state
laws or regulations, irrespective of whether those wastes are located in
Louisiana or another jurisdiction; (G) any substance the presence of which on
the Subject Properties is prohibited by any lawful rules and regulations of
legally constituted authorities in force and effect relating to the Subject
Properties; and (H) any other substance which by any such rule or regulation
requires special handling in its collection, storage, treatment or disposal.
(d) "Environmental Liability" shall mean (i) any liability or
obligation arising under any Environmental Law Requirement, or (ii) any
liability or obligation under any other theory of law or equity (including
without limitation any liability for personal injury, property damage or
remediation) that results from, or is based upon or related to, the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling, or the emission, discharge, release or threatened release into the
environment, of any Hazardous Material, pollutant, contaminant, chemical, or
industrial, toxic or hazardous substance or waste.
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3.20. Compliance with Laws. Bank is in compliance with all applicable
laws, rules, regulations, orders, writs, judgments and decrees the noncompliance
with which could cause a Material Adverse Effect on Bank. There are no
governmental investigations pending or, to Bank's actual knowledge, threatened
against Bank or the Subsidiaries.
3.21. Intellectual Property. Bank owns or holds valid licenses to use
all trademarks, tradenames, service marks and other intellectual property that
are material to the conduct of its business.
3.22. Community Reinvestment Act. Bank has complied in all material
respects with the provisions of the Community Reinvestment Act ("CRA") and the
rules and regulations thereunder, has CRA ratings of not less than
"satisfactory," and has received no material criticism from regulators with
respect to discriminatory lending practices, and has no knowledge of any
conditions or circumstances that are likely to result in CRA ratings of less
than "satisfactory" or material criticism from regulators with respect to
discriminatory lending practices.
3.23. Accuracy of Statements. No warranty or representation made or to
be made by Bank in this Agreement or in any document furnished or to be
furnished by Bank pursuant to this Agreement and no information relating to Bank
or any of its affiliates furnished by Bank pursuant to this Agreement, contains
or will contain, as of the date of this Agreement, the effective date of the
Registration Statement (as defined in Section 5.14 hereof) and the Closing Date,
an untrue statement of a material fact or an omission of a material fact
necessary to make the statements contained herein and therein, in light of the
circumstances in which they are made, not misleading.
Section 4. Representations and Warranties of Whitney and WNB
Whitney and WNB represent and warrant to Bank that, as of the
date of this Agreement and as of the Closing Date:
4.01. Consolidated Group; Organization; Qualification. "Whitney's
consolidated group," as such term is used in this Agreement, consists of Whitney
and all of its consolidated subsidiaries for financial reporting purposes.
Whitney is a corporation duly organized and validly existing under the laws of
the State of Louisiana and is a bank holding company within the meaning of the
Bank Holding Company Act of 1956, as amended. WNB is a national banking
association, duly organized and validly existing and in good standing under the
laws of the United States of America. Each of Whitney and WNB have all requisite
corporate power and authority to own and lease its property and to carry on its
business as it is currently being conducted and to execute and deliver this
Agreement and the Merger Agreement to which it is a party and to consummate the
transactions contemplated hereby and thereby, and is qualified and in good
standing as a foreign corporation in all jurisdictions in which the failure to
so qualify would have a material adverse effect on the financial condition,
results of operations or business of Whitney's consolidated group, taken as a
whole.
4.02. Capital Stock. As of the date of this Agreement, the authorized
capital stock of Whitney consists of 40,000,000 shares of Whitney Common Stock.
As of September 30, 1997, 20,750,110 shares of Whitney Common Stock were issued
and outstanding and 364,491 shares were held in its treasury. All issued and
outstanding shares of capital stock of Whitney and WNB have been duly authorized
and are validly issued, fully paid and (except as provided in 12 U.S.C. Section
55) non-assessable. The outstanding capital stock of Whitney and WNB has been
issued in compliance with all legal requirements and any preemptive or similar
rights. Whitney owns all of the issued and outstanding shares of capital stock
of WNB free and clear of all liens, charges, security interests, mortgages,
pledges and other encumbrances.
4.03. Corporate Authorization; No Conflicts. Subject to approval of the
Merger Agreement by Whitney as the sole shareholder of WNB, all corporate acts
and other proceedings required of Whitney and WNB for the due and valid
authorization, execution, delivery and performance of this Agreement and the
Merger Agreement and consummation of the Merger have been validly and
appropriately taken. Subject to such regulatory approvals as are required by
law, this Agreement and the Merger Agreement are legal, valid and binding
obligations of Whitney and WNB, as the case may be, and are enforceable against
them in accordance with the respective terms of such agreements, except that
enforcement may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium, receivership, conservatorship, and other laws now or hereafter in
effect relating to or affecting the enforcement of creditors' rights
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generally or the rights of creditors of insured depository institutions, (ii)
general equitable principles, and (iii) laws relating to the safety and
soundness of insured depository institutions, and except that no representation
is made as to the effect or availability of equitable remedies or injunctive
relief (regardless of whether such enforceability is considered in a proceeding
in equity or at law). With respect to each of Whitney and WNB, neither the
execution, delivery or performance of this Agreement or the Merger Agreement,
nor the consummation of the transactions contemplated hereby or thereby will (i)
violate, conflict with, or result in a breach of any provision of, (ii)
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, (iii) result in the termination of or
accelerate the performance required by, or (iv) result in the creation of any
lien, security interest, charge or encumbrance upon any of its properties or
assets under, any of the terms, conditions or provisions of its articles of
incorporation or association, as the case may be, or by-laws (or comparable
documents) or any material note, bond, mortgage, indenture, deed of trust,
lease, license, agreement or other instrument or obligation to or by which it or
any of its assets is bound; or violate any order, writ, injunction, decree,
statute, rule or regulation of any governmental body applicable to it or any of
its assets.
4.04. Financial Statements, Reports and Proxy Statements. (a) Whitney
has delivered to Bank true and complete copies of (i) the consolidated balance
sheets as of December 31, 1995 and December 31, 1996 of Whitney and its
consolidated subsidiaries, the related consolidated statements of operations,
changes in shareholders' equity and cash flows for the respective years then
ended, the related notes thereto, and the report of its independent public
accountants with respect thereto, as presented in Whitney's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996 filed with the SEC
(collectively, the "Whitney Financial Statements") and (ii) the unaudited
consolidated balance sheet as of September 30, 1997 of Whitney and its
consolidated subsidiaries and the related unaudited statements of operations and
cash flows for the nine-month period then ended, as presented in Whitney's
quarterly report on Form 10- Q for the quarter then ended filed with the SEC
(collectively, the "Whitney Interim Financial Statements").
(b) The Whitney Financial Statements and the Whitney Interim
Financial Statements have been prepared in conformity with GAAP applied on a
basis consistent with prior periods, and present fairly, in conformity with
GAAP, the consolidated results of operations of Whitney's consolidated group for
the respective periods covered thereby and the consolidated financial condition
of its consolidated group as of the respective dates thereof. All call and other
regulatory reports have been filed on the appropriate form and prepared in all
material respects in accordance with such form's instructions and the applicable
rules and regulations of the regulating federal agency. As of the date of the
latest balance sheet forming part of the Whitney Interim Financial Statements
(the "Whitney Latest Balance Sheet"), no member of Whitney's consolidated group
had, nor were any of any of such member's assets subject to, any material
liability, commitment, indebtedness or obligation, which is not reflected and
adequately reserved against in the Whitney Latest Balance Sheet in accordance
with GAAP.
4.05. Legality of Whitney Securities. All shares of Whitney Common
Stock to be issued pursuant to the Merger have been duly authorized and, when
issued pursuant to the Merger Agreement, will be validly and legally issued,
fully paid and non-assessable, and will be, at the time of their delivery, free
and clear of all liens, charges, security interests, mortgages, pledges and
other encumbrances and any preemptive or similar rights.
4.06. SEC Reports. Whitney has previously delivered to Bank an accurate
and complete copy of the following Whitney reports filed with the SEC pursuant
to the Exchange Act: (a) annual reports on Form 10-K for the years ended
December 31, 1994, 1995 and 1996; (b) quarterly reports on Form 10-Q for the
quarters ended March 31, June 30, and September 30, 1997; and (c) proxy
statements for the years 1995, 1996 and 1997; as of their respective dates, no
such report or communication contained any untrue statement of a material fact
or omitted to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. Whitney has timely filed all reports and
other documents required to be filed by it under the Securities Act of 1933, as
amended (the "Securities Act") and the Exchange Act.
4.07. Absence of Certain Changes or Events. Since the date of the
Whitney Latest Balance Sheet, there has been no event or condition of any
character (whether actual or threatened) that has had, or can reasonably be
anticipated to have, a material adverse effect on the financial condition,
results of operations or business of Whitney's consolidated group taken as a
whole.
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4.08. Legal Matters. (a) There are no material actions, suits,
proceedings, arbitrations or investigations pending or, to Whitney's knowledge
threatened, against any member of Whitney's consolidated group which would be
required to be disclosed in a Form 10-K, Form 10-Q or Form 8-K pursuant to Item
103 of Regulation S-K of the SEC's Rules and Regulations that are not so
disclosed.
(b) There are no material uncured violations, or violations
with respect to which material refunds or restitution may be required, cited in
any compliance report to any member of Whitney's consolidated group as a result
of examination by any bank or bank holding company regulatory authority.
(c) No member of Whitney's consolidated group is subject to
any written agreement, memorandum or order or decree, formal or informal, with
or by any bank or bank holding company regulatory authority.
4.09. Community Reinvestment Act. WNB has complied in all material
respects with the provisions of the CRA and the rules and regulations
thereunder, has CRA ratings of not less than "satisfactory," and has received no
material criticism from regulators with respect to discriminatory lending
practices, and has no knowledge of any conditions or circumstances that are
likely to result in CRA ratings of less than "satisfactory" or material
criticism from regulators with respect to discriminatory lending practices.
4.10. Share Ownership. As of the date of this Agreement, no member of
Whitney's consolidated group owns (except in a fiduciary capacity) any shares of
Bank Common Stock.
4.11. Accuracy of Statements. No warranty or representation made or to
be made by any member of Whitney's consolidated group in this Agreement or in
any document furnished or to be furnished by any member of Whitney's
consolidated group pursuant to this Agreement contains or will contain, as of
the date of this Agreement, the effective date of the Registration Statement (as
defined in Section 5.14 hereof) and the Closing Date, an untrue statement of a
material fact or an omission of a material fact necessary to make the statements
contained herein and therein, in light of the circumstances in which they are
made, not misleading.
Section 5. Covenants and Conduct of Parties Prior to the Effective Date
The parties further covenant and agree as follows:
5.01. (a) Investigations; Planning. Bank shall continue to provide to
Whitney and WNB and to their authorized representatives full access during all
reasonable times to its premises, properties, books and records (including,
without limitation, all corporate minutes and stock transfer records), and to
furnish Whitney and WNB and such representatives with such financial and
operating data and other information of any kind respecting its business and
properties as Whitney and WNB shall from time to time reasonably request. Any
investigation shall be conducted in a manner which does not unreasonably
interfere with the operation of the business of Bank. Bank agrees to cooperate
with Whitney and WNB in connection with planning for the efficient and orderly
combination of the parties and the operation of Whitney and WNB after
consummation of the Merger. In the event of termination of this Agreement prior
to the Effective Date, Whitney and WNB shall, except to any extent necessary to
assert any rights under this Agreement or the Merger Agreement, return, without
retaining copies thereof, or destroy (and certify to same under penalty of
perjury) all confidential or non-public documents, work papers and other
materials obtained from Bank in connection with the transactions contemplated
hereby and shall keep such information confidential, not disclose such
information to any other person or entity except as may be required by legal
process, and not use such information in connection with its business, and shall
cause all of its employees, agents and representatives to keep such information
confidential and not to disclose such information or to use it in connection
with its business, in each case unless and until such information shall come
into the public domain through no fault of Whitney or WNB. Whitney and WNB shall
continue to provide Bank's executive officers with access to their respective
executive officers, during normal business hours and upon reasonable notice, to
discuss the business and affairs of Whitney and WNB to the extent customary in
transactions of the nature contemplated by this Agreement.
(b) Delivery of Schedules of Exceptions; Due Diligence.
Whitney, WNB and Bank stipulate that they have entered into this Agreement prior
to Bank's delivery of its schedule of exceptions to this Agreement (the
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"Schedule of Exceptions") and prior to Whitney's completion of Whitney's
customary due diligence investigation of Bank. Bank shall deliver to Whitney, on
or before the 7th business day following the date hereof, its Schedule of
Exceptions. Upon such delivery, such Schedules shall be initialed on behalf of
Whitney and Bank, shall be appended hereto and shall form a part hereof for all
purposes. If Bank fails to deliver its Schedule of Exceptions on or before the
7th business day following the date hereof, Whitney may terminate this Agreement
without liability by giving written notice of termination to Bank. Whitney shall
have no less than ten business days during which to conduct its due diligence
review, which review may commence at any time following the execution of this
Agreement; provided, however, that at least seven of the said business days
shall follow delivery of the Schedule of Exceptions (the "Review Period"). In no
event shall the Review Period exceed ten business days following Bank's delivery
of the Schedule of Exceptions. At or prior to expiration of the Review Period,
Whitney shall elect, by written notice to Bank, to either (a) proceed to the
Closing (subject to the satisfaction or waiver of all other conditions to
Closing) or (b) terminate the Agreement (without liability to Bank except as set
forth in the last sentence of this subsection 5.01(b)) if the results of the
review conducted in accordance with the provisions of this subsection 5.01(b)
hereof or any of the disclosures contained in the Schedule of Exceptions causes
Whitney to determine, in its good faith judgment, that one or more facts or
circumstances exist or is likely to exist which, individually or in the
aggregate, materially and adversely impacts one or more of the benefits to
Whitney of the transactions contemplated by this Agreement so as to render
inadvisable the consummation of the Merger. Absent timely delivery of written
notice electing to terminate this Agreement, Whitney shall be deemed to have
elected to proceed to the Closing, subject to all other terms and conditions of
this Agreement. If, after receiving Bank's Schedule of Exceptions, Whitney
elects to terminate this Agreement pursuant to the seventh sentence of this
Section 5.01(b), then notwithstanding any other provision hereof, Whitney shall
reimburse Bank for the reasonable out-of-pocket expenses actually incurred by it
in connection with the transactions contemplated by this Agreement through the
date of termination up to a maximum of $150,000.
5.02. Cooperation and Best Efforts. Each of the parties hereto will
cooperate with the other parties and use its best efforts to (a) procure all
necessary consents and approvals of third parties, (b) complete all necessary
filings, registrations, applications, schedules and certificates, (c) satisfy
all requirements prescribed by law for, and all conditions set forth in this
Agreement to, the consummation of the Merger and the transactions contemplated
hereby and by the Merger Agreement, and (d) effect the transactions contemplated
by this Agreement and the Merger Agreement at the earliest practicable date.
5.03. Information for, and Preparation of, Registration Statement and
Proxy Statement. Each of the parties hereto will cooperate in the preparation of
the Registration Statement referred to in Section 5.14 and a proxy statement of
Bank (the "Proxy Statement") which complies with the requirements of the
Securities Act, the Exchange Act, the rules and regulations promulgated
thereunder and other applicable federal and state laws, for the purpose of
submitting this Agreement, the Merger Agreement and the transactions
contemplated hereby and thereby, to Bank's shareholders for approval. Each of
the parties will as promptly as practicable after the date hereof furnish all
such data and information relating to it and its subsidiaries as any of the
other parties may reasonably request for the purpose of including such data and
information in the Registration Statement and the Proxy Statement.
5.04. Approval of Merger Agreement. Whitney, as the sole shareholder of
WNB, shall take all action necessary to effect shareholder approval of the
Merger Agreement.
5.05. Press Releases. Whitney and Bank will cooperate with each other
in the preparation of any press releases announcing the execution of this
Agreement or the consummation of the transactions contemplated hereby. Without
the prior written consent of the chief executive officer of the other party,
which consent will not be unreasonably withheld, neither Bank nor Whitney will
issue any press release or other written statement for general circulation
relating to the transactions contemplated hereby, except as may otherwise be
required by law and, if practical, prior notice of such release is provided to
the other parties. Whitney agrees that it will make a press release with respect
to the results of operations of Whitney and its consolidated group as promptly
as practicable following receipt of financial results covering at least thirty
(30) days of post-Merger combined operations of Whitney to permit the
termination of certain of the restrictions on transfers of Whitney Common Stock
set forth in the Shareholder's Commitments referred to in Section 5.10.
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5.06. Preservation of Business. Bank will use its best efforts to
preserve the possession and control of all of its assets other than those
consumed or disposed of for value in the ordinary course of business, to
preserve the goodwill of customers and others having business relations with it
and to do nothing knowingly to impair its ability to keep and preserve its
business as it exists on the date of this Agreement.
5.07. Conduct of Business in the Ordinary Course. Bank shall conduct
its business only in the ordinary course consistent with past practices, and it
shall not, without the prior written consent of the chief executive officer of
Whitney or his duly authorized designee:
(a) declare, set aside, increase or pay any dividend, or
declare or make any distribution on, or directly or indirectly combine, redeem,
reclassify, purchase, or otherwise acquire, any shares of its capital stock or
authorize the creation or issuance of or issue any additional shares of its
capital stock or any securities or obligations convertible into or exchangeable
for its capital stock, provided that this subparagraph shall not apply to
prevent (i) Bank from paying its regular quarterly cash dividend of $0.175 per
share or (ii) the issuance of shares of Bank Common Stock pursuant to the
exercise of Bank Options outstanding as of the date of this Agreement to
purchase Bank Common Stock;
(b) amend its charter or bylaws or adopt or amend any
resolution or agreement concerning indemnification of its directors or officers;
(c) enter into or modify any agreement so as to require the
payment, conditionally or otherwise, of any salary, bonus, extra compensation,
pension or severance payment to any of its present or former directors, officers
or employees except such agreements as are terminable at will without any
penalty or other payment by it, or increase by more than 5% the compensation
(including salaries, fees, bonuses, profit sharing, incentive, pension,
retirement or other similar benefits and payments) of any such person whose
annual compensation would, following such increase, exceed $50,000 (provided,
however, that Bank may, in a manner consistent with past practices and with
pooling of interests accounting treatment for the Merger, (i) increase its
corporate 401(k) contribution for 1997 in an amount not to exceed in the
aggregate more than $20,000 more than the Bank's total contribution to such plan
for 1996 and (ii) may increase by no more than $50,000 in the aggregate bonus
payments to employees having base salaries of $50,000 or more), or increase any
such compensation in any manner inconsistent with its past practices;
(d) except as described in the Schedule of Exceptions or
except in the ordinary course of business consistent with past practices, place
or suffer to exist on any of its assets or properties any mortgage, pledge,
lien, charge or other encumbrance, except those of the character described in
Section 3.10 hereof, or cancel any material indebtedness owed to it or any
claims which it may have possessed, or waive any right of substantial value or
discharge or satisfy any material noncurrent liability;
(e) acquire another business or merge or consolidate with
another entity, or sell or otherwise dispose of a material part of its assets,
except in the ordinary course of business consistent with past practices or as
described in the Schedule of Exceptions;
(f) commit or omit to do any act which act or omission would
cause a breach of any covenant of Bank contained in this Agreement or would
cause any representation or warranty of Bank contained in this Agreement to
become untrue, as if each such representation and warranty were continuously
made from and after the date hereof;
(g) commit or fail to take any act which act or omission is
intended or reasonably may be expected to result in a material breach or
violation of any applicable law, statute, rule, governmental regulation or
order;
(h) fail to maintain its books, accounts and records in the
usual manner on a basis consistent with that heretofore employed;
(i) fail to pay, or to make adequate provision in all material
respects for the payment of, all taxes, interest payments and penalties due and
payable (for all periods up to the Effective Date, including that portion of its
fiscal year to and including the Effective Date) to any city, parish, state, the
United States or any other taxing authority,
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except those being contested in good faith by appropriate proceedings and for
which sufficient reserves have been established;
(j) dispose of investment securities, except in a manner
consistent with past practice, but in no event having an aggregate market value
greater than 5% of the aggregate book value of its investment securities
portfolio on the date of the Latest Balance Sheet or make investments in
non-investment grade securities or which are inconsistent with past investment
practices;
(k) enter into any new line of non-banking business;
(l) (i) except as described in the Schedule of Exceptions,
charge off (except as may otherwise be required by law or by regulatory
authorities or by GAAP consistently applied) or sell (except for a price not
materially less than the value thereof) any of its portfolio of loans, discounts
or financing leases, or (ii) except as set forth on the Schedule of Exceptions,
sell any asset held as other real estate or other foreclosed assets for an
amount materially less than its book value at the date of the Latest Balance
Sheet;
(m) make any extension of credit which, when added to all
other extensions of credit to a borrower and its affiliates, would exceed Bank's
applicable regulatory lending limits;
(n) take or cause to be taken any action which would
disqualify the Merger as a "pooling of interests" for accounting purposes or as
a "reorganization" within the meaning of Section 368(a) of the Code; or
(o) agree or commit to do any of the foregoing.
5.08. Additional Information. Bank will provide Whitney with prompt
written notice of the occurrence of any event which would have, or which could
reasonably be expected to result in, a Material Adverse Effect on Bank, or any
material action taken or proposed to be taken by any regulatory agency with
respect to Bank. Bank will provide Whitney and WNB and Whitney and WNB will
provide Bank with (a) prompt written notice of any material breach by such party
of any of its warranties, representations or covenants in this Agreement, (b) as
soon as they become available, copies of any financial statements, reports and
other documents of the type referred to in Sections 3.04 and 3.07 as to Bank and
subsection 4.04(a) and Section 4.06 as to Whitney, and (c) promptly upon its
dissemination, any report disseminated to their respective shareholders.
5.09. Bank Shareholder Approval. Bank's Board of Directors shall submit
this Agreement and the Merger Agreement to its shareholders for approval in
accordance with applicable law, together with its recommendation that such
approval be given, at a special or regular meeting of the shareholders of Bank
duly called and convened for that purpose as soon as practicable after the
effective date of the Registration Statement and clearance of the Proxy
Statement. The foregoing obligations of Bank and its Board of Directors
specified in this Section 5.09 are subject to the proviso in the last sentence
of Section 5.12.
5.10. Restricted Whitney Common Stock. Bank will use its best efforts
to obtain no later than twenty (20) days after the execution of this Agreement
an agreement from each person who is a director or executive officer of Bank or
10% beneficial owner of securities of Bank who will receive shares of Whitney
Common Stock by virtue of the Merger to the effect that such person (i) will not
dispose of any Whitney Common Stock received pursuant to the Merger in violation
of Rule 145 of the Securities Act or the rules and regulations of the SEC
thereunder or in a manner that would disqualify the transactions contemplated
hereby from pooling of interests accounting or tax-free reorganization
treatment, (ii) will agree to escrow all shares of Whitney Common Stock received
pursuant to the Merger until Whitney has made a public announcement of the
financial results of at least 30 days of post-Merger combined operations
following the Effective Date and (iii) in the case of directors and executive
officers (subject only to any fiduciary obligation that such individuals may
have to persons other than Bank or their respective shareholders), will agree to
vote all shares as to which they have or share voting power in favor of this
Agreement and the Merger (the "Shareholder's Commitment").
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5.11. Loan Policy. Bank will not make any loans, or enter into any
commitments to make loans, which vary materially from its written loan policies,
a true and correct copy of which loan policies will be provided to Whitney
concurrently with Bank's Schedule of Exceptions, provided that this covenant
shall not prohibit Bank from extending or renewing credit or loans in the
ordinary course of business consistent with past lending practices or in
connection with the workout or renegotiation of loans in its loan portfolio.
5.12. No Solicitations. Prior to the Effective Time or until the
termination of this Agreement, Bank shall not, without the prior approval of
Whitney, directly or indirectly, solicit or initiate inquiries or proposals with
respect to, or, except to the extent determined by the Board of Directors of
Bank in good faith, after consultation with its financial advisors and its legal
counsel, to be required to discharge properly the directors' fiduciary duties to
Bank's shareholders, furnish any information relating to, or participate in any
negotiations or discussions concerning, any Acquisition Transaction (as defined
in Section 7.01) or any other acquisition or purchase of all or a substantial
portion of its assets, or of a substantial equity interest in it or withdraw its
recommendation to the shareholders of Bank of the Merger or make a
recommendation of any Acquisition Transaction, or any other business combination
with it, other than as contemplated by this Agreement (and in no event will any
such information be supplied except pursuant to a confidentiality agreement in
form and substance as to confidentiality substantially the same as the
confidentiality agreement between Bank and Whitney); and Bank shall instruct its
officers, directors, agents and affiliates to refrain from doing any of the
above, and will notify Whitney immediately if any such inquiries or proposals
are received by it, any such information is requested from it, or any such
negotiations or discussions are sought to be initiated with it or any of its
officers, directors, agents and affiliates; provided, however, that nothing
contained herein shall be deemed to prohibit any officer or director of Bank
from taking any action that the Board of Directors of Bank determines, in good
faith after consultation with and receipt of written advice from counsel, is
required by law or is required to discharge his fiduciary duties to Bank's
shareholders.
5.13. Operating Functions. Bank agrees to cooperate in the
consolidation of appropriate operating functions with Whitney to be effective on
the Effective Date, provided that the foregoing shall not be deemed to require
any action that, in the opinion of Bank's Board of Directors, would adversely
affect its operations if the Merger was not consummated.
5.14. Whitney Registration Statement. (a) Whitney will prepare and file
on Form S-4 a registration statement (the "Registration Statement") under the
Securities Act (which will include the Proxy Statement) complying with all the
requirements of the Securities Act applicable thereto, for the purpose, among
other things, of registering the Whitney Common Stock which will be issued to
the holders of Bank Common Stock pursuant to the Merger. Whitney shall use its
best efforts to cause the Registration Statement to become effective as soon as
practicable, to qualify the Whitney Common Stock under the securities or blue
sky laws of such jurisdictions as may be required and to keep the Registration
Statement and such qualifications current and in effect for so long as is
necessary to consummate the transactions contemplated hereby. Bank shall file
the Proxy Statement with the OTS concurrently with Whitney's filing of the
Registration Statement and shall use its best efforts to obtain OTS clearance
thereof as soon as practicable. As a result of the registration of the Whitney
Common Stock pursuant to the Registration Statement, such stock shall be freely
tradeable by the shareholders of Bank except to the extent that the transfer of
any shares of Whitney Common Stock received by shareholders of Bank is subject
to the provisions of Rule 145 under the Securities Act or restricted under
applicable tax or pooling of interests rules.
(b) Whitney will indemnify and hold harmless Bank and its
directors, officers and other persons, if any, who control Bank within the
meaning of the Securities Act from and against any losses, claims, damages,
liabilities or judgments, joint or several, to which they or any of them may
become subject, insofar as such losses, claims, damages, liabilities, or
judgments (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement or the Proxy Statement, or in any amendment or supplement
thereto, or in any state application for qualification, permit, exemption or
registration as a broker/dealer, or in any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse each such person for any
legal or other expenses reasonably incurred by such person in connection with
investigating or defending any such action or claim; provided, however, that
Whitney shall not be liable, in any such case, to the extent that any such loss,
claim, damage, liability, or judgment (or action in respect
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thereof) arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in the Registration Statement or
the Proxy Statement, or any such amendment or supplement thereto, or in any such
state application, or in any amendment or supplement thereto, in reliance upon
and in conformity with information furnished to Whitney by or on behalf of Bank
or any officer, director or affiliate of Bank for use therein.
(c) Promptly after receipt by an indemnified party under
subparagraph (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against
Whitney under such subparagraph, notify Whitney in writing of the commencement
thereof. In case any such action shall be brought against any indemnified party
and it shall notify Whitney of the commencement thereof, Whitney shall be
entitled to participate therein and, to the extent that it shall wish, to assume
the defense thereof, with counsel reasonably satisfactory to such indemnified
party, and, after notice from Whitney to such indemnified party of its election
so to assume the defense thereof, Whitney shall not be liable to such
indemnified party under such subparagraph for any legal expenses of other
counsel or any other expenses subsequently incurred by such indemnified party;
provided, however, if Whitney elects not to assume such defense or if counsel
for the indemnified party advises Whitney in writing that there are material
substantive issues which raise conflicts of interest between Whitney or Bank and
the indemnified party, such indemnified party may retain counsel satisfactory to
it and Whitney shall pay all reasonable fees and expenses of such counsel for
the indemnified party promptly as statements therefor are received.
Notwithstanding the foregoing, Whitney shall not be obligated to pay the fees
and expenses of more than one counsel for all parties indemnified by Whitney in
respect of such claim unless in the reasonable judgment of any such indemnified
party a conflict of interest exists between such indemnified party and any other
of such indemnified parties in respect to such claims.
(d) The provisions of subsections 5.14(b) and (c) are intended
for the benefit of, and shall be enforceable by, the parties entitled to
indemnification thereunder and each such party's heirs, representatives or
successors.
5.15. Application to Regulatory Authorities. Whitney shall prepare, as
promptly as practicable, all regulatory applications and filings which are
required to be made with respect to the Merger.
5.16. Revenue Ruling. Whitney may elect to prepare (and in that event
Bank shall cooperate in the preparation of) a request for a ruling from the
Internal Revenue Service with respect to certain tax matters in connection with
the transactions contemplated by this Agreement and the Merger Agreement.
5.17. Bond for Lost Certificates. Upon receipt of notice from any of
its shareholders that a certificate representing Bank Common Stock has been lost
or destroyed and prior to issuing a new certificate, Bank shall require such
shareholder to post a bond in such amount as is sufficient to support the
shareholder's agreement to indemnify Bank against any claim made by the owner of
such certificate, unless Whitney agrees to the waiver of such bond requirement.
5.18. Dissenters. Bank shall give Whitney (i) prompt written notice of,
and a copy of, any instrument received by Bank with respect to any Bank
shareholder's attempted assertion of dissenters rights, and (ii) the opportunity
to participate in all communications with respect thereto, should Whitney desire
to do so.
5.19. Withholding. Whitney shall be entitled to deduct and withhold
from the consideration otherwise payable to any holder of Bank Common Stock
after the Effective Time such amounts as Whitney may be required by law to
deduct and withhold therefrom. All such deductions and withholdings shall be
deemed for all purposes of this Agreement and the Merger Agreement to have been
paid to the person with respect to whom such deduction and withholding was made.
5.20. Nasdaq Stock Market. Whitney shall cause the shares of Whitney
Common Stock to be issued in the Merger to be duly authorized, validly issued,
fully paid and non-assessable, free of any preemptive or similar right and to be
approved for quotation on the Nasdaq Stock Market National Market System prior
to or at the Effective Time.
5.21. Stock Options. (a) On the Effective Date, each Bank Option which
is then outstanding, whether or not exercisable, shall cease to represent a
right to acquire shares of Bank Common Stock and shall be converted
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automatically into an option to purchase shares of Whitney Common Stock, and
Whitney shall assume each Bank Option, in accordance with the terms of the
applicable Bank Option Plan and stock option agreement by which it is evidenced,
except that from and after the Effective Date, (i) Whitney and its Board of
Directors or a duly authorized committee thereof shall be substituted for Bank
and Bank's Board of Directors or duly authorized committee thereof administering
such Bank Option Plan, (ii) each Bank Option assumed by Whitney may be exercised
solely for shares of Whitney Common Stock, (iii) the number of shares of Whitney
Common Stock subject to such Bank Option shall be equal to the number of shares
of Bank Common Stock subject to such Bank Option immediately prior to the
Effective Date multiplied by the Exchange Ratio, provided that any fractional
shares of Whitney Common Stock resulting from such multiplication shall be
rounded down to the nearest share, and (iv) the per share exercise price under
each such Bank Option shall be adjusted by dividing the per share exercise price
under each such Bank Option by the Exchange Ratio, provided that such exercise
price shall be rounded up to the nearest cent. Notwithstanding clauses (iii) and
(iv) of the preceding sentence, each Bank Option which is an "incentive stock
option" shall be adjusted as required by Section 424 of the 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
Code. Whitney and Bank agree to take all necessary steps to effect the foregoing
provisions of this subsection 5.21(a).
(b) As soon as practicable after the Effective Date, Whitney
shall deliver to each participant in each Bank Option Plan an appropriate notice
setting forth such participant's rights pursuant thereto and the grants subject
to such Bank Option Plan shall continue in effect on the same terms and
conditions, including without limitation the duration thereof, subject to the
adjustments required by subsection 5.21(a) hereof after giving effect to the
Merger. As soon as practicable after the Effective Date, Whitney shall file a
registration statement on Form S-3 or Form S-8, as the case may be (or any
successor or other appropriate forms), with respect to the shares of Whitney
Common Stock subject to such options and shall use its reasonable best efforts
to maintain the current status of the prospectus or prospectuses contained
therein for so long as such options remain outstanding.
5.22. Continuing Indemnity; Insurance. Whitney covenants and agrees
that:
(a) All rights to indemnification (including, without
limitation, rights to mandatory advancement of expenses) and all limitations of
liability existing in favor of indemnified parties under Bank's charter, bylaws
and indemnification plan as in effect as of the date of this Agreement (true and
complete copies of which have been provided to Whitney) and under applicable
federal law with respect to matters occurring prior to or at the Effective Time
(an "Indemnified Party") shall survive the Merger and shall continue in full
force and effect, without any amendment thereto, for a period concurrent with
the applicable statute of limitations; provided, however, that all rights to
indemnification in respect of any claim asserted or made as to which Whitney is
notified in writing within such period shall continue until the final
disposition of such claim.
(b) Promptly after receipt by an Indemnified Party of notice
of the commencement of any action, such Indemnified Party shall, if a claim in
respect thereof is to be made against Whitney under this Section 5.22, notify
Whitney in writing of the commencement thereof. In case any such action shall be
brought against any Indemnified Party, Whitney shall be entitled to participate
therein and, to the extent that it shall wish, to assume the defense thereof,
with counsel reasonably satisfactory to such Indemnified Party, and, after
notice from Whitney to such Indemnified Party of its election so to assume the
defense thereof, Whitney shall not be liable to such Indemnified Party under
such subparagraph for any legal expenses of other counsel or any other expenses
subsequently incurred by such Indemnified Party; provided, however, if Whitney
elects not to assume such defense or if counsel for the Indemnified Party
advises Whitney in writing that there are material substantive issues which
raise conflicts of interest between Whitney or Bank and the Indemnified Party,
such Indemnified Party may retain counsel satisfactory to it, and Whitney shall
pay all reasonable fees and expenses of such counsel for the Indemnified Party
promptly as statements therefor are received. Notwithstanding the foregoing,
Whitney shall not be obligated to pay the fees and expenses of more than one
counsel for all Indemnified Parties in respect of such claim unless in the
reasonable judgment of an Indemnified Party a conflict of interest exists
between an Indemnified Party and any other Indemnified Parties in respect to
such claims.
(c) Whitney shall use best efforts to cause the persons
serving as officers or directors of Bank immediately prior to the Effective Time
to be covered for a period of three (3) years from the Effective Time by the
directors' and officers' liability insurance policy maintained by Bank with
respect to acts or omissions occurring prior
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to or at the Effective Time which were committed by such officers and directors
in their capacity as such; provided that Whitney may substitute therefor
policies of at least the same coverage and amounts containing terms and
conditions which are no less advantageous to such directors and officers, and,
provided further that Whitney shall not be obligated to obtain such insurance if
the aggregate premium therefor exceeds $26,250 (150% of the most current annual
premium paid by Bank for its directors and officers liability insurance).
(d) If Whitney or any of its successors or assigns (i) shall
consolidate with or merge into any corporation or entity and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) shall transfer all or substantially all of its properties and assets to any
individual, corporation or other entity, then and in each such case, proper
provisions shall be made so that the successors and assigns of Whitney shall
assume the obligations set forth in this Section 5.22.
(e) The provisions of this Section 5.22 are intended to be for
the benefit of, and shall be enforceable by, each Indemnified Party and his or
her heirs and representatives.
5.23. Employees and Certain Other Matters. (a) All employees of Bank at
the Effective Time shall become or remain employees of WNB. Whitney and WNB
reserve the right to terminate any such employee, and to modify the job duties,
compensation and authority of such employee. At the Effective Time, all persons
then employed by Bank shall be eligible for such employee benefits as are
generally available to employees of WNB having like tenure, officer status and
compensation levels except (i) all executive and senior level management
bonuses, stock options, restricted stock and similar benefits shall be at the
discretion of WNB's Compensation Committee and (ii) all Bank employees who are
employed at the Effective Time shall be given full credit for all prior service
as employees of Bank provided, however, that all such employees shall be treated
as newly hired WNB employees (i.e., prior service credit with Bank shall not be
considered in determining future benefits under Whitney's or WNB's defined
benefit pension plan) for all purposes of Whitney's or WNB's defined benefit
pension plan.
(b) Bank shall assign to Whitney at Closing the "Employment
Agreements" between Bank and Lee J. Guarisco, William J. Barbera, Stephen R.
Berthelot, Michael D. Templet and Jo Anne R. Bergeron (the "Covered Employees"),
dated as of September 30, 1993 or September 30, 1997, as the case may be, true
and complete copies of which have been delivered to Whitney prior to the
execution of this Agreement (the "Change in Control Agreements"), which
assignment shall be effective at the Effective Time. At the Effective Time
Whitney shall assume the obligations of Bank under the Change in Control
Agreements in accordance with Section 9 thereof. Upon Whitney's assumption of
the Change in Control Agreements, the Date of Termination as defined in Section
1(d) of the Change in Control Agreements shall be deemed the Effective Date and
the benefits payable under the Change in Control Agreements shall be payable in
monthly installments commencing on the first business day of the month following
the Date of Termination as provided in Section 5(b) of the Change in Control
Agreements. At Closing each of the Covered Employees shall deliver to Whitney a
letter agreement agreeing to the termination of the Change in Control Agreements
and releasing Whitney from any obligations thereunder other than payment of the
change in control payments described above and calculated by Whitney in
accordance with the terms of the Change in Control Agreements.
5.24. Undertaking to File Reports and Cooperate in Rule 144
Transactions. Whitney covenants to use its best efforts to file in a timely
manner all material required to be filed pursuant to Section 13, 14 or 15(d) of
the Exchange Act, or the rules and regulations promulgated thereunder, so as to
continue the availability of Rule 144 for resales by affiliates of Bank of the
shares of Whitney Common Stock received by them in the Merger. In the event of
any proposed sale of such Whitney Common Stock by any such former shareholder of
Bank Common Stock who receives shares of Whitney Common Stock by reason of the
Merger, Whitney covenants to use its best efforts to cooperate with such
shareholder so as to enable such sale to be made in accordance with the
requirements of Whitney's transfer agents and the reasonable requirements of the
broker through which such sale is proposed to be executed. Without limiting the
generality of the foregoing, Whitney agrees to furnish, upon request and at its
expense, to the extent it is able, with respect to each such sale a written
statement certifying that Whitney has filed all reports required to be filed by
it under the Exchange Act for a period of at least one year preceding the sale
of the proposed sale, and, in addition, has filed the most recent annual report
required to be filed by it thereunder. Notwithstanding anything contained in
this Section 5.24, Whitney shall not be required to maintain the registration of
the Whitney Common Stock
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under Section 12 of the Exchange Act if it shall at any time be entitled to
deregister those shares pursuant to the Exchange Act and the rules and
regulations thereunder.
5.25. Whitney Conduct of Business. From the date hereof through the
Closing, without the prior written consent of the chief executive officer of
Bank or his duly authorized designee, Whitney shall not take or cause to be
taken any action that would disqualify the Merger as a "pooling of interests"
for accounting purposes or as a "reorganization" within the meaning of Section
368(a) of the Code.
Section 6. Conditions of Closing
6.01. Conditions of All Parties. The obligations of each of the parties
hereto to consummate the Merger are subject to the satisfaction of the following
conditions at or prior to the Closing:
(a) Shareholder Approval. This Agreement and the Merger
Agreement shall have been duly approved by the shareholders of WNB and Bank.
(b) Effective Registration Statement and Cleared Proxy
Statement. The Registration Statement shall have become effective and the Proxy
Statement shall have been cleared prior to the mailing of the Proxy Statement,
no stop order suspending the effectiveness of the Registration Statement shall
have been issued, and no proceedings for that purpose shall have been instituted
or, to the knowledge of any party, shall be contemplated, and Whitney shall have
received all state securities laws permits and authorizations necessary to
consummate the transactions contemplated hereby.
(c) No Restraining Action. No action or proceeding shall have
been threatened or instituted before a court or other governmental body to
restrain or prohibit the transactions contemplated by this Agreement or the
Merger Agreement or to obtain damages or other relief in connection with the
execution of such agreements or the consummation of the transactions
contemplated hereby or thereby; and no governmental agency shall have given
notice to any party hereto to the effect that consummation of the transactions
contemplated by this Agreement or the Merger Agreement would constitute a
violation of any law or that it intends to commence proceedings to restrain
consummation of the Merger.
(d) Statutory Requirements and Regulatory Approval. All
statutory requirements for the valid consummation of the transactions
contemplated by this Agreement and the Merger Agreement (including without
limitation the satisfaction of all notice requirements set forth in 12 C.F.R.
563.22(b)) shall have been fulfilled; all appropriate orders, consents and
approvals from all regulatory agencies and other governmental authorities whose
order, consent or approval is required by law for the consummation of the
transactions contemplated by this Agreement and the Merger Agreement shall have
been received; and the terms of all requisite orders, consents and approvals
shall then permit the effectuation of the Merger without imposing any material
conditions with respect thereto except for any such conditions that are
reasonably acceptable to Whitney in good faith.
(e) Tax Opinion. Whitney and Bank shall have received the
opinion of Arthur Andersen LLP, dated as of the Closing Date, in form and
substance reasonably satisfactory to both of them, as to certain tax aspects of
the Merger, including an opinion that the receipt of Whitney Common Stock by
Bank's shareholders will not be a taxable event to such shareholders.
6.02. Additional Conditions of Whitney and WNB. The obligations of
Whitney and WNB to consummate the Merger are also subject to the satisfaction of
the following additional conditions at or prior to the Closing:
(a) Representations, Warranties and Covenants. The
representations and warranties of Bank contained in this Agreement shall be true
and correct, individually and in the aggregate, on and as of the Closing Date,
with the same effect as though made on and as of such date, except to the extent
of changes permitted by the terms of this Agreement, except as to any
representation or warranty which specifically relates to an earlier date (which
must be true and correct as of such earlier date), and except for breaches of
representations or warranties (other than the representations and warranties
contained in Sections 3.02 and 3.03) which, individually or in the aggregate,
would not
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have a Material Adverse Effect on Bank. Bank shall have in all material respects
performed all obligations and complied with all covenants required by this
Agreement and the Merger Agreement to be performed or complied with by it at or
prior to the Closing. In addition, Bank shall have delivered to Whitney and WNB
its certificate, dated as of the Closing Date and signed by its chief executive
officer and chief financial officer, to the foregoing effect and to the effect
that, except as specified in such certificate, such persons do not know, and
have no reasonable grounds to know, of any material failure or breach of any
representation, warranty or covenant made by Bank in this Agreement.
(b) No Material Adverse Change. There shall not have occurred
from the date of the Latest Balance Sheet to the Closing Date any event or
occurrence that has resulted in, or that could reasonably be expected to result
in, a Material Adverse Effect on Bank.
(c) Accountants' Letters. Whitney shall have received
"comfort" letters from KPMG Peat Marwick LLP, independent public accountants for
Bank, dated, respectively, within three (3) days prior to the date of the Proxy
Statement and within three (3) days prior to the Closing Date, in customary form
for transactions of this sort and in substance satisfactory to Whitney.
(d) Opinion of Counsel. Whitney shall have received from
Elias, Matz, Tiernan & Herrick L.L.P., counsel to Bank, an opinion, dated as of
the Closing Date, customary in scope and in form and substance satisfactory to
Whitney. In giving such opinions, such counsel may rely as to questions of fact
upon certificates of one or more officers of Bank and governmental officials.
(e) Tax Consequences of Merger. Whitney shall have received
satisfactory assurances from its independent accountants that the consummation
of the Merger will not be a taxable event to Whitney or WNB.
(f) Pooling of Interest. Prior to the expiration of the Review
Period and within three (3) days prior to the Closing Date, KPMG Peat Marwick
LLP shall have rendered an opinion to Whitney, in form and substance
satisfactory to Whitney, to the effect that, based upon the facts and
circumstances then known to KPMG Peat Marwick LLP, Whitney will be permitted to
account for the Merger as a pooling of interests. Neither Whitney's independent
accountants nor the SEC shall have taken the position that the transactions
contemplated by this Agreement and the Merger Agreement do not qualify for
pooling of interests accounting treatment.
(g) Shareholder's Commitment. A Shareholder's Commitment
substantially in the form specified on Exhibit 6.02(g) hereto (as contemplated
by Section 5.10) shall have been executed by each person who serves as an
executive officer or director of Bank or who beneficially owns 10% or more of
the Bank Common Stock outstanding; and Whitney shall have received from each
such person a written confirmation dated not earlier than five days prior to the
Closing Date to the effect that each representation made in such person's
Shareholder's Commitment is true and correct as of the date of such confirmation
and that such person has complied with all of his or her covenants therein
through the date of such confirmation; in each case to the extent necessary to
ensure, in the reasonable judgment of Whitney, that the Merger will be accounted
for as a pooling of interests under GAAP and to promote compliance with Rule 145
under the Securities Act.
(h) Termination Letters. A letter agreement in form and
substance satisfactory to Whitney agreeing to the termination of the Change in
Control Agreements and releasing Whitney from any obligations thereunder except
as set forth in subsection 5.23(b) of this Agreement shall have been executed by
each Covered Employee and delivered to Whitney.
(i) Regulatory Action. No adverse regulatory action shall be
pending or threatened against Bank, including (without limitation) any proposed
amendment to any existing agreement, memorandum, letter, order or decree, formal
or informal, between any regulator and Bank, if such action would or could
reasonably be expected to impose any material liability on Whitney or interfere
with the conduct of the businesses of Whitney's consolidated group following the
Merger.
6.03. Additional Conditions of Bank. The obligations of Bank to
consummate the Merger are also subject to the satisfaction of the following
additional conditions at or prior to the Closing:
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(a) Representations, Warranties and Covenants. The
representations and warranties of Whitney and WNB contained in this Agreement
shall be true and correct, individually and in the aggregate, on the Closing
Date, with the same effect as though made on and as of such date, except to the
extent of changes permitted by the terms of this Agreement, except as to any
representation or warranty which specifically relates to an earlier date (which
must be true and correct as of such earlier date), and except for breaches of
representations or warranties (other than the representations and warranties
contained in Sections 4.03 and 4.05) which, individually or in the aggregate,
would not have a material adverse effect on the financial conditions, results of
operations or business of Whitney's consolidated group taken as a whole. Each of
Whitney and WNB shall have in all material respects performed all obligations
and complied with all covenants required by this Agreement and the Merger
Agreement to be performed or complied with by it at or prior to the Closing. In
addition, each of Whitney and WNB shall have delivered to Bank its certificate
dated as of the Closing Date and signed by its chief executive officer and chief
financial officer, to the foregoing effect and to the effect that, except as
specified in such certificate, such persons do not know, and have no reasonable
grounds to know, of any material failure or breach of any representation,
warranty or covenant made by Whitney or WNB in this Agreement.
(b) Opinion of Counsel. Bank shall have received from Milling,
Benson, Woodward, Hillyer, Pierson & Miller, L.L.P., counsel for Whitney and
WNB, an opinion, dated as of the Closing Date, customary in scope and in form
and substance satisfactory to Bank. In giving such opinion, such counsel may
rely as to questions of fact upon certificates of one or more officers of
Whitney or members of Whitney's consolidated group, and governmental officials.
(c) Opinion of Investment Bankers. Bank shall have received
letters from Friedman, Billings, Ramsey & Co., Inc. dated the date of the
mailing of the Proxy Statement to shareholders of Bank and dated the date of the
meeting of the shareholders of Bank, in each case in form and substance
satisfactory to Bank, confirming such financial advisor's prior opinion to the
Board of Directors of Bank to the effect that the consideration to be paid in
the Merger is fair to its shareholders from a financial point of view.
(d) No Material Adverse Change. There shall not have occurred
any material adverse change from the date of Whitney's Latest Balance Sheet to
the Closing Date in the financial condition, results of operations or business
of Whitney's consolidated group taken as a whole.
6.04. Waiver of Conditions. Any condition to a party's obligations
hereunder may be waived by that party, other than the conditions specified in
subparagraphs (a), (b) and (d) of Section 6.01 hereof and the condition
specified in subparagraph (c) of Section 6.03 hereof. The failure to waive any
condition hereunder shall not be deemed a breach of Section 5.02 hereof.
Section 7. Termination
7.01. Termination. This Agreement and the Merger Agreement may be
terminated and the Merger contemplated herein abandoned at any time before the
Effective Time, whether before or after approval by the shareholders of Bank:
(a) Mutual Consent. By the mutual consent of the Boards of
Directors of Whitney and Bank.
(b) Material Breach. By the Board of Directors of either
Whitney or Bank in the event of a material breach by Bank (for a termination by
Whitney) or by either Whitney or WNB (for a termination by Bank), of any
representation or warranty contained in this Agreement or of any covenant
contained in this Agreement, which in either case cannot be, or has not been,
cured within 15 days after written notice of such breach is given to the entity
committing such breach, provided that the right to effect such cure shall not
extend beyond the date set forth in subparagraph (c) below.
(c) Abandonment. By the Board of Directors of either Whitney
or Bank if (i) all conditions to Closing required by Section 6 hereof have not
been met by or waived by Whitney or Bank by August 31, 1998, or (ii) any such
condition cannot be met by August 31, 1998 and has not been waived by each party
in whose favor such condition
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<PAGE>
inures, or (iii) if the Merger has not been consummated by August 31, 1998,
provided that the failure to consummate the transactions contemplated hereby is
not caused by the party electing to terminate pursuant to this clause (iii).
(d) Shareholder Vote. By Whitney or Bank if this Agreement or
the Merger fails to receive the requisite vote at any meeting of Bank
shareholders called for the purpose of voting thereon.
(e) Bank Recommendation. By Whitney if the Board of Directors
of Bank (A) shall withdraw, modify or change its recommendation to its
shareholders of this Agreement or the Merger or shall have resolved to do any of
the foregoing; (B) shall have recommended to the shareholders of Bank (or in the
case of (iii) approved) any of the following (being referred to herein as an
"Acquisition Transaction"): (i) any merger, consolidation, share exchange,
business combination or other similar transaction (other than the transactions
contemplated by this Agreement); (ii) any sale, lease, transfer or other
disposition of all or substantially all of the assets of Bank; or (iii) any
acquisition, by any person or group, of the beneficial ownership of 15% or more
of any class of Bank capital stock; or (C) shall have made any announcement of
any agreement to do any of the foregoing.
(f) Acquisition Transaction. By Bank if Bank receives a bona
fide written offer with respect to an Acquisition Transaction and the Board of
Directors of Bank determines in good faith, after consultation with its
financial advisors and counsel, that such Acquisition Transaction is more
favorable to Bank's shareholders than the transactions contemplated by this
Agreement.
(g) Prior to Notification Date. By Whitney by delivery of a
notice to terminate this Agreement pursuant to Section 5.01.
(h) Regulatory Approval. By Whitney or Bank if any applicable
regulatory authority formally disapproves the transactions contemplated by this
Agreement or approves such transactions in a manner which does not satisfy the
requirements of the last clause of subsection 6.01(d) hereof.
(i) Average Whitney Market Price Below $40.00. By Bank, at any
time during the five-day period following the end of the Pricing Period if both
of the following conditions are satisfied: (i) the Average Whitney Market Price
shall be less than $40.00; and (ii) (A) the quotient obtained by dividing the
Average Whitney Market Price by $50.00 (such number being referred to herein as
the "Whitney Ratio") shall be less than (B) the result obtained by subtracting
0.15 from the quotient obtained by dividing the average of the Index Prices (as
hereinafter defined) during the Pricing Period by the Index Price on the
Starting Date (as hereinafter defined);
subject, however, to the following: If Bank shall elect to terminate this
Agreement pursuant to this subsection 7.01(i), it shall give written notice
thereof to Whitney (provided that such notice of election to terminate may be
withdrawn at any time within the aforementioned five-day period). During the
five-day period commencing with its receipt of such notice, Whitney shall have
the option, in its sole and absolute discretion, to elect to increase the
Exchange Ratio to equal the number (rounded to the nearest thousandth) obtained
by dividing $63.48 by the Average Whitney Market Price (without adjustment for
any postponement of the Closing Date pursuant to this subsection 7.01(i)) and
the Closing Date shall be postponed by the minimum amount of time necessary, if
any, to accommodate Whitney's election of such option (i.e., up to a five-day
period). If Whitney so elects within such five-day period, it shall give prompt
written notice to Bank of such election and the Exchange Ratio, whereupon no
termination shall have occurred pursuant to this subsection 7.01(i) and this
Agreement shall remain in effect in accordance with its terms (except as the
Exchange Ratio shall have been so modified), and any references in this
Agreement to "Exchange Ratio" shall thereafter be deemed to refer to the
Exchange Ratio as adjusted pursuant to this subsection 7.01(i).
For purposes of this Agreement, the following terms shall have
the meanings indicated.
"Index Group" shall mean the bank holding companies listed
below, the common stocks of all of which shall be publicly traded and as to
which there shall not have been, since the Starting Date and the end of the
Pricing Period, any public announcement of a proposal for such company to be
acquired or for such company to acquire another company or companies in
transactions with a value exceeding 25% of the acquiror's market capitalization.
In the event that any such company or companies are removed from the Index
Group, the weights (which have been
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determined based upon the number of shares of outstanding common stock reflected
on the last quarterly report on Form 10-Q for each of the respective companies)
shall be redistributed proportionately for purposes of determining the Index
Price. The bank holding companies and the weights attributed to them are as
follows:
Bank Holding Companies % Weighting
---------------------- -----------
Deposit Guaranty 4.35
Jackson, Mississippi
Hancock 1.73
Gulfport, Mississippi
Trustmark 3.41
Jackson, Mississippi
First American 7.77
Nashville, Tennessee
First Tennessee 10.55
Memphis, Tennessee
Union Planters 11.63
Memphis, Tennessee
AmSouth 11.86
Birmingham, Alabama
Compass 7.11
Birmingham, Alabama
Regions 14.77
Birmingham, Alabama
Southtrust 15.30
Birmingham, Alabama
Hibernia 6.51
New Orleans, Louisiana
First Commercial 5.01
Little Rock, Arkansas
Total 100.00%
========
"Index Price" on a given date shall mean the weighted average
(weighted in accordance with the factors listed above) of the closing sales
prices of the companies composing the Index Group.
"Starting Date" shall mean the first trading day immediately
following the date of the first public announcement of entry into this
Agreement.
If any company belonging to the Index Group declares or
effects a stock dividend, reclassification, recapitalization, split-up,
combination, exchange of shares, or similar transaction between the Starting
Date and the end of the Pricing Period, the prices for the common stock of such
company shall be appropriately adjusted for the purposes of applying any
provision of this subsection 7.01(i) or subsection 7.01(j).
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<PAGE>
(j) Average Whitney Market Price Above $60.00. By Whitney, at
any time during the five-day period following the end of the Pricing Period if
each of the following conditions are satisfied: (i) the Average Whitney Market
Price shall be greater than $60.00; (ii) (A) the quotient obtained by dividing
the Average Whitney Market Price by $50.00 (such number being referred to herein
as the "Whitney Ratio") shall be greater than (B) the result obtained by adding
0.15 to the quotient obtained by dividing the average of the Index Prices during
the Pricing Period by the Index Price on the Starting Date; and (iii) none of
the events specified in subsection 2.01(a)(i)(D) of this Agreement shall have
occurred and be continuing;
subject, however, to the following: If Whitney shall elect to terminate this
Agreement pursuant to this subsection 7.01(j), it shall give written notice
thereof to Bank (provided that such notice of election to terminate may be
withdrawn at any time within the aforementioned five-day period). During the
five-day period commencing with its receipt of such notice, Bank shall have the
option, in its sole and absolute discretion, to elect to have the Exchange Ratio
reduced to equal the number (rounded to the nearest thousandth) obtained by
dividing $81.12 by the Average Whitney Market Price (without adjustment for any
postponement of the Closing Date pursuant to this subsection 7.01(j)) and the
Closing Date shall be postponed by the minimum amount of time necessary, if any,
to accommodate Bank's election of such option (i.e., up to a five-day period).
If Bank so elects within such five-day period, it shall give prompt written
notice to Whitney of such election and the Exchange Ratio, whereupon no
termination shall have occurred pursuant to this subsection 7.01(j) and this
Agreement shall remain in effect in accordance with its terms (except as the
Exchange Ratio shall have been so modified), and any references in this
Agreement to "Exchange Ratio" shall thereafter be deemed to refer to the
Exchange Ratio as adjusted pursuant to this subsection 7.01(j).
(The remainder of this page left blank intentionally.)
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<PAGE>
7.02. Effect of Termination; Survival. Upon termination of this
Agreement pursuant to this Section 7, the Merger Agreement shall also terminate,
and this Agreement and the Merger Agreement shall be void and of no effect, and
there shall be no liability by reason of this Agreement or the Merger Agreement,
or the termination thereof, on the part of any party or their respective
directors, officers, employees, agents or shareholders except for any liability
of a party hereto arising out of (i) an intentional breach of any
representation, warranty or covenant in this Agreement prior to the date of
termination, except if such breach was required by law or by any thrift, bank or
bank holding company regulatory authority or (ii) a breach of any covenant that
survives pursuant to the following sentence. The following provisions shall
survive any termination of this Agreement: the second to last sentence of
subsection 5.01(a); subsections 5.14(b) and (c); Section 7.02; Section 7.03 and
Section 8.
7.03. Termination Fee. If this Agreement is terminated by Whitney or
Bank pursuant to subsection 7.01(e) or subsection 7.01(f), then Bank (or its
successor) shall pay or cause to be paid to Whitney upon demand a termination
payment of $3,000,000, payable in same day funds.
Section 8. Miscellaneous
8.01. Notices. Any notice, communication, request, reply, advice or
disclosure (hereinafter severally and collectively "notice") required or
permitted to be given or made by any party to another in connection with this
Agreement or the Merger Agreement or the transactions herein or therein
contemplated must be in writing and may be given or served by depositing the
same in the United States mail, postage prepaid and registered or certified with
return receipt requested, or by delivering the same to the address of the person
or entity to be notified, or by sending the same by a national commercial
courier service (such as Airborne Express, Federal Express, Emery Air Freight,
Network Courier, Purolator or the like) for next-day delivery provided such
delivery is confirmed in writing by such courier. Notice deposited in the mail
in the manner hereinabove described shall be effective 48 hours after such
deposit, and notice delivered in person or by commercial courier shall be
effective at the time of delivery. A party delivering notice shall endeavor to
obtain a receipt therefor. For purposes of notice, the addresses of the parties
shall, until changed as hereinafter provided, be as follows:
If to Whitney or WNB:
Whitney Holding Corporation
Attention: Mr. William L. Marks
Chairman of the Board and CEO
228 St. Charles Avenue
New Orleans, Louisiana 70130
With copies to:
Whitney National Bank
Legal Department
Attention: Joseph S. Schwertz, Jr.
228 St. Charles Avenue
New Orleans, Louisiana 70130
If to Bank:
Meritrust Federal Savings Bank
Attention: Lee J. Guarisco
Vice Chairman
200 West Second Street
Thibodaux, Louisiana 70303
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<PAGE>
With copies to:
Gerald F. Heupel, Jr., Esq.
Elias, Matz, Tiernan & Herrick L.L.P.
12th Floor
734 15th Street, N.W.
Washington, D.C. 20005
8.02. Waiver. The failure by any party to enforce any of its rights
hereunder shall not be deemed to be a waiver of such rights, unless such waiver
is an express written waiver which has been signed by the waiving party. Waiver
of any one breach shall not be deemed to be a waiver of any other breach of the
same or any other provision hereof.
8.03. Expenses. Except as otherwise provided herein, regardless of
whether the Merger is consummated, all expenses incurred in connection with this
Agreement and the Merger Agreement and the transactions contemplated hereby and
thereby shall be borne by the party incurring them.
8.04. Headings. The headings in this Agreement have been included
solely for reference and shall not be considered in the interpretation or
construction of this Agreement.
8.05. Annexes, Exhibits and Schedules. The annexes, exhibits and
schedules to this Agreement are incorporated herein by this reference and
expressly made a part hereof.
8.06. Integrated Agreement. This Agreement, the Merger Agreement, the
exhibits and schedules hereto and all other documents and instruments delivered
in accordance with the terms hereof constitute the entire understanding and
agreement among the parties hereto with respect to the subject matter hereof,
and there are no agreements, understanding, restrictions, representations or
warranties among the parties other than those set forth herein or therein, all
prior agreements and understandings being superseded hereby.
8.07. Choice of Law. The validity of this Agreement and the Merger
Agreement, the construction of their terms and the determination of the rights
and duties of the parties hereto in accordance therewith shall be governed by
and construed in accordance with the laws of the United States and those of the
State of Louisiana applicable to contracts made and to be performed wholly
within such State.
8.08. Parties in Interest. This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns,
except that this Agreement may not be transferred or assigned by Bank without
the prior written consent of the other parties hereto, including any transfer or
assignment by operation of law. Nothing in this Agreement or the Merger
Agreement is intended or shall be construed to confer upon or to give any person
other than the parties hereto any rights or remedies under or by reason of this
Agreement or the Merger Agreement, except as expressly provided for herein and
therein.
8.09. Amendment. The parties may, by mutual agreement of their
respective Boards of Directors, amend, modify or supplement this Agreement, the
Merger Agreement, or any exhibit or schedule of any of them, in such manner as
may be agreed upon by the parties in writing, at any time before or after
approval of this Agreement and the Merger Agreement and the transactions
contemplated hereby and thereby by the shareholders of the parties hereto. This
Agreement and any exhibit or schedule to this Agreement may be amended at any
time and, as amended, restated by the chief executive officers of the respective
parties (or their respective designees) without the necessity for approval by
their respective Boards of Directors or shareholders, to correct typographical
errors or to change erroneous references or cross references, or in any other
manner which is not material to the substance of the transactions contemplated
hereby.
8.10. Counterparts. This Agreement may be executed by the parties in
any number of counterparts, each of which shall be deemed an original, but all
of which taken together shall constitute one and the same document.
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<PAGE>
8.11. Non-Survival of Representations and Warranties; Covenants. None
of the representations and warranties in this Agreement or in any instrument
delivered pursuant hereto shall survive the Effective Time. Each party hereby
agrees that its sole right and remedy with respect to any breach of a
representation or warranty or covenant by the other party shall be not to close
the transactions described herein if such breach results in the nonsatisfaction
of a condition set forth in Section 6 hereof; provided, however, that the
foregoing shall not be deemed to be a waiver of any claim for an intentional
breach of a representation, warranty or covenant or for fraud except if such
breach is required by law or by any thrift, bank or bank holding company
regulatory authority; it being understood that a disclosure in any closing
certificate provided in accordance with subparagraph (a) of Section 6.02 or
subparagraph (a) of Section 6.03 hereof concerning an inaccuracy of a
representation or warranty shall not of itself be deemed to be an intentional
breach of such representation or warranty. The covenants of the parties set
forth herein shall survive the Effective Time in accordance with their terms
and, in the absence of a specified survival term, for the applicable statute of
limitations.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
WHITNEY HOLDING CORPORATION
BY: /s/ William L. Marks
----------------------------
William L. Marks
ITS: Chairman and CEO
WHITNEY NATIONAL BANK
BY: /s/ William L. Marks
----------------------------
William L. Marks
ITS: Chairman and CEO
MERITRUST FEDERAL SAVINGS BANK
BY: /s/ Lee J. Guarisco
----------------------------
ITS: Vice Chairman
----------------------------
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<PAGE>
Exhibit 1.01(a) to
Agreement and Plan of Merger
AGREEMENT OF MERGER
OF
MERITRUST FEDERAL SAVINGS BANK
INTO
WHITNEY NATIONAL BANK
THIS AGREEMENT OF MERGER (this "Agreement") is made and entered into as
of this _____ day of _______________, 1997, between Meritrust Federal Savings
Bank, a federally chartered stock savings bank, domiciled at Thibodaux,
Louisiana ("Bank"), and Whitney National Bank, a national banking association,
organized under the laws of the United States ("WNB" or the "Receiving
Association").
WHEREAS, as required by law, at least two-thirds of the members of the
respective Boards of Directors of WNB and Bank (collectively called the "Merging
Associations") deem it advisable that Bank be merged with and into WNB (the
"Merger"), as provided in this Agreement and in the Agreement and Plan of Merger
dated November 20, 1997 (the "Plan"), between the Merging Associations and
Whitney Holding Corporation, a Louisiana corporation ("Whitney"), of which WNB
is a wholly-owned subsidiary, which sets forth, among other things, certain
representations, warranties, covenants and conditions relating to the Merger;
and
WHEREAS, as required by law, at least two-thirds of the members of the
respective Boards of Directors of the Merging Associations wish to enter into
this Agreement and submit it to the respective shareholders of the Merging
Associations for approval in the manner required by law and, subject to said
approval and to approval by the Office of the Comptroller of the Currency (the
"OCC") being duly given and to such other approvals as may be required by law,
to effect the Merger, all in accordance with the provisions of this Agreement.
NOW THEREFORE, in consideration of the mutual benefits to be derived
from this Agreement and the Merger, the parties hereto agree as follows:
1. The Merger. At the Effective Time (as defined in Section 2 hereof),
Bank shall be merged with and into WNB under the Articles of Association of WNB,
existing Charter No. 14977, pursuant to the provisions of, and with the effect
provided in, 12 U.S.C. ss.215a and ss.215c, and Whitney National Bank shall be
the resulting institution in such merger. At the Effective Time, WNB, the
Receiving Association, shall continue to be a national banking association, and
its business shall continue to be conducted at its main office in New Orleans,
Louisiana, and at its legally established branches (including, without
limitation, the legally established offices from which Bank conducted business
immediately prior to the Effective Time and any other approved but unopened
branches at the Effective Time). The Articles of Association of WNB shall not be
altered or amended by virtue of the Merger, and the incumbency of the directors
and officers of WNB shall not be affected by the Merger nor shall any person
succeed to such positions by virtue of the Merger.
2. Effective Time. The Merger shall become effective at the close of
business on the date on which this Agreement is executed by the respective
officers of the Merging Associations in the name and on behalf of the Merging
Associations (the "Effective Time").
3.1 Conversion of Capital Stock of Bank. Subject to the provisions of
this Section 3.1, at the Effective Time, by virtue of the Merger and without any
action on the part of the holders thereof, the shares of Bank common stock, par
value $1.00 per share ("Bank Common Stock"), shall be converted as follows:
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<PAGE>
(a) Exchange Ratio. (i) Except for shares of Bank Common Stock
held by Bank as treasury shares (other than in a fiduciary capacity), if any,
which shall by reason of the Merger be canceled ("Treasury Shares"), and subject
to the provisions of Section 3.1(b) relating to fractional shares, each issued
and outstanding share of Bank Common Stock shall be converted into and become
that number of shares of Whitney common stock, no par value ("Whitney Common
Stock"), that is equal to (A) if the Average Whitney Market Price (as
hereinafter defined) is greater than or equal to $46.00 and less than or equal
to $54.00, the quotient (rounded to the nearest thousandth) determined by
dividing (x) $73.00 by (y) the Average Whitney Market Price, (B) if the Average
Whitney Market Price is less than $46.00, 1.587 shares, (C) if the Average
Whitney Market Price is greater than $54.00, 1.352 shares, or (D)
notwithstanding any of the foregoing, if prior to the Effective Date (x) Whitney
issues a press release announcing that it is negotiating or has executed a
letter of intent or definitive merger or other acquisition agreement as a result
of which Whitney will cease to be an independent, publicly traded company and
(y) Whitney has not thereafter issued a press release announcing the termination
of such negotiations, letter of intent or definitive agreement prior to the
Closing, 1.352 shares (the "Exchange Ratio").
(ii) Average Whitney Market Price. The "Average
Whitney Market Price" shall be the average of the closing per share trading
prices of Whitney Common Stock (adjusted appropriately for any stock split,
stock dividend, recapitalization, reclassification or similar transaction which
is effected, or for which a record date occurs) on the twenty (20) trading days
preceding the fifth trading day immediately prior to the Effective Date, as
reported in the Wall Street Journal (corrected for typographical errors).
(b) Fractional Shares. In lieu of the issuance of fractional
shares of Whitney Common Stock, each shareholder of Bank, upon surrender of his
or her certificate that immediately prior to the Effective Time represented Bank
Common Stock, other than Treasury Shares, shall receive a cash payment (without
interest) equal to the fair market value at the Effective Time of any fraction
of a share of Whitney Common Stock to which such holder would be entitled but
for this provision. For purposes of calculating such payment, the fair market
value of a fraction of a share of Whitney Common Stock at the Effective Time
shall be such fraction multiplied by the Average Whitney Market Price.
(c) Exchange of Certificates. After the Effective Time, each
holder of an outstanding certificate or certificates theretofore representing a
share or shares of Bank Common Stock, other than Treasury Shares, upon surrender
thereof to the exchange agent selected by Whitney (the "Exchange Agent"),
together with duly executed transmittal materials provided pursuant to Section
3.1(e) or upon compliance by the holder or holders thereof with the procedures
of the Exchange Agent with respect to lost, stolen or destroyed certificates,
shall be entitled to receive in exchange therefor any payment due in lieu of
fractional shares and a certificate or certificates representing the number of
whole shares of Whitney Common Stock into which such holder's shares of Bank
Common Stock were converted. Until so surrendered, each outstanding Bank stock
certificate shall be deemed for all purposes, other than as provided below with
respect to the payment of dividends or other distributions (if any) in respect
of Whitney Common Stock, to represent the number of whole shares of Whitney
Common Stock into which such holder's shares of Bank Common Stock shall have
been converted. Whitney may, at its option, refuse to pay any dividend or other
distribution to holders of unsurrendered Bank stock certificates until
surrendered; provided, however, that upon the surrender and exchange of any Bank
stock certificates there shall be paid, to the extent not previously paid, to
the record holders of the Whitney stock certificates issued in exchange therefor
the amount, without interest, of accumulated dividends and distributions, if
any, which have become payable with respect to the number of whole shares of
Whitney Common Stock into which the shares of Bank Common Stock theretofore
represented by such certificates shall have been exchanged. The provisions of
this Section 3.1(c) are intended for the benefit of the holders of shares of
Bank Common Stock and shall be enforceable by such holders and each such
holder's heirs, representatives and successors.
(d) Deposit. As of the Effective Time, Whitney shall deposit
or cause to be deposited with the Exchange Agent (i) certificates representing
the shares of Whitney Common Stock and (ii) the cash in lieu of fractional
shares to be issued and paid, as the case may be, in exchange for outstanding
shares of Bank Common Stock pursuant to this Section 3.1.
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<PAGE>
(e) Transmittal Materials. Promptly after the Effective Time,
Whitney shall send or cause to be sent to each former shareholder of record of
Bank at the Effective Time transmittal materials for use in exchanging
certificates of Bank Common Stock for certificates of Whitney Common Stock.
(f) Bank Options. Each Bank Option (as defined in the Plan)
under the Bank Option Plans (as defined in the Plan) that is outstanding at the
Effective Time shall be converted into an option to acquire shares of Whitney
Common Stock in the manner set forth in Section 5.21 of the Plan.
3.2. Closing Transfer Books. At the Effective Time, the stock transfer
books of Bank shall be closed and no transfer of shares of Bank Common Stock
shall be made thereafter.
4. Capital Stock of the Receiving Association. The shares of the
capital stock of WNB, the Receiving Association, issued and outstanding
immediately prior to the Effective Time shall, at the Effective Time, continue
to be issued and outstanding, and no additional shares of WNB shall be issued as
a result of the Merger. Therefore, at the Effective Time, the amount of capital
stock of WNB, the Receiving Association, shall be $3,358,400, divided into
134,336 shares of common stock, par value $25.00 per share.
5. Assets and Liabilities of the Merging Associations. At the Effective
Time, the corporate existence of each of the Merging Associations shall be
merged into and continued in WNB, the Receiving Association, and such Receiving
Association shall be deemed to be the same corporation as each bank, savings
institution or banking association participating in the Merger. All rights,
franchises, and interests of the individual Merging Associations in and to every
type of property (real, personal and mixed) and choses in action shall be
transferred to and vested in the Receiving Association by virtue of the Merger
without any deed or other transfer. The Receiving Association, upon the Merger
and without any order or other action on the part of any court or otherwise,
shall hold and enjoy all rights of property, franchises, and interests,
including appointments, designations, and nominations, and all other rights and
interests as trustee, executor, administrator, registrar of stocks and bonds,
guardian of estates, and in every other fiduciary capacity, in the same manner
and to the same extent as such rights, franchises, and interests were held or
enjoyed by any one of the Merging Associations at the time of the Merger,
subject to the conditions specified in 12 U.S.C. Section 215a(f). The Receiving
Association shall, from and after the Effective Time, be liable for all
liabilities of the Merging Associations.
6. Savings Accounts and Deposits. All savings accounts and deposits of
Bank and WNB shall be and continue to be savings accounts and deposits of the
Receiving Association, without change in their respective terms, maturity,
minimum required balances or withdrawal value. As of the Effective Time, each
savings account or deposit of Bank and WNB shall be considered for interest
purposes as a savings account or deposit of the Receiving Association from the
time said savings account or deposit was opened in Bank and WNB and at all times
thereafter until such account or deposit ceases to be a savings account or
deposit of the Receiving Association.
7. Liquidation Accounts. Any liquidation accounts of Bank shall be
assumed by the Receiving Association at the Effective Time.
8. Shareholder Approval; Conditions; Filing. This Agreement shall be
submitted to the shareholders of the Merging Associations for ratification and
confirmation in accordance with applicable provisions of law. The obligations of
the Merging Associations to effect the Merger shall be subject to all the terms
and conditions of the Plan. If the shareholders of the Merging Associations
ratify and confirm this Agreement, then the fact of such approval shall be
certified hereon by the Secretary of each of the Merging Associations and this
Agreement, so approved and certified, shall, as soon as is practicable, be
signed and acknowledged by the President or Chairman of the Board of each of
them. As soon as may be practicable thereafter, this Agreement, so certified,
signed and acknowledged, shall be delivered to the OCC for filing in the manner
required by law. In no event shall the Merger become effective prior to the
delivery of notification of the Merger to the Office of Thrift Supervision
pursuant to 12 C.F.R. ss.563.22(b).
9. Miscellaneous. This Agreement may, at any time prior to the
Effective Time, be amended or terminated as provided in the Plan. This Agreement
may be executed in counterparts, each of which shall be deemed to constitute an
original. This Agreement shall be governed and interpreted in accordance with
federal law and the applicable laws
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<PAGE>
of the State of Louisiana. This Agreement may be assigned only to the extent
that the party seeking to assign it is permitted to assign its interests in the
Plan, and subject to the same effect as any such assignment. The headings in
this Agreement are inserted for convenience only and are not intended to be a
part of or to affect the meaning or interpretation of this Agreement.
Capitalized terms used herein and not otherwise defined have the meanings given
to them in the Plan.
IN WITNESS WHEREOF, this Agreement has been executed by a majority of
the directors of each of the Merging Associations, as of the day and year first
above written.
[Signature lines omitted]
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<PAGE>
Exhibit 6.02(g) to
Agreement and Plan of Merger
[Letter from directors, executive officers
and 10% beneficial shareholders of Bank]
[date]
Mr. William L. Marks
Chairman and CEO
Whitney Holding Corporation
228 St. Charles Avenue
New Orleans, La. 70130
Dear Mr. Marks:
In consideration of the benefits I will receive as a shareholder of
Meritrust Federal Savings Bank ("Bank") from the Agreement and Plan of Merger
dated __________________, 1997 (the "Agreement") among Bank, Whitney Holding
Corporation ("Whitney") and Whitney National Bank, I agree as follows:
[If a director or executive officer of Bank: I agree to vote all shares
of Bank common stock that I own beneficially or of record in favor of approving
the Agreement and the merger to be effected thereby, unless Whitney is then in
breach or default in any material respect as regards any covenant, agreement,
representation or warranty as to it contained in the Agreement; provided,
however, that nothing in this sentence shall be deemed to require me to vote any
shares of Bank common stock over which I have or share voting power solely in a
fiduciary capacity on behalf of any person other than Bank, if I determine, in
good faith after consultation with and receipt of written advice of counsel,
that such a vote would cause a breach of my fiduciary duties to such other
person.]
I [further] agree that I will not, without the prior consent of
Whitney, transfer any of my shares of Bank common stock within 30 days prior to
the Effective Date, as that term is set forth in the Agreement, except by
operation of law, by will, or under the laws of descent and distribution.
I also acknowledge that Whitney intends to account for the acquisition
of Bank as a pooling of interests. I understand that my transfer of any shares
of Bank common stock within 30 days prior to the Effective Date and any Whitney
common stock that I receive in exchange for Bank common stock, prior to
Whitney's publication of financial results covering at least 30 days of its
combined operations following the Effective Date, may impair this accounting
treatment. Therefore, I agree that, without the prior consent of Whitney, I will
not, except by operation of law, by will, or under the laws of descent and
distribution, sell or otherwise transfer any shares of Bank common stock, (or
the Whitney common stock which I receive in exchange for my Bank common stock)
over which I hold the power to sell, transfer, pledge or otherwise alienate or
encumber during the period commencing 30 days prior to the Effective Date and
ending at such time as:
a. the merger has become effective and Whitney has published
financial results covering at least 30 days of its combined
operations following the Effective Date, or
b. the Agreement terminates.
I authorize Whitney or its authorized agent to hold the certificates
representing the shares of Whitney common stock into which my shares of Bank
common stock will be converted until the date that I am free to trade those
shares in accordance with the foregoing paragraph. I understand that upon my
delivery of certificates to the Exchange Agent in compliance with Section
2.01(c) of the Agreement, I will have the right to vote the Whitney shares
received in
A-35
<PAGE>
exchange therefore and receive dividends in respect thereof during the time that
Whitney or its agent holds the certificates retained by it pursuant to this
letter agreement.
I certify that all of the shares of Bank common stock of which I hold
the power to sell, transfer, pledge or otherwise alienate or encumber are
represented by the following certificates:
Certificate No. No. of shares
I am aware that Whitney intends to structure the acquisition of Bank in
a manner consistent with Section 368 of the Internal Revenue Code. I acknowledge
that applicable tax regulations require "continuity of interest" in order for
the merger to qualify under Section 368. I have no present plan or intention to
dispose of any Whitney common stock that I will receive in the merger to be
effected pursuant to the Agreement.
I also understand the resale or other disposition of Whitney common
stock that I receive may be governed by Rule 145 of the SEC under the Securities
Act of 1933, as amended, which Rule has been explained to me. I agree not to
sell any of the Whitney common stock to be held by me in violation of the
Securities Act of 1933, as amended, or the rules and regulations thereunder.
This letter shall constitute an irrevocable agreement of the
undersigned, and may be revoked only upon the mutual agreement of the parties.
The agreements contained in this letter will terminate upon any termination of
the Agreement under Section 7 of the Agreement.
Sincerely,
[Director, Executive Officer or
10% beneficial shareholder]
A-36
<PAGE>
APPENDIX B
Fairness Opinion of Friedman, Billings, Ramsey & Co., Inc.
<PAGE>
[Letterhead of Friedman, Billings, Ramsey & Co., Inc.]
_______________, 1998
Board of Directors
Meritrust Federal Savings Bank
200 West Second Street
Thibodaux, LA 70301
Board of Directors:
You have requested that Friedman, Billings, Ramsey & Co., Inc. ("FBR"), provide
you with its opinion as to the fairness, from a financial point of view, to
holders of common stock ("Stockholders") of Meritrust Federal Savings Bank
("Meritrust" or the "Company") of the Exchange Ratio (as hereinafter defined) to
be received by such holders pursuant to the Agreement and Plan of Merger between
Meritrust, Whitney Holding Corporation ("WHC") and Whitney National Bank ("WNB"
and collectively with WHC, "Whitney"), dated as of November 20, 1997 (the
"Merger Agreement"), pursuant to which Meritrust will be merged with and into
WNB (the "Merger"). The Merger Agreement provides, among other things, that each
issued and outstanding share of common stock of Meritrust shall be converted
into the right to receive from Whitney shares of Whitney common stock equal to
(a) if the Average Whitney Market Price (defined below) is greater than or equal
to $46.00 and less than or equal to $54.00, the quotient (rounded to the nearest
thousandth) determined by dividing (i) $73.00 by (ii) the Average Whitney Market
Price, (b) if the Average Whitney Market Price is less than $46.00, 1.587
shares, (c) if the Average Whitney Market Price is greater than $54.00, 1.352
shares, or (d) notwithstanding any of the foregoing, if, prior to the effective
date of the Merger, Whitney issues a press release announcing that it is
negotiating or has executed a letter of intent or definitive merger or other
acquisition agreement as a result of which Whitney will cease to be an
independent, publicly traded company and (y) Whitney has not thereafter issued a
press release announcing the termination of such negotiations, letter of intent
or definitive agreement prior to the closing of the transactions contemplated by
the Merger Agreement, 1.352 shares (the "Exchange Ratio"). The Merger Agreement
defines "Average Whitney Market Price" as the average of the closing per share
trading prices of Whitney common stock (adjusted appropriately for any stock
split, stock dividend, recapitalization, reclassification or similar transaction
which is effected, or for which a record date occurs) on the 20 trading days
preceding the fifth trading day immediately prior to the effective date of the
Merger, as reported in the Wall Street Journal (corrected for typographical
errors). Additionally, each option to purchase shares of Meritrust common stock
shall be converted into an option to purchase Whitney common stock, subject to
certain terms and conditions. The Merger Agreement will be considered at a
meeting of the Stockholders of Meritrust. The terms and conditions of the Merger
are more fully set forth in the Merger Agreement.
In delivering this opinion, FBR has completed the following tasks:
1. reviewed Whitney Annual Report to Stockholders for the fiscal year ended
December 31, 1996 and Whitney Annual Reports on Form 10-K filed with the
Securities and Exchange Commission (the "SEC") for the fiscal years ended
December 31, 1994 through 1996;
B-1
<PAGE>
Board of Directors
Meritrust Federal Savings Bank
____________, 1998
Page 2
reviewed Whitney Quarterly Reports on Form 10-Q for the fiscal quarters
ended March 31, 1997, June 30, 1997 and September 30, 1997 filed with the
SEC;
2. reviewed Meritrust Annual Report to Stockholders for the fiscal year ended
December 31, 1996 and Meritrust Annual Report on Form 10-KSB filed with the
Office of Thrift Supervision ("OTS") for the fiscal year ended December 31,
1996; reviewed Meritrust Quarterly Reports on Form 10-QSB for the fiscal
quarters ended March 31, 1997, June 30, 1997 and September 30, 1997 filed
with the OTS;
3. reviewed Meritrust's unaudited financial statements for the ten months ended
October 31, 1997;
4. reviewed the reported market prices and trading activity for the Whitney
common stock for the period January 1994 through November 19, 1997;
5. discussed the financial condition, results of operations, business and
prospects of Meritrust and Whitney with the managements of Meritrust and
Whitney;
6. compared the results of operations and financial condition of Meritrust and
Whitney with those of certain publicly-traded financial institutions (or
their holding companies) that FBR deemed to be reasonably comparable to
Meritrust or Whitney, as the case may be;
7. reviewed the financial terms, to the extent publicly available, of certain
acquisition transactions that FBR deemed to be reasonably comparable to the
Merger;
8. reviewed the financial terms, to the extent publicly available, of certain
acquisition transactions entered into by Whitney;
9. reviewed a copy of the Merger Agreement; and
10. performed such other analyses and reviewed and analyzed such other
information as FBR deemed appropriate.
In rendering this opinion, FBR did not assume responsibility for independently
verifying, and did not independently verify, any financial or other information
concerning Meritrust and Whitney furnished to it by Meritrust or Whitney, or the
publicly-available financial and other information regarding Meritrust, Whitney
and other financial institutions (or their holding companies). FBR has assumed
that all such information is accurate and complete. FBR has further relied on
the assurances of management of Meritrust and Whitney that they are not aware of
any facts that would make such financial or other information relating to such
entities inaccurate or misleading. With respect to financial forecasts for
Meritrust provided to FBR by its management, FBR has assumed, for purposes of
this opinion, that the forecasts have been reasonably prepared on bases
reflecting the best available estimates and judgments of such management at the
time of preparation as to the future financial performance of Meritrust. FBR has
assumed that there has been no material change in Meritrust's assets, financial
condition, result of operations, business or prospects since September 30, 1997.
FBR did not undertake an
B-2
<PAGE>
Board of Directors
Meritrust Federal Savings Bank
____________, 1998
Page 3
independent appraisal of the assets or liabilities of Meritrust nor was FBR
furnished with any such appraisals. FBR is not an expert in the evaluation of
allowances for loan losses, was not requested to and did not review such
allowances, and was not requested to and did not review any individual credit
files of Meritrust. FBR's conclusions and opinion are necessarily based upon
economic, market and other conditions and the information made available to FBR
as of the date of this opinion. FBR expresses no opinion on matters of a legal,
regulatory, tax or accounting nature related to the Merger.
FBR, as part of its institutional brokerage, research and investment banking
practice, is regularly engaged in the valuation of securities and the evaluation
of transactions in connection with mergers and acquisitions of commercial banks,
savings institutions and financial institution holding companies, initial and
secondary offerings, mutual-to-stock conversions of savings institutions, as
well as business valuations for other corporate purposes for financial
institutions and real estate related companies. FBR has experience in, and
knowledge of, the valuation of bank and thrift securities in Louisiana and the
rest of the United States.
FBR has acted as a financial advisor to Meritrust in connection with the Merger
and will receive a fee for services rendered which is contingent upon the
consummation of the Merger. In the ordinary course of FBR's business, it may
effect transactions in the securities of Meritrust or Whitney for its own
account and/or for the accounts of its customers and, accordingly, may at any
time hold long or short positions in such securities. From time to time,
principals and/or employees of FBR may also have positions in the securities.
Based upon and subject to the foregoing, as well as any such other matters as we
consider relevant, it is FBR's opinion, as of the date hereof, that the Exchange
Ratio is fair, from a financial point of view, to the Stockholders of Meritrust.
This letter is solely for the information of the Board of Directors and
Stockholders of Meritrust and may not be relied upon by any other person or used
for any other purpose, reproduced, disseminated, quoted from or referred to
without FBR's prior written consent; provided, however, this letter may be
referred to and reproduced in its entirety in proxy materials sent to the
Stockholders in connection with the solicitation of approval for the Merger.
Very truly yours,
FRIEDMAN, BILLINGS, RAMSEY & CO.,
INC.
B-3
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Section 83 of the Louisiana Business Corporation Law ("LBCL") provides
in part that a corporation may indemnify any director, officer, employee or
agent of the corporation against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with any action, suit or proceeding to which he is or was a
party or is threatened to be made a party (including any action by or in the
right of the corporation), if such action arises out of his acts on behalf of
the corporation and he acted in good faith not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
The indemnification provisions of the LBCL are not exclusive; however,
no corporation may indemnify any person for willful or intentional misconduct. A
corporation has the power to obtain and maintain insurance, or to create a form
of self-insurance on behalf of any person who is or was acting for the
corporation, regardless of whether the corporation has the legal authority to
indemnify the insured person against such liability.
The Articles of Incorporation and By-laws of Whitney Holding
Corporation ("Whitney") provide for indemnification for directors, officers,
employees and agents or former directors, officers, employees and agents of
Whitney to the full extent permitted by Louisiana law.
Whitney maintains an insurance policy covering the liability of its
directors and officers for actions taken in their official capacity.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Securities Act"), may be permitted to directors,
officers and controlling persons of Whitney pursuant to the foregoing provision
or otherwise, Whitney has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable.
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits
The following Exhibits are filed as part of this Registration
Statement:
Exhibit No. Description
2 The Plan of Merger (included in the Registration
Statement as Appendix A and incorporated herein
by reference).
5 Opinion of Milling, Benson, Woodward, Hillyer,
Pierson & Miller, L.L.P.
8 Form of opinion of Arthur Andersen LLP as to
certain tax matters.
23.1 Consent of Arthur Andersen LLP dated February 2,
1998.
23.2 Consent of KPMG Peat Marwick LLP dated January 29,
1998.
23.3 Consent of Friedman, Billings, Ramsey & Co., Inc.
dated January 27, 1998.
II-1
<PAGE>
23.4 Consent of Milling, Benson, Woodward, Hillyer,
Pierson & Miller, L.L.P., included in Exhibit 5.
24 Powers of Attorney of directors of Whitney Holding
Corporation (contained on page S-1 of the
Registration Statement).
99.1 Form of Proxy of the Bank
99.2 The following portions of Meritrust Federal
Savings Bank's annual report to stockholders for
the fiscal year ended December 31, 1996: selected
consolidated financial data (page 5); management's
discussion and analysis of financial condition and
results of operations (pages 6 through 20); and
audited consolidated financial statements and
notes thereto (pages 21 through 44).
(b) Financial Statement Schedules
None
II-2
<PAGE>
Item 22. Undertakings
The undersigned Registrant hereby undertakes as follows:
(1) To respond to requests for information that is incorporated by
reference into the Prospectus pursuant to Items 4, 10(b), 11, or 13 of Form S-4,
within one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of the
Registration Statement through the date of responding to the request.
(2) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the Registration Statement when it became
effective.
(3) That for purposes of determining any liability under the Securities
Act, each filing of the Registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference
in the Registration Statement shall be deemed to be a new registration statement
related to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(4) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the Registrant undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items of
the applicable form.
(5) That every prospectus (i) that is filed pursuant to paragraph (4)
immediately preceding, or (ii) that purports to meet the requirements of Section
10(a)(3) of the Securities Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to the
Registration Statement and will not be used until such amendment is effective,
and that, for purposes of determining any liability under the Securities Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(6) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(7) To deliver or cause to be delivered with the prospectus, to each
person to whom the prospectus is sent or given, the latest annual report to
security holders that is incorporated by reference in the prospectus and
furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3
under the Exchange Act, and to deliver, or cause to be delivered to each person
to whom the prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the prospectus to provide such interim
financial information.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New
Orleans, State of Louisiana, on this 2nd day of February, 1998.
WHITNEY HOLDING CORPORATION
By: /s/ William L. Marks
---------------------------------
William L. Marks
Chairman of the Board
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears immediately below constitutes and appoints R. King Milling and Edward B.
Grimball, and each or any one of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same
with all exhibits thereto, and all other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or his or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ William L. Marks Chairman of the Board February 2, 1998
- -------------------------------------- and Chief Executive Officer
William L. Marks
/s/ R. King Milling Director and President February 2, 1998
- --------------------------------------
R. King Milling
/s/ Edward B. Grimball Executive Vice President and February 2, 1998
- -------------------------------------- Chief Financial Officer
Edward B. Grimball (Principal Financial Officer
and Principal Accounting Officer)
/s/ Guy C. Billups, Jr. Director February 2, 1998
- --------------------------------------
Guy C. Billups, Jr.
/s/ Harry J. Blumenthal, Jr. Director February 2, 1998
- --------------------------------------
Harry J. Blumenthal, Jr.
/s/ Joel B. Bullard, Jr. Director February 2, 1998
- --------------------------------------
Joel B. Bullard, Jr.
</TABLE>
S-1
<PAGE>
<TABLE>
<S> <C> <C>
/s/ James M. Cain Director February 2, 1998
- --------------------------------------
James M. Cain
/s/ Angus R. Cooper, II Director February 2, 1998
- --------------------------------------
Angus R. Cooper, II
/s/ Robert H. Crosby, Jr. Director February 2, 1998
- --------------------------------------
Robert H. Crosby, Jr.
/s/ Richard B. Crowell Director February 2, 1998
- --------------------------------------
Richard B. Crowell
/s/ Camille A. Cutrone Director February 2, 1998
- --------------------------------------
Camille A. Cutrone
/s/ William A. Hines Director February 2, 1998
- --------------------------------------
William A. Hines
/s/ Robert E. Howson Director February 2, 1998
- --------------------------------------
Robert E. Howson
/s/ John J. Kelly Director February 2, 1998
- --------------------------------------
John J. Kelly
/s/ E. James Kock, Jr. Director February 2, 1998
- --------------------------------------
E. James Kock, Jr.
/s/ Alfred S. Lippman Director February 2, 1998
- --------------------------------------
Alfred S. Lippman
/s/ John G. Phillips Director February 2, 1998
- --------------------------------------
John G. Phillips
/s/ John K. Roberts, Jr. Director February 2, 1998
- --------------------------------------
John K. Roberts, Jr.
/s/ W. P. Snyder III Director February 2, 1998
- --------------------------------------
W. P. Snyder III
/s/ Carroll W. Suggs Director February 2, 1998
- --------------------------------------
Carroll W. Suggs
/s/ Warren K. Watters Director February 2, 1998
- --------------------------------------
Warren K. Watters
</TABLE>
S-2
<PAGE>
EXHIBIT INDEX
Sequentially
Exhibit Numbered
Number Description Page
2 The Plan of Merger (included in the Registration Statement
as Appendix A and incorporated herein by reference).
5 Opinion of Milling, Benson, Woodward, Hillyer, Pierson &
Miller, L.L.P.
8 Form of opinion of Arthur Andersen LLP as to certain tax
matters.
23.1 Consent of Arthur Andersen LLP dated February 2, 1998.
23.2 Consent of KPMG Peat Marwick LLP dated January 29, 1998.
23.3 Consent of Friedman, Billings, Ramsey & Co., Inc. dated
January 27, 1998.
23.4 Consent of Milling, Benson, Woodward, Hillyer, Pierson &
Miller, L.L.P., included in Exhibit 5.
24 Powers of Attorney of directors of Whitney Holding
Corporation (contained on page S-1 of the Registration
Statement).
99.1 Form of Proxy of the Bank
99.2 The following portions of Meritrust Federal Savings Bank's
annual report to stockholders for the fiscal year ended
December 31, 1996: selected consolidated financial data
(page 5); management's discussion and analysis of financial
condition and results of operations (pages 6 through 20); and
audited consolidated financial statements and notes thereto
(pages 21 through 44).
<PAGE>
EXHIBIT 5
[MILLING, BENSON, WOODWARD, HILLYER,
PIERSON & MILLER, L.L.P. LETTERHEAD]
February 2, 1998
Whitney Holding Corporation
228 St. Charles Avenue
New Orleans, LA 70130
Re: Meritrust Federal Savings Bank
Registration Statement on Form S-4
Gentlemen:
We have acted as special counsel to Whitney Holding Corporation (the
"Company") in connection with the preparation of that certain Registration
Statement on Form S-4 (the "Registration Statement") filed by the Company on the
date hereof with the Securities and Exchange Commission (the "Commission") for
registration under the Securities Act of 1933, as amended (the "Securities
Act"), of up to 1,338,120 shares of the Company's common stock, no par value
(the "Shares"), to be exchanged for all of the outstanding shares of common
stock of Meritrust Federal Savings Bank ("Meritrust") pursuant to that certain
Agreement and Plan of Merger dated November 20, 1997 between the Company and
Whitney National Bank ("WNB"), on the one hand, and Meritrust, on the other
hand, and the related Agreement of Merger between Meritrust and WNB
(collectively, the "Plan of Merger").
In so acting, we have examined originals, or photostatic or certified
copies, of the Plan of Merger, such records of the Company, certificates of
officers of the Company and of public officials, and such other documents as we
have deemed relevant. In such examination, we have assumed the genuineness of
all signatures, the authenticity of all documents submitted to us as originals,
and the conformity to original documents of all documents submitted to us as
certified or photostatic copies and the authenticity of the originals of such
documents.
Based upon the foregoing, we are of the opinion that:
(1) The Company is a corporation duly incorporated and validly existing
in good standing under the laws of the State of Louisiana.
<PAGE>
February 2, 1998
Page 2
(2) The Shares are duly authorized and, when issued by the Company in
accordance with the terms of the Plan of Merger, will be validly issued, fully
paid and nonassessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us in the prospectus forming a
part thereof under the caption "Legal Matters." In giving this consent, we do
not admit that we are within the category of persons whose consent is required
under Section 7 of the Securities Act or the general rules and regulations of
the Commission.
Very truly yours,
/s/
MILLING, BENSON, WOODWARD,
HILLYER, PIERSON & MILLER, L.L.P.
<PAGE>
EXHIBIT 8
DRAFT
BY HAND
- -------
Whitney Holding Corporation
Attention: Mr. William Marks
228 St. Charles Avenue
New Orleans, Louisiana 70130
Meritrust Federal Savings Bank
Attention: Lee J. Guarisco
200 West Second Street
Thibodaux, Louisiana 70303
Dear Messrs. Marks and Guarisco:
This opinion is being furnished to you in connection with the proposed
acquisition of Meritrust Federal Savings Bank ("Bank") in exchange for stock of
Whitney Holding Corporation ("Whitney"), which is expected to be completed on ,
1998 ("the Effective Date"). You have requested our opinion concerning the
following:
o That the merger of Bank into Whitney National Bank ("WNB"), a wholly
owned subsidiary of Whitney, will qualify as a reorganization under
Section 368(a)(2)(D) of the Internal Revenue Code of 1986, as amended
("the Code").
o That the exchange of Bank common stock to the extent exchanged for
Whitney common stock will not give rise to gain or loss for federal
income tax purposes to the holders of Bank common stock with respect to
such exchange.
Reliance on Certain Facts, Assumptions, And Representations
You have asked for our opinion on the federal income tax consequences to
Whitney, Bank, WNB, and the stockholders of Bank. In rendering our opinion, we
have relied upon the accuracy and completeness of the facts, assumptions, and
information as contained in the Agreement and Plan of Merger dated as of
November 20, 1997 (in each case, without regard to any limitation based on
knowledge or belief)("Plan of Merger"), including all exhibits attached thereto,
the Registration Statement on Form S-4, and the representations included below.
You have represented that such facts, assumptions, and representations are true,
correct, and
<PAGE>
Mr. William Marks
Mr. Lee J. Guarisco
Page 2
, 1998
- ---------------------
complete. However, we have not independently audited or otherwise verified any
of these facts, assumptions, or representations. A misstatement or omission of
any fact or a change or amendment in any of the facts, assumptions, or
representations upon which we have relied may require a modification of all or a
part of this opinion. In addition, our opinion is based on such facts,
assumptions, and representations as represented to us as of the date of this
letter. Any changes in the facts, assumptions, or representations upon which we
have relied between the date of this letter and the actual closing of the
transaction may require a modification of all or part of this opinion. We have
no responsibility to update this opinion for events, transactions,
circumstances, or changes in any of such facts, assumptions, or representations
occurring after this date.
Premise of Opinion
Our opinion is based solely on our interpretation of the Code; U.S. federal
income tax regulations thereunder; relevant judicial decisions; and guidance
issued by the Internal Revenue Service (the "Service") including revenue rulings
and revenue procedures; and other authorities that we deemed relevant; in each
case as of the date of this opinion.
U.S. federal income tax laws and regulations, and the interpretations thereof,
are subject to change, which changes could adversely affect this opinion. If
there is a change in the Code, the regulations thereunder, the administrative
guidance issued thereunder, or in the prevailing judicial interpretation of the
foregoing, the opinion expressed herein would necessarily have to be reevaluated
in light of any such changes. Our opinion is as of the date of this letter and
we have no responsibility to update this opinion for changes in applicable law
or authorities occurring after this date.
Our opinion does not address the potential tax consequences of any transactions,
events, or circumstances other than the transaction as described herein. In
addition, our opinion is limited to the U.S. federal income tax consequences set
forth below. Our opinion does not address any non-income, state, local, or
foreign tax consequences of the transaction. We also express no opinion on
non-income tax issues, such as corporate law or securities matters.
This opinion does not address the U.S. federal income tax consequences of the
transaction to any Bank common stock holder that has a special status, including
(without limitation) insurance companies; financial institutions;
broker-dealers; foreign corporations; estates and trusts not subject to U.S.
federal income tax on their income regardless of source; and persons who are not
citizens or residents of the United States; and persons who acquired stock as
the
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result of the exercise of an employee stock option, pursuant to an employee
stock purchase plan, or otherwise as compensation.
Our opinion is not binding on the Service, and there can be no assurance that
the Service will not take positions contrary to such opinion or will not be
successful in sustaining such contrary positions. However, should the Service
challenge the U.S. federal income tax treatment of the matters discussed below,
our opinion reflects our assessment of the probable outcome of litigation based
solely on an analysis of the existing authorities relating to such matters.
This opinion is solely for the benefit of Bank and Whitney and is not intended
to be relied upon by anyone other than Bank and Whitney. Although you do hereby
have our express consent to inform WNB and Bank common stockholders of our
opinion by including copies of this letter as an exhibit to the Plan of Merger
and as an exhibit in the Registration Statement on Form S-4 for the proposed
transaction and by making reference to us and our opinion in the Proxy
Statement-Prospectus forming a part of the Registration Statement, we assume no
responsibility for any tax consequences to them. Instead, each of these parties
should consult and rely upon the advice of his/her counsel, accountant or other
tax advisor. Except to the extent expressly permitted hereby, and without the
prior written consent of this firm, this letter may not be quoted in whole or in
part or otherwise referred to in any documents or delivered to any other person
or entity.
Proposed Transaction
Our understanding of the proposed transaction is as follows:
A. On the Effective Date, Bank shall be merged with and into WNB
under the articles of association of WNB pursuant to the
provisions of 12 U.S.C. Section 215c, and, as applicable,
Section 215a. The merger shall become effective at the close
of business on the date on which the Bank Merger Agreement,
attached as an exhibit to the Plan of Merger, is executed by
the respective officers of WNB and Bank (collectively called
the "Merging Assocations") in the name and on behalf of the
Merging Associations (the "Effective Time").
B. At the Effective Time, all shares of the issued and
outstanding common stock of Bank, other than shares held by
Bank as treasury shares, shall be converted solely into shares
of Whitney common stock. The stockholders of Bank will receive
shares of Whitney common stock proportionate in value based on
the terms contained in Section 2 of the Plan of Merger. In
lieu of issuing fractional shares of Whitney common stock as a
result
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of the merger, common stockholders of Bank will be entitled to
receive a cash payment equal to the fair market value of any
fraction of a share of Whitney Common Stock to which such
holder would be entitled but for this provision. There will be
no dissenters' rights in connection with the transaction.
Additional Representations
The following representations have been made to us by representatives of
Whitney, WNB, and Bank:
a) Whitney, WNB, Bank, and stockholders of Bank will pay their
respective expenses, if any, incurred in connection with the
successful consummation of the transaction.
b) There is no intercorporate indebtedness existing between
Whitney (or any member of its federal income tax consolidated
group) and Bank (or any member of its federal income tax
consolidated group).
c) Bank will be merged with and into WNB pursuant to the
provisions of 12 U.S.C. Section 215c, and, as applicable,
Section 215a.
d) Except for restrictions placed upon the disposition of Whitney
common stock pursuant to agreements made by certain officers,
directors and shareholders of Bank in the shareholder
commitments referred to in Section 6.02(g) of the Plan of
Merger, the Bank common stockholders will have unrestricted
rights of ownership of Whitney common stock received in the
transaction, and their ability to retain the Whitney common
stock received in the transaction will not be limited in any
way.
e) The ratio for the exchange of shares of Bank common stock for
Whitney common stock in the transaction was negotiated through
arm's length bargaining. Accordingly, the fair market value of
the Whitney common stock to be received by Bank common
stockholders in the transaction will be approximately equal to
the fair market value of the Bank common stock surrendered by
such stockholders in exchange therefor.
f) WNB will acquire at least 90 percent of the fair market value
of the net assets and at least 70 percent of the fair market
value of the gross assets held by Bank immediately prior to
the transaction. For purposes of this representation, amounts
used by Bank to pay reorganization expenses, and all
redemptions and distributions (except for regular, normal
dividends) made by Bank immediately preceding the transfer,
will be included as assets of Bank held immediately prior to
the transaction.
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g) None of the compensation received by any stockholder-employees
of Bank will be separate consideration for, or allocable to,
any of their shares of Bank common stock; none of the shares
of Whitney common stock received by any stockholder-employees
will be separate consideration for, or allocable to, any
employment agreement; and the compensation paid to any
stockholder-employees will be for services actually rendered
and will be commensurate with amounts paid to third parties
bargaining at arm's length for similar services.
h) Whitney, WNB, and Bank intend that the merger will qualify as
a tax-free reorganization within the meaning of Section 368(a)
(1)(A) and (a)(2)(D) of the Code and will report it as such in
accordance with Treas. Reg. ss.1.368-3.
The following additional representations have been made to us by representatives
of Whitney and WNB:
i) The payment of cash in lieu of fractional shares of Whitney
common stock is solely for the purpose of avoiding the expense
and inconvenience to Whitney of issuing fractional shares and
does not represent separately bargained-for consideration. The
total cash consideration that will be paid in the transaction
to the Bank stockholders instead of issuing fractional shares
of Whitney common stock will not exceed (1) one percent of the
total consideration that will be issued in the transaction to
the Bank stockholders in exchange for their shares of Bank
common stock. The fractional share interests of each
Bank stockholder will be aggregated, and no Bank stockholder
will receive cash for such fractional share interests in an
amount equal to or greater than the value of one full share
of Whitney common stock.
j) Neither Whitney nor any related party has any plan or
intention to reacquire any of its stock issued in the
transaction. For purposes of this opinion, a "related party"
includes any corporation (i) that is a member of any
affiliated group, as defined in Section 1504 (determined
without regard to Section 1504(b)), of which Whitney is a
member, or (ii) whose purchase of Whitney stock would be
treated as a distribution in redemption of stock of Whitney
under Section 304(a)(2) (determined without regard to Treas.
Reg. ss.1.1502-80).
k) The proposed transaction is being undertaken for reasons
germane to the continuance of the business of Whitney and WNB.
l) Whitney has no plan or intention to sell or otherwise dispose
of the stock of WNB; or to cause WNB to sell or otherwise
dispose of any of the assets of Bank acquired in the
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transaction, except for dispositions made in the ordinary
course of business or transfers described in Section
368(a)(2)(C) of the Code.
m) Whitney has no plan or intention to liquidate WNB or to merge
WNB with and into another corporation.
n) Whitney and WNB are not investment companies as defined in
Sections 368(a)(2)(F)(iii) and 368(a)(2)(F)(iv) of the Code.
o) The assumption by WNB of the liabilities of Bank pursuant to
the transaction is for bona fide business purposes and the
principal purpose of such assumption is not the avoidance of
federal income tax on the transfer of assets of Bank pursuant
to the transaction.
p) Following the transaction, WNB will continue the historic
business of Bank, or use a significant portion of these
historic business assets in the operation of a trade or
business.
q) Prior to the transaction, Whitney will be in control of WNB
within the meaning of Section 368(c)(1) of the Code (i.e., own
stock possessing at least 80 percent of the total combined
voting power of all classes of stock entitled to vote, and own
at least 80 percent of the total number of shares of all other
classes of stock of the corporation).
r) Following the transaction, WNB will not issue additional
shares of its stock that would result in Whitney losing
control of WNB within the meaning of Section 368(c)(1) of the
Code.
s) No stock of WNB will be issued in the transaction.
t) The Whitney stock issued to the Bank shareholders in the
merger will be newly issued shares that are being issued on
behalf of WNB pursuant to the Plan of Merger.
u) Whitney and WNB do not own, directly or indirectly, nor has
either owned during the past five years, directly or
indirectly, any stock of Bank.
The following representations have been made to us by representatives of Bank:
v) There is no plan or intention by the Bank common stockholders
who own five percent or more of Bank stock, and to the best of
the knowledge of the management of Bank,
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there is no plan or intention on the part of the remaining
common stockholders of Bank to sell, exchange, or otherwise
dispose of a number of shares of Whitney common stock received
in the merger of Bank with and into WNB that would reduce the
stockholders' ownership of Whitney common stock to a number of
shares having a value, as of the Effective Date, of less than
fifty (50) percent of the value of all the formerly
outstanding common stock of Bank as of the same date. For
purposes of this representation, shares of Bank common stock
exchanged for cash in lieu of fractional shares of Whitney
stock will be treated as outstanding Bank common stock on the
Effective Date. Moreover, shares of Bank common stock and
shares of Whitney common stock held by Bank stockholders and
otherwise sold, redeemed, or disposed of prior or subsequent
to the transaction will be considered in making this
representation. Finally, for purposes of this representation,
extraordinary distributions (i.e., distributions with respect
to stock other than regular, normal dividends), prior to and
in connection with the transaction, will be taken into
account. The preceding representation with respect to Bank
common stockholders who own 5 percent or more of Bank stock is
based on representations that Bank has received from such
shareholders.
w) On the Effective Date, the fair market value of the assets of
Bank will exceed the sum of its liabilities plus the amount of
liabilities, if any, to which the assets are subject.
x) The proposed transaction is being undertaken for reasons
germane to the continuance of the business of Bank.
y) Bank is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the
Code.
z) Bank is not an investment company as defined in Sections
368(a)(2)(F)(iii) and 368(a)(2)(F)(iv) of the Code.
aa) The liabilities of Bank assumed by WNB, and the liabilities to
which the transferred assets of Bank are subject, were
incurred by Bank in the ordinary course of business.
Analysis of Applicable Federal Tax Provisions
A. Exchange of Whitney Stock for Bank Stock
Section 354(a)(1) addresses the effects of corporate reorganizations on
shareholders, providing in general that no gain or loss shall be recognized if
stock or securities in a corporation a party
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to a reorganization are, in pursuance of the plan of reorganization, exchanged
solely for stock or securities in such corporation or in another corporation, a
party to the reorganization.
For purposes of Section 354, the terms "reorganization" and "party to a
reorganization" mean only a reorganization or a party to a reorganization as
defined in Sections 368(a) and 368(b). Section 368(a)(1)(A) states that the term
reorganization includes a statutory merger or consolidation. Regulation Section
1.368-2(b)(1) states that in order for a transaction to qualify as a
reorganization under Section 368(a)(1)(A), the transaction must be a merger or
consolidation effected pursuant to the corporation laws of the United States or
State or Territory or the District of Columbia. Under Section 368(b), the term
party to a reorganization includes both corporations in the case of a
reorganization resulting from the acquisition by one corporation of stock or
properties of another. In the case of a reorganization qualifying under Section
368(a)(1)(A) by reason of Section 368(a)(2)(D), the term "party to a
reorganization" includes the corporation which is in control of the acquiring
corporation.
Section 368(a)(2)(D) provides that the acquisition by one corporation in
exchange for stock of a corporation which is in control of the acquiring
corporation, of substantially all of the properties of another corporation shall
not disqualify a transaction under Section 368(a) if no stock of the acquiring
corporation is used in the transaction and such transaction would have qualified
under Section 368(a)(1)(A) had the merger been into the controlling corporation.
The "substantially all" requirement for purposes of Section 368(a)(2)(D) has not
been statutorily defined. The determination of "substantially all" is based upon
all the facts and circumstances of each transaction. The Internal Revenue
Service's advance ruling guidelines (Revenue Procedure 86-42, 1986-2 C.B. 116)
provide that the "substantially all" requirement will be met if at least 90% of
the fair market value of the net assets and at least 70% of the fair market
value of the gross assets of the acquired corporation immediately before the
merger are transferred to the acquiring corporation.
Based on the above representations, the merger will qualify as a reorganization
under Section 368(a)(1)(A) and (a)(2)(D). In the merger, WNB will acquire
substantially all of the assets of Bank in exchange for stock of Whitney, a
corporation in control of WNB.
B. Additional Regulatory Requirements Relating to Tax-Free Reorganizations
The regulations under Section 368 require as a part of a reorganization a
continuity of the business enterprise under the modified corporate form, a bona
fide business purpose for the reorganization, and a continuity of interest
therein on the part of those persons
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who, directly or indirectly, were owners of the enterprise prior to the
reorganization. Regulation Section 1.368-1(d)(2) states that the continuity of
business enterprise requirement is met if the acquiring corporation either
continues the acquired corporation's historic business or uses a significant
portion of the acquired corporation's business assets in the operation of a
trade or business. Based on the information included in the Registration
Statement on Form S-4, as well as management's representations set forth above,
the continuity of business enterprise requirement is met with respect to the
assets and business operations of Bank because WNB will either continue the
historic business of Bank or use a significant portion of the assets of Bank in
a business.
Regulation Section 1.368-2(g) indicates that in addition to coming within the
scope of the specific language of Section 368(a), a reorganization must also be
"undertaken for reasons germane to the continuance of the business of a
corporation a party to the reorganization." If the transaction or series of
transactions has no business or corporate purpose, then the plan is not a
reorganization pursuant to Section 368(a). [Regulation Section 1.368-1(c).] In
the Proxy Statement-Prospectus, a discussion of the reasons for the Plan of
Merger is included. In general, there is a desire to combine the financial and
managerial resources of WNB and Bank to pursue consumer and commercial banking
business in markets currently served by Bank. Whitney's business strategy
includes expansion in the Gulf Coast region, and Whitney's management identified
Bank as an institution that fits well with this strategy. With respect to Bank,
the current and prospective economic environment and competitive constraints
facing small community based banks was a factor in the decision to adopt the
Plan of Merger. Based on the reasons stated in the Proxy Statement-Prospectus
and the representations set forth above, the transaction meets the business
purpose requirement.
The continuity of interest requirement does not require that all shareholders of
the acquired corporation have a proprietary interest in the surviving
corporation after the acquisition; it is not even necessary for a substantial
percentage of such shareholders to have such an interest. Rather, the IRS
announced in Revenue Procedure 77-37, 1977-2 C.B. 568, that it would rule that
the continuity of interest requirement is met so long as one or more of the
acquired corporation's shareholders retain a sufficient proprietary interest in
the continuing corporation. The IRS indicated in Revenue Procedure 77-37 that a
sufficient proprietary interest is an interest with a value that is at least 50%
of the total equity value of the acquired corporation.
In addition to meeting the continuity of interest requirement immediately after
the reorganization, the former shareholders of the acquired corporation must
retain their interest in the acquiring corporation for some time after the
reorganization. The courts have ruled that the tax-free nature of the
reorganization may be retroactively invalidated if the continuity of
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interest is not maintained either because, at the time of the reorganization,
the shareholders intended to dispose of the proprietary interest soon after the
reorganization (Christian Est. v. Comr., T.C. Memo 1989-413) or because a
shareholder disposes of stock immediately following the reorganization in
accordance with a pre-existing commitment to sell (American Wire Fabrics Corp.
v. Comr., 16 TC 607). The courts have generally looked to the intent of the
shareholders at the time of the reorganization to dispose of their interests in
determining whether the continuity of interest requirement is subsequently
violated.
Based on the above representations made by representatives of Bank, the
continuity of interest requirement should be met with respect to the
transaction. Bank has represented that there is no known plan or intention by
its shareholders to dispose of an amount of Whitney stock received in the merger
that would reduce their stock interest in Whitney to a fair market value less
than 50 percent of the fair market value of Bank. However, it should be noted
that the continuity of interest requirement will only be satisfied if the actual
historic shareholders of Bank, in the aggregate, in fact do receive and retain
an amount of Whitney stock that is sufficient to satisfy the requirement.
Finally, it is noted that the Service has recently finalized regulations in the
continuity of interest area that greatly liberalize the rules. In general,
provided a sufficient amount of stock is issued in the transaction to establish
requisite continuity of interest, new Treas. Reg. ss.1.368-1(e) permits
shareholders to dispose of such stock immediately following the reorganization
(provided that such disposition is not made to the issuing corporation or a
corporation related to the issuing corporation). However, it would appear that
those regulations do not apply to this transaction, as the regulations are not
applicable to transactions that are carried out pursuant to a binding contract
executed prior to January 28, 1998. If those regulations were to apply to the
merger, continuity of interest would be satisfied because an amount of stock
satisfying the requirement - in this case the sole consideration is Whitney
stock (except for cash in lieu of fractional shares) - will be issued in the
transaction.
C. Other Operational Code Provisions
In Revenue Ruling 66-365, 1966-2 C.B. 116, the IRS announced that in a
transaction qualifying as a reorganization under Section 368(a)(1)(A) of the
Code where a cash payment is made by the acquiring corporation in lieu of
fractional shares and is not separately bargained for, such cash payment will be
treated under Section 302 of the Code as a redemption of fractional share
interests. Therefore, each shareholder's redemption will be treated as a
distribution in full payment in exchange for his or her fractional share
interest under Section 302(a) of the Code
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and accorded capital gain or loss treatment provided the redemption is not
essentially equivalent to a dividend and that the fractional share(s) redeemed
constitute a capital asset in the hands of the holder as discussed below. In
Revenue Procedure 77-41, 1977-2 C.B. 574, the IRS stated that "a ruling will
usually be issued under Section 302(a) of the Code that cash to be distributed
to shareholders in lieu of fractional share interests arising in corporate
reorganizations...will be treated as having been received in part or in full
payment in exchange for the stock redeemed if the cash distribution is
undertaken solely for the purpose of saving the corporation the expense and
inconvenience of issuing and transferring fractional shares, and is not
separately bargained-for consideration."
Under Section 358(a)(1), in the case of an exchange to which Section 354 or
Section 356 applies, the basis of property which is permitted to be received
under such section without the recognition of gain or loss shall be the same as
that of the property exchanged, decreased by the amount of any money received by
the recipient and the amount of loss recognized by the recipient as a result of
the exchange and increased by the amount which was treated as a dividend and the
amount of other gain recognized by the recipient as a result of the transaction.
It should be noted that where cash is received in lieu of fractional shares, the
substance of the transaction is that of a hypothetical receipt of the fractional
shares and then a redemption of such shares. Therefore, the basis that is to be
allocated to the stock of the acquiring corporation received must be allocated
to the shares retained and the fractional share(s) hypothetically received and
redeemed. The gain or loss attributable to the receipt of cash in lieu of
fractional shares is measured by comparing the cash received with the basis
allocated to the fractional shares that are hypothetically received, and such
gain or loss is recognized as discussed earlier pursuant to Revenue Ruling
66-365.
Code Section 361(a) states that, as a general rule, no gain or loss is to be
recognized by a corporation if such corporation is a party to a reorganization
and exchanges property, in pursuance of the plan of reorganization, solely for
stock or securities in another corporation a party to the reorganization.
Section 361(b) states that if Section 361(a) would apply to an exchange but for
the fact that the property received in exchange consists not only of stock or
securities afforded nonrecognition treatment under Section 361(a), but also of
other property or money, then provided the corporation receiving such other
property or money distributes it in pursuance to the plan of reorganization, no
gain to the corporation shall be recognized from the exchange. Section 361(c)
states that as a general rule no gain or loss shall be recognized to a
corporation a party to a reorganization on the distribution to its shareholders
of any stock in
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another corporation which is a party to the reorganization if such stock was
received by the distributing corporation in the exchange.
Section 1032(a) states that no gain or loss shall be recognized to a corporation
on the receipt of money or other property in exchange for such corporation's
stock, including treasury stock. Treas. Reg. ss.1.1032-2 provides for tax-free
treatment to a controlled corporation, within the meaning of Section 368(c),
upon the transfer of stock of the controlling corporation in a tax-free
reorganization, provided that such stock of the controlling corporation was
received by the controlled corporation pursuant to the plan of reorganization.
Code Section 362(b) states that the basis of property received by the acquiring
corporation in a reorganization is the same as it would be in the hands of the
transferor of the assets, increased by any gain recognized by the transferor.
The transferor for purposes of the preceding sentence in the instant case is
Bank.
Section 1221 defines a capital asset as property held by the taxpayer which is
not inventory or other property held by the taxpayer primarily for sale to
customers in the ordinary course of a trade or business, property used in the
taxpayer's trade or business subject to the allowance for depreciation under
Section 167, a copyright, literary, musical or artistic composition, a letter or
memorandum, or similar property created by the personal efforts of the taxpayer,
accounts or notes receivable acquired in the ordinary course of a trade or
business for services rendered or from the sale of inventory or other property
held by the taxpayer primarily for sale to customers in the ordinary course of
business, or a publication of the United States Government which is received
from the United States Government or any agency thereof other than by purchase
at the price at which it is offered for sale to the public.
Section 1223(1) states that in determining the period for which a taxpayer has
held property received in an exchange, there shall be included the period for
which he or she held the property exchanged if the property has, for the purpose
of determining gain or loss from a sale or exchange, the same basis as the
property exchanged and the property exchanged was a capital asset as defined in
Section 1221 as of the date of the exchange.
Section 1223(2) states that for determining the period for which the taxpayer
has held property however acquired there shall be included the period for which
such property was held by another person if the property has the same basis in
whole or in part in his hands as it would have had in the hands of such other
person.
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Subchapter P of Chapter 1 of the Code provides limitations on the recognition of
capital gains and losses including, but not limited to, the allowance of capital
losses to the extent of capital gains with respect to corporate taxpayers and
the allowance of from $1,500 to $3,000 of net capital losses with respect to
certain taxpayers other than corporate taxpayers.
Opinion
Based upon all of the foregoing, including representations of the management of
Whitney and WNB and the management of Bank, it is our opinion with respect to
the merger that:
a) Provided the shareholders of Bank receive and retain a sufficient
amount of stock in Whitney to satisfy the continuity of interest
requirement discussed on pages 9 and 10, it is our opinion that the
acquisition by WNB of substantially all of the assets of Bank solely
in exchange for Whitney common stock and the assumption by WNB of the
liabilities of Bank will qualify as a reorganization under the
provisions of Section 368(a) of the Code. For purposes of this
opinion, "substantially all" means at least 90 percent of the fair
market value of the net assets and at least 70 percent of the fair
market value of the gross assets of Bank held immediately prior to the
proposed transaction.
b) Whitney, WNB, and Bank will each be a "party to a reorganization"
(Section 368(b)).
c) No gain or loss will be recognized by Whitney or WNB on the merger of
Bank into WNB (Section 1032).
d) No gain or loss will be recognized by Bank on the transfer of all of
its assets to WNB pursuant to the plan of merger (Section 361).
e) The tax basis of Bank's assets in the hands of WNB will be the same as
the basis of those assets in the hands of Bank immediately prior to
the transaction (Section 362(b)). The tax basis of Bank's assets in
the hands of WNB will not be increased by any cash paid in lieu of
fractional shares.
f) The holding period of the assets of Bank in the hands of WNB will
include the period during which such assets were held by Bank (Section
1223(2)).
g) No gain or loss will be recognized by Bank shareholders as a result of
the exchange of Bank common stock for Whitney common stock pursuant to
the merger (Section 354(a)(1)). The payment of cash in lieu of
fractional share interests of Whitney common
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stock will be treated as if each fractional share is distributed as
part of the exchange and then redeemed by Whitney. Subject to the
conditions and limitations of Section 302(a) of the Code, these cash
payments will be treated as having been received as distributions in
full payment in exchange for the fractional share of Whitney common
stock. Any gain or loss recognized upon such exchange (as determined
under Section 1001 and subject to the limitations of Section 267) will
be capital gain or loss provided the fractional share would constitute
a capital asset in the hands of the exchanging stockholder (Revenue
Ruling 66-365 and Revenue Procedure 77-41).
h) The tax basis of the Whitney common stock received by Bank
shareholders will be the same as the basis of the Bank common stock
surrendered in exchange therefor, decreased by the amount of basis
allocated to the fractional shares that are treated as received by the
stockholder and redeemed for cash (Section 358(a)(1)).
i) The holding period of the Whitney common stock received by Bank
shareholders will include the period during which the Bank common
stock surrendered in exchange therefor was held, provided that the
Bank common stock is held as a capital asset in the hands of the Bank
shareholders on the Effective Date (Section 1223(1)).
We express no opinion on the impact, if any, on any other sections of the Code,
including but not limited to Section 382, other than that as stated immediately
above, and neither this opinion nor any prior statements are intended to imply
or to be an opinion on any other matters.
In analyzing the authorities relevant to the potential tax issues outlined in
this opinion we have applied the standards of "substantial authority" and "more
likely than not proper," as used in Section 6662 under current law. Based upon
our analysis, we have concluded that there is substantial authority for the
indicated tax treatment of the transaction, and we also believe the indicated
tax treatment of the transaction is more likely than not proper.
Very truly yours,
ARTHUR ANDERSEN LLP
By
Charles A. Giraud III
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Copies to:
Mr. Joseph S. Schwertz, Jr.
Mr. Gerald F. Heupel, Jr., Esq.
Ms. Elizabeth B. Martin
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated January 16, 1997
(except with respect to the matter discussed in the first paragraph of Note 16,
as to which the date is February 28, 1997) included in Whitney Holding
Corporation's Form 10-K for the year ended December 31, 1996, and to all
references to our Firm included in this registration statement.
/s/ Arthur Andersen LLP
New Orleans, Louisiana
February 2, 1998
<PAGE>
EXHIBIT 23.2
CONSENT OF KPMG PEAT MARWICK LLP
The Board of Directors
Meritrust Federal Savings Bank:
We consent to the use of our reports incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
Baton Rouge, Louisiana
January 29, 1998
<PAGE>
EXHIBIT 23.3
CONSENT OF FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
January 27, 1998
Whitney Holding Corporation
228 St. Charles Avenue
New Orleans, LA 70130
Gentlemen:
This letter will constitute our consent to the inclusion of our opinion
regarding the acquisition of Meritrust Federal Savings Bank by Whitney Holding
Corporation ("Whitney"), in Whitney's registration statement on Form S-4 (the
"Registration Statement") and to the inclusion of the summary of such opinion
and the use of our name in the Registration Statement. In giving the foregoing
consent, we do not admit that we come within the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended
(the "Securities Act"), or the rules and regulations of the Securities and
Exchange Commission (the "Commission") with respect to any part of such
Registration Statement within the meaning of the term "experts" as used in the
Securities Act and the rules and regulations of the Commission promulgated
thereunder.
Very truly yours,
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
/s/ Eugene S. Weil
Eugene S. Weil
Managing Director
<PAGE>
EXHIBIT 99.1
MERITRUST FEDERAL SAVINGS BANK REVOCABLE PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
MERITRUST FEDERAL SAVINGS BANK ("MERITRUST") FOR USE ONLY AT THE SPECIAL MEETING
OF STOCKHOLDERS TO BE HELD ON ___________, 1998 AND AT ANY ADJOURNMENT OR
POSTPONEMENT THEREOF.
The undersigned hereby appoints the Board of Directors of Meritrust, or any
successors thereto as proxies, with full powers of substitution, to vote the
shares of the undersigned at the Special Meeting of Stockholders of Meritrust to
be held at Meritrust's main office located at 200 West Second Street, Thibodaux,
Louisiana, on _______, 1998 at 3:00 p.m., Central Time, and at any adjournment
or postponement thereof, with all the powers that the undersigned would possess
if personally present, as follows:
1. To approve and adopt the Agreement and Plan of Merger dated as of
November 20, 1997, by and among Whitney Holding Corporation ("Whitney"), Whitney
National Bank ("Whitney Bank") and Meritrust, together with a related merger
agreement (collectively, the "Plan of Merger"), pursuant to which (i) Meritrust
will be merged into Whitney Bank (the "Merger"), with Whitney Bank as the
surviving corporation; and (ii) each share of common stock of Meritrust
outstanding immediately prior to consummation of the Merger shall be converted
into and represent the right to receive shares of Whitney common stock as
determined in accordance with the terms of the Plan of Merger, all as more fully
described in the Proxy Statement-Prospectus.
___FOR ___AGAINST ___ABSTAIN
2. To adjourn the Special Meeting, if necessary, to solicit additional
proxies.
___FOR ___AGAINST ___ABSTAIN
In their discretion, the proxies are authorized to vote with respect to
approval of the minutes of the last meeting of stockholders, matters incident to
the conduct of the meeting, and upon such other matters as may properly come
before the meeting.
The Board of Directors recommends that you vote FOR each of Proposals 1
and 2. Shares of common stock of Meritrust will be voted as specified. If no
specification is made,
<PAGE>
shares will be voted in favor of each of Proposals 1 and 2, and otherwise at the
discretion of the proxies. This proxy may be revoked at any time before it is
exercised.
The undersigned hereby acknowledges receipt of the Notice of Special
Meeting of the Stockholders of Meritrust called for _______, 1998 and a Proxy
Statement-Prospectus for the Special Meeting.
Dated: , 1998
-----------------------
-----------------------------------
-----------------------------------
Signature(s)
Please sign this exactly as your
name(s) appear(s) on this proxy.
When signing in a representative
capacity, please give title. When
shares are held jointly, only one
holder need sign.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE>
EXHIBIT 99.2
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL DATA
Year Ended December 31,
-------------------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Selected Financial Condition
and Other Data:
Total assets $ 226,591 $ 220,855 $ 215,462 $ 222,434 $ 231,945
Cash 2,689 2,751 2,802 2,856 2,385
Interest-bearing deposits in
other financial institutions 5,029 7,383 3,105 19,286 26,792
Investment securities 56,042 55,933 58,594 52,261 39,308
Mortgage-backed securities 36,499 34,558 36,678 27,082 27,560
Loans receivable, net 116,479 110,236 104,333 110,844 125,748
Deposits 206,145 201,976 198,559 207,348 222,318
Stockholders' equity 17,525 16,440 14,659 12,923 6,838
Full service offices 8 8 7 7 7
Limited service offices 0 0 1 1 2
Year Ended December 31,
---------------------------------------------------------------------------
1996 1995 1994 1993 1992
----- ---- ---- ---- ----
Selected Operating Data:
Total interest income $ 16,283 $ 15,241 $ 14,154 $ 15,040 $ 17,467
Total interest expense 9,029 8,284 7,298 8,066 10,772
-------- -------- -------- -------- --------
Net interest income 7,254 6,957 6,856 6,974 6,695
Provision for (recovery of)
loan losses 120 0 0 132 (95)
Net interest income after
provision for (recovery of)
loan losses 7,134 6,957 6,856 6,842 6,790
Other income 1,589 1,309 1,281 1,383 1,502
Other expenses 6,536 4,982 5,053 5,358 5,431
-------- ------- ------- ------- --------
Income before income
taxes, extraordinary item
and cumulative effect of
change in accounting principle 2,187 3,284 3,084 2,867 2,861
Federal income taxes 925 1,097 1,019 928 956
-------- ------- ------- ------- --------
Income before
extraordinary item and
cumulative effect of
change in accounting principle 1,262 2,187 2,065 1,939 1,905
Extraordinary item-tax
benefit of net operating loss
carryforward 0 0 0 0 553
Cumulative effect of change
in accounting for income taxes 0 0 0 (284) 0
------ ------ ------ ------- ------
Net income $1,262 $2,187 $2,065 $1,655 $2,458
====== ====== ====== ======= ======
5
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
General
Meritrust Federal Savings Bank (-Meritrust- or -the Bank-) is a federal
chartered, stock savings bank headquartered in Thibodaux, Louisiana. On
September 30, 1993, First Federal Savings and Loan Association of Thibodaux
(-First Federal-) converted from mutual to stock form and simultaneously merged
with and into Atchafalaya Federal Savings Bank (-Atchafalaya-), with Atchafalaya
being the surviving institution (the -Merger Conversion-). Atchafalaya then
changed its name to Meritrust Federal Savings Bank and changed its home office
to the home office of First Federal. The 274,176 shares of common stock of
Atchafalaya outstanding immediately prior to the Merger Conversion were
converted into shares of common stock of Meritrust on a one-for-one basis, and
Meritrust issued an additional 500,000 shares of common stock in the Merger
Conversion. The Merger Conversion was accounted for under the
pooling-of-interests method of accounting, and accordingly all historical data
presented herein for Meritrust includes both First Federal and Atchafalaya.
The principal business of Meritrust is the obtaining of funds in the
form of savings deposits and investing these funds in mortgage loans on
residential real estate, various types of consumer and other loans,
mortgage-backed securities, and investment securities. Generally, these loans
are secured by first and second mortgages on real estate, personal property, and
savings deposits.
The profitability of Meritrust depends primarily on its net interest
income, which is the difference between interest and dividend income on
interest-earning assets, principally loans, mortgage-backed securities and
investment securities, and interest expense on interest-bearing deposits.
Meritrust's net income also is dependent, to a lesser extent, on the level of
its other income, including fees and service charges, and its general,
administrative and other expenses, such as salaries and employee benefits,
occupancy and equipment expense, deposit insurance premiums, and miscellaneous
other expenses, as well as federal income taxes.
Asset and Liability Management
The ability to maximize net interest income is largely dependent upon
the achievement of a positive interest rate spread that can be sustained during
fluctuations in prevailing interest rates. Interest rate sensitivity is a
measure of the difference between amounts of interest-earning assets and
interest-bearing liabilities which either reprice or mature within a given
period of time. The difference, or the interest rate repricing -gap-, provides
an indication of the extent to which an institution's interest rate spread will
be affected by changes in interest rates. A gap is considered positive when the
amount of interest-rate sensitive assets exceeds the amount of interest-rate
sensitive liabilities, and is considered negative when the amount of
interest-rate sensitive liabilities exceeds the amount of interest-rate
sensitive assets. Generally, during a period of rising interest rates, a
negative gap within shorter maturities would adversely affect net interest
income, while a positive gap within shorter maturities would result in an
increase in net interest
6
<PAGE>
income, and during a period of falling interest rates, a negative gap within
shorter maturities would result in an increase in net interest income while a
positive gap within shorter maturities would have the opposite effect.
The lending activities of savings institutions historically emphasized
long-term, fixed-rate loans secured by single-family residences, and the primary
source of funds of such institutions has been deposits. The deposit accounts of
savings institutions generally bear interest rates that reflect market rates and
largely mature or are subject to repricing within a short period of time. This
factor, in combination with substantial investment in long-term fixed-rate
loans, has historically caused the income earned by savings institutions on
their loan portfolios to adjust more slowly to changes in interest rates than
their cost of funds.
Meritrust has attempted to change the composition of its
interest-earning assets to reduce the interest rate risk associated with changes
in interest rates. Since January 1990, Meritrust has generally originated only
adjustable-rate mortgages and short-term (five years or less) consumer loans and
has purchased predominately adjustable-rate mortgage-backed securities and short
term (five years of less) fixed-rate mortgage-backed securities. At December 31,
1996, 72.8% of Meritrust's gross loan and mortgage-backed securities portfolio
consisted of adjustable-rate or short-term products. Because Meritrust's
interest-earning assets which mature or reprice within one and three years are
less than its interest-bearing liabilities with similar characteristics,
material and prolonged increases in interest rates generally would negatively
affect net interest income, while material and prolonged decreases in interest
rates generally would have a positive effect.
It should be noted, however, that the interest rates on adjustable-rate
mortgages only adjust periodically, with the amount of the change subject to
limitations, whereas the interest rates on deposits can change more frequently
and are not subject to limitations.
7
<PAGE>
The following table presents the difference between Meritrust's
interest-earning assets and interest-bearing liabilities within specified
maturities at December 31, 1996. This table does not necessarily indicate the
impact of general interest rate movements on Meritrust's net income because the
repricing of certain assets and liabilities is subject to competitive and other
limitations. As a result, certain assets and liabilities indicated as maturing
or otherwise repricing within a stated period may in fact mature or reprice at
different times and at different volumes.
Interest-earning assets:
Real estate mortgages:
Adjustable-rate (1)
Fixed-rate(2)(3)
Other Loans
Mortgage-backed securities (2)
Investment securities
and other earning assets(4)
Total interest-earning assets
Interest-bearing liabilities:
Passbook savings (5)
NOW Accouints (5)(6)
MMDA's(5)
Certificates of deposit(5)
FHLB advances
Total interest-bearing liabilites
Interest rate sensitivity GAP
Cumulative interest rate
sensitivity GAP
Cumulative GAP/Total Assets
Cumulative ratio, interest-earning
assets/interest-bearing liabilites
8
<PAGE>
<TABLE>
<CAPTION>
Over One Over Three Over Five Over Ten
One Year Through Through Through Through Over
or Less Three Years Five Years Ten Years Twenty Years Twenty Years Total
-------- ----------- ---------- --------- ------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
$ 54,383 $ 759 $ 3,276 $ 589 $ 0 $ 0 $ 59,007
5,421 4,230 3,386 6,146 3,088 339 22,610
8,212 5,773 8,838 11,236 735 68 34,862
24,156 5,437 5,801 490 367 248 36,499
34,274 24,008 4,997 0 0 0 63,279
- -------- --------- --------- --------- --------- --------- ---------
126,446 40,207 26,298 18,461 4,190 655 216,257
======== ========= ========= ========= ========= ========= =========
4,351 3,611 2,821 2,073 1,783 10,953 25,592
4,209 2,293 828 688 571 2,786 11,375
10,552 870 600 414 286 635 13,357
108,178 36,595 4,610 0 0 0 149,383
0 0 0 0 0 0 0
- -------- --------- --------- --------- --------- --------- ---------
127,290 43,369 8,859 3,175 2,640 14,374 199,707
======== ========= ========= ========= ========= ========= =========
$ (844) $ (3,162) $ 17,439 $ 15,286 $ 1,550 $ (13,719) $ 16,550
======== ========== ========= ========= ========= =========
$ (844) $ (4,006) $ 13,433 $ 28,719 $ 30,269 $ 16,550
======== ========== ========= ========= ========= =========
(0.4%) (1.8%) 5.9% 12.7% 13.4% 7.3%
======== ========== ========= ========= ========= =========
99.3% 97.7% 107.5% 115.7% 116.3% 108.3%
======== ========== ========= ========= ========= =========
9
</TABLE>
<PAGE>
(1) Includes all adjustable-rate real estate loans, net of the undisbursed
portion of loans in process, unearned discounts, allowance for loan
losses and deferred loan origination fees.
(2) Assumes that repayments of fixed-rate mortgages, through normal
amortization and prepayments, occur at the rates of 6% per annum for
maturities within five years and 12% per annum for maturities greater
than five years. For fixed-rate mortgaged-backed securities with
maturities greater than one through five years, repayments occur at the
rate of 15% per annum. For fixed-rate mortgage-backed securities with
maturities greater than five years, repayments occur at the rate of 6%
per annum.
(3) Includes all fixed-rate real estate loans, net of the undisbursed
portion of loans in process, unearned discounts, allowance for loan
losses and deferred loan origination fees.
(4) Includes interest-bearing deposits, investment securities, FHLMC stock,
and stock in the FHLB of Dallas.
(5) Assumes that (i) passbook accounts will decrease at the following
rates applied to the remaining outstanding balances during the
respective time periods shown in the above table: 17%, 17%, 16%, 14%,
14% and 14%; (ii) NOW accounts will decrease at the following rates
applied to the remaining outstanding balances during the respective
time periods shown in the above table: 37%, 32%, 17%, 17%, 17% and 17%;
(iii) money market deposits accounts will decrease at the following
rates applied to the remaining outstanding balances during the
respective time periods shown in the above table: 79%, 31%, 31%, 31%,
31% and 31%; and (iv) certificates of deposit will not be withdrawn
prior to maturity, with the exception of a special class of
certificates called -Merit Certificates of Deposit-. These certificates
allow the customer the option of withdrawing, without penalty, at the
-half-way- point of the maturity term. Accordingly, $7.2 million of
four-year -Merit CDs- were moved from the -Over One Through Three
Years- class to the -One Year or Less- class.
(6) Excludes $6.4 million of non-interest-bearing NOW accounts.
Management believes that the assumptions utilized to evaluate the
vulnerability of Meritrust's operations to changes in interest rates approximate
actual experience and considers them reasonable; however, the interest rate
sensitivity of Meritrust=s assets and liabilities in the above table could vary
substantially if different assumptions were used or if actual experience differs
from the historical experience on which the assumptions are based.
Changes in Financial Condition
Meritrust's total assets increased from $215.5 million at December 31,
1994 to $220.9 million at December 31, 1995 and to $226.6 million at December
31, 1996. The net loan portfolio grew from $104.3 million at December 31, 1994
to $110.2 million at December 31, 1995 and to $116.5 at December 31, 1996.
However, the composition of the portfolio has changed with real estate loans
declining from $86.9 million at December 31, 1994 to $86.4 million at December
31, 1995 and to $85.5 at December 31, 1996. This decline was offset by growth in
consumer loans from $20.4 million at December 31, 1994 to $26.4 million at
December 31, 1995 to $35.0 million
10
<PAGE>
at December 31, 1996. Since 1990, Meritrust has originated single-family
residential loans only with adjustable interest rates. Because the demand for
these loans has decreased with the advent of competitively priced fixed-rate
loans in recent periods, the single-family loan portfolio has declined as loan
repayments have exceeded loan originations for this category. Single family
construction loans and expanded consumer loans were emphasized to offset the
single-family loan portfolio shrinkage.
To supplement the loan portfolio, Meritrust purchased $7.9 million and
$2.0 million of mortgage-backed securities in 1996 and 1995, respectively. As a
result, along with the effect of principal repayments, mortgage-backed
securities have changed from $36.7 million at December 31, 1994 to $36.5
million at December 31, 1996.
In addition, interest-bearing deposits increased from $3.1 million at
December 31, 1994 to $7.4 million at December 31, 1995 and decreased to $5.0
million at December 31, 1996. Investment securities decreased from $58.6
million at December 31, 1994 to $55.9 million at December 31, 1995 and increased
to $56.0 million at December 31, 1996.
Non-performing assets, including troubled debt restructurings,
decreased from $947,000 or 0.4% of total assets at December 31, 1994 to
$621,000 or 0.3% of total assets at December 31, 1995 and increased to $924,000
or 0.4% of assets at December 31, 1996. These changes were due primarily to
non-accrual and delinquent loans over ninety days past due changing from
$461,000 at December 31, 1994 to $389,000 at December 31, 1996 being offset by a
growth of $55,000 in real estate owned over the two-year period. Meritrust
employs an aggressive collection and foreclosure policy and an active effort to
sell real estate owned to the general public through local realtors. A minimum
down payment of 5% is required in most cases for sales financed by Meritrust. At
December 31, 1996, Meritrust's allowance for loan losses equalled $670,000 or
.58% of the net loan portfolio (before giving effect to the allowance).
Meritrust's deposits have grown steadily from a level of $198.6 million
at December 31, 1994 to $202.0 million at December 31, 1995 and to $206.1
million at December 31, 1996. In recent years, depositors have shifted their
funds to certificate accounts from short-term transaction accounts, primarily
due to increased interest rates offered on certificate accounts. Rates paid on
certificates of deposit have increased from an average of 4.19% in 1994 to an
average of 4.96% in 1995 and to an average of 5.23% in 1996. Certificate
accounts grew $8.1 million or 6.1% in 1995 and $6.6 million or 4.6% in 1996.
Transaction accounts decreased by $4.7 million or 7.4% in 1995 and by $2.5
million or 4.2% in 1996. Meritrust has followed a policy of paying interest
rates to depositors at market rates, and it does not negotiate rates with
customers.
At December 31, 1996, Meritrust met its tangible, core and risk-based
capital requirements of 1.50%, 3.00% and 8.00%, respectively. At such date,
Meritrust's tangible, core and risk-based capital ratios were 7.73%, 7.73% and
17.21%, respectively.
11
<PAGE>
Results of Operations
Meritrust had net income of $1.3 million, $2.2 million and $2.1
million in 1996, 1995 and 1994 respectively. Net income in 1996 was
substantially affected by a net charge of approximately $1.0 million,
representing the Bank's share of the one-time special assessment levied against
all Savings Association Insurance Fund (-SAIF-) insured depository institutions
n September, 1996. See further discussion below. Excluding this charge,
Meritrust's net income for 1996 would have been $2.3 million. The Bank's net
income before the cumulative effect of the change in accounting for income taxes
increased in 1994 by $126,000 or 6.5%, in 1995 by $122,000 or 5.9%, and, on an
adjusted basis without the SAIF assessment, by $75,000 or 3.4% in 1996.
Net Interest Income. Meritrust's net interest income is determined by
its average interest rate spread (i. e., the difference between the average
yields earned on its interest-earning assets and the average rates paid on its
interest-bearing liabilities) and the relative amounts of interest- earning
assets and interest-bearing liabilities. Meritrust's average interest rate
spread was 3.00% for 1996, 3.11% for 1995, and 3.12% for 1994. Its ratio of
average interest-earning assets to average interest-bearing liabilities has
increased to 108.1% in 1996 from 106.3% in 1995 and from 104.9% in 1994.
Net interest income increased by $297,000 or 4.3% in 1996 and by
$101,000 or 1.5% in 1995 over the respective prior periods. The net interest
margin as a percent of average interest-earning assets has remained relatively
constant at 3.34%, 3.35%, and 3.30% for the respective years of 1996, 1995,
and 1994. The absolute amount of net interest income changed from $6.9 million
in 1994 to $7.0 million in 1995 to $7.3 million in 1996.
The following table sets forth certain ratios regarding the
profitability of Meritrust.
Year ended December 31,
-----------------------------------
1996(1) 1995 1994
--------- ------- --------
Return on average assets 0.56% 1.00% 0.94%
Return on average equity 7.43 14.06 14.97
Average equity to average assets 7.59 7.13 6.30
Dividend payout ratio 38.34 18.58 15.93
Earnings per share $ 1.56 $ 2.73 $ 2.60
(1) It should be noted that the Bank's net charge of $1.0 million for
its share of the one-time SAIF assessment substantially affects
these ratios.
12
<PAGE>
13
<PAGE>
Average Balances, Net Interest Income and Yields Earned and Rates Paid.
The following table represents for the periods indicated the total dollar amount
of interest income from average interest-earning assets and the resultant
yields, as well as the interest expense on average interest-bearing liabilities,
expressed both in dollars and rates, and the net interest margin. The table
does not reflect any effect of income taxes.
Interest-earning assets:
Loans receivable
Mortgage-backed securities
Interest-bearing deposits
Investment securities and
FHLB stock
Total interest-earning assets
Non interest-earning assets
Total assets
Interest-bearing liabilites:
Deposits
Non-interest-bearing liabilites
Total liabilites
Retained earnings
Total liabilities and retained earnings
Net interest income:
Interest rate spread
Net interest margin(2)
Average interest earning assets
to average interest bearing liabilites
14
<PAGE>
<TABLE>
<CAPTION>
(Dollars in Thousands)
Year Ended December 31,
- -----------------------------------------------------------------------------------------------------------------
1996 1995 1994
- ---------------------------------- ------------------------------------ ---------------------------------
Average Yield/ Average Yield/ Average Yield/
Balance Interest Rate(1) Balance Interest Rate Balance Interest Rate
- -------- -------- ------- ------- -------- ------ ------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 112,542 $10,040 8.92% $ 107,285 $ 9,549 8.90% $ 107,589 $ 9,090 8.45%
36,258 2,249 6.20 35,618 2,166 6.08 31,880 1,824 5.72
7,940 416 5.24 5,244 267 5.09 11,196 521 4.65
60,329 3,578 5.93 59,281 3,259 5.50 57,353 2,719 4.74
- --------- ------- --------- -------- --------- --------
217,069 16,283 7.50 207,428 15,241 7.35 208,018 14,154 6.80
10,416 10,731 10,930
- --------- --------- ---------
$ 227,485 $ 218,159 $ 218,948
========= =========
$ 200,767 9,029 4.50 $ 195,179 8,284 4.24 $ 198,344 7,298 3.68
9,564 ------- ------- 7,430 ------- ------- 6,813
- --------- --------- ---------
210,331 202,609 205,157
========= ========= =========
17,154 15,550 13,791
- --------- --------- ---------
$ 227,485 $ 218,159 $ 218,948
========= ========= =========
$ 7,254 3.00% $ 6,957 3.11% $ 6,856 3.12%
======== ======= ======== ======= ======== =======
3.34% 3.35% 3.30%
======= ======= =======
108.12% 106.28% 104.88%
15
</TABLE>
<PAGE>
(1) At December 31, 1996, the weighted average yields earned and rates paid
were as follows: loans receivable, 8.64%; mortgage-backed securities, 6.24%;
investment securities and FHLB stock, 5.96%; interest-bearing deposits, 5.40%;
total interest-earning assets, 7.47%; deposits, 4.38%; and interest rate spread,
3.09%.
(2) Net interest margin is net interest income divided by average interest-
earning assets.
Rate/Volume Analysis. The following table describes the extent to
which changes in interest rates and changes in volume of interest-related
assets and liabilities have affected Meritrust's interest income and expense
during the periods indicated. For each category of interest-earning assets and
interest-bearing liabilities, information is provided on changes attributable to
(i) changes in volume (change in volume multiplied by prior period rate), and
(ii) changes in rate (change in rate multiplied by prior period volume). The
combined effect of changes in both rate and volume has been allocated
proportionately to the change due to rate and the change due to volume.
<TABLE>
<CAPTION>
Year ended December 31,
1996 vs. 1995 1995 vs. 1994
Increase Increase
(Decrease) Total (Decrease) Total
Due to Increase Due to Increase
Rate Volume (Decrease) Rate Volume (Decrease)
------- ------ ---------- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans $ 21 $ 470 $ 491 $ 483 $ (24) $ 459
Mortgage-backed
securities 44 39 83 120 222 342
Investment securities
and FHLB Stock 259 60 319 448 92 540
Interest-bearing deposits 8 141 149 55 (309) (254)
----- ----- ------ ----- ------ ------
Total interest-earning
assets 332 710 1,042 1,106 (19) (1,087)
Interest-bearing liabilities:
Deposits 517 228 745 1,091 (105) 986
----- ----- ------ ----- ------ ------
Increase (decrease) in
net interest income $ (185) $ 482 $ 297 $ 15 $ 86 $ 101
======= ===== ===== ===== ====== ======
</TABLE>
16
<PAGE>
Interest Income. Interest on loans increased by $491,000 or 5.1% in
1996 and by $459,000 or 5.0% in 1995 from the respective prior periods. The
average balance of outstanding loans grew 4.9% in 1996 compared to a .28%
decline in 1995. This was primarily due to increased volume in single-family
construction loans and in consumer loans offsetting the declines in
single-family residential loans. Because Meritrust only offers such
single-family residential loans with adjustable interest rates, th demand for
such loans has decreased in recent periods as borrowers have increased their
preference for fixed-rate loans. Consumer loans and single-family construction
loans increased from 23.4% and 3.5% of the gross loan portfolio, respectively in
1995 to 29.0% and 5.2% of the gross loan portfolio, respectively, in 1996. The
average yield on the loan portfolio has changed to 8.92% in 1996 from 8.90% in
1995 and from 8.45% in 1994.
Interest on mortgage-backed securities increased by $83,000 or 3.8% in
1996 as compared to an increase of $342,000 or 18.8% in 1995. The increase in
interest income in 1996 was due to an increase in the average balance of
$640,000 or 1.8% along with an increase in the average yield to 6.20% from
6.08%. 1995 had a larger increase in interest income because the average
balance increased $3.7 million or 11.7% while the average yield rose from 5.72%
to 6.08%. At December 31, 1996, 53.6% of Meritrust's mortgage-backed securities
have adjustable interest rates.
Interest on interest-bearing deposits increased $149,000 or 55.8% in
1996 compared to a decrease of $254,000 or 48.8% in 1995. The average balance in
1996 increased 51.4% compared to a 53.2% decrease in 1995. The average yields
increased to 5.24% in 1996 from 5.09% in 1995 and from 4.65% in 1994, reflecting
the short-term nature of these assets and the fluctuations in market interest
rates.
Interest and dividends on investment securities and FHLB stock
increased by $319,000 or 9.8% in 1996 as compared to an increase of $540,000 or
19.9% in 1995. The average balance grew by $1.0 million or 1.8% in 1996 compared
to an increase of $1.9 million or 3.4% in 1995. Investment securities purchased
in 1996 and 1995 totalled $25.6 and $29.0 million, respectively. The 1996
purchases mainly replaced maturities while the 1995 purchases exceeded
maturities by $2.6 million. The average yield of the portfolio increased to
5.93% in 1996 from 5.50% in 1995 and from 4.74% in 1994.
Interest Expense. Interest on deposits increased by $745,000 or 9.0% in
1996 and by $986,000 or 13.5% in 1995 from the respective prior periods. These
changes were due to increases in the average balances from $195.2 million to
$200.8 million as well as in the average rate paid from 4.24% to 4.50% in 1996.
In 1995 the average balance decreased from $198.3 million to $195.2 million
while the average rate paid increased to 4.24% from 3.68% in 1994. Rates
offered on new certificate accounts were increased in recent periods to help
offset the increased competition from other financial institutions and
money-market mutual funds. Average deposits increased by 2.9% in 1996 and
decreased by 1.6% in 1995.
Provision for Loan Losses. Meritrust provided $120,000 for loan losses
in 1996 as compared to no provisions for loan losses in 1995 and in 1994. The
decisions not to provide for additional loan losses in the two preceding periods
were based upon, among other things, the substantial decline in non-performing
assets in recent years, the composition of Meritrust's non-accruing loans, and
an improvement in the local economy. However, with the growth of the
17
<PAGE>
Bank's loan portfolio and, in particular, the increased emphasis on consumer and
other non-mortgage loans, a provision for future loan losses is prudent. Total
non-performing assets and troubled debt restructurings have decreased from $2.2
million or 1.3% of total assets at December 31, 1992 to $924,000 or .4% of total
assets at December 31, 1996. The allowance for loan losses was $670,000 or .56%
of the gross loan portfolio at December 31, 1996.
Other Income. Other operating income has increased from $1.28 million
in 1994 to $1.31 million in 1995 to $1.59 million in 1996.
Loan related fees have steadily increased due to fees from fixed-rate
loans originated for a loan correspondent and construction fees from increased
single-family construction loans. Insurance commissions, likewise, have grown
during the periods due to increased consumer loan volume resulting in increased
sales.
Service charges and fees decreased from $745,000 in 1994 to $701,000 in
1995 and increased to $812,000 in 1996. Deposit growth and emphasis on
fee-generating accounts contributed to these changes.
Other non-interest income decreased from $172,000 in 1994 to $122,000
in 1995 and to $104,000 in 1996.
Other Expense. Non-interest expense increased by $1.6 million or 31.2%
in the year ended December 31, 1996. This was caused primarily by a $1.3
million one-time special SAIF assessment paid by Meritrust in the fourth
quarter. See further discussion below. Without the special assessment, non-
interest expense for 1996 would have been $5.2 million compared with $5.0
million for 1995 and $5.1 million for 1994.
Salaries and employee benefits increased by $181,000 or 7.6% in 1996
and by $216,000 or 10.0% in 1995. These increases were due to employee salary
adjustments.
Net occupancy expense increased 10.9% in 1996 and decreased by 8.6% in
1995. The 1995 decrease was primarily caused by reductions in expenditures for
maintenance and repairs from higher levels in prior periods..
Data processing and operating supplies increased by $19,000 or 2.7% in
1996 compared to a decrease of $99,000 or 12.3% in 1995. The 1995 decrease was
primarily accounted for by reductions in data processing telephone line charges,
deposit processing charges, and check printing charges. The increase in 1996
was caused by higher charges for Federal Home Loan Bank deposit processing and
increased expenditures for stationery, printing, and office supplies partially
offset by reductions in check printing charges.
Federal insurance expense increased by $1.3 million or 279.3% in 1996
as compared to a reduction of $28,000 or 5.8% in 1995. See the SAIF assessment
discussion.
Equipment depreciation and repair expense decreased by $12,000 or 4.7%
in 1996 and by $40,000 or 13.5% in 1995. These reductions was caused primarily
by lower maintenance expenses and by lower non-capitalized equipment purchases.
18
<PAGE>
Other miscellaneous expense, which normally consists of miscellaneous
insurance expenses, fidelity bond coverage, supervisory examination fees and
regulatory assessments, increased by $22,000 or 3.6% in 1996 and decreased by
$66,000 or 9.7% in 1995.
Recapitalization of the Savings Association Insurance Fund (-SAIF-). On
September 30, 1996 an appropriations bill containing, among other things,
specific provisions addressing deposit insurance, was signed into law. Savings
institutions nation wide were required to pay a one-time special assessment of
$4.5 billion to recapitalize the SAIF fund. This amount was determined by
applying as assessment rate of $0.657 per $100 to SAIF assessable deposits as of
March 31, 1995. Meritrust's assessment was $1.3 million, reflected as an
ordinary charge to operating expenses in the quarter ended September 30, 1996.
This assessment was necessary to correct the competitive advantage
enjoyed by the commercial banking industry over the thrift industry with respect
to deposit insurance premiums. In 1995 the Bank Insurance Fund (-BIF-) insuring
deposits at commercial banks reached its statutory reserve ratio of 1.25% of
insured deposits. Since a substantial portion of the deposit insurance premiums
paid into the SAIF fund, insuring deposits at most thrift institutions, had been
diverted to pay the interest on the FICO bonds issued during the government's
first attempt to resolve the savings and loan insurance of deposits crisis, it
was doubtful if the SAIF fund would ever be fully capitalized. Accordingly,
savings institutions have been required to pay high deposit insurance premiums
while commercial banks paid only a minimal amount.
However, this special assessment fully capitalizes the SAIF fund at its
1.25% statutory level. SAIF Deposit insurance premiums in the future will be
greatly reduced. Beginning in 1997, Meritrust's premiums will decline from a
level of $0.230 to $0.064 per $100 of insured deposits. Based on current levels,
its annual premium will decline from approximately $474,000 to approximately
$132,000, a reduction of 72.2%.
This legislation also provided for full pro-rata sharing of the
interest obligation on FICO bonds by January, 2000. Further, the BIF and SAIF
funds are to be merged by January 1, 1999, provided that the bank and savings
association charters are merged by that date. Further congressional action will
be needed to affect the re-chartering issues. Management is unable to predict
the outcome of the required legislation. See also the Form 10-KSB for the year
ended December 31, 1996.
Federal Income Tax Expenses and Extraordinary Items. Federal income tax
expense decreased $172,000 or 15.7% in 1996, primarily because of the tax
benefit of the SAIF special assessment=s reduction in pre-tax income. The income
tax expense increased by $78,000 or 7.7% in 1995 primarily due to growth inpre-
tax income for the period. See Note 9 to the Consolidated Financial Statements.
Liquidity and Capital Resources
Meritrust is required under applicable federal regulations to maintain
specified levels of -liquid- investments in qualifying types of U. S.
Government, federal agency and other investments having maturities of five years
or less. Current OTS regulations require that a savings institution
19
<PAGE>
maintain liquid assets of not less than 5% of its average daily
balance of net withdrawable deposit accounts and borrowings payable in one
year or less, of which short-term liquid assets must consist of not less than
1%. Monetary penalties may be imposed for failure to meet applicable liquidity
requirements. At December 31, 1996, Meritrust=s liquidity, as measured for
regulatory purposes, was 32.6% or $56.1 million in excess of the minimum OTS
requirement.
Cash was generated by Meritrust's operating activities during 1996,
1995, and 1994, primarily as a result of net income in each period. The
adjustments to reconcile net income to net cash provided by operations during
the periods presented consisted primarily of amortization and accretion of the
premiums and discounts on investments, depreciation expense, provision for loan
losses, increases or decreases in various receivable and payable accounts, and
increases in deferred income taxes. The primary investing activities of
Meritrust are the origination of loans and the purchase of mortgage-backed
securities and investment securities, which are primarily funded with the
proceeds from amortization and prepayments on existing loans and mortgage-backed
securities and the maturity of investment securities. Net cash was used by
investing activities in 1996, 1995, and 1994 due to the excess of loans
originated over principal repayments and to investment securities and
mortgage-backed securities purchase/maturity activity in those years. The
primary financing activity consists of deposits, which increased in 1996 and
1995 and declined in 1994. Cash and cash equivalents decreased in 1996,
increased in 1995, and decreased in 1994.
At December 31, 1996, Meritrust had outstanding commitments to
originate $2.7 million of single-family residential and consumer loans and to
fund $3.2 million in loans-in-process on the construction of single family
homes. At the same date, the total amount of certificates of deposit which were
scheduled to mature in the following 12 months was $92.0 million. Meritrust
believes that it has adequate resources to fund all of its commitments and that
it can adjust the rate on certificates of deposit to retain deposits to the
extent desired. If Meritrust requires funds beyond its internal funding
capabilities, advances from the FHLB of Dallas are available as an additional
source of funds.
Meritrust is required to maintain specified amounts of regulatory
capital sufficient to meet tangible, core and risk-based capital ratios of
1.50%, 3.00% and 8.00%, respectively. At December 31, 1996, Meritrust met each
of its capital requirements, with tangible, core and risk-based capital ratios
of 7.73%, 7.73% and 17.21% respectively.
Impact of Inflation and Changing Prices
The consolidated financial statements and related financial data
presented herein have been prepared in accordance with generally accepted
accounting principles, which generally require the measurement of financial
position and operating results in terms of historical dollars, without
considering changes in relative purchasing power over time due to inflation.
Unlike most industrial companies, virtually all of Meritrust's assets and
liabilities are monetary in nature. As a result, interest rate generally have a
more significant impact on Meritrust's performance than does the effect of
inflation.
20
<PAGE>
The Board of Directors
Meritrust Federal Savings Bank
Thibodaux, Louisiana:
We have audited the accompanying consolidated statements of financial condition
of Meritrust Federal Savings Bank and subsidiaries (the Bank) as of December 31,
1996 and 1995, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1996. These financial statements are the
responsibility of the Bank's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Meritrust Federal
Savings Bank and subsidiaries as of December 31, 1996 and 1995, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1996 in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
New Orleans, Louisiana
January 22, 1997
21
<PAGE>
Consolidated Statements of Financial Condition
December 31, 1996 and 1995
(in thousands, except share amounts)
Assets 1996 1995
-------- --------- -------
Cash on hand and in banks $ 2,689 2,751
Interest-bearing deposits 5,029 7,383
--------- -------
Cash and cash equivalents 7,718 10,134
Investment securities (market value $56,084
in 1996 and $56,326 in 1995) - (note 2) 56,042 55,933
Federal Home Loan Bank stock, at cost 2,208 2,082
Mortgage-backed securities (market value
$36,175 in 1996 and $34,676 in 1995) - (note 3) 36,499 34,558
Loans receivable, net (note 4) 116,479 110,236
Office property and equipment, net (note 5) 4,908 5,141
Real estate owned (note 6) 464 307
Refundable income taxes 89 106
Accrued interest receivable (note 7) 1,863 1,859
Other assets 321 499
--------- -------
Total assets $ 226,591 220,855
========= =======
Liabilities and Stockholders' Equity
------------------------------------
Liabilities:
Depositor accounts (note 8) 206,145 201,976
Advances from borrowers for insurance and
taxes 573 575
Deferred federal income tax (note 9) 1,416 1,064
Dividends payable to common stockholders 135 116
Accrued interest payable 72 92
Other liabilities 725 592
-------- -------
Total liabilities 209,066 204,415
======== =======
Stockholders' equity (notes 10, 11, and 12):
Common stock, $1 par value; 5,000,000 shares
authorized; 774,176 shares issued and
outstanding in 1996 and 1995 774 774
Additional paid-in capital 4,756 4,756
Net unrealized gain on investment securities 306 --
Retained earnings, substantially restricted 11,689 10,910
-------- -------
Total stockholders' equity 17,525 16,440
-------- -------
Commitments, contingencies and other matters
(notes 13, 14 and 15) -------- -------
Total liabilities and stockholders' equity $ 226,591 220,855
========= =======
See accompanying notes to consolidated financial statements.
22
<PAGE>
Consolidated Statements of Operations
For the years ended December 31, 1996, 1995 and 1994
(in thousands, except per share data)
1996 1995 1994
---- ---- ----
Interest income:
Interest on loans $ 10,040 9,549 9,090
Interest on mortgage-backed securities 2,249 2,166 1,824
Other interest and dividends 3,994 3,526 3,240
-------- ------ -------
Total interest income 16,283 15,241 14,154
Interest expense on deposits 9,029 8,284 7,298
-------- ------ -------
Net interest income before
provision for loan losses 7,254 6,957 6,856
Provision for loan losses 120 -- --
-------- ------ -------
Net interest income after
provision for loan losses 7,134 6,957 6,856
Loan related fees 416 297 256
Insurance commissions 257 189 108
Service charges and fees 812 701 745
Other 104 122 172
-------- ------- ------
Total operating income 8,723 8,266 8,137
Expenses:
Salaries and employee benefits 2,560 2,379 2,163
Occupancy expense 633 571 625
Data processing and operating supplies 722 703 802
Federal insurance expense 1,741 459 487
Equipment depreciation and repairs 244 256 296
Other 636 614 680
-------- ------- -------
Total expenses 6,536 4,982 5,053
Income before federal income tax 2,187 3,284 3,084
-------- -------- --------
Federal income tax:
Current 731 918 836
Deferred 194 179 183
-------- -------- --------
925 1,097 1,019
-------- -------- --------
Net income $ 1,262 2,187 2,065
======== ======== ========
Net income per common share and
common share equivalents $ 1.56 2.73 2.60
======== ======== ========
See accompanying notes to consolidated financial statements.
23
<PAGE>
Consolidated Statements of Stockholders' Equity
For the years ended December 31, 1996, 1995 and 1994
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
Net unrealized
gain on Total
Common Additional paid-in investment Retained Stockholders'
stock capital securities earnings equity
------ ------------------ -------------- --------- -------------
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1993 $ 774 4,756 -- 7,393 12,923
Net income -- -- -- 2,065 2,065
Dividends declared
($.43 per share) -- -- -- (329) (329)
----- ----- ------ ------ -------
Balances at December 31, 1994 774 4,756 -- 9,129 14,659
Net income -- -- -- 2,187 2,187
Dividends declared
($.53 per share) -- -- -- (406) (406)
----- ------ ------ ------- -------
Balances at December 31, 1995 774 4,756 -- 10,910) 16,440
Net income -- -- -- 1,262 1,262
Dividends declared
($.63 per share) -- -- -- (483) (483)
Unrealized
appreciation,
net of deferred
tax expense of $ 158 -- -- 306 -- 306
----- ------ ------ ------- ------
Balances at December 31, 1996 $ 774 4,756 306 11,689 17,525
===== ====== ====== ======= ======
</TABLE>
See accompanying notes to consolidated financial statements
24
<PAGE>
Consolidated Statements of Cash Flows
For the years ended December 31, 1996, 1995 and 1994
(in thousands)
1996 1995 1994
---- ---- ----
Cash flows from operating activities:
Net income $ 1,262 2,187 2,065
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation expense 391 388 412
Amortization and accretion 74 82 235
Provision for loan losses 120 -- --
Provision for deferred taxes 194 179 183
Gain on sale of real estate owned (18) (68) (42)
Gain on sale of equity investment (82) -- --
Stock dividend on Federal Home
Loan Bank stock (126) (129) (90)
Decrease (increase) decrease in refundable
federal income taxes 17 (47) 158
Decrease (increase) in interest
receivable and other assets 86 (79) (82)
Decrease in accrued interest payable
on deposits (20) (89) (12)
Increase in other liabilities 133 44 41
------ ------ ------
Total adjustments 769 281 803
------ ------ ------
Net cash provided by operations 2,031 2,468 2,868
------ ------ ------
Cash flows from investing activities:
Originations, net of principal collected
on loans (6,718) (5,933) 6,291
Mortgage-backed securities:
Purchases (7,930) (2,025) (16,268)
Principal reductions 5,945 4,129 6,623
Investment securities:
Purchases (25,551) (29,068) (33,037)
Maturities 25,845 31,550 26,375
Capital expenditures (158) (279) (201)
Proceeds from sale of real estate owned 168 312 363
Income from sale of equity investment 249 -- --
-------- -------- --------
Net cash used in investing activities (8,150) (1,314) (9,854)
-------- -------- --------
(Continued)
25
<PAGE>
Consolidated Statements of Cash Flows, Continued
1996 1995 1994
---- ---- ----
Cash flows from financing activities:
Net decrease in demand deposits, NOW
accounts and savings accounts $ (2,459) (4,701) (6,837)
Net increase (decrease) in certificates
of deposit 6,628 8,119 (1,952)
Increase (decrease) in advances from
borrowers for insurance and taxes (2) 42 (151)
Dividends paid on common stock (464) (387) (309)
-------- ------- -------
Net cash provided by (used in)
financing activities 3,703 3,073 (9,249)
-------- ------- -------
Net increase (decrease) in cash
and cash equivalents (2,416) 4,227 (16,235)
Cash and cash equivalents at beginning
of year 10,134 5,907 22,142
-------- ------ -------
Cash and cash equivalents at end of year $ 7,718 10,134 5,907
======== ====== =======
Supplemental disclosures:
Cash paid for:
Interest on deposits $ 9,109 8,435 7,310
======== ====== ======
Income taxes $ 716 965 678
======== ====== ======
Transfers from loans to real estate
acquired through foreclosures $ 403 152 363
======== ====== ======
Loans on sale of real estate owned $ -- 158 --
======== ====== ======
See accompanying notes to consolidated financial statements.
26
<PAGE>
MERITRUST FEDERAL SAVINGS BANK AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
December 31, 1996, 1995 and 1994
(1) Summary of Significant Accounting Policies
(a) Nature of Business
Meritrust Federal Savings Bank (Meritrust) is a federally chartered
savings bank which offers a full range of banking and thrift-related
services to customers through its main office and branches in southern
Louisiana, primarily in Lafourche, St. Mary and Terrebonne parishes.
Meritrust is principally engaged in obtaining funds in the form of
savings deposits and investing such funds in mortgage loans on
residential real estate, various types of consumer and other loans,
mortgage-backed securities and investment securities. Generally, the
loans are secured by first and second mortgages on real estate,
personal property and savings deposits.
Lending activities are concentrated in southwestern Louisiana, which
is heavily dependent on agriculture and the oil and gas industry.
Adverse changes in the economic conditions could have a direct impact
on the timing and amount of payments by borrowers.
(b) Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of Meritrust Federal Savings Bank and its wholly-owned
subsidiaries, Atchafalaya Services, Inc. and First Federal Services,
Inc. (the Bank). All intercompany balances and transactions have been
eliminated.
(c) Cash and Cash Equivalents
For the purpose of the accompanying consolidated statements of cash
flows, cash and cash equivalents include cash on hand and in banks and
short-term investments with original maturities of three months or
less.
(d) Investments and Mortgage-Backed Securities
Meritrust's investments in debt securities are classified as held-to-
maturity and are carried at amortized cost, adjusted for unamortized
premiums and unearned discounts which are recognized in interest
income using methods which approximate the interest method over the
remaining period to maturity. Management has the intent and ability to
hold such investments to maturity. Meritrust's investment in FHLMC
stock is classified as available-for-sale and is reported at fair
value with unrealized gains and losses reported in stockholders'
equity. Investments determined to be trading securities are reported
at fair value with unrealized gains and losses included in earnings.
Meritrust has no trading portfolio.
(Continued)
27
<PAGE>
MERITRUST FEDERAL SAVINGS BANK AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
Mortgage-backed securities represent participating interests in pools
of long-term first mortgage loans originated and serviced by the
issuers of the securities. Mortgage-backed securities are classified
as held-to-maturity and are carried at unpaid principal balances,
adjusted for unamortized premiums and unearned discounts. Premiums and
discounts are amortized using methods which approximate the interest
method over the remaining period contractual to maturity, adjusted for
anticipated prepayments. These securities generally amortize on a
regular basis, predominantly monthly, and are subject to prepayment.
Accordingly, actual maturities will differ from contractual
maturities. Management has the intent and the ability to hold these
securities to maturity.
Gains and losses, if any, on the sale of securities are recognized in
income at the time of sale, with cost being determined using the
specific identification method.
Stock in the Federal Home Loan Bank of Dallas is carried at cost. At
December 31, 1996 and 1995, the Bank holds the required level of
Federal Home Loan Bank stock.
(e) Loans Receivable
Loans receivable are stated at unpaid principal balances, less
unearned discounts, net deferred loan origination fees and the
allowance for loan losses.
The allowance for loan losses is increased by charges to income and
decreased by charge-offs (net of recoveries). Management's periodic
evaluation of the adequacy of the allowance is based on the Bank's
past loan loss experience, known and inherent risks in the portfolio,
adverse situations that may affect the borrower's ability to repay,
estimated value of any underlying collateral, and current and
prospective economic conditions. Management believes that the
allowance for losses on loans is adequate. While management uses
available information to recognize losses on loans, future additions
to the allowance may be necessary based on regulatory findings or
changes in economic conditions.
Loan fees and certain direct loan origination costs are deferred, and
the net fee or cost is recognized in income using the interest method
over the contractual life of the loans. Amortization of net deferred
fees is discontinued for loans that are deemed to be non-performing.
Additionally, the unamortized fees are recognized in income when loans
are paid off.
The accrual of interest income is generally discontinued when a loan
becomes greater than three months past due as to principal or
interest. When interest accruals are discontinued, interest is charged
to an allowance for uncollected interest. Income is subsequently
recognized only to the extent cash payments are received until, in
management's judgment, the borrower's ability to make periodic
interest and principal payments is back to normal, in which case the
loan is returned to accrual status.
(Continued)
28
<PAGE>
MERITRUST FEDERAL SAVINGS BANK AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
f) Real Estate Owned
Real estate acquired through foreclosure is initially recorded at the
lower of the related loan balance or fair value, less estimated
disposition costs, at the date of foreclosure. Costs relating to
development and improvement of the property are capitalized, whereas
costs relating to holding the property are expensed. Provisions to
reduce the carrying value of foreclosed properties, to fair value less
estimated disposition costs subsequent to time of foreclosure, if
necessary, are charged to operations.
(g) Depreciation of Office Property and Equipment
Office property and equipment is carried at cost less accumulated
depreciation. Depreciation is provided using straight-line and
accelerated methods over estimated lives ranging from three to twenty
years.
(h) Income Taxes
Income taxes are accounted for using the asset and liability method of
Statement of Financial Accounting Standards No. 109 (Statement 109).
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or
settled. Under Statement 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
(i) Net Income Per Share and Common Share Equivalents
Per share data for the years ended December 31, 1996, 1995 and 1994
was determined by dividing net income for the year by 809,645, 801,651
and 792,841, respectively, the weighted average number of shares and
common share equivalents outstanding for each year. Stock options are
regarded as common share equivalents and, to the extent such options
are dilutive, are considered in the per share calculation, using the
treasury stock method.
(j) Stock Option Plans
On January 1, 1996, the Bank adopted Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation (Statement
123), which permits entities to recognize as expense over the vesting
period the fair value of all stock-based awards on the date of grant.
Alternatively, Statement 123 also allows entities to continue to apply
the provisions of APB Opinion No. 25 and provide pro forma net income
and pro forma earnings per share disclosures for employee stock option
grants made in 1995 and future years as if the fair-value-based method
defined in Statement 123 had been applied. The Bank has elected to
continue to apply the provisions of APB Opinion No. 25 and provide the
pro forma disclosure provisions of Statement 123.
(Continued)
29
<PAGE>
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
(k) Reclassification
Certain items included in the December 31, 1995 and 1994 consolidated
financial statements have been reclassified to conform with the 1996
presentation.
(l) 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.
(2) Investment Securities
Investment securities consist of the following:
Gross Gross
Amortized unrealized unrealized Market
cost gains losses value
---- ----- ------ -----
December 31, 1996 -
Held-to-maturity:
United States
Treasury bonds:
Due within one year $ 2,546 4 -- 2,550
Due after one year
through five years 999 -- 5 994
United States Agency
securities:
Due within one year 24,010 52 2 24,060
Due after one year
through five years 28,006 49 56 27,999
-------- --- -- ------
55,561 105 63 55,603
Available-for-sale-
FHLMC stock 17 464 -- 481
-------- --- -- ------
$ 55,578 569 63 56,084
======== === == ======
(Continued)
30
<PAGE>
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
Investment securities consist of the following:
Gross Gross
Amortized unrealized unrealized Market
cost gains losses value
---------- ---------- ---------- ------
December 31, 1995 -
Held-to-maturity:
United States
Treasury bonds:
Due within one year $ 9,045 70 7 9,108
Due after one year
through five years 998 -- -- 998
United States Agency
securities:
Due within one year 16,860 24 26 16,858
Due after one year
through five years 29,030 373 41 29,362
-------- --- -- ------
$ 55,933 467 74 56,326
======== === == ======
(3) Mortgage-backed Securities
Mortgage-backed securities, classified as held-to-maturity, consist of the
following:
Gross Gross
Amortized unrealized unrealized Market
cost gains losses value
--------- ---------- ---------- -------
December 31, 1996:
Fixed rate:
FHLMC $ 7,745 82 138 7,689
FNMA 9,209 -- 167 9,042
-------- -- --- ------
16,954 82 305 16,731
======== == === ======
Adjustable rate:
FHLMC 10,277 89 137 10,229
FNMA 9,268 34 87 9,215
-------- --- --- ------
19,545 123 224 19,444
======== --- --- ------
$ 36,499 205 529 36,175
======== === === ======
(Continued)
31
<PAGE>
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
Gross Gross
Amortized unrealized unrealized Market
cost gains losses value
---- ----- ------ -----
December 31, 1995:
Fixed rate:
FHLMC $ 9,243 137 67 9,313
FNMA 2,027 40 2 2,065
------- --- -- ------
11,270 177 69 11,378
------- --- -- ------
Adjustable rate:
FHLMC 12,395 121 58 12,458
FNMA 10,893 30 83 10,840
------- --- --- ------
23,288 151 141 23,298
------- --- --- ------
$ 34,558 328 210 34,676
======== === === ======
(4) Loans Receivable
Loans receivable at December 31 consist of the following:
1996 1995
---- ----
First mortgage loans:
Adjustable rate $ 59,683 58,729
Fixed rate 19,588 23,763
--------- ------
79,271 82,492
Construction loans 6,227 3,953
Home improvement loans 17,059 13,612
Consumer finance loans 12,867 8,057
Loans to depositors, secured by savings 5,039 4,740
--------- -------
120,463 112,854
Less:
Unearned income 93 123
Loans in process 3,221 1,839
Allowance for loan losses 670 656
-------- -------
3,984 2,618
-------- -------
$ 116,479 110,236
========= =======
(Continued)
32
<PAGE>
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
A summary of activity in the allowance for loan losses for 1996 and 1995 is as
follows:
1996 1995
----- ----
Allowance at beginning of period $ 656 742
Loans charged-off (147) (112)
Provision for loan losses 120 --
Recoveries 41 26
----- ----
Allowance at end of period $ 670 656
===== ====
The Bank had loans of approximately $111 and $109 at December 31, 1996 and 1995
on a nonaccrual status. The additional amount of income that would have been
recognized during each of the years ended December 31, 1996, 1995, and 1994 had
nonaccrual loans performed according to their terms is not material. At December
31, 1996, 1995 and 1994, the Bank had no loans restructured under troubled debt
restructurings whose effective interest rates were less than those currently
offered on similar loans.
Loans receivable includes amounts outstanding to directors, executive officers,
and their associates. The following table summarizes activity relating to these
loans during the respective years:
Balance at Balance
beginning Additional Loan at end
Period of period borrowings repayments Other of period
- ----------- ----------- ---------- ---------- ------- ---------
Years ended
December 31,
1996 $ 750 401 277 (23) 851
1995 $ 849 341 440 -- 750
Mortgage loans serviced for others are not included in the accompanying
consolidated statements of financial condition. The unpaid principal balances
of these loans at December 31 are summarized as follows:
1996 1995
---- ----
Mortgage loans underlying pass-
through securities:
FHLMC $ 12,617 16,099
FNMA 547 704
Mortgage loan participations
with other investors 1,373 1,397
-------- ------
$ 14,537 18,200
======== ======
(Continued)
33
<PAGE>
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
(5) Office Property and Equipment
Office property and equipment consists of the following at December 31:
1996 1995
---- ----
Land $ 987 987
Buildings 6,651 6,615
Leasehold improvements 357 357
Furniture, fixtures and equipment 3,283 3,159
-------- ------
11,278 11,118
Less accumulated depreciation and
amortization 6,370 5,977
-------- ------
$ 4,908 5,141
======== ======
(6) Real Estate Owned
Real estate owned consists of the following at December 31:
1996 1995
---- ----
Real estate acquired through foreclosure $ 208 51
Real estate acquired for branch development 256 256
------- ----
$ 464 307
======= ====
(7) Accrued Interest Receivable
Accrued interest receivable at December 31 consists of earned, but
uncollected, interest as follows:
1996 1995
---- ----
Investment securities $ 973 971
Loans 631 620
Mortgage-backed securities 259 268
------- -----
$ 1,863 1,859
======= =====
(Continued)
34
<PAGE>
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
(8) Depositor Accounts
A summary of deposits by type of account and interest rate as of December
31 follows:
1996 1995
---------------------- ------------------
Stated Stated
rate Amount rate Amount
---- ------ ---- ------
Regular savings 2.50% $ 25,592 2.50% $ 26,878
Money market deposit
accounts 2.50 13,357 2.50 15,600
NOW accounts 2.00 11,375 2.00 11,081
Checking accounts,
noninterest-bearing -- 6,438 -- 5,662
--------- --------
56,762 59,221
--------- --------
Certificates of deposit:
2.00% to 3.99% 13,472 14,526
4.00% to 5.99% 98,149 86,794
6.00% to 7.99% 37,762 41,435
--------- --------
149,383 142,755
--------- --------
$ 206,145 $ 201,976
========= =========
Maturities of certificates of deposit as of December 31, 1996 are
summarized as follows:
Less than twelve months $ 91,951
Twelve to twenty-four months 37,240
Twenty-four to thirty-six months 15,582
Thirty-six to forty-eight months 4,610
$ 149,383
Included in certificates of deposit are $14,395 and $15,264 of certificates
of deposit with balances of $100 or more as of December 31, 1996 and
1995, respectively.
(Continued)
35
<PAGE>
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
Interest expense and weighted average interest rates paid on deposits for the
years ended December 31 are summarized as follows:
Years ended December 31,
1996 1995 1994
---------------- --------------- ----------------
Amount Rate Amount Rate Amount Rate
------ ----- ------ ----- ------ -----
Regular savings $ 666 2.50% $ 702 2.50% $ 787 2.58%
NOW accounts and ===== ===== =====
money market
demand deposit
accounts 566 2.24% 660 2.34% 822 2.27%
Certificates ===== ===== =====
of deposit 7,857 5.23% 6,985 4.96% 5,735 4.19%
------ ===== ------ ===== ----- =====
9,089 8,347 7,344
Less penalties
for early
withdrawals 60 63 46
------ ------ -----
$ 9,029 4.37% $ 8,284 4.12% $ 7,298 3.53%
======= ===== ======= ===== ======= =====
(9) Federal Income Tax
A reconciliation of the Bank's effective income tax rate to the statutory
corporate tax rate is as follows:
1996 1995 1994
Statutory federal income tax rate 34.00% 34.00% 34.00%
Tax bad debt reserve recapture 10.31 -- --
Bad debt reserve, due to decline in
tax base year reserves (3.05) -- --
Difference in federal bad debt
deduction for book and tax purposes -- (.60) (.96)
Other 1.04 -- --
------ ------ ------
Effective tax rate 42.30% 33.40% 33.04%
====== ====== ======
(Continued)
36
<PAGE>
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
The tax effects of temporary differences that give rise to the net deferred tax
liability at December 31 are presented below:
1996 1995
---- ----
Deferred tax assets:
General loan loss allowance $ 243 223
Deferred revenue, principally due to
insurance commissions and loan fees 176 129
Real estate, held for development
written down for book purposes 79 79
Other 7 9
------ ----
Total deferred tax assets 505 440
Valuation allowance -- --
------ ----
Net deferred tax assets 505 440
------ ----
Deferred tax liabilities:
Office properties and equipment, principally
due to differences in cost basis and
depreciation 1,053 968
Federal Home Loan Bank stock, due to
differences in basis 315 273
Unrealized gain on investments
available-for-sale 158 --
Tax bad debt reserve recapture 226 --
Adjustment for accrual to cash basis -- 16
Securities, principally due to market discount 62 48
Bad debt reserve, due to decline in tax base
year reserves 66 142
Premium recorded on loan sales 41 57
----- -----
Total deferred tax liabilities 1,921 1,504
----- -----
Net deferred tax liability $ 1,416 1,064
======= =====
The Small Business Protection Act of 1996 repealed Internal Revenue Code Section
593 (IRC Section 593), which had allowed thrifts to use the percentage of income
method for computing bad debts. The tax act required small thrifts to change
their method of computing reserves for bad debts to the experience method of
Internal Revenue Code Section 585. The repeal is effective for taxable years
beginning after December 31, 1995.
Meritrust implemented this change during December 31, 1996. As a result of the
change, Meritrust is required to recapture the excess of the thrift's qualifying
and nonqualifying bad debt reserves as of December 31, 1995 over its contracted
base year reserves. As prescribed by IRC Section 593, the recapture adjustment
of $796,000, is to be reflected in income over a six year period.
(Continued)
37
<PAGE>
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
(10) Stockholders' Equity
In conjunction with the September 30, 1993 conversion from the mutual to
the stock form of organization, the Bank established a liquidation account
and maintains this account for the benefit of the certain depositors(former
members). The initial balance of this liquidation account was $4,280. In
the event of a complete liquidation (and only in such event), each former
member shall be entitled to receive a liquidation distribution from this
account in the amount of the then current adjusted balance for deposits
then held, before any liquidation distribution may be made to the
stockholders. The liquidation account will not restrict the Bank=s use or
application of net worth except for the repurchase of the Bank=s stock and
the payment of dividends. The Bank is prohibited from declaring cash
dividends and repurchasing its capital stock if it would cause a reduction
in the Bank's net worth below either the liquidation account or the
statutory net worth requirement set by the regulations.
In addition to its common stock,the Bank's federal stock charter authorized
the issuance of 1,000,000 shares of one or more classes of serial preferred
stock. No preferred stock has been issued.
Stockholders' equity and net income as reflected in reports filed with the
Office of Thrift Supervision of Dallas are in agreement with those amounts
presented in the accompanying consolidated financial statements for the
year ended December 31, 1996.
(11) Stock Options
The 1993 Key Executive Stock Compensation Plan (the Plan) provides for the
granting of incentive and compensatory stock options to officers and other
key employees. These options become exercisable at the rate of 20% per year
over five years and expire ten years after the date of grant. The
Directors' Plan provides for the granting of compensatory stock options
to nonemployee directors. These options become exercisable six months after
grant and expire ten years after the date of grant.
(Continued)
38
<PAGE>
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
A summary of the stock option information follows:
1996 1995
--------------------------- --------------------------
Number of Number of
shares Option price shares Option price
--------- ------------ ---------- ------------
Outstanding,
beginning
of year 55,000 $ 10.00 - 26.25 52,750 $ 10.00 - 18.25
Granted 14,000 $31.50 2,250 $26.25
Exercised -- -- -- --
Expired -- -- -- --
------- --------------- ------- ---------------
Outstanding,
end of year 69,000 $ 10.00 - 31.50 55,000 $ 10.00 - 26.25
======= =============== ======= ===============
Exercisable,
end of year 53,000 $ 10.00 - 31.50 34,750 $ 10.00 - 18.25
======= =============== ======= ===============
At December 31, 1996, there were 8,418 additional shares available for grant
under the Plan.
The per share weighted-average fair value of stock options granted during 1996
and 1995 is as follows:
1996 1995
------- ------
Weighted-average fair value $ 11.05 9.08
These values were calculated using the option-pricing model and the following
assumptions:
Assumptions:
Expected dividend yield 2.06% 2.06%
Risk-free interest rate 5.125% 5.114%
Expected life 10 years 10 years
Volatility 25% 25%
The Company applies APB Opinion No. 25 in accounting for its Plan and,
accordingly, no compensation cost has been recognized for its stock options in
the financial statements. Had the Company determined compensation cost based on
the fair value at the grant date for its stock options under SFAS No. 123, the
Company's net income would have been reduced to the pro forma amounts indicated
below:
1996 1995
---- ----
Net income: As reported $ 1,262 2,187
Pro forma 1,160 2,174
Per share: As reported $ 1.56 2.73
Pro forma 1.43 2.71
(Continued)
39
<PAGE>
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
Pro forma net income reflects only options granted in 1996 and 1995. Therefore,
the full impact of calculating compensation cost for stock options under SFAS
No. 123 is not reflected in the pro forma net income amounts presented above
because compensation cost is reflected over the options' vesting period of 5
years and compensation cost for options granted prior to January 1, 1995 is not
considered.
(12) Regulatory Capital
As a federally insured depository institution, the Bank is required to
comply with a variety of regulations, including minimum capital standards.
Under the regulatory guidelines of FIRREA, which addresses minimum capital
standards, thrift institutions must have core capital equal to 3 percent of
adjusted total assets and tangible capital equal to 1.5 percent of adjusted
total assets. FIRREA also established risk-based capital standards as a
percentage of risk-weighted assets of 8.0 percent. At December 31, 1996,
the Bank exceeded all applicable capital standards.
At December 31, 1996, the Bank's regulatory capital is as follows
(unaudited):
Total
Tangible Core/Leverage Risk-Based
Equity Capital Capital Capital
Stockholders' equity $ 17,525 17,525 17,525
Adjustments -- (3) 156
--------- ------- ------
Regulatory capital $ 17,525 17,522 17,681
========= ======= ======
Adjusted total assets $ 226,591 226,591
========= =======
Risk-weighted assets $ 102,752
=========
Capital ratio 7.73% 7.73% 17.21%
========= ======= =========
Required ratio 1.50% 3.00% 8.00%
========= ======= =========
Required capital $ 3,399 6,798 8,220
========= ======= =========
Excess capital $ 14,126 10,724 9,461
========= ======= =========
(13) Commitments and Other Matters
On September 30, 1996 the Deposit Insurance Funds Act of 1996 (DIFA) was
signed into law. Under DIFA, the Federal Deposit Corp. (FDIC) imposed a
special assessment on SAIF - assessable deposits insured as of March 31,
1995. This assessment was equal to $.65 for every $100.00 of SAIF-insured
deposit. The Bank's assessment was $1,300, which was paid during the fourth
quarter.
The Bank is a party to financial instruments with off-balance sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments
(Continued)
40
<PAGE>
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
to extend credit. The Bank had outstanding commitments to extend credit at
December 31, 1996 of approximately $2,723. Commitments are disbursed
subject to certain restrictions and extend over varying periods of time
with the majority being disbursed within a sixty-day period.
The Bank has three-year employment agreements with certain executive
officers. The agreements grant these employees the right to receive an
amount equal to their annual salary received during the preceding calendar
year in the event of a change in control of the Bank (as defined),
termination for reasons other than cause of the death or disability of the
employee, plus any compensation or benefit due for the remaining term of
the agreements. The aggregate commitment for future salaries under these
employment agreements is approximately $1,054. In addition, such agreements
provide for accelerated vesting of stock options.
The Board of Directors has adopted a plan to indemnify directors, officers
and employees (covered person) of the Bank against claims and related
expenses of litigation. The plan calls for indemnification to be made if
there is a final judgment on the merits in favor of the covered person. For
all other cases an indemnification can still be made if a majority of the
disinterested directors determine that the covered person was acting in
good faith within the scope of his employment or authority.
Before indemnification can be made, the Bank must give the Office of Thrift
Supervision sixty days notice. During this period of time, the Office of
Thrift Supervision can file an objection to the indemnification. At
December 31, 1996, the Bank was not involved in any claims or litigation
which would require indemnification to be made to a covered person.
The Bank sponsors a noncontributory employee profit-sharing plan for
eligible employees. Employees are eligible after they have one year of
service and have reached 21 years of age. No specific percentage of profits
is distributed, as contributions are made solely at the discretion of the
Board of Directors. Benefits vest under the plan based on years of service
with full vesting after six years of service. The Bank made contributions
to this plan of $140, $120 and $120 for the years ended December 31, 1996,
1995 and 1994, respectively.
(14) Disclosure about Fair Value of Financial Instruments
SFAS No. 107, Disclosures about Fair Value of Financial Instruments,
requires that the Bank disclose estimated fair values of its financial
instruments. The following methods and assumptions were used to estimate
the fair value of each class of financial instruments:
(a) Cash, Interest-bearing Deposits, and Accrued Interest Receivable
For those short-term instruments, the carrying amount is a reasonable
estimate of fair value.
(Continued)
41
<PAGE>
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
(b) Investment Securities
Fair values for investment securities are based on quoted market
prices or dealer quotes.
(c) Loans Receivable
The fair values of loans receivable are estimated separately for
portfolios of loans with similar financial characteristics. Loans are
segregated by type such as commercial, residential mortgage, and
consumer loans. The aggregate fair value of each group of loans is
estimated by discounting the future cash flows using the current rates
at which similar loans would be made to borrowers with similar credit
ratings and for the same remaining maturities.
The fair value of significant nonperforming loans is based on current
management evaluations of the value of the collateral securing these
loans.
(d) Deposit Liabilities
The fair value of demand deposits, savings accounts, and certain money
market deposits is the amount payable on demand at the reporting date.
The fair value of fixed-maturity certificates of deposit is estimated
using the rates currently offered for deposits of similar remaining
maturities.
(e) Commitments to Extend Credit
The fair value of commitments to extend credit is estimated using the
fees currently charged to enter into similar agreements, taking into
account the remaining terms of the agreements and the present
creditworthiness of the borrower. For fixed rate loan commitments,
fair value also considers the difference between current levels of
interest rates and the committed rates. Because of the short-term
nature of the commitments, the carrying amount of the commitments
approximates the estimated fair commitments to extend credit.
(f) Limitations
Estimates of fair value are made at a specific point in time, based on
relevant market information and information about the financial
instrument. These estimates do not reflect any premium or discount
that could result from offering for sale, at one time, the Bank's
entire holdings of a particular financial instrument. Because n
market exists for a significant portion of the Bank's financial
instruments, fair value estimates are based on judgments regarding the
amount and timing of anticipated cash flows, future expected loss
experience, current economic conditions, risk characteristics of
various financial instruments, and other factors. These estimates are
Fair
(Continued)
42
<PAGE>
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
value estimates relate to existing on and off-balance sheet financial
instruments without attempting to estimate the value of anticipated future
business and the value of assets and liabilities that are not considered
financial instruments. For example, other significant assets and
liabilities that are not considered financial assets or liabilities include
office properties and equipment, deferred tax assets and liabilities, and
other liabilities. In addition, the tax ramifications related to the
realization of the unrealized gains and losses can have a significant
effect on fair value estimates and have not been considered in the
estimates.
The following presents the estimated fair values of the Bank's financial
instruments at December 31:
1996 1995
---------------------- -------------------------
Carrying Fair Carrying Fair
amount value amount value
-------- -------- ---------- ---------
Financial assets:
Cash and interest-
bearing deposits $ 7,718 7,718 10,134 10,134
Accrued interest
receivable 1,863 1,863 1,859 1,859
Investment
securities 56,042 56,084 55,933 56,326
Federal Home
Loan Bank stock 2,208 2,208 2,082 2,082
Mortgage-backed
securities 36,499 36,175 34,558 34,676
Loans receivable,
net 116,479 117,437 110,236 111,473
Financial liabilities -
deposits 206,145 205,496 201,975 201,432
(Continued)
43
<PAGE>
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
(15) Consolidated Subsidiaries
The bank has two wholly-owned subsidiaries at December 31, 1996 and 1995,
Atchafalaya Services, Inc. and First Federal Services, Inc., which are
Louisiana corporations. Summary financial information for Atchafalaya
Services, Inc. and First Federal Services, Inc. follows:
1996 1995
---- ----
Atchafalaya Services, Inc.
- --------------------------
Assets - investment in General Financial
Life Insurance Co., at cost $ -- 71,527
---- ------
Liabilities - due to parent $ -- 8,567
Stockholder's equity:
Contributed capital $ -- 71,527
Retained deficit $ -- (8,567)
---- ------
Total liabilities and stockholder's
equity $ -- 71,527
==== ======
First Federal Services, Inc.
- ----------------------------
Assets - investment in General Financial
Life Insurance Co., at cost $ -- 95,625
---- ------
Liabilities - due to parent $ -- 64,360
---- ------
Stockholder's equity:
Contributed capital $ -- 41,265
Retained deficit $ -- (10,000)
---- ------
$ -- 31,265
---- ------
Total liabilities and
stockholder's equity $ -- 95,625
==== ======
In March 1996, the investment in both companies was sold to Magnolia Life
Insurance Co. for $249. A total gain of $82 was recorded. Both subsidiaries had
no income or expenses for the years ended December 31, 1995 and 1994.
44
<PAGE>
